Bulkhaul Ltd v Rhodia Organique Fine Ltd

In assessing damages for breach of contract, a claimant must give credit for the realisable market value of retained assets where reasonable efforts could have enabled their sale. The party alleging failure to mitigate bears the burden of proving it. A court may infer both the existence of a market and the value of goods from any sufficient relevant evidence; it need not identify a willing buyer at a specified price. Offers made before breach may remain relevant to market existence and value after breach, particularly where there is no evidence of a material change in value. The court may make the best estimate supported by the evidence, including evidence of offers to buy and sell, and may allow reasonable sale costs.

Bulkhaul agreed to lease 18 bespoke tanks to Rhodia for transporting hydrofluoric acid for a ten-year term. Rhodia repudiated the agreement in October 2004, and Bulkhaul accepted the repudiation. In proceedings for the unpaid rentals, liability had been determined in Bulkhaul’s favour. On the assessment of damages, the Leeds Mercantile Court held that Bulkhaul had failed to mitigate its loss by not making reasonable efforts to sell the tanks, and deducted their estimated net residual value from the damages, awarding £161,158.

Bulkhaul appealed, arguing that there was no sufficient evidential basis for finding either an available market or a value for the tanks. The central issue was whether the judge was entitled to infer a market and assess the tanks’ residual value from the evidence available.

Appeal dismissed. The court upheld the damages assessment and the deduction for the tanks’ net residual value.

1. Burden and mitigation. Rhodia bore the burden of proving that Bulkhaul had failed to take reasonable steps to mitigate its loss. Where the tanks were realisable with the degree of effort reasonably expected of Bulkhaul, Bulkhaul had to give credit for their market value. The judge was entitled to find that reasonable efforts could have resulted in a sale within three years of the breach; since the tanks remained unsold, credit had to be given for their market value.
2. Market and value. A judge may infer the existence of a market from any sufficient relevant evidence and may infer the value of goods from any sufficient relevant evidence of value. It is unnecessary to identify a willing buyer at a specified price. If the evidence is insufficient for a safe conclusion, the party bearing the burden fails; but properly drawn inferences cannot be attacked merely because they are estimates.
3. Evidence relied upon. The judge was entitled to consider the pre-breach Lanxess offers, because the fact of the offers evidenced a market and their amounts evidenced value. The offers remained relevant to the period after breach because there was no evidence of a fall in value, while other evidence indicated continuing demand, stable or increasing new-tank prices, and Bulkhaul’s own asking prices. Offers by Bulkhaul to sell at specified prices were also relevant evidence of value if made in good faith.
4. Assessment. The estimate of £20,000 per tank, less £2,000 sale costs, was supported by the evidence and was not arbitrary. Bulkhaul’s failure to adduce contrary evidence carried the risk that the judge would reach a conclusion on the evidence called by Rhodia. Lord Justice Keene and Lord Justice Sedley agreed with Lady Justice Smith.

• Leeds Mercantile Court: HH Judge Behrens awarded Bulkhaul £161,158 for breach of the lease and hire contract, after deducting the assessed net residual value of the tanks for failure to mitigate.
• Court of Appeal (Civil Division): Bulkhaul appealed. The court dismissed the appeal and upheld the assessment.