On 24 October 2017 the Court of Appeal handed down its decision in what has become known as the Waterfall IIA and B litigation (Burlington Loan Management Limited and others v Lomas and others  EWCA Civ 1462). The decision also covered an appeal of one point from the High Court Waterfall IIC decision. A number of the issues originally intended to be covered in the appeal fell away following the earlier Supreme Court decision in Waterfall I (see the joint administrators of LB Holdings Intermediate 2 Ltd v the joint administrators of Lehman Brothers International (Europe)  UKSC 38). The remaining issues concerned the calculation of, and the entitlement of creditors to, statutory interest, in accordance with Rule 2.88 under the Insolvency Rules 1986. By way of background, as it relevant for a number of the issues forming the subject of the appeal, under Rule 2.88(9) statutory interest accrues either at the rate specified in s.17 Judgments Act 1838 or the “rate applicable to the debt apart from the administration”, whichever is the higher.
Litigation over statutory interest is rare because statutory interest is only payable once all provable debts have been paid in full. However, following the payment in full of all provable debts, there remains in the LBIE estate a surplus of c.£7.9bn. There are, accordingly, significant amounts at stake in the litigation.