The District Court of New South Wales recently dismissed a claim for damages by the owner of an inflatable waterpark which had been damaged by the defendant’s yacht.
Although the Court found that the defendant had been negligent, the plaintiff failed to tender evidence establishing that it suffered any damage by way of repair costs or loss of profits as a result of the incident. Accordingly, the Court delivered judgement for the defendant.
The decision demonstrates the importance of being able to provide appropriate and admissible evidence in support of claims for damages for repair costs and loss of profits. Conversely, for defendants in such claims, the decision provides guidance in how to assess whether a plaintiff has substantiated their claimed losses.
Facts
On 12 February 2017 the sloop ‘Magnolia’ was anchored in Coffs Harbour. The sloop was owned and skippered by the defendant. The plaintiff’s inflatable waterpark was positioned north-east of the sloop. A predicted strong southerly wind blew up that night and the ‘Magnolia’ dragged anchor and came into contact with the waterpark.
The plaintiff alleged that the defendant negligently failed to properly the anchor the sloop when he knew or ought reasonably to have known of the expected weather conditions.
The decision
The Court concluded that the risk that ‘Magnolia’ could drag anchor in a strong southerly wind and come into contact with the inflatable waterpark was foreseeable and that the defendant, as an experienced sailor, knew of the risk.
After considering a joint experts’ report, the Court found that the defendant was negligent in failing to reset the anchor to take into account the predicted southerly winds.
Accordingly, the court found that the plaintiff had made out a case of breach of duty of care. However, the plaintiff also had to demonstrate that it had suffered loss as a result of the breach.
The plaintiff claimed damages for repair costs and loss of profits.
In support of the claim for repair costs of $52,292.10, the plaintiff tendered an invoice from the contractor which repaired the waterpark. Importantly, this evidence was not accompanied by relevant evidence of a causal relationship between the incident and the claimed repair costs such as:
- photographs which showed the damage to the waterpark as a result of the incident;
- expert evidence that the ‘Magnolia’ would have caused the damaged to the inflatable waterpark if it came into contact with it at a speed of between three and four knots; and
- evidence connecting the items in the repair invoice to the damage allegedly caused by the ‘Magnolia’.
Accordingly, the claim for repair costs was not made out.
The plaintiff also claimed damages for loss of profits between 13 February 2017 and 7 April 2017 while the waterpark was being repaired. The plaintiff alleged that it would have achieved average daily profits of $1,500.00 during this period.
The plaintiff tendered various financial statements and an affidavit from a director of the plaintiff in support of the claim rather than evidence from an accountant.
The Court noted that the claim failed to take into account the plaintiff’s operating costs, any savings in operating costs through the waterpark being closed. Importantly, the claim was based on earnings during the school holidays (when the waterpark was open every day until 30 January 2017) and applying it to a period during which the waterpark would only have operated on weekends.
The defendant led evidence from an accountant which identified the shortcomings in the methodology adopted for the claim. The Court noted that in spite of matters raised in the defendant’s expert report, no attempt was made to supplement the ‘scanty evidence’ put forward by the plaintiff, much of which was inadmissible.
The Court found that the plaintiff had failed to prove the claims for property damage or loss of profits. Consequently, in the absence of proof of damage flowing from the defendant’s negligence, the plaintiff’s claim was dismissed and judgment given for the defendant.
Commentary
The decision is relevant to both plaintiffs and defendants in claims for damages to property and loss of profits as it illustrates the importance of:
- evidence demonstrating a causal relationship between the alleged negligence and the damage to the property and associated repair costs and loss of profits;
- adopting appropriate methodology for calculating claims for loss of profits which takes into account potential savings and possible changes in expected revenue during the period in which the alleged losses have occurred; and
- ensuring that evidence in support of the claims (or challenging them) is admissible.
For plaintiffs, this means taking care to ensure that repair costs are substantiated and clearly identified as being referable to the alleged negligence. Claims for loss of profits need to be calculated appropriately and be admissible, preferably in the form of expert evidence from an account if the methodology requires explanation.
Conversely, defendants need to cast a critical eye over such claims and consider whether elements of the claim may be vulnerable to challenge due to lack of substantiation or incorrect calculation of losses.
This article was written by Anthony Highfield, Partner and James McIntyre, Special Counsel.
