Mobis Parts Australia Pty Ltd v XL Insurance Company SE (No 8)

1. [1]

   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).

2. [2]

   These reasons assume familiarity with that judgment.

3. [3]

   I shall use the same abbreviations here as in those reasons.

4. [4]

   In relation to a number of issues concerning the quantum of Mobis’s claim, I:

5. [5]

   I have now heard submissions from Mobis and XL in relation to those matters.

Building claim – more robust construction

1. [6]

   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.

2. [7]

   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.

3. [8]

   The addition of that extra steel work resulted in the need for additional piles, pile cappings and pad footings.

4. [9]

   At [784] to [789], I considered the observations of the Court of Appeal in General Accident Insurance Asia Ltd v Sakr [2001] NSWCA 402.

5. [10]

   I then said:

6. [11]

   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.

7. [12]

   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.

8. [13]

   That does not take account of the cost of the extra piles and pad footings themselves.

9. [14]

   Mobis calculates that, based upon my findings, the value of its building claim is in the order of $15.2 million.

10. [15]

    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.

11. [16]

    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

1. [17]

   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.

2. [18]

   I concluded:

3. [19]

   Again, I was not inviting a submission as to whether my conclusion that some stock in saleable condition had been destroyed was correct.

4. [20]

   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.

5. [21]

   Again, I am reluctant to dismiss Mobis’s claim in its entirety because of the evidentiary shortcoming in this area.

6. [22]

   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”.

7. [23]

   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”.

8. [24]

   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]).

9. [25]

   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.

10. [26]

    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.

11. [27]

    Accordingly I propose to deduct from Mobis’s claim an amount of $125,000 on this account.

12. [28]

    I should add that Mobis referred to cl 4.11 of the Local Policy which, relevantly, provided:

13. [29]

    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

1. [30]

   Both Mobis and XL adduced expert evidence on these questions.

2. [31]

   Neither expert made any allowance for the effect of the 30 July 2015 fire on Mobis’s profitability or labour costs.

3. [32]

   At [1077] and [1078] I concluded that the fire must have had some effect on both these matters.

4. [33]

   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.

5. [34]

   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.

6. [35]

   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

1. [36]

   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.

2. [37]

   I have been assured that, in the light of these and my earlier reasons, the parties can reach agreement on the appropriate deductible.

Conclusion

1. [38]

   I invite the parties to confer and agree on the amount of the judgment that should now be entered for Mobis against XL.

2. [39]

   The further matter awaiting consideration is the question of costs.

3. [40]

   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.