Rolls-Royce Holdings PLC v Goodrich Corporation & Ors

On summary judgment, the court must decide whether the opposing case has a realistic, rather than fanciful, prospect of success. It must avoid a mini-trial, while deciding a short point of law or construction where the evidence is sufficient. The court should hesitate to make a final decision where further factual investigation could affect the outcome.

A contractual estoppel may arise where parties agree, through their contract, to proceed on the basis that a state of affairs exists, even if it does not. A novation by conduct requires consideration of the conduct of all three parties and any contractual formalities. Estoppel may prevent reliance on those formalities. Where a construction issue remains genuinely arguable, summary judgment should be refused.

Rolls-Royce Holdings PLC sought summary judgment for a declaration that it had validly exercised a call option concerning Goodrich Corporation’s engine-control-systems aftermarket business.

The option originated in agreements involving Rolls-Royce Group plc. Following a corporate reorganisation, later agreements between Rolls-Royce Holdings and Goodrich treated Holdings as the relevant counterparty. Goodrich disputed the alleged novation and argued that the December 2017 agreements had replaced or removed the earlier call option. Holdings exercised the option in October 2018, while negotiations concerning governmental approval remained unresolved.

The application raised issues of contractual estoppel, novation by conduct, misrepresentation, and contractual construction. The central question was whether Goodrich had a defence with a realistic prospect of success.

1. Summary judgment test. The court applied the principles in EasyAir Limited v Opal Telecom Limited: the opposing case must have a realistic prospect of success; the court must avoid a mini-trial; and it must consider evidence reasonably expected to be available at trial. A short point of law or construction may be decided where the evidence is sufficient. The question is possibility, not probability (paras [30]-[33], [105]-[107]).
2. Contractual estoppel. The contractual documents showed that both parties proceeded on the agreed basis that the extended rights under the PCOA were vested in Rolls-Royce Holdings. That agreement was not merely a unilateral representation. The legal mechanism was secondary: Goodrich was contractually estopped from denying that Holdings was its counterparty, whether or not an actual novation had occurred (paras [56]-[58], [81]-[90], [119](ii)-(iii)).
3. Novation by conduct. An actual novation inferred from conduct requires consideration of the conduct of all three parties. Where formal contractual requirements apply, they must be satisfied unless the relevant party is precluded by representation, agreement or conduct from relying on them. The evidence concerning Rolls-Royce Group was insufficient to establish an actual novation summarily, although Goodrich’s conduct would have satisfied the consent requirement as between Goodrich and Holdings (paras [82]-[90]).
4. Misrepresentation. Goodrich’s proposed misrepresentation case could not defeat the application. The non-reliance clauses would prevent reliance on the alleged misrepresentation, and Goodrich had affirmed rather than rescinded the agreements. The argument was also unpleaded, although that was not by itself decisive (paras [64]-[67], [91]).
5. Construction. Goodrich’s construction that the December 2017 Letter Agreement prevented exercise of the call option after 31 December 2017 was tenable and had a real prospect of success. Summary judgment therefore could not be granted. The court provisionally preferred Holdings’ construction of the separate governmental-approval issue, but made no final determination because that issue required further argument and factual investigation (paras [93]-[117], [119](iv)-(v)).
6. Disposition. The application for summary judgment was refused (para [120]).