ARENA LIVING HOLDINGS LIMITED v LENDLEASE CAPITAL SERVICES PTY LIMITED [2020] NZHC 1308

ARENA LIVING HOLDINGS LIMITED v LENDLEASE CAPITAL SERVICES PTY LIMITED [2020] NZHC1308 [11 June 2020]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2019-404-1462[2020] NZHC 1308BETWEEN ARENA LIVING HOLDINGS LIMITEDPlaintiffAND LENDLEASE CAPITAL SERVICES PTYLIMITEDDefendantHearing: On the papersAppearances: S J P Ladd and B J Ward for the PlaintiffJ F Anderson QC and M Eastwick-Field for the DefendantJudgment: 11 June 2020JUDGMENT OF ASSOCIATE JUDGE R M BELLThis judgment was delivered by me on 11 June 2020 at 4:00pmpursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarSolicitors:Bell Gully (S Ladd and B Ward), Auckland, for the PlaintiffRussell McVeagh (M Eastwick-Field), Auckland, for the DefendantCopy for:Jane F Anderson QC, Auckland, for the Defendant[1] Lendlease Capital Services Pty Ltd seeks leave under s 56(3) of the SeniorCourts Act 2016 to appeal against my interlocutory decision of 9 March 2020dismissing its application to strike out those parts of the plaintiff's statement of claimalleging breach of a maintenance warranty.1[2] Arena Living Holdings Ltd as purchaser is suing Lendlease Capital ServicesPty Ltd for breach of two warranties in an agreement of 31 January 2016, under whichit bought the shares of a company which ran five retirement villages. The agreementhas warranties as to absence of significant and systemic watertightness issues and asto maintenance. Under cl 10.4 of the agreement, there are time limits for notifying aclaim for breach of warranty. Within 18 months of the completion date, the purchaserhad to give the vendor written notice of a claim, setting out reasonable particulars ofthe grounds on which it was based. Lendlease accepts that it was given proper noticeof the claim for breach of the watertightness warranty, but it says that Arena'scorrespondence within the 18 month period did not amount to valid notice of a claimfor breach of the maintenance warranty. It applied unsuccessfully to strike out themaintenance claim.[3] Under Greendrake v District Court of New Zealand, these considerations arerelevant in an application for leave under s 56(3):2(a) a high threshold exists;(b) the applicant must identify an arguable error of law or fact;(c) the alleged error should be of general or public importance warrantingthe determination or otherwise of sufficient importance to theapplicant to outweigh the lack of general or precedential value;(d) the circumstances must warrant incurring further delay;(e) the ultimate question is whether the interests of justice are served bygranting leave.1 Arena Living Holdings Ltd v Lendlease Capital Services Pty Ltd [2020] NZHC 587.2 Greendrake v District Court of New Zealand [2020] NZCA 122 at [6].[4] Lendlease has proper grounds for appeal. My decision is arguably wrong.Lendlease says that I erred in:(a) distinguishing between contractual notices requiring a person to do ornot do something and notices that convey information, and requiringgreater clarity for the former than for the latter;(b) finding that looseness in references to breaches of other warranties inArena's notices was not fatal;(c) finding that cl 10.4 allowed Arena to leave its way open to make claimsunder other warranties without expressly identifying them in its notices;(d) not following English decisions on the interpretation of provisions suchas cl 10.4;(e) finding that a vendor notified of watertightness defects was fairlynotified of a claim under the maintenance warranty;(f) finding that reasonable particulars of the grounds had been notified,even if the particular warranty was not referred to; and(g) finding that, in the context of a leaky building claim, it would be undulyoppressive to require the purchaser to give greater specificity byidentifying particular warranties under which it intended to claim.All these grounds are capable of serious argument and cannot be dismissed asfrivolous.[5] Some grounds are suitable for consideration by an appellate court. At thehearing, both sides cited English authorities on contracts with deadlines for notifyingclaims. There are apparently no New Zealand authorities on point. I said thatI regarded some of the English decisions as unduly strict.3 It is appropriate for the3 Arena Living Holdings Ltd v Lendlease Capital Services Pty Ltd [2020] NZHC 587 at [61].Court of Appeal to consider whether New Zealand should take a different approachfrom England. Moreover a decision from the Court of Appeal will give usefulguidance to lawyers on how a notice of claim should be given under these provisions.These issues have wider application and are of general importance.[6] I held that the court had all the information required to decide the strike-outapplication.4 I add a qualification. I disregarded late evidence by Arena to show thata lawyer acting for Lendlease understood from the notifications that the maintenancewarranty was in issue. As the meaning of the notifications is objective, I did notconsider that one person's subjective understanding should influence theinterpretation. If Arena wishes to rely on that evidence, it may do so at trial or onappeal.[7] An appeal is not likely to delay the substantive hearing. The case will continuein this court on the basis that the breach of maintenance warranty allegations will standuntil overruled. I assume that Lendlease will prosecute its appeal diligently. The Courtof Appeal is likely to hear the appeal over one day before the end of 2020 and is likelyto give its decision no later than the first quarter of 2021. This case will not go to trialuntil 2022. It will take more than four weeks. I take as a comparator the BotanyDowns Secondary School case, Ministry of Education v Hawkins Construction NorthIsland Ltd.5 That was a claim for one leaky school where more than one building wasinvolved and only one defendant was sued. The case was hard-fought. It took justover four weeks. As this case involves three retirement villages, it is likely to takelonger. There is no time available for hearing a leaky building claim of that length inAuckland in 2021, but a fixture could be given to start on any of the following dates:8 February 2022, 2 May 2022 and 11 July 2022. There will be no time available inthe fourth quarter of 2022. With a hearing in 2022, the parties will have adequate timein which to prepare their cases, whichever way the Court of Appeal decides.4 At [36].5 Minister of Education v H Construction North Island Ltd [2018] NZHC 871.[8] My decision on the strike-out application is not final.6 The dismissal of thestrike-out application does not mean that at trial Lendlease will not be able to re-runits arguments and present new submissions why Arena's breach of maintenancewarranty was not properly notified.[9] The claim for breach of the maintenance warranty is secondary. Arena'sprimary claim is for breach of the watertightness warranty. Lendlease accepts thatArena properly notified that claim. The case will go to trial on that claim. I describedthe maintenance warranty claim as a back-up.7 Arena may only need to rely on it, ifits relief in the watertightness cause of action is not as extensive as it would wish, forexample, if the $7.5m threshold were held to apply per building and Arena'srectification cause of action failed. A decision on the notification of the maintenanceclaim is not critical to the whole case. Both sides will have to undertake extensivepreparation on the watertightness warranty, including instructing experts such asbuilding surveyors and quantity surveyors, carrying out investigations and preparingevidence.[10] Whether there is an appeal or not, both sides will make discovery on themaintenance issue. My decision will stand until overruled at trial or on appeal. Thatis unlikely to add significantly to discovery, because documents showing maintenanceof the buildings are likely to be relevant to the existence of watertightness defects inthe first cause of action.[11] If the case goes to trial without any appeal, both sides will prepare evidence onthe maintenance warranty. As Arena points out, that is unlikely to require additionalexpert witnesses. It will, however, require witnesses on the watertightness claim alsoto address maintenance, for example, as to the appropriate maintenance standards andwhether they were followed. Building surveyors in building defects litigation aregenerally able to give evidence on maintenance issues. Defendants sometimes allegelack of maintenance by plaintiffs as a contributory negligence defence.6 For an example where my interpretation of a contract on a defendant's unsuccessful summaryjudgment application was not followed at trial and on appeal, see Commercial Factors Ltd vMeltzer [2017] NZHC 30, Commercial Factors Ltd v Meltzer [2017] NZHC 3267, CommercialFactors Ltd v Meltzer [2018] NZCA 505, [2019] 2 NZLR 484 and Commercial Factors Ltd vMeltzer [2019] NZSC 17.7 At [40].[12] An assessment is required of the resources spent on an appeal compared withleaving the issue to be argued at the substantive hearing. Under either course, mydecision may be overruled. Fewer resources will be required if the issue is left fortrial:(a) Only one judge will decide the issue at trial, as opposed to three judgeson appeal;(b) For the parties, there will be extra time, effort and expense in runningthe appeal instead of arguing the issue at trial. The appeal is a separateproceeding which will require its own extra commitment of resources.If the matter is left until trial, the parties will have to prepare for it, butthat effort is not likely to match that for an appeal.[13] At trial, a decision on the maintenance warranty may be moot, if Arenasucceeds on its watertightness claim. It is not a good use of resources to spend timeand effort on an issue, if it turns out to be moot.[14] If the notification issue is crucial and the trial judge rules against Lendlease, itwill have the normal rights of appeal on that issue and on other parts of the judgment.It is more efficient to leave the appeal right on hold to see whether the issue is stillalive after judgment at trial.[15] While the matters Lendlease wishes to take on appeal are worthy ofconsideration by the Court of Appeal, on balance the better course is to leave the matterfor decision at trial because:(a) my decision can be reviewed at trial;(b) the issue is not critical to the entire case;(c) there are greater efficiencies in allowing the case to go to trial on allissues without first troubling the Court of Appeal; and(d) Lendlease will keep its appeal rights if it is unsuccessful at trial.[16] Accordingly, the application for leave to appeal is dismissed.Associate Judge R M Bell