Derek Larsen as Trustee for the Larsen Superannuation Fund & Anor v Tastec Pty Ltd ACN 051516682

JUDGMENT

1. On 15 November 2018, the plaintiffs, Derek and Floyd Larsen, as trustees of the Larsen Superannuation Fund ("the Fund") entered into a contract with the corporate predecessor of Tastec Pty Ltd ("Tastec") for the supply and assembly of a house comprised of prefabricated components ("the house"). The house was to be constructed on a property owned by the Fund in Glen Alice, New South Wales ("NSW") ("the Property").
2. Tastec supplied the house and assembled it on the Property.
3. The Larsens brought proceedings in the District Court of NSW in relation to the supply and assembly of the house against Tastec (the first defendant) and Stephen Sainsbury (the second defendant), who was, at all relevant times, a registered architect and a director of Tastec. The decision of the judge at first instance, dated 17 December 2021 ("the first instance decision"), was appealed to the Court of Appeal and the Court of Appeal remitted part of the Larsens' claim to the District Court. In the Court of Appeal judgment, Mitchelmore JA, with whom Ward P and Kirk JA agreed, set out the history of the proceedings to that stage (Larsen v Tastec Pty Ltd [2023] NSWCA 39 ("the Appeal decision") at [3] to [7]: 3 In their capacity as trustees of the Fund, the Larsens brought proceedings in the District Court alleging that the first respondent's supply and assembly of the house was defective as to the roof and wall components, and in relation to windows and doors. The Larsens also alleged that both respondents made misleading or deceptive representations about cladding material which caused the defective roof and wall cladding to be used, in contravention of ss 18 and 29 of the Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law ("ACL"). They sought damages against the first respondent for breach of contract, being the cost of rectifying the alleged defects, and damages and/or compensation under ss 236 and 237 of the ACL. The Larsens separately sought orders against Mr Sainsbury, on the basis that he engaged in the same contravening conduct as the first respondent, or was otherwise involved in the first respondent's contraventions. 4 The primary judge, S J Gibb DCJ, dismissed the Larsens' claims. Her Honour found that there was no contractual relationship between the Larsens and the respondents in respect of which they could bring a claim. Alternatively, her Honour held that their claim failed on various other bases, including that the Larsens had failed to establish either damage and/or causation in respect of their various contractual claims related to defects in cladding, windows and doors, and had also failed to establish that the respondents had made false or misleading representations on which they had relied to their detriment. 5 By their Amended Notice of Appeal, the Larsens have advanced six grounds of appeal. The focus of the appeal was the cladding of the house, with the Larsens contending that her Honour erred in dismissing their allegations that the respondents had made false or misleading representations about the cladding which they had relied on to their detriment (Ground 1A). Ground 3 also related to cladding, although Senior Counsel for the Larsens accepted that there was overlap between Ground 1A and Ground 3, such that Ground 3 may not need to be determined in the event that the Court upheld Ground 1A. 6 The Larsens also contended that her Honour had wrongly concluded that they had contracted with Tastec in their personal capacity and not as trustees of the Fund (Ground 1), which error affected her Honour's conclusion regarding the validity of the contract (Ground 2(a)). Further, the Larsens contended that her Honour erred in dismissing their allegations that the windows and external doors were not fit for purpose (Ground 4), and in dismissing their claim of breach of contract in relation to four of the internal doors (Ground 6). 7 The Larsens have also appealed the primary judge's failure to find that Tastec owed them a duty of care pursuant to the Design and Building Practitioners Act 2020 (NSW) (Ground 2(b)). In the course of the hearing, however, Senior Counsel for the Larsens accepted that even if correct as to the submitted failure, it would be difficult for the Larsens to obtain a different outcome on the issue of breach of the statutory duty, as success would rely on the expert evidence of Mr O'Mara, which was rejected. Senior Counsel accepted that the findings on the claimed defects were against the Larsens. These findings were not the subject of appeal.
4. Mitchelmore JA summarised the decision of the Court of Appeal at [8] to [10]: 8 For the reasons I set out below, I consider that Ground 1A should be upheld. The first respondent engaged in conduct that was misleading or deceptive or was likely to mislead or deceive, which the Larsens relied on in deciding to proceed with the cladding solution ultimately installed. In circumstances where the primary judge did not consider the correct comparative task in assessing the issue of damages, the appropriate course is to remit the matter to consider that issue. In light of my conclusion on Ground 1A, it is unnecessary to consider Ground 3. 9 As to Ground 1, I consider that the primary judge erred in her conclusion regarding the parties to the Contract. However, the Larsens' success on Ground 1 only has effect potentially as to costs, and also in so far as they maintained claims for breach of the Contract on the appeal, which was limited to the leaking claims (Ground 4). Were it necessary to determine the issue, I would uphold Ground 1. I consider that Ground 4 should be dismissed. I also consider that Ground 6 should be dismissed. 10 As to Ground 2 of the appeal, which raised the Design and Building Practitioners Act, it is an arid exercise to consider whether the primary judge failed to consider the claim made under the Act in circumstances where, in any event, the loss and damage claimed rested on evidence which her Honour rejected and that rejection is not challenged on appeal. The ground should be dismissed on that basis.
5. The orders made by the Court of Appeal are as follows: (1) Appeal allowed. (2) Set aside Order 1 of the orders of the District Court on 17 December 2021, and Order 4 of the orders of the District Court on 4 March 2022. (3) In lieu thereof, order that: (a) The Plaintiff's claim for damages for breach of contract against the First Defendant is dismissed. (b) The Plaintiff's claim against the First and Second Defendants for relief under the Australian Consumer Law (ACL) be remitted to the District Court, to a judge other than the primary judge, for the determination of: (i) what relief (if any) should be granted pursuant to s 236 and/or s 237 of the ACL, and (ii) the costs of the proceedings. (4) The respondents are to pay the appellants' costs of the appeal.
6. This is the decision on the remitter referred to in paragraph [8] of the Court of Appeal judgment, set out above at [4] and in order 3(b) of the orders of the Court of Appeal.
7. That part of the plaintiffs' claim which has been remitted to the District Court comprises the assessment of whether the plaintiffs should be awarded damages under s 236 or compensation under s 237 of The Australian Consumer Law ("the ACL") which is Schedule 2 of the Competition and Consumer Act (2010) (Cth) ("the Act"), and, if so, the quantum of such damages or compensation.
8. Until 1 January 2011, the Act was called the Trade Practices Act 1974 ("the Trade Practices Act"). It has been amended many times since then, but the provisions with which the remitter is concerned, being ss 18(1), 236 and 237 of the ACL remain similar or the same as their counterparts in the Trade Practices Act, which were ss 51(1), 82(1) and 87.

The Plaintiffs' ACL Claim in the Amended Statement of Claim

1. The Amended Statement of Claim sets out the plaintiffs' claim for relief under the ACL: The Cladding Compatibility Representations 25 After the execution of the Contract and in the general course of discussions and correspondence about the Dwelling between Mr Sainsbury (representing WBC), other representatives of WBC, and the Trustees: a. Mr Sainsbury proposed the use of the Bonder 580 as a substitute for the Maxline 340 product for the roof and wall cladding. Particulars In an email to the Trustees on 14 December 2018 Mr Sainsbury said "They are aluminium alloy clad with option for anodising in colorbond colours - Monument here - the really good bit is that they are a 580mm panel width - so ridges at 580mm centres and excellent durability and compatibility with our alloy frame system. As opposed to the 340mm wide line [sic] product we have been chasing. This also comes as an integrated panel rather than having to be an add on..." In an email to the Trustees on 6 March 2019 Mr Sainsbury said "This is the 580mm Aluminium Bondor upstand seam profile we saw in the workshop. This is a unique new product. It looks wide in the office but on site it is quite elegant and appropriate to the wider vast landscape and open sky we believe, particularly in the long sheet. Can use this for wall panels also - though aligning roof and wall seams will be challenging - but worthwhile." b. The Trustees repeatedly rejected the use of the Bonder 580 and informed Mr Sainsbury and WBC that the Bondor 580 was not in accordance with the terms of the Contract. Particulars The Trustees rejected the Bonder 580: i. At a face to face meeting with Mr Sainsbury and Tim Woods of WBC at WBC's Blackwattle Bay warehouse on or about 24 January 2019 where the Trustees were shown a sample of the Bonder 580; ii. By email to Mr Sainsbury on 12 March 2019. c. Mr Sainsbury and WBC acknowledged the Trustees' rejection of the Bondor 580 and stated that WBC would procure the Maxline 340 product as required by the Contract. Particulars WBC letter to the Trustees dated 12 March 2019 including the following words "Noted - we will procure the cladding panels as specified as Maxline 340 in Monument colorbond". d. WBC sent email correspondence to the Trustees providing pictures of what WBC alleged was the Bondor 294 product being fabricated in its warehouse in Blackwattle Bay. Particulars Email from Joey McAuley of WBC (copying Mr Sainsbury) to the Trustees dated 10 May 2019 attaching various photographs and stating "This option uses the high-end alloy faced composite panel with a customised extra fin in Monument finish. The first image shows the profile you have specified for comparison of rib spacings and height. The second shows how the height of the rib fits perfectly with our extrusion on the building". e. The Trustees raised concerns with the pictures contained in the WBC email above at subparagraph (d) as appearing similar or identical to the Bondor 580 panels they had previously been shown and which they had expressly rejected at the face to face warehouse meeting set out above at the particulars to sub-paragraph (b) and reiterated that the Contract required the Maxline 340 to be supplied and installed. Particulars Email from the Trustees to Joey McAuley of WBC (copying Mr Sainsbury) on 20 May 2019 stating that "We have significant concerns with respect to the cladding product as presented. Is it the same product shown to us by Stephen in your Sydney office a few months ago? Because if so, we said clearly then that it was not the cladding solution we had always agreed on from the commencement of discussions." f. WBC did not respond to the Trustees' concerns and the email detailed at sub-paragraph (e) above and the particulars thereto other than to suggest that the product shown in the photos was appropriate and the best choice both aesthetically and functionally for the Dwelling. Particulars Email from Joey McAuley of WBC (copying Mr Sainsbury) to the Trustees on 22 May 2019 stating that "As per photos sent through to Floyd this morning of the roofing detail used here on King Island, I believe this to be the best choice both aesthetically and functionally for your build. . .I can confirm that the tray with [sic] is 294mm wide, and the ribs are 23mm high." g. Having received no response to their concerns set out at sub-paragraph (e) above, the Trustees again raised their concerns regarding WBC's apparent non-compliance with the Contract requirements. Particulars Email from the Trustees to Joey McAuley of WBC (copying Mr Sainsbury) on 23 May 2019 stating that "As far as we are concerned this is a significant variation to our original contract, and referencing emails as recent as April confirming that the finish was to be Maxline 340 (or similar) battened out across the whole building, so I'm sure you will agree that this change to the whole of the external finish is a major variation..." h. On 24 May 2019 Joey McAuley of WBC (copying Mr Sainsbury) emailed the Trustees in respect of the email set out above at subparagraph (g) stating that the cladding product being fabricated by WBC was not the Bondor 580 but was instead a different product, being one that was "custom" and was "refined by the manufacturer to double the amount of ribs to gain a 294mm spacing". Particulars In the email, Mr McAuley stated that "This is not the same as the option you were shown in Sydney. It was refined by the manufacturer to double the amount of ribs to gain a 294mm spacing, thereby meeting the Owners 'about 300mm' requirement. lt is a customised option, covered by the Bondor manufacturer's warranty…' i. Later on 24 May 2019 Mr McAuley sent a document titled "Variation 6" by email to the Trustees. Variation 6 contained a proposed substitution of the Maxline 340 roof and wall cladding for the Bondor 294 but contained no costing breakdown. Particulars Variation 6 contained a sub-heading "Cladding and Roofing Face Option - No Added Cost" with the words "Exchange Maxline 340 cladding arid roofing to Custom Bondor Shademaster Extraline 294 composite SIPS panels aluminium faced in coloubonded [sic]/Monument compatible finish with Bondor extended 15 year rural area Warranty. And Codemark certification. And covered by EcoShelta Statutory Warranty provisions for fit for purpose building systems." 26 By making the claims set out in paragraph 25 (d), (f), (h) and (i) Mr Sainsbury and WBC represented to the Trustees, that: a. WBC would not use the Bondor 580 roof and wall cladding product (which had been repeatedly rejected by the Trustees) on the Dwelling; b. instead, Bondor Shademaster had manufactured a customised product for the DweIling being the Bondor 294 that had ribs at 294mm; c. the Bondor 294 was a product covered by Bondor Shademaster's manufacturer's warranty; and d. the Bondor 294 was an equivalent or superior product to the Maxline 340 in terms of aesthetics and functionality (including the insulation role that the Maxline 340 was to perform) for the Dwelling and it would functionally satisfy the Building Work Obligations, the Statutory Warranties and the Contract Warranties, (together, the Cladding Compatibility Representations). 27 In reliance on the Cladding Compatibility Representations, the Trustees executed Variation 6 on or about 27 May 2019. 28 On 11 June 2019 WBC commenced the works at the Dwelling to be completed within 4 weeks in accordance with the Contract. 29 On 18 June 2019 the Trustees took delivery of the roof and wall cladding panels. Upon viewing the panels, the Trustees became aware that the panels delivered were the Bondor 580, not the Bondor 294 as specified by Variation 6. Particulars The Trustees sent an email to Mr Sainsbury and Mr McAuley at 1:04pm on 18 June 2019 stating that "… we received the first 2 packs of roofing panels today and on opening the packs we note that the pan width is circa 580mm wide and as we've agreed (attached) and had confirmed, we were to be in receipt of a pan width of circa 290mm (rather than the Maxline 340). We understood the manufacturer was able to produce the profile that we had agreed to and this was the order placed." 30 The WBC site foreman, Mr Taidgh Rowley stated to the Trustees that he had been instructed by Mr Sainsbury and/or Mr McAuley to glue/Sikaflex separately spray-painted t-strips onto the Bondor 580 panels after they had been installed on the roof and walls. Particulars a. On site meeting between the Trustees and Mr Rowley on 18 June 2019. b. Further particulars to be provided by way of evidence. 31 After hearing the matters pleaded and particularised at paragraph 30 the Trustees were so concerned that they immediately drove from the site to Sydney (an approximately six hour round trip) and attended WBC's warehouse in Blackwattle Bay that same afternoon on 18 June 2019. 31A After requesting an inspection of the panels at WBC's warehouse, the Trustees saw the Bondor 580 panels and then saw separate t-strips being spraypainted by WBC and a "mock-up' of the Modified Bondor 580 panels with the t-strips affixed being prepared. Particulars Further particulars including photographic evidence to be provided by way of evidence. 32 In response to a request for information posted by the Trustees on Bondor Shademaster's website, Bondor Shademaster confirmed on 14 October 2019 that "Bondor Shademaster have no such product referred to as Extraline 294... This product code does not exist in the industry." Particulars Particulars including screenshots of the relevant web pages will be provided by way of evidence. 33 Following the response from Bondor Shademaster detailed at paragraph 32 above the Trustees sent 2 emails to Metecno Pty Limited, the parent company of Bondor Shademaster seeking confirmation of Bondor Shademaster's position on the existence of the Bondor 294. Particulars Email from Floyd Larsen (copying Derek Larsen) to Geoff Marsdon arid Paul Adams dated 29 October 2019. Email from Floyd Larson (copying Derek Larsen) to Geoff Marsdon and Paul Adams dated 10 November 2019. 33A On 15 November 2019 Metecno responded by email to the Trustees stating that "Metecno Pty Ltd confirm that it has had no involvement in this matter and indeed has no knowledge of this matter, other than what you have told us in your emails." Particulars Email from Paul Adams to Floyd Larsen and Geoff Marsdon (copying Derek Larsen). 34 Mr Sainsbury and WBC made the Cladding Compatibility Representations (and then remained silent and failed to correct the Cladding Compatibility Representations) so as to induce the Trustees into agreeing to Variation 6 in circumstances where Mr Sainsbury, and consequently WBC knew, or ought to have known, that the Cladding Compatibility Representations were misleading and deceptive or false because: a. WBC was using the Bondor 580 roof and wall cladding product (which had been repeatedly rejected by the Trustees) on the Dwelling and simply retrofitting a superficial t-strip to the pre-fabricated Bondor 580 so as to give the appearance of a customised product with rib spacing aligned to the Maxline 340 product; b. Bondor Shademaster had never manufactured a customised product for the Dwelling being the Bondor 294 that had ribs at 294mm; c. neither the Bondor 294 (which did not exist) nor the Modified Bondor 580 as supplied, were products covered by Bondor Shademaster's manufacturer's warranty; and d. neither the Bondor 294 (which did not exist) nor the Modified Bondor 580 as supplied, were equivalent or superior products to the Maxline 340 in terms of aesthetics and functionality (including the insulation role that the Maxline 340 was to perform) for the Dwelling and they would not functionally satisfy the Building Work Obligations, the Statutory Warranties and the Contractual Warranties. 35 In reliance on the Cladding Compatibility Representations the Trustees agreed to Variation 6 to substitute the Maxline 340 for the Bondor 294. 36 The Cladding Compatibility Representations were made by WBC in trade or commerce. 37 Further, the Cladding Compatibility Representations were made by Mr Sainsbury personally in trade or commerce because: a. WBC was engaged in trade or commerce; b. the Cladding Compatibility Representations made by Mr Sainsbury were designed to induce the Trustees to agree to Variation 6; and c. in making the Cladding Compatibility Representations Mr Sainsbury was acting in the trade or commerce of a company (WBC) of which he was a director and company secretary. 38 The Cladding Compatibility Representations were misleading or deceptive or false and WBC and Mr Sainsbury or both contravened sections 18 and 29 of the ACL. 39 Alternatively, if Mr Sainsbury did not make the Cladding Compatibility Representations himself in trade or commerce and breach the ACL in that way as alleged in paragraph 37 above, Mr Sainsbury was a person actively involved in a contravention of sections 18 and 29 of the ACL by aiding, abetting, counselling or procuring WBC's breach of the ACL. Particulars Mr Sainsbury was aware of the matters pleaded above at paragraph 34 at all material times, he knew or ought to have known were misleading or deceptive or false and he still made the Cladding Compatibility Representations and/or failed to correct those representations. 40 In reliance on the Cladding Compatibility Representations the Trustees agreed to Variation 6 and have thereby suffered the loss and damage pleaded and particularised at paragraph 24 above. 40A Further or in the alternative, in breach of Variation 6, WBC failed to supply Bondor 294, as a result of which the Trustees have suffered the loss and damaqe particularised at paragraph 24 above.

The Findings of Fact

1. The Court of Appeal found that Tastec made each of the representations in relation to the nature of the cladding that the plaintiffs alleged in the Amended Statement of Claim, which were, in summary, in the Appeal decision, described as follows at [102]: 1. The solution Tastec was offering did not involve use of the Bondor 580 that the Larsens had seen (and rejected) in Sydney. 2. The "Extraline 294" was a customised option which Bondor had refined and which had rib spacing at 294mm. 3. The Extraline 294 was covered by Bondor's manufacturer's warranty. 4. The Extraline 294 was an equivalent or superior product to the Maxline 340 in terms of aesthetics and functionality ("better, stronger [and] longer lasting" than the Maxline 340, was "the best choice both aesthetically and functionally for [the Project]", featured benefits which outweighed the functional use of the Maxline 340,), and carried "all installation warranties to Statutory warranty provisions as per Maxline 340".
2. The Court of Appeal determined that the representation to the plaintiffs that the product Tastec showed them in May 2019 was not the same as the Bondor 580 panel that they were shown in February 2019 was false or misleading (see the Appeal decision [107] - [111]).
3. The Court of Appeal further determined that the representation to the plaintiffs that Bondor was involved in refining the product to produce "Extraline 294" was false. The discussions between officers of Bondor and officers of Tastec concerning the production of "Extraline 294" "did not amount to any active involvement on the part of Bondor, and certainly not to a degree that warranted the description of the product as having been refined by the manufacturer" (see the Appeal decision at [112]).
4. The plaintiffs did not press, and the Court of Appeal did not find, that the representation that Extraline 294 was covered by Bondor's manufacturer's warranty was misleading or deceptive (see the Appeal decision at [114]).
5. The plaintiffs did not press, and the Court of Appeal did not determine, that the representation as to the relative functionality of Extraline 294 and Maxline 340 set out in paragraph 4, quoted above at [14], were false or misleading (see the Appeal decision at [116]). The representation with respect to the aesthetic impact of Extraline 294 relative to Maxline 340 set out in paragraph 4 quoted above at [14] was, however, misleading (see the Appeal decision at [118]).

The basis for an award of damages under s 236 and compensation under s 237 of the ACL in respect of a breach of s 18 of the ACL

1. The ACL provides, in ss 236 and 237: Division 3 -- Damages 236 Actions for damages (1) If: (a) a person (the claimant ) suffers loss or damage because of the conduct of another person; and (b) the conduct contravened a provision of Chapter 2 or 3; the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention. (2) An action under subsection (1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued. Division 4 -- Compensation orders etc. for injured persons and orders for non - parties 237 Compensation orders etc. on application by an injured person or the regulator (1) A court may: (a) on application of a person (the injured person ) who has suffered, or is likely to suffer, loss or damage because another person has engaged in conduct in contravention of a provision of Chapter 2, 3 or 4; or (b) on the application of the regulator made on behalf of, and with the consent in writing of, one or more such injured persons; make such order or orders as the court thinks appropriate against the person who engaged in the conduct, or a person involved in that conduct. Note: The orders that the court may make include all or any of the orders set out in section 243. (2) The order must be an order that the court considers will: (a) compensate the injured person, or any such injured persons, in whole or in part for the loss or damage; or (b) prevent or reduce the loss or damage suffered, or likely to be suffered, by the injured person or any such injured persons. (3) An application under subsection (1) may be made at any time before the end of 6 years from the day on which the cause of action accrued that relates to the conduct referred to in that subsection.
2. In the Appeal decision, the Court of Appeal determined that the defendant had committed a breach of s 18(1) of the ACL. Section 18(1) of the ACL is in Chapter 2, Part 2 of the ACL and a contravention of s 18(1) therefore falls within s 236(1)(b) of the ACL.
3. Under s 236 of the ACL, the plaintiffs may recover from the defendant "the amount of the loss or damage" suffered by them on account of the contravening conduct of the defendant.

The plaintiffs' argument

1. The plaintiffs argued, on the remitter, that immediately prior to agreeing to Variation 6 they were in the position of being entitled under their contract with the defendant to a house clad in Maxline 340 for the contract price.
2. In their written submissions, the plaintiffs set out their summary of the Appeal decision and then assert: 85. The correct counterfactual was the other option available at the time of Variation 6. That is, the Larsens' entitlement to remain with the Maxline 340, for the Contract price, as the Contract required. That is the context in which her Honour described in [135] what was to be remitted to the District Court.
3. In their written submissions, under the heading RETURNING THE LARSENS TO THEIR CONTRACTUALLY ENTITLED POSITION the plaintiffs argued: 87. The Bondor Shademaster, as the name might suggest, is for the purposes of outdoor areas such as patios. Nonetheless, that was the SIP that Mr Sainsbury and Tastec determined to use on the Larsen roof and walls. 88. It is not the type required by the Contract because that was a steel SIP. On one view returning the Larsens [to] their Contract position would require the Bondor Shademaster 580 that was used, according to Mr Sainsbury, in compliance with Variation 6 to be removed and replaced with a Maxline 340 clad over a Bondor SIP with steel skin. 89. However, in line with their obligation to mitigate their loss the Larsens have adopted a sensible approach, to clad the Maxline 340 over the existing Shademaster 580.
4. Further, in their written submissions, the plaintiffs say: THE PRIMA FACIE MEASURE OF DAMAGE 95. The prima facie measure of loss in cases of nonconforming building works is the well known proposition from Bellgrove v Eldridge that: (a) the measure of loss is the cost of the work necessary to produce conformity with the contract; (b) subject to the qualification that it is a reasonable course to adopt. Bellgrove v Eldridge (1954) 90 CLR 613 ("Bellgrove v Eldridge") is a decision of the High Court concerning damages for breach of contract.
5. The plaintiffs sought, by way of damages or compensation against both of the defendants (presumably jointly and severally) the cost of overcladding the external walls and roof of the existing, completed house with Maxline 340 steel cladding.
6. The plaintiffs acknowledged that the defendants were arguing that the increased thickness of the external walls, once overclad with Maxline 340, would create functional difficulties in relation to the movement of a door in each of the living room and the dining room and some windows. The risk of future galvanic corrosion arising from potential incompatibility between the aluminium Bondor Shademaster and the steel Maxline 340 had also been raised. The plaintiffs answer, in very brief summary, was that, in the event that I were to find that the functional difficulties arising from the overcladding proposed made the overcladding unreasonable, then the solution would be to award by way of damages the cost of removing the Bondor Shademaster and replacing it with a steel SIP overclad with Maxline 340.

The defendants' argument

1. The defendants argued that the plaintiffs' case on remitter proceeded on the wrong counterfactual because "the plaintiffs were never entitled to have Maxline 340 clad over the existing Bondor Shademaster 580 SIPS".
2. The defendants also argued that it is neither a feasible nor a reasonable solution to overclad the walls and roof of the house with Maxline 340 panels, so that the Court should not order compensation by reference to such a solution. In the first instance decision, Judge Gibb determined that such an outcome would not meet the BASIX requirements as to insulation, and the installation of Maxline 340 panels on the walls over the Bondor Shademaster 580 SIPS would result in several doors being unable to open as they should (see the first instance decision at p 4).
3. The defendants argued, based upon Henville v Walker (2001) 206 CLR 459, that the comparison to be made is between the position in which the plaintiffs found themselves upon the completion of the house, and the position they would have been in had they not agreed to Variation 6. It was argued that the plaintiffs would have been in the same, or virtually the same situation under both scenarios.
4. It is necessary for the Court to ask, in relation to the second, hypothetical, scenario what would have happened between 23 May 2019 (the date of Variation 6) and the date of completion of the house if the plaintiffs had not agreed to Variation 6. The defendants argued that it should be predicted, in that hypothetical scenario, that the plaintiffs would have agreed to abandon their wish to have the house clad in Maxline 340 panels for reasons other than the misleading or deceptive conduct; namely because having Maxline 340 over a Bondor SIP (Lux Wall 100mm on the roof and Lux Wall 75mm on the walls, provided for in the contract) was not feasible. The contract would have had to have been amended in any event because the swing doors would not have opened properly from the living room and the dining room onto the verandah. The project would have had to have been amended in any event.
5. It was pointed out, in the defendants' submissions, that the plaintiffs were aware of the existence of other cladding products which could be an alternative to the Maxline 340 when they agreed to the use of the Bondor Shademaster 580 panels (see the first instance decision at pp 46-47). The defendants submitted that this suggests that, upon being confronted with the difficulties of using Maxline 340 with the Lux Wall SIP, the plaintiffs would, in the hypothetical counterfactual, have made the same decision they made in reality, in reliance upon the misleading or deceptive conduct.

The evidence on the remitter

1. On the remitter, both the plaintiffs and the defendants called evidence to supplement the relevant evidence adduced at the initial trial in this Court. The claim was a much broader claim at the time of the initial trial, involving allegations of breaches of the contract. The claims for breach of contract were unsuccessful at first instance and were not the subject of the Appeal decision. The only claims before me are the claims under the ACL. The remitter is for the purpose of making a determination of what relief (if any) should be granted pursuant to s 236 and/or s 237 of the ACL and for deciding the question of the costs of the proceedings.
2. The affidavits and reports adduced before me are contained in the Remitter Bundle (four volumes). Mrs Larsen gave oral evidence, and so did Mr Sainsbury. Expert engineers Mr Moisidis (instructed by the plaintiffs) and Mr Karsai (instructed by the defendants) gave evidence concurrently, as did expert quantity surveyors Mr Bolt (instructed by the plaintiffs) and Mr O'Donnell (instructed by the defendants).
3. In very brief summary, the evidence of the engineers indicated that it would be physically possible to overclad the Bondor Shademaster panels on the exterior walls and roof of the house provided that changes were made to the door assembly of the swing doors to the outdoors from the living and dining rooms. Neither of the engineers were aware of such overcladding involving these two types of panels being undertaken before, or of any testing of the various fixings, battens and flashings, for example, which the process would require. The visual effect of the process cannot be predicted precisely at this stage because detailed design work has not been performed. At the present level of detail, some risk remains to the weatherproofing of the house and there is a risk of the overcladding process giving rise to visual and performance consequences which cannot presently be foreseen on account of the lack of testing. It may be that the warranties upon which the plaintiffs can rely presently from Bondor and EcoShelta would be invalidated by the overcladding.
4. Again, in very brief summary, Mr Bolt estimated that the cost of the proposed overcladding would be $526,728.80 (as at December 2023). Mr O'Donnell estimated that the cost would be $277,021.21. The difference in the estimates is attributable to many things, including different estimates of rates and hours of work for aspects of the project, differences in anticipated preliminary costs and differences in allowances for overheads, professional fees and profit and contingencies. There are aspects of the cladding work which have not yet become clear. For example, Mr Bolt believes that it may be necessary to replace the windows to achieve waterproofing and visual consistency. Dr O'Donnell doubts that the replacement of the windows would be necessary. Dr O'Donnell believes that the overcladding works could be completed in six weeks and Mr Bolt estimates that it would take about 11 weeks, allowing for all of the purpose-made facias, trims and flashings. Mr Bolt was also concerned about the difficulties inherent in installing the Maxline 340 sheets so that the ribs are in the right place and the increase in thickness at various points can be dealt with by the design and fabrication of unique flashings as the need arises. Such issues may take time to address on site, with consequent increased labour costs.

Consideration

1. As I have said, the plaintiffs seek damages under s 236 of the ACL or compensation under s 237 of the ACL, equal to the cost of installing Maxline 340 cladding on top of the existing Bondor Shademaster SIP which has been installed on the walls and roof of the house.
2. The plaintiffs seek damages or compensation calculated in this way to bring them into the position that they were entitled to be in under the contract prior to their agreement to Variation 6.
3. The plaintiffs have based their claims for damages and compensation upon an entitlement to damages applicable in an action for a breach of contract which, as I have set out in detail above at [21] - [37] is not the basis for a claim under the ACL. As the High Court said in Gates, the objective of damages in an action for breach of contract is to place the plaintiffs in the position they would have been in had the contract been performed. To that end, damages may be awarded for loss of bargain (expectation loss) and damage suffered, including expenditure incurred in reliance on the contract. In contrast, based upon but not identical to an action for damages caused by the commission of the tort of deceit, damages or compensation for a breach of s 18(1) of the ACL are awarded to place the plaintiffs in the position they would have been in had the breach not occurred. It is clear from the High Court authorities set out above, which are binding on the District Court, that expectation loss is not a basis for an award of damages or compensation under the ACL. The ACL is not concerned with the enforcement of contracts. It is concerned with the promotion of competition and fair trading and provision for consumer protection (see s 2 of the Competition and Consumer Act 2010 (Cth)).
4. In order to obtain an award of damages under s 236 of the ACL, the plaintiffs must show that they have suffered loss or damage because of the contravention of s 18(1) of the ACL. The quantum of damages will be calculated by reference to the amount of the loss or damage suffered by the plaintiffs.
5. The comparison to be made is the comparison between the position of the plaintiffs at the end of the construction of the house, after their agreement to Variation 6 on the one hand, and the position that they would have been in at the end of the construction of the house had they not been influenced by the misleading or deceptive conduct of the defendants to agree to Variation 6.

Orders: 1. The plaintiffs' claim against the first and second defendants for relief under the Australian Consumer Law is dismissed. 2. I will hear the parties in relation to the costs of the proceedings in the District Court.

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