Lauralu UK Limited v Bodypower Sports Limited (The Fitness Superstore)

An adverse inference from a party’s failure to call or produce readily available evidence must be adverse to that party. It may strengthen the opposing evidence or weaken the defaulting party’s case, but it cannot fill evidential gaps by assuming facts favourable to the defaulting party.

A claimant seeking damages must provide a rational evidential basis for quantification. Where the evidence cannot establish even a minimum loss without guesswork, the relevant head of loss fails. Appellate interference is justified where factual findings depend on impermissible inferences, lack reasons, or are inconsistent with accepted expert evidence.

The appeal concerned damages awarded on the Respondent’s counterclaim for stock allegedly damaged by condensation from structures supplied by the Appellant. The Recorder awarded the Respondent £347,285, having valued the damaged stock at £567,285 after deductions and then deducted £250,000 for hypothetical storage and handling costs.

The Appellant challenged the factual findings, the use of inferences concerning the quarantining process, the assessment of loss, and the sufficiency of the evidence. The Respondent brought a cross-appeal against the £250,000 deduction. The central issues were whether the evidence permitted a rational assessment of damage and whether the Recorder had impermissibly filled gaps in the evidence.

1. Appeal allowed. The Recorder’s award for damage to the Quarantined Stock was set aside. The Respondent had failed to prove the quantum of that head of loss.
2. Where relevant evidence is readily available but is not produced, the court may draw an inference if there is no satisfactory explanation. Any such inference must be adverse to the party withholding the evidence. It may strengthen the opposing case or weaken the withholding party’s case, but cannot support that party’s case by filling evidential gaps. The Recorder erred by inferring that the majority of the stock was seriously damaged and by assuming facts about the quarantining criteria and process which the missing evidence could have established.
3. The finding that most of the stock was seriously damaged was also perverse and unsupported. The Recorder accepted the generally agreed expert evidence that, 18 months after separation, a large proportion remained saleable and only a relatively small proportion required inspection before discounted sale. That evidence was inconsistent with the conclusion that 85% was seriously damaged when separated.
4. The Spreadsheet and witness evidence established the purchase cost of the stock, but not how much was damaged or the extent of damage in January 2022. The available evidence did not permit a rational minimum valuation. Any assessment would have been guesswork, so the damages claim failed for want of proof.
5. The Recorder’s findings on mitigation were not all disturbed. The Appellant bore the burden of proving unreasonable mitigation, judged by information available at the relevant time. The finding that no alternative storage was available was upheld. The Respondent’s delay in disposing of the stock after its own expert’s inspection was unreasonable, but that did not cure the failure to prove the underlying loss.
6. The cross-appeal was thereby disposed of. The Appellant accepted that, once the Respondent had failed to prove its loss, it had no basis to recover storage costs from the Respondent.

• High Court (Chancery Division): Appeal from the order of Recorder C Butler dated 8 August 2024. The appeal was allowed and the Respondent’s counterclaim for the stock-loss head of damages failed for want of proof. The cross-appeal was disposed of accordingly.