Splash Waterpark Pty Ltd v Tim Schnitzerling

District Court of NSW|2021-03-10

Solicitors: Vardanega Roberts (Plaintiff) MCK Lawyers (Defendant) File Number(s): 2019/204374

Introduction

On 12 February 2017 the sloop Magnolia was anchored in Coffs Harbour. She was owned and skippered by the defendant Mr Tim Schnitzerling. To the north east of the Magnolia was an inflatable waterpark owned by the plaintiff Splash Waterpark Pty Ltd ("Splash"). A predicted strong southerly change blew up at night. The Magnolia dragged anchor and came into contact with the waterpark.
Splash pleads that Mr Schnitzerling was negligent in his management of the Magnolia and through that negligence it has suffered property damage and consequential loss.
Because of significant deficiencies in the quantum evidence put forward by Splash, it is necessary to recite some of the procedural history in the matter.

Liability - Evidence

The Further Amended Statement of Claim pleaded that the defendant owed a duty of care to the plaintiff to take reasonable care in the use and operation of the defendant's vessel. By par 5(a) of the Defence the defendant admitted that he had a duty of care to act reasonably while operating the Magnolia. Further, the defendant pleaded that he acted in accordance with that duty.
The plaintiff pleaded that a collision between the Magnolia and the waterpark was caused by the negligence of the defendant. In the Defence the defendant denied that there was a collision and that the wind caused the Magnolia "to drag anchor, drift and ease up against a structure of the waterpark". The defendant denied that he was negligent.
The plaintiff provided no evidence concerning the events in Coffs Harbour on the night. The defendant's version was set out in his first affidavit (DX 1). That version was not the subject of any substantial challenge.
Mr Schnitzerling was the owner of the Magnolia which had been built in 2011. He had been sailing for over 40 years by the time of the events which are the subject of these proceedings. He had owned the Magnolia since 2011. He had sailed and anchored yachts hundreds of times.
On Friday, 27 January 2017 Mr Schnitzerling set sail on the Magnolia from Tin Can Bay in Queensland bound for Cygnet in Tasmania. The Magnolia was equipped with three anchors: 1. Primary anchor: Manson Plough 9kg with 10m of 8mm chain and 50m of 12mm nylon laid rope. 2. Secondary/reserve anchor: 10kg Bruce pattern anchor with 10m of 8mm chain and 50m of 12mm nylon laid rope. 3. Kedge anchor: 5kg Bruce pattern with 50m of 12mm nylon laid rope.
During his journey Mr Schnitzerling accessed information published each day by the Bureau of Meteorology ("BOM"). Using his phone and a laptop he viewed the MetEye website conducted by BOM.
On 12 February 2017 Mr Schnitzerling departed from Yamba and sailed south towards Coffs Harbour. Before departure from Yamba he checked the forecast issued by BOM for the Coffs Coast. The forecast predicted an evening change from a northerly wind of 15-25 knots to a south to south westerly wind of 20-30 knots. One knot equates to 1.852 kilometres per hour. The BOM forecast which Mr Schnitzerling consulted contained the following note: "Wind gusts can be 40 percent stronger than the averages given here."
On the afternoon of 12 February 2017 Mr Schnitzerling sailed into Coffs Harbour and contacted Volunteer Marine Rescue ("VMR") by VHF radio. He inspected the area to the north of the jetty in Coffs Harbour and dismissed it as a potential anchorage because of the 25 knot northerly wind and the forecast strong southerly. The marina in Coffs Harbour was closed because it was under repair due to previous storm damage. Mr Schnitzerling dropped anchor in Coffs Harbour south of the jetty at Jetty Beach where there was a depth of four metres. He used his primary anchor and set the scope of his anchor so it would be 8:1 at high tide at 11.00pm.
After he anchored he checked the most up-to-date weather information published by BOM. He was aware of the forecast southerly change for the evening and was confident that his anchor was appropriately set. Since there was then a northerly wind blowing, the anchor was sitting on the seabed to the north of the Magnolia. When he anchored, Mr Schnitzerling observed the inflatable waterpark which was situated about 190m north north west of the Magnolia.
In the evening on 12 February 2017 the wind swung to a south westerly tending southerly. Mr Schnitzerling was below deck when the wind changed direction and came on deck because he felt the Magnolia begin to swing rapidly through a wide arc. The yacht held for a few moments but after 10-20 seconds it began to drag anchor in a north north east direction at a speed of about 3-4 knots. He began using the rudder in an attempt to steer. This was unsuccessful. He had little control over his direction. The yacht was drifting towards the waterpark despite his attempts to control it. Mr Schnitzerling considered starting the four horsepower outboard motor but decided it had insufficient power against the wind and there was a risk it might become entangled with and cause damage to the waterpark.
Within less than a minute of dragging anchor the Magnolia came into contact with the midpoint of the eastern side of the waterpark. The yacht came to a rest with its bow facing south. Mr Schnitzerling was able to put his hand on the waterpark and could "shove" his hand between the yacht and the waterpark without feeling any great pressure. He was able to push the waterpark a centimetre or so away from the yacht. He thought it prudent to do nothing to move the yacht away from the waterpark at that point.
Mr Schnitzerling contacted VMR by radio and reported that the Magnolia had dragged anchor but was now safely resting against the waterpark. Two young men swam out to the waterpark. They said they were there to deflate the waterpark but offered to help Mr Schnitzerling. They requested that he throw them a rope, which he did. The two young men then lashed the rope from the Magnolia and tied the sloop to the waterpark.
In his affidavit Mr Schnitzerling gave evidence about the assistance which VMR gave him by towing him off the waterpark later in the night. Mr Schnitzerling gave no evidence that there was a collision with the waterpark, that there was any damage caused to the waterpark by the Magnolia, or that when the Magnolia was towed away from the waterpark by VMR, it was still lashed to the waterpark.
I accept Mr Schnitzerling as a reliable witness of truth. There was no real challenge in cross-examination to his evidence summarised above.
The particulars of negligence were set out in par 11 of the Further Amended Statement of Claim as follows: "(a) Allow the defendant's vessel to drift close to Jetty Beach and the Plaintiff's Property. (b) Failure to observe the dangers of allowing the Defendant's Vessel to drift towards the Plaintiff's property. (c) Failure to observe the weather forecast before leaving securing the Defendant's vessel. (d) Failure to take adequate action and additional measures to prevent damage to the Plaintiff's Property in circumstances where the Defendant knew or ought reasonably to have known, upon visual inspection, or observing the weather forecast that strong winds were forecast. (e) Failure to take reasonable care to ensure that the Defendant's Vessel was properly secured to its moorings. (f) Failure to use sufficient lines to secure the Defendant's vessel in circumstances where the Defendant knew or ought reasonably to have known of the expected weather conditions. (g) Failure to properly check the conditions of the lines and mooring before securing the Defendant's Vessel. (h) Failure to ensure that the Defendant's vessel was properly secured in circumstances where the Defendant knew or ought reasonably to have known of the expected weather conditions. (i) Failure to take reasonable care to ensure that the Defendant's Vessel was properly anchored. (j) Failure to anchor the Defendant's vessel properly in circumstances where the Defendant knew or ought reasonably to have known of the expected weather conditions. (k) Failure to keep a proper lookout. (l) Failing to avoid colliding with the plaintiff's Property."
Since the only evidence as to what happened aboard the Magnolia is that from Mr Schnitzerling, particulars (c), (g) and (k) are not made out on the evidence.
Most of the particulars of negligence relate to steps which Mr Schnitzerling should have taken before the southerly change. Counsel for the plaintiff characterised some of the particulars as steps which Mr Schnitzerling should have taken after the southerly change arrived and after the Magnolia commenced to drag anchor. Counsel submitted that Mr Schnitzerling should have deployed a second anchor or used the four horsepower outboard motor to attempt to steer away from the waterpark. As Mr Akacich, the defendant's liability expert, put it in his oral evidence, after the Magnolia commenced to drag, "time was his enemy". I accept that opinion. There was little or nothing which Mr Schnitzerling could have done after the Magnolia commenced to drag anchor to prevent it reaching the waterpark. This judgment will therefore focus on the precautions which should have been taken prior to the southerly arriving.
As previously recited, the plaintiff's expert Mr Bailey and the defendant's expert Mr Akacich provided the reports which are listed above. The conclave report (PX 9) is a particularly useful document, because it records matters of agreement between the experts. Both experts attended court and gave joint oral evidence.
In PX 9 the experts agreed that the BOM record at the Coffs Harbour Airport, which was only one kilometre south of the harbour itself, recorded that at 7.30pm the wind was from the north west (30 degrees) with a speed of 11 knots. The speed of the wind then dropped to 9 knots at 7.43pm, 7 knots at 8.00pm, 4 knots at 8.25pm, 5 knots at 8.30pm and 1 knot at 8.39pm. By 8.39pm the direction of the wind had changed to 70 degrees.
Mr Akacich gave oral evidence, which I accept, that in the hour prior to the southerly change arriving at 8.44pm, this drop in the speed of the northerly wind, and the change in direction, should have alerted any sailor to the fact that the forecast southerly was approaching.
At 8.44pm the BOM data stated that the wind speed at the airport was 30 knots from a direction of 190 degrees (almost due south) with gusts of 39 knots. The speed increased to 33 knots, with gusts of 43 knots at 8.47pm and 31 knots at 8.54pm, with gusts of 49 knots.
According to the evidence of Mr Schnitzerling the Magnolia swung around in a wide arc as the southerly arrived and almost immediately commenced to drag anchor. The drift towards the waterpark must have occurred within minutes of the southerly arriving, when the wind speed and the wind gusts were at their peak.
In PX 9 the experts agreed that when the southerly arrived the sloop moved to the north which applied force to the previously set anchor and dislodged that anchor from the seabed. The yacht was then being dragged in a general northerly direction. The anchor did not reset or re-engage with the seabed after it was dislodged.
In PX 9 Question 2.4 was: "What potential options were available to the skipper, knowledgeable of the approaching change in weather, that would have reduced the risk of the anchor dislodging from the seabed and the subsequent movement into contact with the waterpark."
The experts agreed that "there were other options available to the skipper".
Mr Bailey suggested that one option was to delay leaving Yamba until the forecast southerly had passed. I do not accept that this was a reasonable precaution to take as the evidence shows that if the Magnolia had been anchored to take account of a southerly change within Coffs Harbour, the incident would not have occurred. Mr Bailey also suggested that the Magnolia could go into the marina at Coffs Harbour, but this option was not available because the marina was closed due to previous storm damage.
Mr Bailey's third option was expressed as follows: "Reset the anchor for a southerly blow prior to arrival of the change and let out appropriate scope in this direction (e.g. 8:1). This could be done by either: (i) pulling up to the anchor and then backing down in a northerly direction to reset the anchor and pay out sufficient scope (e.g. 8:1) provided sufficient 'sea room' remained between the northerly location and potential hazards that would be to lee (i.e. downwind) during southerly winds, or (ii) lifting the anchor and re-anchoring for a southerly blow at a suitable location either to the south or south east of the former location, or on the south east side of the harbour where increased sea room would be available to the north, or anchor in the designated anchorage to the north of the jetty if room was available between other vessels. Either operation could be completed after the breeze had dropped between approx 7:30pm and 8:40pm in twilight conditions."
Mr Akacich's rather Delphic answer was: "In hindsight there are many options when considering anchorages."
During his oral evidence, Mr Akacich conceded that one of those options was to reset the anchor to take account of a southerly change.
Question 2.6 in PX 9 was: "Assuming the yacht was anchored per Q 2.5 above when the forecast weather change occurred, what factors would affect the ability of the anchor to continue to remain sufficiently effective to cause the yacht to avoid contact with the waterpark?"
The experts agreed that: "After being set for northerly winds, the anchor needed to change orientation and either remain engaged with the sea bed, or re-engage with the sea bed, to be able to effectively oppose movement under winds from the opposite direction."
This agreed matter was, in essence, what Mr Bailey had said in answer to Q 2.4, and what Mr Akacich said in his oral evidence was a suitable option.
In oral evidence, Mr Akacich was asked whether he thought that Mr Schnitzerling had acted prudently. Mr Akacich was careful to say in his answer that Mr Schnitzerling acted prudently after the Magnolia commenced to drag anchor. He did not say in his oral evidence that Mr Schnitzerling acted prudently before the southerly change arrived.

Liability - Consideration

Section 5B of the Civil Liability Act 2002 (NSW) ("CLA") provides as follows: "5B General principles (1) A person is not negligent in failing to take precautions against a risk of harm unless: (a) the risk was foreseeable (that is, it is a risk of which the person knew or ought to have known), and (b) the risk was not insignificant, and (c) in the circumstances, a reasonable person in the person's position would have taken those precautions. (2) In determining whether a reasonable person would have taken precautions against a risk of harm, the court is to consider the following (amongst other relevant things): (a) the probability that the harm would occur if care were not taken, (b) the likely seriousness of the harm, (c) the burden of taking precautions to avoid the risk of harm, (d) the social utility of the activity that creates the risk of harm."
The risk is pleaded in the Further Amended Statement of Claim as follows (par 9): "The Defendant knew or ought to have known at the time of anchoring that if he failed to take precautions, there was a risk that the Defendant's Vessel may make contact with and cause damage to the Plaintiff's Property."
The two experts agreed that there was a risk that the Magnolia could drag anchor in the strong southerly wind and make contact with the inflatable waterpark. In answer to Q 2.8 in the conclave report (PX 9) the defendant's expert Mr Akacich said: "This vessel is not the first vessel to drag anchor, nor will it be the last…"
I find that the pleaded risk was foreseeable. Further, I find that Mr Schnitzerling, as an experienced sailor, knew of such a risk.
I also find that the risk was not insignificant. According to Mr Akacich, this risk is well known to come to fruition. The evidence in the case shows that on the night of 12 February 2017, another vessel in Coffs Harbour dragged anchor. It collided with the jetty causing significant damage.
In considering whether in the circumstances a reasonable person in the position of the defendant would have taken precautions against a risk of harm, the matters set out in s 5B(2) have to be considered. The probability that the harm would occur if care were not taken is a significant probability. The likely seriousness of the harm was that the vessel could cause property damage. The burden of taking precautions to avoid the risk of harm was minimal. Mr Schnitzerling was on a recreational voyage and was below deck at the time. He was not engaged in any activity that took his attention away from the weather conditions. It would have been a simple and cost-free matter to reset the anchor. The social utility of the activity that created the risk of harm is not relevant, as Mr Schnitzerling was sailing the boat for pleasure.
In considering the issue of liability, regard must be had also to s 5C of the CLA which provides: "5C Other principles In proceedings relating to liability for negligence: (a) the burden of taking precautions to avoid a risk of harm includes the burden of taking precautions to avoid similar risks of harm for which the person may be responsible, and (b) the fact that a risk of harm could have been avoided by doing something in a different way does not of itself give rise to or affect liability for the way in which the thing was done, and (c) the subsequent taking of action that would (had the action been taken earlier) have avoided a risk of harm does not of itself give rise to or affect liability in respect of the risk and does not of itself constitute an admission of liability in connection with the risk."
As I understand the decisions of the Court of Appeal in cases such as Bunnings Group Limited v Giudice [2018] NSWCA 144, the task for the court is to go through each of the precautions which the plaintiff pleads should have been taken, and analyse each precaution with s 5B and s 5C of the CLA in mind. I have indicated above those particulars which fail at the outset because of lack of evidence.
I now deal with the pleaded particulars which remain. All of the remaining particulars can really be summarised as a failure to take suitable steps or precautions to guard against the risk of the Magnolia dragging anchor in the forecast strong southerly breeze. The simplest and safest precaution, which would have been cost-free, was to reset the anchor. Both experts agreed that this is something which could have been done. Mr Bailey said that it should have been done. I accept that opinion. It was too late to do anything once the Magnolia had dragged anchor and started moving towards the inflatable waterpark while out of control. I find that Mr Schnitzerling should have reset the anchor earlier in the night, given that he knew that there was going to be a strong southerly change. I am fortified in that conclusion by the evidence of Mr Akacich that the drop in wind speed in the hour before the southerly hit Coffs Harbour should have alerted any sailor to the fact that the weather was about to change.

Contributory Negligence

Contributory negligence was pleaded in par 11 of the final Defence. The defendant bore the onus of establishing the pleaded facts, and that such facts, if established, made a material contribution to the damage suffered by the plaintiff. The defendant made no attempt to prove any of these matters and the allegation of contributory negligence fails.

Conclusion on Liability

The plaintiff has made out a case of breach of duty of care. The judgment will now consider damages, which are an essential element of the tort of negligence.

The Pleadings

Paragraph 12 of the Further Amended Statement of Claim pleads as follows: "As a result of the Collision, the Plaintiff has suffered loss and damage including repair costs and consequential loss. Particulars of the plaintiff's unliquidated claim are provided below. Particulars of Loss and Damage (a) Repair costs $52,292.10 (b) Business interruption/loss of profits for the closure period of the Waterpark between 13 February 2017 and 7 April 2017 (30 trading days), based on an average daily profits of approximately $1,500 (c) Assessment and investigation costs - approximately $3.709.31"
The response to par 12 of the Further Amended Statement of Claim appears in par 10 of the Amended Defence, as follows: "The defendant denies paragraph 12 of the Further Amended Statement of Claim. (a) The repair costs are exorbitant. (i) The cost claim include repairing wear and tear caused by exposure to wind, sun, salt and use on water, that are unrelated to the incident that is the subject of these proceedings. (ii) The costs claimed include the cost of repairing damage not caused by the vessel being rafted to the water waterpark tower. (b) The business interruption claim is exorbitant. (i) The waterpark employees were instructed to deflate the waterpark structures on 12 February 2017 after the weather event started. (ii) The plaintiff had been taking steps which necessitated the deflation and inflation of waterpark assets, hence the business interruption if any was not caused by the defendant. … (iii) The plaintiff operated the waterpark for limited periods during school holidays. (iv) The defendant puts the plaintiff to proof on the business interruption claimed. (c) The assessment and investigation costs claimed are claims investigation costs incurred by the plaintiff's insurer's choice, those costs do not arise out of the alleged negligence (which is denied)."

Plaintiff's Evidence

The plaintiff tendered the affidavit of Mr Anthony Kelly dated 24 February 2020 (PX 1). That affidavit consisted of 14 paragraphs and five pages of annexures.
Paragraph 5 of the affidavit was struck out, on objection being taken, as it stated in a conclusory fashion that damage had been caused by the collision with the Magnolia and the subsequent towing of the Magnolia away from the waterpark. Parts of pars 6 and 10 were struck out, on objection being taken, because they stated in a conclusory fashion that the waterpark was not able to operate on certain days due to the damage caused by the incident.
The parts of the affidavit which survived objection consisted of statements by Mr Kelly concerning the days of operation of the waterpark after the collision with the Magnolia. Annexure "A" was said to be a table outlining the days of operation of the waterpark over the period of 10 January 2017 to 24 April 2017. Annexure "A" is a curious document, because the first column refers to dates between 10 January 2017 and 31 January 2017, the second column refers to some of the dates between 4 February 2017 and 12 February 2017, but the third column refers to dates in April 2016. Presumably this was an error. Against the dates recorded in Annexure "A" are dollar figures for each date, but what those dollars figures represent was not explained in evidence. They added up to $97,527.40 which was a figure inconsistent with the method which Mr Kelly put forward in his affidavit, concerning gross takings.
Mr Kelly deposed that between 13 February 2017 and 7 April 2017 "The Waterpark would not have been able to operate for 23 days due to bad weather". Annexure "B" was a copy of the daily weather observations for Coffs Harbour for February and March 2017. Mr Kelly deposed that taking into account days lost to bad weather, 30 days were lost.
Mr Kelly gave evidence that during 2017 the waterpark was to operate at Coffs Harbour from 10 January 2017 until 24 April 2017, a total of 105 days.
Reference to Annexure "A" shows that after 31 January 2017, the waterpark was then open on 4, 5, 10, 11 and 12 February 2017.
I take judicial notice of the fact that the school holidays for January 2017 finished on 30 January 2017. Annexure "A" shows that the waterpark was not open on 1, 2 and 3 February 2017. These were school days. The waterpark was open on 4 and 5 February 2017, which was a weekend. The waterpark was not open on 6, 7, 8 and 9 February 2017. It was open on 10 February 2017, which was a Friday, but the dollar figure next to that date was $0. The waterpark was open on Saturday 11 February 2017 and Sunday 12 February 2017, being the date of the collision.
Annexure "A" shows that when the waterpark re-opened on 8 April 2016 (sic), it was then open every day until 24 April 2016 (sic). I take judicial notice of the fact that school holidays in 2017 ran from Saturday 8 April 2017 to Tuesday 25 April 2017. Counsel for the plaintiff was content for the court to take judicial notice of the dates of the school holidays in 2017.
Annexure "C" to the affidavit of Mr Kelly was said to be a profit and loss statement for the periods of 1 January 2016 to 30 April 2016, 1 January 2017 to 30 April 2017 and 1 January 2018 to 30 April 2018.
Mr Kelly deposed that "During the period of 2017 Splash Waterpark made a gross profit of $76,093 over the 52 days it was operational, an average income of $1,463.33 per day". This figure of $76,093 comes from Annexure "C". It was the "Gross Profit" earned by Splash in that period. However, damages for the tort of negligence are not awarded on gross figures, but have to take into account the operating expenses needed to earn such a figure, as well as tax. The starting point for an assessment of damages is net profits, not gross profits. Annexure "C" shows that for the period 1 January 2017 to 30 April 2017, during which the gross profit was $76,093, the operating expenses were $77,715, leaving a nett loss for the period of $1,622.
The calculation of damages also has to take into account whether any operating expenses were saved by the waterpark being closed. Mr Kelly gave no evidence as to whether Splash had been able to reduce its operating expenses for the days or weeks when the waterpark was allegedly closed.
Mr Kelly's affidavit concluded by asserting as follows: "At an average income of $1,463.33 per day, I calculate the loss of income for the 30 day period as $43,899.81."
The mathematics are almost accurate (the correct figure is $43,899.90). As a matter of law this is a flawed approach to calculation of a consequential loss claim. Firstly, it takes a gross profit figure and does not take account of operating expenses or tax (although on the figures in Annexure "C", there would have been no tax because there was a nett loss).
Secondly, that approach fails to take account of any savings in operating costs through the waterpark being closed.
Thirdly, the gross income for the waterpark between 1 January 2017 and 30 April 2017, set out in Annexure "C", comes from school holidays plus the two weekends immediately after the end of the January school holidays. The waterpark does not appear to have been open after the end of the January school holidays except on weekends. To take the profit made in school holidays and extrapolate it for a period during which the waterpark would have been closed on many days, even absent bad weather, is to take an incorrect approach to the calculation of loss.
Fourthly, Annexure "A" shows that in the April 2017 school holidays after the waterpark re-opened, gross takings per day were much less than daily takings in the January 2017 school holidays. This could have been because of the cooler weather. Whatever be the reason, it is invalid to extrapolate from daily takings in the busy month of January, and apply that figure to later periods when the waterpark was not open every day, and would not have been as busy.
Several of these problems were pointed out in the expert report of Mr Ehlers (DX 10), to which reference will be made below.
The second affidavit relied upon by the plaintiff in relation to damages was the affidavit of Mr Musch dated 2 March 2020 (PX 2).
Most of this affidavit was struck out upon objection being taken. Mr Musch described himself as a senior consultant in the employ of the claims manager for the insurer of Splash. Annexed to his affidavit were a number of reports made by a loss adjustor named Mr Holliday, who was not called to give evidence. The paragraphs of the affidavit referring to those reports were struck out on objection being taken, and the reports were not received into evidence. Those reports purported to go to the quantum of loss, but were not expert reports as required by the Rules. Instead of dealing with calculation of damages suffered as a result of a tort, they related to commercial arrangements between an insurer and its insured. Property damage policies provide different forms of cover, which may produce a figure more or less than common law damages. The reports had no relevance to the calculation of damages in the present case.
One document annexed to that affidavit (Annexure "H") was not objected to. It was an invoice from a German company Wibit addressed to Splash and dated 20 March 2017. The invoice listed a number of items which presumably related to the waterpark and the invoice price for each item. The total price on the invoice was $38,377 US Dollars.
It is noted that Mr Kelly gave no evidence at all concerning any damage to any of those items. Nor was there any evidence from Mr Kelly or Mr Musch concerning the necessity for those items to be supplied to the plaintiff, or as to the reasonableness of the price charged for each item.
The affidavit of Mr Musch also dealt with the investigation costs charged by his employer to the insurer. These parts of the affidavit were rejected, and counsel for the plaintiff acknowledged that the insurer's investigation costs could not be part of the plaintiff's damages claim. This part of the claim was abandoned.

Mr Schnitzerling

The first affidavit of Mr Schnitzerling (DX 1) covered both liability and damages. The relevant evidence in relation to damages given in that affidavit was as follows: 1. After it dragged anchor, the Magnolia came to rest against the eastern side of the waterpark (par 38). 2. Mr Schnitzerling was able to "shove" his hand between the yacht and the waterpark without feeling any great pressure and was able to easily push the waterpark a centimetre or so away from the yacht (par 40). 3. Two young men swam out to the waterpark and were thrown a rope by Mr Schnitzerling. They tied the yacht to the waterpark (par 44). 4. VMR indicated to Mr Schnitzerling that they were going to tow the Magnolia away from the waterpark (par 46). 5. Mr Schnitzerling spoke to a young man on the waterpark and asked to be untied. The young man said that he would (par 48). 6. The yacht was then towed off the waterpark by VMR (pars 49-53). 7. On 13 February 2017 Mr Schnitzerling had a conversation with Mr Anthony Kelly (par 60). Mr Kelly said: "We are packing the waterpark up. We were going to pack up anyway as it was the end of the school holidays." 1. On the evening of 13 February 2017 Mr Schnitzerling spoke to the young men who had assisted him on the night before (par 62). He asked whether there was any damage to the waterpark and one of them replied: "It looks like some of our anchor points were torn away but we need to have a proper look."
The cross-examination of Mr Schnitzerling in relation to the conversation with Mr Kelly about packing up the waterpark after the school holidays was limited to having Mr Schnitzerling agree that that conversation may have been with a person other than Mr Kelly. There was no challenge in cross-examination to such a statement having been made by someone associated with the waterpark. Mr Kelly did not deny the conversation. I accept the evidence of Mr Schnitzerling which is summarised above.
Nor was there any challenge in cross-examination by way of suggesting to Mr Schnitzerling that when VMR towed the Magnolia away from the waterpark, it was still lashed to the waterpark by a rope, and that damage was then caused to the waterpark.
Finally, there was no attempt in cross-examination to suggest to Mr Schnitzerling that the Magnolia had done damage of any sort to any part of the waterpark.

Expert Report of Mr Ehlers

The defendant served the expert report of Mr Chris Ehlers, a chartered accountant (DX 7). It was the only expert evidence of an accounting nature in the case.
Under the heading "Critique of Claim of Loss of Income", Mr Ehlers said that Mr Kelly's assertion that $76,093 was a "Gross Profit" failed to take into account the following matters: 1. The period of time in which the waterpark had operated prior to the collision was during the summer school holidays as compared to the closure period which was during the non-school holiday period. 2. Any savings to the plaintiff in business expenses as a result of the closure of the waterpark were likely to include sub-contractors, wage costs, fuel and first aid expenses. 3. There may have been savings in the licence fee of $1,000 paid to Coffs Harbour City Council.
Mr Ehlers dealt with the reference by Mr Kelly to the profit and loss statements. He said that it was inappropriate to rely on such management records in determining loss of income, when special purpose financial statements had been prepared for the appropriate financial year by an accountant.
In pars 18-21 of the report, Mr Ehlers set out his opinion about the appropriate method which should have been used to calculate loss of income. The method included: 1. Establish the expected operating days over the closure period. 2. Establish the expected number of paid admissions for each operating day over the closure period. 3. Establish the expected income for paid admission. 4. Provide a detailed analysis of business expenses, to determine which expenses were saved as a result of the closure of the waterpark. 5. Using historical income, estimate the loss of income if comparable waterpark data could be provided to be used as a benchmark.
Mr Ehlers set out the further documents required to determine whether there had been lost income. These included: 1. Daily attendance reports for 2016, 2017 and 2018. 2. Daily turnover/attendance reports for similar waterparks. 3. Detailed weekly payroll records for 2016, 2017 and 2018. 4. Breakdown of bad weather days on a daily basis for 2016, 2017 and 2018.
If ever an expert report should have rung warning bells for a plaintiff who was claiming consequential economic loss, this report was it. In spite of the matters raised by Mr Ehlers in his report, no attempt was made to supplement the scanty evidence put forward in the affidavit of Mr Kelly and the affidavit of Mr Musch, most of which was completely inadmissible in form.

Consideration of Damages

As previously recited, the plaintiff claimed three heads of damage, set out in par 12 of the Further Amended Statement of Claim. It abandoned the assessment and investigation costs, leaving a claim for repair costs, and a claim for loss of profits.

Repair Costs - Principles

Property damage includes any interference which diminishes the value of an object, without the need for structural damage: Hunter v Canary Wharf [1996] AC 655. McGregor on Damages, Sweet & Maxwell, (15th Edition, par 1247), says: "The normal measure of damages is the amount by which the value of the goods damaged has been diminished. This, in the ship collision cases, has invariably been taken as the reasonable cost of repair."
As to whether the diminution in the value of an object is to be measured by rebuilding, refurbishment or replacement, a plaintiff is not able to recover a cost of repair that is disproportionate to or greater than the market value of purchasing similar property: Public Trustee v Hermann (1968) WN (Pt 1) (NSW) 442.
In Murphy v Brown (1985) 1 NSWLR 131 at 133 the Court of Appeal said: "Where a plaintiff claims the cost of work necessary to put him or his property in the pre-injury condition, the work must not merely be necessary for the purpose but it must be a reasonable course to adopt to do that work: Bellgrove v Eldridge (1954) 90 CLR 613 at 618 ."
In relation to that part of the plaintiff's damages claim for the repair cost, it is necessary for the plaintiff to prove on the balance of probabilities: 1. The damage which did occur. 2. That such damage was caused by the negligence of the defendant. 3. That the repair is a necessary and reasonable course to adopt i.e. that the cost of repair is a reasonable cost.

Repair costs - Consideration

Mr Kelly was the person who could have given evidence about his observation of the state of the waterpark prior to the contact with the Magnolia and any change in condition that he observed after that contact. In other words, he would have been the person who could have given evidence about any damage which necessitated repair or replacement. Mr Kelly gave no such evidence. Nor was there any evidence on that topic from any other witness.
In relation to evidence concerning causation of any damage, there was no evidence to contradict the evidence of Mr Schnitzerling who spoke of the Magnolia resting alongside the waterpark, not even exerting pressure upon it. Nor was there any evidence that the Magnolia was towed off the waterpark with the rope still attached to the waterpark, thus causing damage. There was a hearsay statement from one of the boys who assisted Mr Schnitzerling on the night of the collision, to the effect that some of the mooring points might have been damaged, but he was not sure. Even if they were damaged, there was no evidence that they were damaged by anything to do with the Magnolia, as opposed to damage which could have been caused by the effect of the strong southerly winds upon the waterpark.
There were no photographs tendered which showed any damage to the waterpark.
While there was an invoice from a German company directed to Splash, there was no evidence to connect any line item in that invoice to any damage done to the waterpark by the incident.
As to the third element that has to be proved by a plaintiff, there was no evidence as to the reasonableness of the cost of any of the line items in the invoice referred to above. The Defence to the Further Amended Statement of Claim pleaded, inter alia, that the cost claimed included repairing wear and tear.
Counsel for the plaintiff accepted that the plaintiff bore the onus of proving that damage had been suffered, that it was caused by the negligence of the defendant, and that the repair costs were necessary and reasonable. Counsel cited par 344 of McGregor on Damages: "On the other hand, where it is clear that some substantial loss has been incurred, the fact that an assessment is difficult because of the nature of the damage is no reason for awarding no damages or merely nominal damages."
Counsel for the plaintiff acknowledged that there was no direct evidence of the matters which the plaintiff had to prove on damages. He submitted that the court should draw inferences as to damages based upon the following evidence.
Firstly, it was submitted that there was evidence that the waterpark was in good condition prior to the incident involving the Magnolia. The affidavit PX 10 showed that the waterpark was purchased new in 2015. Annexure "A" to PX 1 showed that it had been operating up to the date of the incident.
Counsel also submitted that the Magnolia was a vessel which weighed 1,000kg and the evidence showed that it had dragged anchor at 3-4 knots, which was a speed of between 5.6km and 7.4km per hour. He submitted that a collision with such a vessel would necessarily cause damage to the waterpark.
However, this submission ignored the fact that Mr Schnitzerling had given evidence that the Magnolia came to rest against the waterpark, and that he could "shove" his hand between the hull of the sloop and the edge of the waterpark without feeling any great pressure. There was no cross-examination to challenge Mr Schnitzerling about this. Mr Schnitzerling certainly did not give evidence that there was any collision of moment with the waterpark or that there was any damage done. Nor were such things suggested to him in cross-examination. There was no expert evidence that the Magnolia would necessarily have caused damage to the inflatable waterpark if it contacted it at a speed of between three and four knots.
Counsel for the plaintiff also submitted that there was hearsay evidence in business records, being emails from Ms T Kelly and Mr A Kelly, stating to the Council that "a few pieces" of the waterpark had been damaged in the incident with the Magnolia. There was no indication of the source of such hearsay assertion by Ms Kelly. Further, Mr Kelly did give evidence by way of his affidavit but said nothing at all about any damage that he observed to the waterpark.
Counsel for the plaintiff submitted that from the invoice from Wibit alone, an inference could be drawn that the Magnolia had caused that amount of damage to the waterpark. The trouble with that submission is that there was no evidence that any of the line items in that invoice had been damaged by the Magnolia.
Damage is the gist of an action in negligence. Counsel for the defendant submitted that the plaintiff's claim must fail because there was no evidence that the waterpark had suffered damage.
In Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; (2003) 196 ALR 257 at [38] the High Court said: "It may be that, in at least some cases, it is necessary or desirable to distinguish between a case where a plaintiff cannot adduce precise evidence of what has been lost and a case where, although apparently able to do so, the plaintiff has not adduced such evidence. In the former kind of case it may be that estimation, if not guess work, may be necessary in assessing the damages to be allowed."
In Troulis v Vamvoukakis [1998] NSWCA 237 Gleeson CJ observed that where evidentiary proof of damages had not been provided: "Justice does not dictate that, in such a case, a figure should be plucked out of the air."
To return to the words quoted from McGregor on Damages, this is not a case where an assessment of damages "is difficult because of the nature of the damage". The plaintiff could and should have been able to provide precise and direct evidence of the damage which was caused, of how it was caused, and of the necessity to repair such damage and the reasonableness of the cost of repair. The plaintiff made no attempt to call such evidence. This case does not fall into the category where the court has to make an estimate because proof of precise damage is difficult. The allegation of the plaintiff in this case is that there was precise damage, but it has simply called no evidence about such damage.
The plaintiff has failed to establish, on the balance of probabilities, that the repair claim is made out. This is not an appropriate case to estimate damages. There was no evidence of damage, or causation or reasonableness. Yet it would have been well within the power of the plaintiff to call precise evidence on each of those matters.

Loss of Profits Claim

I accept the opinion of Mr Ehlers that the approach to the loss of profits claim, set out by Mr Kelly in his affidavit in a perfunctory fashion, is an incorrect approach to assessment of loss of profits. For all the reasons set out in Mr Ehlers' report, Mr Kelly's assertions about average daily gross profit are flawed. Further, the notion of relying upon gross profit, rather than properly establishing the actual loss, is not the correct approach to such claims for damages.
The claim for loss of profits is one brought for the benefit of Splash itself. It does not seem to have formed part of any payout by the insurer. There are a number of completely flawed assumptions in the approach set out in pars 6-14 of the affidavit of Mr Kelly. They have been dealt with above.
It could not be thought that the challenge to the loss of profits claim came as a surprise to the plaintiff. The report of Mr Ehlers was served a long time ago, and it exposed the flaws in the approach pursued in the Kelly affidavit. Mr Ehlers was even good enough to inform the plaintiff how it might prove a loss of profits claim, but that invitation was not taken up.
The plaintiff has failed to prove, on the balance of probabilities, the claim for loss of profits.

Conclusion on the Plaintiff's Damages Claim

The plaintiff has failed to call evidence to establish that it suffered any damage, either by way of repair costs, or loss of profits. The plaintiff's claim fails and there will be judgment for the defendant with costs.

Orders

The orders of the court are: 1. Judgment for the defendant. 2. Order the plaintiff to pay the defendant's costs. 3. Grant leave to the parties to notify my Associate by 22 March 2021 if a different costs order is sought.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 March 2021

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Judgment (18 paragraphs)

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Cases Cited (6)