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High Court gives first ever decision on the effect of section 24(2) of the Limitation Act 1980 to costs orders.
Mrs Justice Dias has today given judgment on the correct interpretation of 24(2) of the Limitation Act 1980. Critically, she accepted Mr Vik’s submission that the subsection imposes a six-year statutory ‘cap’ on the amount of interest that can be recovered on a judgment debt. In that sense, its effect is conceptually different from the sections imposing limitation periods, which bar a cause of action after a period of time. Deutsche Bank was therefore only entitled to recover from Mr Vik the last six years’ worth of interest from the date on which it sought to recover it.
The decision of Mrs Justice Dias is now the leading authority on the application of section 24(2) to the enforcement of costs orders. However, there are a number of other points of interest in her judgment. First, she expressly doubted whether the decision in Hunt v Douglas Roofing that an order for costs to be assessed is a judgment debt for the purposes of section 17 of the Judgments Act 1838 remains good law. Impliedly, she suggested that the point should be revisited by the Supreme Court or Parliament. Secondly, her judgment is the first to spell out clearly what has been obliquely suggested before, which is that Parliament’s intention in enacting section 24(2) was to impose a statutory cap on recoverable interest. Thirdly, in reaching that decision, she accepted Mr Vik’s submission that there is a “very powerful policy argument in favour of such a cut-off, since it encourages a judgment creditor to enforce its judgment with due expedition”. That observation will likely be relevant to future arguments about the interpretation of various provisions in the Limitation Act.
The matter arose from the longest-running detailed assessment of costs in history, which took place over 100 days before Senior Costs Judge Gordon-Saker over many years. On 8th November 2013, Deutsche Bank obtained judgment for $250 million against Sebastian Holdings Inc, a company which Mr Vik controlled, following a 44-day trial in the Commercial Court. The bank was awarded 85% of its costs, assessed on the indemnity basis, along with a payment on account of £32,000,000. Those sums went unpaid by the defendant, and the bank obtained two non-party costs orders against Mr Vik in 2014 and 2016, making him liable to pay the bank’s costs. In 2019, the bank served a bill of costs seeking costs of over £53,000,000.
The assessment concluded earlier this year, and a final cost certificate was awarded in the bank’s favour for the balance of the unpaid costs. Mr Vik paid the interest which had fallen due on that sum in the last six years, but refused to pay over £700,000 of earlier interest on the basis that the bank was not entitled to it by virtue of section 24(2) of the Limitation Act, 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”. The bank, through its solicitors, dismissed that contention as being without merit and accused Mr Vik of having deliberately prolonged the detailed assessment to keep the bank out of its money and then to avoid paying interest. The Senior Costs Judge laid blame at the bank’s door for the length of time the assessment had taken and referred the question to a High Court Judge for determination. In passing, the Senior Costs Judge remarked that he did not consider that Mr Vik’s argument would succeed.
Before Dias J, counsel for the bank contended that interest on a judgment debt “became due” only once the amount of the principal had been quantified, since until then the judgment creditor could not meaningfully enforce its right to interest. Interest, he argued, became “due” only when it became “payable”. He relied on a number of authorities in support of that proposition. The Court rejected that argument and accepted Mr Vik’s submission that, giving the words their ordinary and natural meaning, a sum becomes “due” when the liability crystallises. She accepted Mr Vik’s further submission that 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. Both sides relied on the legislative history of the provision, going all the way back to the Real Property Limitation Act 1833, and on numerous authorities on the various subsequent enactments over the centuries. The Court accepted Mr Vik’s principal submission that, seen in context, the intention of Parliament was to impose a statutory ‘cap’ on the amount of interest that could be recovered, whenever a judgment came to be enforced. Mr Vik is therefore not liable to pay interest of over £700,000 sought by the bank.
Tom Morris acted throughout the detailed assessment for Mr Vik, instructed by James Clarke of Brecher LLP.
