NED v NASTASIA [2024] DIFC CFI 008 — Partial allowance of appeal regarding delay-related damages (09 July 2024)

What was the specific factual dispute between Ned and Nastasia regarding the AED 184,627.75 delay-related counterclaim?

The dispute arose from a construction contract for the renovation of a villa owned by Nastasia, where Ned served as the contractor. Following a disagreement over the completion of "snagging" works and the rectification of defects, the Small Claims Tribunal (SCT) originally ordered Ned to pay Nastasia AED 184,627.75 for damages under the subtitle "Delay." This sum was intended to compensate Nastasia for alternative accommodation expenses and distress caused by the contractor's failure to complete the project on time.

The core of the controversy centered on whether the costs incurred by Nastasia for rental accommodation, storage, and moving were legally attributable to Ned’s breach of the contractually adjusted completion date. Ned challenged the SCT’s findings, arguing that the evidence did not support the timeline or the necessity of these expenses. As noted in the court record:

The Defendant says that the Claimant's breach of contract caused her to incur costs for accommodation and associated expenses between 11 August 2022 and 3 December 2022 when she was unable to take up residence in the villa.

The dispute highlights the evidentiary burden required to link specific financial losses to a breach of contract in residential construction, particularly when the timeline for completion is subject to variations.

Which judge presided over the appeal of the SCT decision in CFI 008/2024?

The appeal was heard by Justice Rene Le Miere in the DIFC Court of First Instance. Following the initial order issued by H.E. Deputy Chief Justice Ali Al Madhani in the Small Claims Tribunal on 25 December 2023, Justice Le Miere granted partial permission to appeal on 2 February 2024 and subsequently presided over the appeal hearing held on 6 May 2024.

What legal arguments did Ned and Nastasia advance regarding the delay damages?

Ned, represented by its managing director Mr. Nasir, argued that the SCT judge erred in both fact and law by awarding damages for stress and inconvenience. Ned contended that the evidence presented did not establish circumstances justifying non-pecuniary damages for breach of the renovation agreement. Furthermore, Ned challenged the factual basis for the accommodation costs, asserting that the expenses were not incurred as a direct result of any delay attributable to the contractor.

Nastasia, appearing in person, maintained that the contractor’s failure to complete the works with reasonable care and skill, and the subsequent delay, directly necessitated her incurring alternative accommodation costs. She argued that the distress and anxiety caused by the prolonged renovation of her primary residence warranted the compensation awarded by the SCT. The court summarized the Claimant's position on the non-pecuniary aspect as follows:

The Claimant appeals against that award of damages on the ground that the learned judge erred in fact and law in finding that the Defendant must be entitled to the damages for stress and inconvenience.

What was the precise legal question the Court had to answer regarding the SCT’s award?

The Court was tasked with determining whether the SCT judge was "plainly wrong" in awarding damages for delay, specifically focusing on two components: the pecuniary claim for accommodation costs and the non-pecuniary claim for stress and inconvenience. The doctrinal issue was whether the evidence supported the finding that the accommodation costs were incurred because of the breach of the adjusted completion date, and whether, as a matter of law, damages for distress are recoverable in a residential construction contract under DIFC law.

How did Justice Le Miere apply the "plainly wrong" test to the SCT’s findings?

Justice Le Miere applied the established appellate standard that an appellant must demonstrate that the lower court’s findings of fact were "plainly wrong." Regarding the accommodation costs, the Court found that the expenses were incurred before the contractually adjusted completion date, meaning they could not be attributed to the breach. Consequently, the Court set aside the AED 134,627.75 portion of the award.

However, regarding the claim for stress and inconvenience, the Court upheld the SCT's discretion. Citing the nature of the contract—the renovation of a personal residence—the Court determined that such damages were appropriate. The reasoning is captured in the following blockquote:

I am not satisfied that the Claimant has established that the Judge was wrong to award damages of AED 50,000 to the Defendant for stress and inconvenience suffered as a result of the Claimant’s breaches of contract.

The Court concluded that the Claimant failed to show that the SCT judge lacked the justification to award these non-pecuniary damages or that the quantum was unreasonable.

Which statutes and RDC rules were central to the Court’s determination in this appeal?

The Court relied heavily on the Rules of the DIFC Courts (RDC), specifically those governing the appeal process and the conduct of proceedings. RDC 44.75 and 44.78 were relevant to the procedural framework of the appeal. Furthermore, the Court referenced RDC 53.7 and 53.1 concerning the Small Claims Tribunal's jurisdiction and the finality of its orders, reinforcing that while SCT decisions are subject to appeal, the appellate court maintains a deferential stance toward findings of fact unless they are clearly erroneous.

How did the Court utilize English and DIFC precedents in its reasoning?

The Court utilized Al Khorafi v Bank Sarasin-Alpen (ME) Ltd [2015] CA 003 and DAS Real Estate v First Abu Dhabi Bank PJSC [2017] CA 007 to reinforce the "plainly wrong" test for appeals against findings of fact. These cases establish that an appellate court will not interfere with a lower judge's assessment unless it is demonstrated that the judge reached a conclusion that no reasonable judge could have reached.

Regarding the recoverability of damages for stress, the Court looked to Watts v Morrow [1991] 1 WLR 1421 and Baltic Shipping Company v Dillon (1993) 176 CLR 344. These authorities were used to distinguish between commercial contracts, where such damages are rarely awarded, and residential renovation contracts, where the physical consequences of a breach—such as the inability to reside in one's home—make distress and inconvenience a foreseeable and compensable head of damage.

What was the final disposition and the specific relief granted by the Court?

The appeal was allowed in part. The Court varied the original SCT order by setting aside the award of AED 134,627.75 for accommodation and associated costs, as these were not proven to be caused by the breach. The Court maintained the award of AED 50,000 for stress and inconvenience. Consequently, the total judgment debt for the counterclaim was reduced to AED 50,000. No order as to costs was made for the appeal proceedings. As noted in the court's order:

The appeal against the order that the Claimant shall pay the Defendant the sum of AED 184.627.75 for her counterclaim under the subtitle Delay is made out to the extent that the award of damages of AED 134,627.75 for accommodation and associated costs must be set aside.

What are the wider implications for practitioners regarding residential construction disputes in the DIFC?

This case serves as a critical reminder for practitioners that non-pecuniary damages for stress and inconvenience are recoverable in the DIFC for residential renovation contracts, provided the breach causes significant physical disruption to the claimant's living situation. However, the case also underscores the strict requirement for causation in pecuniary claims. Practitioners must ensure that any claim for delay-related costs, such as alternative accommodation, is strictly tied to the contractually defined completion dates. Failure to provide clear evidence that costs were incurred after the breach of the completion date will result in the dismissal of such claims on appeal.

Where can I read the full judgment in Ned v Nastasia [2024] DIFC CFI 008?

The full judgment can be accessed via the official DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-0082024-ned-v-nastasia or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/court-first-instance/DIFC_CFI-008-2024_20240709.txt

Cases referred to in this judgment:

Legislation referenced:

• Rules of the DIFC Courts (RDC): 44.75, 44.78, 53.1, 53.7