Private property finance can move fast. A borrower needs money, a lender is ready to provide it, real estate goes up as security and everyone expects the debt to be cleared within a few months. When that timetable slips, however, the numbers can change very quickly.
That is what makes Haiyong Su v 5 Blackman Cres Macquarie Pty Ltd [2026] NSWSC 875 interesting. The NSW Supreme Court decision, delivered by McGrath J on 23 July 2026, concerned a $100,000 short-term loan secured by mortgage. Under the deed, interest accrued at 2% per month, compounded monthly, described as the “Discount Interest Rate”. Following default, the rate increased to 3% per month, also compounded monthly.
Those figures are worth reading twice. They are monthly rates, not annual ones. Once compounding enters the equation, even a relatively modest loan can grow surprisingly fast.
The borrower challenged the loan and security documents on several grounds. The Court ultimately found that the documents had been validly executed and were generally enforceable. The company was bound by documents executed by its sole director, secretary and shareholder.
But a valid loan did not automatically make every term within it enforceable.
| Issue | What happened in Haiyong Su | Why it matters |
| Principal | $100,000 short-term loan | Compounding can make even a modest principal grow quickly |
| Ordinary interest | 2% per month, compounded monthly | Described as the “Discount Interest Rate” |
| Default interest | 3% per month, compounded monthly | The higher rate was triggered by default |
| Loan documents | Generally valid and enforceable | The problem with one clause did not destroy the entire transaction |
| Penalty issue | Higher default rate was unenforceable | Calling the lower rate a “discount” did not decide the issue |
| Recovery | Interest was limited to the lower rate | The lender could not recover the penal uplift |
A “discount” is still judged by what it actually does
The most interesting part of the case was the two-tier interest structure. On paper, the borrower enjoyed a discount while the loan remained compliant. In reality, default caused interest to jump from 2% to 3% per month, while monthly compounding continued.
The Court looked past the label. There was no evidence showing that the additional interest reflected higher funding costs, increased credit risk or another commercially justifiable consequence of default. In those circumstances, the increased rate operated in terrorem — effectively as a deterrent or punishment — and was an unenforceable penalty. The lender’s interest recovery was therefore confined to the lower rate.
That does not mean every high default interest rate is automatically unlawful. Nor does a lender necessarily have to establish an exact dollar-for-dollar “genuine pre-estimate of loss”. Modern Australian penalty doctrine is more nuanced, including consideration of whether the detriment imposed is out of proportion to the legitimate interest being protected.
The case did not outlaw compound interest either. The difficulty arose from the particular combination of a substantial default uplift, monthly compounding and the lack of evidence supporting a commercial justification for that increase.
For anyone considering short-term or private property finance, that makes the small print particularly important. Before signing, look at • the ordinary interest rate • exactly what constitutes default • the default rate • whether and how often interest compounds • extension and exit fees • enforcement costs • the maturity date • refinancing requirements • and precisely what property is being offered as security.
Signing the loan deed may take five minutes. The default provisions can keep calculating long after that.
Flash Conveyancing Advice
If private finance is helping fund your property purchase, don’t assess the loan only on the assumption that everything will run perfectly. Read the default provisions as though settlement, construction or refinancing might be delayed. Know when a higher rate starts, whether it compounds, which fees are triggered and what security the lender can enforce. Complex private lending and mortgage documentation may warrant specialist finance-law advice before you sign.
Flash Conveyancing, led by Julian & Renee, specialises in property transactions throughout NSW. When private finance sits behind an acquisition, timing becomes especially important. A settlement date that looked comfortably achievable when contracts were exchanged can feel very different when a short-term facility is approaching maturity.
That is why the purchase contract, finance arrangements and settlement timetable need to work together. A conveyancer can help keep the property transaction ready for settlement, identify registered interests affecting title and coordinate the conveyancing requirements around completion. Questions about whether a particular interest provision amounts to a penalty, is unconscionable or is otherwise unenforceable may require specialist banking, finance or litigation advice.
That distinction is important after Haiyong Su. Rather than promising that an expensive clause can simply be “struck out”, the sensible approach is to identify significant terms early, understand how they could affect the transaction and obtain further advice where the risks extend beyond ordinary conveyancing.
Julian and Renee personally oversee files as part of Flash Conveyancing‘s boutique, human-led service. According to the practice’s own procedures, sensitive settlement payment directions are directly voice-verified, while confidential client information is supported by offline local-storage measures.
Flash Conveyancing assists buyers and sellers throughout Sydney, Newcastle and Wollongong, together with Blacktown, Hawkesbury, the Blue Mountains, The Hills, Hornsby and Parramatta. Its service area includes Acacia Gardens, Angus, Arndell Park, Blacktown, Colebee, Glendenning, Glenwood, Grantham Farm, Kellyville Ridge, Kings Langley, Marsden Park, Melonba, Oakhurst, Parklea, Quakers Hill, Riverstone, Schofields, Seven Hills, Stanhope Gardens, Tallawong, The Ponds, Baulkham Hills, Beaumont Hills, Bella Vista, Castle Hill, Kellyville, Kenthurst, North Rocks, Northmead, Rouse Hill, Vineyard, Windsor, Annangrove, Box Hill, Cattai, Dural, Gables, Galston, Glenhaven, Glenorie, Maraylya, Middle Dural, Nelson, North Kellyville, Norwest and Winston Hills.
