Thursday, 15 November 2012

Jersey: interest charged must be 'moderate or reasonable'

Earlier this month the Royal Court gave judgment in Doorstop Ltd. v Gillman and Lepervier Holdings Limited [2012] JRC 199. This is an important decision in which the court considered and explained the rule of Jersey customary law that interest charged must be 'moderate or reasonable'. In doing so the court noted the importance of the principle la convention fait la loi des parties (about which see here, pdf) and stated that market practice would not, of itself, determine what would be 'moderate or reasonable'. The court also stated (at para. 51):
... in our view lenders, including institutional lenders, do have a responsibility towards those who want to borrow money. An urgent need for funds can make a person vulnerable and vulnerable people may be inclined to agree terms which reasonable people would not agree – no longer can one say that such persons are the best judges of what is in their own interests. Responsible lenders will not lend to those who will obviously not be able to make repayment or upon terms that offend the rules against usury. It is with this in mind that the Court does not – indeed cannot - ignore the customary law of this Island which requires the Court not to enforce the contract to the extent that an interest rate is immoderate or unreasonable."

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