Importer awarded $1.5m payout

Insurance companies QBE and American Home Insurance have been ordered to pay a small sporting goods company $1.5 million after turning down the business' claim for stolen stock.

North Shore-based Pegasus Group went to the High Court after QBE, and the insurance company of the warehousing company it used, AHA, refused to pay out over $354,000 of stock losses.

The insurers said the goods had not been stolen, but rather the discrepancies were due to stocktaking errors.

However, Justice Helen Winkelmann has ruled that there was "relatively unrestrained and widespread theft" from the warehouse. He said Pegasus was entitled to the $354,000 claim, plus $412,500 for loss of profit due to business interruption, legal and other expenses, and interest - an amount Pegasus owner Kerrin Harrison estimates totals $1.5 million to $2 million.

Pegasus imports sporting and leisure goods including drink bottles, rugby balls, bikes and golf clubs for supply to retailers such as The Warehouse and Farmers. It stored its stock with warehousing company NZ Express, first at premises in Ellerslie and then in Mt Wellington.

From June 2004 stocktakes started to show up large discrepancies. In February 2005 Pegasus received an email from a former NZE employee alleging theft. As a result NZE hired a private investigator and installed covert cameras in its warehouses.

Justice Winkelmann said over the two weeks that the cameras were in operation 13 NZE staff were identified stealing stock - half of the warehouse employees at the time. NZE went into liquidation in May 2005.

An NZE supervisor who gave evidence admitted to theft and said it was a "free for all".

He told the court he saw employees walking out with cartons full of stock, and even saw one staff member back his car up to the warehouse and spend 20 minutes filling it.

Justice Winkelmann said there was also evidence there was a practice of throwing stock over the back fence of the property to be collected later in the day.

Another NZE client gave evidence that he had had $20,000 of stock stolen from the warehouse, including items as large as sofas.

But QBE and AHA argued that the apparent losses were the result of miscalculation of stock levels and that Pegasus' records had been corrupted by inaccurate information.

They said the discrepancies would have involved the removal of large quantities of stock on an almost daily basis and involve supply to some other party at a commercial level, and there was no evidence of any more than petty theft.

But the judge did not accept the argument.

"This was not simply a case of error in the inventory records.

"There was ... a widespread culture of theft existing within a business where there was also widespread opportunity for such conduct."

She said there was significant evidence that staff did have the chance for large-scale theft. There were usually no security cameras, no security on the gates, and many employees had after hours access to the warehouse.

Harrison said the case had all but sent him broke. However, his business was still operating, he was negotiating with his bankers, and he aimed to restart.

He said the dispute had been additionally damaging because rumours had circulated among suppliers and customers that the business was about to go under. He felt vindicated by the judgment.