He has a claim for the REPLACEMENT cost of his shirt, and NOT just
its SALE value, in the condition that it was. As the cheapest decent
shirt is nowadays over 20 quid, he may have bought an up-market one
at 50, and it may have been fairly new, 5 quid is insulting.

You are quite wrong. The law does not allow him to be in any better off than
he was. He is not entitled to betterment i.e. he is only entitled to the
second-hand value that is, as I said, unlikely to be more than £10 at the
maximum. Take a look at the prices of secondhand shirts in charity shops if
you don't believe me.

And, as BAC points out, he has a RIGHT to take the claim to court
(unless he is a vexatious litigant). And the courts might well be
sympathetic (as far as costs go) if he asked for reasonable
compensation and was given an offensive offer.

In theory yes, but in practice he would be likely to get short shrift for
taking such a trivial matter to court.