WENTWORTH RETREAT (2009) LIMITED AND MARES PROPERTIES (NZ) LIMITED v DELL INC [2016] NZHC 2592

WENTWORTH RETREAT (2009) LIMITED AND MARES PROPERTIES (NZ) LIMITED v DELL INC[2016] NZHC 2592 [31 October 2016]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV 2016-404-000510[2016] NZHC 2592BETWEEN WENTWORTH RETREAT (2009)LIMITED AND MARES PROPERTIES(NZ) LIMITEDPlaintiffsAND DELL INCDefendantHearing: 25 October 2016Appearances: C Langstone for the Plaintiffs/RespondentsM Russell/O Klaassen for the Defendant/ApplicantJudgment: 31 October 2016JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSENThis judgment was delivered by me on31.10.16 at 3:00pm, pursuant toRule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDateThe application[1] The defendant (Dell) applies for an order that the plaintiffs file and serve amore explicit statement of claim.Statement of claim[2] It is pleaded the plaintiffs Wentworth Retreat (2009) Limited (Wentworth) andMares Properties (NZ) Limited (Mares) jointly owned the land, buildings and contentsat 456 Wentworth Valley Road, Whangamata and that at about 2:45am on 4 January2014 a fire occurred in the main building on the property (Wentworth Lodge) causingextensive damage to the structure and contents. The previous evening between9:00pm and 12:00 midnight, Mrs McGregor, one of the directors of Wentworth hadbeen using a Dell Latitude E6500 laptop, serial number H91252S at the Lodge.[3] Dell's business address is in Texas, USA. It carries on business as a computingmanufacturer and supplier. The laptop was manufactured by the defendant (Dell). Itcontained a lithium ion battery pack (the battery pack) made up of four lithium ioncells (the cells).[4] The plaintiffs plead that as a result of internal overheating within the batterypack, one of the cells exploded causing it to catch fire. The plaintiffs say the firedamaged Wentworth Lodge beyond repair. Losses totalling $1.44M are claimed. Themarket value of the property prior to the fire was $1.94M and because WentworthLodge was damaged beyond repair it was demolished and has not been rebuilt.[5] In March 2015 the plaintiffs sold the property for $500,000.[6] A single cause of action of negligence is pleaded. The plaintiffs allege Dellowed a duty of care to manufacture laptops that were safe and would not catch fireunder normal operating circumstances; that in breach of that duty Dell:(a) Failed to ensure the laptop was free of any defect which could result indamaged property;(b) Manufactured and supplied a laptop which contained a lithium ionbattery pack which was known to be capable of overheating andbursting into flames. The plaintiffs say in that regard they rely on Dell'sproduct recall in 2006 for certain models of laptop computers whichused lithium batteries;(c) Failing to ensure defective batteries were not installed in its laptops;(d) Failing to ensure the laptop would not explode when in use and causedamage to property; and(e) By failing to put controls in place to ensure the battery pack was not afire hazard.[7] In the alternative the plaintiffs rely on the legal presumption of res ipsa loquiturin order to prove Dell was negligent in the manufacture of the laptop.Statement of defence[8] By its statement of defence Dell pleads that Wentworth was no longer aregistered company it having been removed from the Register on 4 November 2015.[9] Dell admits a fire occurred at the time claimed, and puts the plaintiffs to proofthat it was a Dell Latitude E6500 laptop being used between 9:00pm and 12:00midnight as asserted. It admits the laptop includes a lithium ion battery pack but saysit has no knowledge of the specific laptop in question.[10] Regarding claims of damage, Dell pleads the sale of the Wentworth Lodgeproperty was not for true market value because it was not an "arms length transaction"because the property was sold to Mr Gordon McGregor and a trustee company andthat Mr McGregor had been a director and shareholder of Wentworth. Also Dell claimsthe sale included undamaged buildings and other plant, equipment, furniture and toolsonsite.[11] Dell accepts it owed a duty of care in the manufacture of the laptop and saysits duty of care is limited to the reasonable skill and care required of an overseasmanufacturer.[12] Regarding the plaintiffs detailed claims of negligence, Dell pleads it hasinsufficient particulars of the alleged defect which could result in damage to property;has insufficient particulars of the product recall in 2006; and denies claims of failingto ensure defective batteries were not installed, or ensuring the laptop would notexplode when in use, or that it had failed to put controls in place to ensure the batterypack was not a fire hazard.[13] Dell pleads the laptop was sold to Mr Gordon McGregor on or about 24 August2010 by a New Zealand retailer trading as GraysOnline.com some four years after itsmanufacture and Dell puts the plaintiffs to proof that the battery pack and the laptopsold to Mr McGregor was a battery installed and/or supplied by Dell. Dell pleads ithas insufficient particulars of the negligence alleged against it in relation to its role asa supplier and a manufacturer.[14] Dell also pleads Wentworth has no legal ability to issue the proceeding becauseit was not a registered company it having been removed from the Register before thepleading was issued.[15] Dell also pleads Wentworth and Mares received indemnities in respect ofalleged losses caused by the fire and as well from the sale of the property subsequently,and therefore no loss occurred to them because they had by their insurance avoidedthe loss claimed.[16] Dell's defence also advances claims of a failure to adhere to productinstructions and a warning to comply with the New Zealand Building Code, andcontributed to their own loss by selling the property at undervalue.The application for further particulars[17] It addresses the pleadings in paragraphs 4, 5, 7, 8, 9, 11, 12 and 13 of thestatement of claim.[18] Paragraph 4 - pleads that at 2:45am on 4 January a fire occurred in the Lodgecausing extensive damage to the structure and contents.[19] Dell wants to know what buildings and contents allegedly damaged wereinsured and what was not insured and regarding items insured it requests the name ofthe insurer, the type of insurance policy in place, the level of indemnity paid, and whenit was paid.[Indemnity cover][20] Paragraph 5 – Dell requests particulars including:(a) How long the laptop had been in use on the day of the fire?(b) What functions the laptop was performing before and at the time of thefire?(c) How it was plugged into an electricity source prior to the fire:(d) What other electrical appliances were plugged in to the laptop at thetime of the fire:(e) Where was the laptop located before the fire?(f) Who else other than Mrs McGregor had used it on the relevant day?[Laptop functions pre fire][21] Paragraphs 7 and 8 – pleads the laptop contained a lithium ion battery packmade up of four lithium ion cells which as a result of internal overheating one of thecells exploded causing it to catch fire. Dell says it wants particulars about:(a) What make and model of battery pack was in the laptop?(b) Who manufactured the battery pack?(c) Who installed the battery pack in the laptop?(d) What caused the internal overheating within the battery pack?(e) How did the overheating cause the cell to explode?(f) How did the cells cause a fire?[Whose battery pack was it and how did it cause the fire?][22] Paragraph 9 – Dell wants to know:(a) How the fire in the laptop caused the fire to the building and contents?(b) What were the estimated costs of repair to the property and when wasthat estimate provided?[How and to what extent did the fire cause damage?][23] Paragraph 11 – pleads that Dell owed a duty of care to the public at large tomanufacture safe laptops that would not catch fire under normal operating conditions.Dell asks:(a) What are alleged to be "normal operating conditions"(b) What duty of care is it alleged is owed by Dell as a manufacturer andby Dell as a supplier?[What duties of care were owed as a manufacturer and as a supplier?][24] Paragraph 12 – it is claimed Dell was in breach of duties of care by failing toensure its laptop was free of any defect which could result in damage or pose a risk,or by its manufacture and supply of a laptop containing a lithium ion battery packknown to be capable of overheating and bursting into flames.[25] In that regard the plaintiffs rely also on Dell's product recall in 2006 for certainlaptop models. Dell wants the plaintiffs to plead particulars of the alleged defect.Regarding the notice of product recall it wants to know the date of that notice and whatspecific defect was identified by it, and which products the recall notice related to, andwhere the notice was published.[26] Dell asks why it is alleged the battery pack was known by Dell to be capableof overheating and bursting into flames. Dell wants to know when it supplied thelaptop to who it was supplied and where it was supplied, and what condition it was in,whether unaltered, refurbished or enhanced.[Defect details/recall notice/supply details][27] Dell also wants particulars about its alleged failures in relation to manufactureand in relation to supply of the laptop; and what controls Dell was required to put inplace for the manufacture and for the supply of the laptop.[28] Finally, concerning paragraph 13 and regarding the plaintiffs res ipsa loquituralternative pleading, Dell requests the plaintiffs to supply the facts upon which it asksthe Court to rely on in that legal presumption.Legal principles[29] Counsel agree these are not controversial. As noted in Pricewaterhouse1properly drawn pleadings are an essential roadmap for the Court and the parties. Astatement of claim outlines the case advanced. It must provide the basis for evidencepreparation and pre trial briefing.[30] The High Court Rules2 require a statement of claim to show the nature of theclaim and to specify the relief sought.[31] As noted in the Commissioner of Inland Revenue v Chesterfields Pre SchoolsLimited3:• The pleading must be accurate, clear and intelligible.• Sufficient particulars must be given to enable the defendant to befairly informed of the case to be met.• Separate causes of action must be separately stated.• The pleading should set out all of the elements of the cause of action.[32] Pleading particulars should be sufficient to inform the defendant to know whatwitnesses it will need to retain and enable it to start preparing evidence ahead of theformal exchange of evidence.4ConsiderationsParagraph 4 – Indemnity cover[33] The Court's impression of the defendant's further particulars claim and ofsubmissions offered in support of their justification is that a significant degree ofdiscovery rather than particulars is sought. The defendant justifies these requests ongrounds it is necessary for them to focus their investigations in order to better preparetheir defence.1 Pricewaterhouse v Fortex Group Limited (Unreported, CA 179/98, 30 November 2008 at 17.2 Rules 5.26 and 5.27.3 [2013] 2 NZLR 679 at [84].4 Platt v Porirua City Council [2012] NZHC 2445 at [19].[34] This judgment has already detailed the reasons provided regarding particularssought, by reference to certain paragraphs of the statement of claim. The primarythrust of particulars regarding paragraph 4 concerned the plaintiff's insurance cover.The defendant says the nature of insurance arrangements "may well be" relevant toissues in the proceedings. It is Dell's position the plaintiffs have avoided the lossclaimed by receiving indemnities from their insurer. Dell asserts the extent of thesubrogation right will limit the ability of the subrogated party to pursue a defendant inthe extent of its recovery. Reference is made to the property having been sold for"only $500,000" despite initial disclosure (showing a post fire valuation of $650,000(inclusive of GST and including chattels)).[35] Also and because the claim focuses upon a Dell laptop and because thedefendant says the plaintiffs did not use it correctly and indeed by their actions hadcaused the fire, in those circumstances it is asserted the insurers should not have paidthe claim.[36] In response Mr Langstone for the plaintiff submits the plaintiffs' insurancedetails are not relevant to the claim because the claim is about negligence and thateven if they were relevant, those details would not be a matter for pleadings butdocumentary evidence provided through discovery.[37] The Court agrees that in response to claims on behalf of Dell that the plaintiffshave avoided the loss claimed by receiving indemnities from their insurer the Courtconsiders it is not the plaintiffs' obligation to provide particulars to substantiate thedefendant's defence. Furthermore the Court agrees that it is a fundamental principleof the doctrine of subrogation that a third party, if sued by an insured, cannot avoidliability on the ground that the insured has been fully indemnified for his loss. Whatis in issue is the plaintiffs' claim of loss sustained by them because of a defectivelaptop. Pleadings regarding the extent of the insurance policy cover are not a pleadingsissue.[38] The defendant asserts the plaintiffs have provided discovery of insurancedocuments. The evidence suggests some emails were disclosed because they detailedcosts incurred by the plaintiffs as a result of the fire. One of those regarding demolitionmentioned the insurer having reserved rights until its investigations were completed.Another attached a quote received for sewerage and electrical work and had asked theinsurers approval of costs.[39] The Court agrees with Mr Langstone that this disclosure does not put insuranceat issue in this proceeding.Paragraph 5 – Laptop functions pre fire[40] Paragraph 5 of the statement of claim pleaded the Dell laptop had been usedfor a period of three hours some two and a half hours before the fire. The defendant'srequest for further particulars focussed on the period of use, the performance of laptopfunctions, how it was plugged in, and what other appliances were plugged into it, andwhere it was located.[41] The evidence is that this information has been provided by way of initialdisclosure and/or discovery and that the defendant has been provided with transcriptsand interview audio of the material witnesses.[42] Mr Langstone submits these are requests for evidence and that any elaborationon the information already provided would be by way of briefs of evidence – uponwhich the defendant would have an opportunity to cross examine witnesses.[43] The plaintiffs have provided a copy of a report from Mr Ramsey a forensicelectrical investigator, dated 28 February 2014. Mr Ramsey has provided full detailsof his investigation. His report attached clear photos of the fire damaged laptop. MrRamsey reported he found no evidence of an ignition source. It was his opinion thecause of the fire was an exploding lithium ion cell in the battery pack of the Delllaptop.[44] Mr Ramsey's report provides very much more detail than it appears anypleading particulars could. Moreover his report was provided to Dell's solicitors on12 August 2015, shortly after the proceeding was filed.[45] Mr Langstone submits and the Court agrees the defendant's request is forevidence and not particulars.Paragraphs 7 – 8 – Who manufactured the battery pack and how did it cause the fire?[46] The defendant's request for paragraphs 7 and 8 particulars concerns mattersthat the defendant may well be better able to provide answers to.[47] The plaintiffs have pleaded the laptop model and serial number. The plaintiffshave identified the laptop as best they can regarding who the manufacturer of thebattery pack was. The defendant's own expert has long since had the opportunity toundertake an inspection. The defendant's records will likely provide it with allrelevant manufacture and supply details. The defendant supplied the laptop to thatentity which supplied it to the plaintiffs.[48] Requests regarding how internal overheating may have caused an explosionare matters for expert evidence in due course. In that regard the defendant has thebenefit of the plaintiffs' expert report.[49] The plaintiffs' requests are not for particulars, but for evidence.Paragraph 9 – how and to what extent did the fire cause damage?[50] The defendant's request for paragraph 9 particulars regarding how the laptopfire caused fire to the building and contents and for the estimated costs of repairlikewise cannot succeed. For the defendant it was argued that each component of aDell laptop has a specific and distinct safety requirement and accepted industrypractice; and that negligence would attach to each specific requirement as to whetherDell was negligent as a manufacturer or as a supplier.[51] The Court agrees again with Mr Langstone that the defendant will have all ofthe documents regarding specific requirements within its control. Also this and anumber of other mentioned enquiries on behalf of Dell are best left for considerationonce the defendant's expert has examined the laptop.Paragraphs 11 and 12 - what duties of care were owed and what knowledge did Dellhave of these?[52] The defendant's paragraphs 11 and 12 request further particulars of the duty ofcare allegedly owed, and of the alleged defects, and regarding reference to the recallnotice in the statement of claim. As well it seeks particulars of alleged manufacturerand supply failures and the details that ought to have been provided by the defendantby way of damage control.[53] However, that too, the Court considers is a request for information about abreach of duty of care owed that was not within the plaintiffs' control. This case likemany others is premised on a claim by way of indirect circumstantial evidence. In thiscase the plaintiffs will have to prove the alleged defects in the battery. They will callin support the evidence of an expert. They will then argue the required standard ofcare was not met.[54] If the 2006 recall notice did not concern the type of laptop this proceeding isconcerned with then evidence of the recall may have little or no relevance. It willdepend on whether or not in the circumstances of the recall that Dell ought to haveknown whether these other deficiencies alerted them to obligations in respect of otherproducts. The plaintiffs are unlikely to know what could have been done or whatshould have been done in the outcome of the issue of a recall notice.Paragraph 13[55] With regard to paragraph 13 of the statement of claim the defendant hasrequested particulars of the facts relied on by the plaintiffs in their res ipsa loquiturclaim.[56] Mr Langstone agrees that claim ought to have been separately pleaded.However it is clearly an alternative pleading available for the Court to reachconclusion upon even if the plaintiffs' evidence was deficient in some respect. It willbe a matter for determination, if at all, upon the facts proved. In the context of thepresent proceeding there is no requirement for further particulars to be provided.Wentworth having been removed from the Companies Register[57] It may have been but has since been restored to the Register. That matter is nolonger in issue.Summary[58] As Bell AJ noted in Helicopter Finance5, the complaints of the defendants andtheir requests for further particulars shows the plaintiffs' case had been misunderstoodor how it is intended to prove it; that with cases of negligence, a plaintiff is (often)unable to call direct evidence as to the way in which the defendant has allegedly beennegligent. Such information is often not in the plaintiff's control as the plaintiff cannotknow exactly how the defendant carried out its tasks. As in that case, so too in this, itis futile to require the plaintiffs to specify in what way the defendant allegedly carriedout its task in breach of the duty of care. All the plaintiffs can do is to prove the defectsand the required standard of care and show that damage would not have occurred hadthe defendant carried out its work to the required standard.[59] Proving negligence may require little else than providing evidence of defectsbefore and after the event alleged to have caused the damage. Indirect orcircumstantial evidence, from which inferences may be drawn, is often characteristicof negligence cases.Result[60] The Court agrees with Mr Langstone that the statement of claim is more thanadequately pleaded. Many of the defendant's requests for further information couldhave been avoided has its expert been engaged.5 Helicopter Finance Limited v Tokoeka Properties Limited [2012] NZHC 686 at [21-23].[61] The application in all its aspects is refused.[62] The defendant shall pay the plaintiffs costs on a 2B basis together withdisbursements as approved. If there is any dispute regarding the calculation of thosecosts then counsel are to file memoranda. A decision will issue in due course.Associate Judge Christiansen