© the new south wales bar association - professional … · 2019-08-30 · plaintiff chris collins...


Form 2 (version 1)

Rule 6.2

[Omitting Formal Parts of Uniform Civil Procedures Form – the form below is used to indicate the form currently in use]

STATEMENT OF CLAIM

COURT DETAILS

Court District Court of New South Wales

Division

List Commercial

Registry Sydney

Case number 279 of 2013

TITLE OF PROCEEDINGS

Plaintiff Chris Collins

Number of plaintiffs 1

Defendant Greencent Insurance Limited

Number of defendants 1


FILING DETAILS

Filed for Plaintiff

Address Brady’s, Solicitors Macquarie Street Sydney NSW 2000 Ph: 9238 3874

TYPE OF CLAIM

Mercantile Law - Insurance Disputes

VENUE

Intended hearing venue Law Courts Building

Queen’s Square, Sydney

RELIEF CLAIMED

The Plaintiff claims:

Damages;

Interest pursuant to section 57 of the Insurance Contracts Act 1984;

Costs.


PLEADING AND PARTICULARS

The plaintiff relies on the following facts and assertions:

1. The defendant is, and was at all material times, a company duly incorporated and liable to be sued by its corporate name and style.

2. At all material times the defendant carried on the business of general insurance.

3. At all material times the plaintiff was the proprietor of a grocery shop business at 100 King Street, Newtown in the State of New South Wales.

4.By a policy of insurance dated 24 August 2010 (the Policy) the defendant insured the grocery shop business carried on by the plaintiff for various risks including:

(i)destruction by fire of contents for the sum of $750,000;

(ii)consequential loss sustained as a result of fire for the sum of $60,000, (‘Policy’).

5.The term of the Policy was one year from 24 August 2009 and the Policy has been renewed

each year on 24 August, the latest renewal being 24 August 2012.

6. On 8 September 2012 the contents of the plaintiff’s grocery shop business were wholly destroyed by fire.

7. As a consequence of the fire the plaintiff suffered loss.

8. The defendant has neglected or refused to indemnify the plaintiff under the Policy. Particulars of Loss:

The plaintiff estimates the loss as follows:– $

Trading Stock 165,000 Shelving 30,000 Two cash registers 10,000 Refrigerator 15,000 Freezer 15,000 Two counters 10,000 Burglar alarm system 2,000 Loss of trading profits for 12 months 60,000

Total 307,000


9. The plaintiff says that he is entitled to be indemnified by the defendant under the Policy in respect of the loss suffered by him.

SIGNATURE


Signature of solicitor, authorised person

for [role of party] or [role of party]

Name

Solicitor for [Plaintiff]

Date 7 June 2013


Form 6 (version 1)

Rule 14.3

[Omitting Formal Parts of Uniform Civil Procedures Form – the form below is used to indicate the form currently in use]

]

DEFENCE

COURT DETAILS


Division

List Commercial

Registry Sydney







FILING DETAILS

Filed for Defendant

Address McCoys Solicitors 180 Phillip Street Sydney NSW 2000 Ph: 9235 2873

PLEADING AND PARTICULARS


The defendant relies on the following facts and assertions:

1. The defendant admits paragraphs 1, 2, 3, 4, 5, 6 and 7 of the statement of claim.

2. In answer to paragraph 8 of the statement of claim, the defendant:

(a) admits that it has refused to indemnify the plaintiff under the Policy;

(b) says that it was entitled to refuse to indemnify the plaintiff; (c) says that it does not know and cannot admit that the plaintiff suffered loss in the In the amounts claimed; (d) otherwise does not admit paragraph 8 of the statement of claim.

3. The defendant denies paragraph 9 of the statement of claim and that the plaintiff is entitled to be indemnified in respect of the loss claimed or at all. 4. In answer to the whole of the statement of claim the defendant says that it is entitled to refuse to pay the plaintiff’s claim by reason of the fact that the fire was deliberately lit by the plaintiff or at the direction of the plaintiff and the claim is therefore fraudulent.

SIGNATURE

Signature of solicitor, authorised person

for [role of party] or [role of party]

Name

Solicitor for Defendant

Date 26 June 2013


McCoys Solicitors

180 Phillip Street, SYDNEY NSW 2000 DX 123 SYDNEY

4 October 2013 Bradys Solicitors DX 321 SYDNEY Dear Sirs,

Greencent Insurance Ltd ats Collins

We act for the defendant in the above proceedings and note that you act for the plaintiff. Would you kindly supply the following further and better particulars of your Statement of Claim.

As to the trading stock, please supply a complete list of the stock allegedly in the store together with details of the purchase cost of each of those items of stock.

Please provide details of the shelving, including location, size and purchase price, together with alleged value.

Please describe the cash registers with reference to age, condition, purchase price and value.

Please provide similar details as to the refrigerator, freezer, counters and burglar alarm system.

Please identify the persons who sold each of the above items of equipment to the plaintiff.

As to the claim for loss of trading profits, please supply particulars of the loss, including details of gross sales, purchases and all trading expenses together with copies of all tax returns lodged since the plaintiff commenced trading.

Please also let us know whether you will consent to have an accountant inspect the plaintiff's books and records on our behalf. Yours faithfully, McCOYS SOLICITORS


Bradys Solicitors

180 Phillip Street, SYDNEY NSW 2000 DX 321 SYDNEY

17 October 2013 McCoys Solicitors DX 123 SYDNEY Dear Sirs,

Collins v Greencent Insurance Ltd

We refer to your letter dated 4 October 2013 and furnish the following further and better particulars, using your numbering:

The plaintiff does not have and is unable to prepare an accurate list of all trading stock destroyed in the fire. The estimate set out in paragraph 9 of the statement of claim is based on figures prepared by the plaintiff and the accountant in July 2012 for the purpose of inclusion in the plaintiff's tax return. Upon the hearing of the claim the plaintiff intends to adduce evidence of invoices raised by various grocery wholesalers with respect to the plaintiff's purchases prior to the fire.

The shelving destroyed by the fire was as follows:

(a) 10 x 14 foot wall mounted shelves; (b) 4 x double sided gondola 10 feet long of 5 shelves on either side; (c) 2 x wooden shelving units 6 feet long containing 6 shelves; (d) 6 x wall mounted shelves 30 feet long.

The plaintiff does not have records of the price of the shelving. However, the plaintiff recalls that it was in the order of $15,000. The plaintiff has obtained a quote of $30,000 for replacement of that shelving.

The two cash registers were modern electronic registers. The plaintiff's records were destroyed

in the fire and the plaintiff is unable to furnish further particulars. The plaintiff recalls paying $1,000 for each register on hire purchase. Those registers are now $5,000 each to replace.

The refrigerator and freezer are the subject of a lease agreement dated 7 September 2011 which provides for 36 monthly rental payments in the sum of $450.00 and stipulates a residual value of $4,500. The replacement cost as per quotation is $15,000 each.


The counters were built in November 2011 at a cost of approximately $2,500. Replacement cost as per quotation is $10,000.

The burglar alarm system was installed by the plaintiff's brother-in-law. The plaintiff paid him $240 for the cost of the system. The replacement cost is $2000.

We refer to paragraph 4 above.

This is a matter for evidence.

Yes.

Yours faithfully, BRADYS SOLICITORS


Statement – Chris Collins Address: 60/6 Stanley Street, East Sydney, NSW. Occupation: Unemployed (former shop proprietor)

I am the plaintiff.

In about August 2010, I purchased a grocery shop business in King Street, Newtown, from Morrie Terahan.

When I acquired the business, the value of trading stock was approximately $20,000. In late October 2011, I joined the trading group Peter Holdings Pty Limited. Membership of that group entitled me to purchasing benefits such as buying goods at cost price plus service and delivery fee and obtaining special line discounts in relation to various grocery products.

From that time onwards, I built up the level of stock in the business to a value of approximately $165,000. It was my practice to maintain that level of trading stock. I usually obtained regular groceries from Peter Holdings. In addition, I usually stocked quantities of gourmet products such as almond croissants, herb brioche and other exotic pastries and various smallgoods which I obtained from a private supplier.

At the time that I acquired the business, I engaged a carpenter to fit the premises with shelving and service counters. I paid the carpenter the sum of $17,500 for the supply and installation of that equipment. I think that $15,000 was for the shelving and the counters made up the rest.

Prior to commencing trading at the business, I asked my brother-in-law to install a burglar alarm system at the premises of the business. I paid him $240 for the cost of the system. I did not pay him any fee for installing the system. He is now in Lebanon.

At the time of acquiring the business, I also entered into hire purchase agreements in relation to the following equipment at the prices indicated:

(i) Two cash registers $2,000 (ii) Display refrigerator $4,500 (iii) Wall freezer unit $6,000

The business was financed by means of an overdraft facility with ANZ Bank. There was a limit of

$13,000 on that account. I also had a loan with ANZ for about $19,000 which I needed when I was setting up the business but the loan was extended quite a bit by November 2011. I have also borrowed various other amounts since I started the business.

In August 2010 when I bought the business I took out an insurance policy in relation to the business. That policy covered stock for about $90,000. By the time I had to renew the policy in August 2012, I knew I had stock well in excess of that and I became concerned that I may have been under-insured. When I renewed the policy in August 2012, I raised the level of cover in relation to stock to $180,000.

From the time that I commenced trading in August 2010 to September 2012 the level of trade increased. By mid 2012 I felt that I was well known in the community and the business was doing well.


My usual trading hours were 8.00 am to 8.00 pm 7 days a week. I usually took $800 per day on weekdays and on weekends usually around $900 each day.

On 8 September 2012 I closed the shop at 7.40 pm as I was not feeling well. At that time, I lived in King Street, Newtown, just near the shop. I locked the premises and went to my home, where I had a shower, got into my pyjamas and went to bed.

At approximately 8.20 pm a lady knocked on my door to tell me that there was a fire. I immediately ran to the shop where I saw that it was indeed on fire. There was a police car and two fire engines already there. The fire appeared to be under control at that stage. While I was waiting to talk to police, I had a look at the state of the shop. I was trying to think how this had happened or what had caused the fire. I noticed that the window next to the front door was no longer in place. It might have been smashed by someone trying to break into the store.

As a result of the fire, the premises and their contents were completely destroyed. I was unable to resume trading at those premises.

The items destroyed included all the stock, the shelving, the fridge and freezer, the counters, the cash registers and all other fittings and fixtures.

I also had at the shop some valuable items which were left to me by my grandmother, who died about 10 years ago. They included a stamp collection valued at $20,000, a coin collection valued at $32,000 and a box of antiques valued at $20,000. Those items were kept by my mother for safe keeping until August 2011 when my mother died.

I have obtained quotes for the replacement of various items in the shop. Those quotes are attached to this statement.

I have been unemployed since the fire. I have been unable to buy a new business because the insurance company won’t pay me the money under my policy. I don’t know why I even bothered to take out the insurance policy. ____________________________________ Chris Collins NOTE TO READERS: This statement must not be tendered as the plaintiff’s evidence in chief. The plaintiff’s evidence must be taken orally in proper form. If acting for the defendant, the statement can be used for whatever purpose you elect is forensically appropriate for your case.


Record of Interview

Conducted at Newtown Police Station

Between Sergeant Starkey (SS) and Chris Collins (CC)

on 8 September 2012 at 11.05pm

SS: As I have explained to you, I am conducting an investigation into a fire at premises located in King Street, Newtown tonight. Do you agree that you have accompanied me voluntarily to the police station for the purpose of assisting me with my inquiries?

CC: Yes. SS: Do you also agree that prior to commencing this record of interview, I warned you that

you are not obliged to say anything but that anything you do say will be recorded by me as the interview takes place and may be used in evidence against you.

CC: Yes. SS: What is your full name? CC: Chris Collins SS: What is your address? CC: 80 King Street, Newtown. SS: What is your occupation? CC: Shop proprietor. SS: What are you able to tell me in relation to this matter? CC: I left the shop as usual making sure I locked up properly. I went home and was just

about to fix myself something to eat when I heard a siren coming down the street. I heard a lady yell "Oh my God, there's a fire". I immediately ran straight out and down to my shop which was on fire.

SS: What were your usual trading hours at the shop? CC: 8.00am to 8.00pm 7 days a week. SS: What time did you leave the shop tonight? CC: I honestly couldn't tell you. I lock up at 5 to 8 and I'm home nearly by 8. SS: What did you do when you got home? CC: I had a shower.


SS: Do you normally have a shower first thing when you get home? CC: Well I was going to go straight to bed. I wasn't feeling very well. SS: How are you feeling now? CC: Oh, I'm OK now. Could I have a cigarette? (Interview suspended. Collins provided with a cup of coffee and a cigarette.) SS: I would now like to ask you some questions in relation to your business. Do you

understand that? CC: Yes. SS: When did you buy the business? CC: In 2010, in August. SS: Was the business doing well? CC: Of course. SS: What were your weekly takings? CC: Approximately $2,100 to $2,400. On weekends it would be about $2,400 to $2,700 each

day. SS: How much stock did you have in the shop last night? CC: About $180,000 worth. SS: Who do you get your stock through? CC: Mainly Peter Holdings. I also sell a lot of exotic pastries and smallgoods which I get from

a guy in Newtown. SS: Do you have any insurance in relation to your business? CC: Yes, I am insured with Greencent Insurance. The stock is insured for $180,000. SS: I have reason to believe that you have recently increased the insurance on your

business. Is that correct? CC: Yes. I increased it from $90,000 to $180,000 last month because I was under-insured. I

have built up the stock considerably in the last year or so. SS: Who do you bank with?


CC: The ANZ bank. SS: Do you have any loans outstanding? CC: Yes, I owe them about $60,000. That's a term loan. I also have an overdraft of $12,000. SS: Do you owe any other money? CC: I pay Email Finance $456 per month, that's for equipment lease. I also have various

personal loans. SS: Are you in financial difficulty at the moment? CC: No. SS: Do you have any trade creditors? CC: I think there would be about $30,000. SS: How are you able to meet those debts? CC: From my takings from the business. I am doing fine. SS: Is there anything further you wish to tell me in relation to this matter? CC: No. SS: Do you agree that I have been recording this interview as it takes place? CC: Yes. SS: Are you now prepared to read this record of interview and sign it as an accurate record

of our conversation? CC: Certainly. What is going to happen to me now? SS: I am going to charge you with arson. CC: Will I go to jail? SS: That is a matter for the judge.


ZANY ACCOUNTING SERVICES PTY LIMITED

24 October 2013 Joe Hammond 37/6 Stanley Street EAST SYDNEY Accountant.

I am an accountant employed by Zany Accounting Services Pty Limited.

I have read the code of conduct for expert witnesses as set out in schedule 7 of the Uniform Civil Procedure Rules (NSW) 2005 and agree to be bound by it.

I have been requested by Bradys Solicitors, to prepare a report as to the property loss and consequential loss arising out of a fire at the premises of a grocery shop business operated by Chris Collins.

In reaching my conclusions I have referred to documents provided to me, as detailed in Appendix B and also I have relied upon further information provided to me at my interview with Chris Collins on 22 October 2013, as set out in Appendix C.

In my opinion, the loss arising out of the fire totals $302,675, as detailed in Appendix A. __________________ Joe Hammond


Appendix A

ZANY ACCOUNTING SERVICES PTY LIMITED

Stock Loss – Replacement Value

Trading Stock – as per information provided by Chris Collins $165,000 Shelving – Per Quotation $30,000 Cash Registers (2) – Replacement Cost $10,000 Refrigerator – Replacement Cost $15,000 Freezer – Replacement Cost $15,000 Counters (2) – Per Quotation $10,000 Burglar alarm – Replacement Cost plus installation $2,000

TOTAL $247,000

Consequential Loss – For A 12 Month Period

Loss of Trading Profits (Refer Attached Schedules) $55,675

TOTAL LOSS $302,675


Appendix B

Statement of Claim

Defence

Request for further and better particulars by McCoys Solicitors dated 4 October 2013 and reply

to same by Bradys Solicitors dated 17 October 2013

Insurance Policy and Insurance Certificate for “Yummy Groceries Convenience Store”

Application for Trading Account and Group Membership by “Yummy Groceries” to Peter Holdings

Pty Ltd

Statements from Peter Holdings for the periods ending 30/06/2012, 31/07/2012 and 31/08/2012

General (Nominal) Ledger of Chris Collins for the Year from 1/7/2011 to 30/6/2012

Income tax returns and financial statements for the 2011 and 2012 Financial Years

Lease Agreement between Chris Collins and Email Finance dated 7 September 2010.

Affidavit of Fr. Montebello sworn 10 October 2013.

Quotations for Replacement of Counters and Shelving from Viney’s – The Carpenter’s Apprentice

and other quotations.


Appendix C

Information obtained from Chris Collins by Joe Hammond of Zany Accounting at an interview on 22 October 2013.

The letter from Bradys to McCoys dated 17 October 2013 correctly sets out the details of the

fittings and equipment which were destroyed and the replacement costs of those items.

The plaintiff does not have invoices or other records of payments for all purchases of stock. The figures in the tax returns accurately set out the financial position of the business.

In respect of the period from 1 July 2012 to 8 September 2012, the plaintiff estimates closing stock of at least $165,000 on the basis that the value of stock had increased by at least $30,000 in the period after 30 June 2012.


Schedule 1

Consequential Loss Claim

Claim For The Twelve Months ended 8 September 2012

% $ Standard Takings (52 x $11,335 - Refer Schedule 3) 589,442 Less: Actual Takings 0 Loss of Takings 589,442 Rate of Trading Profit (Schedule 4) 15.68% Reduction in Takings 92,423 Less: Sum saved during the indemnity period (Schedule 2) 36,749 Consequential Loss Claimed 55,675


Schedule 2

Savings (Expenses Which Ceased/Reduced)

As per financial accounts for the year ended 30/06/2012

Total $

Per Week $

Variable Expenses:

Advertising 1,185 23

Cleaning 468 9

Light & Power 4,794 92

Postage 81 2

Stationary 180 3

Repairs And Maintenance 1,311 25

Telephone 3,516 68

Travelling Expenses 780 15

Wrapping Supplies 2,169 42

Refuse Removal

234 5

Total 14,718 283

Sales For Prior Period 493,770

Expenses as % Of Prior Period Sales 2.98%

Adjusted Standard Takings (Refer Schedule 3)

589,442

Variable Expenses Saved (@2.98%) 17,570

Fixed Expenses:

Insurance 3,483 67

License And Fees 96 67

Rent 15,600 300

Totals 19,179 369

Fixed Expenses Saved 19,179

Total Expenses Saved 36,749


Schedule 3

Calculation Of Standard Takings

Takings in twelve months immediately prior to damage

Total $

Per Week $

9.43 Weeks To 08/09/2012 92,319 9,790

42.57 Weeks To 30/06/2012 404,227 9,496

52 Weeks To 08/09/2012 496,546 9,549

(*Assumes takings were incurred uniformly across entire year)

Adjustments To Prior Period Damages:

Anticipated sales growth at 3% 14,896 286

Agreement with St. Vincent de Peter 78,000 1,500

Adjusted standard takings 589,442 11,335


Schedule 4

Calculation Of Rate Of Trading Profit

Rate from immediately preceeding financial year 14.72% Adjustment as allowed by contract: Rate from 31 weeks to 08/09/2012 20.00% Rate from 21 weeks to 30/6/2012 14.72% Average rate at damage date 15.68% (* Assumes margin remained constant throughout entire year)


Form 62 (version 2) Rule 35.1

[Omitting Formal Parts of Uniform Civil Procedures Form – the form is used to indicate the form currently in use]

AFFIDAVIT OF IGNATIUS MONTEBELLO – 10 OCTOBER 2013

COURT DETAILS


Division

List Commercial

Registry Sydney







FILING DETAILS

Filed for Plaintiff

Address Bradys, Solicitors Macquarie Street Sydney NSW 2000 Ph: 9238 3874

AFFIDAVIT DETAILS


Name

Fr. Ignatius Montelbello

Address 777 Holy Grail Way, Vatican City

Occupation Minister of Religion

On 10 October 2013, I say on oath:

I am a Friar of the Franciscan Order. I am currently on secondment to The Holy Father in Rome.

In June 2013, I wrote a letter, a copy of which is attached hereto, to Mr Chris Collins,

whom I knew to be a shopkeeper of Newtown.

The matters of fact referred to in the contents of the said letter were true and correct at the time I wrote the said letter and my opinions expressed in the said letter were my true opinions.

I believe that the information contained in this affidavit is true.

SWORN

At The Vatican City

Signature of deponent

Signature of witness

Name of witness

Capacity of witness


St Vincent de Peter

Mission of Mercy to the Homeless

20 June 2013 Chris Collins 60/6 Stanley Street EAST SYDNEY Dear Chris, We were devastated to hear of your terrible fire of last September – it goes to show; one can never be too prepared for what the future might bring! We trust and pray that you have overcome the shock of your loss and are progressing well in your new business. We write to confirm that it was our intention, had it not been for the unfortunate events referred to above, to purchase from your shop in Newtown all the groceries needed for the two Shelters for the Homeless that we have in the greater Sydney region. (With the help of our faithful donors, we hope to open our third shelter in the near future!). These requirements, which I fear will now have to be met from one of your old competitors, would have run to approximately $500 per week for each of these shelters. I trust that this letter meets your requirements. You remain, as ever, in our prayers. Fr. Ignatius Montebello.


PERIOD OF INSURANCE: from 24 August 2012 to 23 August 2013 at 4.00pm

POLICY NO: 180121663 BP-K

This copy certificate displays the cover effective at the “from” date shown above and must be read in conjunction with the wording of the Business Pak Policy. Insured: Chris Collins Situation: 100 King Street, Newtown Nature of Business: Grocery Shop Fire Section: 001 Contents sum insured: $250,000 Reinstatement / extra cost conditions apply Consequential Loss Section: 002

Trading Profits sum insured: $60,000 Period of indemnity: 12 months Theft Section: 003

Contents sum insured: $20,000 Money Section: 004

Money on premises sum insured: $4,000 Glass Section: 005

Replacement Value Public Liability Section: 007

Limit of liability sum insured: $500,000 Signed on behalf of Greencent Insurance………………………………... [N.B. Readers should assume that the risk insured under the terms of the policy includes the losses claimed by the plaintiff from the fire being stock, fitting, fixtures and equipment (under fire section: 001 to $250,000) and loss of trading profits for 12 months (under consequential loss section:002 to $60,000).]


Statement

Sergeant Starkey

College Street, Sydney, NSW Occupation: Detective Sergeant of Police

I am a Detective Sergeant in the New South Wales Police Force currently attached to Ultimo Police Station.

I have been a member of the New South Wales Police Force for 17 years. I have undertaken an Arson Investigator's Course and a Forensic Evidence Course. Until last October, I was attached to the Arson Unit, Regional Crime Squad, South, where I have been stationed for 10 years. My duties included the investigation of suspicious fires and the examination of crime scenes, especially in relation to arson.

I estimate that whilst at the Arson Unit I investigated not less than 60 cases of suspected arson.

At 8.30pm on 8 September 2012 Detective Paul Groves and I were called to the scene of a fire in King Street, Newtown.

Upon our arrival at the scene of the fire I observed Fire Brigade units engaged in extinguishing a fire in those premises. I also observed that Constable First Class Bush and other police including a sniffer dog were in attendance. I had a conversation with Constable Bush and he told me something.

I then observed a person, whom I now know to be the plaintiff, standing close to the outside of the burnt-out premises. I observed that this person was dressed in a red shirt, blue jeans and sneakers. I approached in company with Detective Groves and said:

"Are you the proprietor?" The plaintiff said "Yes". I said "Don't go away".

I then proceeded to conduct an external examination of the burnt-out premises.

The building was a two-storey structure of brick construction with cement rendering and a

corrugated iron roof. The ground floor contained a food store. The first floor appeared to be unoccupied.

The food store had a chain and padlock on the front door which I observed were intact. To the left of the door was a glass window approximately 2 metres by 1.5 metres which I believe had been blown out by the force of the fire. The window was at a level of approximately 1 metre from the ground.

At the rear of the premises was a door which I observed was locked. At about 10pm, when it was safe to do so, I entered the premises through the front window and proceeded to conduct an internal examination of the premises. Fire damage was extensive throughout the premises. There


was noticeably more damage on the western side of the store. On the eastern side, I noticed bottles of mineral turpentine on the third eastern shelf and pressure packs stored on the second western shelf. Those items had not ignited or exploded in the fire.

I concluded that the seat of the fire was to the western side of the store. Charring patterns on the shelves in that area indicated that the fire had spread from the floor level upwards. Severe charring had occurred to the ceiling immediately above the seat of the fire. I formed the opinion that an accelerant had been used to start the fire. The basis of my opinion is that the charring marks on the ceiling above the seat of the fire were consistent with fast combustion at a high temperature. By contrast, areas of the eastern side of the store were not affected by fire and there was no charring of the ceiling in those areas.

I also base my opinion on the fact that I observed that a stool in the western aisle had indications of having had a liquid accelerant spilt across it. This was indicated by the vinyl covering on the stool having had the colour bleached out in flow patterns and splashes. The floor of this section also had indications of liquid accelerant floor patterns.

I inspected the cash register and found that it had not been tampered with and was in the closed position.

At 10.40pm I again spoke to the plaintiff, Chris Collins. I said:

“As you are aware, I am conducting an investigation in relation to an alleged fire at these premises. Do you have any information in relation to the fire?"

The plaintiff said to me:

"I don't know nothing about it. I was in the shower. The first I knew was when the lady called to me to come quick because there's a fire. I came straight here."

I said:

"Do you own the business?"

The plaintiff said:

"What's left of it."

I said:

"Are you prepared to accompany me to the police station to assist me further with my inquiries?"

The plaintiff said:

"Sure."


I then conveyed the plaintiff to Newtown Police Station where I conducted a record of interview which was recorded by me as it took place on a typewriter. At the conclusion of the interview I saw the plaintiff sign each page of the record. Sgt. S. Starkey


Statement

Kim Gustav

22 October 2013 47/6 Stanley Street EAST SYDNEY Accountant

I am an accountant employed by the firm Crazy Accountants.

I have read the code of conduct for expert witnesses as set out in schedule 7 of the Uniform Civil Procedure Rules (NSW) 2005 and agree to be bound by it.

I have been requested by the defendant’s solicitor to prepare a report as to the financial condition of the plaintiff’s business as at 8 September 2012, the date of a fire at the defendant’s business premises. I am aware that this statement is to be used as expert evidence in relation to proceedings in the District Court of New South Wales arising from a claim in relation to that fire.

This report is prepared with the use of documents provided to me by the defendant’s solicitors including the statement of claim, requests for particulars and replies to such requests, the record of interview, stock records, bank accounts, invoices and the ledger of the business.

I have assessed:

the financial position of the plaintiff as at 8 September 2012. the amounts claimed by the plaintiff in the statement of claim.

FINANCIAL POSITION

I am of the opinion that as at 8 September 2012, the plaintiff was in financial difficulties.

The business commenced trading under the plaintiff’s management on 8 August 2010.

I have compared the activities of the business since its commencement to the date of the fire. The period 8 August 2010 to 30 June 2011 and the period 1 July 2012 to 8 September 2012 are not full accounting years. Accordingly, I have calculated the weekly average of the trading results so that a meaningful comparison may be made.

A summary of the plaintiff’s trading activities is set out in Schedule 1 and Schedule 2. The two Schedules deal with the financial periods ending 30 June 2011 and 30 June 2012 on the basis of the income tax and financial accounts of the business. The third period from 1 July 2012 to 8 September 2012 is based on accounting records provided which are incomplete. In respect of this period Schedule 1 has been prepared on the basis of an alleged gross profit from trading of 20 percent and closing stock amounting to $165,000. In respect of this period, Schedule 2 represents my analysis of the period as explained below.


I am instructed that the plaintiff’s business operated from 8.00 am to 8.00 pm, 7 days per week, giving a working week of 84 hours.

The net profit of the business for each period as set out in Schedule 2 is as follows:- Financial year ended 30 June 2011 (46.71 weeks) $115.00 per week Financial year ended 30 June 2012 (52 weeks) $372.00 per week Period ended 8 September 2012 (9.43 weeks):

On a projected profit and loss account based on the allegations made by the plaintiff and the records available, $594 per week (see Schedule 1)

On the profit and loss account as considered applicable by me on the records available, $77 per week (see Schedule 2).

The basis of my projection of the alleged weekly profit and my opinion as to the true profit arise by reason of the following: (i) The plaintiff claims in the statement of claim lost trading stock in the amount of

$165,000 but has not provided a list of such stock. (ii) From the records of the business, the purchases for which there are accounts were

in the amount of $32,141 for the relevant 9.43 week period. (iii) As there are no reliable records as to the value of closing stock, in my opinion a

proper estimate of the gross profit from the business is best obtained by applying the percentage of gross trading profit for the previous twelve months to the period.

(iv) On this basis the value of the closing stock is estimated at $89,538 and the net weekly profit before tax was $77 pw.

(v) Conversely, if the allegation by the plaintiff as to the value of closing stock was true, then the purchases for the period would have to have been $102,732 if the percentage of gross profit from trading during this period was 20 percent, as I understand is alleged by the plaintiff.

Over the three financial periods, the turnover of the business increased from $4,324 per week to

$9,790.00 per week (see Schedule 1 under “Sales”). However, the rate of net profit did not have a corresponding increase.

The principal reason for the failure to obtain higher profits is the inability to maintain a gross profit margin. The gross profit margin is the rate of gross profit as a percentage of sales. Gross profit is determined by deducting the cost of goods sold (the opening stock plus purchases less the closing stock) from the sales.

The weekly gross profit of $870 during the initial period of trading to 30 June 2011 is equal to 20.12% of sales but for the full financial year ended 30 June 2012, the gross profit of $466.00 is 14.72% of weekly sales of $3,165.00 per week (Schedule 1).

The lower rate of gross profit erodes any benefit that is achieved by higher turnover. A simple example of this is that the weekly turnover for the 52 weeks ended 30 June 2012 is $9,496 per week which is an increase of $5,172 (119.6%) over the preceding period. Gross profit for the year ending 30 June 2012 was $1,398 per week which is an increase of $528 per week over the preceding period, an increase of 60.69%.

The inability to maintain this rate of gross profit could be caused by a number of factors including:– the need to have a low pricing policy in order to attract business and achieve the level of

turnover; the loss of perishable food through expiry of shelf life; and/or


the removal of products for which sales are not recorded.

Notwithstanding the increase in the level of turnover, in my opinion, the resultant net profit is insufficient properly to reward the plaintiff for efforts or to provide any reward for the investment of capital (including borrowed funds) in the business.

By way of comparison, I have looked at a service called “Bench Marks on Disk – for mixed business (Cornerstores)”. This is a service provided by Beasley and Geddes Pty Limited, where data is collated for similar businesses to enable comparisons.

I attach as Schedule 3 an analysis by Beasley and Geddes. Even though the information is for the year ended 30 June 2010 in my opinion that information is still an appropriate comparison.

The business falls somewhere between groups 1 and 2 and on that basis should have a gross profit percentage in the range of 19.1% to 27.3%. From Schedule 2 it can be seen that the gross profit percentage achieved was 20.12% for the 46.71 weeks to 30 June 2011. However, for the year ended 30 June 2012, this percentage dropped to 14.72%.

I have attempted to calculate a cash flow by using bank statements of the plaintiff in conjunction with the general (nominal) ledger information for the period 1 July 2011 to 30 June 2012. A proper cash flow has not been able to be undertaken due to a lack of full information.

While financial accounts for the year ended 30 June 2011 and 2012 have been provided, for the period to date of the fire 8 September 2012 there are no financial statements but some accounting records. Accordingly, it is relevant to refer that documentation to obtain the necessary financial position of the plaintiff as at the date of the fire.

A summary of borrowings is attached as Schedule 4.

It appears that the borrowings of the business increased by $91,382.19 during the financial years ended 30 June 2011 to 30 June 2012 and for the 9.43 weeks ended 8 September 2012 by a further $48,153.00.

Taking into account other borrowings the total amount of liability as at 8 September 2012 is $241,945.70.

The principal assets of the plaintiff at that time were the assets of the business. Assets comprising stock that would be required for the maintenance of turnover would not normally be readily realised. The fixtures and fittings would normally only be realised in the event that the business was sold.

The plaintiff has the following monthly commitments:– (a) Email Finance $456 per month (b) ANZ Bank $520 per month (c) AGC Limited $568 per month (d) Associates Pty Limited $232 per month (e) Associated Finance Limited $232 per month

TOTAL $2,008 per month


I was advised by the manager of ANZ Bank that as at 8 September 2012, the plaintiff had an overdraft account with a limit of $13,000 and $55,000 for a fully drawn advance. Both of those accounts were out of order as at that date. The overdraft was $13,827.54 and the fully drawn advance was $55,872.00.

Attached as schedule 5 is a summary of cheques of the plaintiff dishonoured in the 5 months preceding the fire.

I note that the plaintiff borrowed money at 30% per annum shortly before 8 September 2012. That rate is well in excess of the commercial rate available to borrowers at that time.

In summary, in my opinion, the plaintiff was in financial difficulty as at 8 September 2012 in as much as the plaintiff was unable to pay debts as and when they fell due and capacity to borrow additional funds appears to have been restricted. STOCK

The plaintiff has claimed $165,000 in relation to lost stock. There is no list of that stock or valuation of the same.

The standard method of determining the amount of stock is to determine the cost of goods sold and to deduct that cost from the sum of the opening stock and the purchases. The cost of goods sold for the financial year ended 30 June 2011 as set out in Schedule 1 was $421,071 which equals 85.28% of sales. It is unlikely, in my opinion, that the rate of gross profit would dramatically alter in a short period of 9.43 weeks.

By using the same rate of cost of goods sold to sales made between 1 July 2012 and 8 September 2012, purchases for the same period and the closing stock for the year ended 30 June 2012, the amount of closing stock can be calculated as a theoretical stock of $53,376.

I note that there is a journal entry among the documents I have cited indicating actual stock as at 30 June 2012 at $45,374.

I have also seen a statement by Ian Curly of Peter Holdings to the police dated 21 October 2012 where he states that prior to 8 September 2012, he inspected the store and noticed that stock holdings were down to approximately $30,000. He had noticed a decline in stock since April 2012. CONSEQUENTIAL LOSS

I calculate the amount of loss representing consequential loss in accordance with the terms of the policy to be $21,684. The basis of my calculation is set out in Schedule 6 which is attached.

Schedule 7 sets out my calculations of trading profit which in accordance with the terms of the policy is $72,699.

The claim should be reduced by any sum in respect of such charges payable out of trading profit as may cease in consequence of the damage. My calculation of savings is $53,268 as set out in Schedule 8.


Kim Gustav M.I.A.A., F.T.I.A.


Schedule 1

Greencent Insurance Limited ats Collins

Summary of profit / loss as per income tax returns / financial accounts For the year period 8 August 2010 to 8 September 2012 (Note: final 9.43 week period is as alleged by plaintiff)

30 June 2011

46.71 Weeks Weekly

%Age Of Sales

30 June 2012

52 Weeks Weekly

%Age Of Sales

8 Sept. 2012

9.43 Weeks Weekly

%Age Of Sales

Sales 201,960 4,324 100% 493,770 9,496 100% 92,319 9,790 100%

Less Cost Of Goods Sold

Opening Stock 0 59,925 136,125 Purchases For Period

221,259 4737 497,271 9,563 102,732 10,894

Purchases On Annual Basis

221,259 557,196 238,857

Closing Stock 59,925 136,125 165,000 Cost Of Goods Sold 161,334 3,454 79.88% 421,071 8,098 85.28% 73,857 7,832 80%

Gross Profit From Trading

40,626 870 20.12% 72,699 1,398 14.72% 18,462 1,958 20%

Insurance Recovery 0 2,115 0

40,626 20.12% 74,814 15.15% 18,462 20%

Less Expenditure

Accountancy Fees 321 7 0.16% 3,810 73 0.77% 750 80 0.81%

Advertising 1,143 24 0.57% 1,185 23 0.24% 225 24 0.24%

Bank Charges 945 20 0.47% 2,871 55 0.58% 495 52 0.54%

Cleaning 114 2 0.06% 468 9 0.09% 81 9 0.09%

Depreciation 1,275 27 0.63% 1,371 26 0.28% 201 21 0.22%

Cartage 48 1 0.02% 0 0 0% 0 0 0%

Equipment Hire 282 6 0.14% 1,053 20 0.21% 189 20 0.2%

Insurance 3,462 74 1.71% 3,483 67 0.71% 750 80 0.81%

Leasing Charges 4,518 97 2.24% 5,436 105 1.1% 903 96 0.98%

Legal Costs 486 10 0.24% 0 0 0% 0 0 0%

Licences & Fees 57 1 0.03% 96 2 0.02% 30 3 0.03%

Light & Power 3,903 84 1.93% 4,794 92 0.97% 1,200 127 1.30%

Postage 33 1 0.02% 81 2 0.02% 99 10 0.11%

Stationery 33 1 0.02% 180 3 0.04% 180 19 0.19%

Rent 12,900 276 6.39% 15,600 300 3.16% 2,700 286 2.92%

Repairs & Maintenance

2,802 60 1.39% 1,311 25 0.27% 600 64 0.65%

Telephone 1,659 36 0.82% 3,516 68 0.71% 879 93 0.95%

Travelling Expenses 306 7 0.15% 780 15 0.16% 135 14 0.15%

Wrapping Supplies 951 20 0.47% 2,169 42 0.44% 405 43 0.44%

Filing Fees 0 0 0% 228 4 0.05% 0 0 0.0%

Rates & Taxes 0 0 0.0% 915 18 0.19% 0 0 0.0%

Refuse Removal 0 0 0.0% 234 5 0.05% 39 4 0.04%


Borrowing Costs 0 0 0.0% 381 7 0.08% 0 0 0.0%

Interest 0 0 0.0% 7,872 151 1.59% 3,000 318 3.25%

Total Expenses

35,238 754 17.45% 57,834 1,112 11.71% 12,861 1,364 13.93%

Net Profit

5,388 115 2.67% 16,980 327 3.44% 5,601 594 6.07%


Schedule 2


Summary of profit/(loss) as per income tax returns/financial accounts For the year period 8 August 2010 to 8 September 2012 (Note: final 9.43 week period is as per analysis of documents provided)

30 June 2011

46.71 Weeks Weekly

%Age Of Sales

30 June 2012

52 Weeks Weekly

%Age Of Sales

8 Sept. 2012

9.43 Weeks Weekly

%Age Of Sales

Sales 201,960 4,324 100% 493,770 9,496 100% 92,319 9,790 100%

Less Cost Of Goods Sold

Opening Stock 0 59,925 136,125 Purchases For Period

221,259 4737 497,271 9,563 32,142 3,408

Purchases On Annual Basis

221,259 557,196 168,267

Closing Stock 59,925 136,125 89,538 Cost Of Goods Sold 161,334 3,454 79.88% 421,071 8,098 85.28% 78,729 8,349 85.28%

Gross Profit From Trading

40,626 870 20.12% 72,699 1,398 14.72% 13,590 1,441 14.72%

Insurance Recovery 0 2,115 0

40,626 20.12% 74,814 15.15% 13,590 14.72%

Less Expenditure:

Accountancy Fees 321 7 0.16% 3,810 73 0.77% 750 80 0.81%

Advertising 1,143 24 0.57% 1,185 23 0.24% 225 24 0.24%

Bank Charges 945 20 0.47% 2,871 55 0.58% 495 52 0.54%

Cleaning 114 2 0.06% 468 9 0.09% 81 9 0.09%

Depreciation 1,275 27 0.63% 1,371 26 0.28% 201 21 0.22%

Cartage 48 1 0.02% 0 0 0% 0 0 0%

Equipment Hire 282 6 0.14% 1,053 20 0.21% 189 20 0.2%

Insurance 3,462 74 1.71% 3,483 67 0.71% 750 80 0.81%

Leasing Charges 4,518 97 2.24% 5,436 105 1.1% 903 96 0.98%

Legal Costs 486 10 0.24% 0 0 0% 0 0 0%

Licences & Fees 57 1 0.03% 96 2 0.02% 30 3 0.03%

Light & Power 3,903 84 1.93% 4,794 92 0.97% 1,200 127 1.30%

Postage 33 1 0.02% 81 2 0.02% 99 10 0.11%

Stationery 33 1 0.02% 180 3 0.04% 180 19 0.19%

Rent 12,900 276 6.39% 15,600 300 3.16% 2,700 286 2.92%

Repairs & Maintenance

2,802 60 1.39% 1,311 25 0.27% 600 64 0.65%

Telephone 1,659 36 0.82% 3,516 68 0.71% 879 93 0.95%

Travelling Expenses 306 7 0.15% 780 15 0.16% 135 14 0.15%

Wrapping Supplies 951 20 0.47% 2,169 42 0.44% 405 43 0.44%

Filing Fees 0 0 0% 228 4 0.05% 0 0 0.0%

Rates & Taxes 0 0 0.0% 915 18 0.19% 0 0 0.0%

Refuse Removal 0 0 0.0% 234 5 0.05% 39 4 0.04%


Borrowing Costs 0 0 0.0% 381 7 0.08% 0 0 0.0%

Interest 0 0 0.0% 7,872 151 1.59% 3,000 318 3.25%

Total Expenses 35,238 754 17.45% 57,834 1,112 11.71% 12,861 1,364 13.93%

Net Profit 5,388 115 2.67% 16,980 327 3.44% 729 77 0.79%


Schedule 3


Business benchmarks on disk – mixed businesses (“corner stores”) year ended 30/6/2011 Financial analysis of: As at:

Client Result

All Firms Average

Averages For Firms On Various Turnover Levels

GROUP 1 GROUP 2 GROUP 3 GROUP 4 GROUP 5

1. Profitability Total Trading Revenue 50 1,240,083 398,823 685,401 1,065,057 1,455,141 2,734,998

Less Cost Of Goods Sold 78.5% 72.7% 80.9% 77.1% 82.2% 79.9%

Equals Gross Profit 21.5% 27.3% 19.1% 22.9% 17.8% 20.1%

Less Rent And Lease Expenses

2.5% 2.8% 2.4% 2.8% 2.6% 1.8%

Interest 2.5% 3.3% 1.7% 3.3% 1.8% 2.2%

Staff Wages 3.1% 2.7% 1.3% 3.2% 3.4% 5.0%

Electricity & Gas 1.7% 2.3% 2.2% 1.6% 1.2% 1.1%

Equipment Costs 1.5% 2.4% 1.5% 1.5% 0.8% 1.0%

Other Expenses 5.0% 9.3% 3.8% 4.5% 3.0% 4.4%

Equals Net Profit (Before Owners Salaries)

5.3% 4.5% 6.3% 6.0% 4.9% 4.6%

Net Profit (Before Owners’ Salaries) Per Owner

36,486 10,641 27,861 35,118 40,287 68,148

2 Personnel Productivity Trading Revenues Per Person 400,200 202,296 321,048 407,346 450,150 617,916

Gross Profit Per Person 81,399 53,928 61,806 90,153 79,383 120,069

Net Profit (Before Owners’ Salaries) Per Person

20,925 10,341 21,669 23,271 21,489 27,951

3. Hours Trading Hours Per Week 76 64 78 76 83 75

4. Balance Sheet Asset Turnover (Times P.A.) 4.2 2.2 3.9 2.9 5.0 6.6

Stock Turnover (Times P.A.) 18.3 11.8 16.9 19.1 23.3 19.8

Goodwill As % Of Assets 0.3 0.3 0.4 0.4 0.4 0.3

Equity As % Of Assets 0.5 0.4 0.7 0.6 0.4 0.2

5. Personnel Working Owners 1.9 1.8 1.8 2.0 2.0 2.0

Employees 1.2 0.6 0.4 0.8 1.4 2.7

6. Margin Of Safety (Before Owners’ Salaries)

23.7% 13.8% 32.7% 24.8% 27.7% 19.7%

Copyright 2013. Beasley And Geddes Pty Ltd. All Rights Reserved


Schedule 4


Statement of Liabilities as at 8 September 2012

30 June 2011 30 June 2012 Movement Over Prior Period – Increase (Or Decrease)

8 Sept. 2012 Movement Over Prior Period – Increase (Or Decrease)

ANZ Bank: Overdraft Account 0.00 17,647.71 17,647.71 13,827.54 (3,820.17)

Fully Drawn Advance 19,440.00 57,132.63 37,692.63 55,872.00 (1,260.63)

19,440.00 74,780.34 55,340.34 69,699.54 (5,080.80)

Bankcard 6,000.51 5,181.51 (819.00) 9,000.00 3,818.49

Loans: Mrs Kahn 24,000.00 0.00 (24,000.00) 0.00 0.00

Khalida Began 0.00 25,500.00 25,500.00 25,500.00 0.00

Dr Ajala 0.00 21,000.00 21,000.00 36,000.00 15,000.00

Associate Finance Services Pty Ltd 0.00 14,453.85 14,453.85 13,758.00 (695.85)

TRADE CREDITORS: General 93.00 0.00 (93.00) 0.00 0.00

Peter Holdings Pty Ltd 0.00 0.00 0.00 31,367.16 31,367.16

Arethra (Self Service) Pty Ltd 0.00 0.00 0.00 3,744.00 3,744.00

49,533.51 140,915.70 91,382.19 189,068.70 48,153.00

Not Recorded In Financial Accounts Australian Guarantee Corp Ltd 42,056.00 42,056.00

The Associates Pty Ltd 10,821.00 10,821.00

49,533.51 140,915.70 91,382.19 241,945.70 101,030.00


Schedule 5


Summary Of Dishonoured Cheques For April to September 2012 Date Originally Presented At Bank

Cheque Number Amount $

12–Apr 264317 817.02

18-Apr 264327 9,810.30

29-Apr 264332 75.00

29-Apr 264342 870.90

3-May 264344 1,071.66

3-May 264345 300.00

4-May 264347 1,224.75

5-May 264348 148.35

5-May 264350 1,250.70

8-May 264349 859.02

9-May 264348 148.35

9-May 264350 1,250.70

9-May 264353 1,265.97

9-May 264346 498.33

9-May 815055 300.00

14-Jun 815095 8,977.89

30-Jun 547306 537.57

30-Jun 547319 1,740.00

5-Jul 547323 1,565.58

5-Jul 547324 357.21

5-Jul 547325 2,886.00

5-Jul 547326 512.91

20-Jul 547342 329.97

7-Aug 834610 3,743.13

16-Aug 834620 2,400.00

1-Sept 834635 340.38

1-Sept 834639 328.11

1-Sept 834641 481.74

2-Sept 834636 165.57

2-Sept 834644 165.00

2-Sept 834647 759.90

2-Sept 834649 187.20

subtotal 45,369.21

After Fire 10-Sept 834645 2,547.00

10-Sept 834648 270.00


11-Sept 834646 2,115.54

subtotal 4,932.54

total 50,301.75


Schedule 6


Consequential Loss Claim Claim For The Twelve Months Ended 8 September 2012 Period Period $ $ Standard Takings (52 X $9,790) 509,076 Less: Actual Takings 0 Loss Of Takings 509,076 Rate Of Net Takings 14.72% Loss Of Net Takings 74,953 Less Savings 53,268 Claim: 21,684


Schedule 7


Calculation Of Trading Profit Based On The Year Ended 30th June 2012 2012 Takings 493,770 Less: Cost Of Goods And Services Relative Thereto: Opening Stock 59,925 Purchases 497,271 557,196 Less Closing Stock 136,125 421,071 Trading Profit As Defined 72,699 Rate Of Trading Profit 14.72%


Schedule 8


Savings (Expenses Which Ceased/Reduced) As per financial accounts for the period ended 8 September 2012

8 Sept 2012 9.43 Weeks Weekly

Accountancy 750 80

Advertising 225 24

Bank Charges 495 52

Cleaning 81 9

Cartage 0 0

Equipment Hire 189 20

Insurance 750 80

Leasing Charges 903 96

Licences And Fees 30 3

Light & Power 1,200 127

Postage 99 10

Stationery 180 19

Rent 2,700 286

Repairs And Maintenance 600 64

Telephone 879 93

Travelling Expenses 135 14

Wrapping Supplies 405 43

Refuse Removal 39 4

Totals 9660 1024

For Twelve Months 53,268 ($1,024 X 52)

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