The Case

The lenders appointed a receiver following a failure to pay an interest instalment, which they said was payable in advance.  The Defendant said the appointment of the receiver was invalid because the interest was due in arrears.

The Court had to reconcile the different interpretations of the Finance Offer Schedules which provided two accounts of when interest was due: one, “on the last day of the period”; the second, payable “monthly in advance”.

Findings

The Defendant’s first argument was that the interest clauses should not be enforced because they were inconsistent. The Court rejected this on the basis that just because clauses are inconsistent is not in itself a reason for the provisions are void.  The Court’s task is to identify the true intention of the parties looking at the contract as a whole – not just by focusing on isolated clauses taken out of context.

The Defendant’s second argument was that the interest was not payable in advance.  In rejecting this argument, the Court:

• Looked at the context of the seemingly contradictory clauses, not just the clauses themselves in isolation.

• Gave considerable weight to the fact that the loan was for three months and that interest was payable monthly – which meant three interest payments in all.

• Under the common provisions, the first instalment had to be paid in advance because it provided for the deduction of that amount from the facility limit.

The Court then found that if the first instalment was to be paid in advance, it was natural to infer that future interest payments would also be paid in advance – which was consistent with the words in the Finance Offer Schedule – “monthly in advance”. 

The Court concluded that the words “on the last day of the period” – when read in the overall context of the agreement – did not dilute the strength of the wording of the agreement as whole, pointing clearly to an intention that interest was payable in advance.

Takeaway for Lenders

While this case is a comfort to lenders, it should not detract from the benefits of tried and tested loan documents. Let strong standard contract terms do the work for you, not an expensive court process.

DISCLAIMER: This article is current as at July 2026. It is general in nature and does not constitute legal advice. Specific advice should be obtained for your particular circumstances.