Deutsche Bank AG v Sebastian Holdings Inc.

Hearing date: 8 February 2024

Approved Judgment

This judgment was handed down remotely at 10.00am on 14 March 2024 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

Introduction

This appeal raises a short point of construction on s. 24(2) of the Limitation Act 1980, as to when time commences to run for limitation purposes on interest on costs where the order is for costs to be assessed.

The appellant (‘DB’) brought proceedings against Sebastian Holdings Inc (‘SHI’), and following a trial in 2013 before Cooke J, succeeded in its claim for some US$243m. By an order dated 8 November 2013 Cooke J ordered SHI to pay 85% of DB's costs of the action on the indemnity basis, to be subject to detailed assessment if not agreed (‘the Costs Order’). An order for a payment on account of costs of £32m plus VAT was made. Cooke J subsequently made an order pursuant to s. 51 Senior Courts Act 1981 that the Respondent, Mr Vik, was liable as a non-party for the payment on account. That order was paid by Mr Vik, but he sought to challenge it up to the Supreme Court and the European Court of Human Rights. Meanwhile by an order dated 10 October 2016 Cooke J made a further non-party costs order against Mr Vik (‘the NPCO’) in relation to all the costs which were the subject of the Costs Order, as to which no detailed assessment had yet commenced by reason of Mr Vik's pursuit of appeals against the first non-party costs order. Mr Vik also sought to challenge the NPCO. His appeals were unsuccessful.

The assessment process commenced in 2017. DB served its final detailed bill of costs on 25 January 2019. The assessment hearing commenced before Senior Costs Judge Gordon-Saker for three days in February 2020. For reasons into which it is unnecessary to go, the assessment lasted an unprecedented 100 hearing days (longer than the trial had taken), spread over three years. The assessment was not concluded until a Final Costs Certificate was issued on 11 May 2023. Shortly before the conclusion of the assessment, on 20 April 2023, the Costs Judge referred to the High Court the issue of construction which arises in the appeal. In the final assessment the Costs Judge disallowed 12 months' interest as a result of DB's delay in pursuing the detailed assessment proceedings.

Section 24 of the 1980 Act provides:

(1) An action shall not be brought upon any judgment after the expiration of six years from the date on which the judgment became enforceable.

(2) No arrears of interest in respect of any judgment debt shall be recovered after the expiration of six years from the date on which the interest became due.

Three aspects of an order for costs to be assessed are common ground. First, an order for the payment of costs to be assessed is a judgment debt within the meaning of the Judgments Act 1838 so as to carry interest pursuant to section 17 of that Act. Secondly, interest accrues from the date of the order, not the date of assessment: Hunt v R M Douglas (Roofing) Ltd [1990] 2 AC 398. In this it differs from a judgment for damages to be assessed, on which interest runs from the date of assessment: Thomas v Bunn[1991] AC 362, 380. Thirdly, the costs order is not enforceable as a judgment until the detailed assessment has been carried out and the costs liability thereby quantified: Times Newspapers Ltd v Chohan[2001] 1 WLR 1859 at [33].

Dias J (‘the Judge’) held that “due” in s. 24(2) means the date on which the interest liability accrues; and that interest on the costs as assessed first became due on the date of the Costs Order on 8 November 2013 and daily thereafter. The result is that DB is precluded from recovering some 3 ¹/₂ years' worth of interest on the assessed costs, which is said to deprive it of about £775,000.

DB contends that the Judge was wrong to treat “due” in s. 24(2) as referring to the date on which the interest liability accrues. It submits that “due” means payable (in the sense of enforceable, which is the sense in which I will use the word); and that no interest on costs was payable until the costs had been quantified in the Final Costs Certificate in May 2023. In the alternative, DB contends that if the Judge was correct in her construction of s. 24(2), the relevant date is not that of the Costs Order in 2013 but that of the NPCO in 2016, because the NPCO is the judgment debt which it is seeking to enforce against Mr Vik, and it was only upon the NPCO in 2016 that Mr Vik's liability arose for costs payable under the Costs Order and interest thereon.

The Judgment

The Judge's reasoning may be summarised as follows. There is a conceptual difference between an amount being “due” and being “payable”. The plain and ordinary meaning of the word “due” is that a sum becomes due when the liability “crystallises”, by which she meant accrues. This is supported by the fact that an accrued liability which is not yet payable can be set-off against a debt from the judgment creditor; and if an accrued debt is paid before it becomes payable, it ceases to be a debt: it is no longer due. This is reinforced by the contrast between the use of the word “due” in s. 24(2) and the word “enforceable” in s. 24(1). The other parts of the 1980 Act in which the word “due” appears, upon which DB relied, namely sections 19, 20(5) and 22, provide no assistance because they are concerned with the bringing of suit rather than execution.

The Judge considered the legislative history of section 24, which originated in sections 40 and 42 of the Real Property Limitation Act 1833, and can be traced into the consolidating Limitation Acts of 1939 and 1980. The history is recounted in detail in the speech of Lord Lloyd in Lowsley v Forbes [1999] 1 AC 329. The Judge concluded that this showed that s. 24(1) is concerned with actions on the judgment only, not execution; whereas s. 24(2) is concerned with execution. Since there is no limitation period for enforcement by execution, there was nothing unjust in Parliament having imposed a cut-off point for the recovery of interest; on the contrary, otherwise a judgment creditor could execute a judgment whenever it saw fit and recover interest in full going back decades. She treated this as a powerful policy argument in favour of her construction because it encouraged a judgment debtor to enforce its judgment with due expedition and discouraged the pursuit of stale claims. She derived further support from the fact that the House of Lords in Lowsley was seemingly unperturbed that, even in circumstances where enforcement had been delayed beyond six years by fraudulent concealment on the part of the judgment debtor, the blameless judgment creditor could still only recover interest going back six years. Although a judgment creditor might not be at fault in not achieving an assessment within six years, the court had sufficient tools to do justice by issuing interim costs certificates. Conversely, a receiving party who delays unnecessarily may find all or part of the Judgment Act interest disallowed [under CPR Part 47.8(3)]. The two appellate authorities upon which DB relied, namely Barclays Bank plc v Walters (unrep) 13 October 1988 and ( (1851) 1 De G M & G 24Toft v Stephenson42 ER 461), ( (1854) De G M & G 73543 ER 1955) (sub nom Toft v Stevenson), did not dictate any different conclusion.

Submissions

Mr McLeod and Mr Morris presented their arguments on the appeal with exceptional skill and economy, to which no summary can do full justice. I will refer to them in the course of my analysis and conclusions.

Principles of statutory interpretation

There was no real dispute about the principles applicable to statutory construction, following the recent Supreme Court decisions in R(O) v Secretary of State for the Home Department[2022] UKSC 3[2023] AC 255; and Potter v Canada Square Operations Ltd[2023] UKSC 41 [2023] 3 WLR 963. So far as relevant they can be summarised as follows:

(1) Statutory interpretation involves an objective assessment of the meaning which a reasonable legislature as a body would be seeking to convey in using the statutory words under consideration. Words and passages in a statute derive their meaning from their context, and must be read in the context of the section as a whole, a relevant group of sections, or the statute as a whole.

(2) One aspect of this context is that there is a presumption that where the same words are used in an Act, they have the same meaning; and that where different words are used they have a different meaning; the weight of any such presumption will itself depend upon the context: Bennion, Bailey & Norbury on Statutory Interpretation 8 ^th edn. section 21.3.

(3) The words are the primary source by which meaning is ascertained. External aids to construction can assist if they enable the court to identify the purpose of a statutory provision or the mischief at which it is aimed, but these play a secondary role to the language used by Parliament. They cannot displace the meaning conveyed by the words of a statute which after consideration of the context are clear and unambiguous and do not produce an absurdity.

(4) In the case...