The Law Debenture Trust Corporation Plc v Ukraine

When deciding whether to impose a condition on a stay or permission to appeal, the court must balance the risk of stifling the appeal against the risk that the judgment will remain unsatisfied. A condition should not be imposed where it may generate satellite litigation or make the appeal practically nugatory. Contractual provisions may require judgment-rate interest on a non-sterling debt both before and after judgment. Where statutory interest is awarded on unpaid contractual interest, the governing principle is compensation for being kept out of the money. Contractual trustee indemnities are given effect on a full indemnity basis, but disputed costs ordinarily require detailed assessment.

The judgment determined consequential matters following judgment for the claimant trustee on US$3 billion of notes in [2017] EWHC 655 (Comm). Ukraine had permission to appeal and sought an unconditional stay. The trustee sought a US$325 million payment into court as a condition of the stay and appeal, security for appeal costs, judgment-rate interest, and summary judgment for contractual costs.

The central issues were whether monetary conditions should be imposed pending appeal; the proper construction of the contractual interest clause; the rate of statutory interest on unpaid coupon interest; the effect of the trustee’s contractual indemnity; and whether costs should be summarily quantified or assessed.

1. Stay and appeal conditions. The principles governing conditions on permission to appeal are relevant to conditions on a stay. The court must balance the risk that a condition will stifle the appeal against matters such as non-compliance with orders and a real prospect that the judgment will remain unsatisfied. A condition requiring payment of the US$3 billion judgment debt would have made the appeal nugatory. The proposed US$325 million payment had no sufficiently compelling connection with the debt in dispute and might generate satellite proceedings. No condition was imposed on the stay or appeal.
2. Interest on principal. Clause 2.2.2 of the Trust Deed expressly provided for interest on overdue principal before and after judgment at the contractual rate or, if higher, the rate of interest on judgment debts under English law. The applicable judgment-debt rate was 8%, which exceeded the contractual 5% rate. The parties were entitled to agree that rate for a US dollar debt, and the contractual provision was enforced.
3. Interest on coupon. Clause 2.2.2 did not apply to unpaid coupon interest. Interest was therefore awarded under section 35 A of the Senior Courts Act 1981 according to the compensatory principle. The relevant party was the Noteholder. In the absence of evidence of borrowing costs, the court selected six-month US dollar LIBOR plus 3% rather than the higher alternative proposed by the trustee.
4. Costs. The trustee’s contractual indemnity covered liabilities properly incurred, meaning costs not improperly incurred, assessed in accordance with commercial reasonableness and the agreed full indemnity basis. The scope of the costs was recoverable, but the disputed quantum required detailed assessment rather than summary judgment. The trustee received an interim payment of 50% of its stated costs. A 15% deduction applied to costs of two contentious claims which had been stayed by agreement. No percentage reduction was made for unsuccessful issues that had nevertheless been properly incurred.
5. Security for appeal costs. If the interim costs payment was made, there was no cogent basis for security for appeal costs. The application could be renewed if payment was not made.

High Court (Commercial Court): Judgment on the notes was given for the trustee in [2017] EWHC 655 (Comm). Permission to appeal was granted to Ukraine. The present judgment determined consequential matters and imposed no monetary condition on the stay or appeal.