Issues
60The issues raised by the proceedings are:
(a)What jewellery was taken in the robbery.
(b)Who owned that jewellery the subject of the robbery.
(c)What quantum of loss was Four Seasons entitled to be reimbursed under the policy.
61Although Mr Hanna gave evidence that jewellery was taken in the robbery, the primary evidence for the precise jewellery taken is that contained in the stocktake schedule described earlier in this judgment.
62The insurer challenged the probative value of the schedule. However, there was no evidence to counter the evidence of Mr Hanna and Mrs Bennett-Parizian, and the document itself, that the schedule was what it appeared to be, namely a record of the jewellery held as at September 2008. I accept the schedule for that purpose.
63Four Seasons submitted that as a result of the separation agreement, the jewellery specified on the schedule was transferred from Sparkling Jewellers to Four Seasons, and the cost price shown on the schedule was the "historical cost price" to Four Seasons for the purposes of section 1 of the policy. There are a number of difficulties with this submission.
64First, the separation agreement, to the extent that it transfers property or recognises ownership, vests that property in Mr Hanna, not in Four Seasons. In the absence of further evidence, the schedule neither proves the ownership of Four Seasons nor the cost to Four Seasons of the jewellery.
65Secondly, Ms Bennett-Parizian was confronted with tax returns during her cross-examination. These returns showed a relatively small amount of closing stock of Sparkling Jewellery for the 2008 financial year, the sum of $48,872. This amount can be contrasted with the large amount of jewellery (at a cost price of $284,777.25) shown in the schedule resulting from the stocktake in September 2008. Ms Bennett-Parizian gave evidence in re-examination to explain this difference. She testified that most of the jewellery on the stocktake belonged to Mr Hanna, and therefore the stock of Sparkling Jewellers was limited:
Q. You've been asked a number of questions about tab A which is before you. You mentioned in answer to a question from my learned friend that something happened in relation to the stock numbers, could you tell the Court what happened, please?
A. Yes, I do. This document was put together for the purpose of our splitting assets. The jewellery that Paul had when he came into the marriage did not all go into my business. He still kept the more expensive items aside, especially since when I first started there was an armed robbery so they were not included. (T264/45 - 265/5)
...
Q. Before the break I was asking you some questions in relation to annexure A that you were shown and the stock numbers in your tax return. You said something happened. Would you explain to the Court, if you would, what happened?
A. This printed document you see of stock was put together for the purpose of our settlement our personal financial settlement. It was not all stock I personally had in the shop. Part of it was what Paul had from whatever previous times what he made in preparation for his take over, and it was certainly not a tax document. It was merely for us to work out how to do the split evenly, and that's why that was there. So that it just basically showed our assets, not my business' assets. (T268/25-35)
66This was contrary to the evidence of Mr Hanna who testified that his jewellery was given to Sparkling Jewellers in 2003 (T215) and that the stocktake spreadsheet recorded all of Sparkling Jewellers' stock. In his affidavit, Mr Hanna deposed:
"7. When I took over the Sparkling Jewellers business from 5 November 2008 the cost of the stock transferred from Sparkling Jewellers to me was the cost value as set out in the stock spreadsheet."
67Thus, Ms Bennett-Parizian's evidence explained her tax return, but it created other problems for Four Seasons. Her evidence and her tax returns suggested that the stocktake was not a record of the jewellery owned by Sparkling Jewellers nor did it record the property transferred to Four Seasons at the time of the separation. Rather, Mr Hanna had always owned a substantial amount of the jewellery recorded on the stocktake.
68Thirdly, the evidence of Mr Hanna quoted above in [66] is to the same effect as the separation agreement, namely that the stock was transferred to him, not to Four Seasons.
69Further, I was not comfortable relying upon the markings on the schedule as a record of the jewellery that was taken in the robbery. Although the items wholly ruled through may have been a proper record of the items that remained after the robbery, I was not satisfied that the items ticked (and subsequently partly ruled through) comprised a complete record of the items sold before the robbery. To do so would require me to conclude that the items were always ticked after a sale. Two matters indicated otherwise.
70First, the exhibited copy of the schedule did not invariably display these ticks. I was unable to conclude whether that omission may have been due to poor photocopying.
71More importantly, this method of ticking, or checking off, items in the schedule when they were sold was not replicated in respect of items purchased after September 2008 and sold before the robbery. There was no contemporaneous record made of those sales. No explanation was proffered for the differing treatment between items on the schedule and items purchased thereafter.
72Accordingly, there was an absence of appropriate record keeping. I am not satisfied that all the items sold prior to the robbery were ticked. I think it likely, given the poor record keeping, that as at the date of the robbery some of the items may have been sold but not ticked so as to indicate a sale. It follows that the schedule was not a reliable record of the items, or even part of the items, taken in the robbery.
73Moreover, as I indicated earlier, the evidence compels me to conclude that the schedule was a record of, or at least included, items which belonged not to Four Seasons but to Mr Hanna. The proposal form itself, it may be noted, indicated by the repeated deleted references to "his own personal jewellery $140,000" that a substantial amount of jewellery, perhaps to the value of $140,000, may have been owned by Mr Hanna personally.
74In these circumstances, I was left to conclude that in January 2010 Mr Hanna controlled a substantial amount of jewellery, but there was no evidence of its value (the schedule not being evidence of value), and I was not satisfied of the particular items held. There was also no evidence that the jewellery on the schedule became the property of Four Seasons, there being no evidence of any transaction which led to Four Seasons obtaining ownership of the jewellery.
75I have noted earlier that section 1 of the policy provided, under the "Basis of Settlement of Claims" clause, that settlement of a claim was to be "negotiated on...historical cost price as evidenced by the Insured's books kept in the normal course of business".
76It was common ground that this clause stated the entitlement of Four Seasons to compensation for loss under the policy. The insurance clause provided for "indemnity...as detailed in the coverage sections" and this clause was contained in the relevant coverage section.
77Accordingly, Four Seasons was entitled to "the historical cost price as evidenced in the Insured's books".
78The evidence included some taxation records of Four Seasons, including a business activity statement ("BAS") of Four Seasons covering the December 2008 quarter. This statement covered a period including the date of the separation agreement, 5 November 2008, which, as I have noted above, was said by Mr Hanna to be the time when transfer of the jewellery from Sparkling Jewellery occurred.
79On the occasion the matter was re-listed to consider the joinder of Mr Hanna, the parties were referred to these documents and made submissions in respect of them. The BAS lodged on 26 March 2009 and covering the October to December 2008 quarter (Ex 9, p 177) showed non-capital purchases of $111,494 of which (Ex 9, p 209) $104,242.83 was referable to stock purchases in that quarter.
80The insurer submits that these documents have no relevance as they relate to a different company namely, Four Season Sign and Painting Pty Ltd. I do not accept this submission. The incomplete statement prepared on 29 January 2009 (Ex 9, p 194) contained this name, but the completed statement lodged on 26 March 2009 (Ex 9 - see also p 209) had Four Seasons' name, or at least the name I take to be equivalent to Four Seasons, namely Four Season Jewellry Pty Ltd. More significantly, the Australian Business Number ("ABN") of 80 122 210 824 was unchanged. I would infer that the corporate vehicle 80 122 210 824 had a name change from "Four Season Sign and Painting Pty Ltd" to "Four Season Jewellry Pty Ltd" in the latter part of 2008 after the settlement agreement when Mr Hanna took over the operation of Sparkling Jewellers.
81The name of Four Seasons on the court documents is identical to the corporate vehicle referred to in the insurance policy. There is no evidence confirming whether this name is a mistake or is the correct name of "Four Season Jewellry Pty Ltd" as reflected in the 2009 financial documents, or whether the name of the corporate vehicle was changed again by the time of the proposal, policy and claim, each of which refer to "Four Seasons Jewellers Pty Ltd". In any event, no issue has been taken about the difference between "Four Season Jewellry Pty Ltd" and "Four Seasons Jewellers Pty Ltd", and I propose to proceed on the basis that Four Seasons, as named in the proceeding, is a name of the corporate vehicle with the ABN 80 122 210 824, which is the ABN reflected on all the documents to which I have been referred to in the evidence.
82The 2009 tax return of Four Seasons was also in evidence and referred to in submissions. It indicated a closing stock of $375,244 (Ex 9, p 214). Much of this closing stock appears to have been derived from purchases of $289,915 made in the July to September 2009 quarter, according to the relevant BAS.
83However, the reliability of these records was questioned because they were both created after the robbery. Nor was there any explanation for the significant purchases in the July to September 2009 quarter; no other records or invoices were tendered in support of this amount and it was inconsistent with the case presented by Four Seasons which relied predominantly on the purchase in September 2008 of the items or the stocktake schedule. I could not ignore that there was an incentive for Four Seasons to exaggerate purchases in two respects: it supported the claim against the insurer, and also purchases recorded on a BAS operated in favour of the taxpayer, entitling it to an input tax credit of one-eleventh of the purchases, and usually a substantial refund.
84The insurer submitted that "Four Seasons has not discharged its onus of proof in relation to establishing what stock was present at the business on 18 January 2008, and the historical cost price of it". However, I have found that a robbery did occur and jewellery of Four Seasons was taken. It follows that, subject to the words of the policy, I must do my best to assess the level of the loss on the evidence, even if there is no clear evidence of a particular value.
85In these circumstances, I propose to act upon the last record in evidence in the proceedings which was prepared prior to the robbery. That is, the BAS for the December 2008 quarter (Ex 9, p 177). As indicated above, it shows non-capital purchases of $111,494, and an accompanying summary table (Ex 9, p 209) indicates that this comprised $104,242.33 of stock. Sales for that quarter are shown as $41,478 inclusive of GST. The schedule indicates a mark-up of 100% (or gross profit on sales of 50%) thereby indicating that the cost of the goods which produced $41,478 in sales was 50% of this figure, or $20,739. On this analysis, $104,242.33 (cost of purchases) minus $20,739 (cost of sales) of stock remained from the December 2008 quarter, that is $83,503.33. The records do not indicate that closing stock remained from the September 2008 quarter (Ex 9, p 209).
86This December 2008 quarter included the date of 5 November 2008 when the stock listed in the Sparkling Jewellers schedule was transferred under the separation agreement. I am satisfied that the whole or part of the Sparkling Jewellers' stock (perhaps with other stock) was acquired by Four Seasons at a cost of $104,242.33. Accordingly, I find that $83,503.33 of stock was held at the end of the December 2008 quarter and that this included whatever stock in the schedule was transferred to Four Seasons (and remained unsold).
87There is no reliable evidence as to the extent of purchases and sales after this date, although there remained a further twelve months before the robbery. Doing the best I can do, I am prepared to infer that stock levels were at this same level on the date of the robbery. I have no evidence which persuades me of the contrary.
88The insurer also contended that there was no "historical cost price as evidenced by the Insured's books kept in the normal course of business". Whether or not this matter was a pre-condition to recovery, I am of the view that it was satisfied here. I accept that the December 2008 BAS and the accompanying table prepared prior to the robbery are part of the "Insured's books kept in the normal course of business", and those two documents do evidence the "historical cost price" of the stock acquired in that quarter.
89Mr Hanna testified that 95% of the stock on hand on 18 January was stolen (T205/28). I accept this evidence. 95% of the stock of $83,503.33 produces a cost value of the stolen stock of $79,328.16.
90Accordingly, I find that Four Seasons is entitled to an award of $79,328.16 for the cost of Four Seasons' stock lost in the robbery. The precise jewellery taken in the robbery, and the ownership of the particular stolen items, are matters of which I am unable to be satisfied on the balance of probabilities. However, given the view I have taken of the matter, that is not fatal to Four Seasons' case.