Denella Holdings Pty Ltd v Container Swing Lift Services Pty Ltd

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: DENELLA HOLDINGS PTY LTD -v- CONTAINER SWING LIFT SERVICES PTY LTD [2006] WADC 172

CORAM: COMMISSIONER LEY

HEARD: 10 & 11 OCTOBER 2006

DELIVERED : Delivered Extemporaneously on 12 OCTOBER 2006 typed from tape and edited by Trial Judge

FILE NO/S: CIV 1577 of 2001

BETWEEN: DENELLA HOLDINGS PTY LTD (ACN 098 949 976)
Plaintiff
AND
CONTAINER SWING LIFT SERVICES PTY LTD (ACN 010 877 791)
Defendant

Catchwords:

Torts - Negligence - Damage to building - Disruption of business - Claim for consequential loss - Liability admitted - Causation - Proof of damage - Turns on own facts

Legislation:

Nil

Result:

Judgment for the plaintiff

Representation:

Counsel:

Plaintiff: Ms A R Aria-Retnam
Defendant: Mr A P Hershowitz

Solicitors:

Plaintiff: Jarman McKenna
Defendant: Srdarov Richards Burton

Case(s) referred to in judgment(s):

Bonham‑Carter v Hyde Park Hotel Ltd (1948) 64 TLR 177
Enzed Holdings Pty Ltd v Wynthea Pty Ltd (1984) 57 ALR 167
JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237

Case(s) also cited:

Nil

COMMISSIONER LEY: This is a claim for damages by the plaintiff against the defendant arising out of an incident which occurred on 18 October 1999. On that day, a truck owned by the defendant and driven by one of the defendant's employees, was delivering a seatainer to business premises at 12A Harold Street in Dianella.
In order to lift the seatainer off the tray of the truck, the defendant's truck driver prepared to operate a crane on the back of the truck. To stabilise the crane, the truck driver put down a number of outriggers on various sides of the truck. He set the leg of one of the outriggers onto the lid of a soak well on the premises.
When he operated the crane and the outrigger took the weight, the leg of the outrigger and the weight placed upon it by the truck caused the lid of the soak well to collapse and the tray of the truck tilted over. As a result, the seatainer slid off the tray and crashed into the wall of a building on the adjoining premises at 12 Harold Street, Dianella.
At that time, a company called Visarell Pty Ltd, which was the trustee for the Woodsies Windscreens Unit Trust ("the Trust"), which traded as Woodsies Windscreens Repairs, carried on business at 12 Harold Street. Visarell was in the business of supplying and fitting windscreens, window glass and other spare parts to veteran, vintage and classic cars.
Visarell, as the trustee for the Trust, rented the premises at 12 Harold Street from the registered proprietors, John Stephen Apathy and Gail Mary Apathy, who were also directors of and shareholders in Visarell and unit holders in the Trust. Mr and Mrs Apathy had insured the building at 12 Harold Street against accidental damage and, therefore, immediately following the accident, made a claim against their insurer and asked it to repair the damage to the building at its (the insurer's) cost.
The insurer agreed to do that and the building was repaired at the insurer's cost. During the repairs, it was not possible for Visarell to occupy a reception area or two offices at the front of the building. In addition, spare parts and other materials, which had previously been displayed and kept in the reception area and on a mezzanine floor at the front of the building, had to be relocated from the front of the building to two rooms at the rear: one which was used as a warehouse to store stock and the other which was a manufacturing area.
To overcome the loss of its reception and offices, Visarell hired a transportable office and other necessary equipment and had the transportable office placed, with the agreement of the proprietors, on premises situated at 14 Harold Street, next door to the premises occupied by Visarell but on the opposite side from the premises to which the seatainer was to have been delivered.
The transportable office was placed at 14 Harold Street a few days after the accident. Mr Apathy, who gave evidence for the plaintiff, could not remember exactly when that occurred. However, according to invoices issued by Coates Hire Service, the company which hired the transportable office and the other equipment to Visarell (exhibit 7), the hire of the office and other equipment by Visarell commenced on 22 October 1999.
Accordingly, I find that that was when Visarell's hire of the transportable office and the other equipment commenced.
There was some dispute as to how long the transportable office and the other equipment remained at 14 Harold Street being used by Visarell while the repairs to the building at 12 Harold Street were being carried out. In his evidence‑in‑chief, Mr Apathy claimed that the repairs took 11 weeks from about the time of the accident and that it took Visarell another week after that to move back into 12 Harold Street. Mrs Apathy, who also gave evidence for the plaintiff, was less definite. She said Visarell was out of its premises for 11 weeks but it might have been 10 weeks and a few days.
Mr Apathy said Visarell did not move back into its premises until mid‑January. Mrs Apathy could not say when that occurred. However, in cross‑examination, there was put to Mr Apathy a Coates Hire invoice dated 30 December 1999 (part of exhibit 7), which indicated that the hire of the transportable office was terminated on 17 December 1999 and that the office was removed from the site and returned to the Coates Hire branch from where it had come on 20 December 1999.
Also put to Mr Apathy in cross‑examination was a letter which he wrote to AON Insurance Brokers, representing the insurer of the defendant, dated 7 January 2000 (exhibit 4), in which he said that Visarell had been out of its premises for "approximately nine weeks." Although Mr Apathy denied it, it seems likely that that letter was written by him after Visarell had moved back into its own premises. It seems improbable to me that he would have made a claim against the defendant's insurer until that had happened.
Mrs Apathy was also cross‑examined about that matter and was shown the Coates invoice. She said she recalled that it was close to Christmas 1999 when the transportable office was sent back. That is consistent with the notation on the invoice. I consider that the dates appearing on the Coates Hire invoice, corroborated to some extent by the evidence of Mrs Apathy, are much more likely to be accurate than Mr Apathy's recollection over six years after the event.
In addition, Mr Apathy's oral evidence is contradicted by his own statement in his letter dated 7 January 2000 to AON Insurance Brokers. Accordingly, I find that Visarell was out of its own premises and was conducting its business from the transportable office at 14 Harold Street from 22 October to 17 December 1999, a period of exactly eight weeks.
These proceedings were instituted by Visarell on 15 June 2001. However, on 19 July 2001, an order was made by the Supreme Court of Western Australia that Visarell be wound up on the ground of insolvency. That order was made on the application of the Australian Taxation Office, which claimed that Visarell then owed $177, 612.50 of unpaid PAYG tax, superannuation guarantee charges and penalties (exhibit 10).
In his evidence, Mr Apathy said that, prior to 2000, he had understood that Visarell owed no tax or only a small amount of tax to the ATO. However, he said that the ATO had audited Visarell in about 2000 and, following that audit, had claimed unpaid tax in a substantial amount dating back to 1993. He said he disputed the amount of the tax and Visarell's liability for it. He said that, notwithstanding correspondence between him and the ATO about those matters, he had not known of the order winding up Visarell until he received a visit from the appointed liquidators of Visarell several days after 19 July 2001. Mrs Apathy said much the same thing.
Mr Apathy said that, after the liquidation of Visarell, its business continued and he worked as an employee of the business for some time. He said that, after the liquidators had obtained some valuations of the plant, equipment and stock of the business, he and his wife incorporated a new company, the plaintiff, and purchased the business including the stock, plant and equipment from the liquidators.
Mr Apathy claimed that the plaintiff had paid the liquidators $360,000 to purchase the business. However, the only sale agreement which I was shown (dated 25 January 2002, but which was not admitted into evidence because a stamped copy could not be produced) suggested that the purchase price was in fact $80,000 and included an amount of $19, 998, which was said to be the value of Visarell's claim in these proceedings against the defendant.
On 8 August 2005, the plaintiff obtained an order substituting it as the plaintiff in this action in lieu of Visarell. On 18 August 2005, the plaintiff filed a statement of claim pleading the accident and the damage which it had caused to the premises at 12 Harold Street and alleging that that damage and other consequential loss, which it said Visarell had suffered, was caused by the negligence of the defendant by its employee, the truck driver. The plaintiff also alleged that, pursuant to the sale agreement dated 25 January 2002, Visarell had assigned to the plaintiff the right to sue the defendant in this action.
On 14 October 2005, the plaintiff filed a substituted statement of claim. In that pleading, the plaintiff claimed as damages from the defendant in effect:
(a) the cost of repairing the damage to the building at 12 Harold Street;
(b) the cost of hiring the transportable office;
(c) the cost of installing electrical cables to the transportable office;
(d) labour costs for the temporary move of the business to the transportable office;
(e) loss of earnings suffered by Visarell while it had to operate out of the transportable office;
(f) bank fees and interest paid as a result of the disruption of Visarell's business;
(g) taxation penalties paid by Visarell as a result of the disruption of its business;
(h) consultants' fees incurred in attempting to manage Visarell's business disruption and ultimately its liquidation; and
(i) Visarell's excess on its insurance policy.
No specific amounts were claimed in respect of any of those heads of damage.
On 31 October 2005, the defendant filed a defence in which it denied that it had been negligent, alleged that Visarell had been negligent, said that its (Visarell's) negligence had contributed to the accident and denied that its conduct had caused Visarell to suffer the alleged or any damage.
At the beginning of the trial, counsel for the plaintiff told me that the plaintiff would not press its claim for damages for the cost of repairing the damage to the building at 12 Harold Street (which was hardly surprising when I was told during the trial that the building was not owned by Visarell but was owned by Mr and Mrs Apathy and that their insurer had paid for those repairs).
Also at the beginning of the trial, counsel for the defendant told me that, contrary to the terms of the defence, the defendant would admit that it had been negligent and that its negligence had caused the accident. However, he said that the defendant still maintained that the accident had not caused Visarell to suffer the loss alleged. I then granted the defendant leave to amend its defence to reflect its change of plea.
During her opening, counsel for the plaintiff told me that the plaintiff was claiming as damages:
(a) $1,079 being the cost of hiring the transportable office;
(b) $1,580 being the cost of installing the electrical cabling to the transportable office,
(c) $1,240 for labour costs incurred as a result of the temporary move of the business, and
(d) $35,000 ‑ $50,000 being loss of "earnings" suffered by Visarell while it had to operate out of the transportable office.
Counsel also told me that the plaintiff claimed as damages a total of $57, 158 paid to the liquidators of Visarell and $11,411 for stamp duty. I pointed out to her that those claims were not pleaded in the statement of claim, at least to my mind, and she said that she would deal with those matters in due course.

Burden of proof

As a result of the change in the defendant's plea, the trial was concerned only with the issues of whether the accident had caused the plaintiff to suffer the losses which it alleged, and if so, the quantum of those losses. In respect of those issues, the onus was at all times on the plaintiff to prove by admissible evidence, on the balance of probabilities, that the accident had caused Visarell's loss and the quantum of those losses.

Hire of transportable office

In the course of his address, counsel for the defendant conceded that this was a loss that was caused by the accident and was properly incurred in the sum of $1,079. Accordingly, I allow this part of the claim in that amount.

Cost of installing electrical cabling

Mr Apathy gave evidence that, as part of the move to the transportable office, Visarell engaged electricians to install electrical cabling from 12 Harold Street to the transportable office. However, no evidence was adduced of what they charged or whether they were paid.
Nevertheless, during the course of addresses, the parties agreed that there should be an allowance of $500 under this head. Accordingly, I make that allowance.

Labour costs

Mr Apathy said that, when Visarell moved into the transportable office, it paid one or some of its staff overtime to move stock and generally assist with the move. However, he did not say which member or members of staff did that work or how much overtime they were paid. No staff members gave evidence and the plaintiff did not produce any records of Visarell to prove the overtime worked or the amount paid for that work. In those circumstances, this head of damage has not been proved and I make no allowance for it.

Loss of earnings

Although this head of damage was termed "loss of earnings", counsel for the plaintiff acknowledged during her address that it was in fact a claim for profits lost by Visarell as a result of the disruption to its business caused by the damage to the building at 12 Harold Street and its temporary relocation into the transportable office. The only witnesses called by the plaintiff were Mr and Mrs Apathy. They both said that, as a result of the accident, the damage to the building and the temporary move to the transportable office, Visarell's business was disrupted and that there were some occasions when they lost potential customers because they could not supply them and others when they delayed in supplying existing customers.
However, neither of them could point to specific instances in which work was lost and neither produced in chief any documents tending to show that Visarell had lost profits as a result of that occasional loss of custom and those delays. It was not until Mr Apathy was cross‑examined that there were produced two "Special Purpose Financial Reports" for the years ended 30 June 1999 and 30 June 2000 (exhibits 2 and 3), which were effectively financial statements of Visarell and the Trust for those years, said to have been prepared by Mr P D Christian, a chartered accountant and formerly the accountant for Visarell and the Trust.
Each of the reports was signed by Mr Christian and dated 16 April 2000. As Mr Christian was not called to give evidence and the reports were effectively admitted into evidence by consent, it was never explained to me how Mr Christian could prepare accounts for the financial year ended 30 June 2000, two and a half months before that year had ended. That gave me some cause to doubt the accuracy of the figures contained in the report for that year.
Nevertheless, the reports indicated that the trading position of the Trust in 1999 and 2000 was as follows:
19992000          Increase/(Decrease)
Trading income         $600,947     $562,551     ($38,396)
Gross trading profit$      155,317     $119,487     ($35, 830)
Total expenses               $147,211     $180,384     $33,173
Net profit/(loss)             $8,106       ($60,897)    ($69,003)
In her closing address, and notwithstanding that she had said in her opening address that the plaintiff's claim under this head was between $35,000 and $50,000, counsel for the plaintiff submitted that the plaintiff's loss of profits as a result of the accident was $69,003, being the difference between the net profit made by the Trust in 1999, and the net loss made by the Trust in 2000.
However, apart from Mr and Mrs Apathy's rather vague claims that a few customers could not be supplied and other supplies were delayed as a result of the disruption to the business caused by the accident, there was no evidence which established, on the balance of probabilities, that the disruption between October and December 1999 was the cause of the total loss for the year reflected in the financial statements prepared by Mr Christian or any part of it.
Causation in circumstances such as these is usually proved by expert accounting evidence in which downturns in sales and increases in expenses during the period of disruption are identified and analysed and are then demonstrated to have led to the eventual loss or part of it. However, no such evidence was adduced in this case.
When it is alleged that the negligence of a person has caused physical damage to property and also consequential loss in the form of the loss of profits of a business, the general rule is that the plaintiff must prove those damages with as much precision as is possible in the circumstances: JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237; Enzed Holdings Pty Ltd v Wynthea Pty Ltd (1984) 57 ALR 167.
That is particularly so in actions in tort because, in such actions, damage is the gist of the action.
Accordingly, damage must be proved with reasonable certainty: see Jacobs, Damages in a Commercial Context p 324, par 15.10. As was said long ago by Goddard CJ in Bonham‑Carter v Hyde Park Hotel Ltd (1948) 64 TLR 177 at 179:
"It is not enough to write down the particulars [of damage] and…throw them at the head of the court, saying, 'This is what I have lost; I ask you to give me these damages.' They have to prove it."
It rather seems to me that that is what the plaintiff is doing in this case. It says that Mr Christian has prepared a report (exhibit 3) showing that there was a difference of $69,003 between the net profit which the Trust made in 1999 and the net loss which it made in 2000, and, without proving that that difference was related in any way to the disruption which had occurred between October and December 1999, asks me to find that that figure is the correct measure of loss of profits caused by the disruption.
I would also mention that when Mr Apathy first made a claim on behalf of Visarell in his letter dated 7 January 2000 to AON Insurance Brokers (exhibit 4), he submitted that Visarell's "loss of earnings" as a result of the accident was $76,898.32. He said that he arrived at that figure by comparing Visarell's trading income figures during the disruption (which he said was from October 1999 to January 2000) with its trading income figures for the same months in the previous three years. Although that was not the correct measure (only lost profit can be recovered as damages, not a reduction in trading income), a comparison between the trading income figures for the period of disruption and the trading income figures for the same months in the previous three years might have at least given a starting point for an analysis of whether Visarell had suffered a loss of profit as a result of the accident. However, no monthly trading income figures for the period of the disruption or any previous years were produced.
Also during the cross‑examination of Mr Apathy, there were admitted into evidence some draft financial statements for the Trust, also prepared by Mr Christian, for the year ended 30 June 2001 (exhibit 9). Included in those statements were the figures for the Trust for 1997 and 1998 years. They showed that the Trust's total trading income fell by almost $65,000 between the 1997 and 1998 years. Mr Apathy doubted those figures and could not explain the fall in income between 1997 and 1998.

That raises the distinct possibility that the loss suffered by Visarell in 2000 resulted, not from the disruption of its business caused by the accident, but from other factors.
On the evidence, I am not satisfied that Visarell or the Trust suffered any loss of profits during the time that it was obliged to operate out of the transportable office or, if it did, that any such loss resulted from the accident.

Bank fees and interest

No evidence was adduced to establish that Visarell incurred any additional bank fees or interest as a result of the disruption of its business. Therefore, I make no allowance under this head.

Taxation penalties

The plaintiff did not press this part of the claim.

Liquidators' fees

No evidence was adduced as to the fees charged by the liquidators or the payment of those fees. Nor was it proved that the disruption to the business caused by the accident caused Visarell to be wound up. It seemed fairly clear to me, on the evidence, that Visarell was wound up because the ATO did an audit in 2000 and then claimed that Visarell owed tax, superannuation guarantee charges and penalties dating back to 1993. That had nothing to do with the accident. Accordingly, I make no allowance under this head.

Excess on insurance policy

The plaintiff did not press this part of the claim.

Summary

In summary, therefore, I assess the plaintiff's damages as proved or agreed at $1,579, being:
Cost of hiring transportable office $1,079
Cost of installing electrical cables $ 500
Total$1,579
In addition, the plaintiff is entitled to interest on that amount at six per cent per annum from 18 October 1999 to judgment. That is a further $661.62. Accordingly, the plaintiff is entitled to judgment for $2,240.62.

[2006] WADC 172

12 October 2006 typed from tape and edited by Trial Judge