Ashley and Tracy Hays bought the store in 2002. The vendor arranged the stocktake and they split the cost.
A few months later they discovered that the stocktakers had counted the actual video cassettes behind the counter for rental (charged at £4 each) but only had cases for less than half of these on the video display, thus rendering them useless. When the Hays rang the stocktakers they heard, to their dismay: “Oh yes, we remember your stocktake well because it’s very unusual to do a stocktake at retail value and not at cost!”
They went to their solicitor who went to the stocktakers who reluctantly put it in writing and the difference between the two valuations (cost and retail) was estimated at £7,000. In March of this year the dispute escalated with the vendor’s solicitor claiming the £7,000 plus another £1,000 interest for the two years in dispute. The Hays’ solicitor is unsure how to proceed because, if they lose, it could cost the Hays £15,000, which they don’t have.
I spoke to Jeff Etherton from National Stocktakers, who is also on the council of the Trade Valuers Institute. He confirmed that it is very unusual to do a stocktake at retail value and he further suggested that a forceful solicitor might be in order here.
When premises change hands, the two stocktakers should agree on the day what the value is. Jeff suggests that the following day is probably too late, let alone three years later. It is not unusual for solicitors to get the wording of the contract wrong. Jeff says that the contract should state specifically: ‘The “stock-in trade”’ (a term that is defined in law) ‘will be valued at whichever is the lower: cost or net realisable value’.
In other words stock should be valued at what it was bought for, or, if it’s getting close to its sell-by date, for example, then for whatever can be realistically achieved. And if it’s not fit for sale then it has no value.
Jeff also said that discrepancies of £7,000 would not be unusual, but, he repeated, they should be thrashed out on the day. If this particular case came to court, he added, the likely outcome would be a 50/50 split as it’s history.
What a shame though, that the outgoing retailer apparently sought to stitch up the purchasing pair.