ACLBDD Holdings Ltd & Ors v Staechelin & Ors (Costs)

Interest on a foreign-currency judgment debt under section 44A of the Administration of Justice Act 1970 is determined by the compensatory principle. The court should award fair compensation for the creditor being kept out of its money. The fixed 8% rate under section 17 of the Judgments Act 1838 does not govern the exercise of that discretion where it would exceed the compensatory requirement. The court should not automatically use the judgment currency, the debtor’s presumed borrowing rate, or the return on a deposit. A pragmatic compromise between the claimant as a notional borrower and saver may be appropriate. Where the same compensatory assessment has already been made under section 35A of the Senior Courts Act 1981, a different rate under section 44A requires justification.

The judgment concerned consequential submissions following an earlier judgment in which the defendants were ordered to pay the LLP a US-dollar judgment debt of $10 million, with interest and costs. The court had previously awarded interest on the judgment debt at 3% above Bank of England base rate under section 35A of the Senior Courts Act 1981.

The parties then disputed the rate applicable to the judgment sum under section 44A of the Administration of Justice Act 1970. The LLP argued for 8%, or alternatively a rate based on US borrowing costs. The defendants argued for a rate based on deposit or US Treasury Bill returns. The issue was the appropriate application of the compensatory principle.

1. Applicable principle. The court determined that section 44A of the Administration of Justice Act 1970 confers a discretion directed to compensating the creditor for being kept out of its money. This was the principle identified in Novoship (UK) Ltd v Mikhaylyuk [2015] QB 499.
2. Rejection of proposed benchmarks. The statutory 8% rate under section 17 of the Judgments Act 1838 was materially higher than required to compensate the LLP. The court also rejected the US Prime Rate because there was no evidence that the LLP needed to borrow in the United States, or at all. A deposit rate or US Treasury Bill yield alone would fail to reflect the usual pragmatic compromise between the claimant as a notional borrower and saver, identified in Sycamore Bidco Ltd v Breslin [2013] EWHC 174 (Ch).
3. Rate selected. The court had already assessed fair compensation under section 35A of the Senior Courts Act 1981 at 3% above Bank of England base rate. The same compensatory question arose under section 44A, and no reason justified a different answer. The rate payable on the judgment sum was therefore 3% above Bank of England base rate from time to time.
4. Each party was provisionally directed to bear its own costs of the submissions on this issue.