CATALYST RECYCLING LIMITED v NICKELHÜTTE AUE GmbH

A shipment complying with the EU regulatory framework is not rendered unlawful merely because officials question whether an adequate financial guarantee exists. The destination authority may intervene only where it has sufficient reason to believe that the authority of dispatch has failed properly to determine the guarantee. A company’s change of name does not invalidate a guarantee issued to the same legal entity. In assessing contractual damages, the court selects the least burdensome reasonable mode of performance for the defendant, while considering the interests of both parties. Where loss of profits cannot be measured, a reasonable release payment may be awarded in an appropriate case. Delay alone does not waive unpaid contractual invoices.

The claimant operated an exclusive agency arrangement under which it sourced waste metal in the United Kingdom and Irish Republic for processing by the defendant in Germany. The defendant terminated the arrangement after the German destination authority questioned whether the claimant’s financial guarantee remained valid following a change of company name and shipments were quarantined.

The claimant contended that the shipments were lawful because the guarantee was in fact valid. It claimed damages for the defendant’s alleged repudiatory breach, including lost profits, alternatively a reasonable release payment and wasted expenditure. The claimant also sought payment of unpaid invoices. The issues concerned the legality of the shipments, the validity of the termination, the basis and period of recoverable damages, and whether the invoices had been waived or required an account.

1. Shipments. The December 2004 GB and Irish shipments were lawful. Under EU Regulation 259/93, Article 27 required an adequate financial guarantee, and such a guarantee was in place. The destination authority’s concern did not itself make otherwise lawful shipments unlawful. The guarantee remained valid because the claimant and the company named in the guarantee were the same legal entity despite the change of name.
2. Under section 7 of the German Waste Movement Law, responsibility ordinarily rested with the authority of dispatch. The destination authority could intervene only in exceptional circumstances where it had reason to believe that the authority of dispatch had failed properly to determine whether adequate security existed. That threshold was not met. The Irish objection was also made too late to render the shipment unlawful.
3. Termination and loss. The defendant’s termination of the Agency Agreement was a repudiatory breach. The agreement permitted notice during the final year of the five-year term, so damages ran to 22 October 2006. The claimant established that the breach caused the loss of the JMC business.
4. Following Paula Lee v Robert Zehil & Co [1983] 2 All ER 390 and Lavarack v. Woods of Colchester Ltd [1967] 1 Q.B. 278, damages were to be assessed by selecting the least disadvantageous reasonable mode of performance for the defendant, considering both parties’ interests. The actual rate of NHA’s subsequent direct trading with JMC was the appropriate primary basis, subject to deducting costs of work the claimant would have performed and excluding charges that would not have been made.
5. If loss of profits could not be established, a reasonable sum for release from the Agency Agreement would be recoverable, consistently with WWF – World Wide Fund for Nature v World Wrestling Federation Entertainment inc [2007] EWCA Civ 286. Wasted expenditure attributable to the breach was recoverable in principle.
6. The unpaid invoices were properly incurred. Delay alone did not establish waiver, and there was no evidence of express or implied waiver. The invoices could be pursued as debts without ordering an account.

Judgment was entered for the claimant in respect of the unpaid invoices, with damages for the contractual breach to be determined on the stated basis.