Deutsche Bank AG v Sebastian Holdings Inc & Anor

For section 24(2) of the Limitation Act 1980, interest becomes due when it is payable and enforceable, not when the liability to pay interest accrues. The reference to arrears of interest is decisive: interest cannot be in arrears before a time for payment has passed.

Accordingly, where a costs order requires detailed assessment, interest may accrue from the date of the order but the six-year period for recovering it does not begin until the costs are quantified and the interest can be enforced. This construction accords with the use of the same language elsewhere in the Act and avoids time expiring before a judgment creditor can enforce the right.

DB obtained an order in 2013 that Sebastian Holdings Inc pay 85% of its costs, subject to detailed assessment. A later non-party costs order made Mr Vik liable for those costs. The detailed assessment began in 2017 and concluded with a final costs certificate on 11 May 2023.

The Costs Judge referred a limitation issue to the High Court. Dias J held that interest became due when it accrued from the costs order, with the result that DB could not recover interest accruing more than six years before the assessment. DB appealed from that decision, reported at [2023] EWHC 1527 (Comm).

The central issue was when time starts to run under section 24(2) of the Limitation Act 1980 for interest on costs which have yet to be assessed.

1. Appeal allowed unanimously. Popplewell LJ, with whom Males and King LJJ agreed, held that in section 24(2) of the Limitation Act 1980 the word due means payable in the sense of enforceable. Dias J had therefore erred in treating it as referring to the earlier accrual of the liability to interest.

2. In isolation, due can mean either owing or payable. Its statutory context resolved that ambiguity. Section 24(2) bars recovery of arrears of interest. Arrears presuppose that a sum has become payable and that the time for payment has passed without payment. The reference to the date on which “the interest” became due therefore means the date on which the arrears of interest became payable.

3. The surrounding provisions pointed in the same direction. Sections 19, 20(5) and 22 use due in relation to arrears and the commencement of limitation periods. The binding construction of section 20(5) in Barclays Bank plc v Walters was that interest became due for payment under the parties’ agreed payment terms. The presumption that the same word used for the same purpose has the same meaning was strong and unrebutted.

4. The policy of limitation legislation also supported that construction. A costs judgment creditor cannot enforce interest until detailed assessment quantifies the liability. Starting time earlier could remove the right to interest before enforcement was possible, and could encourage delay by the paying party. The procedural powers concerning detailed assessments did not provide a satisfactory answer to that injustice.

5. Interest on the costs had accrued from the 2013 costs order, but it did not become payable, and so did not become due for section 24(2), until the final costs certificate was issued in May 2023. DB’s alternative reliance on the 2016 non-party costs order did not arise for decision.

• Court of Appeal (Civil Division): Allowed DB’s appeal and held that interest under section 24(2) of the Limitation Act 1980 became due when enforceable following assessment.
• High Court (Commercial Court): Dias J held that interest became due as it accrued from the costs order: [2023] EWHC 1527 (Comm). That construction was reversed.