ARENA LIVING HOLDINGS LTD v LENDLEASE CAPITAL SERVICES PTY LTD [2020] NZHC 587

ARENA LIVING HOLDINGS LTD v LENDLEASE CAPITAL SERVICES PTY LTD [2020] NZHC 587 [9March 2020]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2019-404-1462[2020] NZHC 587BETWEEN ARENA LIVING HOLDINGS LIMITEDPlaintiffAND LENDLEASE CAPITAL SERVICES PTYLIMITEDDefendantHearing: 9 March 2020Appearances: S J P Ladd and B J Ward for the PlaintiffM Eastwick-Field and A Robertson for the DefendantJudgment: 9 March 2020ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELLSolicitors:Bell Gully, Auckland, for PlaintiffRussell McVeagh, Auckland, for DefendantIntroduction[1] In this leaky building proceeding, the defendant applies to strike out the secondcause of action on the ground of a substantive defence, that the plaintiff failed to notifyit of the breach of warranty on which the second cause of action is based.[2] Arena Living Holdings is suing under an agreement of 31 January 2016, underwhich it bought all the shares in PLT New Zealand Ltd which ran five retirementvillages, four on the North Shore in Auckland (the Peninsula Club, Mayfair,Knightsbridge and Parklane) and one in the Bay of Plenty (Ocean Shores at MountMaunganui). The vendor was PLT New Zealand Pty Ltd, an Australian corporation.Under orders of the Federal Court of Australia made on 23 October 2019, PLT NewZealand Pty Ltd has been consolidated into Lendlease Capital Services Pty Ltd, thedefendant, which has assumed all the liabilities of PLT New Zealand Pty Ltd, includingany liabilities under the agreement for sale and purchase. For this decision, it is notnecessary to distinguish between PLT New Zealand Pty Ltd and Lendlease. I willrefer to them both interchangeably as "the vendor" and "the defendant".[3] Under the agreement for sale and purchase the vendor gave extensivewarranties, apparently some 120. They include a warranty as to the maintenance ofplant and buildings, and another that certain buildings did not have significant orsystemic watertightness issues. The agreement set a time limit for the purchaser tonotify the vendor of any claims for breach of warranty. The purchaser had to givewritten notice of a claim, giving reasonable particulars of the grounds on which it wasbased, within 18 months after completion date of the agreement.[4] The purchaser found that some of the retirement villages had watertightnessproblems. It notified the vendor. It began this proceeding alleging breaches of thewarranties as to maintenance and watertightness. The vendor accepts that it cannotapply to strike out the cause of action on the watertightness warranty, but it says thatthe notification of the breach of the maintenance warranty was ineffective and thatclaim is out of time.The warranties[5] Schedule 2 of the agreement sets out an extensive list of warranties by thevendor under 23 heads. Under the heading "Condition of plant and buildings" arethese:14. Condition of Plant and Buildings14.1 The plant and buildings of the Group (including the BusinessPremises) are appropriately maintained in all material respects having regardto their age and comply in all material respects with the standards required byapplicable Law.14.2 No apartment building or community centre building forming part ofthe Business Premises has significant and systemic watertightness issueswhich would require remedial works which result in a Loss to the Group inexcess of $7,500,000.[6] There are some interpretation issues. First, I treat 14.1 and 14.2 as separatewarranties. Any reasonable legally-informed reader would understand that they areseparate promises.[7] There are differences between the parties as to the interpretation of theweathertightness warranty 14.2. One issue is how the threshold of $7,500,000 is tooperate. The defendant says that it operates only when the costs of remedial works forany building suffering watertightness problems exceed $7,500,000 and that it is onlyliable to the extent that the costs of the remedial works for that building are more than$7,500,000. On the other hand, Arena says that the threshold sum is not to be read asan excess. If a claim comes within 14.2, then once the threshold is crossed thedefendant is liable for the full measure of the loss. It also disputes the "per building"interpretation and says that the threshold is to be measured by the aggregate loss acrossall buildings and all villages.[8] For the defendant, it was submitted that "systemic" should be read as meaningonly defects in construction or design. I do not read "systemic" in that way. For thisapplication, I will treat "systemic" as meaning going to the body or the entire integrityof the building, no matter what the cause.[9] For this decision, I will apply the interpretation claimed by the plaintiff. Thatis on the assumption that in a strike-out application based on an affirmative defencethe plaintiff is to be credited with proving what it has pleaded. The court assumes thatthe claim will be established and the question is whether the affirmative defenceapplies.[10] The main body of the contract has provisions as to warranties. It categorisessome warranties as repeat warranties. Those are warranties that apply not only as atthe date of the agreement but also at the date of completion. The warranties under14.1 and 14.2 are repeat warranties.[11] Under cl 10.1 the vendor warrants and represents to the purchaser that, subjectto the limitations in the agreement, each of the warranties is true and accurate as at thedate of the agreement and, for the repeat warranties, at the date of completion.[12] Clause 10.3 contains exceptions. There is an exception for matters fairlydisclosed in the due diligence material.[13] Under cl 10.15 the parties acknowledge that the purchaser has entered into theagreement in reliance on the warranties, and agree that the warranties should remainin force, notwithstanding the completion of the agreement.[14] Clause 10.14 deals with the operation of the warranties. The warranties shallbe given at the date of the agreement, and, for the repeat warranties, at the date ofcompletion with reference to the facts then existing. It also provides that each of thewarranties is to be construed independently of the others and is not limited byreference to any of the others.[15] Under cl 10.8 (c), the purchaser is under a duty to use its best endeavours tonotify the vendor of any claim under the warranties. That is to be done as soon aspracticable following the purchaser becoming aware of the implications of the facts orcircumstances giving rise to such a claim. There is a proviso that any delay or failureto notify the vendor of any claim will not release the vendor from its obligations inrespect of any breach of warranties except to the extent that such delay or failurematerially prejudices the vendor. The text refers to cl 10.8(b) which provides anexclusion where the purchaser is in breach of other obligations. But Mr Ladd forArena submitted that the proviso also applies to the notification requirement under cl10.8(c).[16] The key provision for this decision is the notification requirement in cl 10.4,on which the defendant relies:10.4 Time LimitsThe Purchaser shall not be entitled to make or pursue any claim for a breachof Warranty and/or under the Tax Indemnity, unless the Purchaser, acting ingood faith, gives the Vendor written notice of the claim setting out reasonableparticulars of the grounds on which it is based. Insofar as any claim is made:(a) Under the Tax Indemnity, the notice must be received on or before31 May 2021;(b) for breach of a Fundamental Warranty the notice must be received onor before 36 months after the Completion Date; and(c) for all other claims for breach of Warranty, notice must be receivedwithin 18 months after the Completion Date.[17] Under cl 10.6 a purchaser will not be entitled to pursue any claim for loss frombreach of warranty unless the amount of the claim (excluding legal costs) exceeds$140,000. There is also a threshold for aggregated claims.Arena's notifications[18] The agreement was made on 31 January 2016. The sale was completed on11 July 2016. The watertightness and maintenance warranties operated on that date.Under cl 10.4, the time for making a claim started running from the completion date.So the deadline for the warranties was 11 January 2018.[19] In the second half of 2017, Arena's lawyers wrote to the vendor making claimsabout weathertightness issues in three of the retirement villages. This began with aletter of 14 July 2017 headed "Notice of Claim". It is about the Mayfair retirementvillage. The letter includes the following:3. We are instructed that Arena Living Holdings has very recentlybecome aware of significant weathertightness issues in relation to the MayfairLifestyle Retirement Village at 14 Oteha Valley Road, Fairview Heights,Auckland (the Property). The Property forms part of the Business Premises.4. Arena Living Holdings investigations in relation to theweathertightness issues are at an early stage. However, it is already apparentthat these issues are serious and will give rise to a breach of theweathertightness Warranty in paragraph 14.2 of the SPA. Subject to theoutcome of further investigations, given the scope and nature of the defectsdiscovered to date, Arena Living Holdings considers that it is likely otherWarranties will also have been breached.5. Under clause 10.8(c) of the SPA, Arena Holdings is required to notifyPLT of any claim under the Warranties as soon as practicable, following ArenaLiving Holdings becoming aware of the implications of the facts orcircumstances giving rise to such a claim.6. Accordingly, although Arena Living Holdings is still in the process ofinvestigating the defects, the purpose of this letter is to put PLT on notice thatArena has a claim against PLT for breach of the Warranties.[20] The defendant makes the point that there was no express reference to warranty14.1. The letter does not put the defendant on notice that it is said to have breachedthe warranty 14.1 as to maintenance.[21] On 1 August 2017, Arena's lawyers wrote to the New Zealand lawyers for thedefendant, advising that Arena was continuing with its investigations and that it wasbeginning investigations and testing at the Parklane, Knightsbridge and PeninsulaClub retirement villages.[22] On 24 August 2017, Arena's lawyers wrote to the defendant's lawyers. Thisletter is headed "Reports for Mayfair Retirement Village". It enclosed copies ofreports from consultants about the Mayfair retirement village:(a) an inspection report by building surveyors;(b) a report as to fungal growth in wood samples and framing samples bya biodeterioration specialist;(c) a quantity surveyor's estimate of the cost of re-cladding; and(d) a report as to air quality sampling tests.While the letter referred to earlier correspondence and later emails, it said nothingexpress about warranties.[23] On 13 November 2017, Arena's executive chairman sent an email toMr Randello of the defendant, advising that Arena was progressing with theengineering for the re-clad of the Mayfair apartment building. The email also advised,further to the letter of 1 August 2017, that Arena had undertaken further investigativeworks on the apartment and community buildings at Knightsbridge, Parklane andPeninsula Club. The work on the Knightsbridge buildings had shown watertightnessfailure, with elevated frame moisture levels. The email did not refer to any warrantiesbut did state that Arena expected to have the final works and analyses ready byDecember and would advise of any further notification required under the agreement.[24] On 22 December 2017, Arena's lawyers wrote to the defendant, under theheading "Additional Notice of Claim (Peninsula Club and Parklane Villages)".Among other things, the letter referred to the earlier letter of 1 August 2017 and thenotice of claim of 14 July 2017 notifying significant watertightness issues at theMayfair Village. The letter advised that as a result further investigation by Arena andits consultants, Arena had become aware of significant and systemic watertightnessissues at the Peninsula Club and the Parklane villages. While the investigations wereat an earlier stage than at Mayfair, the current expert advice that Arena had receivedwas that the defects included, but were not limited to, elevated moisture content in thebuilding frame, and frame degradation at:(a) the Stage 1 building at Peninsula Club, that is, the main communityfacility but not the apartment buildings. The clubhouse would requirea complete re-clad; and(b) the upper level of the Parkland apartment building. The upper level ofthe building and potentially some parts of the second level of thebuilding would require extensive re-cladding.The letter went on:5, Based on the advice received by Arena Living Holdings, it considersthat the defects give rise to a breach of the weathertightness Warrantyin paragraph 14.2 of the SPA and likely other Warranties.6. Accordingly, the purpose of this letter is to put PLT on notice thatArena Living Holdings has further claims against PLT for breach ofthe Warranties in respect of the issues at Peninsula Club andParklane.[25] The defendant's point about this correspondence is that, whereas the lettersrefer expressly to the weathertightness warranty 14.2, there is no specific reference tothe maintenance warranty 14.1 but merely a general reference to "other warranties".Part of its argument is that the letters would not have alerted it to the fact that it wasfacing a claim for breach of the maintenance warranty 14.1.The claims in this case[26] Arena began this proceeding in July 2019. According to the statement of claim,the retirement villages are said to consist of buildings, including large apartmentbuildings containing individual units, community centres (with amenities such asclubrooms, bars, restaurants and games rooms) and individual stand-alone townhousesand villas. That classification is important because the watertightness warranty appliesonly to the apartment buildings and community centres. The statement of claim pleadscontractual provisions, including the warranties. Arena only became aware ofsymptoms of watertightness issues in Mayfair village in June 2017 and soon aftercarried out its own preliminary investigations. It gave notice on 14 July 2017 andadvised of further investigations at other retirement villages on 1 August 2017. Itpleads notification of the claims for Peninsula Club and Parklane on 22 December2017. It alleges that the vendor breached both the watertightness warranty and themaintenance warranty for the three villages and that these defects were not fairlydisclosed. Arena claims as its losses remediation costs and consequential damages.For the Mayfair village it puts the remediation costs at $19.6 million excluding GST,for Peninsula Club $11.3 million excluding GST and for Parklane, $7.8 millionexcluding GST. It also claims, as part of its consequential losses, costs of additionalworks to address the defendant's material under-investment in maintenance. It allegesongoing business costs and losses – giving as examples the need to buy backapartments from residents, where the watertightness defects remain unresolved. It alsoclaims loss of income and the reduction of future sales.[27] For its first cause of action, it pleads breach of the watertightness warranty. Inits second cause of action it pleads breach of the maintenance warranty. It alleges thatthe breaches of the maintenance warranty were caused or exacerbated by otherwatertightness defects.[28] The statement of claim has six schedules of defects. The first three schedulesdeal with watertightness defects, one schedule for each village. The other threeschedules are for maintenance defects, again one schedule for each village. The samedefects for each village are alleged under both warranty claims. The defects arealleged to be in the community centres and apartment buildings, not in individual villasor townhouses. The watertightness schedules give particulars of locations of defectsand damage, as well as applicable building standards under the New Zealand BuildingCode, New Zealand Standards and technical literature.[29] Mr Ladd for Arena went through the defects' descriptions, pointing out that formany of the defects the causes were not only construction or design defects but alsomaintenance defects. The schedules of maintenance defects identify defects and setout the requisite maintenance standards (standards in BRANZ bulletins,manufacturers' recommendations and similar), maintenance actions that should havebeen carried out by the defendant and damage caused or exacerbated because of thedefendant's alleged maintenance failings. Mr Ladd pointed out the overlap of thealleged maintenance failings and the defects in the watertightness schedules.[30] There is a third cause of action seeking rectification of the watertightnesswarranty. This is pleaded in the alternative in case the defendant's "per building"interpretation of warranty 14.2 is upheld. If that interpretation is held to be correct,Arena seeks rectification so that the warranty is applied on an aggregated remedialcosts basis.Strike-out principles[31] The defendant seeks strike-out of the second cause of action for breach of themaintenance warranty and all other parts of the statement of claim referring to orrelying on the maintenance warranty. The basis for the strike-out application is thatthe claim for breach of the maintenance warranty is out of time because a valid claimunder within cl 10.4 of the agreement for breach of that warranty was not notifiedwithin 18 months of the completion date. It says that none of the correspondencecounts as a valid written notice of claim within cl 10.4. Its objection applies to allthree retirement villages. It relies on an affirmative defence as the basis for its strike-out application.[32] In applications under r 15.1 of the High Court Rules, the court may strike outa pleading on substantive or procedural grounds. We are dealing with a substantivematter. The defendant says that even if Arena can prove breaches of the warrantiesand its losses, the breach of the maintenance claim must still fail because of itsaffirmative limitation defence under cl 10.4 of the agreement. When the court is askedto strike out a pleading on the basis of an affirmative defence, it is not necessary toapply the strike out test for assessing whether the plaintiff has a reasonably arguablecause of action.1 Instead, when the defendant relies on an affirmative defence, thecourt assumes that the plaintiff may be able to prove its case but considers whether,even so, it is bound to fail because of the defence.[33] The basis for striking out an affirmative defence began with limitationdecisions.2 Those decisions say that a cause of action that is clearly statute-barred canbe considered as frivolous, vexatious or an abuse of process. Those grounds applymore typically where the court considers that the proceeding should be struck out onprocedural grounds. While the lead was set with decisions on statutory limitations,the courts have applied a similar approach where there are contractual deadlines forbeginning a proceeding.3[34] In cases on limitation defences, the courts have applied a two-step process, ascan be seen in Tipping J's judgment in Murray v Morel & Co Ltd.4 The court1 As recognised in Attorney-General v Prince [1988] 2 NZLR 262 (CA) and Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725.2 Ronex Properties Ltd v John Lang Construction Ltd [1983] QB 398 (CA). Matai Industries Ltd vJensen [1989] 1 NZLR 525 (HC) and Murray v Morel & Co Ltd [2007] NZSC 27, [2007] 3 NZLR721 at [33]-[34].3 Heinz Wattie Ltd v Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft A/S & Co KG(1999) 14 PRNZ 227 (HC).4 Murray v Morel & Co Ltd [2007] 3 NZLR 721 (SC).considers, first, whether the defendant has shown that the claim is clearly statute-barred; next, whether the plaintiff has shown a realistic basis for defeating thelimitation (for example if the limitation period has been waived or extended). If thereis factual uncertainty at the first step (for example, the claim is not shown to be clearlystatute-barred) then strike-out will not be granted and the matter will be left to trial.[35] In this case, I am only asked to decide the matter at the first stage, that is,whether the defendant has clearly shown that the claim is bound to fail. The plaintiffis not alleging that there is some way of getting around the time bar if it applies. Itdoes not allege estoppel or waiver, or some other reason barring the defendant frominvoking the time limitation.[36] There is no dispute as to the terms of the contract. There is no suggestion thatthe correspondence in evidence is incomplete or that I need more information. Thedefendant has not pleaded prejudice as a ground for saying that it has suffered fromthe alleged non-notification. If there were questions of prejudice, that would raisequestions of fact that would make it harder to rule on the strike-out issue. Instead, asthere is little, if anything, in the way of factual dispute, the case is suitable to decidethe strike-out issue.Comparison of the warranty claims[37] During the hearing, Arena was at pains to show the overlap between the claimsfor breach of the watertightness warranty and the claims for breach of the maintenancewarranty. The defendant, on the other hand, was at pains to point out that a claim forbreach of the maintenance warranty is something different from a claim for breach ofthe watertightness warranty.[38] There is considerable overlap, but there are also differences. As to thesimilarities, both causes of action plead the same building defects. All the defects arein apartment buildings or community centres under the watertightness warranty, andthere is no claim for defects in other buildings or other plant. The relief claimed ineach cause of action is the same.[39] As to the differences, there are different thresholds for claims for breach of thewarranties. For the watertightness warranty, the threshold is $7.5 million; for thebreach of maintenance warranty the threshold is $140,000. There are differences asto the interpretation of the watertightness warranty: whether the threshold alsoinvolves an excess and whether the threshold applies "per building" or on anaggregated basis. No such questions arise under the maintenance warranty. For itsclaim under the watertightness warranty, Arena only needs to prove that the specifieddefects exist – that is, "significant and systemic watertightness issues." It does notneed to prove how those defects were caused. For the claim for breach of themaintenance warranty, Arena needs to show that there were failures to carry out therequired maintenance that resulted in the defects on which it sues.[40] If Arena succeeds on its first cause of action under the watertightness warranty,it will not need to prove its claim under the second cause of action. Seen in that way,the second cause of action is a back-up in case, for example, Arena cannot show thatthe $7.5 million threshold has been met.Did Arena give notice of its claim for breach of warranty 14.1?[41] On its strike-out application, the defendant accepts that it cannot complain oflack of notification of the claim breach of the watertightness warranty. That goes forall three villages. While the defendant was provided with fairly extensive informationfor the Mayfair village, it was given relatively scant information as to the PeninsulaClub and Parklane villages. By the time Arena's lawyers wrote the letter of22 December 2017, investigations in those villages were still at an early stage.[42] For notification of the claim for breach of the maintenance warranty, thedefendant's case is that there was no express reference to the maintenance warrantyand there was nothing in the letters that would put it on notice that it was facing aclaim for breach of that warranty. The general reference to other warranties havingbeen breached is not enough to inform it that Arena was claiming for breach of themaintenance warranty.[43] In support, the defendant cites English decisions on contractual provisionssetting deadlines for proceedings for breaches of contractual warranties in agreementsfor sale and purchase, unless notices of the claims have been given. The decisions areSenate Electrical Wholesalers Ltd v Alcatel Submarine Networks Ltd,5 RWE NukemLtd v AEA Technology plc6 and Teoco UK Ltd v Aircom Jersey 4 Ltd.7[44] In the Senate case, the vendor under an agreement for sale and purchase of abusiness gave a warranty as to management accounts. That was subject to a conditionthat the vendor would not be liable unless the purchaser gave notice to the vendor"setting out such particulars of the grounds on which the claim was based promptlyand in any event within 18 months of completion date". The Court of Appealagreed with the trial judge that the clear commercial purpose of the clause was that thevendor should know, at the earliest practicable date and in sufficiently formal writtenterms, that a particularised claim for breach of warranty was to be made so that thevendor might take such steps as are available to deal with it. The commercial purposewould not be sensibly served if an uninformed and uninformative notice was given atthe earliest conceivable moment. The Court of Appeal went on:891. It does not stop there. Certainty is the only crucial foundation forcommercial activity. Certainty is only achieved when the vendor is left in noreasonable doubt not only that a claim may be brought but of the particularsof the ground upon which the claim is to be based. The clause contemplatesthat the notice will be couched in terms which are sufficiently clear andunambiguous as to leave no such doubt and to leave no room for argumentabout the particulars of the complaint. Notice in writing is required in orderto constitute the record which dispels the needs for further argument andcreates the certainty. Thus there is merit in certainty and accordingly, in ourjudgment the point taken by the appellants is not a matter of mere technicalityand is not without merit.[45] In the RWE Nukem Ltd case Gloster J stated certain propositions:9(i) Every notification clause turns on its own individual wording;(ii) Due regard must be had to the fact that where such notification clausesoperate as a condition precedent to liability, it is for the party bringinga claim to demonstrate that it has complied with the notification5 Senate Electrical Wholesalers Ltd v Alcatel Submarine Networks Ltd [1998] EWCA Civ 3534,[1999] Lloyds Rep 423.6 RWE Nukem Ltd v AEA Technology Plc [2005] EWHC 78 (Comm).7 Teoco UK Ltd v Aircom Jersey 4 Ltd [2018] EWCA Civ 23, [2018] BCC 339.8 Senate at 91.9 RWE Nukem Ltd v AEA Technology plc [2005] EWHC 78 (Comm) at [10]requirement and that it gave proper particulars of its claims and didgive those specific details as were available to it.(iii) The wording must however be interpreted by reference to thecommercial intent of the parties; that is to say, the commercial purposethat the clause was to serve.(iv) Where the clause stipulates that particulars of the grounds on which aclaim is based are to be provided, the Court of Appeal's statement asto certainty in Senate Electrical applied.(v) In all cases, it is important to consider the detailed claim being madein terms of both the breach complained of and the remedy beingsought, to ensure that it was a claim which was properly notified.[46] In that case, the notification clause provided "the vendor will be under noliability in respect of any claim unless written particulars of such claim (giving detailsof the specific matter as are available to the purchaser in respect of which such claimis made), having been given to the vendor within a period of 24 months from the dateof completion". Gloster J said:10In my judgment, what has to be notified in relation to any particular claim inthe present case will largely depend on the nature of the claim, the facts knownto the vendor at the date of the notice, and whether it is realistic to put anymonetary quantification on the amount claimed. I do not think one can laydown too rigid a formula for ascertaining what precise particulars and detailshave to be notified. The answer is that it will all depend. However, consistentwith Mr Rowley's submissions, I would expect that a compliant notice wouldidentify the particular warranty that was alleged to have been breached; Iwould expect that, at least in general terms, a notice would explain why it hadbeen breached; at least some sort of particularisation of the facts upon whichsuch an allegation was based, and would give at least some sort of indicationof what loss had been suffered as a result of the breach of warranty.On the facts, she found that some claims had not been properly notified. With someother claims, she held that they had been notified even though the wording may havebeen inelegant and had not referred to all the relevant warranties.11[47] In Teoco UK Ltd v Aircom Jersey 4 Ltd,12 there were warranties as to taxliabilities and a "tax covenant" under which the vendor put aside a sum to coverundischarged tax liabilities. The contract provided that the vendor would not be liablefor any claim unless notice was given setting out reasonable details of the claim as10 At [11].11 At [30].12 Teoco UK Ltd v Aircon Jersey 4 Ltd [2018] EWCA Civ 23, [2018] BCC 339.soon as reasonably practicable after the purchaser became aware of the claim andunless legal proceedings were begun within six months of the notification. The vendorcould not be liable under both the tax warranties and the tax covenant. The purchasersnotified the vendor of the claims which it described as "either warranty claims or taxclaims". The letter was said to be defective for not specifying the particular warrantiesthat might have been breached, nor did it particularise the facts alleged to constitutethe breaches. Failure to identify the warranties was held to be fatal.[48] The Teoco decision was made on a strike-out application but the other twocases were decided after a full hearing on the merits. In the RWE Nukem Ltd casethere was a hearing on preliminary issues. The Senate case was an appeal from ajudgment after trial.[49] Arena says, on the other hand, that cl 10.4 is not to be read as strictly as thedefendant submits. It has referred to decisions where the courts have not required anotice to state particular warranties13 and submits that each case will turn on thewording of the limitation clause and the notice given. Ms Eastwick-Field forLendlease distinguished Forrest v Glasser.14 In that case the clause only requirednotification of a claim without having to give further particulars.[50] Some of the decisions refer to the House of Lords decision in MannaiInvestments Co Ltd v Eagle Star Life Assurance Co Ltd.15 That case is often referredto because of what Lord Hoffmann said about contractual interpretation. The case isimportant as guidance on how to construe contractual notices generally. Part of thespeech of Lord Steyn is of assistance. Mannai was a case about a break clause in alease. Lord Steyn held that there was no reason for such clauses to be in a specialcategory. He said:16Even if such notices under contractual rights reserved contain errors they maybe valid if they are "sufficiently clear and unambiguous to leave a reasonablerecipient in no reasonable doubt as to how and when they are intended tooperate" ...13 Forrest v Glasser [2006] EWCA Civ 1086 and GB Gas Holdings Ltd v Accenture (UK) Ltd [2010]EWCA Civ 912 at [60].14 Forrest v Glasser [2006] EWCA Civ 1086.15 Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] ACT 749 (HL).16 Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 (HL) at 768.After citing cases on settlement notices under agreements for the sale and purchase ofland,17 he went on:That test postulates that the reasonable recipient is left in no doubt that theright reserved is being exercised. It acknowledges the importance of suchnotices. The application of that test is principled and cannot cause anyinjustice to a recipient of the notice. I would gratefully adopt it.(Citations omitted)[51] Now for the purpose of the notification clause in this case. There are two. Thefirst is to set a cut-off date by which the vendor is to be notified of any claims forbreach of warranty. Establishing a cut-off date is important for the vendor because ifno notice is given, it has peace of mind and can redirect funds and resources that itmight have set aside in case any claim were made. Claims that were otherwisecontingent are eliminated. Giving a notice of claim is performative, in that it stops thecontractual limitation operating. For this purpose, it is important that the purchasertell the vendor that it is making a claim. Arena's lawyers' letters of 14 July 2017 and22 December 2017 contain appropriate language indicating that a claim is being made.The defendant does not suggest that that purpose was not met here. It is not thereforenecessary to deal further with that purpose.[52] The second purpose of cl 10.4 is to inform the vendor about the claim. That isto allow the vendor to consider what steps it should take to deal with the claim.A vendor informed of an alleged warranty breach might set funds aside to provide forthe claim, gather relevant information, including from current or former members ofstaff, collate documents, engage consultants to make enquiries and carry outinvestigations and instruct lawyers. For that purpose, it needs to have someinformation to decide how to deal with the claim. That purpose can be seen in thewords "setting out reasonable particulars of the ground on which it (the claim) isbased." That requirement can also be seen as reinforcing the first purpose – if thepurchaser is to allege a breach of warranty, it must be able to give a basis for it.[53] While the second purpose involves informing the vendor, it does not requirethe vendor to do anything. That can be compared with contractual notices that require17 Delta Vale Properties Ltd v Mills [1990] 1 WLR 445 and Carradine Properties Ltd v Aslam [1976]1 WLR 442.the person notified to do or refrain from doing something – for example, a settlementnotice under an agreement for sale and purchase of land. In cases of notices requiringsteps to be taken, clarity and certainty are required so that the person receiving thenotice can be under no doubt what is required. That was the context for the cases citedby Lord Steyn in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd:18settlement notices under sale and purchase agreements. Lord Steyn's dictum is to beread in the light of that context.[54] That heightened need for clarity is not present when the notice is only requiredto convey information. The contract wording is to "give reasonable particulars of thegrounds on which it is based". There is obvious room for give and take. In any case,there are likely to be questions of degree and reasonable minds can differ as to theextent of detail to be provided. In many cases, it may be tempting to a vendor to allegethat the purchaser had other information which it could have given but did not, andtherefore failed to give reasonable particulars. As a failure to comply with cl 10.4means that a purchaser is denied what might otherwise be a worthy claim, somecaution is required before acceding too readily to claims that the vendor has not beenadequately informed, when there has been a genuine effort to inform the vendor of thebasis of a claim.[55] The context here is buildings with watertightness defects. A well-knownfeature of leaky building litigation is that after construction it takes time forwatertightness defects to appear. At first when defects do appear, owners may haveonly limited knowledge of the extent of the damage, the causes, the appropriateremedial steps and the full extent of losses.19 Parliament has recognised the problemin the case of leaky homes. Under the Weathertight Homes Resolution Services Actthe owner of a leaky home can apply for an assessor's report, and on doing so, timestops running for limitation purposes.20 That is to allow the owners time to be properlyinformed before they begin proceedings in the tribunal or court.18 Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 (HL).19 Bianco Off Queen, Body Corporate 406198 v Argon Construction Ltd NZHC [2019] NZHC 887,Retro Apartments, BC 202692 v Auckland Council [2019] NZHC 1976.20 Weathertight Homes Resolution Services Act 2006, s 37.[56] While the Weathertight Resolutions Services Act does not apply in this case, itis nevertheless recognition of the uncertainty facing owners of leaky buildings. Oftenin leaky building cases that the full extent of the defects and damage does not becomeapparent until the repairs are undertaken.21 The owner of a leaky building required togive prompt notice of defects, with limited knowledge, will be concerned to allow forfresh information to come to hand and to leave itself free to sue for all defects anddamage that may come to light. It would want to avoid hemming itself in whennotifying a claim. That has to be balanced against a defendant's entitlement to beproperly informed.[57] In a decision on particulars for pleadings, Price Waterhouse v Fortex GroupLtd,22 the Court of Appeal noted that there is an eternal tension between plaintiffs whowish to keep content as wide and general as possible, allowing maximum room tocover oversight and further developments, and defendants who wish to narrow issuesand impose restrictions to the maximum possible degree. A similar tension arises withnotification clauses. In notification clauses, the issue is more acute. In courtproceedings an inadequately particularised pleading can be repaired. On the otherhand, in a notification clause, the purchaser must ensure that adequate particulars aregiven before the deadline. Failing that, it will have no chance to repair its notice.[58] The defendant says that when all the correspondence is taken together, it wasnot informed that it faced a claim for breach of the maintenance warranty. It says thatthe reference to breach of other warranties was inadequate to inform it, because thereference to other warranties was so general and vague that a reasonable reader wouldnot appreciate that this was a reference to the maintenance warranty 14.1.Ms Eastwick-Field took me through some of the warranties in the schedule to theagreement and pointed out how others could potentially apply. With hindsight, itmight be said that in the light of the statement of claim, they would not apply. Forpresent purposes I am to deal with the matter on the basis of the knowledge of areasonable reader not knowing what the statement of claim would say.21 Bianco Off Queen, BC 406198 v Argon Construction Ltd NZHC [2019] NZHC 887, ImperialGardens, BC 348047 v Auckland Council [2019] NZHC 1738 and Retro Apartments, BC 202692v Auckland Council [2019] NZHC 1976.22 Price Waterhouse v Fortex Group Ltd, CA179/98, 30 November 1998.[59] The reasonable reader in the position of the defendant can be credited withknowledge of matters going to the background and with the ability to draw inferencesfrom information that has been provided. Mannai Investment Co Ltd v Eagle Star LifeAssurance Co Ltd is authority for this.23 In that case a notice was sent stating that thelease would terminate on 12 January. The majority in the House of Lords held that"12 January" should be read as "13 January". They credited the reader with the abilityto see that the date was a mistake and to draw inferences.[60] There is, admittedly, a looseness in the references to breaches of otherwarranties. But in my judgment that is not fatal to the notices. The important featureis that this was a claim for watertightness defects. That has been constant throughout.The buildings with the watertightness defects were identified, as were the villages.A claim for watertightness defects was made with a reference to liability arising undercl 14.2, and also under other warranties. In stating under 'other warranties' Arena wastrying to leave its way open to make claims under other warranties, even though itmight not have been aware of the basis when it sent its letters. It was reserving theability to claim under other warranties even without having expressly identified them.[61] Here I am departing somewhat from what I see as an unduly strict approach inthe English cases, especially the dicta as to certainty in the Senate case. A reasonablevendor under the agreement for sale and purchase, appreciating that a claim has beenmade against it for watertightness defects, is going to react the same way whether it istold that the claim is under warranty 14.2 or that claims may be made under otherwarranties as well. The fact that the particular other warranties have not been notifieddoes not mean that it has not been fairly informed of the basis of the claim. A claimfor breach of the maintenance warranty is covered, so long as it is confined to the samewatertightness defects as for the watertightness warranty. It was open to a person inthe position of the purchaser, giving the notices it did in the second half of 2017, toadvise that there has been breaches of the watertightness warranty and to also claimfor the same damage, in the same buildings, under another warranty although it maynot be aware at that stage of precisely which warranty it will invoke.23 Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 1 WLR 749 (HL).[62] In my view, given the uncertainties in leaky building claims, it would be undulyoppressive to require the purchaser to give greater specificity at that stage.Accordingly, I decline to strike out the second cause of action and the other parts ofthe statement of claim that deal with breach of the maintenance warranty.Other matters[63] There are additional matters. On the eve of the hearing, the plaintiff tenderedan additional affidavit with further correspondence between the parties, most of it afterthe contractual limitation date. The defendant did not object strongly to my readingthose materials. The submissions did refer to that correspondence. I have not focusedon it in this decision, primarily because I did not regard correspondence after thelimitation date as relevant to the notification question. The plaintiff wanted toestablish that the lawyers acting for the defendant (not the present lawyers) appreciatedthat the maintenance warranty was in issue, even before this proceeding started.I accept Ms Eastwick-Field's submission that that is really by the by. One reader'ssubjective understanding of the notices is not decisive.[64] The other matter relates to discovery. In a case management conferenceminute, I directed that the parties should set today as a target for making discovery.I am advised that the defendant has an enormous number of documents to workthrough. It expects to complete discovery by mid-May. I direct it to completediscovery by the end of May. I direct the Registrar to arrange a case managementconference during July 2020 for further case management directions.[65] If counsel are unable to agree on costs, memoranda may be filed..Associate Judge R M Bell