Contractual interest: plead it or lose it

In most monetary claims, a party will seek to recover interest on the debt or damages claimed.  In most circumstances, section 35A of the Senior Courts Act 1981 gives the Court a discretion to award interest on debt or damages at a rate they see fit.  Ordinarily this means that, even if you have not claimed interest on the debt or damages, the Court can still order the paying party to pay interest.  This is not the case, however, if you were entitled to claim contractual interest and failed to do so.

In Rolls-Royce Holdings plc v Goodrich Corporation [2023] EWHC 2002, the Court held that they did not have the power, under s35A of the Act, to award interest when the Claimant had failed to plead their claim for contractual interest, to which they were entitled, from the outset.

In the case of Rolls-Royce Holdings, Goodrich was successful in obtaining judgment against Rolls-Royce Holdings plc and then sought to claim pre-trial interest on the judgment sum.  Notably, Goodrich were entitled to contractual interest on sums due to them but failed to plead a claim for the same.  In denying Goodrich’s claim for interest (statutory or otherwise), the court relied upon s35A(4) of the Act which states the following:

“Interest in respect of a debt shall not be awarded under [s35A] for a period during which, for whatever reason, interest on the debt already runs.”

The court held that as Goodrich already had a contractual right to interest (which they had failed to plead), s35A(4) meant that Goodrich would not be entitled to statutory interest either.

This decision highlights the importance of ensuring that you are aware of the contractual terms that apply to the subject matter of any proposed claim and that you verify that your pleadings accurately reflect all relevant terms, including contractual interest.  Failure to plead terms that you are contractually entitled to rely on could result in you losing your entitlement to the benefit of the same entirely.

If you require advice and/or representation in respect of breach of contract or high value debt proceedings, contact our civil litigation solicitors by sending us an email, completing our online enquiry form or calling on 020 3813 5366.