Court of appeal rules against Rolls-Royce in liability cap dispute

The Court of Appeal has ruled against Rolls-Royce Motor Cars in a dispute over the interpretation of a liability cap in a software contract with German technology firm Topalsson GmbH.

Rob Winder Senior Associate Chartered Legal Executive in our Dispute Resolution team provides an update.

The case arose after Rolls-Royce commissioned Topalsson in October 2019 to develop digital visualisation software for its car customisation service. The contract was terminated in April 2020 following delays, leading to a legal battle in which Rolls-Royce successfully counterclaimed for damages in the High Court last year.

The court ruled that Topalsson was liable for €5m in damages. However, Topalsson appealed on the grounds that the liability cap had been incorrectly applied.

In the latest ruling, Lord Justice Coulson determined that the liability cap should apply separately to both parties before any set-off calculations were made. This overturned the High Court’s approach, which had first deducted sums owed to Topalsson before applying the €5m cap. As a result, Topalsson’s liability was reduced to €4.2m.

“The cap must be applied to both parties’ liabilities separately before any set-off is calculated,” Lord Justice Coulson said. “To do otherwise would allow the liability cap to be circumvented.”

The court rejected Topalsson’s attempt to argue that interest on late payments should also be capped. It ruled that interest charges were a separate contractual obligation and not part of the capped liability.

For more information about the issues raised in this article please contact Rob on 01228 516666 or click here to send him an email.