Valuation
April 19, 2022

Precious examination: recovery of lost profits after theft in a jewelry store

The core of the matter

There was a burglary in a jewelry store owned by a sole proprietor. The store premises were guarded by the ROSINKAS division of the Bank of Russia under a security agreement. Since the security clearly did not cope with its function, the sole proprietor (plaintiff) went to court and recovered damages in an amount of about 4 million rubles (case No. A16-178/2016). After receiving the money from ROSINKAS, the plaintiff filed a new claim for the recovery of lost profits.

In such cases, it is indeed possible to recover not only damages, but also lost profits (Article 15 of the Civil Code of the Russian Federation). The plaintiff believed that in the period from the date of the burglary to the day the defendant paid the amount of damages, he did not receive the income that he could have expected under normal conditions. He himself calculated the lost profits in the amount of 3,284,498.53 rubles and specified it in the claim (case No. A16-1558/2017).

The defendant objected to the asserted claims of the plaintiff. He argued that there were no lost profits in this case, since during the period under study the jewelry market was going through hard times, and the store's activity at that time was unprofitable. All this called into question the very fact of the existence of lost profits by the plaintiff.

Therefore, the court appointed an examination on the case and entrusted its conduction to Veta expert group. The expert was Dmitriy Zharskiy, the 1st category appraiser, forensic expert, CEO of the Veta expert group.

What questions to the expert were raised?

The court posed the following question to the expert:

‘What objectively possible income would a sole proprietor Ginzburg N.G. draw in the period from 12/03/2015 to 12/27/2016 for sales of jewelry stolen from the ‘Almaz’ store, named as missing in the inventory reports of material assets (ware with and watches with diamond, goldware), under normal conditions of civil circulation?‘

How the expert worked

There is no universal formula for determining lost profits. As a general rule, the amount of lost profits is equal to lost income – the amount by which the property of the victim could be but was not increased. The main difficulty in conducting the examination consisted in the market analysis and modelling of those economic indexes of the organization's work that were forcedly changed due to the burglary.

The expert paid special attention to objective factors that influenced the amount of profit. Then he did a retrospective analysis of the store, comparing financial performance after the burglary with the same period before it.


What influenced the calculations

  1. All-Russian trend of revenue decline in 2014. Jewelry were sold worse by everyone – including the plaintiff.
  2. Seasonality. The peak of jewelry sales is December, and the burglary took place just in December 2015. Plaintiff's financial records show that the proceeds were significantly lower.
  3. Product turnover.. he expert calculated this index for the market as a whole and for the plaintiff's company separately – it amounted to more than three years while the period for calculating the lost profit was a little more than a year. That means that during this time the sole proprietor could not sell all the missing goods.
  4. Reasonable costs factor.This is a general rule for calculating the amount of lost profits – under normal conditions, the entrepreneur bears reasonable costs, and they shall also be taken into account. But in this situation, the fixed costs of the store and the lost profits do not depend on each other, since the store continued to operate as usual after the burglary.
  5. Sales volume.The burglary affected sales volumes and bottom line profit by means of gross profit margin. Therefore, the lost profits in this case are the gross profit from the possible sales volume that the product range could achieve if it was available.

That is, the lost profits are the difference between the lost revenue from the sale of products and the cost of their purchase.

According to the results of the examination, the amount of lost profits turned out to be less than the plaintiff had originally stated – 535,249.49 rubles, but not zero. The plaintiff agreed with the amount and announced a claim dilution.

What is the result

Recognition of the specific nature of the market and the listed factors made it possible to carry out an objective appraisal. The expert opinion helped the plaintiff convince the court of the loss of profits and justified the corrected amount of the claim – 535,249.49 rubles.

Despite the defendant's objections, the court satisfied the plaintiff's claims in full and recovered from the defendant in favor of the entrepreneur:

  • lost profits in the amount of 535,249.49 rubles;
  • part of the paid state duty in the amount of 13,705 rubles;
  • part of the costs for a forensic examination in the amount of 5,703.68 rubles.

Moreover, since the plaintiff announced in a timely manner that the amount of the claim was reduced, the court also decided on return to him the overpaid part of the state duty from the budget in the amount of 25,717 rubles.

Thereafter, the defendant tried to appeal against the decision of the court, but his complaint was not approved. The decision resisted.

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