Kazzi v KR Properties Global Pty Ltd t/as AK Properties Group [2024] NSWCA 143 (Kazzi v KR Properties)
A recent Court of Appeal case confirms that in relation to a claim under section 37 of the Design and Building Practitioners Act 2020 (NSW) (DBP Act) the Court may assess damages in a robust manner, relying on presumptions against the wrongdoer and resolving doubtful quantum questions against the party in breach.
Background
Mr Pierre Kazzi (Mr Kazzi) was the sole director, shareholder and nominated supervisor of Oxford (NSW) Pty Ltd (Oxford), a building company. Oxford entered in a contract with KR Properties Global Pty Ltd t/as AK Properties Group (Owners) to construct a six-unit apartment building.
The Owners terminated the contract following Oxford’s failure to complete the building by the date of practical completion. It later transpired that the building was also beset with significant defects.
Oxford later commenced proceedings in the Supreme Court[1] to recover payment for unpaid invoices and the Owners cross claimed against Oxford for breach of contract, and against Mr Kazzi for breach of his statutory duty under s 37 of the DPBA which required he ‘act reasonably to avoid economic loss caused by defects’ . The Supreme Court dismissed the Owner’s breach of statutory duty claim, but on appeal the Court of Appeal overturned that decision.
Issue
One of the issues before the Court of Appeal was whether the Owners’ failed to separate the expenses incurred in rectifying the defects, and in completing the building to a significant degree of precision, noting that under the DBP Act, Mr Kazzi’s liability extended to “economic loss caused by defects”, i.e. the rectification costs, but not costs to complete the building.
Decision
At first instance the Supreme Court allowed the Owners’ claim against Oxford but rejected the Owners’ claim against Mr Kazzi for breach of statutory duty under the DPB Act. As the building was both incomplete and defective, the Owners were unable to distinguish and appropriately allocate the expenses incurred as either rectification costs or costs to complete the building. This was the sole reason that the Supreme Court rejected their claim against Mr Kazzi.
The Court of Appeal found that Mr Kazzi was in breach of section 37. In terms of quantum the Court accepted that where a party has made the precise assessment of damages difficult (in this case Oxford and Mr Kazzi who caused the incomplete works and defects), damages can be assessed in a robust manner, relying on presumption against wrongdoers and resolving doubtful questions against that party, i.e, assessed to a less stringent standard of proof.
On this basis, the Court of Appeal accepted that the allocations, and assumptions made in the Owners’ evidence, and found that the Owners’ quantum assessment of damages were sufficient enough to uphold their claim against Mr Kazzi for breach of the statutory duty under section 37 duty of the DBP Act.
Key Takeaway
It is common in building defects disputes that the rectification costs, and costs to complete the unfinished building are difficult to distinguish. The separation of such costs are particularly important where a claim under section 37 of the DBP Act is involved.
This case clarifies that the Court may accept a general allocation of damages when a precise assessment between defects and incomplete works is difficult.
If you would like to discuss this article with us, please contact Brett Vincent, Partner, or Rhianna Brooker, Paralegal, on (02) 9261 5900.
[1] Directors – Are You Liable Under Section 37 of the DBPA? – Vincent Young