Court of Appeal clarifies interpretation of due in Limitation Act 1980 for interest on assessed costs

Citation: [2024] EWCA Civ 245
Judgment on

Introduction

This article examines the case Deutsche Bank AG v Sebastian Holdings Inc & Anor: [2024] EWCA Civ 245, a recent ruling by the Court of Appeal (Civil Division). The case concerns the interpretation of s. 24(2) of the Limitation Act 1980, particularly relating to when time starts to run for limitation purposes on interest on costs in circumstances where the costs order specifies that costs are to be assessed.

Key Facts

Deutsche Bank AG (DB) succeeded in its claim against Sebastian Holdings Inc (SHI) after a 2013 trial, with costs ordered on an indemnity basis to be assessed if not agreed. The case subsequently involved appeals against non-party costs orders involving Mr. Vik, SHI’s representative. The detailed assessment of costs commenced in 2017 and concluded in 2023 with a significant delay attributed to the appeals and the assessment process duration. A central issue referred to the High Court concerned construction on the commencement of the limitation period for interest on assessed costs. The High Court previously decided that interest commenced from the date of the original Costs Order, thereby precluding DB from recovering approximately £775,000 in interest due to the assessment delay.

The case focused on interpreting the term “due” as it appears in s. 24(2) of the Limitation Act 1980. The section stipulates that no arrears of interest on any judgment debt shall be recovered after six years from when the interest became due. The court had to determine if “due” meant when the liability to interest accrues or when interest becomes payable (enforceable).

The Court of Appeal’s reasoning involved the following legal principles:

  1. Statutory Interpretation: The court applied principles from R(O) v Secretary of State for the Home Department [2022] UKSC 3, which emphasizes the objective understanding of a reasonable legislature and the consideration of statutory words in the context of the entire Act.

  2. Contrast in Language: The use of contrasting terms such as “due” in s. 24(2) and “enforceable” in s. 24(1) was considered, leading to the interpretation that “due” in s. 24(2) means payable rather than simply accruing.

  3. Presumption of Consistent Meaning: The presumption that the same term within an Act is intended to carry the same meaning, barring a clear context suggesting otherwise, led to the conclusion that “due” connotes payable, in line with other sections of the Act (s. 19, s. 20(5), and s. 22).

  4. Impact of the Term “Arrears”: The term “arrears” within s. 24(2) was read to imply a past due payment, thus supporting the implication that “due” refers to a failure to make a payment that is already payable.

  5. Past Decisions as Precedent: Prior case law, specifically Barclays Bank plc v Walters, was used to support the interpretation of “due” as meaning payable within the limitation context.

  6. Policy Considerations: Limitation periods serve to balance the claimant’s rights against the defendant’s protection post-judgment, with the court highlighting that execution of judgments and accruing interest should not be unduly limited by the statute, allowing the receiving party ample time to enforce their rights before the limitation period triggers.

  7. Avoidance of Anomalies: Interpretation avoids an anomalous outcome where a receiving party is pressured to pursue assessment prematurely or where the paying party benefits from delaying tactics.

Outcomes

The Court of Appeal held that the term “due” in s. 24(2) refers to the point when interest on a costs order becomes payable, not merely when the liability accrues. On this basis, DB’s appeal was allowed, meaning the interest on the costs assessed commenced from the making of the Final Costs Certificate, not the date of the original Costs Order. The court found that the decision disallowing recovery of certain interest amounts based on the earlier assessment lacked legal support.

Conclusion

In conclusion, the Court of Appeal’s judgment in Deutsche Bank AG v Sebastian Holdings Inc & Anor emphasized a pragmatic and coherent interpretation of the term “due” within the context of the Limitation Act 1980. A careful balance of legal principles, statutory language, past precedent, and policy considerations informed this substantive clarification in limitation law. The court’s decision aids in mitigating injustices arising from long, complex, and delayed litigation processes, ensuring a receiving party is not unduly penalized for enforcement delays beyond its control.