Arena Living Holdings Limited v LendLease Capital Services Pty Limited

[2020] NZHC 1308

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-1462

[2020] NZHC 1308

BETWEEN

ARENA LIVING HOLDINGS LIMITED

Plaintiff

AND

LENDLEASE CAPITAL SERVICES PTY LIMITED

Defendant

Hearing:

On the papers

Appearances:

S J P Ladd and B J Ward for the Plaintiff

J F Anderson QC and M Eastwick-Field for the Defendant

Judgment:

11 June 2020

JUDGMENT OF ASSOCIATE JUDGE R M BELL

This judgment was delivered by me on 11 June 2020 at 4:00pm

pursuant to Rule 11.5 of the High Court Rules

…………………………. Registrar/Deputy Registrar

Solicitors:

Bell Gully (S Ladd and B Ward), Auckland, for the Plaintiff

Russell McVeagh (M Eastwick-Field), Auckland, for the Defendant

Copy for:

Jane F Anderson QC, Auckland, for the Defendant

ARENA LIVING HOLDINGS LIMITED v LENDLEASE CAPITAL SERVICES PTY LIMITED [2020] NZHC 1308 [11 June 2020]

[1]                 Lendlease Capital Services Pty Ltd seeks leave under s 56(3) of the Senior Courts Act 2016 to appeal against my interlocutory decision of 9 March 2020 dismissing its application to strike out those parts of the plaintiff’s statement of claim alleging breach of a maintenance warranty.1

[2]                 Arena Living Holdings Ltd as purchaser is suing Lendlease Capital Services Pty Ltd for breach of two warranties in an agreement of 31 January 2016, under which it bought the shares of a company which ran five retirement villages. The agreement has warranties as to absence of significant and systemic watertightness issues and as to maintenance. Under cl 10.4 of the agreement, there are time limits for notifying a claim for breach of warranty. Within 18 months of the completion date, the purchaser had to give the vendor written notice of a claim, setting out reasonable particulars of the grounds on which it was based. Lendlease accepts that it was given proper notice of the claim for breach of the watertightness warranty, but it says that Arena’s correspondence within the 18 month period did not amount to valid notice of a claim for breach of the maintenance warranty. It applied unsuccessfully to strike out the maintenance claim.

[3]                 Under Greendrake v District Court of New Zealand, these considerations are relevant 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 warranting the determination or otherwise of sufficient importance to the applicant 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 by granting 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 or not do something and notices that convey information, and requiring greater clarity for the former than for the latter;

(b)finding that looseness in references to breaches of other warranties in Arena’s notices was not fatal;

(c)finding that cl 10.4 allowed Arena to leave its way open to make claims under other warranties without expressly identifying them in its notices;

(d)not following English decisions on the interpretation of provisions such as cl 10.4;

(e)finding that a vendor notified of watertightness defects was fairly notified 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 unduly oppressive to require the purchaser to give greater specificity by identifying particular warranties under which it intended to claim.

All these grounds are capable of serious argument and cannot be dismissed as frivolous.

[5]                 Some grounds are suitable for consideration by an appellate court. At the hearing, both sides cited English authorities on contracts with deadlines for notifying claims.  There  are  apparently no  New  Zealand  authorities  on  point.   I  said  that I regarded some of the English decisions as unduly strict.3 It is appropriate for the

3      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 approach from England. Moreover a decision from the Court of Appeal will give useful guidance 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-out application.4 I add a qualification. I disregarded late evidence by Arena to show that a lawyer acting for Lendlease understood from the notifications that the maintenance warranty was in issue. As the meaning of the notifications is objective, I did not consider that one person’s subjective understanding should influence the interpretation. If Arena wishes to rely on that evidence, it may do so at trial or on appeal.

[7]                 An appeal is not likely to delay the substantive hearing. The case will continue in this court on the basis that the breach of maintenance warranty allegations will stand until overruled. I assume that Lendlease will prosecute its appeal diligently. The Court of Appeal is likely to hear the appeal over one day before the end of 2020 and is likely to give its decision no later than the first quarter of 2021. This case will not go to trial until 2022. It will take more than four weeks. I take as a comparator the Botany Downs Secondary School case, Ministry of Education v Hawkins Construction North Island Ltd.5 That was a claim for one leaky school where more than one building was involved and only one defendant was sued. The case was hard-fought. It took just over four weeks. As this case involves three retirement villages, it is likely to take longer. There is no time available for hearing a leaky building claim of that length in Auckland 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 in the fourth quarter of 2022. With a hearing in 2022, the parties will have adequate time in 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 the strike-out application does not mean that at trial Lendlease will not be able to re-run its arguments and present new submissions why Arena’s breach of maintenance warranty was not properly notified.

[9]                 The claim for breach of the maintenance warranty is secondary. Arena’s primary claim is for breach of the watertightness warranty. Lendlease accepts that Arena properly notified that claim. The case will go to trial on that claim. I described the maintenance warranty claim as a back-up.7 Arena may only need to rely on it, if its relief in the watertightness cause of action is not as extensive as it would wish, for example, if the $7.5m threshold were held to apply per building and Arena’s rectification cause of action failed. A decision on the notification of the maintenance claim is not critical to the whole case. Both sides will have to undertake extensive preparation on the watertightness warranty, including instructing experts such as building surveyors and quantity surveyors, carrying out investigations and preparing evidence.

[10]              Whether there is an appeal or not, both sides will make discovery on the maintenance issue. My decision will stand until overruled at trial or on appeal. That is unlikely to add significantly to discovery, because documents showing maintenance of the buildings are likely to be relevant to the existence of watertightness defects in the first cause of action.

[11]              If the case goes to trial without any appeal, both sides will prepare evidence on the maintenance warranty. As Arena points out, that is unlikely to require additional expert witnesses. It will, however, require witnesses on the watertightness claim also to address maintenance, for example, as to the appropriate maintenance standards and whether they were followed. Building surveyors in building defects litigation are generally able to give evidence on maintenance issues. Defendants sometimes allege lack of maintenance by plaintiffs as a contributory negligence defence.

6      For an example where my interpretation of a contract on a defendant’s unsuccessful summary judgment application was not followed at trial and on appeal, see Commercial Factors Ltd v Meltzer [2017] NZHC 30, Commercial Factors Ltd v Meltzer [2017] NZHC 3267, Commercial Factors Ltd v Meltzer [2018] NZCA 505, [2019] 2 NZLR 484 and Commercial Factors Ltd v Meltzer [2019] NZSC 17.

7 At [40].

[12]              An assessment is required of the resources spent on an appeal compared with leaving the issue to be argued at the substantive hearing. Under either course, my decision may be overruled. Fewer resources will be required if the issue is left for trial:

(a)Only one judge will decide the issue at trial, as opposed to three judges on appeal;

(b)For the parties, there will be extra time, effort and expense in running the appeal instead of arguing the issue at trial. The appeal is a separate proceeding which will require its own extra commitment of resources. If the matter is left until trial, the parties will have to prepare for it, but that effort is not likely to match that for an appeal.

[13]              At trial, a decision on the maintenance warranty may be moot, if Arena succeeds on its watertightness claim. It is not a good use of resources to spend time and 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, it will 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 still alive after judgment at trial.

[15]              While the matters Lendlease wishes to take on appeal are worthy of consideration by the Court of Appeal, on balance the better course is to leave the matter for 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 all issues 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