Lauralu UK Limited v Bodypower Sports Limited (The Fitness Superstore) [2026] EWHC 47 (Ch)

[2026] EWHC 47 (Ch)

Date Date: 13 January 2026

IN THE HIGH COURT OF JUSTICE

Before

His Honour Judge Rawlings (sitting as a Section 9 judge of the High Court)

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Between

LAURALU UK LIMITEDClaimant / Appellant

BODYPOWER SPORTS LIMITEDDefendant / Respondent

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Counsel for Appellant– Mr Griffiths

Counsel for Respondent– Mr Buttimore

Hearing: 6 November 2025

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On appeal from the Order of Recorder C Butler

in the BIRMINGHAM DISTRICT REGISTRY

APPEAL REF: CH-2024-BHM-000024

Claim No.: J51YX253

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INTRODUCTION

[1]By an Appellant’s Notice dated 28 August 2024, the Appellant seeks to set aside the order of Recorder Butler (“the Recorder”) dated 8 August 2024 (“the Order”) insofar as it granted judgment to the Respondent in the sum of £347,285 plus interest in respect of the Respondent’s Counterclaim. (“the Appeal”).

[2]By a Respondent’s Notice, dated 23 December 2024, the Respondent seeks to set aside that part of the Order which deducts £250,000 from the amount awarded to the Respondent in relation to its Counterclaim (“the Cross Appeal”).

[3]This judgment deals with the Appeal and the Cross Appeal.

BACKGROUND

[4]The background to the Appeal and the Cross Appeal is set out in the judgment of the Recorder dated 8 August 2024 (“the Judgment”) paragraphs 1 – 8 and I do not repeat it here.

[5]The Recorder decided that the Respondent had validly rescinded its contract with the Appellant for the hire of three structures (as defined in the Judgment). As a result of that, the Recorder dismissed the Appellant’s claim for rent in relation to those structures. Neither the decision of the Recorder that the contract for the hire of the three structures had been validly rescinded, nor the dismissal of the Appellant’s claim for rent are challenged by the appeal. There was a fourth structure supplied to the Respondent by the Appellant, but this fourth structure was sold by the Appellant to the Respondent and the contract for sale not rescinded. I will refer to the three structures which were hired by the Appellant to the Respondent as the Hired Structures, the structure which was purchased as the Purchased Structure and the Hired Structures and the Purchased Structure together as “the Structures”.

[6]The Respondent’s Counterclaim was for the loss it said it had suffered as a result of condensation dropping from the roofs of the Structures supplied by the Appellant onto the stock of fitness equipment stored by the Respondent in the Structures. This part of the Judgment occupies by far the largest part of the Judgment, the Recorder deals with the Respondent’s Counterclaim for this loss at paragraphs 49 - 102 and 109 (2) – (11) of the Judgment.

[7]The Respondent claimed £667,983.02 in its Counterclaim for damage to its stock. It claimed to have quarantined 2,571 boxes of stock all of which was damaged by condensation dropping from the roofs of the Structures onto that stock (“the Quarantined Stock”). The Quarantined Stock was quarantined by moving it, in January 2022, from the Hired Structures into the Purchased Structure (insofar as it was not already in the Purchased Structure). It is common ground that the condition of the Quarantined Stock deteriorated over the time that it was stored in the Purchased Structure from January 2022. A key issue in determining the loss that the Respondent suffered was how much of the Quarantined Stock was damaged and how badly, when it was moved to the Purchased Structure in January 2022.

[8]The Recorder deducted 15% from the figure of £667,983.02 to take account of the possibility that the Respondent had, although acting honestly, claimed for stock which had not been damaged at all or that was subject to only minor damage, which would, in either case, not prevent it from being sold to retail customers at full price. The Recorder deducted a further £16,500 which the Respondent had received net from the salvage company to whom the Quarantined Stock had been sold, shortly before trial. This gave a net figure for damaged stock of £567,285, from which the Recorder deducted £250,000, being the sum which the Recorder estimated as being storage and handling charges which the Respondent would probably have incurred, had it not rented the Rented Structures from the Appellant (the Recorder deals with the deduction of £250,000 at paragraph 109 (11) of the Judgment). It is this £250,000 deduction which is the subject matter of the Cross Appeal. The Recorder also awarded damages of £46,000 for the installation charges paid by the Respondent to the Appellant. The net amount awarded in damages to the Respondent was therefore £347,285.

[9]On 27 November 2024 Green J granted permission for the Appellant to appeal on all grounds set out in the Grounds of Appeal and on 25 February 2025, Green J granted permission to the Respondent to appeal on the grounds set out in the Cross Appeal.

REPRESENTATION

[10]At the hearing of the Appeal and the Cross Appeal, Mr Griffiths appeared for the Appellant and Mr Buttimore for the Respondent, as they did before the Recorder.

THE GROUNDS OF APPEAL

[11]The Grounds of Appeal are as follows: Ground 1 The Recorder erred in law by drawing inferences in favour of the Respondent and against the Appellant where the Respondent did not call witnesses or produce documentary evidence in support of such an inference and provided no reason or explanation for failing to do so:(a) the Recorder drew inferences about the quarantining process undertaken by the Respondent (paragraph 51) where there was no evidence about the instructions that were given to those undertaking that exercise, the process that was followed, or the criteria that were used by the Respondent or those undertaking that exercise to assess whether stock would be quarantined;

(b) the Recorder drew inferences as to what a witness who was not called, Mr Steve Dron, would have said had he been called (paragraph 53) where there was no direct evidence in support of the same. The Recorder drew these inferences where there was no evidence, explanation, or submission as to why Steven Dron or anyone involved in the quarantining process had not been called to give evidence. Ground 2 – The Recorder made perverse findings of fact unsupported by the evidence or contrary to the weight of evidence and the natural inferences to be drawn from the available evidence that: (a) “[T]he clear finding that the majority of the quarantined stock was significantly damaged at the time it was quarantined” (paragraph 56(i)). (b) There was no likelihood that Mr Steve Dron or anyone instructed by him would have deliberately quarantined boxes with insignificant signs of damage (paragraph 53).

(c) The Respondent acted in reasonable mitigation of its loss until the stock inspection of the Appellant’s expert on 1st June 2023 (paragraph 102).

(d) The Respondent had tried to sell the damaged stock (paragraphs 51 and 56(ii)).

(e) There was no alternative storage available to the Respondent in the period from January 2022 (paragraph 77(d)).

(f) There was a stark difference between the parties’ quantum experts on the value of the stock at different dates (paragraph 77(f) when the experts had agreed: (i) In October 2021 the damage meant that sections of the top layer of stock stored in the Structures would need to have its packaging removed before it could be sold. But that the rest of it could be sold as new stock. (ii) at the date of the Appellant’s expert witness’ inspection (1st June 2023) a large portion of the stock was found to be in a saleable condition and that a relatively small portion would require the removal of its packaging and to be sold at a discount as salvage. Ground 3 – The Recorder made perverse findings of fact unsupported by the evidence or contrary to the weight of the evidence and the natural inferences to be drawn and for which no reasons were given that the Appellant’s expert witness, Mr Fogarty: (a) was not qualified to give the evidence that he gave in respect of the damage to the Respondent’s stock (paragraphs 90 and 97). (b) in giving his evidence was not acting impartially (paragraph 90). Ground 4 – Having found that: (a) It was likely that some stock management errors had been made in recording the stock included in the claim (paragraph 50). (b) It was “likely that some boxes with negligible damage or even no damage slipped through” the quarantining exercise (paragraph 52). (c) The Respondent had failed to reasonably mitigate its loss by not taking steps to sell the stock after the Appellant’s expert witness’s inspection on 1st June 2023 (paragraph 63). The Recorder erred in limiting the reduction in the sum of the Respondent’s damaged stock claim to only 15 per cent globally in respect of all these matters in combination (paragraphs 69-71). Ground 5 – The Recorder erred in concluding that the Respondent had adduced sufficient evidence to enable the assessment of its damages when as a matter of fact and law it had not. Ground 6 – The Recorder erred in concluding that the Respondent had suffered damage to its stock in the sum of £567,785. This finding was not open to him on the evidence and was wrong as a matter of fact and law.

[12]The Grounds of the Cross Appeal are as follows: Ground 1 -the Respondent challenges the [Recorder’s] deduction of the sum of £250,000 from the damages awarded as set out in paragraph 109 (11) of his judgment where he says this “From that should be deducted £250,000 (being a significantly higher figure than the cost of [renting the Rented Structures] to reflect the rent and handling charges which would probably have been paid in storage costs if the [Rented Structures] had not been used) leaving a net figure of £347,285. Issues of the cost of alternative storage incurred by the [Respondent] and credited to the [Appellant] for the positive use of the [Rented Structures] are subsumed in that net figure” Ground 2 – The £250,000 deduction was wrong and/or contrary to the evidence and/or unfair because it was tainted by a serious procedural irregularity for the following reasons:(a) the question for determination was the value of the stock damaged consequent upon the Appellant’s breach of contract and/or misrepresentation and it is irrelevant what the costs of alternative storage and handling would have been had there been no breach/misrepresentation;

(b) in any event there was no, or no sufficient evidence of what the costs of alternative storage and handling were to arrive at the figure of £250,000 (which in the circumstances was perverse), or any figure, and a nil deduction should have been applied;

(c) to the extent that the figure of £250,000 subsumed a “credit to the [Appellant] for the positive use of the [Rented Structures]: (i) there should be no credit for use of the [Rented Structures] given the primary question was what the damage to the stock was and the value to be attributed to it; (ii) or if there should, it was for the Appellant to have pleaded a case on this and led evidence which it did not, raising this point for the first time after the close of evidence;

(d) further the [Recorder] in proceeding to apply a deduction against damages by reference to hypothetical increased storage and handling charges and/or by way of a credit on rescission meant that there was a serious procedural or other irregularity that renders his decision unjust and the deduction of £250,000 should be reversed. This is in circumstances where: (i) the Appellant had not until around the time of closing arguments contended that there should be a deduction against damages claimed by reference to the use of the [Rented Structures]; (ii) the [Recorder] decided instead to apply a deduction by reference to hypothetical storage and handling charges - an issue which, on the statements of case, was not one which the parties had come to court to deal with; (iii) the Respondent was deprived of the opportunity of adducing evidence specifically directed at the issues of whether any potential credit for storage or handling charges would be offset by the profit that would have been made on sale of the goods, had they not been damaged.

(e) Further or alternatively, the [Recorder’s] £250,000 deduction from the base costs of the damaged goods (i.e. excluding any profit) was perverse and inconsistent with his finding that if the contracts for the [Rented Structures] had not been entered into, the Respondent’s stock would not have been sold at a loss (judgment paragraph 75). On the basis of that finding, any handling, storage or other costs would have been covered by the profit made;

(f) Alternatively, the maximum deduction applied should have been the rent that was payable under the contract of hire with the Appellant for the use of the [Rented Structures], in the sum of £145,800 (or a proportion thereof).

THE APPEAL

[13]The Appellant’s overriding point is that the Respondent produced insufficient evidence to prove its claim for damage caused to the Respondent’s stock by condensation dripping from the ceilings of the Structures. In particular it did not produce evidence that was available to it (no witness statement from anyone who carried out the exercise of quarantining the damaged stock, or any evidence of the criteria used to quarantine damaged stock) no good reason was given as to why this evidence was not produced and the Recorder ought simply to have concluded that the Respondent had not proved its case on quantum. Instead, the Recorder made inferences, based on the lack of evidence for which the Respondent was responsible, which were, in reality, adverse inferences against the Appellant which enabled the Recorder to conclude that the Respondent had proved the quantum of its claim.

[14]It is clear that the Recorder found significant difficulty in quantifying the Counterclaim. In paragraph 19 of his judgment he records that, after the trial and before handing his judgment down, he invited further submissions from counsel on how the Counterclaim should be quantified, including as to whether he should hear further evidence on the issue of quantum (for example from Steven Dron (“Steven”)) or order that there be an account and inquiry as to the Respondent’s losses. In the event, having considered counsel’s further submissions, the Recorder elected to determine the quantum of the Counterclaim on the evidence he had heard and not to direct an account and inquiry. GROUND 1 The Appellant’s Case

GROUND 1

[15]Mr Griffiths started by making submissions about the nature of the inferences that it is appropriate for a judge to make, where a party fails to produce evidence that is available to them at trial to prove a matter which is important to their claim or defence. Mr Griffiths says that:(a) In Mackenzie v Alcoa Manufacturing Ltd [2020] PIQR 6 at 43 – 52 and Wisiniewski v Central Manchester Health Authority [1998] PIQR 324 the Court of Appeal said, where relevant, that whether it is appropriate to draw an adverse inference and if so the extent of the inference depended on the facts of the particular case. Silence or a failure to adduce relevant evidence could either convert evidence on the other side into proof or weaken the evidence of the party that fails to adduce the evidence. An adverse inference would not be appropriate if there is a satisfactory reason given for the absence of a witness or the evidence;

(b) in Royal Mail Group v Efobi

[2021] 1 WLR 3863

the Supreme Court said that the drawing of inferences was simply a matter of ordinary rationality and Lord Leggatt said that the range of interrelated matters that would have to be assessed included the evidence that the witness might have given and the significance of that evidence in the context of the case as a whole; and

(c) therefore here, where the Respondent has not adduced evidence of the quarantining process which was carried out or evidence from Steven, who the Respondent says carried out or supervised the carrying out of the quarantining exercise, the Recorder erred in that, rather than making an adverse inference (or inferences) that strengthened the Appellant’s evidence or that weakened the Respondent’s case, the Recorder made inferences on which he relied in concluding that the Respondent had proved its case on quantum at least for 85% of what it was claiming.

[16]Ground 1 splits into two parts:(a) inferences which the Appellant says the Recorder wrongly made about the quarantining exercise; and

(b) inferences which the Appellant says that the Recorder wrongly made about the evidence that Steven would have given, had he been called as a witness.

[17]As to the quarantining exercise, Mr Griffiths says that there was a failure by the Respondent to produce the following evidence:(a) the Respondent says that the quarantining exercise was carried out by or under the supervision of Steven, but no witness statement was produced from Steven;

(b) the Respondent says that about half of the stock stored in the Structures was damaged by condensation, before the Quarantined Stock was quarantined, but the Respondent does not say what criteria was used to determine whether stock was damaged or not; and

(c) the Respondent’s response to the Appellant’s Part 18 request asserts that the Respondent carried out a proportionate and detailed sampling exercise in relation to the Quarantined Stock which was very time consuming but no documentary evidence and no witness evidence of that sampling exercise has been produced.

[18]Notwithstanding those failures by the Respondent to produce key evidence to support their claim for the quantum of their losses, the Recorder made a number of inferences about the quarantining exercise which were, in the round, highly favourable to the Respondent and adverse to the Appellant, namely:(a) it was likely that Paul Walker (“Mr Walker”) Managing Director of the Respondent, who did provide a witness statement, instructed Steven to segregate all the damaged stock;

(b) Steven probably took those instructions literally;

(d) whilst some boxes with no or no significant damage might have slipped through the majority of the Quarantined Stock was significantly damaged when it was quarantined.

[19]The only justification which the Recorder gave for making those inferences was that Mr Walker and Michael Dron (“Michael”) were honest witnesses who he considered would not act unreasonably, but they were not involved in the quarantining process and gave no evidence of ever having inspected the damage to the Quarantined Stock themselves.

[20]Notwithstanding the failure to produce a witness statement from Steven, or any explanation as to why he did not give evidence, the Recorder made inferences as to what Steven would have said if he had been called as a witness. Whilst those inferences, on their face, might appear as if they were inferences which were adverse to the Respondent’s case, what the Recorder in fact did was to infer that Steven would have given evidence supporting the conclusion that the vast majority of the Quarantined Stock was significantly damaged when it was quarantined which was an impermissible inference. The Recorder inferred that, if Steven had been called to give evidence he:(a) would have agreed that a significant part of the Quarantined Stock had only very minor visible damage;

(b) may have agreed that some undamaged stock had slipped through; and

[21]Mr Griffiths says that the inferences in paragraph 14 (a) - (d) and 16 (a) - (c) above are against the weight of the other evidence as to the extent to which the Quarantined Stock was damaged and were inferences favourable to the Respondent’s case, whereas the only appropriate inferences that could be drawn from the failure of the Respondent to produce evidence concerning the quarantining exercise, the sampling of the Quarantined Stock and the unexplained absence of Steven, were adverse inferences.

[22]The only evidence as to what the Respondent’s attitude to the quarantining process was is set out in email exchanges between Michael and Steven of 20 January 2022 regarding the quarantining exercise:(a) Michael to Steven – “We need to start a process for quarantining these wet boxes ASAP guys…”

(b) Steven to Michael – “Are we quarantining it to then assemble for refurb? Or Are we quarantining to then move to a dry location for storage?..”

(c) Michael to Steven “OR we place in a corner and wait for [the Appellant] to pay for it and collect I just need it quarantining and storing in a shed for now-yes it won’t dry out - I just need to stop it selling and going out…”.

[23]Mr Griffiths says that that email exchange does not suggest a diligent and reasonable approach to quarantining the Quarantined Stock, but rather an approach which treated it as the Appellant’s problem.

[24]In a joint report dated 16 May 2024, the Appellant’s expert, Mr Fogarty and the Respondent’s expert. Mr Leivers agreed that:(a) as at October 2021 photographs showed only a section of the top layer of stock in the Structures (prior to separation of the Quarantined Stock) would need to have its packaging removed and the products checked before it could be sold to retail customers, but the rest could simply be sold;

(b) during Mr Fogarty’s inspection on 1 June 2023 a large proportion of the Quarantined Stock was still in a saleable condition and a relatively small proportion would need to have its packaging removed, the product tested and it could then be sold at a discount; and

(c) the Quarantined Stock and its packaging would deteriorate over time at different rates. The Recorder’s conclusion that, when the Quarantined Stock was quarantined in January 2022, the majority of it was significantly damage was contrary to those three agreed opinions, particularly the opinion that, even 18 months after the Quarantined Stock was separated, only a relatively small proportion of it would need to have its packaging removed and the product checked, before selling it at a discount (the rest could be sold at full retail value without checking).

The Respondent’s case

[25]Mr Buttimore says that the conclusions of the Recorder that:(a) it was likely that Mr Walker instructed Steven to segregate all the damaged stock;

(b) Steven probably took those instructions literally;

(d) Steven was probably told to carry out that quarantining exercise ASAP were all reasonable findings for the Recorder to make.

[26]The findings of the Recorder that Steven would, had he given evidence, have:(a) agreed that a significant part of the Quarantined Stock had only very minor visible damage;

(b) agreed that some undamaged stock had slipped through; and

(c) accepted that he did not segregate slightly damaged stock from severely damaged stock, were all adverse findings that the Recorder was entitled to make, as a result of Steven not giving evidence.

[27]As to the Recorder’s finding that the majority of the Quarantined Stock was significantly damaged, at the time it was quarantined, Mr Buttimore said that the Recorder was entitled to make that finding based on the photographs which were taken of stock in the Structures prior to the Quarantined Stock being separated, the evidence of Mr Walker and Michael, the amount of water falling on the stock and the recording of the 2,751 items of Quarantined Stock in the print out provided with the Part 18 Reply.

[28]The Recorder found that Mr Walker and Michael were both honest and reasonable witnesses and so it was reasonable to infer that they would have instructed Steven to act reasonably in selecting stock to be quarantined. Neither Mr Walker, nor Michael were asked why Steven did not appear as a witness for the Respondent.

[29]If a box is damaged, then neither it nor its contents can be sold to a retail customer. The Recorder accepted Mr Walker’s evidence that it would have been a logistical nightmare to check all the Quarantined Stock and then attempt to sell it as damaged stock.

[30]Mr Walker gave evidence that a significant sampling exercise had been carried out and he was not extensively cross examined on that evidence and Michael gave evidence as to the damaged state of the Quarantined Stock.

[31]Mr Fogarty, the Appellant’s expert only examined 5 boxes and Mr Leivers, the Respondent’s expert only examined 16 items. Mr Fogarty is a materials engineer and Mr Leivers a loss adjuster and so they were not even experts in the same field. The Recorder found the evidence of Mr Fogarty to be unreliable

Does Ground 1 succeed?

[32]I accept that:(a) in cases where a party does not produce evidence easily available to them at trial, which is obviously relevant to the issues that the court has to determine, the court may (but is not obliged to) make inferences as a result of that failure;

(b) if there is a good excuse for not producing the evidence then it may not be appropriate to make such inferences;

(c) the only inferences which the court may make (if any) in those circumstances are adverse inferences which either strengthen the evidence of the opposing party or undermine the evidence of the party that failed to produce the evidence;

(d) whilst there was evidence that Quarantining Stock had been separated from other stock, in the form of a stock list attached to the Respondent’s part 18 response, there was no evidence:

(e) as to what criteria had been used to separate the Quarantined Stock; (i) concerning the substantial sampling exercises which the Respondent stated in its part 18 replies had been carried out in relation to the Quarantined Stock; and (ii) although the evidence that was before the court suggested that Steven and/or people acting under Steven’s direction had carried out the exercise of separating the Quarantined Stock from other stock, neither Steven nor anyone else who took part in the process of separating the Quarantined Stock was called by the Respondent as a witness;

(f) no good reason or indeed any reason was given for the failure of the Respondent to produce any of the evidence in (d) above; and

(g) it was open to the Recorder to make inferences (he did not have to) as a consequence of the Respondent not producing the evidence in (d) above concerning the issue that that evidence would have been relevant to (the question of whether and if so how badly the separated Quarantined Stock was damaged, when it was separated in January 2022) but such inferences could only be adverse inferences and not inferences which supported the Respondent’s case on quantum, to fill the gaps in its evidence caused by its failure to produce evidence that it could have produced.

[33]Mr Griffiths says that the inference that the Recorder made concerning the extent to which the Quarantined Stock was damaged, that the majority was significantly damaged, was an inference which was favourable to the Respondent and against the weight of other evidence that very little of the Quarantined Stock was seriously damaged (the email exchanges of 20 January 2022, see paragraph 18 above and the expert evidence, see paragraph 20 above).

[34]Mr Buttimore says that the inferences that the Recorder made were reasonable and so far as the evidence that the Recorder found that Steven would have given, if called as a witness, adverse to the Respondent’s case. The conclusion that the majority of the Quarantined Stock was significantly damaged was not an inference he made as a result of the Respondent failing to call evidence, but a finding of fact based upon the evidence of Mr Walker and Michael who he found to be honest and reasonable. That evidence led him to conclude that Steven would not have been instructed to act unreasonably in separating out damaged stock and that, if a box was damaged it was impractical to try to sell the product to retail customers. The Recorder also relied on photographs and drone footage of the damaged stock taken prior to the Quarantined Stock being separated, in January 2022.

[35]In order to decide whether Ground 1 succeeds, I need to decide how the Recorder came to conclude that the majority of the stock was “significantly damaged” and whether he did so by making inferences favourable to the Respondent, to fill the gaps in the evidence caused by the Respondent’s failure to produce evidence concerning the quarantining exercise, the sampling exercise and a witness who had been involved in the quarantining and sampling exercises. The Recorder’s reasons for coming to the conclusions that the majority of the Quarantined Stock was “significantly damaged” are set out in paragraphs 51 – 53 and 56 of the Judgment. I will first quote from what the Recorder said in those paragraphs and then decide how he came to conclude that the majority of the Quarantined Stock was “significantly damaged”:

“51. More importantly, submits Mr Griffiths, is the lack of evidence in relation to the criteria applied by the [Respondent] when deciding what stock should be quarantined as damage stock which cannot reasonably be sold. In assessing damages, I have taken both the likelihood that some mistakes may have been made (though that is not Mr Griffiths’s main submission) and, more importantly, that (a) I do find that Mr Walker reached the stage (reasonably) at which he decided that it was simply no longer feasible to continue the [Respondent’s] attempts to sell damage stock on the retail market. Selling damaged goods would have entailed so much extra work, space, effort and risk, mostly for significantly reduced sale prices leading to lack of profit or even losses, that he took the view that, after so long without the problems in the [Structures] being resolved, it was time to concentrate on the sale of undamaged stock, quarantine all damage stock and store it in the [Purchased Structure]…. I find it likely that, again reasonably, Mr Walker instructed [Steven] to segregate all damaged stock. [Steven] would probably have taken those instructions literally…. Combined with the expert evidence which I have heard from Mr Fogarty and Mr Leavers, I find it likely that all boxes with any significant damage were quarantined by [Steven]. He was probably told to carry out the quarantining task as quickly as possible. It was probably not physically carried out entirely by [Steven] and he may not have been present at all times. If there have been further specific detailed criteria applied, I would have expected the [Respondent] to lead evidence to that effect.” 52. In those circumstances, there was scope for mistakes on the part of those physically carrying out the exercise. I do not accept Mr Griffiths’s suggestion that whole stacks of goods may have been condemned simply because there was damage to the upper boxes. But I do find, on balance that it is likely that some boxes with negligible damage or even no damaged slipped through. To that extent I find that the [Respondent] has not proved its loss… 53. Mr Griffiths suggests that assessment of damages without further evidence on these matters is impossible and no damages should be awarded… At the most, only a very modest award should be made. The problem with that submission is that (a) having heard Mr Walker and [Michael] , I do not find them to be unreasonable or dishonest. They would not have instructed [Steven] to adopt an unreasonable or extreme approach. I have no reason to suppose that he would have done so. I have therefore assumed that, if he had been called, he would have agreed that a significant part of the stock which was quarantined had only very minor visible damage, which may be largely what Mr Griffiths would have tried to establish in cross examination. He may even have agreed that it is possible that some undamaged stock slipped through. There is no likelihood that [Steven] or anyone instructed by him would have deliberately condemned to quarantine boxes with insignificant signs of damage and no likelihood that a substantial amount of entirely undamaged stock was included. He would probably have accepted, had he been called to give evidence, that he did not segregate slightly damaged from severely damage stock. I am not simply guessing these matters. They are the best findings of fact I can make in accordance with the evidence before me, on the balance of probabilities, including such inferences as I find appropriate without hearing [Steven]. 56. When inviting counsel’s further submissions, I had not completed my thought process. In summary my findings are as follows: (i) I start from the clear finding that the majority of the quarantined stock was significantly damaged at the time it was quarantined…”

[36]The Recorder accepted at the end of paragraph 53 that he had made inferences about what Steven would have said, if the Respondent had produced evidence from him. Although the inferences made in paragraph 53 are very specific and are presented as inferences that lead to the quantum of the Respondents claim being reduced (and therefore may appear to be adverse inferences) the underlying inference is that, with the exception of those minor concessions which would have been made by Steven, Steven would, in his evidence, have supported the conclusion that the majority of the Quarantined Stock was “significantly damaged” when it was quarantined. In my judgment that was an impermissible inference for the Recorder to have made, when there was no excuse given by the Respondent for not calling evidence from Steven and it was, in my judgment entirely clear that Steven or someone else with direct evidence to give as to the quarantining exercise would be highly relevant to the key question of how badly damaged the Quarantined Stock was, when it was separated from the other stock in January 2022.

[37]The findings, in paragraph 51, that Steven would probably have taken instructions to quarantine all damage stock literally and that all boxes with any significant damage were quarantined by Steven must have been based on inferences but those inferences do not lead to the conclusion, in paragraph 56 that the majority of the Quarantined Stock was significantly damaged at the time it was quarantined. Paragraph 51 ends with an observation by the Recorder that, if any specific detailed criteria was applied in separating the Quarantined Stock, he would have expected the Respondent to lead evidence to that effect. With the greatest of respect to the Recorder, whilst of course the Respondent ought to have produced evidence of any specific criteria which was used, by those actually involved in separating the Quarantined Stock, the Respondent called no evidence from anyone involved in the segregation of the Quarantined Stock who would have been able to say what criteria was used. Insofar as the Recorder, by the observation he made at the end of paragraph 51, was inferring that there was no specific criteria applied, beyond segregating all damaged stock, I consider that he was wrong to do so. It is unclear whether and if so, how far this apparent inference contributed towards the Recorder’s finding that the majority of the Quarantined Stock was “significantly damaged”.

[38]In paragraph 52, the Recorder rejects a suggestion, by Mr Griffiths, that a whole stack of goods might have been condemned, simply because there was damage to the upper boxes. It is unclear why the Recorder rejected that submission, he does not say why and the experts, as will be seen later in this judgment (see paragraph 43 below) agreed that, even a few months before the Quarantined Stock was separated, only a section of the top layer of all the stock would need its packaging removed and the product checked, the rest could be sold at full retail value and 18 months after it was separated only a small proportion of the Quarantined Stock would need to be checked before being sold at a discount. The expert evidence therefore tended to support the conclusion that boxes were segregated which showed no sign of damage. The Recorder’s rejection of Mr Griffiths’ submission might be regarded as a finding of fact, for which no explanation was given, or an inference which filled a gap in the Respondent’s evidence, namely as to the criteria which was used to separate the Quarantined Stock or as to the carrying out of the exercise of separation, if it was an inference, then it was an impermissible inference which was favourable to the Respondent, given that there was no good excuse for the Respondent having not produces this clearly relevant evidence.

[39]The inference the Recorder made that it is likely that some boxes with only minor visible damage or even no damage slipped through and that to that extent the Respondent had not proved its case appears to be a finding made by inference from the lack of any direct evidence produced by the Respondent as to what criteria Steven and those supervised by him used in undertaking the segregation exercise. The Recorder’s reference to boxes with minor visible damage or no damage “slipping through” suggests that whoever carried out the segregation exercise would not have intentionally segregated boxes which showed very minor visible damage, but if Steven took literally Mr Walker’s instruction to segregate all damaged stock, why would he not segregate stock showing only very minor visible damage. I consider the Recorder’s inference that stock showing only minor visible signs of damage was not deliberately segregated to also be an impermissible inference which favoured the Respondent’s case, rather than being adverse to the Respondent’s case, it was impermissible, because it was made to fill a gap in the evidence caused by the Respondent’s failure to produce evidence available to it, without good excuse.

[40]Mr Buttimore submitted that the Recorder relied, in coming to the conclusion that the majority of the Quarantined Stock was “seriously damaged”, on the evidence of Mr Walker and Michael and photographs and drone footage of the stock stored in the Structures, prior to the Quarantined Stock being segregated and placed in the Purchased Structure. There is however no suggestion in the Recorder’s judgment that he took into account the photographs or the drone footage in coming to that conclusion. As for the evidence of Mr Walker and Michael, the Recorder found, having heard from them, that they would not have instructed Steven to adopt an unreasonable or extreme approach, but the Recorder also found, paragraph 51, that Mr Walker instructed Stephen to segregate all damaged stock (my emphasis added) and that Steven would have taken that instruction literally. The natural inference from that conclusion was that Steven would have deliberately segregated stock which had very minor or insignificant signs of damage, because that was what he had literally been instructed to do.

[41]The Recorder does not say what he means by “seriously damaged”, in paragraph 56 (i) of the Judgment. The Recorder however quantified the Respondent’s loss at 85% of the value placed on the Quarantined Stock by the Respondent. It appears that the Recorder must have meant by “seriously damaged” seriously enough damaged to mean that it was incapable of being sold to retail customers without boxes being opened and their contents being inspected and tested first. To this extent at least the Recorder seems to have accepted the evidence of Mr Walker that it was not feasible to sell damaged stock into the retail market, because of the extra cost of doing so for an uncertain return (see paragraph 51 of the Judgment). GROUND 2 The Appellant’s Case

GROUND 2

[42]There are six findings of fact which Mr Griffiths says were perverse and not supported by the evidence (see ground 2, paragraph 9 (a) – (f) above). Mr Griffiths says, relying on Manning v Stylianou

[2006] EWCA Civ 1655

, that because I have all of the evidence that was before the Recorder, I can substitute my own findings for those of the Recorder.

[43]For convenience I will repeat what each of the six grounds are and say (in respect of each one) why Mr Griffiths says that the findings were perverse and not supported by the evidence. The wording in bold is the ground followed by Mr Griffiths’ submissions in normal type.(a) “[T]he clear finding that the majority of the Quarantined Stock was significantly damaged at the time it was quarantined” (paragraph 56(i) of the Judgment). (i) there was no evidence about the process of separating the Quarantined Stock; (ii) the finding was contrary to the expert opinion of both experts and the Recorder never explained why he did not accept that opinion; (iii) photographs which were taken in July 2022 of the Quarantined Stock, six months after it was quarantined, showed that damage was principally confined to the packaging; and (iv) there was no evidence as to the condition of the Quarantined Stock in January 2022, when it was separated and placed in the Purchased Structure

(b) There was no likelihood that Mr Steve Dron or anyone instructed by him would have deliberately quarantined boxes with insignificant signs of damage (paragraph 53). There was no evidence of the process undertaken when the Quarantined Stock was separated and this finding was contrary to what was revealed of the Respondent’s attitude to the Quarantined Stock immediately before the quarantine exercise was carried out (namely the exchange of emails between Michael and Steven on 20 January 2022 (see paragraph 18 above).

(c) The Respondent acted in reasonable mitigation of its loss until the stock inspection of the Appellant’s expert on 1st June 2023 (paragraph 102). (i) There was no justification for the Respondent failing to act to mitigate its loss until the Appellant’s expert inspected the Quarantined Stock, on 1 June 2023. It could have been refurbished or sold prior to that date and if the Respondent had told the Appellant that it wanted to do either of those things, the Appellant could have arranged an earlier inspection, by its expert; (ii) In January 2022, the Respondent elected to store the Quarantined Stock in the Purchased Structure which was an environment that the Respondent knew was causing damage to the stock. To the extent that the Quarantined Stock was not damaged when it was moved to the Purchased Structure, but deteriorated thereafter, there was a failure by the Respondent to mitigate its loss. The Respondent asserted that the Quarantined Stock only had scrap value when it was separated and stored in the Purchased Structure, but the experts disagree; and (iii) in the alternative, the Respondent’s actions broke the chain of causation by the Respondent storing the Quarantined Stock in the Purchased Structure and thereby damaging it (see Howmet Ltd v Economy Devices Ltd

[2016] EWCA Civ 847

)

(d) The Respondent had tried to sell the damaged stock (paragraphs 51 and 56(ii)). There is no evidence of the Respondent attempting to sell the Quarantined Stock once it was separated. Prior to that time, the Respondent produced evidence that it had received a small number of complaints about packaging being damaged, but only one complaint was about the actual product being damaged. No attempt was made to sell the Quarantined Stock, once separated as damaged stock, to consumers. Whilst Mr Walker said that this would have been a logistical nightmare, it could have been sold as refurbished stock, this is another example of the Respondent’s failure to mitigate its loss.

(e) There was no alternative storage available to the Respondent in the period from January 2022 (paragraph 77(d)). The Respondent claimed for costs of storage for the undamaged stock from January 2022 elsewhere but failed to prove it. This shows that the Respondent could have found somewhere else to store the Quarantined Stock. Whilst it is accepted that, if the Quarantined Stock was worthless, there was no point in incurring the costs of storing it elsewhere, the Respondent has not proved that it was worthless, when it was segregated in January 2022.

(f) There was a stark difference between the parties’ quantum experts on the value of the stock at different dates (paragraph 77(f)) when the experts had agreed: (i) in October 2021 the damage meant that sections of the top layer of stock stored in the Structures would need to have its packaging removed before it could be sold. But that the rest of it could be sold as new stock. (ii) at the date of the Appellant’s expert witness’ inspection (1st June 2023) a large portion of the stock was found to be in a saleable condition and that a relatively small portion would require the removal of its packaging and to be sold at a discount as salvage. Whilst the Respondent’s expert expressed the view that he was not surprised that the offer to purchase the Quarantined Stock as salvage was £16,500, net of the costs of removal, the Respondent’s expert never attempted to place a value on the Quarantined Stock. The experts, in their joint report agreed that, as at 1 June 2023 a relatively small proportion of the Quarantined Stock would need to be removed from its packaging and checked, before being sold, and the Respondent’s expert confirmed that that remained his view, at trial. The Recorder never acknowledged, in the Judgment this agreed opinion of the experts or explained why, in light of that opinion, he found that there was a stark difference between the two experts as to the value of the Quarantined Stock. Whilst the Respondent relies on Britania Zinc Ltd v Southern Electric Contracting and another

[2002] EWHC (TCC) 606

in that case the experts had effectively compromised an issue that they were asked to opine upon and the judge was not bound to endorse what they had agreed, but here the experts agreed on the extent to which the Quarantined stock was damaged at October 2021 and June 2023 and the Recorder needed to give good reasons for departing from their opinions, but he gave none.

The Respondent’s Case

[44]I will adopt a similar approach to Mr Buttimore’s submissions in relation to Ground 2, but as I have already set out each finding of the Recorder which Mr Griffiths says was perverse and not supported by the evidence, (see paragraph 39(a) – (f) above) I will set out Mr Buttimore’s submissions against the letters (a) – (f) without repeating the impugned findings: (a) It was open to the Recorder, on the evidence, to find that the majority of the Quarantined Stock was significantly damaged. Significantly damaged means visible signs of water damage on the box. Mr Walker’s evidence was that he would not send out stock with visible signs of water damage on the box, because that may damage the Respondent’s reputation with suppliers and customers. Although the Recorder did not explain very well, what he meant by “significantly damaged”, he accepted Mr Walker’s evidence that it was uneconomic to unbox every item and examine its contents for damage. Mr Fogarty, in cross examination, said that he spent 15 - 20 minutes examining an exercise bike supporting Mr Walker’s conclusion that inspecting the contents of every box would have been uneconomic. There was no agreed expert evidence, just a joint report in which they set out those matters on which they agreed and disagreed. The Recorder noted that the experts had only carried out a very limited inspection. In Britania Zinc theexperts agreed that the business interruption claim was worth £78,000, but the court took the view that determining the value of the claim was a matter for it.

(b) Steven was instructed to quarantine wet stock, and it was reasonable to infer that that was what he did.

(c) This is a question of fact, and it is rarely appropriate to interfere with factual findings of a judge on appeal. Secretary of State for Health v Servier Laboratories

[2016] EWHC 2381 (Ch)

confirmed that the burden lies on the opposing party to prove that the party suffering damage has not acted reasonably to mitigate their loss (paragraph 38). What is reasonable conduct is a question of fact (paragraph 41) and reasonableness can only be judged against the knowledge that the party suffering loss had at the time. Applying the subsequent view of the experts, as to the condition of the Quarantined Stock, when it was separated, would not render Mr Walker’s belief that the Quarantined Stock could not be economically sold, unreasonable or irrational. The Appellant suggests that storing the Quarantined Stock in the Purchased Structure amounted to a break in the chain of causation. The Appellant relies on Howmet Ltd but in that case the item causing loss was a chattel and here the Structures were fixed to the ground. Here, unlike in Howmet (see page 84) there has been no voluntary assumption of risk, the Respondent had no choice other than to store the Quarantined Stock in the Purchased Structure, due to a lack of storage space elsewhere.

(d) The Respondent did deliver to customers stock that had been water damaged, but the Respondent then received complaints from customers and manufacturers about what was delivered. Mould and condensation had built up inside the boxes. It would, as Mr Walker said, have been a logistical nightmare to unbox all the products and check them before seeking to sell them to customers, depending on their condition.

(e) Mr Walker was cross-examined as to the availability of alternative storage. Just because the Respondent failed to prove its claim for storage charges for undamaged stock, which would otherwise have been stored in the Structures, does not mean that there was yet more storage available. The burden is on the Appellant to prove that alternative storage could have been found, as this is a failure to mitigate point; and

(f) Mr Leivers said that a rough rule of thumb was that stock could be sold for approximately 10% of its wholesale value, as salvage. In contrast to that, Mr Fogarty expressed the view that damaged stock would be worth 65% of its wholesale value. However, the Respondent, acting reasonably, could not economically recondition the Quarantined Stock in order to sell it, so it could not be sold for anything other than its salvage value and so the value suggested by Mr Fogarty was starkly different to the value suggested by Mr Leivers. Does Ground 2 succeed and if so to what extent (a). “[T]he clear finding that the majority of the Quarantined Stock was significantly damaged at the time it was quarantined”.

[45]In dealing with Ground 1, I have already concluded that, insofar as the Recorder relied on inferences which were favourable to the Respondent, to fill the gaps in the evidence provided by the Respondent, which the Respondent had no good excuse for not producing, he was wrong to do so. I have found that this means that the Recorder was wrong to infer that:(a) Steven would not have segregated boxes showing only minor visible damage; and

(b) that there was no specific criteria used to segregate the Quarantined Stock. I have also concluded that the Recorder rejected, without explanation, the submission by Mr Griffiths that whole stacks of boxes could have been segregated as Quarantined Stock merely because the top box showed signs of water damage (see paragraph 34 above). As I have already observed that might be regarded as a finding of fact, with no explanation of why the finding was made, or an impermissible inference, where the Respondent, without good excuse, led no evidence of the criteria used for segregating the Quarantined Stock or an impermissible inference as to the segregation exercise itself. Insofar as the Recorder’s conclusion that the majority of the Quarantined Stock was significantly damaged at the time it was quarantined was based on those or other inferences favourable to the Respondent which filled the gaps in the evidence it ought to have produced, such inferences cannot properly be made to support that conclusion.

[46]I have concluded that, by using the words “seriously damaged”, the Recorder must have meant stock seriously enough damaged to mean that it was incapable of being sold to retail customers without boxes being opened and their contents being inspected and tested first. This is broadly the meaning of “seriously damaged” that Mr Buttimore contends for.

[47]Notwithstanding that Mr Buttimore asserts that the experts joint report of 16 May 2024 does not amount to agreed expert evidence, the Joint Report does make it clear that Mr Fogarty and Mr Leivers agree the following points: (a) as to the condition of the Quarantined Stock over time:

“photographs reportedly taken on 29 July 2021, show minor visual damage on some of the top layers or stock due to water droplets. Although it’s possible to sell the stock without removing it from its packaging for testing, the stock affected by the water droplets would likely need to be sold at a reduced price” “Photographs reportedly taken [in September 2021 and October 2021] show that a section of the top layer of stock will need to have its packaging removed and be tested before it can be sold (salvage)” (b) as to the salvageability of the Quarantined Stock: “During Mr Fogarty’s site inspection [1 June 2023] a large portion of the stock was found to be in a saleable condition. However, a relatively small portion of the stock will require removal of its packaging and testing before it can be sold at a discount (salvage). During Mr Leivers site inspection [4 March 2024], a large portion of the stock required removal of its packaging and testing before it could be sold (salvage), while a small proportion of the stock was likely directly saleable. Further, a small portion of the stock was also deemed to be “scrap value” due to compromised packaging, corrosion and contamination.”

[48]The substance of what was agreed by the experts, which is relevant to the question of how much of the Quarantined Stock was damaged and to what extent, when it was segregated in January 2022 by the experts was that:(a) in July 2021, 6 months before the Quarantined Stock was separated, only the top layers of the whole stock exhibited minor visual damage;

(b) in June 2023, 18 months after the Quarantined Stock was separated, a large portion of the Quarantined Stock was in a saleable condition with only a small proportion requiring to be removed from its packaging and tested before being sold at a discount.

[49]I accept that, if experts provide opinions on matters that are for the court to decide, rather than a matter for expert evidence, then the court may dispense with their opinions (see Britania Zinc). However here one of the key matters that the experts were instructed to provide opinions upon was the condition of the Quarantined Stock, at various points in time, based on the available evidence. Unlike the Recorder they do have at least some expertise in relation to assessing the condition of stock of this nature and unlike the Recorder, they had the advantage of inspecting the Quarantined Stock (by which I do not just mean the boxes they opened, but the Quarantined Stock as a whole).

[50]Taking at its height what the Recorder was entitled to find and did find, from the evidence of Mr Walker and Michael was that it would have been a logistical nightmare and likely uneconomic to remove all of the Quarantined Stock from their boxes, test them and then sell them at a discount. Neither Mr Walker, nor Michael however gave any evidence as to the condition of the Quarantined Stock when it was separated and placed in the Purchased Structure in January 2022, or at any point before or after that time. The Recorder does not say how he concluded that the majority of the Quarantined Stock was significantly damaged at the time it was separated. If it was based on inference, filling the gaps in the Respondent’s evidence, such inference was impermissible. The Recorder accepted that the Quarantined Stock would deteriorate over time after it was placed in the Purchased Structure (because the Purchased Structure was dripping condensation onto the Quarantined Stock). It follows that the condition of the Quarantined Stock would probably be materially worse (and certainly no better) when it was inspected by Mr Fogarty, in the Purchased Structure 18 months after it was separated and put there, than it was when it was separated and put there. The finding that the majority of the Quarantined Stock was significantly damaged at the time it was quarantined is inconsistent with the opinion of both experts that, even 18 months after it was segregated only a small proportion would need to be removed from its packaging and sold at a discount (that is only a small proportion was seriously damaged). As noted by me in paragraph 69 below, the Recorder accepted the agreed opinions of the experts, but he does not explain why, in light of that agreed opinion, he concluded that the majority of the Quarantined Stock was significantly damaged when it was moved to the Purchased Structure and I conclude that that finding was perverse and against the weight of the evidence and must be set aside. I will consider later whether I am in a position to substitute my own finding for those of the Recorder. (b). There was no likelihood that Mr Steve Dron or anyone instructed by him would have deliberately quarantined boxes with insignificant signs of damage.

[51]I have already found (see paragraph 35 above) that this was an impermissible inference made by the Recorder, the only inference which he could have made on this point, on the evidence before him, was that Steven or those instructed by him would have deliberately quarantined boxes with minor visible signs of damage. This latter inference would also be consistent with the agreed evidence of the experts. (c). The Respondent acted in reasonable mitigation of its loss until the stock inspection of the Appellant’s expert on 1st June 2023.

[52]The Appellant bears the burden of proving that the Respondent did not act reasonably in mitigating its loss. I accept Mr Buttimore’s point that the reasonableness of the Respondent’s actions depends upon the information available to them at the relevant time, which for example would not include the content of the experts’ reports.

[53]It is clear that the Recorder did accept the evidence of Mr Walker that it would have been a logistical nightmare and likely uneconomic to inspect every box in the Quarantined Stock before selling it as damaged stock to customers and that Mr Walker would not sell any of the Quarantine Stock as “new stock” to retail customers for reputational reasons.

[54]The difficulty with this is that, if large amounts of the Quarantined Stock was saleable “as new” without needing to be inspected and without risking reputational damage to the Respondent and the Respondent ought to have known that then it is at least arguable that the Respondent did not act reasonably in mitigating its loss by moving it all to the Purchased Structure and ceasing attempts to sell it to retail customers. I consider this point in greater detail in dealing with grounds 4 and 5.

[55]The Recorder did find that the Respondent ought reasonably to have sought to dispose of the Quarantined Stock before it did, shortly before trial, as salvage. The date that the Recorder fixed as the date after which the Respondent was no longer acting reasonably by not seeking to sell the Quarantined Stock was the date that Mr Fogarty inspected the Quarantined Stock (1 June 2023). Mr Griffiths says that the date for compliance with a case management direction could not be the trigger date for the Respondent to seek a purchaser and he says that, if the Respondent had said that it wished to sell the Quarantined Stock, the Appellant would have brought forward the date of its experts inspection.

[56]At paragraph 56 (ix) the Recorder says “Thus I conclude that the [Respondent] should have been prepared with its expert evidence and ready to dispose of the damaged stock on the best terms reasonably available, by the date when the [Appellant’s] expert had examined it. If it were not possible for Mr Leavers to examine it before he did, another expert could have been used. It is not clear what “Thus” relates to, it suggests that something that previous paragraphs say contains the Recorder’s reasons for the finding he makes in paragraph 56 (ix), but paragraphs 56 (i) – (viii) are all factual findings none of which are relevant to, or lead to the conclusion in paragraph 56 (ix) and I am unable to find anything else in the Judgment that provides such reasons. The Recorder seems to have proceeded on the basis that it was reasonable to wait until the Appellant’s expert had inspected the Quarantined Stock, but unreasonable for the Respondent to delay disposal to a later date after its own expert had inspected it. I consider that the Recorder was right to conclude that attempts to dispose of the Quarantined Stock should not have been delayed after the Respondent’s expert’s inspection, but he does not explain why it was reasonable for the Respondent to delay until the Appellant’s expert inspected. Bearing in mind however that the Appellant bears the burden of proving that the Respondent acted unreasonably, I am not satisfied that the Recorder was clearly wrong in the conclusion that he came to, on the basis that what was being considered by him was a disposal of the entire Quarantined Stock to a single purchaser which is the basis upon which the Recorder appears to have approached disposal, having accepted Mr Walker’s evidence that it would be a logistical nightmare and potentially uneconomic to seek to sell the Quarantined Stock to retail customers.

[57]The Recorder found that there was no alternative storage available in which to store the Quarantine Stock (paragraph 77 (d) of the judgment). This finding is challenged at Ground 2 (e) (see paragraph 61 - 63 below) for the reasons set out in that paragraph, I do not find that the Recorder’s finding, that there was no alternative storage available for the Quarantine Stock should be set aside. Absent the availability of alternative storage, the Respondent cannot be said to have acted unreasonably in storing the Quarantined Stock in the Purchased Structure.

[58]Mr Griffiths says that, in the alternative to the Respondent failing to act reasonably in mitigating its loss, storing the Quarantined Stock in the Purchased Structure broke the chain of causation, at least in so far as the Quarantined Stock reduced in value as a result of it being stored in the Purchased Structure after January 2022. Mr Griffiths referred to the Court of Appeal case of Howmet in support of that proposition. Mr Buttimore says that the facts of Howmet are very different from the present case and that the Court of Appeal decision in Howmet, that the chain of causation was broken, was based on a voluntary assumption of risk that does not apply here.

[59]The first point I will make is that Mr Griffiths’ argument that the chain of causation was broken by the Respondent storing the Quarantined Stock in the Purchased Structure is not part of the grounds for which permission was given. Even if Mr Griffiths can pursue that argument it fails for the reasons that follow.

[60]In Howmet, Economy Devices was the manufacturer of a device which measured the level of liquid in a tank and automatically switched off the heat to the tank, if the liquid level became dangerously low, which prevented the liquid catching fire. Howmet purchased the device, but it failed on a number of occasions causing liquid in the tank to catch fire. Howmet nonetheless continued to use the tank with the device in place, instructing its employees to keep a careful watch on the level of the liquid. Unfortunately, an employee accidentally switched on the heat to the tank when the liquid was dangerously low and the device did not switch off the tank, resulting in a fire which caused some £20 million worth of damage. Howmet sued Economy Devices. At first instance the judge decided that because Howmet knew that there was a risk of fire with the defective device in place, Howmet was no longer relying on that device and instead was relying on the vigilance of its own employees and as a result Howmet’s claim against Economy Devices failed.

[61]Jackson LJ delivered the lead judgment in the Court of Appeal. Much of his judgment is concerned with the question of whether the knowledge of particular employees, that the device was not working, should be attributed to Howmet, which he decided it should be. The Court of Appeal dismissed the appeal and in doing so said that when a purchaser of a chattel discovers that it is in a dangerous condition but nonetheless continues to use the chattel then, normally, the purchaser will do so at their own risk. The consequence of that could be analysed in two ways:(a) that once Howmet discovered the defect in the device, Economy Devices no longer owed a duty of care to Howmet in negligence; or

(b) the negligence of Economy Devices was not the cause of the damage, instead it was the failure of the system put in place by Howmet of asking its employees to be extra vigilant.

[62]The facts of this case are very different from those in Howmet. In Howmet the claim related to a defective safety device. In this case Mr Griffiths says that storing the Quarantined Stock in the Purchased Structure damaged it and, at least so far as damage was caused to the Quarantined Stock, after segregated and put in the Purchased Structure, the chain of causation was broken in relation to that damage. However, as I have already mentioned, the Recorder accepted that the Respondent had nowhere else to store the Quarantined Stock and for reasons I will explain shortly I will not set aside that finding. In Howmet Jackson LJ said that when a purchaser of a chattel discovers that it is in a dangerous condition but nonetheless continues to use the chattel then, “normally”, the purchaser will do so at their own risk. Jackson LJ said that they would not apply where the purchaser has no choice other than to use the chattel and if the principle can be extended to the present case and I make no finding on that, based on the Recorder’s finding which I will not overturn, the Respondent had no choice other than to store the Quarantined Stock in the Purchased Structure. (d). The Respondent had tried to sell the damaged stock.

[63]In the Judgment, the Recorder says:(a) at paragraph 51 - “I do find that Mr Walker reached the stage (reasonably) at which he decided that it was simply no longer feasible to continue the defendant’s attempts to sell damaged stock on the retail market. Selling damaged goods had entailed so much extra work, space, effort and risk, mostly for the significantly reduced sale prices leading to lack of profit or even losses, that he took the view that, after so long without the problem in the structures being resolved, it was time to concentrate on sale of undamaged stock, quarantine all the damaged stock and store it in the purchased structure….”; and

(b) at paragraph 56 (ii) – “The [Respondent] was reasonable in ceasing to attempt retail sales when it did. It had attempted such sales but this had been an expensive and time-consuming exercise and had resulted in an unusual rate of stock returns, which in turn caused more loss of time and losses. As Mr Walker put it, it was a logistical nightmare.”

[64]In fact, the Respondent only provided evidence of a small number of products being returned which it attributed to water damage caused by condensation in the Structures and only one return where the complaint concerned the product itself, rather than the box it was contained in. In cross examination, Mr Walker accepted that the state of the packaging shown in pictures of returned boxes appeared to be worse than anything seen in the photographs of damaged stock before it was separated and he accepted that allowing products to be delivered to retail customers in the state shown in the photographs of returned products constituted a failure by the Respondent’s staff to ensure that products, in such an obviously poor state, was not sent out to retail customers.

[65]Mr Griffiths suggests that the Recorder found that the Respondent made attempts to sell the Quarantined Stock after it was separated. I do not consider that he did so, to the contrary, paragraph 51 of the Judgment contains an implicit finding that the Respondent ceased its attempts to sell water damaged products once the Quarantined Stock had been separated and placed in the Purchased Structure and concentrated instead on selling undamaged stock.

[66]As for attempts by the Respondent to sell water damaged product, before it was separated and placed in the Purchased Structure, the Recorder was entitled to find that the Respondent attempted to do so on the evidence before him, for example the returned stock which the Respondent said was water damaged. There appears, however, to have been little to support the Recorder’s finding that selling water damaged goods “had entailed so much extra work, space, effort and risk, mostly for the significantly reduce sale prices leading to lack of profit or even losses that [Mr Walker] took the view that, after so long without the problem in the structures being resolved, it was time to concentrate on sale of undamaged stock, quarantine all the damaged stock and store it in the purchased structure….”. Mr Walker’s evidence that it would be a logistical nightmare to unbox and check every product before attempting to sell it to retail customers appears to have been directed at the reasons why the Respondent did not attempt to sell the Quarantined Stock to retail customers after it had been separated and not to refer to the amount of extra work, space, effort and risk which had been involved in selling water damage stock to retail customers before the Quarantined Stock was segregated and placed in the Purchased Structure. The fact that pictures of a small number of returns of water damaged boxes (and in one case product) showed packaging in such an obviously poor state that Mr Walker accepted that the Respondent’s staff could not have checked it properly before it was sent out tends to support the conclusion that the Respondent was not incurring “so much extra work, space, effort and risk” in selling water damaged stock to retail customers before the Quarantined Stock was segregated. (e). There was no alternative storage available to the Respondent in the period from January 2022.

[67]At paragraph 77 (d) of the Judgment, the Recorder said: “I accept the evidence of Mr Walker…. The cost and inconvenience of [moving the Quarantined Stock to alternative storage] would have been disproportionate. There is no evidence that it was available. Permanent warehousing was in extremely short supply and very expensive indeed. It was not known how much stock could then be saved and/or sold or at what price or how much restoration would be required. Damaged stock could not be offered with a guarantee. Nor was the [Respondent] willing to risk its reputation by selling substantial numbers of damaged or unboxed items… I take into account that the [Respondent] was a busy company whose primary business was Internet sales of gym equipment. It was not in the business of spending large amounts of time and effort to achieve what would have been likely to be very small financial gain or saving and which may in any event have resulted in losses.”.

[68]The Recorder’s finding was not therefore a simple finding that alternative storage was not available for the Quarantined Stock, instead he accepted the evidence of Mr Walker that:(a) there was no evidence that temporary warehousing was available and permanent warehousing was in very short supply and very expensive;

(b) the cost and inconvenience involved in moving the Quarantined Stock to other storage would in any event have been disproportionate;

(c) it was not known how much of the Quarantined Stock could be sold, at what price and what expenses would be incurred in doing so;

(d) the Respondent was not willing to risk its reputation by selling substantial amounts of damaged or unboxed items; and

(e) the Respondent was a busy company which was not in the business of spending large amounts of time and effort to achieve a very small and uncertain financial gain.

[69]The Recorder did not just make a finding that there was no alternative storage available for Quarantined Stock, rather (a) – (d) led the Recorder to conclude that the Appellant had not proved that the Respondent had acted unreasonably in mitigating its loss by not transferring the Quarantined Stock to alternative storage premises where its condition would not deteriorate. (f). There was a stark difference between the parties’ quantum experts on the value of the stock at different dates

[70]In paragraph 77 (f) of the Judgment, the Recorder says: “I shall deal with the expert evidence later but it is agreed that the stock continued to deteriorate as time went by. There is a stark difference between the evidence of Mr Fogarty the [Appellant’s] expert and Mr Leavers for the [Respondent] as to the value of the stock at different dates. Suffice it at this stage to say that I prefer the evidence of Mr Leavers, who did not think that selling the stock at an earlier date would have resulted in a very high price….”.

[71]It is at paragraphs 90 – 99 of the Judgment that the Recorder deals with the expert evidence. I will set out a summary of what he said in some detail, because it is relevant not only to this ground of appeal, but others too.

[72]At paragraphs 90 – 93, the Recorder says, about Mr Fogarty’s evidence, that:(a) he had prepared a schedule setting out his estimate of the percentage decrease in value of the Quarantined Stock, as time went by, but he did not consider that Mr Fogarty was well qualified to give that evidence and he had not given his evidence impartially;

(b) having considered the photographs dated 29 July 2021, Mr Fogarty said there was no reduction in value of the stock which the Respondent said was water damaged, at that stage;

(c) having considered the photographs taken on 21 September 2021 there was an increase in moisture, but this was unlikely to damage the product and he estimated that the stock had reduced in value by only 5% (including 2% for crushed packaging, testing the equipment and selling it at a discounted price) by this date;

(d) as at December 2021 the stock had reduced in value by 9%;

(e) by 1 July 2022 there was a 20% reduction in the value of the stock;

(f) he accepted in cross examination that he had not taken into account the work necessary to sell the products (and the Recorder accepted the evidence of Mr Walker and Michael that it was not commercially or practically viable to take the steps of unpacking the stock and selling it at a considerable discount;

(g) he had made only one site visit on 1 June 2023 and at that point estimated a 35% reduction in value of the Quarantined Stock;

(h) in cross examination, Mr Fogarty was unable to say how much the actions he recommended should be taken would cost, he had little experience of dealing with sports equipment cases, he accepted his percentages were generalisations and did not know what price damage stock would achieve on the open market.

[73]The Recorder deals with the evidence of Mr Leivers at paragraphs 94 – 99 of the Judgment, in summary he says that Mr Leivers:(a) was an experienced loss adjuster with particular expertise in valuing damaged stock and was a more convincing witness than Mr Fogarty;

(b) whilst his visit was brief, he identified 16 of the 29 categories of products included in the Respondent’s schedule of Quarantined Stock;

(c) the offer of the salvage company made on 4 June 2024 was not a surprise to him, as a rule of thumb damaged stock would be valued at 10% of its wholesale cost;

(d) he did not think the Quarantined Stock could be sold as new, only for salvage value;

(e) he accepted that if sold earlier the stock would probably have achieved a higher price. The photographs taken on 29 July 2021 showed minor visual damage to some of the top layers of the stock due to water droplets. That stock would have to be sold at a reduced price;

(f) the September 2021 photographs indicated that some of the top layers needed to have their packaging removed and equipment tested before being sold as salvage and the October 2021 photographs show the same; and

(g) the experts agreed that, during Mr Fogarty’s site inspection a large proportion of the stock was found to be in saleable condition and a relatively small portion required removal of its packaging and testing before it could be sold at a discounted salvage rate. By the time of Mr Leivers site inspection, a large proportion required removal of its packaging and testing before it could be sold as salvage a small portion of it was likely to be directly saleable. Agreement between the experts does not bind the court, he did however accept the generally agreed views of the experts

[74]Mr Griffiths’ real point is that Mr Fogarty and Mr Leivers agreed (see paragraph 44 above) that, in July 2021, six months before the Quarantined Stock was separated, only the top layer of stock had visible signs of damage and that, in June 2023, 18 months after the Quarantined Stock was separated, only a small proportion of it would need to be removed from its boxes and checked, before being sold at a discount, the rest could be sold without checking at full retail value. On that basis, when Mr Fogarty valued the Quarantined Stock, at 65% of its cost value in June 2023. Mr Leivers was not valuing the same stock at 10% of its cost value. Mr Leivers was only valuing a small proportion of that stock at 10% of cost and the majority of it at 100% of cost value. There was therefore no stark difference between the experts as to the value of the Quarantined Stock as at June 2023, nor at any other date, given that the experts agreed that the Quarantined Stock would deteriorate over time.

[75]I do not accept that the Recorder did not, as Mr Griffiths asserts, acknowledge in the Judgment the agreed opinion of the experts. In paragraph 101 of the Judgment, the Recorder specifically says that, whilst he was not bound to accept what the experts have agreed “I do, however, accept the generally agreed views of the experts in this case.”. That brings me to the Britannia Zinc case which can have no application here, not for the reason given by Mr Griffiths (a failure by the Recorder to give reasons for departing from the agreed opinions of the experts) but because the Recorder specifically accepted the agreed opinions of the experts. (a). was not qualified to give the evidence that he gave in respect of the damage to the Respondent’s stock (paragraphs 90 and 97). (b). In giving his evidence was not acting impartially (paragraph 90).

[76]Given the findings I have just made in relation to Ground 2 (e), these findings, which I accept the Recorder made, are of little relevance to the overriding questions of: whether the Recorder was right to reduce the Respondent’s claim by only 15% and of whether the Respondent produced sufficient evidence to prove it suffered any loss as consequence of the Structures producing condensation which damaged the Quarantined Stock (grounds 4 and 5). I propose therefore to deal with ground 3 relatively quickly.

[77]Mr Griffiths’ case is that the Recorder:(a) failed to give reasons for his conclusions;

(b) concluded that Mr Fogarty’s opinions were outside his expertise and that he failed to act impartially. These are findings that he failed to comply with the fundamental obligations of an expert under CPR Part 35. In respect of his expertise, Mr Fogarty was cross examined as to how many times he had valued stock in circumstances similar to those of this case. Mr Fogarty stated that he undertook this type of assessment in his professional role approximately three to four times per year, and that he did so in relation to sports equipment approximately once per year. Mr Fogarty accepted that he did not have direct experience of what such equipment achieved from selling it but maintained that he undertook valuations such as that with which he had been tasked in this case. Mr Fogarty was not cross examined at all on the question of whether he was acting impartially, nor did the Recorder ask him any questions about his impartiality; and

[78]Mr Buttimore says:(a) Mr. Fogarty in his report set out details of by how much he estimated that the product had decreased in value over time as a result of condensation damage following an inspection of only five sample products. Following his oral evidence, it was clear that he had no basis for these estimates;

(b) Mr Buttimore refers to several parts of Mr Fogarty’s evidence from the transcript which he says makes it clear that Mr Fogarty had no real basis for his estimates of the value of the Quarantined Stock; and

(c) it may be that the Recorder could have better explained himself, but his reasons for concluding that Mr. Fogarty was not properly qualified to give the evidence he gave and that he gave partial evidence are clear from the extracts from Mr Fogarty’s oral evidence.

[79]The Recorder does not explain in the Judgment why he concluded, at paragraph 90 of the Judgment that Mr Fogarty was not well qualified to estimate the percentage decrease in the value of the Quarantined Stock over time and had not given his evidence impartially. I accept that there is material within the cross examination of Mr Fogarty from which he could have formed those opinions, but the onus was on the Recorder to set out why he came to these conclusions in the Judgment and he does not do so.

[80]As the only really relevant part of the expert evidence, for the purposes of this appeal is that the experts agreed how much of the Quarantined Stock was damaged, so that it would need to be checked and could not be sold at full retail price, as at July 2021 and June 2023, ground 3 does not add to the grounds on which the Recorder’s award of damages of £347,285 to the Respondent should be overturned. Ground 4 - Having found that: (a). It was likely that some stock management errors had been made in recording the stock included in the claim (paragraph 50). (b). It was “likely that some boxes with negligible damage or even no damage slipped through” the quarantining exercise (paragraph 52). (c). The Respondent had failed to reasonably mitigate its loss by not taking steps to sell the stock after the Appellant’s expert witness’s inspection on 1st June 2023 (paragraph 63).92. The Recorder erred in limiting the reduction in the sum of the Respondent’s damaged stock claim to only 15 per cent globally in respect of all these matters in combination (paragraphs 69-71).

93. Ground 5 – The Recorder erred in concluded that the Respondent had adduced sufficient evidence to enable the assessment of its damages when as a matter of fact and law it had not.

[81]Mr Griffiths dealt with grounds 4 and 5 together on the basis, he said, that they both involve the question of the proper approach to whether and if so, how damages should be assessed. Mr Griffiths made the following points.

[82]A past loss claim for damage to goods is not a difficult head of loss to prove. The Recorder should have concluded that the Respondent had not discharged its burden of proof in respect of the damage caused to the Quarantined Stock by condensation dripping from the ceilings of the Structures.

[83]The Respondent relied on Pluczenik Diamond Company NV v W Nagel (A Firm)

[2018] EWCA Civ 2640

to support its proposition that the Recorder should do the best he could to assess the Respondent’s losses, with the evidence that he had.

[84]In Pluczenik the Court was faced with two claims, one for breach of the applicable Regulations and a claim for breach of contract. The claimant’s claim for breach of the Regulations failed, but the claim in contract succeeded. The Claimant said that losses for the claim for breach of the Regulations and the claim for breach of contract should be calculated in the same way, but the court found that the way in which the claimant had calculated its losses applied only to the breach of Regulations claim and not to the contract claim. The Court of Appeal said:

“… the fact that the expert evidence was directed solely at the regulation 17 claim meant that the court had less assistance in assessing damages for breach of contract. But the fact that further or better evidence could have been obtained does not relieve a defendant of the obligation to pay damages, provided that there is a rational basis on which to estimate the claimant’s loss. It is a well-established principle that, where it is clear that the claimant has suffered a substantial loss, but the evidence does not enable it to be precisely quantified, the court will assess damages as best it can on the available evidence.”

[85]Here there is no rational basis to assess the Respondent’s losses, instead the Recorder relied on guesswork which Leggatt LJ made clear in Pluczenik was not appropriate: “Certainly, a point may come where the court concludes that the claimant’s failure to adduce evidence on which the court can reasonably rely in order to prove loss means that the claim must fail for want of proof”.

[86]In answer to the Appellant’s Part 18 Request, the Respondent provided the Spreadsheet setting out the cost value of every item of Quarantined Stock, Mr Leivers could not find a single example of 13 of the 29 items set out in the Spreadsheet, during his inspection of the Quarantined Stock. The Respondent provided no evidence of the damage to the stock or the quarantining process that had been followed. As such all that the court could conclude about the damaged stock claim was that, whilst the Respondent asserted that all the Quarantined Stock was damaged and that some boxes had been exposed to condensation (from photographs) the experts agreed that, as at October 2021, this affected a relatively small proportion of the stock in the Structures which would need testing before it could be sold and by June 2023, a large proportion of the Quarantined Stock remained in a saleable condition.

[87]This was not a case in which the Respondent had been unaware of the issues with the adequacy of its evidence on quantum or where there was not readily available to the Respondent evidence to prove its case on quantum. By its Request for information, regarding the quantification of the Respondent’s claim, the Appellant highlighted the inadequacies in the Respondent’s evidence but the Respondent failed to produce evidence available to it to prove its case, for no apparent reason, and asked the Court from the very outset at trial to do the best it could with the inadequate evidence the Respondent had elected to bring to trial. That the failure to bring evidence of the actual damage suffered by the Quarantined Stock, when it was quarantined, was a deliberate part of the Respondent’s case strategy is an unavoidable conclusion.

[88]The Recorder should have held that the Respondent had not produced at Court the available evidence necessary for damages to be assessed and dismissed the head of loss. In attempting to quantify the Respondent’s losses the Recorder fell into error using guesswork.

[89]Mr Griffiths’ fall back argument is that, if it was appropriate for the Recorder to undertake the exercise of estimating the Respondent’s losses, then he was far too generous in estimating the Respondent’s losses at 85% of what they claimed.

[90]Mr Buttimore says that the Spreadsheet was verified in Michael’s witness statement. Michael says, at paragraph 96:

“The stock represents a loss to the [Respondent] of £667,983.02. The retail value of the stock in an undamaged state would be approximately double that figure. Details of the [Respondent's] losses have been provided in the course of these proceedings which are derived from the [Respondent’s] records. The current stock valuation that has been produced (and matched to the [Respondent’s] Part 18 response dated 19th October 2023) is based on actual stock purchase invoices which have then been uplifted by the actual/proportional 12 shipping costs (based on product weight/container weight x actual container freight cost) applied at the time the goods landed into the [Structures]”

. The figure of £667,983.02 and the 2,571 items of stock summarised in the Spreadsheet is also referenced in Mr. Walker’s witness statement, says Mr Buttimore. None of this evidence was challenged in cross-examination.

[91]Mr Buttimore says that having rejected the valuation evidence of Mr. Fogarty and recognising the limited stock sampling by the experts, the Recorder accepted the factual evidence of Michael and Mr Walker, and he was entitled to start with the headline figure of £667,983.02 and go on to assess the stock damage claim at £567,785.

[92]In my judgment, for the reasons that follow, the Recorder did err in deciding that he could quantify the Respondent’s loss at 85% of the amount claimed in the Spreadsheet and in not simply deciding that the Respondent had failed to prove the quantum of its claim. I will explain why, by reference to the findings that I have already made in relation to grounds 1 - 3.

[93]The first point I will make is that the Spreadsheet and the evidence of Michael and Mr. Walker, which the Recorder found supported it, only provided evidence that the price at which the Respondent had purchased the 2,571 items of stock which made-up the Quarantine Stock was £667,983.02. The Spreadsheet provides no evidence of how much of the Quarantined Stock was damaged or how badly it was damaged, when it was quarantined in January 2022.

[94]I have concluded that the Recorder, in saying that the majority of the Quarantined Stock was “seriously damaged” meant seriously enough damaged to mean that it was incapable of being sold to retail customers at full retail price, without the product being first removed from the boxes and checked (see paragraph 37 above). It is this that led the Recorder on to conclude, (based on his acceptance of Mr Walker's evidence) that the Respondent had not acted unreasonably by not opening damage boxes in order to check their contents prior to sale, because such exercise, the Recorder was satisfied, would be a logistical nightmare and uneconomic. However absent the Recorder making what I have found to be impermissible adverse findings in the Respondent’s favour to fill the gaps in the Respondent’s evidence regarding the quarantining exercise and the criteria used in connection with it, the Recorder could not conclude on the evidence before him that 85% of the Quarantined Stock was seriously damaged when it was quarantined.

[95]There is then the joint report of the quantum experts. Mr Buttimore said that the Recorder was right to find that Mr Fogarty did not have the necessary expertise to value the Quarantined Stock and had not given his evidence impartially, however the Recorder did accept the generally agreed views of the experts (in their joint report dated 16 May 2024). That report concluded that on 1 June 2023, some 18 months after the Quarantined Stock had been separated and placed in the Purchased Structure a large proportion of the Quarantined Stock was in saleable condition and only a small proportion would require removal of its packaging and testing before being sold at a discount. Given that it was common ground that the keeping of the Quarantined Stock in the Purchased Structure exposed it to ongoing damage from condensation and therefore deteriorated over time, the joint opinion of the experts which the Recorder said he accepted was entirely at odds with the finding of the Recorder that the majority of the Quarantined Stock was significantly damaged when segregated in January 2022. If the experts were right then there would be no need to segregate the majority (perhaps the vast majority) of the Quarantined Stock, it could simply be sold at full retail price without checking it.

[96]I have the same evidence before me as the Recorder had and consider myself able to decide whether there is any figure at which I could value the Respondent’s loss or whether I should simply conclude that the Respondent has failed to prove the quantum of its claim so that I can attribute no value to its loss.

[97]The evidence that the Recorder had before him does not, having regard to the Recorder’s acceptance of the joint report, support a finding that the majority of the Quarantined Stock was seriously damaged or that 85% of it was. It is neither appropriate nor possible, in my judgment to place a minimum value on the Respondent’s loss, for the following reasons:(a) on the face of it the Respondent had available to it directly relevant evidence to prove its claim which it did not produce, namely witnesses, including Steven, who took part in the quarantining of the Quarantined Stock and who knew what criteria was used to quarantine that stock. Nor did it produce any evidence from witnesses involved in what it described as extensive sampling exercises that it carried out at great expense or any documents relating to that exercise. The Respondent provided no explanation as to why none of this evidence was produced. Mr Griffiths says that I should make an adverse inference that the Respondent chose not to produce this evidence because it would not have supported its case. In the absence of some other explanation and there is none, it does seem to me to be reasonable to infer that the Respondent deliberately chose not to deploy evidence which was directly relevant to the quantification of its loss; and

(b) it is not in my judgment in any event possible to set any minimum value for the Respondent’s losses on any rational basis, rather it would amount to guesswork, for the following reasons: (i) it is common ground that the Quarantined Stock will have deteriorated over the time that it was stored in the Purchased Structure. It is therefore reasonable to infer that the Quarantined Stock was less damaged when it was segregated in the Purchase Structure in January 2022 than it was 18 months later in June 2023, perhaps substantially so. I cannot however say how much of it was damaged in January 2022, so that it could not be sold at full retail price without checking, but on the only available evidence (the agreed opinions of the experts) it was a minority and perhaps a small minority of the Quarantined Stock; (ii) the Recorder accepted Mr Walker's evidence that it would have been a logistical nightmare (and probably uneconomic) to open the boxes where there was evidence of water damage to the box to check the product inside before selling it (probably at a discount). However, the Recorder appears to have concluded that around 85% of the Quarantined Stock was damaged so that it would have been necessary to open the box and check the product inside for 85% of the Quarantined Stock. If however the amount of Quarantined Stock which was subject to water damage on the boxes was only around say 10%, then opening and checking the product inside 10% of the boxes would be a wholly different exercise and might be neither a logistical nightmare, nor an economic one; (iii) The Recorder found that the Respondent had not acted unreasonably in not storing the Quarantined Stock in anywhere other than the Purchased Structure, but that was on the basis that 85% of the Quarantined Stock was seriously damaged. What if only around 10% of the Quarantined Stock was seriously damaged and the rest could have been sold at full retail value? and (iv) it is not only therefore not possible to determine what percentage of the Quarantined Stock was actually subject to any water damage when it was quarantined but also whether it would have been practical and economic to open those boxes that were damaged and check the product inside those boxes, before selling it. Further if 90% of the Quarantined Stock could be sold at full retail value without checking it, then the Respondent probably did act unreasonably by moving it to the Purchased Structure and leaving it there to deteriorate.

[98]My finding that the Respondent has not proved that there is any minimum value that can be placed on the losses it suffered as a result of condensation dripping onto the Quarantined Stock before it was separated, disposes of grounds 4 and 5 and renders ground 6 academic.

[99]Mr Griffiths accepted that, if I came to the view that the Respondent had not discharged its burden of proving its loss then he would not maintain that the Appellant has any basis for claiming a sum from the Respondent in respect of storage costs that the Respondent would have incurred had they not used the Structures. He was right to do so and this disposes of the cross-appeal.