Lloyd's Maritime and Commercial Law Quarterly

Pre-judgment interest on liquidated and unliquidated sums

Jeremiah Lau *

Prior to the prohibitory rule laid down by Lords Ellenborough and Tenterden in the nineteenth century, the common law used to award pre-judgment interest. Sempra Metals v IRC (2007) has now lifted that prohibitory rule, and interest awards are again legitimate. In the pre-Ellenborough period, interest was awarded on liquidated sums but denied on unliquidated sums. This distinction may help shape our understanding of how pre-judgment interest should be awarded today. The development of this distinction in England was prematurely cut short. Focusing on the contractual context, this article draws on a comparative and historical approach in order to make sense of the liquidation distinction and situate it within the larger context of the law on remedies.


When can pre-judgment interest be awarded at common law? This article answers that question, referring primarily to contractual situations. This has practical significance, particularly in a commercial context. All forms of statutory interest are simple; compound interest is available only at common law.1 In a recent Privy Council decision, interest calculated on a compound basis was roughly 52 times greater than that calculated on a simple basis, and roughly 368 times the principal sum.2 This question also has doctrinal significance. Interest awards are one way that the law responds to the passage of time in the remedial context, and have received surprisingly little attention in the scholarship.
The early common law facility of an award of pre-judgment interest became subject to a prohibition. The English prohibitory rule began with certain judgments of Lords Ellenborough and Tenterden in the King’s Bench in the early nineteenth century, most notably Calton v Bragg,3 and was given the approval of the House of Lords in the London, Chatham and Dover Railway case4 in 1893. After the decision of the House of Lords in Sempra Metals v IRC,5 the prohibitory rule has been largely dismantled and pre-judgment

Pre-Judgment Interest


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