Loss caused by removal of the shoes
165The Tribunal's approach. As stated above, numerous shoes forming the major component of the Lessee's stock in Shop 31 were removed into Shop 64 and Shop 67. At [139], the Tribunal noted that the Lessee made no claim with respect to the shoes taken to Shop 64. Accordingly, the shoes taken to Shop 67 by agents of the Lessors were the sole focus of attention.
166The Tribunal's assessment of the damages to be paid to the Lessee was chiefly based on the opinions of the two expert witnesses, Mr Nour (engaged by the Lessee) and Mr McHugh (engaged by the Lessors). Their methods, findings and opinions were described and evaluated at some length in the Tribunal's decision, at paragraphs [131] to [191]. For reasons explained below, it is not necessary for us to review all the matters outlined in those paragraphs.
167The Tribunal drew attention to the difficulties that the two experts faced in endeavouring to quantify the loss suffered by the Lessee. It found that they were both appropriately qualified. It rejected a submission by the Lessors that because Mr Nour had conducted business dealings with the Lessee on previous occasions he had failed to maintain impartiality. It concluded instead that both witnesses had complied with this important obligation of an expert. The Tribunal also observed (at [158]) that because Mr Nour's primary expertise was in women's shoes - the sale of which was the 'primary business' of the Lessee - Mr McHugh 'often deferred to' his 'expertise... in this discrete field'.
168Each expert viewed his principal task as being to estimate, with regard to the shoes that he inspected, (a) their value as at 31 August 2008 (being the date on which their removal to Shop 67 commenced) and (b) their 'present wholesale market value' at the time of his inspection(s) of them.
169Mr Nour, who inspected the Removed Shoe Stock at the Lessee's warehouse and the Left Shoe Stock at the RestorX warehouse, arrived at the following figures:-
Removed Shoe Stock
Value at 31 August 2008: $87,369.79
Value at time of inspections (early November 2008): $32,710.00
Left Shoe Stock
Value at 31 August 2008: $64,744.35
Value at time of final inspections (January-February 2010): $6,401.30
170The values ascribed by Mr Nour to both the Removed Shoe Stock and the Left Shoe Stock, as at 31 August 2008, were the wholesale prices paid for them by the Lessee. These were shown on the relevant invoices, which Mr Nour did not inspect. They were also recorded in a computerised inventory of the Lessee's stock, which had been updated on 28 August 2008 and was adjusted to account for the sales that occurred between that day and 31 August.
171Attached to Sophie's second affidavit were two schedules setting out the types and numbers of shoes comprising the Removed Shoe Stock and the Left Shoe Stock respectively, together with the prices paid as shown on the relevant invoices. It was on these schedules that Mr Nour relied when calculating the value of the two components of the stock. The total amounts that appeared in his reports - $87,369.79 and $64,744.35 respectively - were those shown in the schedules. Copies of most of the invoices were also included in the Lessee's evidence.
172The figures supplied by Mr McHugh (who did not inspect the Removed Shoe Stock) were:-
Left Shoe Stock
Value at 31 August 2008: $12,029.30
Value at time of final inspections (January-February 2010): $8,572.50
173In his evidence, Mr McHugh explained that his methodology in estimating the values of the Left Shoe Stock as at 31 August 2008 principally involved increasing the values that he placed on the shoes at the time of his inspections. He did this to make allowance for factors such as the damage that he perceived on some of the shoes and the depreciation that would have occurred between August 2008 and early 2010 in the value of the women's summer fashion stock (which he described as 'the majority of the stock').
174Mr McHugh stated that he endeavoured to match invoices given to him by Fraser Clancy with the shoes that he inspected. The aggregate of the prices on the invoices that he was able to match was $14,460.00, but the value that he attributed to the relevant shoes as at 31 August 2008 was only $2,615.00. His main reasons for discounting the invoice prices to such an extent were that many of the shoes were 'old stock', which would have depreciated significantly by 31 August 2008, and that other shoes had been sold to the Lessee by 'secondary suppliers', who would have been paid a lower price than that shown on the invoices.
175The Tribunal did not state expressly at any point that it preferred the evidence of Mr Nour over that of Mr McHugh. But it clearly did so. This appears from the following passages in its decision, in which it set out its reasons why the amount to be awarded with respect to the Lessee's stock of shoes, before deduction of an appropriate amount for GST, should (as indicated above at [160]) be $101,702.24:-
178 The significance of the evidence of Mr Nour is this: in his view (Exhibit "O" at [36(ff)]: "the only reasonable way of determining the market value for the shoes is to refer to the invoice price as recorded in the inventory. In (his) experience this is the usual practice of insurance companies when assessing claims for lost shoes". His experience "in making insurance claims for my stores and in dealing with insurers (and their solicitors) (is that claims) were paid based on the invoiced value". His view was "given the importance of boxes, size, ranges, styles, (and) fashion changes, the invoices provide the only clear record of the value".
184 Counsel have submitted that the primary difference between the two experts is that Mr Nour commences his analysis from the original invoice price. I think that must be correct...
185 The invoice price is "the price that (the Applicant) paid for the stock in its shop ... the price (the Applicant) had on the invoice from the supplier (the Applicant) brought from ... the amount (the Applicant) paid ..." (T. 29/04/10 at 8). If the aim of an award of damages is to restore (as best reasonably possible) the injured party to its position prior to the injury, then it seems to me that the price paid for the goods now damaged is an excellent starting point.
187 In my view there should be an appropriate discounting against the claim of the Applicant. Valuation is not exact science - that is always the case and has been demonstrated almost since time began - experts can hardly ever agree - notwithstanding the earnest and mis-placed attempts by judges to encourage agreement - and one has to do one's best with the evidence provided and the legitimate but differing views of experts.
189 The [Lessee's] claim for "lost or damaged shoes" was made up as follows:-
"Invoiced value of shoes at 31 August 2008 $152,114.34
Less: value of shoes retained (by Applicant) $ 32,710.00
Less: value of other shoes in storage $ 6,401.30
Total loss on shoes: $113,003.04"
190 In my opinion the basics of that claim are supported by Mr Nour's evidence save that in my view there should be a discount, simply because it is difficult to be "certain" of the ultimate conclusions having regard to various missing and/or unconnected invoices and the understandable generality of the approach taken by both experts. However, in all the circumstances, I do not believe that the discount should be more than 10%, such that on this head of damage the loss should be $113,003.04, less 10% at $11,300.30; total loss therefore $101,702.74.
176In their lengthy submissions on damages in the appeal, the Lessors challenged many aspects of this reasoning by the Tribunal. We will discuss each of them in turn.
177Evidence that the Lessee's business in Shop 31 was not commercially successful. In its initial submissions in the appeal, the Lessors maintained that the Tribunal erred in finding (at [151]) that the Lessee's business in Shop 31 was commercially successful. It should, they argued, have found to the contrary. The evidence on which they relied was the Lessee's financial statements for the financial years 2005-06, 2006-07 and 2007-08. These showed a loss in the second of these years ($38,530.62) that virtually cancelled out the sum of the profits in the first and third years ($12,992.61 and $26,318.62). It also showed that the Lessee's liabilities exceeded its assets in each of these years.
178We agree with a contention of the Lessee, however, that because these financial statements related to two other shoe shops owned by it as well as Shop 31, they did not provide sufficient grounds for challenging the Tribunal's finding. We note that this argument by the Lessors was not repeated in their supplementary submissions in the appeal.
179Stock held on consignment. Each of the two schedules of stock attached to Sophie's second affidavit included, as the last individual entry, an item of 'consignment' shoes. Within this category, the schedule relating to Removed Shoe Stock listed 1,000 pairs of shoes, with a unit price of $20 and a total price of $20,000.00. The schedule relating to Left Shoe Stock listed 800 pairs, with the same unit price of $20 and a total price of $16,000.00.
180In this affidavit, Sophie stated as follows: (a) the only company providing stock to the Lessee on consignment was Solar Sports; (b) there was no written agreement setting out the terms on which the Lessee took possession of it; (c) this stock would be retained for sale for three to four months; (d) at the end of that period, any of the stock that had been sold would be paid for at the price recorded on the delivery docket and any unsold stock would be returned; (e) in accordance with this arrangement, 1,800 pairs of shoes had been delivered to Shop 31 in February 2008, but had not yet been returned; (f) the Removed Shoe Stock included 1,000 of those pairs of shoes; and (g) the remainder of them had either been sold or formed part of the Left Shoe Stock 'because of their damaged state'.
181Annexed this affidavit was a copy of a delivery docket dated 7 February 2008 from Solar Shoes. It referred to '1800 prs mix style shoes', showed a unit price of $20 and a total price of $36,000.00, and included the words 'For consignment'.
182Because Mr Nour drew his figures for the values, as at 31 August 2008, of both the Removed Shoe Stock and the Left Shoe Stock, from the schedules accompanying Sophie's affidavit, these figures of $87,369.79 and $64,744.35 included the amounts of $20,000.00 and $16,000.00 respectively for the consignment stock received from Solar Sports. In his itemised valuation of the Removed Shoe Stock at the time of his inspection, however, he attributed no value to this consignment stock, even though the valuation noted its existence and the value of $20,000.00 stated in the delivery docket. Similarly, neither he nor Mr McHugh indicated that consignment stock formed or may have formed part of the Left Shoe Stock which they inspected.
183In their submissions in the appeal, the Lessors argued that Mr Nour erred in failing to deduct the amount of $20,000.00 for consignment stock from his valuation of the Removed Shoe Stock as at 31 August 2008, while at the same time failing to attribute any value to it as at the time of his inspection. It followed, in their submission, that his assessment of the diminution of the value of the Removed Shoe Stock was overstated by $20,000.00.
184The Lessee sought to rebut this argument in its initial submissions by claiming that the consignment stock should be regarded as an asset of the Lessee's business and that there was no evidence that the consignor would accept the return of damaged stock.
185In our opinion, this argument by the Lessors is well founded. Indeed, the same reasoning applies to Mr Nour's inclusion of $16,000.00 on account of consignment stock in his valuation of the Left Shoe Stock as at 31 August 2008.
186Our grounds for taking this view of the consignment stock are as follows. The essence of the Lessee's claim is that the Lessors breached their duty of care as bailees of the shoes. The resulting economic loss, not the value of the shoes, is therefore the appropriate measure of damage. According to Sophie's evidence, the Lessee did not pay the total sum of $36,000.00, or any part of this sum, to Solar Shoes when it received the 1,800 pairs from that company in February 2008. It must be assumed, in the absence of evidence to the contrary, that the parties did not intend that the title to these shoes should pass from Solar Shoes to the Lessee. The Lessee tendered no evidence to the effect that Solar Shoes had required it to make any payment for the shoes, whether damaged or undamaged, following their removal from Shop 31. As Sophie stated, the Lessee may indeed have sold some of them before the removal of them.
187For these reasons, the Lessee has not established that it suffered any economic loss by virtue of the removal of the consignment stock from Shop 31 to Shop 67. Accordingly, on the footing that Mr Nour's valuations of the Removed Shoe Stock and the Left Shoe Stock as at 31 August 2008 should continue to be regarded as the starting-point for the assessment of the Lessee's damages, they should be reduced by $20,000.00 and $16,000.00 respectively.
188Other stock claimed not to have been owned by the Lessee. In its initial submissions in the appeal, the Lessors claimed that a number of the invoices produced by the Lessee stipulated that the purchaser was an enterprise other than the Lessee. They submitted that we should infer that the stock to which these invoices referred was not in Shop 31 on 31 August 2008 and therefore should not have been included in the valuation carried out by Mr Nour in reliance on the produced invoices.
189The Lessee's response in its initial submissions was that during cross-examination it was never put to Sophie or any other witness called by the Lessee that this stock had not been purchased by the Lessee. Since the Lessee had had no opportunity to explain why names other than that of the Lessee appeared on the invoices in question, it would, the Lessee claimed, be unfair and inappropriate for us to draw the suggested inference.
190We agree with this response. We note that this particular challenge to Mr Nour's evidence regarding damages was briefly referred to, but not restated in full, in the Lessors' supplementary submissions in the appeal.
191Insufficiency of invoices. In their supplementary submissions in the appeal, the Lessors drew attention to the following items of evidence. First, Mr Nour said in cross-examination that he did not see the invoices on which he based his valuation of the Lessee's shoes as at 31 August 2008, but relied on the itemised schedule given to him by Sophie. Secondly, Mr McHugh testified, as mentioned above, that in valuing the Left Shoe Stock he tried to match invoices given to him with the stock that he was inspecting. Thirdly, the aggregate of the prices on the invoices that he was able to match was only $14,460.00, even though the aggregate of the prices paid for the Left Shoe Stock, as reflected in Mr Nour's valuation, was $64,744.35.
192On the basis of this evidence, the Lessors argued that it could not be assumed that the invoices annexed to Sophie's second affidavit bore any significant relationship to the stock that was located in Shop 31 and removed to Shop 67 on and soon after 31 August 2008.
193In our opinion, the response in the Lessee's supplementary submissions is sufficient to dispose of this argument. This was that, as both Joy and Sophie testified and the Tribunal noted (at [131]), the operations of the Lessors' agents in Shop 31 on 1 and 2 September caused the loss of a significant quantity of the Lessee's business records, including a number of its invoices. The outcome of Mr McHugh's attempt to match invoices with stock is therefore insufficient to cast serious doubt on the reliability of the invoices listed and disclosed by Sophie in furnishing evidence of the prices paid for the shoes moved from Shop 31 to Shop 67.
194Diminution in the value of the Lessee's shoes between the various dates when they were purchased and 31 August 2008. The Lessors argued that the Tribunal, through treating the invoice prices for the Lessee's shoes as establishing their value as at 31 August 2008, failed to take account of a number of important factors that would have resulted in substantial depreciation. In this connection, they put forward three propositions, as follows.
195First, they argued, the Lessee's inventory of its stock as at 28 August 2008 revealed that in a number of lines of shoes it held less than a full range of sizes. Referring to a summary of aspects of this inventory attached to their supplementary submissions in the appeal, the Lessors maintained that there was a 'broken size range' for as many as 62.5% of the shoes listed in the inventory. They pointed out that Mr Nour, in assessing the value of the shoes at the times when he inspected them, regarded the breaking up of size ranges within any line of shoes as a factor significantly reducing its value. In his first report, Mr Nour in fact stated that this would cause a reduction between 10% and 40%, depending on how many sizes were missing. It followed, the Lessors argued, that Mr Nour should also have applied discounts within this range to many of the invoice prices for the Lessee's shoes when estimating their value as at 31 August 2008. He did not do so and the Tribunal, while referring to Mr Nour's evidence regarding broken size ranges (e.g. at [167]), did not itself apply any discount.
196In conjunction with this submission, the Lessors drew attention to evidence from Sophie to the effect that while Shop 31 was in operation, she would 'top up' broken size ranges by purchasing new stock or drawing on stock that the Lessee maintained in two other shoe stores that it owned during August 2008. As indicated by the Tribunal at [108], Mr Nour referred to this evidence in the course of explaining why he did not apply any discount on this ground when assessing the value of the Lessee's stock as at 31 August 2008. Based on these considerations, both Mr Nour and the Tribunal erred, according to the Lessors, in ignoring the fact that the value of shoes within broken size ranges that formed part of the Removed Shoe Stock or the Left Shoe Stock could equally well have been enhanced by 'topping up' in this way.
197In response to these submissions, the Lessee relied on evidence given by Sophie to the effect that as at 31 August 2008 about 80% of the Lessee's stock of shoes was in full size ranges and only 20% was in broken size ranges. It pointed out that this evidence was not disputed at the Tribunal hearing and that the Lessors appeared to have accepted it in the written submissions filed after the hearing. On these grounds, the Lessee argued that we should disregard the summary of aspects of the inventory of 28 August 2008 on which the Lessors based this challenge to Sophie's evidence.
198We agree with this specific proposition advanced by the Lessee. We also agree, however, with the Lessors' argument that after the Lessee had obtained access to its shoes, there was no obvious reason why it could not have 'topped up' the broken size ranges identified by Mr Nour, using the same means as he described in his evidence relating to the stock maintained by the Lessee when carrying on business in Shop 31. We will revisit this matter shortly.
199Secondly, the Lessors submitted that the Tribunal had erred in failing to take account of (a) a concession by Mr Nour during cross-examination that the values of the shoes in Shop 31 would have diminished between their invoice dates and 31 August 2008 by factors ranging between 0% and 30% and (b) a acknowledgment made to the Tribunal by Mr Fernon that the starting-point in assessing their diminution in value thereafter should be the invoice value less 15%. The Lessors pointed out that the discount of 10% that the Tribunal actually made in its decision at [190] (see [175] above) was applicable only to the assessed diminution in the value of the shoes, not to their invoice value.
200The Lessee's submissions in response were (i) that Mr Nour also suggested that the discount should be at the lower end of the range between 0% and 30%, because most of the stock in Shop 31 was not fashion stock, and (ii) that the discount rate of 10% employed by the Tribunal was 'consistent with the evidence of Mr Nour' and within the permissible range.
201In our opinion, the Tribunal's ruling on this matter is open to question, because it involved ignoring, without any explanation, an important aspect of the methodology of the expert witness (Mr Nour) whose opinions on valuation the Tribunal was generally prepared to adopt. We agree with the Lessors that the distinction between a discount on the invoice price and a discount on the assessed diminution in value is an important one. As we have just pointed out, Mr Nour testified, and the Tribunal agreed, that the value of the Removed Shoe Stock diminished substantially during the period of two months between 31 August and 31 October 2008. But the Tribunal took no account of his accompanying evidence that a significant diminution could occur over comparable, or in some instances distinctly longer, periods of time prior to 31 August 2008. In this connection, we refer to a schedule, prepared by the Lessors and tendered late in the Tribunal proceedings, showing that while the dates of the invoices for the bulk of the stock were within the first eight months of 2008, a significant proportion were within 2007 or 2006 and a few of them bore dates in 2002.
202The price paid for the shoes might well, as the Tribunal said at [185], have been 'an excellent starting point' in assessing the damages payable to the Lessee. But it was only a starting point.
203We will defer until later in this decision our conclusions regarding the implications of this error by the Tribunal for the assessment of the damages payable to the Lessee.
204The third proposition of the Lessors stemmed from the opinion expressed by Mr Nour that, to quote phrases used by him in his first report and reproduced in the Tribunal's decision at [167], the months of October and November were 'typically a time when wholesalers reduce the price of their shoes' because they "have clearance sales so as to clear their stock prior to Christmas which is typically a very slow period for wholesalers'. Accordingly, Mr Nour wrote, the 'sale price of shoes in October and November would typically result in the reduction in the price of the shoe by 10% to 50%'. The Lessors pointed out also that, according to the Lessee's own record of its sales of pairs of shoes from Shop 31, it sold 887 pairs during the 25 days between 7 and 31 August 2008. On this footing, its monthly sales would approximate to only 1,050 pairs.
205Accordingly, the Lessors maintained, if the Lessee had been able to continue trading from other premises during September 2008, it still would have retained, at the end of that month, a substantial proportion of the stock that it held on 31 August. The value of this stock would have declined significantly during the ensuing months, for the reasons given by Mr Nour. Yet neither Mr Nour nor the Tribunal made any allowance for this factor when determining the value that should be attributed to the stock as at 31 August.
206The Lessors proceeded from this stage in their reasoning to contend that the Lessee could have moved all its stock to its warehouse by 2 October 2008, pursuant to the Tribunal's directions. It followed, they maintained, that this 'time of year' basis for treating Removed Shoe Stock as less valuable because of their conduct should only apply to 525 pairs of shoes (it being assumed that the 1,050 pairs presumptively sold during September would have been drawn in equal proportions from the Removed Shoe Stock and the Left Shoe Stock).
207In seeking to rebut this reasoning, the Lessee argued as follows in paragraphs 24 to 26 of its supplementary submissions in the appeal:-
24 [This] approach to assessment of damages... is wrong. It asserts that damage is only caused by the extent AXL was prevented from selling its stock by reason of Prosha's conduct. It then proceeds to assess what stock AXL may have sold in a 1 month period. Yet damage is assessed at the time the breach by Prosha occurred, namely from 1 September onwards. AXL lost the value of its stock. That stock has a value. The lost value continued after 30 September 2008, being the so called cut off date.
25 Prosha seems to assert that AXL failed to comply with directions on 25 September 2008 by failing to remove all shoes on 2 October 2008. That is wrong. The directions made on 25 September 2008... required AXL to only remove the stock that it agrees is not damaged. It is clear that much of the stock was damaged... That basic error undermines the balance of Prosha's submissions.
26 Prosha's actions deprived AXL of its stock. It consistently refused to give AXL access to Shop 67 without AXL going to the Tribunal to obtain directions... It did so even though it believed AXL had agreed to take a lease of Shop 67. There was no opportunity to sell any stock whilst it remained in the possession of Prosha. The stock was paid for by AXL. On any normal accounting basis, the loss suffered is the damage suffered to the stock. That is the appropriate basis on which the Tribunal assessed stock at the trial.
208In our opinion, the Lessee's contention that it could not have removed all its stock from Shop 67 by 2 October 2008 is correct. The Tribunal's directions required it to leave in that Shop all stock that it claimed to have been damaged. Furthermore, given the task that confronted Sophie and her staff and the circumstances in which they had to fulfil it, we do not think that they took an unduly long time to identify the undamaged stock and move it to the Lessee's warehouse. As indicated above, they completed this task on 30 October 2008.
209We consider, however, that there is merit in the Lessors' submission regarding the diminution in value that would, if the Lessee had been able to continue trading after 31 August 2008, have affected the stock that it held in Shop 31 on that date but would have remained unsold on 30 October. If the rate of sales during August (1,050 pairs) had been maintained during September and October, the Lessee would have sold 2,110. It would still have retained about 5,000 out of the total number of pairs (about 7,500) held in Shop 31 on 31 August. The prospect that the value of these shoes would have declined as claimed by the Lessors should, in our opinion, be taken into account in attributing a value to all the Lessee's stock as at 31 August.
210Our reasons for so concluding stem from our ruling, stated above at [186], that the damages awarded to the Lessee should, so far as possible, reflect the economic loss that it suffered on account of the Lessors' wrongful conduct. It is not correct, as the Lessee maintained, that the relevant loss is 'the value of the stock' as at 'the time the breach by Prosha occurred'.
211We can further explain our conclusion on this matter by focusing on the Removed Shoe Stock. Mr Nour assessed the value of this stock on 31 August 2008 as $87,369.79 and its value at time of his inspection in early November as $32,710.00. One of the reasons that he gave for this pronounced decline in value was, as just stated, that the resale price of shoes typically fell during October and November. But since, as appeared from the Lessee's records of its sales during August, it would not (if it continued trading) have sold all the stock held on 31 August by the end of October, its takings from the remaining unsold stock would have reflected the significant decline in value that Mr Nour identified and for which he gave reasons.
212The Lessors sought to quantify the reduction in damages that should follow, in their submission, from these considerations. We are not prepared to adopt their calculations, particularly because we do not accept their premise that the Lessee could have regained possession of, and started selling, the Removed Shoe Stock as early as the beginning of October 2008. But as already stated, we believe that their underlying argument is sound.
213In summary, therefore, our conclusion on this matter is as follows. The value that would otherwise be attributed to the Lessee's shoes as at 31 August 2008 should be reduced to take account of the following considerations: (a) if the Lessee had been able to trade without interruption from that date onwards, a significant proportion of those shoes would have still been in its possession at the beginning of November; and (b) those shoes would have sold for noticeably less than the prices obtainable during September.
214The Tribunal failed to take these considerations into account. We will again defer until later in this decision our conclusions regarding the implications of this error by the Tribunal for the assessment of the damages payable to the Lessee.
215Diminution of the value of the shoes after 31 August 2008. In this connection, we return first to the Lessors' argument that after the Lessee had obtained access to its shoes, there was no apparent reason why it could not have 'topped up' the broken size ranges identified by Mr Nour through such measures as purchasing new stock or drawing on stock that it held in the two other shoe stores that it owned.
216Beyond observing that Mr McHugh made no attempt to ascertain the extent to which size ranges were broken during the process of separating the Removed Shoe Stock from the Left Shoe Stock, the Lessee did not refer to this matter in its submissions in the appeal.
217In our opinion, this submission by the Lessors has some merit. We will indicate shortly the impact that it should have on the assessment of damages.
218The Lessors also claimed in their supplementary submissions in the appeal that Mr Nour's valuation of the Removed Shoe Stock in early November 2008 should not be accepted because he simply 'applied a blanket formula', paying no regard to the two specific factors - namely, the existence of broken size ranges and the diminution in the value of shoes during the months of October and November - that he had identified as relevant. The evidence on which the Lessors relied was the schedule to Mr Nour's first report in which he listed for each type of shoe inspected the invoice price and his determination of the value in November 2008. What this showed, according to the Lessors, was that 'anything within a price range was given the same residual value (e.g. all stock with an alleged invoice value of between $12.00 and $16.00 was reduced to $8.00)'.
219This pattern amongst the determinations recorded by Mr Nour is indeed apparent in his schedule. The Lessee argued, however, that he was familiar with the condition of the shoes as a result of inspecting them, that his expertise with regard to the relevant types of shoes was greater than that of Mr McHugh, that Mr McHugh did not criticise this approach and that the two valuers, when inspecting the Left Shoe Stock, adopted a similar approach and came up with similar results.
220Although the pattern of determinations shown in Mr Nour's schedule provides support for this submission of the Lessors, we do not think that it provides sufficient grounds for treating his valuation of the Removed Shoe Stock in November 2008 as wholly unreliable. His valuation is, as indicated earlier, the only evidence on the matter that was put before the Tribunal.
221The Lessors raised several further arguments designed to show that Mr Nour's valuation of the Left Shoe Stock at the time when he inspected it should not be accepted. They argued, for instance, that (a) this followed from the fact that he, unlike Mr McHugh, did not inspect all this stock and (b) his failure, in particular, to inspect pairs of shoes that remained in their original boxes should have induced the Tribunal to find, in line with a comment by him that the Tribunal quoted at [174], that these pairs of shoes (which the Lessors calculated as numbering 1,632) were undamaged and should indeed have been included amongst the Removed Shoe Stock.
222We do not consider it necessary to review these arguments. The reason is that, as indeed the Lessors' counsel observed during the hearing, the estimates given by the two experts of the value of the Left Shoe Stock at the time of their inspections did not differ greatly. Initially, these estimates were very close indeed: Mr Nour's figure was $6,401.30 and Mr McHugh's was $7,402.30. The same could be said even after Mr McHugh raised his figure to $8,572.50. In our opinion, the final estimates are not sufficiently far apart to warrant investigation by us of all the questions raised in this part of the Lessors' submissions.
223Our assessment of the damages to be paid on account of diminution in the value of the Lessee's stock of shoes . In the light of the foregoing discussion, the amount of damages ($101,702.74, before deduction of GST) that the Tribunal awarded to the Lessee on account of economic loss caused by the Lessors' removal of its shoes from Shop 31 to Shop 67 is too high. The 'correct and preferable decision' on the material before us is that a distinctly smaller sum should be awarded.
224We agree with the Tribunal that the appropriate 'starting point' is the price that was paid for the shoes that were in Shop 31 on 31 August 2008, as shown on the invoices relating to them. Like the Tribunal, we prefer this aspect of Mr Nour's approach to assessing the damages.
225We also consider, as did the Tribunal, that Mr Nour's valuations of the Left Shoe Stock at the times when it was inspected should be adopted in preference to those of Mr McHugh. We take account here of the Tribunal's opinion that Mr Nour possessed greater expertise in valuing the types of shoe involved in this case. Not much turns on this ruling since, as pointed out above, the two experts' valuations of the Left Shoe Stock differed by little more than $2,000.
226As indicated in the above discussion, however, there are several reasons why we consider the subsequent steps taken by the Tribunal in arriving at its figure of $101,702.74 to have been unsatisfactory. In broad terms, the measures that should be adopted by way of modifying the Tribunal's approach are as follows:-
- An amount of $20,000.00, relating to consignment stock, should be deducted from the figure of $87,369.79, put forward by Mr Nour and accepted by the Tribunal, as the value of the Removed Shoe Stock as at 31 August 2008.
- An amount of $16,000.00, also relating to consignment stock, should be deducted from the figure of $64,744.35, put forward by Mr Nour and accepted by the Tribunal, as the value of the Left Shoe Stock as at 31 August 2008.
- The values attributed to these two categories of the Lessee's shoe stock at 31 August 2008 should be further reduced by a factor of 15%, to take account of the likely diminution in their value in the period preceding that date.
- A further reduction to these values should be made to take account of the following considerations: (a) if the Lessee had been able to trade without interruption from 31 August 2008 onwards, a significant proportion of its shoes would have still been in its possession at the beginning of November; and (b) those shoes would have been sold for less than the prices obtainable during September.
- In assessing the value of the two categories of the Lessee's shoes (the Removed Shoe Stock and the Left Shoe Stock) after it had obtained access to each of them, account should be taken of the fact that the Lessee could have 'topped up' any broken size ranges through such measures as purchasing new stock or drawing on stock that it held in the two other shoe stores that it owned.
227The specific adjustments to be made on account of the first three of these five matters are straightforward. Each of them calls for a reduction of the amount assessed by Mr Nour as reflecting the value of the Lessee's stock as at 31 August 2008.
228It is more difficult to determine an adjustment reflecting the fourth matter. Although we have treated it as a factor bearing on the valuation of the stock as at 31 August 2008, the adjustment should instead be made to the amounts assessed for the diminution in value of the two categories of stock after that date. These should be subjected to moderate discounting only, because (a) the grounds for discounting apply to only a proportion of the Lessee's stock and (b) other important factors, such as the creation of broken size ranges and the damage done to the Left Shoe Stock, caused the value of the stock to diminish. With respect to the Removed Shoe Stock, the discount should be 10%. With respect to the Left Shoe Stock, which suffered more heavily from other factors reducing its value, the discount should be 5%.
229The adjustment reflecting the fifth of the factors listed should again take the form of a discount to the amounts assessed for the diminution in value of the two categories of stock. In our judgment, a further discount of 5% is sufficient.
230The Tribunal at [190] applied a 'contingency discount' of 10%, on the ground that it was 'difficult to be "certain" of the ultimate conclusions having regard to various missing and/or unconnected invoices and the understandable generality of the approach taken by both experts'. We think that this discount should be retained.
231The Tribunal also made a deduction to reflect 'the GST component'. Neither side challenged this on appeal. With regard to the damages relating to both the shoes and the other stock and equipment, a further proportion (1/11) should be deducted.
232As a result of making these adjustments, the substantial gap between Mr Nour's valuation of the stock at 31 August 2008 and the valuations of either or both of Mr Nour and Mr McHugh at the times of the subsequent inspections will be narrowed to a significant extent. This seems to us to be an appropriate outcome.
233We would add here, with reference to Mr Nour's valuations of the Removed Shoe Stock, that the gap of $54,659.79 (between $87,369.79 and $32,710.00) seemed particularly difficult to justify at first sight. This stock was not damaged on account of the Lessors' conduct. From a practical point of view, all that happened to it was that none of it could be sold to a customer of the Lessee during the period of two months from 31 August to 30 October 2008.
234When the foregoing approach to quantification of the Lessee's damages is implemented, the outcome is as follows:-
Removed Shoe Stock
Invoice value
87,369.79
Less consignment stock
20,000.00
Adjusted invoice value
67,369.79
Discount 15% - depreciation
57,264.32
Less value on inspection
32,710.00
Diminution in value
24,554.32
Discount 10% - unsold stock
22,098.89
Discount 5% - size ranges
20,993.95
Discount 10% - uncertainty
18,894.55
Left Shoe Stock
Invoice value
64,744.35
Less consignment stock
16,000.00
Adjusted invoice value
48,744.35
Discount 15% - depreciation
41,432.70
Value on inspection
6,401.30
Diminution in value
35,031.40
Discount 5% - unsold stock
33,279.83
Discount 5% - size ranges
31,615.84
Discount 10% - uncertainty
28,454.26
235The total of the last amounts in these tables, $18,894.55 and $28,454.26, is $47,248.81. When GST is deducted, this is reduced to $42,953.46.
236We accordingly assess the damages payable by the Lessors on account of their conduct in removing the Lessee's stock of shoes from Shop 31 at $42,953.46.