Case Nos: CL-2022-000294; CL-2022-000557; - [2025] EWHC 2529 (Comm)

Commencement Date

As to the start date, I was referred to the guidance given in the case of Quorum v Schramm (No. 2) [2002] 2 Lloyd’s Rep 72, which itself referred to what was said in BP Exploration Co. (Libya) Ltd v Hunt (No. 2) [1979] 1 WLR 783. Thomas J said this at [3]-[8]:

Although there is a considerable amount of authority on the question as to the date from which interest should run which was recently reviewed by Langley J in Kuwait Airways Corporation v Kuwait Insurance Co. [2000] LIRLR 678, the most helpful guidance is to be found in the judgment of Robert Goff J in BP Exploration Co. (Libya) Limited v Hunt (No 2) [1979] 1WLR 783. The passage at p 846, as Mr Justice Langley rightly observed, is not only a clear statement of principle but one which has stood the test of time and reconciled the applicable principles:

“…. interest will generally run from the date of accrual of the cause of action in respect of money then due or loss which then accrues; and in respect of loss which accrues at a date between accrual of the cause of action and judgment, from such date. For convenience, I shall refer to these dates compendiously as the “date of loss”, although I recognise that the term is not altogether appropriate in a case of restitution…..But the power to award interest is discretionary, and there is certainly no rule that interest will invariably run from the date of loss. It is no part of my task to attempt to define the circumstance in which the court will depart from the fundamental principle; indeed, since the discretion to award interest is unfettered, it would be improper to do so. There appear, however, to be three main groups of cases in which, in the exercise of its discretion, the court may depart from the fundamental principle. ”

Robert Goff J then considered the three groups of cases. Only the first is relevant to this issue. He said:

“The first group of cases concerns the position of the defendant. The court may consider, in the light of all the circumstances, that his position was such that it would not be just to make the defendant pay interest from the date of loss. It may do so if, for example, the circumstances were such that the defendant neither knew, nor reasonably could have been expected to know, that the plaintiff was likely to make a claim, and so was in no position either to tender payment, or even to make provision for payment if the money should be found due. In such a case, the court may in its discretion only grant interest from the date of the plaintiff’s claim, or even from such a date as will allow reasonable investigation of the claim. Again, to quote from Lord Wilberforce’s speech in the Firestone case, at page 836:

“In a commercial setting, it would be proper to take account of the manner in which and the time at which persons acting honestly and reasonably would pay””

Robert Goff J then concluded:

“The basic principle is, however, that interest will be awarded from the date of loss. Furthermore, the mere fact that it is impossible for the defendant to quantify the sum due until judgment has been given will not generally preclude such an award. Thus, in Admiralty, in collision cases where the ship is totally lost, interest has been held to run from the date of the loss (see eg The Berwickshire [1950] P.204 and Owners of Leisbosch Dredger v Owners of SS Edison [1933] A.C. 449, 468) and in the case of a salvage award, from the date of the rendering of the salvage services: see The Aldora [1975] Q.B. 748. There must have been many cases in the commercial court in which, although the quantum of damages was in doubt until the date of the judgment, interest was awarded from the date of loss.”

I therefore turn to apply these principles to the present claim. The first question is to determine when the sum became due under the policy. As a matter of technical and legal analysis, I accept an insurer is in breach in failing to pay the assured the sum due under the policy at the date of the loss. I agree with the view of Mance J in Insurance Corporation of the Channel Islands v McHugh [1997] LIRLR 94 at 137, where he said that insurance contracts are treated in law as contracts to hold the insured harmless against liability or the loss insured against; therefore insurers are in the absence of contrary provision in breach of contract as soon as the insured liability or loss occurs.

However, although the date of the loss is when the sum became due under the policy, it does not follow that the court awards interest in every case from the date of the loss. For example in the Popi M [1984] 2 Lloyd’s Rep 555 the assured put forward a claim on a basis substantially different to that which proved successful at trial. The trial judge (Bingham J) awarded interest from a period about 4 years and 4 months after the loss. The Court of Appeal awarded interest commencing 2 years after the date of the loss; Sir John Donaldson M.R. (with whom O’Connor LJ agreed) considered that the case was unusual and underwriters therefore needed time to make up their minds. May LJ, though not differing from the other judges in the result, expressed the view that although in most cases insurers would need to investigate claims, prima facie interest ought to be awarded from the date of the loss. Another example is McLean Enterprises v Ecclesiastical Insurance [1986] 2 Lloyd’s Rep 216, where interest was awarded by the trial judge (Staughton J) from a date some 5 weeks after the loss. In Kuwait Airways Corporation (to which I have referred) the loss occurred shortly after the invasion of Kuwait by Iraq on 2 August 1990, but interest was only awarded from 5 December 1990; the judge found that it was not clear that until 12 November 1990 that a claim in respect of loss of spares was being pursued and insurers needed a little time to appreciate that fact and consider the claim.

The decisions to which I have referred are but examples common in the experience of the Commercial Court in relation to insurance claims in unusual cases or those that are not straightforward. In such cases, the court usually exercises its discretion on the basis it is proper to allow insurers some time to consider the claim. The time varies accordingly to the nature of the loss, the way the claim is presented and the circumstances that require investigation. In many cases the time may be quite short. The court will always have regard to the particular circumstances specific to that claim.

AerCap contended that interest should run from the date of loss, which I have found to have been 10 March 2022; alternatively from 29 April 2022, the date on which AerCap made a claim under its OPs; alternatively from 9 June 2022, when the Claim Form in AerCap’s LP claim was issued.

AerCap’s War Risks Insurers argued that none of these dates is appropriate. They contended that AerCap should not be entitled to any pre-judgment interest on the basis that AerCap’s primary case throughout the trial had been that the loss of the aircraft was due to an all risks peril, and thus War Risks Insurers had not deprived AerCap of the use of its money. Alternatively they contended that AerCap was not entitled to interest from the date of loss of the aircraft because AerCap did not at that point have a cause of action under its LP cover; and that the same applied as of 29 April 2022 and 9 June 2022.

As to 10 March 2022, I agree with War Risks Insurers that it is not appropriate to take this as the start date for interest. This is because I have found that it was necessary, in order for there to be a successful claim under the LP, that there should at least have been a claim made on the OP (paragraph 280 of the Judgment). Whether this means that, strictly, AerCap had no cause of action under the LP before such a claim was made is not something which I need to decide because I consider that, in any event, it would not be appropriate as a matter of discretion to award interest to run from before the date of such a claim.

AerCap, in the alternative, commended 29 April 2022 as the date from which interest should run on the basis that that was the date of a claim made on the OP insurers. War Risks Insurers responded to that by saying that the claim made on 29 April 2022 was a claim on the all risks section of the OPs, and against the all risks reinsurers of those policies, and not against the war risks section or war risks reinsurers. No claim under the war risks section of the OPs was made, even in the alternative, until 25 May 2023, when an amended Claim Form naming the OP war risks reinsurers was served.

The distinction which War Risks Insurers sought to draw as to the claim made on 29 April 2022 being only against all risks insurers and not against war risks OP insurers is not, as a matter of fact, an easy one. The OP insurances of AerCap were generally one policy with one (Russian) insurer. A claim on that policy made on the basis that there had been an all risks loss could have been met, had it been accepted that the loss was a war risks loss, by the insurer saying that cover was actually provided under the war risks, not the all risks section of the policy.

More generally, I do not accept that the contingency which I recognised in paragraph 280 of the Judgment is that there should have been a claim made under the correct section of the OP. That appears to me to introduce a requirement which I did not find to be implicit in the LP cover, and which I do not consider can be read into it.

I do not, however, accept that it is appropriate simply to take the date of 29 April 2022 as the start date for interest. As recognised in paragraph 8 of Quorum v Schramm (No. 2), the court usually exercises its discretion to allow insurers some time to consider their position after a loss. That should not in the present case, in my view, be a very extensive time. Given the nature of the insurance and the circumstances of the loss the insured could reasonably expect promptitude from insurers. In my judgment, therefore, it is appropriate to take the date of 9 June 2022 as the start date for the running of interest. That is a date which both gave the OP insurance some time to respond, and LP insurers a fair time since the emergence of the loss to have considered their position.

I reject War Risks Insurers’ contention that there should be no pre-judgment interest. I consider that War Risks Insurers have deprived AerCap of the use of its money on the simple basis that, since 9 June 2022, AerCap has been claiming in its action as against the War Risks Insurers the sums for which War Risks Insurers have been found liable. War Risks Insurers have failed to pay them, and have denied that they were liable to pay them. I would add that it would appear to me to be unjust for AerCap not to be entitled to claim interest from War Risks Insurers on the ground that its primary claim was that there had been an all risks loss. That does not alter the fact that AerCap has been held out of the sums which, as I have held, it was entitled to from War Risks Insurers.

Rate

The second area of dispute was as to the rate of pre-judgment interest which should be awarded.

AerCap claimed a rate of US Prime, given that its claim was for a dollar amount, and given the decision in Lonestar Communications Corp LLC v Kaye [2023] EWHC 732 (Comm).

For their part, War Risks Insurers contended that US Prime was too high a rate to award. The court’s task, they contended, was to choose a rate which is a realistic reflection of the cost of borrowing of the class of person(s) to which the claimant belongs; and that here it could be seen that AerCap’s borrowing costs were less than Prime. They relied on a spreadsheet which had been produced during the course of disclosure in lieu of production of the underlying documents, which tabulated the average interest rate of borrowing between January and September 2024 for each of the AerCap companies which had owned the aircraft in issue. This showed an average cost of borrowing of some 6%, or 2.5% less than US Prime at the relevant dates. War Risks Insurers contended that this was a reflection of AerCap’s size and unique characteristics as the world’s largest aircraft leasing company. The rate which the court should order was therefore Prime less 2.5%.

AerCap responded to this by saying that War Risks Insurers had not properly put forward a case that AerCap’s actual borrowing costs were lower than Prime. As to the spreadsheet, AerCap said that this had been prepared for the purpose of responding to a disclosure request showing the average costs of borrowing for the AerCap SPVs in the period January to September 2024. It did not seek to show AerCap’s cost of borrowing. Most of the rates shown were for internal group funding, not external funding. Furthermore, it is not apparent when the facilities, giving rise to these rates, were entered into, and whether the rates specified were fixed or floating. This was important because interest rates had risen sharply after March 2022 to mid-2024. These issues had not been explored because insurers had not pleaded that AerCap’s cost of borrowing was lower than Prime, nor had they pursued the matter during the trial, for example by putting any points to relevant AerCap witnesses.