Rolls-Royce Holdings Plc v Goodrich Corporation

Where parties have contractually agreed when and on what basis interest is recoverable, the court will ordinarily give effect to that agreement when exercising its statutory discretion to award interest. A contractual interest mechanism may prevent statutory interest under Senior Courts Act 1981, section 35A, even where contractual interest has not been claimed or a procedural condition for payment has not been satisfied. A claimant cannot avoid the contractual limitation by presenting the underlying claim as damages rather than debt. Where contractual interest is running from the due date, failure to provide evidence of loss does not mean that section 35A(4) is inapplicable. Post-judgment interest remains available unless the contract clearly excludes it.

Goodrich had obtained judgment for $112,285,440 against the Rolls-Royce entities in proceedings concerning amounts payable under the ECSURS. The parties then disputed Goodrich’s entitlement to pre-judgment interest.

The Rolls-Royce entities relied on clause 44, which provided a contractual mechanism for interest on late payment, subject to proof of interest paid or foregone and a cap for the first three months. Goodrich argued that the clause did not apply to its debt and damages claims, or that section 35A(4) was not engaged because no contractual interest had been claimed or paid.

The court also considered whether any discretionary reduction was appropriate for delay in advancing the clause 11.1 claim, and the basis for post-judgment interest.

1. Clause 44 governed pre-judgment interest. Its wording addressed all sums not paid in accordance with the ECSURS. It provided the agreed mechanism of redress for late payment and, through its sufficiency wording, excluded other forms of redress for that consequence.
2. The contractual mechanism applied whether the claim was characterised as debt or damages. The damages claim was based on the failure to pay sums due under the agreement and could not escape the contractual restrictions by being pleaded in damages.
3. Section 35A(4) reflects the wider principle that the court should not award interest on a different basis where the parties have agreed when interest is payable. That principle is not dependent on section 35A(4) being technically engaged. Contractual arrangements are a factor of great weight in the exercise of the procedural discretion.
4. Where clause 44 applied, interest ran from the date payment was due, even though payment was conditional on evidence of loss. If Goodrich had suffered no qualifying loss, the contractual agreement meant that no interest was payable. Goodrich had neither asserted nor proved a clause 44 interest claim, so no pre-judgment statutory interest was awarded. Permission to appeal was granted on that issue.
5. If statutory interest had been awarded, the court would have made no reduction for delay. The delay was not the predominant cause of Goodrich being kept out of its money, and the claim could not have been quantified earlier. However, any award would have reflected clause 44’s three-month capped-interest period.
6. Clause 44 did not exclude post-judgment interest. The contractual right to interest merged in the judgment, and the court awarded judgment interest. For the US dollar judgment debt, the rate was fixed at US Prime under section 44A of the Administration of Justice Act 1970.

First-instance decision. The court granted Goodrich permission to appeal on the pre-judgment interest issue.