Section 24(2) of the Limitation Act 1980, which provides that “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”, operates as a six-year statutory “cap” on the amount of interest which can be recovered on a judgment debt.
The High Court has settled the correct interpretation of section 24(2) of the 1980 Act in Deutsche Bank AG v Sebastian Holdings Inc and another [2023] EWHC 1527 (Comm), a long-running detailed assessment of costs.
On 8 November 2013, the claimant, obtained judgment for more than $243m against the defendant, a company controlled by Alexander Vik. The claimant was awarded 85% of its costs on an indemnity basis subject to detailed assessment, and a payment on account of just over £34.5m. The defendant failed to make payment and the claimant obtained non-party costs orders against Vik in 2014 and 2016, making him liable for the costs.
Under section 17 of the Judgments At 1838, every judgment debt carries interest from the date of judgment until payment unless the court orders otherwise. An order for payment of costs is a judgment debt, so interest accrues from the date of the order: Hunt v RM Douglas (Roofing) Ltd [1990] 2 AC 398. However, the order does not become payable until assessment has taken place: until then there is nothing to enforce.
In 2019, the claimant served its bill of costs seeking more than £53m. Following a detailed assessment which lasted nearly 100 days, the claimant obtained a final cost certificate for £37.7m in May 2023. Having paid the sums due under interim cost certificates, Vik paid the balance of the sum due together with interest accrued within the previous six years. He refused to pay earlier accrued interest.
The claimant argued that interest on a judgment debt only “became due” when it became “payable”, once the amount of the principal had been quantified. The court disagreed. It accepted Vik’s submission that, giving the words of section 24(2) their ordinary and natural meaning, a sum becomes “due” when the liability crystallises. The imposition in section 24(1) of a six-year limitation period on enforcing a judgment debt from when it becomes “enforceable” reinforced that interpretation. Seen in context, parliament’s intention was to impose a statutory “cap” on the amount of interest that could be recovered whenever a judgment came to be enforced.
Louise Clark is a property law consultant and mediator
