In addition to insolvency services, our firms undertakes litigation support and forensic accounting services, through our division OIS Forensics.

Recently, a judgment was delivered in a matter in which we were instructed to provide such forensic accounting services for the benefit of the Court: Adelaide (SA) Pools & Spa Manufacturing and Installation Pty Ltd v Westcourt General Insurance Brokers Pty Ltd (No 2) [2021] SASC 123.

The case had some interesting facts that are relevant, not only from a forensic accounting and liability point of view, but also from an insolvency-recovery view.

The plaintiffs were a group of entities that manufactured and installed fiberglass pools, spas and related products. 

In January 2010, there are a fire at the plaintiffs’ factory which caused extensive damage to the plaintiffs’ operations.  The fire was believed to be caused by static electricity igniting combustible materials used in the manufacturing process.

The plaintiffs could no longer manufacture the pool and spa fiberglass shells from the factory.

But they were insured and received certain insurance payments.  They undertook efforts to rebuild or replace the damaged factory and, in the interim, set about sourcing pool shells from interstate (at a greater cost).

Ultimately, however, the plaintiffs were unable to reinstate their businesses to their pre-fire levels.  Certain of the plaintiff companies became insolvency and entered Voluntary Administration.  Deeds of Company Arrangements were accepted by those companies’ creditors.

The plaintiffs alleged that they were under-insured and, had they obtained adequate cover, they would not have ceased business.  Further, they alleged that their insurance broker acted in breach of contract and in breach of a duty of care to ensure the plaintiffs had adequate insurance cover.

They claimed damages for those breaches and certain consequential losses.

Significantly, they claimed that the ‘business interruption’ component of their insurance policies had an inadequate level of indemnity cover.  The policies provided for indemnity cover for a duration of only 6 months.

The ‘business interruption’ cover was to provide for a loss of gross profit and for loss arising from an increased cost of working.

His Honour Doyle J found that the broker had breached its duty of care and ought to have recommended indemnity for 24 months rather than the 6 months.

OIS Forensics issued several expert reports and the author gave evidence at trial, to assist the Court as an independent accounting expert.  The quantum of loss was in issue and an independent expert engaged by the defendant gave partly different views.

Some of the plaintiffs’ claims for consequential losses were not allowed.  However, with the assistance of the author’s calculations, Doyle J assessed the plaintiffs’ losses at $3.2 million.

Interest and costs are yet to be determined.

Our OIS Forensics team were pleased to assist in this matter.  We welcome the opportunity to be involved in particularising losses and conducting business valuations in both insolvency and non-insolvency matters.