A Brisbane retailer has won a $2 mil damages battle against the occupier of a nearby jewellery business whose burnt-out vacuum cleaner spread soot and smoke throughout the retailer’s premises.
Mitchell Ogilvie Menswear has carried luxury Italian suits, business shirts and high-end accessories as floor stock on display in its Edward St Brisbane premises for three decades.
The otherwise innocuous fire caused a fine layer of soot to settle on and impregnate most of the inventory –the pre-damage retail value of which was $4.5 mil from a buy-in cost of $1.68 mil – as well as the shop’s light fittings, carpets and wood grain wall paneling.
Chemical treatment of the garments to remove the strong odour and a greasy residue produced a variable result and dry-cleaning was not an option.
Cunningham Lindsey’s Brett Hanlon – appointed by Ogilvie’s insurer Allianz – agreed that it was impossible to bring the high-value stock back to a re-saleable condition and declared a total loss.
Fearing damage to his own reputation and that of the exclusive labels he supplied – were the damaged goods to be passed off by a discounter or auction house – Ogilvie accepted an Allianz proposal for him to retain the contaminated goods and pay it the “fire sale” value of that inventory.
But what were the contaminated goods worth?
Andrew Webber – a valuer with Lloyd’s Auctions Australia and 20 years experience – projected the stock would sell at auction between 5 cents and 10 cents to the dollar of regular retail price, yielding gross proceeds of somewhere between $220k and $450k.
Ogilvie paid Allianz an agreed $225k and then held a one-off “fire sale” offering for example, a bundle of 10 items – including shirts that usually sold at $250 and other apparel that retailed up to $595 per item – for $499.
Ogilvie – or rather his insurer Allianz – demanded the net loss of $1.24 mil being the wholesale value of the contaminated stock less salvage of $225k, from the jeweller’s insurer.
Because Ogilvie couldn’t produce accurate records of the fire sale price each item had sold for and had kept its doors open while dealing with the calamity, the latter insurer suspected the salvage ought to have been much higher than $225k.
The jeweller argued that the salvage value of the stock should be the midpoint of Mr Webber’s valuation namely $325k even though the valuer himself was only prepared to guarantee a recovery of $195k.
“The store could not accurately isolate and arrive at the sale price of the salvaged goods as distinct from new goods that were sold at about the same time,” observed Justice Peter Applegarth when the brawl came before him in the Supreme Court at Brisbane.
He was however was satisfied that $225k represented an amount for the goods that “a willing but not anxious vendor was prepared to accept from a willing but not anxious purchaser”.
He ordered Ogilvie and Allianz be paid that sum by the other insurer. Interest of $796k was also allowed bringing the total award to nearly $2.1 million.
Allianz abandoned recovery of any business interruption losses that it paid to its insured due to evidentiary problems of properly proving the loss.
But its simplification of the claim to one of property damage “capable of relatively easy proof” did not mean, noted his honour, there was no loss to the business.