Wentworth Retreat (2009) Limited v Dell Inc
[2016] NZHC 2592
•31 October 2016
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV 2016-404-000510
[2016] NZHC 2592
BETWEEN WENTWORTH RETREAT (2009)
LIMITED AND MARES PROPERTIES (NZ) LIMITED
PlaintiffsAND
DELL INC
Defendant
Hearing: 25 October 2016 Appearances:
C Langstone for the Plaintiffs/Respondents
M Russell/O Klaassen for the Defendant/Applicant
Judgment:
31 October 2016
JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN
This judgment was delivered by me on
31.10.16 at 3:00pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date……………
WENTWORTH RETREAT (2009) LIMITED AND MARES PROPERTIES (NZ) LIMITED v DELL INC [2016] NZHC 2592 [31 October 2016]
The application
[1] The defendant (Dell) applies for an order that the plaintiffs file and serve a more explicit statement of claim.
Statement of claim
[2] It is pleaded the plaintiffs Wentworth Retreat (2009) Limited (Wentworth) and Mares Properties (NZ) Limited (Mares) jointly owned the land, buildings and contents at 456 Wentworth Valley Road, Whangamata and that at about 2:45am on 4 January 2014 a fire occurred in the main building on the property (Wentworth Lodge) causing extensive damage to the structure and contents. The previous evening between 9:00pm and 12:00 midnight, Mrs McGregor, one of the directors of Wentworth had been 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 computing manufacturer and supplier. The laptop was manufactured by the defendant (Dell). It contained a lithium ion battery pack (the battery pack) made up of four lithium ion cells (the cells).
[4] The plaintiffs plead that as a result of internal overheating within the battery pack, one of the cells exploded causing it to catch fire. The plaintiffs say the fire damaged Wentworth Lodge beyond repair. Losses totalling $1.44M are claimed. The market value of the property prior to the fire was $1.94M and because Wentworth Lodge 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 Dell owed a duty of care to manufacture laptops that were safe and would not catch fire under normal operating circumstances; that in breach of that duty Dell:
(a)Failed to ensure the laptop was free of any defect which could result in damaged property;
(b)Manufactured and supplied a laptop which contained a lithium ion battery pack which was known to be capable of overheating and bursting into flames. The plaintiffs say in that regard they rely on Dell’s product recall in 2006 for certain models of laptop computers which used 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 cause damage to property; and
(e)By failing to put controls in place to ensure the battery pack was not a fire hazard.
[7]In the alternative the plaintiffs rely on the legal presumption of res ipsa loquitur
in 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 a registered 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 proof that it was a Dell Latitude E6500 laptop being used between 9:00pm and 12:00 midnight as asserted. It admits the laptop includes a lithium ion battery pack but says it has no knowledge of the specific laptop in question.
[10] Regarding claims of damage, Dell pleads the sale of the Wentworth Lodge property 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 and that Mr McGregor had been a director and shareholder of Wentworth. Also Dell claims the sale included undamaged buildings and other plant, equipment, furniture and tools onsite.
[11] Dell accepts it owed a duty of care in the manufacture of the laptop and says its duty of care is limited to the reasonable skill and care required of an overseas manufacturer.
[12] Regarding the plaintiffs detailed claims of negligence, Dell pleads it has insufficient 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 failing to ensure defective batteries were not installed, or ensuring the laptop would not explode when in use, or that it had failed to put controls in place to ensure the battery pack was not a fire hazard.
[13] Dell pleads the laptop was sold to Mr Gordon McGregor on or about 24 August 2010 by a New Zealand retailer trading as GraysOnline.com some four years after its manufacture and Dell puts the plaintiffs to proof that the battery pack and the laptop sold to Mr McGregor was a battery installed and/or supplied by Dell. Dell pleads it has insufficient particulars of the negligence alleged against it in relation to its role as a supplier and a manufacturer.
[14] Dell also pleads Wentworth has no legal ability to issue the proceeding because it was not a registered company it having been removed from the Register before the pleading was issued.
[15] Dell also pleads Wentworth and Mares received indemnities in respect of alleged 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 avoided the loss claimed.
[16] Dell’s defence also advances claims of a failure to adhere to product instructions and a warning to comply with the New Zealand Building Code, and contributed 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 the statement of claim.
[18] Paragraph 4 - pleads that at 2:45am on 4 January a fire occurred in the Lodge causing extensive damage to the structure and contents.
[19] Dell wants to know what buildings and contents allegedly damaged were insured and what was not insured and regarding items insured it requests the name of the insurer, the type of insurance policy in place, the level of indemnity paid, and when it 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 the fire?
(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 the time 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 pack made up of four lithium ion cells which as a result of internal overheating one of the cells 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 was that 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 to manufacture 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 and by 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 to ensure 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 pack known 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 certain laptop 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 what specific defect was identified by it, and which products the recall notice related to, and where the notice was published.
[26] Dell asks why it is alleged the battery pack was known by Dell to be capable of overheating and bursting into flames. Dell wants to know when it supplied the laptop 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 manufacture and in relation to supply of the laptop; and what controls Dell was required to put in place for the manufacture and for the supply of the laptop.
[28] Finally, concerning paragraph 13 and regarding the plaintiffs res ipsa loquitur alternative pleading, Dell requests the plaintiffs to supply the facts upon which it asks the Court to rely on in that legal presumption.
Legal principles
[29] Counsel agree these are not controversial. As noted in Pricewaterhouse1 properly drawn pleadings are an essential roadmap for the Court and the parties. A statement of claim outlines the case advanced. It must provide the basis for evidence preparation and pre trial briefing.
[30] The High Court Rules2 require a statement of claim to show the nature of the claim and to specify the relief sought.
[31] As noted in the Commissioner of Inland Revenue v Chesterfields Pre Schools Limited3:
·The pleading must be accurate, clear and intelligible.
·Sufficient particulars must be given to enable the defendant to be fairly 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 what witnesses it will need to retain and enable it to start preparing evidence ahead of the formal exchange of evidence.4
Considerations
Paragraph 4 – Indemnity cover
[33] The Court’s impression of the defendant’s further particulars claim and of submissions offered in support of their justification is that a significant degree of discovery rather than particulars is sought. The defendant justifies these requests on grounds it is necessary for them to focus their investigations in order to better prepare their 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 particulars sought, by reference to certain paragraphs of the statement of claim. The primary thrust of particulars regarding paragraph 4 concerned the plaintiff’s insurance cover. The defendant says the nature of insurance arrangements “may well be” relevant to issues in the proceedings. It is Dell’s position the plaintiffs have avoided the loss claimed by receiving indemnities from their insurer. Dell asserts the extent of the subrogation right will limit the ability of the subrogated party to pursue a defendant in the 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 the defendant says the plaintiffs did not use it correctly and indeed by their actions had caused the fire, in those circumstances it is asserted the insurers should not have paid the claim.
[36] In response Mr Langstone for the plaintiff submits the plaintiffs’ insurance details are not relevant to the claim because the claim is about negligence and that even if they were relevant, those details would not be a matter for pleadings but documentary evidence provided through discovery.
[37] The Court agrees that in response to claims on behalf of Dell that the plaintiffs have avoided the loss claimed by receiving indemnities from their insurer the Court considers it is not the plaintiffs’ obligation to provide particulars to substantiate the defendant’s defence. Furthermore the Court agrees that it is a fundamental principle of the doctrine of subrogation that a third party, if sued by an insured, cannot avoid liability on the ground that the insured has been fully indemnified for his loss. What is in issue is the plaintiffs’ claim of loss sustained by them because of a defective laptop. Pleadings regarding the extent of the insurance policy cover are not a pleadings issue.
[38] The defendant asserts the plaintiffs have provided discovery of insurance documents. The evidence suggests some emails were disclosed because they detailed costs incurred by the plaintiffs as a result of the fire. One of those regarding demolition
mentioned the insurer having reserved rights until its investigations were completed. Another attached a quote received for sewerage and electrical work and had asked the insurers approval of costs.
[39] The Court agrees with Mr Langstone that this disclosure does not put insurance at issue in this proceeding.
Paragraph 5 – Laptop functions pre fire
[40] Paragraph 5 of the statement of claim pleaded the Dell laptop had been used for a period of three hours some two and a half hours before the fire. The defendant’s request for further particulars focussed on the period of use, the performance of laptop functions, how it was plugged in, and what other appliances were plugged into it, and where it was located.
[41] The evidence is that this information has been provided by way of initial disclosure and/or discovery and that the defendant has been provided with transcripts and interview audio of the material witnesses.
[42] Mr Langstone submits these are requests for evidence and that any elaboration on the information already provided would be by way of briefs of evidence – upon which the defendant would have an opportunity to cross examine witnesses.
[43] The plaintiffs have provided a copy of a report from Mr Ramsey a forensic electrical investigator, dated 28 February 2014. Mr Ramsey has provided full details of his investigation. His report attached clear photos of the fire damaged laptop. Mr Ramsey reported he found no evidence of an ignition source. It was his opinion the cause of the fire was an exploding lithium ion cell in the battery pack of the Dell laptop.
[44] Mr Ramsey’s report provides very much more detail than it appears any pleading particulars could. Moreover his report was provided to Dell’s solicitors on 12 August 2015, shortly after the proceeding was filed.
[45] Mr Langstone submits and the Court agrees the defendant’s request is for evidence 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 matters that the defendant may well be better able to provide answers to.
[47] The plaintiffs have pleaded the laptop model and serial number. The plaintiffs have identified the laptop as best they can regarding who the manufacturer of the battery pack was. The defendant’s own expert has long since had the opportunity to undertake an inspection. The defendant’s records will likely provide it with all relevant manufacture and supply details. The defendant supplied the laptop to that entity which supplied it to the plaintiffs.
[48] Requests regarding how internal overheating may have caused an explosion are matters for expert evidence in due course. In that regard the defendant has the benefit 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 laptop fire caused fire to the building and contents and for the estimated costs of repair likewise cannot succeed. For the defendant it was argued that each component of a Dell laptop has a specific and distinct safety requirement and accepted industry practice; and that negligence would attach to each specific requirement as to whether Dell was negligent as a manufacturer or as a supplier.
[51] The Court agrees again with Mr Langstone that the defendant will have all of the documents regarding specific requirements within its control. Also this and a number of other mentioned enquiries on behalf of Dell are best left for consideration once the defendant’s expert has examined the laptop.
Paragraphs 11 and 12 - what duties of care were owed and what knowledge did Dell have of these?
[52] The defendant’s paragraphs 11 and 12 request further particulars of the duty of care allegedly owed, and of the alleged defects, and regarding reference to the recall notice in the statement of claim. As well it seeks particulars of alleged manufacturer and supply failures and the details that ought to have been provided by the defendant by way of damage control.
[53] However, that too, the Court considers is a request for information about a breach of duty of care owed that was not within the plaintiffs’ control. This case like many others is premised on a claim by way of indirect circumstantial evidence. In this case the plaintiffs will have to prove the alleged defects in the battery. They will call in support the evidence of an expert. They will then argue the required standard of care was not met.
[54] If the 2006 recall notice did not concern the type of laptop this proceeding is concerned with then evidence of the recall may have little or no relevance. It will depend on whether or not in the circumstances of the recall that Dell ought to have known whether these other deficiencies alerted them to obligations in respect of other products. The plaintiffs are unlikely to know what could have been done or what should 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 has requested particulars of the facts relied on by the plaintiffs in their res ipsa loquitur claim.
[56] Mr Langstone agrees that claim ought to have been separately pleaded. However it is clearly an alternative pleading available for the Court to reach conclusion upon even if the plaintiffs’ evidence was deficient in some respect. It will be a matter for determination, if at all, upon the facts proved. In the context of the present 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 no longer in issue.
Summary
[58] As Bell AJ noted in Helicopter Finance5, the complaints of the defendants and their requests for further particulars shows the plaintiffs’ case had been misunderstood or 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 been negligent. Such information is often not in the plaintiff’s control as the plaintiff cannot know exactly how the defendant carried out its tasks. As in that case, so too in this, it is futile to require the plaintiffs to specify in what way the defendant allegedly carried out its task in breach of the duty of care. All the plaintiffs can do is to prove the defects and the required standard of care and show that damage would not have occurred had the defendant carried out its work to the required standard.
[59] Proving negligence may require little else than providing evidence of defects before and after the event alleged to have caused the damage. Indirect or circumstantial evidence, from which inferences may be drawn, is often characteristic of negligence cases.
Result
[60] The Court agrees with Mr Langstone that the statement of claim is more than adequately pleaded. Many of the defendant’s requests for further information could have 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 with disbursements as approved. If there is any dispute regarding the calculation of those costs then counsel are to file memoranda. A decision will issue in due course.
Associate Judge Christiansen
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