Larsen v Tastec Pty Ltd

Background to the proceedings

1. It is best to consider the detail of the dealings between the parties in the context of the grounds of appeal, in particular Ground 1A. However, some introductory background is useful to identify some of the construction products and concepts in issue.
2. Tastec is the licensed fabricator of the proprietary Ecoshelta prefabricated modular building system. According to Mr Sainsbury, the Ecoshelta system is a flat pack frame and panel system, which uses factory welded, prefabricated aluminium alloy, post and beam frame parts, together with composite panel floor panels, wall panels and roof panels, door and window systems. The components are shipped to site as a flat pack, for manual assembly.
3. The Contract identified the parties as Wonders Building Company Pty Ltd, which later became Tastec, and "Floyd and Derek Larsen", who were specified as "the Owner". Pursuant to the Contract, Tastec undertook to provide Project Management Services to the Larsens for an "Ecoshelta system three Pavilion, four pod with end extensions, Accommodation Cabin at [the Property]".
4. The pods and extensions were specified in the Contract to be "with custom Maxline 340 'Monument' Colorbond finish cladding system in 3 pavilions". In his affidavit, Mr Sainsbury explained that the Maxline 340 product is a steel sheet with 340mm spacing between the ribs at the sheet junctions. As a sheet product, the Maxline 340 needs to sit on top of a structural base panel system. These structural panels were referred to in the proceedings as structural insulated panels, or SIPs. Tastec contracted to use products manufactured by Bondor as the SIP for the walls and the roof, to which the Maxline 340 would be affixed.
5. Central to the proceedings below, and the appeal, was the execution by the parties of a variation to the Contract known as Variation 6, on 23 May 2019. I will address the course of correspondence leading up to its execution below, but sufficiently for present purposes, under the heading "Cladding and Roofing Face Option", Variation 6 provided: "Exchange Maxline 340 cladding and roofing to Custom BONDOR SHADEMASTER EXTRALINE 294 composite SIPS panels aluminium faced in colourbonded/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."
6. It was common ground that Bondor did not manufacture a product called "Extraline 294". Instead, Tastec used a Bondor SIP product called the Bondor Shademaster 580 ("Bondor 580"), which it customised by affixing a t-strip to the centre of each panel with an industrial adhesive in an upside-down position, so as to create the appearance of the panel having an extra seam running down its length. This was the purpose of affixing the t-strip, with a view to accommodating the Larsens' aesthetic preference for a narrower panel. In the Amended Statement of Claim ("ASOC"), the Larsens described this modified product as the "Modified Bondor 580" and that is how I will refer to it below.
7. Tastec had previously shown the Larsens the Bondor 580 panel and they had rejected it, consistently with their wish for narrower spacing between the panel seams (or ribs). The Larsens first became aware that Tastec had used the Modified Bondor 580 when panels were delivered to the Property on 18 June 2019. On delivery, some of the panels had the t-strips glued on and some did not.
8. After inspecting the Modified Bondor 580 at Tastec's warehouse the next day, the Larsens instructed Tastec to proceed using unmodified Bondor 580 panels (that is, without affixing the t-strip). Both of the Larsens gave evidence that if they had known that the Modified Bondor 580 product comprised the Bondor 580 and a glued-on t-strip, they would not have agreed to the variation to that product.

The allegations before the primary judge

1. In light of the arguments that the parties advanced on the appeal, it is necessary to identify with some precision the claims that the Larsens advanced against Tastec in the District Court. Although some of the claims are not pressed on the appeal, the structure of the pleading makes it necessary to canvass them below.

The Contract claim

1. The Larsens alleged that there was an express term of the Contract requiring the first respondent to supply and install the wall and roof panels as per the specification requiring the Maxline 340 to be used for all exposed cladding and roofing panels. Another express term required the first respondent to supply and install door and window and highlight glazing elements as per the schedule and specifications, including solid timber internal doors. They alleged that the Modified Bondor 580 was inconsistent with the first respondent's obligations under the Contract; and/or, to the extent that the requirement for Maxline 340 was effectively varied by Variation 6, it was inconsistent with that variation "because and insofar as it was not "Custom Bondor Shademaster Extraline 294", there being no such product manufactured by Bondor. The Larsens described this as the "Non-Conforming Cladding Supply".
2. Additionally, the Larsens alleged that what was ultimately installed was deficient in a number of respects, which it defined as the "Cladding Deficiencies". The Larsens contended that the product installed: was a single SIP, with no additional aluminium panel sitting atop battens to provide protection from direct ultra violet rays and to minimise the SIP's capacity to expand and contract; was too dark in colour so as to minimise heat absorption and the panel's capacity to expand and contract; as installed on the roof, did not comply with the relevant thermal rating requirement for roof insulation; and as installed on the walls, did not comply with the relevant thermal rating requirement for external wall insulation.
3. The Larsens pleaded that the Non-Conforming Cladding Supply and the Cladding Deficiencies had caused "significant and ongoing cracking to ceilings and walls throughout the building", which was defined in the ASOC as "the Cracking Damage". They alleged that by reason of the above matters, the first respondent breached the Contract, inter alia by failing to supply and install cladding materials that complied with the specified product nominated and required in the Contract, with Variation 6, and with the requirements of the Building Code of Australia. They further alleged that the first respondent failed to supply and install the materials with due care and skill, and also alleged that the materials were not fit for their intended purpose.

The ACL claim

1. As I have noted above, the ACL claim was made against both respondents. The respondents filed separate defences, each of which contained bare denials of the claim under the ACL. The respondents were jointly represented and filed joint submissions in support of dismissal of the ACL claim as against them both, without drawing any distinction between them as to where liability rested in the event that it be established. For the purposes of considering the ACL claim I will proceed, as did the primary judge, on the basis that there is no relevant distinction as between the two respondents and will refer to them collectively as Tastec. I note that no submissions were made on the appeal that if the Court were to uphold Ground 1A, it should do so only against one respondent and not the other.
2. The Larsens' ACL claim turned on a series of interactions following the execution of the Contract between them and Mr Sainsbury (and other representatives of Tastec), in the course of which Tastec and Mr Sainsbury were alleged to have made the following representations: "(a) [Tastec] 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 Dwelling being the Bondor 294 [to which I have referred above as the Extraline 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."
3. The Larsens contended that they executed Variation 6 in reliance on these representations ("the Cladding Compatibility Representations"); that the Representations were made to induce them to agree to the variation; and that, to the knowledge of Tastec and Mr Sainsbury, they were misleading or deceptive or false because: "(a) [The respondents were] 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 Shademater'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."

Supply and installation of defective windows and external doors

1. The Larsens also contended that the windows and external doors that the first respondent supplied and installed comprised glazed panes fitted with an aluminium glazing suite designed for use as internal partitioning, meaning that they were not appropriate or suitable for installation as external windows. Further, and in any event, they were not properly sealed so as to avoid water penetrating the Ecoshelta during rain events. During significant rain events on 8 and 11 February 2020, "all of the windows in the Dwelling leaked and water penetrated into the inside of the Dwelling". The Larsens pleaded that the supply and installation of the windows and external doors with the identified deficiencies was in breach of the Contract. They further pleaded that the breaches caused loss and damage, including the cost of removing and replacing the windows and external doors and the cost of rectifying the internal water damage.

Supply and installation of inappropriate and defective doors

1. Relevantly to the appeal, the Larsens contended that the first respondent supplied and installed four internal swing doors that were not solid timber doors as the Contract stipulated in Schedule 2, but rather were timber "block" doors. They claimed as loss and damage the cost of replacing and installing four solid timber internal swing doors.

Witnesses

1. The primary judge engaged in an extensive examination of the credibility and reliability of each witness who gave evidence. For present purposes it is sufficient to note that her Honour made positive credit findings in relation to Mr Sainsbury and generally accepted his evidence. Her Honour found that each of the Larsens was a difficult witness and rejected their evidence where it was contradicted by a contemporaneous document or an otherwise reliable witness, "including Mr Sainsbury". Her Honour also did not accept the evidence of the Larsens' builder, Mr Cover.
2. A number of expert witnesses gave evidence in relation to the defects on which the Larsens relied. The Larsens' central expert witness was Mr O'Mara. Her Honour described him as a difficult and evasive witness whose evidence was "far from frank throughout". Her Honour rejected his reports and his opinions as lacking in expertise "to the point of being inadmissible". To the extent that his opinion was admissible, her Honour found it unpersuasive.

Assessment of the Larsens' claims

1. Her Honour described the case as being, "[a]t its core…a contract case about alleged defects, despite the overlay introduced by the assertion of various alleged (mis)representations". The alleged significant physical problems, such as the Cracking Damage and the water ingress, were the focus of the case.
2. Her Honour described the pleaded relief as seeking "both to retain the structure as erected plus secure in damages more than the price [the Larsens] paid for it". Specifically in relation to the pleaded misleading or deceptive conduct, her Honour described the Larsens as wanting "both the aluminium composite panels and an additional steel layer as an added roof above it (which was not contemplated by the contract)" (emphasis added).
3. Although the Contract did not provide for the Maxline 340 and an aluminium composite panel, her Honour appears to have misunderstood that the Contract did provide for the Maxline 340 to be fixed to a SIP, albeit a steel one. The same misunderstanding can be seen on the next page of her Honour's reasons, where her Honour stated that if Variation 6 was ignored, the Contract provided for "a single metal composite foam panel, relevantly Maxline colourbond, not Bondor aluminium composite panels; but not both". In this Court, the Larsens contended that this misunderstanding triggered a series of further errors on the part of the primary judge.
4. In relation to the Larsens' contract claim, her Honour found that at least as at 2018, the Fund was the beneficial owner of the Property, and that the Larsens held the title as trustees of that Fund. In her Honour's opinion this finding created a difficulty for the Larsens in relation to the Contract, with her Honour ultimately concluding that its structure and content, as well as its express words, manifested an objective intention that the Larsens contracted in their personal capacity. Her Honour also had regard to what she described as mutually known pre-contractual facts and post-contractual communications, which in her Honour's view supported that the Larsens did not enter the Contract as trustees of the Fund. It followed that the Larsens had no contractual relationship with the first respondent on which to found their claim in contract, and it failed on that basis.

Cladding Compatibility Representations

1. The primary judge next considered the Cladding Compatibility Representations. Before considering whether the pleaded representations were made and whether, if made, they were false, her Honour concluded that the Larsens "did not act on anything said by the defendants in respect of the 'Custom bondor shademaster externalline (sic) 294'", being the Modified Bondor 580 product. Her Honour relied on the Larsens having rejected that product and directed Tastec, on 19 June 2019, "to proceed with the unmodified Bondor panels (without Maxline 340)". Referring to passages from Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 ("Sellars") about reliance and causation, her Honour stated: "Putting aside the contractual complexity (where the contractual 'promise' about Maxline 340 was made to the Larsens personally, not the plaintiff) the starting position (from which the Larsens changed position) was an entitlement to a steel product, a 'Maxline 340 Sheet faced composite foam panel roofing' sheet. They got an aluminium faced composite foam panel roofing sheet with a 15 year warranty."
2. This passage repeats her Honour's misunderstanding that the Contract provided for a single "'Maxline 340 Sheet faced composite foam panel roofing' sheet", rather than a Maxline 340 sheet that was fixed to a Bondor SIP.
3. Her Honour found that the aluminium panel that was ultimately installed was stronger than "the Maxline 340 Sheet faced composite foam panel" (being a steel product). Her Honour also inferred that the foam panels "would have been less thick than those supplied, (or not thicker) and thus to supply less insulation or at least no more". The Larsens contended that this inference was contrary to the evidence.
4. In relation to the Cladding Compatibility Representations, her Honour's starting point was that the Contract did not require Tastec to supply "additional insulation or the Bondor Aluminium Faced Composite Panel": it "contemplated steel faced composite panels, and left insulation (and linings) to the owners". In so far as this observation suggested that the Contract did not make provision for insulated panels in the form of SIPs, that involved the misunderstanding of the Contract that the Larsens drew attention to and to which I have referred.
5. Her Honour considered that at the point when "the Bondor aluminium panels were under discussion", the talk about the different pan size was "about a customised product that was being adapted to produce the look sought by the Larsens". Her Honour accepted that Tastec went "too far" in describing the product, in correspondence with the Larsens, as "refined by the manufacturer" or the product of a joint venture with them. Nonetheless, her Honour considered that it was true to say that the result doubled the amount of ribs on the Bondor 580; and that the manufacturer was involved in discussions about placing the extra ribs, referring to evidence of Tastec's interactions with the State Manager for Bondor, Mr Da Silva, to which I will come in due course.

Loss and damage

1. Her Honour noted that whether the claim was in contract, negligence or by way of representation, the damage pleaded was "focused upon the selection of the cladding applied to the roof and walls and cracking and complains (sic) about water leakage and flashings". Despite the Larsens' focus on the look prompting "extensive discussion of modification", there was, in her Honour's opinion, "no evidence that the 'look' sounds in any economic loss".
2. After setting out [24] of the ASOC, and acknowledging that the cladding issues were complex, her Honour concluded that the claims about the Cladding Deficiencies and the Cladding Compatibility Representations went "nowhere". Her Honour accepted in this respect a number of submissions that Tastec advanced, to the effect that the Larsens: 1. had not explained how they were entitled to be returned to the position they would have been in but for Variation 6 when the proposed product would not allow the doors to open, and would create a thick roofing profile and flashings which would not comply with BASIX insulation values; 2. had failed to establish that they had suffered any loss or damage even if the claims of misleading or deceptive conduct were made out; 3. had not adduced any evidence that the cost of installing the Maxline 340 or similar was necessary or reasonable to accommodate the thermal movement of the structure; and 4. had not established that the defects and rectification claimed were the result of the Maxline 340 not being installed.
3. Earlier in her Honour's reasons, her Honour had concluded that none of the pleaded defects had been established. The Larsens' claims in this regard relied primarily on the evidence of Mr O'Mara, and her Honour comprehensively rejected his evidence. In response to the Larsens' further claim regarding fitness for purpose, her Honour found that there was no reliable evidence to support that claim. Her Honour referred in this context to the corporate brochure for the Bondor composite panels which described them as having been designed for all options of structure, including fully enclosed structures, with which this case was concerned. In so far as the Larsens' expert, Mr O'Mara, took a contrary view, her Honour rejected his evidence.
4. Specifically in relation to the Cracking Damage, her Honour found that the cause of the cracking was the failure of the builder to install insulation and comply with manufacturer instructions, so as to allow for movement tolerances in the building materials, rather than any conduct on the part of Tastec. Her Honour also considered that cracking may have been caused by the Larsens' addition of retaining walls, fill, and landscaping, a matter given little to no consideration by the expert witnesses who gave evidence on their behalf.

The internal doors

1. The primary judge described this aspect of the Larsens' claim as put on the basis that Tastec had supplied and installed internal swing doors which were not "solid timber" doors as specified in the Contract, but merely "solid core" doors. In terms of the chronology, her Honour observed that the Contract required six "internal doors and sliders - solid timber internal doors - standard with face mount slider systems & latch". On 14 May 2019, Tastec offered to swap some sliding doors for swing doors, which the Larsens indicated they desired. This was picked up in Variation 6: "Exchange Face Sliding Doors in bedrooms from bridge area with swing door systems including standard passage latch handle…". As the four solid timber internal swing doors were not part of the Contract, her Honour dismissed the claim.

The windows and external doors

1. The primary judge also rejected this claim. Her Honour accepted that leaking occurred in the course of two significant rain events, on 8 February 2020 and 11 February 2020. However, it did not follow that the windows or external doors were defective. In circumstances where the Larsens resided at the Property "65% of the time", her Honour considered it significant that there was no evidence "about any other water damage or the source of any relevant leak other than some water ingress observed after two significant rain events". There was also no evidence of any leakage since those events.
2. Her Honour accepted Tastec's expert evidence on this issue, which found no signs of defect or water ingress, which was supported by a fact sheet published by the Australian Glass and Window Association on the east coast storms in February 2020. The fact sheet stated, inter alia, that "[w]indow design is a balance between performance and affordability, and it is not feasible to produce windows that can withstand the most extreme weather events".

Notice of Appeal: extension of time

1. On 22 December 2021, the Larsens' legal representatives filed a notice of intention to appeal in this Court. Following email communication with the Court to confirm the filing protocol, the Larsens' representatives emailed a copy of the Notice of Appeal to the Court of Appeal mailbox for filing at 5:34pm on 17 March 2022. A reply email attached a sealed copy of the notice, indicating (wrongly) that it had been filed on 18 March 2022. Although Tastec initially opposed the Larsens' application to extend the time in which to file the Notice of Appeal, Counsel for Tastec abandoned that objection at the outset of the hearing. The Court made an order granting leave for the extension of time.

Ground 1A (and Ground 3): Cladding representations

1. In light of what I have said about the position of the respondents on the ACL claim, for the purposes of this ground of appeal I will refer to them collectively as Tastec, save where otherwise stated.
2. By Ground 1A of the Amended Notice of Appeal, the Larsens alleged that in dismissing their claim under the ACL in respect of the Cladding Compatibility Representations, the primary judge erred in the following respects: "(a) failing to determine whether the representations were made by [Tastec] in the documents particularised and submitted; (b) failing to determine whether the representations were false; (c) determining that there was nothing in the impugned conduct viewed as a whole that had a tendency to lead a person into error; (d) failing to find that the representations were relied on by the [Larsens] in agreeing to Variation 6; and (e) failing to find that the representations caused the [Larsens] to suffer loss."
3. Ground 3 is related to Ground 1A in so far as it took issue with her Honour's findings on the loss and damage related to the cladding. The Larsens contended that her Honour erred in finding that the Contract provided for a single metal composite foam panel and not a two tier system (Grounds 3(a) and (b)), and that they ultimately got better strength and insulation than had been secured under the Contract (Grounds 3(c) and (d)). The Larsens also took issue with her Honour's findings as to fitness for purpose, the absence of defects and that the Cracking Damage was inevitable (Grounds 3(e)-(g)).
4. As I noted above, at the hearing of the appeal Senior Counsel for the Larsens indicated that if they were to succeed on Ground 1 there would not be a need to deal with Ground 3. Additionally, however, the Larsens did not press their challenge to her Honour's finding on the Cracking Damage, because it necessarily depended on Mr O'Mara's evidence.
5. Turning to Ground 1A, the Larsens submitted that rather than addressing the evidence that each misrepresentation had been knowingly made by Tastec, the primary judge "dealt with limited matters, in a limited way, and in doing so made a number of other errors". Those errors included the determination that there was nothing in Tastec's conduct which could tend to lead a person into error; and that the Larsens had not relied upon any representations so as to have suffered loss as a result. By reference to a detailed review of the communications between the parties, the Larsens submitted that her Honour should have concluded that the Cladding Compatibility Representations had been made, were false or misleading, and were relied upon by the Larsens to their detriment. Although the pleading relied on both ss 18 and 29 of the ACL, the focus of the Larsens' submissions was s 18, which is the statutory successor of s 52 of the repealed Trade Practices Act 1974 (Cth).

The Contract

1. I have referred to the execution of the Contract above. In clause 1.1, the works were described as "a new accommodation cabin using four Ecoshelta e.pods and end extensions with custom Maxline 340 'Monument' Colorbond finish cladding system in 3 pavilions constructed from Ecoshelta e.pod 'N' Series prefabricated construction system to Lock Up stage only and associated works as listed in, or otherwise set out in the Schedules attached to this contract". Schedule 2, which set out the line-item works costs, specified the Base Unit, noting "custom Maxline 340 colorbond roofing and cladding - Monument". Schedule 3, which was titled "Illustrated Fitout Schedule", included a photograph described as the "ROOFING SHEET PROFILE - 'Maxline 340' Colorbond - 'Monument'" for "All Exposed cladding and roofing panels".
2. The requirement in the Contract for the Maxline 340 reflected the Larsens' desire for a particular cladding profile for their house, which they made clear from their first meeting with Mr Sainsbury on 26 August 2018. The Larsens took a brochure to that meeting, which included a photograph of a house with the ribs of the roof and wall cladding spaced at a distance that the Larsens liked, and in a colour they liked, being Monument. Mr Sainsbury's notes of the meeting referred to the particular cladding as "Longline 305 in colorbond 'Monument' roofing and wall cladding system (Possibility for BONDOR? Kingspan?)". Longline 305 was a product produced by Lysaght, and was referred to in a series of quotes that Tastec issued to the Larsens from September 2018 onwards. A copy of the Contract dated 15 November 2018 was the first to refer to the Maxline 340 as the proposed cladding material.
3. The Contract itself does not refer specifically to Bondor SIPs sitting under the Maxline 340 sheet, which might explain why her Honour described the Contract as making provision for the Maxline 340 alone, and the Variation as adding an insulated panel. However, it is apparent from the Fitout Schedule that the Maxline 340 was a sheet product, and from Schedule 2 of the Contract that it was to be cladded over the Base Unit. In so far as her Honour understood that the Contract made provision only for the Maxline 340, and not an underlying SIP, her Honour erred.
4. The Payment Schedule for the works, in Schedule 1 of the Contract, indicated that most of the $422,028.71 contract value was attributable to what was described as "Parts Supply", totalling $390,029.54. The structure of the payments also indicated that most of the "Parts Supply" amount was to be paid before delivery of the prefabricated product to the Property.

Events following execution of the Contract

1. By email dated 14 December 2018, Mr Sainsbury emailed the Larsens about a different cladding product. He wrote that there was "a very promising new product which may suite (sic) the [house] very well". The product was an aluminium alloy clad integrated panel which had a 580mm panel width. Mr Sainsbury subsequently showed the Larsens this product during a meeting in February 2019; he accepted in his evidence that they told him they wanted to stay with the Maxline 340.
2. In subsequent email correspondence with the Larsens in early March 2019, Mr Sainsbury confirmed that the insulated panels (being the SIPs onto which the Maxline 340 sheets would be fixed) were the Bondor Shademaster 90mm panels for the roof, and the Bondor Luxepanel 75mm panels for the walls. This information was included in the Structural Notes for drawings that Tastec prepared for the construction certificate, dated 5 March 2019.
3. Also on 5 March 2019, Mr Sainsbury made another approach to the Larsens about the product he had showed them in February. He emailed them a photograph which he described as showing "the new aluminium faced colour bonded roofing material". When the Larsens asked by return email how wide the profile was, Mr Sainsbury replied that the product was "the 580mm Aluminium BONDOR upstand seam profile we saw in the workshop". In their response of 12 March 2019, the Larsens reiterated their commitment "to our original specs of Maxline 340 and/or Lysaght Imperial Standing Seam with a maximum of c320mm between ribs in Monument colour".
4. Following receipt of the Larsens' email, Tastec confirmed on the same day that it would procure the cladding panels. As the Maxline 340 was not a material that was available within the structural system of the Ecoshelta pods, the subroof and subwall structure would be "a base ecoshelta standard composite structural panel with maxline 340 cladding over". The following day, an internal Tastec email prepared by Mr Sainsbury identified the need to investigate options for optimum cost-effective roofing panels, and to set up an order for the Maxline 340.
5. An employee of Tastec, David Butler, undertook those inquiries. In his response to Mr Sainsbury, dated 13 March 2019, Mr Butler referred to having sought options and pricing for basic affordable roofing panels but noted: "Still expect to pay $80-$100 p/sqm plus the Maxline. It's going to be an expensive roof." In a subsequent email dated 28 March 2019, after obtaining a quote for the Maxline 340 on a per square metre basis, Mr Butler informed Mr Sainsbury that it was necessary to have all details sorted before making the order, "so that I can order the right sheet lengths". Mr Butler wrote: "This isn't the kind of stuff that you flip around and cut on site", and "at $75 p/sqm there's no room for errors".

The RFI Response and the alleged representations

1. Mr McAuley sent the Larsens an email on 24 May 2019, which attached a document dated 23 May 2019 and titled "Construction RFI Responses", signed by Mr Sainsbury ("RFI Response"). Although the RFI Response was central to the Larsens' misrepresentation case, they relied on the correspondence that preceded it as providing necessary context. They also relied on the covering email, in which Mr McAuley relevantly stated that the change in material was "noted and understood" but that "in order to use a more appropriate profile to better suit the job, we have worked to develop the custom aluminium cladding", the benefits of which "[outweigh] the functional use of the Maxline 340 as outlined in the attached RFI responses".
2. The RFI Response referred to "the issues raised in the Owners email RFI of the 21st May" but appears to respond to the issues the Larsens raised in their email of 20 May 2019, to which I have referred above at [92]. In relation to cladding, the RFI Response provided as follows: "The mock-up issued is of the proposed customised extraline 294 mm spaced standing seam - all in aluminium alloy. The rib spacings are at 294mm centres double the typical product and about the same spacing as the proposed 304mm NailStrip product. 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. It is a customised option, covered by the Bondor manufacturer's warranty, and worth the higher base product cost we believe, which can be offset against site costs and time and materials costs to batten and overclad all elements. We are having a full sized sample prototype prepared to demonstrate flashing systems. The product will allow for the usual Ecoshelta 75mm wall thickness which allows the main glass doors to slide past full opening as intended. The Maxline 340 and other high profiles with clip systems and hidden fixings will project some 74mm past the wall and column lines and will stop the doors sliding past - or we can reset the wall panels to allow the deep profile to sit flush with internal linings projecting in from column alignments on the front facades only, which would be minimally noticeable." (Emphasis added.)
3. Under the heading "Cladding Options", the RFI Response described the proposed solution as "BONDOR Special Order - Customised ExtraLine 294mm spacing Standing Seam Aluminium Full Composite Panel. - Joint venture special customised system developed by Ecoshelta and Bondor - for this project only". Above two photographs of the "Extraline 294mm", Tastec set out the following nine points: "a. We believe this is the optimal solution and will save considerable (sic) on site time and costs offset against higher panel base costs. b. Single element without extra depth for battens and ridging. c. 125mm thick vs 185mm - 255mm d. Allows doors to slide past - no bulky corner and opening flashings. e. More costly to prefab but considerably less site assembly time. f. These can be done as completely prefab panels. g. Better, stronger, longer lasting - compatible materials - extended 15 yr warranty from BONDOR. All installation warranties to Statutory warranty provisions as per Maxline 340 etc. h. Highly resistant to corrosion, hail and mechanical damage. i. Owners to confirm option approval."

Were the representations misleading or deceptive?

1. When determining whether the conduct that the Larsens allege that Tastec engaged in was misleading or deceptive, it is necessary to consider the character of Tastec's conduct in relation to the Larsens, bearing in mind what matters of fact each knew, or may be taken to have known, about the other as a result of the nature of their dealings and the conversations between them: Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [37]; [2004] HCA 60 ("Butcher"); Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [27]-[28]; [2009] HCA 25 ("Campbell v Backoffice"). The conduct of the person alleged to have engaged in the misleading or deceptive conduct must be viewed as a whole: Butcher at [109], cited with approval in Campbell v Backoffice at [102]; Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45; [2000] HCA 12 at [98]-[99]. The question is an objective one that the court must determine for itself: Butcher at [109].
2. The Larsens submitted that the first representation was false or misleading because the "Extraline 294" panel was the Bondor 580 panel they had been shown in Sydney, with a t-strip glued on to it. In his evidence, Mr Sainsbury accepted that Tastec had not described the Extraline 294 product in a way that referred to the Bondor 580. However, Tastec submitted that it was accurate to state that the panel that it proposed to the Larsens was not the same Bondor 580 panel they had been shown in February, emphasising that Mr McAuley said in the RFI Response that the Modified Bondor 580 was "not the same panel option" (emphasis added). Apart from the t-strip, the panel was of a different composition, now aluminium instead of steel. It also had different dimensions as compared with the standard Bondor 580 panel.
3. In relation to the composition of the Bondor 580 as proposed in May 2019 being aluminium rather than steel, I do not accept the submission that there was a such a change. From the first occasion on which Tastec raised the Bondor 580 with the Larsens, in December 2018, Tastec described that panel as an aluminium product (see [73] above). There was a difference between the SIPs to which the Maxline 340 was to be affixed pursuant to the Contract, which were steel products, and the Bondor 580 panel, which was an aluminium composite panel, but that does not assist Tastec as to a difference between the Bondor 580 as it was shown to the Larsens at the workshop and as it was later proposed under the name Extraline 294.

Did the Larsens rely on the representations?

1. The Larsens accepted that Tastec was not forcing the option they put forward upon them, and they were not forced to accept the move to Extraline 294 panels under Variation 6. Nonetheless, they submitted that Tastec's misleading or deceptive conduct induced them not to proceed with the Maxline 340 and to accept an alternative option. Contrary to her Honour's conclusion about reliance, they submitted that the clear inference from the correspondence was that they were reluctant to change the cladding system, and they agreed to the change in Variation 6 because of the representations that Tastec had made to them. The Larsens submitted that they expressly said as much in their email of 26 May 2019, in which they thanked Tastec "for this final variation offer that notes all changes and additions discussed and detailed in our emails over the past couple of weeks".
2. Senior Counsel for the Larsens submitted that in concluding that reliance had not been established because of their direction to Tastec to proceed with the unmodified Bondor panels, her Honour failed to consider reliance at the relevant time, namely, at the time of entry into Variation 6. By the time the panels were delivered to the site on 18 June 2019, the whole of the contract price, save for some $4,000, had been paid. At that time, he submitted, the Larsens "found themselves realising that despite what they've been told, what they've been given was what they had expressly said they didn't want at a time when they handed over all the money, and assembly of the panels was about to commence". Putting the t-strip back on did not put the Larsens back in the position they would have been in but for the representations. Rather, the position they would have been in but for the representations was with the Maxline 340 roof that they had contracted for. That her Honour found to the contrary was submitted to be related to her initial misconception of what Tastec had promised to provide in the Contract, which was a non-composite panel comprised of a SIP and the Maxline 340 sheeting.
3. Tastec, on the other hand, submitted that the Larsens had not established reliance in circumstances where they had a choice as to whether or not to use the panels that arrived on site. In deciding to reject the product with the t-strip and proceed with the Bondor 580 panel alone, the Larsens could not establish that the loss was caused by the defendant's conduct: Sellars at 367-368. Alternatively, Tastec relied on the same authority as the primary judge, to the effect that where a party becomes aware of the truth about a misrepresentation and proceeds with a course of conduct, it is not entitled later to claim damages for being misled: Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653 at [607]-[610]; [2008] NSWCA 206.

Question of loss and damage

1. The Larsens contended that the Contract entitled them to a composite panel with a Bondor base that was clad in the Maxline 340 sheeting. Their reliance on Tastec's conduct meant that they did not get that, and instead entered into Variation 6. The loss that they claimed was "the cost of installing Maxline 340 as quantified by Stephen Bolt, a quantity surveyor (whose evidence was not challenged)". This was a more confined basis on which to claim damages than the Larsens had sought before the primary judge. In particular, the Larsens abandoned the aspect of their claim which related to the Cracking Damage (see [22] above). In reply, Senior Counsel for the Larsens confirmed that their measure of damages was as follows: "We don't say pull the [Bondor] 580 off and put another type of SIP on as it was originally contemplated. A sensible approach would be to clad over what is there. That has been costed, and I accept what my learned friend says as part of a larger costing exercise, but having regard to the narrower case on appeal, if that were to go back, that would need to be costed. That can be done because Mr O'Mara said it can be done. I accept that his evidence was criticised and rejected, but the proposition that one has to cost that doesn't undermine the fact that somebody could come up with the way in which that would be done and then a quantitative surveyor could cost that [a]lone, excluding the other aspects that we claimed in the Court below."
2. Counsel for Tastec submitted that the case that the Larsens ran below was one about cladding defects, whether constituting a breach of contract or s 18 of the ACL, or a claim under the Design and Building Practitioners Act. Counsel submitted that the claim for the Cracking Damage in ASOC [24(c)] related directly to the Cladding Deficiencies in ASOC [24(b)], of which it was alleged to be the consequence. In circumstances where the Larsens did not press the claim in [24(c)] in relation to the Cracking Damage, and none of the Cladding Deficiencies to which [24(b)] referred had been established, Counsel for Tastec submitted that the Larsens could not now advance a separate claim based on a representation case that related to the look of the panel alone. Further, the feasibility of over-cladding the existing panel was not supported by evidence from any person at the trial (aside from Mr O'Mara, whose evidence was rejected by her Honour).

Ground 1: Identity of contracting parties

1. By Ground 1 of the Amended Notice of Appeal, the Larsens alleged that the primary judge erred "in finding that the Larsens entered into the contract in their personal capacity and not as trustees for the Larsen Superannuation Fund". Apart from the question of costs, this ground of appeal can only be relevant to the extent that the breach of contract claim is maintained on appeal. That claim is now limited to the leaking of the windows and doors, which is the subject of Ground 4. The Larsens' claim relating to the doors arose out of Variation 6, which her Honour found was a collateral contract to which the Larsens were parties in their capacity as trustees. In circumstances where I have found, for the reasons outlined below, that the Larsens have not made out Ground 4, it is unnecessary to determine this ground of appeal. However, as it may also be relevant to costs, I will deal with it briefly.
2. The Larsens submitted that, as they owned the Property as trustees of the Fund, it was only in that capacity that they, as "owners", could have entered into the Contract with Tastec. The absence of the words "as trustee" from the Contract was not determinative. This position was said to align with the pre-contractual facts and the post-contractual conduct of the parties, as evidenced by (among other things) the invoice that Tastec issued shortly after the Contract was executed, which referred to them as trustees of the Fund. They also relied on Variation 6, which was prepared by Mr Sainsbury and which described the Larsens as trustees of the Fund. The Larsens submitted that the variation could only vary a Contract to which the Larsens were a party as trustees of the Fund. It followed, in their submission, that the primary judge erred in finding that they had no contractual relationship with Tastec pursuant to the Contract, and that as a result no statutory duty of care was breached (or, indeed, owed).
3. Tastec did not make any oral submissions on this ground. In its written submissions, it argued that the primary judge correctly applied the principles of contractual construction to the evidence in determining that the Larsens had entered into the Contract in their own right, rather than as trustees of the Fund. Counsel for Tastec pointed to a number of factors to support this conclusion, including the Larsens' self-identification as plaintiffs in the statement of claim before it was amended; the multiple references in contractual and property documents to "Floyd and Derek Larsen" without reference to the Fund; the absence of evidence of the Contract being novated or assigned to the Larsens as trustees; and the absence of evidence of the Fund having purchased the Property.

Ground 4: Windows and glazed external doors

1. The Larsens alleged that in respect of the windows and external doors that Tastec supplied, the primary judge erred: 1. in failing to determine whether the windows and external doors were fit for purpose; 2. in finding that their expert, Mr Smithson, made various assumptions that were not correct, including that all windows were assembled off-site before delivery to the Property; and 3. in finding that there was no defect in the windows despite their failure to comply with the conditions of the development consent.
2. Although the Larsens alleged these three errors, they did not address the third (relating to the development consent) in their written or oral submissions on this ground. Their main complaint was that the primary judge erred in dismissing their claim that the windows and external doors were without defect, when there was evidence of water leakage on two separate occasions in February 2020. Relying on Part 3.6 of the Building Code of Australia, and the Guide to Tolerances, they submitted that water entry was not permitted. It followed that Tastec had breached the Contract (assuming Ground 1 was made out) and the statutory warranties in the Home Building Act 1989 (NSW).
3. The Larsens took particular issue with her Honour's qualification that there had been no evidence of leakage "other than some water ingress observed after two significant rain events". Senior Counsel for the Larsens submitted that the leaking during the two rain events was indicative of precisely the defect about which they complained; whether that occurred when it rained heavily was neither here nor there. In reply, he relied on a statement of Mr Larsen during cross-examination, that "the house was leaking", as demonstrating that leaking had occurred beyond those two rain events.
4. In response, Tastec submitted that the windows complied with the proper standards for the location of the house, and were not defective. The two occasions of water leakage on which the Larsens relied occurred during extreme weather events far exceeding the normal conditions that the windows were designed and required to withstand.
5. The primary judge made a finding that in the course of the significant rain events on 8 February 2020 and 11 February 2020, there was water entry into the house constructed on the Property. That finding was consistent with the evidence of Mr Sainsbury: in response to the evidence of Mr Larsen about the events of those dates, he accepted that water ingress may have occurred. In so far as the Larsens relied additionally on the statement of Mr Larsen that "the house was leaking", that evidence was given under cross-examination and no further detail was elicited.

Ground 6: Internal doors

1. Finally, the Larsens alleged that in respect of the internal doors, the primary judge erred in: 1. finding that the requirement for "solid timber" in the Contract was for sliding doors, not swing doors; 2. finding that the four solid timber internal swing doors were not part of Tastec's contract; and 3. failing to find that Tastec breached the requirement to supply solid timber swing doors.
2. In the course of the hearing, it was agreed that the subject of this claim was two swing doors, not four doors. Consistently with its monetary value, this ground was addressed briefly in the Larsens' written and oral submissions. In short, they submitted that while the primary judge was correct in finding that Variation 6 changed the requirement for sliding doors to swing doors, she erred in finding that the "solid timber" requirement only applied to the sliding doors, and that providing solid timber swing doors was not part of the Contract. The Larsens submitted that in supplying only "solid core" doors, rather than solid timber doors, Tastec breached its contractual obligations and was liable for the replacement cost.
3. In response, Tastec submitted that the effect of Variation 6 was to distinguish the solid core doors from cheaper, hollow versions, in circumstances where a fully timber door would not be expected to be installed internally. There was no evidence, in Tastec's submission, that what was provided was not properly considered a solid timber door. A proper reading of Schedule 2 of the Contract and Variation 6 demonstrated, in Tastec's submission, that what was promised was two sliding doors to the bathroom, two swing doors to the bedroom, and two sliding doors to the laundry and WC; and there was no merit in the Larsens' claim that it failed to meet these requirements.
4. Although the primary judge's reasoning on this issue was not altogether clear, the conclusion that her Honour reached was the right one. Schedule 2 of the Contract, which set out the line-item work costs, included a reference to "Solid timber internal doors - standard with face mount slider systems & latch", at $445.00 each, with six required. Variation 6 made changes in relation to four of the six doors: 1. In relation to two of the doors, which were intended for the bedrooms, the face sliding doors were substituted "with swing door systems including standard passage latch handle". 2. For the other two doors, intended for the bathrooms, the face sliding doors were substituted "with Cavity Slider doors systems".

Conclusion

1. In light of the Larsens' success on Ground 1A of the Amended Notice of Appeal, the appeal should be allowed. The order that her Honour made on 17 December 2021 entering "verdict and judgment for the defendants jointly and severally against the plaintiffs jointly and severally" should be set aside. The Larsens sought an order in lieu thereof in the following terms: "Judgment for the appellants on the Amended Statement of Claim". An order in those terms is not appropriate in circumstances where the Larsens were not successful on their claim in contract (which related to the claimed defects and appears to have taken up the bulk of the 17-day hearing below). To the extent that the Larsens appealed from her Honour's findings on that claim, they were not successful in establishing any error.
2. In relation to remittal of the question of relief under ss 236 and 237 of the ACL, the Larsens have sought that the matter be remitted to a different judge. Senior Counsel for the Larsens submitted that her Honour made substantial credit findings against the Larsens, and the assessment of damages could be addressed on the evidence as admitted and the transcript. Counsel for Tastec submitted that in so far as her Honour made adverse credit findings, they were not made in relation to the quantity surveyor, and the credit findings would otherwise not form part of any assessment of relief. A remittal to her Honour would also, he submitted, be more efficient in circumstances where the primary judge has the knowledge of the matter. Although the length of the trial is a relevant factor, in light of the reasons of this Court it would be efficient and appropriate for another judge to hear the matter, given the adverse credit findings involve the Larsens and part of the confined issue that remains concerns what they would have done in the absence of the misleading or deceptive conduct.
3. There remains the question of costs. I consider that it is appropriate to award the Larsens their costs of the appeal. Although they were not successful as to all of the grounds, they have succeeded on Ground 1A which was the most significant of the grounds and took up the most time in the two-day appeal.
4. The Larsens also sought to set aside the primary judge's order as to costs and in lieu thereof an order that the respondents pay the costs below. The orders of the primary judge dismissing the proceedings, dated 17 December 2021, included an order that the Larsens jointly and severally pay the respondents' joint and several costs in respect of the whole proceedings (Order 6), and a further order granting leave to the parties to apply within 14 days for a variation of the costs order (Order 7). Although it was not included with the appeal books, at the conclusion of the appeal hearing it emerged that her Honour made further orders as to costs on 4 March 2022, following an application that the respondents made for indemnity costs. A copy of her Honour's further orders, together with her Honour's reasons on the application, were provided to the Court after the hearing.

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