Mobis Parts Australia Pty Ltd v XL Insurance Company SE (No 8)
[2017] NSWSC 1507
•07 November 2017
Supreme Court
New South Wales
Medium Neutral Citation: Mobis Parts Australia Pty Ltd v XL Insurance Company SE (No 8) [2017] NSWSC 1507 Hearing dates: 1 November 2017 Decision date: 07 November 2017 Jurisdiction: Equity - Commercial List Before: Stevenson J Decision: Damages to be calculated to take account of the matters at [16], [27] and [35]
Catchwords: DAMAGES – certain matters not established – what allowance to be made Cases Cited: General Accident Insurance Asia Ltd v Sakr [2001] NSWCA 402
Mobis Parts Australia Pty Ltd v XL Insurance Company SE (No 7) [2017] NSWSC 1321Category: Consequential orders (other than Costs) Parties: Mobis Parts Australia Pty Ltd (Plaintiff)
XL Insurance Company SE (First Defendant)
AIG Europe Limited (Second Defendant)
UNIQA Versicherungs AG (Third Defendant)Representation: Counsel:
Solicitors:
T Mehigan and E Ball (Plaintiff)
D S Weinberger (First Defendant)
Ashurst Australia (Plaintiff)
McCabes Lawyers (First Defendant)
Hicksons Lawyers (Third Defendant)
File Number(s): SC 2015/281297
Judgment
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I gave judgment in this matter on 29 September 2017 (Mobis Parts Australia Pty Ltd v XL Insurance Company SE (No 7) [2017] NSWSC 1321).
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These reasons assume familiarity with that judgment.
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I shall use the same abbreviations here as in those reasons.
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In relation to a number of issues concerning the quantum of Mobis’s claim, I:
concluded that Mobis had not established aspects of its claim;
said that one possible consequence of that failure was to reject that aspect of Mobis’s claim entirely; but
invited submissions as to whether an alternative course was available.
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I have now heard submissions from Mobis and XL in relation to those matters.
Building claim – more robust construction
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It was common ground at the hearing that the warehouse that Mobis constructed to replace that which collapsed on 25 April 2015 is more robust than its predecessor.
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As I recorded (at [778]), Mobis incurred some $793,000 costs in relation to extra steel work that was incorporated into the reconstructed building and made no claim on XL for that cost.
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The addition of that extra steel work resulted in the need for additional piles, pile cappings and pad footings.
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At [784] to [789], I considered the observations of the Court of Appeal in General Accident Insurance Asia Ltd v Sakr [2001] NSWCA 402.
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I then said:
"In my opinion, XL has sustained its evidentiary onus of showing betterment; namely, that the reconstructed warehouse, as well as having additional steel columns, has additional piles, pile capping and pad footings.
Mobis has not proved, and allowed as a deduction of its claim, the value of that betterment.
But some allowance must be made.
In Sakr, Hodgson JA said at [79] that in such a circumstance:
‘The situation would be one where a judge would have to do his or her best on the basis of inadequate material, erring within the area of uncertainty against the party responsible for the deficiency of evidence.’
Here the party ‘responsible for the deficiency of evidence’ is Mobis.
Even doing the best I can, on the basis of the ‘inadequate material’ before me, I can only guess what part of the amount claimed by Mobis for the reinstatement of the warehouse is referrable to the extra piles, pile capping and pad footings.
In those circumstances, one alternative is simply to reject Mobis’s building case in its entirety on the basis that it had not proved the damage in respect of which it is entitled to indemnity.
However, I will invite submissions as to whether there is an alternative course available.” [At [790] to [797]]
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I did not intend by those paragraphs to invite submissions as to whether my analysis of Sakr, or its application to the facts of this case, was correct.
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Mobis has drawn attention to evidence which suggests that the likely cost of replacing existing pile capping at the warehouse was in the order of $855 and that 48 additional pile caps were installed when the warehouse was reconstructed. Thus, it was submitted, that the reasonable cost of installing those 48 additional pile caps would have been in the order of $41,000.
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That does not take account of the cost of the extra piles and pad footings themselves.
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Mobis calculates that, based upon my findings, the value of its building claim is in the order of $15.2 million.
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For reasons which I trust are obvious, and despite what I said as recorded at [10] above, I am reluctant to reject that claim entirely merely because of the shortcoming that I have found concerning this aspect of the building case.
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In those circumstances, doing my best on the basis of the “inadequate material” before me (to adopt Hodgson JA’s expression in Sakr), I propose to deduct a total of $100,000 from Mobis’s claim on account of the betterment constituted by the additional piles, pile cappings and pad footings.
Undamaged stock
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At [931] to [939] I concluded that it was likely that Mobis had destroyed some stock that was in saleable condition, albeit in packaging which was damaged during the warehouse collapse.
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I concluded:
“There is no evidence before me as to how much stock was destroyed for this reason, or what its value was.
Some allowance must be made on this account.
It is for Mobis to prove how much of its stock was damaged by the collapse. As it appears likely that Mobis has, evidently for reasons of practicality, itself destroyed stock which was not damaged in the collapse, unless Mobis proves the value of the stock so destroyed, it cannot make out the total claim that should be the subject of indemnity.
As in the case of the extra piles and footings issue (see [795]-[797] above), one possible course is simply to dismiss Mobis’s claim for damage to stock for the reason that this element (which would constitute a deduction from its claim) is not proven.
However, I will invite submissions as to whether any alternative course is available and preferable.” [At [935] to [939]]
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Again, I was not inviting a submission as to whether my conclusion that some stock in saleable condition had been destroyed was correct.
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Mobis’s total claim for stock was in the order of $27.5 million. Based upon my reasons, subject to this question, Mobis is entitled to recover something in the order of $6.3 million.
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Again, I am reluctant to dismiss Mobis’s claim in its entirety because of the evidentiary shortcoming in this area.
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At [848] I found that Mr Stoddart, Mobis’s General Manager Warehouse and Logistics, prepared a document called “Demolition and Recovery Process” which stated, amongst other things, that if stock appeared to be in “saleable condition” it was to be removed from the warehouse for further inspection elsewhere and an assessment made as to whether it was in “saleable condition” which assessment “may involve unpacking for detailed inspection”.
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I also found (at [932]) that Mr Stoddart accepted that there would have been occasions where a box containing stock was wet but where the contents of the box was housed in plastic wrapping and was entirely dry. Mr Stoddart had said that such contents were not capable of inspection because “there are millions of parts” and “we just couldn’t have done it”.
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Mr Stoddart’s unchallenged evidence was that the total value of the saleable stock retrieved from within the warehouse after the collapse was $123,590 (at [849]).
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If I am not to reject Mobis’s claim for stock entirely, I must come to a conclusion as to the value of the stock which was discarded by reason of damaged packaging but which was, nonetheless, itself undamaged and in saleable condition.
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The best I can do is to assume that it was a figure in the order of the stock found to be in saleable condition.
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Accordingly I propose to deduct from Mobis’s claim an amount of $125,000 on this account.
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I should add that Mobis referred to cl 4.11 of the Local Policy which, relevantly, provided:
“The Insured shall have full right to the possession of all Goods involved in any loss under this Policy, and shall retain control of all damaged Goods. The Insured, exercising reasonable discretion, shall be the sole judge as to whether the Goods involved in any loss under this Policy are fit for consumption or use, and no Goods so deemed by the Insured to be unfit for consumption or use shall be sold or otherwise disposed of except by the Insured or with the Insured’s consent, but the Insured shall allow the Company any salvage obtained by the Insured on any sale or other disposition of such Goods.”
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However, although that provision was drawn to my attention in the course of the hearing, Mobis did not seek to deploy it in relation to this aspect of its stock claim. The question of whether Mobis exercised “reasonable discretion” in discarding, without inspection, stock in damaged packaging, was not explored at the hearing. It is not a matter I am prepared to entertain now.
Business interruption – loss of gross profit, additional labour costs
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Both Mobis and XL adduced expert evidence on these questions.
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Neither expert made any allowance for the effect of the 30 July 2015 fire on Mobis’s profitability or labour costs.
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At [1077] and [1078] I concluded that the fire must have had some effect on both these matters.
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As with the issue of extra pilings and saleable stock, I concluded (at [1079] and [1080]) that, in the absence of any evidence on this subject, one available course was to simply disallow these aspects of Mobis’s claim. Again, I invited submissions as to whether there was any alternative course.
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I was not meaning to invite submissions as to whether my conclusion that the fire must have had an effect on these matters was correct.
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As Mobis offered no submission as to what alternative course was available (and as, so far as concerns loss of gross profit, it appears that the effect of my findings concerning rate of gross profit (at [1062] to [1064]), period of lost sales (from [1065] to [1068]) and rate of trend (at [1069] to [1075]) is that Mobis has suffered no loss of profit) I propose not to allow any amount for loss of profit, and not to allow that part of Mobis’s claim for additional labour costs as was not accepted by XL (that is $39,104 – see [1082]).
Other matters
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There is no longer any dispute about the adjustment that should be made to Mobis’s contents claim on account of average or about Mobis’s claim for capital items and depreciation.
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I have been assured that, in the light of these and my earlier reasons, the parties can reach agreement on the appropriate deductible.
Conclusion
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I invite the parties to confer and agree on the amount of the judgment that should now be entered for Mobis against XL.
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The further matter awaiting consideration is the question of costs.
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If the parties are unable to agree about the costs order that should be made in the proceedings, I invite them to confer and agree on a timetable for the exchange and delivery of submissions.
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Decision last updated: 13 December 2017
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