Plaintiff v Defendant

NEGLIGENCE - Negligent misstatement - Announcement of government policy - Whether duty to take reasonable care in making announcements or to correct statements previously made - Whether reasonable reliance on announcements possible - Whether actual reliance.

TRADE PRACTICES - Whether design, implementation and administration of government policy constituted carrying on a business - Whether such conduct was in trade or commerce - Trade Practices Act 1974 (Cth) s 2A, 52.

CONTRACTS - Nature of agreement created by documents defining eligibility for participation for subsidy in Home Insulation Program - No contract of the type alleged - Repudiation.

1 This proceeding is a group proceeding brought pursuant to Part IVA of the Supreme Court Act 1986 (Vic). The plaintiffs claim damages for losses said to arise out of one aspect of the fiscal stimulus program implemented by the defendant early in 2009 in response to the Global Financial Crisis (GFC), namely what became known as the Home Insulation Program (HIP).

2 From its incorporation in Queensland on 20 May 2008, Roo Roofing Pty Ltd (Roo Roofing) has carried on business as a roofing contractor and an installer of roofing insulation.

3 Matsuh Pty Ltd (Matsuh), incorporated on 9 July 2003 in Queensland, has carried on business under the name Cellulose Insulation Manufacturing Co (CIMCo) as a manufacturer of ceiling insulation, a business that commenced in 1978 and was purchased by Matsuh on its incorporation. Prior to the termination of the HIP, CIMCo's main customer was a related party that installed insulation for consumers.

4 Both Roo Roofing and Matsuh are companies of which Matthew James Hannam (Hannam) is a director.

5 Other companies in Hannam's group of companies as at February 2009 and following included Environmentally Safe Natural Insulation Pty Ltd (ESNI). This company was incorporated in 2003 and carried on business as an installer of insulation, including as a contractor to other insulation companies and as a wholesaler of insulation products. Over 90% of ESNI's business was retrofitting insulation in established homes. ESNI ceased trading on 31 December 2012, was then put into administration and is now in liquidation. ESNI is not an eligible participant in the group proceeding.

(a) was registered on the HIP 'installer provider register' on 24 June 2009;

(b) submitted 75 work orders pursuant to the HIP between 14 August 2009 and 13 April 2010, each of which were the subject of payments by the Commonwealth;

(c) was paid $97,553 by the Commonwealth in respect of the work orders it submitted during the period of operation of the HIP; and

(d) continues to trade subsequent to the termination of the HIP.

7 The plaintiffs identified the group members to whom the proceeding relates to be persons or corporations falling within one or more of the following sub-groups (collectively referred to as the 'Insulation Industry'); being persons who, at material times, either carried on business in Australia and/or were incorporated in, citizens of, or resident in Australia.

8 The first sub-group was defined in the pleadings as owners, being persons who owned or partly owned a business directly or indirectly in their capacity as one or more of shareholder or unitholder, or as a beneficial owner of shares or units, that guaranteed some or all of the debts and obligations of such businesses being an installer business, a manufacturer business and/or a supplier business that installed, manufactured and/or supplied insulation in a home or homes in Australia between sometime after 3 February 2009 and 19 February 2010 (the relevant dates) and pursuant to the terms of the program that was renamed the HIP on about 2 September 2009. Such persons were either pre-existing owners who owned or partly owned a business on or before 3 February 2009 (owners) or new owners who owned or partly owned a business that commenced on or after 3 February 2009 and who suffered loss as a result of the early termination of the HIP on 19 February 2010 and who remain or will become legally entitled to commence and maintain a claim against the defendant in respect of that loss.

9 The second sub-group was installers, being persons who operated a business that installed insulation in a home or homes in Australia between the relevant dates and pursuant to the terms of the HIP. Again, that group could consist of pre-existing installers and new installers, depending on whether they commenced to operate their business prior to or after 3 February 2009. This category of group members was limited to installers who suffered loss as a result of the early termination of the HIP and who remain or will become legally entitled to commence and maintain a claim against the defendant in respect of that loss.

10 The third sub-group was manufacturers, being persons who operated a business that manufactured insulation or insulation products for retrofitted installation in a home or homes in Australia between the relevant dates. Again, this category includes both pre-existing and new manufacturers who suffered loss as a result of the early termination of the HIP and who remain or will become legally entitled to commence and maintain a claim against the defendant in respect of that loss.

11 The final sub-group was suppliers, persons who operated a business that supplied as a retailer or wholesaler and/or distributor of insulation or insulation products for use in retrofitted installation in a home or homes in Australia between the relevant dates. Again, there are two subcategories being pre-existing suppliers and new supplies who suffered loss as a result of the early termination of the HIP.

12 On 3 December 2007, Prime Minister Kevin Rudd and his ministry, including Julia Gillard as Deputy Prime Minister, Wayne Swan as Treasurer, Lindsay Tanner as Minister for Finance and Peter Garrett as Minister for the Environment, were sworn in.

13 The Prime Minister and Ministers Gillard, Swan and Tanner constituted the Strategic Priorities and Budget Committee of Cabinet (SPBC). This Cabinet committee was the defendant's principal decision making body in respect of the HIP. Dr Ken Henry, in his role as both Treasury Secretary and as a member of the Board of the Reserve Bank, was a senior advisor to, and a regular participant in meetings of, the SPBC in respect of the government's response to the events with which this proceeding is concerned.

14 The government departments and public servants advising the SPBC and otherwise involved in the design, implementation and administration of the HIP will be identified shortly.

15 The plaintiffs relied on four distinct causes of action as a basis for seeking damages or statutory compensation orders against the defendant. First, the plaintiffs alleged that the defendant owed them a duty to take reasonable care to avoid economic harm to them in the design, implementation and administration of the HIP. Secondly, the plaintiffs contended that the defendant owed them a duty to take reasonable care in making statements about the HIP or alternatively a duty of care to correct statements once it became aware that such statements were misleading. Thirdly, the plaintiffs alleged that the defendant engaged in conduct in trade or commerce that was misleading or deceptive or likely to mislead or deceive in breach of s 52 of the Trade Practices Act 1974 (Cth). The fourth cause of action claimed that the defendant repudiated a contract that had come into existence between the plaintiffs and the defendant.

16 I have determined that the defendant did not owe the duty of care alleged against it and that the causes of action in negligence and negligent misrepresentation fail. Further, the defendant was neither carrying on a business nor engaging in conduct in trade or commerce and its activities that are the subject of investigation in this proceeding were not amenable to regulation under the Trade Practices Act. Finally, there was not a contract in the form alleged by the plaintiffs that was repudiated by the defendant when it terminated the HIP.

17 Those findings require that the proceeding be dismissed, which is the judgment that will be entered in favour of the defendant.

18 After setting out my findings of fact in relation to the defendant's activities and conduct that were the subject of investigation at trial, I will explain my reasons for dismissing each of these causes of action.

19 I then turn to examine the issues raised on the question of breach of duty, which involves returning to make further, more detailed, findings of fact. After expressing my reasons for concluding that had the plaintiffs persuaded me that the defendant owed them a duty of care, it would have breached that duty of care, I examine the issue of causation. The plaintiffs did not persuade me that their claimed losses were caused by the defendant's conduct.

20 I have also made findings in relation to the losses claimed by the plaintiffs. This exercise involved firstly identifying the period that the HIP would have run but for early termination, and then examining the particulars of loss advanced by the plaintiffs to express findings as to quantum.

21 These reasons conclude by identifying my answers to the common questions stated by the parties.

22 Finally, I have included as an appendix the schedule provided by the plaintiffs that identifies firstly the names and functions of the key personnel referred to throughout the evidence, and secondly a list of the abbreviations that have been adopted throughout these reasons.

23 The evidence at trial was primarily documentary. It was supported by oral evidence from different categories of witness. The primary witness for the plaintiffs was their managing director, Hannam. At an early stage in the proceeding Enviroflex Pty Ltd (Enviroflex) had been the lead plaintiff. Enviroflex had participated in a Commonwealth compensation scheme and, in that context, had granted the defendant a release. Subsequently it was excluded from the group in the proceeding by definition. Enviroflex's general manager, also a director and shareholder, Mr Andrew Arblaster (Arblaster) also gave evidence. He had been an office bearer in the Cellulose Insulation Trade Association (ACIMA) and following the HIP, a director of Installation Australasia. Mr Dennis D'Arcy (D'Arcy) was the CEO of the Insulation Council of Australia and New Zealand (ICANZ). Mr Peter Ruz (Ruz) had been the national marketing manager employed by CSR Bradford (CSR), the marketing manager for Fletcher Insulation Pty Ltd (Fletchers) and an active participant in ICANZ.

24 Mr Anthony Plevey (Plevey), a training specialist, was relevantly employed by EE-Oz Training Standards Australia (EE-Oz). Mr Malcolm Richards (Richards) was the CEO of Master Electricians Australia (MEA). Mr Stewart was the proprietor of an insulation installation business, Insul-Safe.[1] Mr Hook was the Co-ordinator-General for South Australia.

25 The plaintiff also called Mr Matthew Levey (Levey), who was a policy adviser in the office of Minister Garrett and the former Prime Minister Kevin Rudd. In that category the defendant called evidence from former Minister Lindsay Tanner, Dr Ken Henry and the former Commonwealth Co-ordinator-General Mr Mike Mrdak (Mrdak). The defendant called the following witnesses in relation to the circumstances of installer deaths: Christopher McKay, Benjamin McKay, Nicholas Lindsay (Lindsay) and Gavin Thompson (Thompson). On issues concerning training for installers, the defendant also called Dr Melissa McEwen (Dr McEwen) and Mr Brendan Mulhall (Mulhall).

26 The plaintiffs submitted that the defendant's failure to call certain witnesses was relevant. The missing witnesses were Ms Robyn Kruk (Kruk), Mr Kevin Keeffe (Keeffe), Mr Martin Hoffman (Hoffman), and Mr William Kimber (Kimber), all senior public servants involved with the HIP. This submission is considered in due course.

27 In 2008, the world experienced a Global Financial Crisis (GFC). Advanced economies experienced an unprecedented 7.5% decline in real Gross Domestic Product (GDP) during the fourth quarter of 2008 and economic output continued to fall almost as fast during the first quarter of 2009. On 15 September 2008, Lehman Brothers, a large global financial services company based in the United States, filed for reorganisation under the bankruptcy laws of the United States. On 28 and 29 September 2008, the United Kingdom (UK) and European governments bailed out several major financial institutions including Bradford and Bingley (UK), Fortis Bank (Benelux), Dexia (FrancoBelgian), Hypo Real Estate (Germany), and Glitnir (Iceland). The Irish Government guaranteed the deposits of six major banks.

28 In early October 2008, there was an unprecedented co-ordinated cut in interest rates by the United States Federal Reserve, European Central Bank and four other major OECD central banks. As at 10 October 2008, the world economy was entering a major downturn in the face of the most dangerous financial shock in mature financial markets since the 1930s. The situation was exceptionally uncertain and subject to considerable downside risks. The immediate policy challenge was to stabilize financial conditions, while nursing economies through a period of slow activity and keeping inflation under control.

29 The Australian and New Zealand economies were slowing down noticeably, after prolonged economic expansions driven by commodity and housing booms. Real GDP growth in Australia was projected to fall below potential, to about 2.5% in 200809 from 4.25% in 2007. From 12 October 2008, the Australian Government guaranteed bank deposits in Australian-owned banks, locally incorporated subsidiaries of foreign banks, credit unions and building societies for a period of three years.

30 By November 2008, Australian equity prices had fallen by approximately 50% from their peak a year earlier. As at 15 November 2008, there were serious challenges to the world economy and financial markets. On 15 November 2008, the G20 held its first 'Summit on Financial Markets and the World Economy' in Washington DC. The G20 participants issued a declaration which referred to 'serious challenges to the world economy and financial markets'. The G20 agreed that immediate steps were needed to restore growth, avoid negative spill overs and support emerging market economies and developing countries. This included the use of fiscal measures to stimulate domestic demand to rapid effect.

31 In January 2009, the OECD rated Australia's Business Confidence Index at 97.18%. This was the lowest BCI for Australia since November 1974 when it was at 95.89%. The volume of world trade in the three months to January 2009 was 40% lower than the previous three months.

32 By 3 February 2009, many advanced economies around the world were in recession, with the IMF forecasting a collective budget deficit of 7% of GDP for advanced economies. The world was in the worst economic crisis since the Second World War and decisive action was required in response to the global recession.

33 On 28 January 2009, the IMF predicted that output in advanced economies would contract by 2% in 2009, the first annual contraction since the Second World War. On 3 February 2009, as a result of the sharp deterioration in global economic conditions, the Treasurer and the Minister for Finance released an 'Updated Economic and Fiscal Outlook' which set out the Australian Government's revised fiscal strategy, and updated economic forecasts and key fiscal aggregates.

34 By March 2009, world growth had fallen from 3.8% in the June quarter of 2008 to -2.8% in the March quarter of 2009. In seasonally adjusted terms, Australia's GDP increased by 0.4% in the March quarter. On 4 March 2009, the Australian Bureau of Statistics (ABS) announced that, in seasonally adjusted terms, Australia's GDP decreased by 0.5% in December 2008.

35 On 14 October 2008, the Prime Minister and the Treasurer announced the first round of economic stimulus as a policy response to the GFC called the 'Economic Security Strategy'. The government determined there was a need to introduce a fiscal stimulus package urgently.

36 Dr Ken Henry explained the policy advice that prompted this response. Dr Henry had monitored the emerging developments in the GFC. In September 2007 there was a run on a bank in the UK, the first in 150 years, caused by the quality of sub-prime mortgages and derivatives written on sub-prime mortgages and the bank's exposure to them. Dr Henry considered that the risks of greater financial instability and the risk of recession affecting Australia were large and became acutely concerned after US authorities allowed the collapse of Lehman Brothers on 15 September 2008. The global financial system might simply freeze, starving Australia of international capital.

37 To address this crisis the government announced that they would guarantee the entire liability of the Australian banking system and a sizable fiscal stimulus program of $10.4 billion, designed so that much of the stimulus would occur before the end of the calendar year. The general components of the stimulus package were cash payments to lower income households designed to encourage the funds paid over to be spent. Dr Henry explained that, having experienced the recession in the 1990s, it was important to avoid a fiscal response that was too slow to have any of the desired effect. In 2004, Treasury undertook modelling analysis of earlier responses to recession that emphasised the need to immediately inject a large fiscal stimulus into the economy. It was noted that infrastructure programs carried implementation delay when speed was of the essence.

38 At a joint press conference held by the Prime Minister and the Treasurer, the Prime Minister described the GFC as: '[t]he economic equivalent of a rolling national security crisis'. The Treasurer said that:

We are in the midst of the worst financial crisis ever to confront the modern market economy. And the sooner that governments act to protect their people the better. ... The situation is moving very fast, and it does require decisive ... action. And decisive action requires a fiscal stimulus.

It is very important to act early and decisively. If you are to learn anything from economic history it is this: at a time when economies need stimulus support, don't leave it too late. There are critical messages and lessons to be learned from history here, which is act decisively, act responsibly and act early. And we have done that and we are acting ahead of the curve, looking to where our economic circumstances would be well into next year.

40 Minister Tanner, in evidence, recalled very strong advice that the government should act quickly and get money flowing into the economy quickly. He described his memories of the stimulus package in the early 1990s that took several years to take effect and he readily accepted advice that it was important to move quickly.

41 The government designed the Economic Security Strategy to support continued positive growth in the Australian economy, strengthen the national economy and to provide practical support for Australian households given the risk of a deep and prolonged global economic slowdown. It contained five key elements, including nation building.

42 The High Court considered the government's first fiscal stimulus package in Pape v Commissioner of Taxation (Pape).[2] French CJ, Gummow, Crennan and Bell JJ assessed the exercise of the Commonwealth's executive power in response to the GFC to be valid.

43 Economic circumstances continued to deteriorate, necessitating a second set of stimulus measures. Dr Henry stated:

By early 2009 we in the treasury anyway had formed the view that an Australian recession was highly probable, almost notwithstanding any action that was taken, that we should nevertheless advise the Australian government to do a lot more in an effort to ensure that the recession which we expected to occur, that the recession would be shallow, and that it would not persist for too long.

44 Treasury identified building and related trades as part of the economy that was particularly vulnerable in the very early part of an economic downturn. Dr Henry's advice was that the government needed to avoid implementation lags that would have the fiscal impact of a stimulus package being felt in the Australian economy once it had already started to recover. Treasury proposed a package designed to plug a gap in aggregate demand; it being its assessment that a big gap in aggregate demand would present itself in 2009 and that in subsequent years the Australian economy would from 2010 start to recover.

45 Mr Rudd, speaking generally, identified two sets of policy issues that underpinned the government's interest in the HIP. The first policy issue, which predated the global financial crisis, was a commitment to energy efficiency in order to reduce greenhouse gas emissions. During the course of 2007-08 measures for renewable energy and a price on carbon were contemplated, and the government was developing an effective national energy efficiency strategy. During 2008, Minister Garrett's environment department had developed an 'energy efficient homes' strategy. The government's response to the global financial crisis that hit around the second week of October 2008 was the second set of policy considerations. Cabinet debated a range of measures necessary to stimulate the economy.

46 As one of those measures, the HIP drew on pre-existing work on the energy efficient homes program, which dovetailed the interests in reduction of carbon emissions with providing useful employment opportunities in a relevant area of the economy by insulating people's homes.

47 In January 2009, Cabinet directed that the proposal for what became the HIP be further considered and developed by the public service in consultation with industry, and return to Cabinet for further and final consideration. The Department of Environment undertook developing a proposal for the HIP that was to commence on 1 July 2009. Cabinet was not advised of any safety risks affecting either workers or householders when the matter came back for final consideration in June 2009.

48 Dr Henry expressed his concern when the HIP was first raised with him as a possible fiscal stimulus measure, to be:

Whether the package could be implemented in a sufficiently timely manner, and the key consideration there was the capacity of the industry to be able to implement the package; Did we in Australia have sufficient quantities of insulation material to be able to implement the package? Was the workforce sufficiently large to be able to implement the package, those sorts of things, those were the foremost considerations in my mind.

49 Dr Henry stated that his intention was to achieve maximum stimulatory effect and a stimulatory measure was less likely to receive his support if industry capacity was not present, or had there been considerable delay in accessing capacity to roll out the HIP.

50 Minister Tanner recalled the advice that a second stimulation package of considerably greater magnitude was required and that at some point the HIP became one of the options on the table. He identified the features of the HIP that made it a suitable candidate for consideration as part of a fiscal stimulus package. It was important to ensure that the money being pumped into the economy would be spread relatively widely across different sectors, including the particular sectors most likely to contract quickly such as construction and retail. Further, it was important that it would flow to the most likely people to be retrenched as a result of an economic contraction. Mr Tanner recalled Dr Henry's advice to the SPBC - that it was important to move quickly and that to engender confidence in the economy, money needed to be moving and be seen to be moving - was delivered with strong emphasis.

51 Mr Tanner was not advised of any safety risks arising from the HIP. The only risk that he recalled being discussed was the capacity of industry to provide the raw material because there were only two local manufacturers, a concern that ultimately was satisfied. He accepted that a beneficial impact of the HIP in terms of greenhouse gas emission reductions was understood and identified as a benefit. He was not aware of any encouragement by the government to industry to invest, beyond the mere announcement of the HIP. Mr Tanner accepted that the objective of setting Australia up for a low carbon future was a twin goal, with economic stimulus, of the HIP.

52 In February 2009, the Treasurer and the Minister for Finance published an updated Economic and Fiscal Outlook Statement. The Ministers explained that the outlook for the global economy had deteriorated sharply, stating '[t]hese are exceptional circumstances and fiscal policy must take a strong role in supporting the economy'.

53 The update confirmed that the government had decided to deliver a $42 billion Nation Building and Jobs Plan to boost the economy. This fiscal strategy was described as using additional spending to deliver timely, targeted and temporary stimulus, with the clear objective of other budget priorities and new policy proposals being met through a reprioritisation of existing expenditure.

The plan is a rapid response to deteriorating global economic conditions ... doing nothing is not an option. It is becoming increasingly apparent that, while still important, monetary policy action alone will not be sufficient to restore growth in demand within a reasonable time period. The government's swift action ensures that fiscal policy, along with monetary policy, is targeted at supporting economic growth and jobs.

55 The objective was to add directly to aggregate demand through direct government investment in the economy, by well-designed discretionary fiscal policy implemented quickly. The Ministers explained that measures needed to be implemented swiftly so that the boost to demand occurred when it was most needed, which meant including measures that take effect in the first half of 2009.

56 The Ministers cautioned that such boosts to the economy also needed to be capable of falling away over time, and to cease operation when no longer needed, as locking in long term spending may pose risks for inflation and interest rates and the government's budget position. Further, spending needed to be carefully targeted to maximise GDP growth, capture spare capacity caused by the global recession and add to investment in the long-term drivers of growth and productivity.

57 One element of the Plan was the Energy Efficient Homes Program (EEHP) that would deliver free ceiling insulation for Australian homes, and would help to tackle climate change. It was expected the insulation program would create a significant number of new Australian jobs that required limited retraining, enabling the benefits to the community to be realised quickly.

58 The EEHP was one of a series of policy measures designed to respond to an economic emergency. Two policy imperatives were to be achieved by its implementation:

(a) the economic goal of creating fiscal stimulus to combat the effects of the GFC; and

(b) the social or environmental goal of reducing energy use and greenhouse gas emissions.

59 Witnesses expressed differing recollections as to the relative weight attributed to these policy imperatives in the decision to implement the HIP. Mr Rudd recalled that the government's commitment to energy efficiency predated the GFC, and that was clearly so. Dr Henry noted the double benefits of the HIP. However, for him the key consideration behind the EEHP was its impact on aggregate demand, that is, its contribution to the fiscal stimulus. Dr Henry observed:

Let me put it this way: were it not for the global financial crisis and the need to find fiscal stimulus measures, I don't know, maybe this program would have been considered by government at some stage, but it would not have been considered by government in February 2009.

I am satisfied that the economic role of creating fiscal stimulus was the dominant policy imperative and the capacity of the program to meet that objective was the primary focus in any assessment of the program's performance.

60 On 3 February 2009, Prime Minister Rudd and Treasurer Swan launched the Nation Building and Jobs Plan, an economic stimulus package spending $42 billion which incorporated six elements:

(a) the Building the Education Revolution program;

(b) a one-off tax bonus to low and middle income families, workers and students;

(c) funding for public and community housing and Defence Force personnel housing;

(d) small business temporary tax breaks;

(e) funding for local community infrastructure; and

(f) the Energy Efficient Homes Program, which in turn comprised:

(i) the Homeowner Insulation Program;

(ii) the Low Emissions Assistance Plan for Renters (LEAPR); and

(iii) the Solar Hot Water Rebate Program.

61 The PM and Treasurer stated that the world was 'caught in the worst economic crisis since the Second World War, a crisis that has delivered recessions in the United States, the UK, Japan and the Eurozone' and that 'the global recession has already pushed the Budget into deficit, even before policy action is taken' and 'decisive action is now required to strengthen the Australian economy in these circumstances... In the midst of this global recession it would be irresponsible not to act swiftly and decisively to support jobs and invest in nation building'.

62 The published media release, 'Energy Efficient Homes - Ceiling Insulation in 2.7 Million Homes' recited the dual purposes for which the EEHP was established, namely 'to support jobs and set Australia up for a low carbon future' and to 'support the jobs of tradespeople and workers employed in the manufacturing, distribution and installation of ceiling insulation during a severe global recession'. The EEHP was also designed to ensure households receive support to take practical action to reduce energy use and save on energy bills.

63 The media release continued that, for the dual purpose of supporting jobs in the industry and reducing carbon emissions, 'the Rudd Government will install free ceiling insulation in around 2.7 million Australian homes.' Relevantly it stated:

For a time-limited period of two and a half years, from 1 July 2009 owner-occupiers without ceiling insulation will be eligible for free product and installation (capped at $1,600) simply by making a phone call.

As an interim arrangement, from today and until 30 June 2009, eligible owner-occupiers who install ceiling insulation in their homes will be able to seek reimbursement (up to $1,600) after the program commences. The Government estimates 2.2 million owner-occupied home will benefit from this program.

64 And, in relation to the Low Emissions Plan for Renters:

To help [rental] households lower their emissions and save money on energy bills, the Government will also double the rebate available under the Low Emissions Plan for Renters for landlords to install insulation in their rental properties - from $500 to up to $1,000 - from today until 30 June 2011.

65 Arblaster saw this media release when Mr Kevin Herbert (Herbert) forwarded it to him. No other witnesses gave evidence that they had viewed or were aware of the media release or fact sheet.

66 Mrdak, the Commonwealth's Coordinator-General in respect of these fiscal responses, described the second stimulus package as a mixture of short, medium and long-term measures. The short-term measures were immediate cash payments into the economy. The medium-term measures were implemented over six to twelve months and designed to maintain confidence, particularly amongst employers, and demand across the economy. Among the medium-term measures were the School Buildings program, the Social Housing program and the EEHP. The longer-term measures were largely infrastructure programs that were designed to ensure sustained demand when the economy geared up to a higher level of activity. Those measures were intended to operate over the ensuing three to four years.

67 The Nation Building and Jobs Plan was designed to provide an immediate boost to economic growth of around 0.5% of GDP in 2008-2009 and around 0.75% to 1% of GDP in 2009-2010. It would temporarily add to the budget deficit but did not lock in permanent increases in government spending. The stated purposes of the Nation Building and Jobs Plan were to:

(a) respond to the severe global recession;

(b) support up to 90,000 jobs in 2008-2009 and 2009-2010; and

(c) provide a boost to economic growth of around 0.5% of GDP in 2009 and around 0.75% to 1% of GDP in 2009-2010.

68 These objectives were to be achieved by a combination of Commonwealth-funded expenditure programs via the states and territories, such as the three-year $14.7 billion Building the Education Revolution, and by direct payments by the Commonwealth to Australian households and citizens. Cash injections into the economy were focused on bolstering continuous spending. Other measures focused on building prosperity were targeted at employment, particularly in sectors like construction and building materials. Treasury recognised that in this sector of the economy much production of materials was domestically based, such that a stimulus package was beneficial for a significant proportion of the workforce substantially affected by the economic downturn.

69 Key Components of the Nation Building and Jobs Plan were as follows.

70 Although the Nation Building and Jobs Plan had six elements, this proceeding involves just one component, the EEHP. The HIP was in turn, one of three components to the EEHP.

71 The Nation Building and Jobs Plan identified the HIP as 'the $2.7 billion insulation program [that] will result in insulation for up to 2.2 million homes (capped at $1,600 per house) over three years'. According to the ABS, in October 2008, 5.08 million Australian dwellings had insulation, with between 65,000 and 70,000 retrofitted insulation installations taking place in Australia per year on average.

72 The HIP was, from the outset, described as 'time limited' and subject to a budget of $2.7 billion. The interim or Phase 1 payments would be a reimbursement of expenditure first made by Australian households. In Phase 2, the Commonwealth would provide 'free product and installation' to Australian households.

73 On 3 February 2009, the Prime Minister and the Treasurer identified the key policy elements of the HIP to be:

(a) The HIP would commence on 1 July 2009 and would run for a time limited period of two and a half years.

(b) In the meantime, an interim rebate arrangement would be in place from 3 February 2009 to 30 June 2009.

(c) Free ceiling insulation would be installed in around 2.7 million Australian homes (comprising 2.2 million owner-occupied homes and approximately 500,000 rented homes).

(d) Owner-occupiers without ceiling insulation would be eligible for a free product and installation (capped at $1,600) simply by making a phone call.

(e) An increase in the subsidy to landlords who install insulation in rental properties under the LEAPR to $1,000 from that date.

(f) As an interim arrangement until 30 June 2009, eligible owner-occupiers who installed ceiling insulation in their homes would be able to seek reimbursement (up to $1,600) after the program commenced.

74 At this time, each of the states and territories had their own established:

(a) public service structures for the design, implementation and administration of government programs on a state/territory wide basis;

(b) offices/agencies with specified roles and responsibilities for such matters as the regulation and oversight of building and construction activity and standards and occupational health and safety; and

(c) offices/agencies with responsibility for fair trading and consumer affairs.

75 On 5 February 2009, the Council of Australian Governments (COAG) endorsed the Nation Building and Jobs Plan and agreed to new national oversight and coordination arrangements to maximise the timely and effective delivery of the Plan. This endorsement was formalised by a National Partnership Agreement (NPA). The NPA, while providing for State delivery of certain key aspects of the Plan, did not agree on any role or responsibility for the states in the delivery of the HIP or specify any communication or co-ordination function between the Commonwealth and the states in respect of the development and implementation of the HIP. The NPA contemplated that Phase 2 of the HIP would be designed, implemented and administered by anticipated cooperation between the Commonwealth and states and territories.

76 The Departments involved in the design, implementation and administration of the HIP were the:

(a) Department of Prime Minister and Cabinet (PMC);

(b) Office of the Coordinator-General (which had been established on 2 February 2009 within PMC) (OCG);

(c) Department of Education, Employment and Workplace Relations (DEEWR); and

(d) Department of Environment, Water, Heritage and the Arts (DEWHA), which ultimately had primary responsibility for the HIP.

77 During January 2009, DEWHA commenced initial design of the EEHP. Initially, there were two schemes in operation; the 'Homeowner Insulation Program' and LEAPR. By 1 September 2009, the two schemes had been rolled into one program re-titled the Home Insulation Program or HIP. On 18 February 2009, the Appropriation (Nation Building and Jobs) Act (No's 1 and 2) 2008-2009, which allocated money to DEWHA for, among other things, the HIP, was assented to.

78 The HIP was initially designed to be implemented as a regional brokerage business model, by which large and experienced firms in the Insulation Industry would be engaged by the defendant to effect installations, or to sub-contract others to do so, on a regional basis by contracts which made provision for such businesses to manage and be responsible for supervision of installers, the training of them, mechanisms for occupational health and safety and general performance of the works (Regional Model).

79 In late March and early April 2009, the defendant varied the model and introduced a model by which householders would engage directly with installer businesses on a Commonwealth register, and the installer would be paid directly by the defendant for the cost of the work, up to the $1,600 ceiling (Direct Model).

80 Under the Direct Model, the defendant set the terms for entry into the register and payment for installations, which required consideration of the necessary and appropriate training and qualifications of installers. This was by reason of the huge scope of industry expansion needed to deliver the program. A large part of the installer workforce would not come to the industry with any prior experience or understanding of the installation of insulation.

81 Up to late March 2009, DEWHA proceeded on the basis that Phase 2 delivery would use the Regional Model, and it consulted with industry on this basis. The change in delivery model to the Direct Model, contrary to the views of DEWHA, was a change to a model favoured by the OCG and public servants in PMC. The change removed experienced industry participants from a head contractor role. Decisions as to the product to be used for a particular application and as to training and qualifications for installer participation would have been made by that head contractor.

82 Stepping back to trace the evolution of the HIP, as Mr Rudd noted in his evidence, throughout 2008 the defendant sought to identify appropriate schemes for improving household energy consumption.

83 This work, and statements in relation to this work, included:

(a) a strategic review of the Australian Government's Climate Change Program;

(b) roundtable discussions concerning household energy efficiency;

(c) a Green Paper in relation to Carbon Pollution Reduction;

(d) the announcement of energy efficiency measures for households and small to medium enterprises; and

(e) the preparation of memoranda within PMC recommending a National Energy Efficiency Strategy.

84 On 2 October 2008, COAG agreed that energy efficiency programs would be resolved by December 2008 and implementation of the energy efficiency strategy would be finalised by June 2009. On 15 October 2008, costings for an energy efficient measure for a four-year period were provided to an Assistant Secretary, and another colleague, within DEWHA.

85 By 7 November 2008, DEWHA's intention was to develop a co-ordinated package with the states and territories in implementing a sustainable homes assistance package. On 28 November 2008, officers within PMC prepared a 'Taskings' document that, among other things, asked DEWHA to provide options for a program to install insulation in under-insulated Australian homes. On 29 November 2008, COAG agreed that the determination of streamlined roles and responsibilities under the National Energy Efficiency Strategy should be deferred for consideration until early 2009.

86 On 1 December 2008, DEWHA internally distributed a document entitled 'Insulating Australian Homes Plan' (IAHP) which discussed an option of installing insulation costing up to $1,500 per household, with the total cost of insulation averaging $1,200 over five years (2009 to 2014). The IAHP would support the installation of insulation in the 4.68 million uninsulated and under-insulated homes at a total cost estimated to be approximately $5.61 billion over five years. The Plan noted that the 'current insulation installation network has additional capacity at the moment, however would have to expand and create new jobs if the government aimed to have all uninsulated houses insulated' but that this was 'a relatively straightforward matter as installers do not require extensive training and can be brought on line quickly'.

87 On 12 December 2008, the Secretary of PMC sought a briefing for the Prime Minister on what a Commonwealth initiative, like the energy efficiency program prepared by the Victorian Government, would look like. The draft brief, dated 18 December 2008, recommended that any energy efficiency package should be delivered jointly with COAG. The brief stated:

joint delivery would improve the effectiveness of the package by leveraging existing state delivery networks. This would be an important benefit for the Commonwealth. A key area where this may be advantageous would be the delivery of energy efficiency audits. The majority of jurisdictions have existing audit programs in place. Audits have the capacity to drive significant improvements in energy efficiency through behavioural change, and a cooperative approach to delivery that utilises these existing programs may allow for a significant increase in the number or intensity of audits that could otherwise be delivered.

88 The brief noted that while joint delivery with the states may delay implementation compared to Commonwealth-only delivery, benefits to be gained far outweighed any delays in program commencement. However, no final, or acknowledged, version of this draft brief emerged at trial and its status was uncertain.

89 On 18 December 2008, DEWHA participated in a teleconference about lessons learned from the UK WarmFront scheme, noting that lessons for Australia to consider included developing national standards, and that interaction with states and territories would be essential. The UK body offered guidance in relation to program design, however there was no evidence that this offer was taken up. On 12 January 2009, DEWHA briefed PMC with a list of existing state and territory household energy efficiency programs, including the energy efficiency rebate program implemented in Victoria known colloquially as the VEET scheme.

90 On 19 January 2009, PMC provided papers to the SPBC in relation to the national energy efficiency strategy. The papers related to a proposal to announce a national energy efficiency strategy, costing $3.7 billion over two years and planned to commence on 1 July 2009. The papers stated that the Insulation Installation Network may require expansion, which will not be a major obstacle as installers do not require extensive training. Further, the papers stated that DEWHA would be responsible for managing delivery of the project and noted that further work on a detailed submission was anticipated for consideration before the March COAG meeting. The papers recorded that there was no business case assessment/formal risk assessment of the proposal.

91 On 19 January 2009, Levey, an advisor to Minister Garrett, noted a conversation with Minister Garrett that recorded the need to prepare a 'one and a half to three pager' that, among other things, would 'identify risks, like can training happen in time'.

Choosing the initial model for the HIP - the Regional Model

92 By 21 January 2009, DEWHA was examining the feasibility of the EEHP and had developed an initial design. DEWHA public servants briefed Minister Garrett about implementation challenges, the challenges presented by fast and large scale roll-out, and the need to ensure that DEWHA had adequate resources. The Department of Finance was concerned about whether the HIP package could be delivered over two years and sought further clarification from PMC on its costings and assumptions.

93 On 23 January 2009, the SPBC directed that officials develop an Energy Efficient Homes Program for consideration. PMC asked DEWHA to provide potential designs and delivery models, with risk assessment and a suite of costings, for a program presumed to run from 1 July 2009 on a two-year roll-out assuming an average cost per installation estimated at $1,200. DEWHA was instructed not to contact industry and to keep the information internally confidential.

94 On 24 January 2009, DEWHA told the Department of Finance that delivery of the program over two years might not be achievable due to the possible lack of industry capacity to either produce the insulation and/or to install the material. DEWHA noted that PMC, 'as the lead agency', had asked DEWHA not to talk with the industry about capacity as 'it might raise expectations' and DEWHA had not found any other source of information to assess industry capacity. DEWHA was assuming that the program would split Australia into numerous regions, approximating the market, with a separate contractor/provider for each region who would employ local installers to carry out the work.

95 On 25 January 2009, DEWHA finalised its paper for delivery of the HIP. It included a risk assessment. The paper, entitled 'Energy Efficiency Homes Program: Implementing the Insulation Component', referred to the 'boom/bust nature' of the HIP. It identified that 'the ability of the industry to respond, particularly on the manufacturing' was 'questionable'. It stated that there were 'significant political risks' if the Insulation Industry was required to shed the 'substantial workforce required to deliver' the HIP over two years when the market 'slumps to current levels'. Further, it recommended the delivery of the HIP over five years (instead of two) because it would provide significant benefits for the industry and Australian households. A more realistic expansion of the industry was likely with a five-year program that would provide adequate time for the industry to adjust and respond to the changes in the market and to make longer-term business decisions.

96 The paper expressed concern about the feasibility of delivering the HIP over a twoyear period, stating that there were significant risks associated with tight timeframes for the implementation of major programs and that tight procurement oversight and regular reporting would be required to meet the deadline of 1 July 2009.

97 DEWHA recommended that a 'regional roll out' model could be tested and improved in consultation with industry before full roll out across Australia. DEWHA had consulted and were aware of earlier insulation schemes in Victoria and England. Public servants had noted the lessons from such schemes.

98 The Prime Minister was subsequently briefed by PMC, as was the SPBC, with a paper that recommended that the HIP be rolled out over a two-year period at a total cost of $2.8 billion (inclusive of departmental expenses). The brief also stated that its 'final design' was 'to be settled between the Prime Minister, the Treasurer, the Minister for Finance and Deregulation and the Minister for the Environment, Heritage and the Arts prior to announcement.' What was significant was that the key decision-making body for the design of the HIP was the SPBC.

99 The briefing to the Prime Minister and the SPBC identified the only risks of the HIP as being: the ability of the industry to respond to the HIP, the fact that a 'rapid expansion' creates a risk that the industry will need to shed the 'substantial workforce required to deliver' the two-year option, the potential for costs to increase significantly, and the potential for insulation to be installed without weather stripping or sealing significant gaps so as to limit its effectiveness. The briefing did not identify inadequate installer training or installer/household safety as risks.

100 PMC had consulted industry prior to the endorsement by SPBC of the two-year rollout. Ruz stated in evidence that he informed PMC that the industry had the capacity to insulate 2.7 million homes in two and a half years, based on his knowledge of both local and international manufacturing capacity.

101 Although the brief departed from the view held by DEWHA and the Department of Finance as to the program term, it made clear that the HIP would be delivered by the Regional Model. It stated:

It is proposed that a series of implementation regions (up to fifteen) be identified by DEWHA and a lead delivery entity be selected through an open tender process to ensure that the assistance can be delivered consistently across the region. It is expected that the lead entity would then implement detailed delivery arrangements with other organisations/businesses in specific locations to ensure coverage of the whole region. The suggested regional approach would allow bulk procurement and sourcing to occur at a regional level. This would limit the administrative issues surrounding bulk procurement by the Commonwealth, while maximising benefits for regional economies and ensuring involvement of multiple industry players.

102 On 28 January 2009, the SPBC approved the HIP with a two-year roll out in two phases, with Phase 2 to commence on 1 July 2009. However, a few days later, the defendant announced a two and a half year rollout.

103 From 3 February 2009, DEWHA was the department responsible for the design, implementation and administration of the HIP. On that date, David Tune (Tune) from PMC emailed his departmental colleagues, Dickson and Johnston, stating:

DEWHA will need to move very quickly on implementing the new EE measures, particularly the insulation element for owner/occupiers. It seems to me that a very early meeting with the relevant industry group will be needed to emphasise the need for them to ramp up supply urgently and to take them through the proposed implementation arrangements.

104 Tune appeared anxious about DEWHA's capacity to administer the HIP, remarking that although DEWHA had portfolio responsibility, PMC will 'need to stay close to it' including by attending 'the meeting with industry groups and be closely involved in developing the detailed implementation plan'.

105 The HIP commenced formally on 1 July 2009 (Phase 2). Prior to that, between 1 February 2009 and 30 June 2009, an interim scheme was in place (Phase 1).

106 The defendant estimated the cost of ceiling insulation installation in an average sized house at $1,200, which was probably a generous estimate. From 3 February 2009 until 1 November 2009, the defendant set the maximum sum at $1,600 per house, which was probably consistent with its fiscal stimulus objective. From midnight on Sunday 1 November 2009, the maximum sum was set at $1,200 per house.

107 During Phase 1 from 6 February 2009, the Commonwealth paid rebates (capped at $1,600 per installation) to householders after they had engaged an installer, obtained eligible insulation for their home and paid for the service. Participation in Phase 1 was limited to existing Insulation Industry participants after DEWHA had made an assessment of eligibility. DEWHA engaged temporary contractors to process claims for rebates under Phase 1.

108 At the time that the HIP was being designed and implemented, there were, among others, a number of documents that were intended to guide appropriate and responsible decision-making and policy implementation by government departments. These documents included:

(a) 'Implementation of Programme and Policy Initiatives: Making Implementation Matter', which was published jointly by PMC and the Australian National Audit Office in 2006 to establish best practice guidelines for the effective delivery of government programs;

(b) 'Contemporary Government Challenges, Building Better Governance: Delivery Performance and Accountability', which was published by the Australian Public Service Commission in 2007 and which set out principles for good governance, including the way in which departments take decisions and implement government programs;

(c) 'Some Better Practice Principles for Developing Policy Advice 2001', which was published by the Australian National Audit Office in 2001, which applied to DEEWR and which set out best practice guidelines for properly advising the government in the course of delivering a government program;

(d) sections 10 and 13 of the Public Service Act 1999 (Cth), which set out the APS Values and Code of Conduct, each of which contained requirements that must be met by every public servant employed in the APS and stipulated that the public service works collaboratively to achieve the best result for the Australian community and the government and provides frank honest and timely advice to the political executive based on the best available evidence;

(e) the Australian Policy Handbook, which emphasised delivery of policy (as opposed to promises) and encouraged public servants to be proactive, including by reaching informed defensible assessments; and

(f) the 'APS Values and Code of Conduct in practice' (published by the Australian Public Service Commission) which guided compliance with the APS Values and Code of Conduct.

109 As at February 2009, in relation to government guidelines:

(a) the provisions of the Public Service Act 1999 (Cth) provided, among other things, for APS values, an APS code of conduct, a Public Service Commissioner and the issuing of Public Service Commissioner directions;

(b) the then current and/or available better practice guidelines listed on the Australian National Audit Office website included:

(i) 'Administering Regulation' (March 2007);

(ii) 'Implementation of Programme and Policy Initiatives: Making Implementation Matter' (October 2006);

(iii) 'Developing and Managing Contracts: Getting the Right Outcome, Paying the Right Price' (February 2007); and

(iv) 'Some Better Practice Principles for Developing Policy Advice' (November 2001);

(c) the Commonwealth Public Service Commission had published various guides and advices, including:

(i) 'Delivery Performance and Accountability';

(ii) 'Policy Implementation Through Devolved Government';

(iii) 'Working Together: Principles and Practices to Guide the Australian Public Service'; and

(iv) 'Building Better Governance'.

110 In relation to the regulation of the Insulation Industry:

(a) South Australia was the only state that had specific regulatory requirements concerning the licensing of insulation installers;

(b) the existing VEET scheme in Victoria incorporated mandatory training for installers; and

(c) there were no rules or regulations or any established Australian Standard that specifically governed the safe installation of foil insulation. The only standard (discussed below) dealing with insulation was AS 39991992, entitled 'Thermal insulation of dwellings - Bulk insulation requirements' (1992 Insulation Standard) and it dealt only with bulk insulation.

111 As at February 2009, in relation to insulation in Australia:

(a) there were approximately 270 businesses in Australia which carried on the business of installing roof insulation in domestic premises (both in pre-existing and new houses);

(b) approximately 60% of Australian houses had ceiling insulation;

(c) approximately 200,000 new and existing houses were fitted with ceiling insulation each year, of which approximately 25% were retrofit installations;

(d) the home insulation installation industry in Australia was growing at about 5% per year;

(e) the share of the retrofit insulation market for each product type was approximately: glass wool 65%, rock wool 5%, polyester 15%, cellulose 15% and wool
(f) the regulation of electricians and builders was a matter of state legislative competence;

(g) state and territory legislation governed the circumstances and entitlements pursuant to which a person might undertake electrical work;[3]

(h) states and territories legislation provided as to those persons who could undertake home building work (with some exceptions, for example, under a certain monetary value) and provided for registration and/or licensing of such persons;[4]

(i) South Australia had legislated specifically for licensing of insulation installers:

(i) pursuant to the Building Work Contractors' Act 1995 (SA), building work contractor licences were individually assessed and tailored to the applicant and the scope of building work they were contracting for;

(ii) licensing was administered by the South Australian Office of Consumer and Business Affairs (OBCA);

(iii) in order to undertake insulation installation, the relevant person or business in South Australia was required to have a 'building work contractor' licence which included insulation within its scope of activities and either be or employ registered supervisors that had insulation within their scope of competencies;[5]

(iv) under the South Australian legislation, supervisors could be asked to attend a technical interview to verify their qualifications and experience before the OCBA would register them.[6]

(i) had legislation or statutory instruments in place:

1. permitting or authorising the inspection of building work including works to retrofit insulation;
2. pursuant to which not all building work required permission/authorisation or inspection, for example, building work with a low value;

(ii) had systems in place and resources dedicated to the inspection of building work by state or local government, organised on a regional or 'local' basis, for example, in Victoria, by building inspectors for which the Building Act 1993 (Vic) provided;

(k) occupational health and safety was the subject of regulation by state, territory and Commonwealth legislation or statutory instruments;

(l) state and territory legislation or statutory instruments provided for the inspection and examination of premises in connection with occupational health and safety but, in some cases, contained exemptions in the case of residential premises (e.g. Victoria);

(m) state and territory legislation or statutory instruments required, as did the Commonwealth of Australia, that workers on job sites must have undertaken construction induction training:

(i) in occupational health and safety legislation (including requirements); and

(ii) on basic principles of risk management and the prevention of injury and illness;

(iii) on completion of which, they were entitled to be issued with an 'OH&S white card'.

112 On 2 February 2009, the defendant established the OCG within PMC to coordinate delivery of the Nation Building and Jobs Plan (which included supporting government departments to deliver programs for which they were responsible).

113 On 9 February 2009, Mrdak commenced as the Coordinator-General. Mrdak's role was to support and monitor the implementation of key infrastructure and stimulus measures (including the HIP) by ensuring the relevant milestones were achieved and implementation issues were urgently addressed.

114 From 3 February 2009, DEWHA was (at least within PMC) treated as the department responsible for the design, implementation and administration of the HIP. From that time the need for industry to urgently expand supply was recognised.

115 Although DEWHA was being given primary responsibility for the HIP, senior officers in PMC recognised that PMC would need to stay involved and to attend meetings with industry groups and be closely involved in developing the detailed implementation plan.

116 At the time that it was given primary responsibility for the HIP, DEWHA was a policyfocussed department without experience in the design and delivery of major operational programs such as the HIP, and did not have the program management capabilities of some other departments or external contractors.

117 Insulation products for residential dwellings generally fall into one of two categories: bulk or reflective. Sometimes the two are combined into a composite material. The effectiveness of these products in keeping heat in or out (known as thermal resistance) is measured by what is known as an 'R-value'. An R-value may be measured:

(a) by reference to product value (which is the R-value of a product divorced from other factors); or

(b) by reference to what is known as a 'total R-value' (which involves determining the thermal qualities of a product installed in particular circumstances).

118 Insulation material may come in the form of batts, rolls, boards, loose fill, as polyurethane foam or, in the case of reflective foil laminate (RFL), in rolls of sheeting.

119 As at March 2008, the material in existing dwellings with ceiling insulation was:

(a) bulk batts (fibreglass/wool/polyester) - 65.8%;

(b) loose fill - 15.2%;

(c) sisalation/reflective foil - 5.2%;

(d) other - 1.9%; and

(e) 'don't know' - 11.9%.

120 CSR and Fletchers were the dominant manufacturers of bulk batts.

121 A number of trade organisations featured prominently in industry consultation. ACIMA represented cellulose manufacturers. ICANZ represented glass and rock wool batt manufacturers. The Aluminium Foil Insulation Association (AFIA) represented manufacturers of RFL.

122 On 6 February 2009, ICANZ, CSR Bradford and Fletchers met twice with public servants. The first meeting was with DEWHA staff. The second meeting was with PMC staff. Afterwards the desirability of multiple communication channels with industry was canvassed. Various issues about ensuring quality product and installation occurred for all households were raised, including different product types, imports versus exports, manufacturing plant and warehousing issues. These were to be explored with industry in further meetings. At this time, DEWHA contemplated requiring contractors to undertake the one to two day training package that was run in Victoria for the VEET program. RFL was not mentioned. Neither DEWHA nor any other arm of the defendant undertook any product testing or obtained independent advice as to the suitability and the safety requirements concerning the installation of RFL products in ceilings.

123 DEWHA followed up with the attendees at the meetings on 6 February 2009 about training, insulation rating guidelines and a regional delivery model. Training was considered a priority. ICANZ responded, stating in relation to training that 'most installers currently working in Victoria' were assessed based on the 1992 Insulation Standard.

124 On 18 February 2009, DEWHA and PMC held an industry consultation meeting regarding the EEHP. Minutes of the meeting show that it took place in Canberra. Attendees included 16 Insulation Industry representatives, one of whom was Herbert. In attendance were also representatives from PMC and DEWHA. No representative of the electrical trades was invited to attend.

125 The plaintiffs relied on the following extracts from the minutes:

Open discussion about insulation manufacturers' capacity to cope with the demands and if not, what are the alternatives, noting the Prime Minister is urging industry to optimise local product versus imports during the 2.5 year period of the delivery of this package.

...

It was noted that 2.7 million houses is very much on the top end and it is likely to be less than that. More likely to be closer to 2 million households. Industry expectation is to insulate 500,000 homes per annum.

...

Andrew Wilson from the Office of the Coordinator General informed that $2.7M worth of funding is in part structured around the Government going into deficit for a short period of time. Clear statements from Treasurer and the Prime Minister states that funding is required to be spent within 2.5 years with a cap of $1600 per household.

...

The Chair assured meeting participants that site inspection and quality audits will certainly be a part of the program and, to take advantage of the assistance, eligible householders will be required to give permission for the property to be independently audited.

126 DEWHA emailed a draft of the minutes to attendees on 20 February 2009.

127 Mr Peter Stewart (Stewart) was, at the time of the introduction of the HIP, owner and director of Insul-Safe Pty Ltd (Insul-Safe). Insul-Safe was a member of ACIMA. Stewart stated that, following the 18 February 2009 meeting, Herbert reported to members of the ACIMA (including Stewart) that the industry should increase its manufacturing and installation capacity to prepare for a dramatic increase in retrofit insulation installs. Stewart also stated that Herbert reported the HIP would run through to the end of 2011, or until the money which the government had announced was to be allocated to the HIP ran out.

128 D'Arcy, the Chief Executive Officer of ICANZ, was also present at the 18 February 2009 meeting. His evidence was:

COUNSEL: [referring to the minutes] You see the statement that's recorded there from Andrew Wilson, that it's $2.7 million worth of funding is part structured around the Government going into deficit for a short period of time. Does that accord with your recollection of statements about the program funding that were made at that meeting?

WITNESS: I wouldn't dispute that, I can't clearly remember that. There is another statement I remember Andrew Wilson saying - whether it was here or not - that the program had very defined financial and timing restraints, that it was not something that was flexible, and it would run for the period of time allocated or till all the houses were insulated, or till when the money ran out, whichever came first. I think that was virtually the statement he made, and somewhere I'm pretty sure it was Andrew Wilson said they were looking for so many thousand a month.

129 Ruz, then the national marketing manager at Fletchers, was present at the 18 February 2009 meeting:

COUNSEL: In respect of this meeting, do you recall whether anything was said about the length of the program at this meeting?---

WITNESS: On the 18th, I recall that there was a number of groups, ICANZ included, who were asking for the program to be extended beyond 2011; we felt that a two and a half year time horizon was too short, and it was made very clear to us that it was only going to go till 2011 or until the money ran out.

Was it said or did you have an understanding that it could be or would be terminated any earlier than that?---

Just, if the money ran out before that, so it was a fixed amount of money, I think $2.7 billion or when all the homes were insulated whichever came first.

130 Ruz warned DEWHA about the risk of electrocution and death from the use of foil as a retrofit insulation product. Even though Fletchers was the largest manufacturer of RFL insulation in Australia for use in new installation, Ruz strongly recommended that RFL insulation not be included in the HIP. The minutes record that Ruz informed the meeting that a similar scheme in New Zealand had to be suspended due to three contractors being electrocuted while installing RFL. After the meeting, Ruz gave DEWHA two newspaper articles about the deaths in New Zealand. Later on the same day, Ruz informed ICANZ members that at the meeting there had been industry agreement that installers should be registered and required to meet minimum training standards for installation.

131 On 19 February 2009, Ruz sent a further email to DEWHA warning of the risk of using RFL as a retrofit insulation product, adding '[m]oreover, reflective products when installed as a retrofit in an attic space will typically be stapled to the roof timbers and we need to heed the experience from New Zealand where three contractors doing this type of work were electrocuted'.

132 DEWHA took no action either to make inquiries in New Zealand until after the death of Matthew Fuller (Fuller) in October 2009 or to exclude RFL from eligible products until 9 February 2010.

133 Training was also discussed at this consultation meeting. One consultant, Dr James Fricker (Dr Fricker), reported:

The high demand for the program will necessitate the training of a large number of new installers. It is also likely to give incentive for new installation companies to be formed. Both categories [i.e. new installers and new installation companies] will require accreditation, in my opinion... For each type of insulation, the training will have both common elements (OH&S) and also insulation-type specific training.

134 In late February and early March 2009, DEWHA approached the CSIRO to ask about its capacity to provide technical advice to it in relation to insulation products and program design issues. The possibility of engaging CSIRO does not appear to have been further pursued.

135 On 25 February 2009, Senator Mark Arbib (Senator Arbib) was appointed Parliamentary Secretary for Government Service Delivery and, from early June 2009, Minister for Employment Participation.

136 At this time, DEWHA was attempting to identify the regulatory framework applicable to insulation. In late February 2009, for example, the defendant sought advice as to whether the National Code of Practice for the Construction Industry and associated Guidelines (Code) would apply to the installation of insulation and would require the defendant to oversee compliance with the Code. On 25 February 2009, the defendant received advice stating that the Code did not apply.

137 During February and March 2009, a number of meetings were held, including:

(a) a meeting of the federal, state and territory Coordinators-General on 26 February 2009. At this meeting, the development and implementation of the HIP, the choice of a delivery model, requirements to register in order to be an eligible participant, training requirements or workplace health and safety risks and electrical safety risks that might arise under the HIP were not discussed;

(b) a consultation meeting of the states and territories concerning the HIP on 12 March 2009, at which DEWHA recognised the need for homeowners to have faith in the installers installing insulation into their homes. For that reason, DEWHA's aim was to provide a nationally consistent short course, with particular focus on installation, OH&S and duty-of-care; and

(c) a National Industry Consultation Meeting with representatives of the Insulation Industry on 20 March 2009.

138 On 26 February 2009, the 'Energy Efficient Homes Package - Homeowner Insulation Program - Early Installation Guidelines', version 1.0, the first of multiple versions of the Installation Guidelines, was published. Versions 1.0 and 1.1 related to Phase 1 of the HIP. Version 2 was published on 1 June 2009 and related to Phase 2, due to commence on 1 July. Many Installer Advices were published during the period of operation of the HIP to inform and advise installer businesses.

139 I pause to note that the plaintiffs alleged that, from time to time after the 18 February 2009 meeting, DEWHA, in the following documents set out in chronological order, repeated a statement or undertook to the effect that the defendant would fund the installation of ceiling insulation until 31 December 2011 or until the allocated funds had run out:

(a) 26 February 2009: the 'Energy Efficient Homes Package - Homeowner Insulation Program - Early Installation Guidelines' (HIP Guidelines) Version 1.0;

(b) 27 March 2009: HIP Guidelines Version 1.1;

(c) 1 June 2009: HIP Guidelines Version 2.0 now titled 'Energy Efficient Homes Package - Homeowner Insulation Program - Program Guidelines';

(d) 29 June 2009: 'Installer Advices' emailed by the Department to the Insulation Industry from 29 June 2009;

(e) 1 September 2009: HIP Guidelines Version 3;

(f) 2 November 2009: HIP Guidelines Version 4.0;

(g) 1 December 2009: HIP Guidelines Version 5.0.

140 The defendant admitted that public servants from time to time stated or repeated the details of the HIP as contained in the EEHP media release, and conveyed the information in the guidelines applicable to the HIP as amended from time to time. However, the defendant denied that any undertaking was made, adding that each iteration of the HIP guidelines stated that the defendant reserved the right to change any part of the HIP.

141 Versions 1 and 1.1 include the following statements as to the length of the program:

• 'It is expected that approximately 2.2 million owner-occupied households will benefit from this offer.'
• 'The Homeowner Insulation Program will start on 1 July 2009 and will run until December 2011.'
• 'The program will run from 1 July 2009 to 31 December 2011.'

• 'It is expected that approximately 2.2 million owner-occupied households will benefit from this offer.'
• 'This booklet provides guidelines for installation between 1 July 2009 and 31 December 2011.'
• 'The main phase of the Homeowner Insulation Program runs from 1 July 2009 until 31 December 2011.'

143 All versions included statements to the following effect (with minor differences in wording):

• The Australian Government reserves the right to change the amount of the assistance provided or any other aspect of these guidelines.
• The Australian Government accepts no liability for any loss, damage or cost incurred as a result of, or arising from, the installation of a ceiling insulation which has been subject to the assistance offered under the Homeowner Insulation Program, or its process.

144 Hannam believed the plaintiffs received or would have received copies of the 26 February 2009 guidelines, the 27 March 2009 guidelines, and later installer guidelines. He also believed the plaintiffs received the 1 June 2009 guidelines and stated that he 'would have definitely read [these and the other guidelines] from front to back'.

145 In a review of an early draft of the Early Installation Guidelines, a public servant suggested that the statement that the Commonwealth 'reserved the right to change the amount of assistance provided or any other aspect of these guidelines' should be made less 'sensitive' in its wording and moved to the end section of the guidelines so as not to be giving an impression things were likely to change.

146 The first version of the Early Installation Guidelines did not permit the use of RFL products because it required compliance with the 1992 Insulation Standard which (as explained further below) did not apply to RFL products. Dr Fricker, who was a spokesman for AFIA, complained that the newly published guidelines meant only bulk insulation was acceptable, contravening what was proclaimed at the industry consultation meeting. The guidelines excluded often less costly, alternative insulations having a reflective component. Subsequently, Dr Fricker remained very concerned that the EEHP guidelines remained exclusive to bulk insulation only. It appears that concerns were expressed about Dr Fricker's independence. However, DEWHA noted that immediate feedback had been received from industry about the exclusion of RFL products.

147 On 3 March 2009, DEWHA announced a 'workshop/brainstorming session in advance of preparing the Project Management Plan for the Energy Efficient Homes Package' and that the 'project plan will be their main focus over the next week or two, and they will have a draft ready by Friday next week'. DEWHA was concerned that Senator Arbib should not talk to industry, because he 'may get a biased view of the industry and the products depending on which associations he talks to'. DEWHA also asked for OCG to minimise any 'ad hoc reporting' requests.

148 On 5 March 2009, DEWHA proposed clarifications to the Early Installation Guidelines to allow products outside the scope of the 1992 Insulation Standard to be used in the HIP without proposing any change to the requirement that the insulation had to 'cover the entire ceiling area', thus requiring any RFL product used as part of the HIP to be installed flat against the ceiling, and to remove the two-quote requirement. The proposed 'clarifications' were adopted in Version 1.1 of the Early Installation Guidelines released on 12 March 2009.

149 Minister Garrett was briefed on 18 March for a further industry roundtable scheduled for 20 March. The brief noted that '[t]here are a range of strong and divergent views held amongst major players in the Insulation Industry. These views are aligned with the various products and interest of the industry associations'. It further noted that:

The Australian Building Codes Board and a number of independent technical advisors contracted by the Department are providing expert advice on technical matters. This independent advice is designed to assist decision making on key areas of divergence between industry players, and ensure full eligibility for all products and companies which meet the minimum performance, safety and quality standards under the program.

150 The 'talking points' outlined in the brief included 'clarifying eligibility of products outside the scope of the Australian Standard 3999' to 'make it clear that the broadest range of insulation products and technologies that are eligible for use under the program' [sic].

151 Minister Garrett briefly addressed the National Industry Consultation Meeting held on 20 March 2009. DEWHA determined who was invited to attend and limited the number of attendees. Despite recent correspondence from EE-Oz Training Standards Australia and the National Electrical and Communications Association (NECA) alerting DEWHA to safety risks, no representative of the electrical trades was invited to attend either this meeting or the technical workshop subsequently held on 3 April 2009.

152 Insulation Industry participants who attended the brief session with the Minister agreed that they would each speak for only two to three minutes. Installer training was identified as an area for priority attention. The Master Builders Association (MBA) advocated the training of new entrants in the installation industry, and ICANZ recommended the Victorian model for training.

153 Minister Garrett appeared to have been briefed that a number of independent technical advisors contracted by the DEWHA were providing expert advice on technical matters, to assist decision making on key areas of divergence between industry players, and ensure full eligibility for all products and companies which meet the minimum performance, safety and quality standards under the program. There was no evidence of such expert advice having been sought or received as stated.

154 The plaintiffs contended that at the meeting, in response to a question, the Minister for the Environment stated words to the effect that the HIP 'will run for the full term or until the money runs out. You can take my word for that'. The defendant admitted that the meeting took place, but denied the alleged exchange.

155 Documentary evidence in relation to the meeting included the agenda, a running sheet, an email from Keeffe to Levey dated 19 March 2009, and a meeting summary. The attendees included Minister Garrett, as well as Hannam, Ruz, D'Arcy, Herbert and Mr Greg Rashleigh, the owner of All Seasons Insulation and a member of ACIMA (Rashleigh). None of these documents contain the alleged representation. While Hannam agreed that he recalled in broad terms attending the meeting, no witness gave evidence of the alleged representation. It was not pressed in final submissions by the plaintiffs.

156 The plaintiffs alleged that Minister Garrett and Senator Arbib made statements similar to that made at the 20 March 2009 meeting on the following occasions:

(a) 12 May 2009: media release by Minister Garrett;

(b) 29 June 2009: media release by Minister Garrett, and at a meeting in Brisbane with representatives from the Insulation Industry including owners, installers, manufacturers and suppliers at which he made oral statements to this effect in answer to a question 'will the program go full term?';

(c) 2 July 2009: media release by Minister Garrett and Senator Arbib; and

(d) 3 February 2010: at a meeting in Canberra with representatives from the Insulation Industry including owners, installers, manufacturers and suppliers, at which Minister Garrett repeated the government's commitment and guaranteed that the program would continue.

157 The defendant denied that such statements were made and that denial was supported by the evidence.

158 On 12 May 2009, Minister Garrett issued a media release titled '$4.3 billion for improving the energy efficiency of homes'. The media release included the following statements:

More than three million Australian households are set to benefit from the largest energy efficiency rollout Australia has ever seen.

The $4.0 billion Energy Efficient Homes Package will install ceiling insulation in 2.9 million homes ....

'I encourage the millions of eligible Australians to take advantage of the package as we roll it out across the nation's suburbs over the next few years. This investment is a critical measure in our journey to a more energy efficient, sustainable Australia,' Mr Garrett said.

159 No witness gave evidence in relation to this media release.

160 On 29 June 2009, Minister Garrett issued a media release titled 'Aussie homes a winner with ceiling insulation program'. That release stated that:

As well as the ceiling insulation offer for homeowners, there is also insulation assistance of up to $1,000 available for renters and landlords. It is expected around 2.9 million households Australia-wide will benefit from the insulation offers.

161 No evidence was given in relation to this media release.

162 On 29 June 2009, DEWHA held an industry consultation meeting in Brisbane with representatives from the Insulation Industry. Minister Garrett attended the meeting. His briefing paper noted that the 'audit and compliance strategy will be implemented in stages' for Phase 1 and Phase 2 of the HIP, and that 'larger installation companies are planning their own audit program to maintain quality control'. Documents tendered relating to the meeting included a summary of the meeting, a typed copy of a hand-written file note made by Levey, and extracts of a notebook belonging to Levey.

163 The meeting summary noted that attendees included Hannam, D'Arcy, Herbert and Rashleigh. The summary included the following statements:

(a) 'The Minister indicated that the program aims to achieve 2.9 million households with ceiling insulation, hopefully by the current program termination date of 31 December 2009 [sic].'

(b) 'Regarding forward planning, the government has committed to insulate 2.2 million owner occupied and 700,000 rentals, that is the forward plan. The COAG agreement to go to 6 stars will give a larger ongoing need to produce and install insulation.'

164 D'Arcy believed the reference to 31 December 2009 would be a typographical error for 2011. He recalls receiving the minutes and not disputing them at the time. In his evidence, his recollection of the events at the meeting was:

COUNSEL: Do you recall Mr Keeffe ... being asked a question about a possible extension of the program... without consulting your notes?--- I recall asking Kevin Keeffe whether or not - what was the length of the program. I think he didn't comment on, that it would be extended, but I think he did say that they were working towards the initial goals of the program; so in other words, would go either when the money ran out or the December 2011. But we did - I'm sure I did ask him both questions, I did ask him both questions quite often actually.

...

Well, [Mr Keeffe] would always come back and say, 'It is our intention to fulfil the original guidelines of the program', which was to 31 December or till the money ran out.

165 Levey's file note included the following statement:

The Minister said, his commitment is to a program - is to 2.9 million uninsulated homes. There will be no commitment over and above that but this commitment will be met. He referred to the national strategy for energy efficiency and minimum standards to drive demand. This program is different to the solar homes and communities plan. That was an industry support program. Went up and down, covered only part of the costs. This insulation program is very different, a commitment that will be met to all uninsulated homes.

166 This statement is reflected in the notebook extracts of Levey. Levey was likely to have only been at the meeting for part of the time. These statements are a consistent expression of current government policy as earlier announced.

167 On 2 July 2009, Minister Garrett and Senator Arbib issued a joint media release titled 'Energy Efficient Home Agreement to create job opportunities', but it was not alluded to in oral evidence at trial.

168 From 1 March 2009, claims could be submitted under Phase 1 of the HIP for payment directly to householders once installation had occurred and after DEWHA had made an assessment of eligibility. Participation was limited to existing Insulation Industry participants. DEWHA engaged temporary contractors to process claims for rebates under Phase 1.

169 When Phase 1 commenced, it was anticipated that the HIP would achieve a 15-fold increase in the number of installations each year and it was anticipated that there would not be sufficient manufacturing capacity in Australia to meet the demand for insulation products from the HIP.

170 In his progress report for the period 3 February 2009 to 30 June 2009, the Coordinator-General reported:

(a) 52,484 homes had been insulated as part of the HIP; and

(b) 26,409 claims for the HIP rebate had been processed and $37,702,512 had been paid in rebates.

171 When the HIP was announced as part of the overall measures in early February 2009, it was also announced that Phase 2 of the HIP would commence on 1 July 2009.

172 Mrdak was informed by the Prime Minister that this date had been chosen by reason of the fact that the HIP was 'designed to fill an immediate point in the economic cycle where the Government was most concerned about rising levels of unemployment'.

173 The need for fiscal stimulus was urgent. For the short and medium term projects, there was a focus on programs which were 'shovel ready'. Mr Tanner recalled that Dr Henry's advice was in the following terms:

[H]e was quite strong in emphasising that it was important to move quickly and that money needed to be moving and seen to be moving quickly, so that, particularly businesses and consumers could have an expectation that, even if the money was not going to be in their bank account next week, that their behaviour would be influenced by the knowledge that things would be different even in a matter of a month or two longer.

174 These sentiments are echoed in a progress report which was published in August 2009, titled: 'The Nation Building Economic Stimulus Plan Progress Report Commonwealth Coordinator General'. The report noted that: '[t]o ensure effective delivery, new mechanisms were needed to break red tape and get work happening on the ground as soon as possible'.

175 During Phase 1, industry feedback was that the Insulation Industry was gearing up for the 1 July 2009 start date for Phase 2. Further, householders were holding off booking insulation jobs until after 1 July 2009. These factors underscored the need to ensure the start date was met.

176 Between February and July 2009, Mrdak became concerned that 1 July might not be capable of being met, for reasons including that DEWHA had fallen behind in processing claims. He raised with Senator Arbib delaying the start date on four occasions from early March onwards.

177 Mrdak recalled that the general thrust of Senator Arbib's response was that: '1 July remained the government's date, that best efforts should be maintained to meet that.' Mrdak specifically recalled an occasion in early June when he and the Minister were discussing whether DEWHA's systems would be robust enough to meet the 1 July start date. On that occasion the Minister made it clear that the date needed to be maintained on two grounds: '[f]irstly, it appeared the systems would be ready based on the advice we had and, secondly, the installation industry was very much geared up to a 1 July start at that point'.

178 Ultimately, no formal request was made by Mrdak to extend the start date and a paper prepared by the OCG on 31 March 2009 stated that the HIP must be in place for the 1 July 2009 launch date. Phase 2 commenced as announced on 1 July 2009.

179 As set out in paragraph [130], the defendant was told in February 2009 that the use of foil in retrofitting subfloor insulation in New Zealand had resulted in the deaths of three installers. It was told that the physical work of placing insulation in old houses, in the roof space, a place not often visited, unlit, and where electrical wiring was bound to be present exposed installers to a risk of physical harm, irrespective of the insulation product. There was also risk of property damage. For example, if insulation was placed too close to existing downlights there was a risk of fire, as was known by the past history of retrofitted insulation in Australia.

180 During February and March 2009, electrical and safety risks associated with insulation installation and the need for appropriate training were communicated to the defendant on numerous occasions, including:

(a) as at February 2009, ABS statistics showed that the rate of fire incidents in Australia related to home insulation before the introduction of the HIP was 2.4 per 100,000 house per year;

(b) on 4 February 2009, by Autex Pty Ltd (Autex), which sent a letter to Minister Garrett informing him of the risks of fire and of poor insulation installation (that letter being passed on by Levey to DEWHA);

(c) on 16 February 2009, by Anthony Canavan, the Victorian Coordinator- General, who flagged a concern with Mrdak about the accreditation and training of installers;

(d) on 18 and 19 February 2009, by Ruz, who raised the risk of electrocution and death from the use of foil as a retrofit insulation product;

(e) on 19 February 2009, by the South Australian government which issued a press release in relation to recent fires and warning of the fire risk of insulation. It referred to the defendant's HIP initiative, and said that the South Australian government would make contact with the Commonwealth government to recommend that the guidelines under the free insulation program should require installers to meet basic installation safety standards. It sent the press release to DEWHA;

(f) on 20 February 2009, by Neil Gow from the MBA, who wrote to DEWHA recommending the training of new entrants into the Insulation Industry;

(g) on 23 February 2009, by ICANZ, which wrote to DEWHA expressing support for the Victorian training model for installers;

(h) on 27 February 2009, by EE-Oz, who informed DEEWR about safety risks (including the risks of installing insulation in the ceiling of existing homes), relevant safety standards and proposed units of competency for installer training;

(i) on 9 March 2009, by NECA, which wrote to Minister Garrett about the risk of fire in the installation of insulation (that letter being passed on to DEWHA who responded to it on 16 April 2009); and

(j) on 11 March 2009, by Workplace Standards Tasmania, who wrote to express concern about the proposed standard for installing insulation. The Department of Planning in New South Wales supported that view and called for a consistent and national approach.

181 On 6 March 2009, DEWHA issued a tender for a risk assessment commencing in midMarch 2009 and expected to finish on 10 April 2009. Although expressly raised by Levey, on 23 January 2009, and in the context of urgency expressed by government Ministers, DEWHA took no steps to initiate a risk assessment of potential designs and delivery models until this time. On 13 March 2009, DEWHA appointed Minter Ellison Consulting, namely Ms Margaret Coaldrake (Coaldrake) and Mr Eric Chalmers, as external risk consultants for the HIP to undertake a comprehensive risk assessment in less than a month and at a fixed cost of $28,985.

182 Following that engagement Minter Ellison Consulting met with DEWHA and DEEWR for briefings on 16 March 2009 and 23 March 2009. On 20 April 2009, Minter Ellison Consulting was engaged on an hourly basis for a further period from 27 April 2009 to 30 July 2009 to provide support to and assist the nominated DEWHA risk manager, if required, to report to and attend PCG meetings and to respond to the risk manager's queries. Coaldrake left Minter Ellison Consulting on 30 June 2009 and was engaged through her own company at a cost of up to $40,000 for the period from 1 July to 31 December 2009.

183 On 16 March 2009, Senator Arbib sought from the OCG a risk assessment document concerning the HIP and a meeting with appropriate officers and ministerial staff to discuss roll out of the HIP. Senator Arbib was told DEWHA would be in a position to discuss such matters in the week commencing 30 March 2009. There is no evidence that Minister Garrett or Senator Arbib ever saw a copy of a Risk Register.

184 On 19 March 2009, DEWHA released the first draft HIP project plan (Project Plan) as a 'Tier 1' project. It identified the need for compliance with occupational health and safety legislation as a 'constraint'. It provided for a Risk Register and a Risk Management Plan. The Project Plan was amended from time to time.

185 On 25 March 2009, in the context of the Regional Model and following a workshop held on 23 March 2009, DEWHA prepared an initial risk list. That list separately identified the risk of installer injury as a risk rated as 'likely' with major consequence. In the section of the Risk Register entitled 'Installation Quality', an entry briefly titled 'installer injury' appeared, with the likelihood recorded as 'almost certain', consequence 'major' and risk 'extreme'. The reference to installer injury was in a draft Risk Register on 25 March 2009. On 27 March 2009, Coaldrake sent that draft of the Risk Register to DEWHA and OCG. The Register was updated with changes by DEWHA later that day, and the risk identified as 'installer injury' was taken out and the document was returned by Coaldrake.

186 At a meeting later that day, Coaldrake presented the Risk Register to the OCG. In this version the risk matrix was 'stripped down'. On the assumption management controls identified in the document were put in place, there were 11 extreme initial risks and, after management controls, three risks would remain extreme: procurement, time and political. The Risk Register was replete with 'red' risks. A red risk is one that is a 'critical' risk, one that is 'almost certain' to occur. Some risk levels were identified as being unsustainable. DEWHA told OCG that 'time' was an 'extreme risk' in the sense that there was 'limited time available to develop and deliver the program in a properly controlled way in order to reduce a range of other risks including fraud, compliance, legal and regulatory risk'.

187 In an internal email sent that day, DEWHA stated that the '[t]ake home message is that risks are extreme even with concerted mitigation measures in next twelve weeks to 1 July.' The email also noted that 'PMC have legitimate concerns at this stage but we would urge caution against pre-emptive changes to overall policy settings'.

188 On 30 March 2009, Coaldrake sent DEWHA an updated Risk Register and proposed that Minter Ellison Consulting could continue to assist DEWHA to program the management controls needed to implement the Risk Management Plan into the Project Plan and to develop individual risk strategies for the identified risks. The Risk Register assumed that the delivery model was to be the Regional Model. Coaldrake asserted that 'if you can extend the time available for development then you can reduce risk'.

189 Feedback from DEWHA to Coaldrake recorded the following as highest risks:

• Highest risk program in the department
• Accountability framework/reporting framework
• Internal/external stakeholder management
• Speed/capacity to deliver
• Working/compliance
• Model for Phase 2: brokering versus supply for small households

190 In prior versions of the Risk Register, safety risks had been identified as a risk of fire. Safety risks had been identified as separate or distinct from installer injury but risks related to installer safety were not particularised.

191 Although Minter Ellison Consulting proposed assisting DEWHA to incorporate the Risk Management Plan into the Project Plan and implement it, DEWHA did not take up this proposal.

192 On 31 March 2009, Jo Beath, an Assistant Director of the HIP (Beath), sent an email to Rachael Shanahan of the Northern Territory Government stating that she understood that 'tradespeople in the NT are concerned that untrained or unskilled parties will be insulating homes'. Beath stated that the defendant was in negotiations with DEEWR, the Housing Industry of Australia (HIA) and the MBA regarding the training of insulation tradespeople and that it was expected that training would and could be delivered by the existing Registered Training Organisation (RTO) network.

193 As set out above, during February and March 2009 the HIP was developed for implementation by the Regional Model.

194 On 26 March 2009, DEWHA communicated to OCG that it had developed a draft business model paper that reflected discussions between them. The email stated:

This would leave us with a range of potential approaches (and hybrid approaches) to be explored through a business model process mapping (with KPMG) and the formal risk analysis (with Minter Ellison). Our decisions on 'the kind of business model' we want will inform a procurement exercise that needs to commence early in April. Some models may require Ministerial decisions to change the agreed and announced policy settings.

195 KPMG had only just provided a quote and had not yet been retained.

196 The draft business model paper supported the Regional Model. However, in respect of the smaller operators, the paper stated:

However it may be possible to consider a more 'Yellow Pages' oriented model that reinforces the relationship of choice between the householder and the local installer. Options could be developed (perhaps in combination with a procurement based end to end service approach as well as regional brokers) to provide householders with redeemable vouchers (after calling the 1800 number) that could be used to 'pay for' insulation installation to the specified amount. The installer provides the (signed as completed) vouchers back to Government for reimbursement.

197 The draft business model paper recommended a hybrid approach be considered further.

198 On 31 March 2009, Senator Arbib met with senior representatives from PMC, OCG, DEWHA and Levey from Minister Garrett's office. Those present at the meeting agreed that the HIP would be rolled out under a new business model, a direct access model under which homeowners would be permitted to engage with insulation installation businesses of their choice directly. This was the Direct Model, described earlier in these reasons.

199 Following the meeting, PMC briefed OCG with a note for Senator Arbib, which was not to be provided to DEWHA. However, a version of the draft note was sent to DEWHA. The note prepared for Senator Arbib stated that 'key elements of a preferred model [were] largely agreed', including:

(a) it should be open to all insulation installation businesses who met the required registration standards;

(b) registered installation businesses were to provide/install insulation to eligible households;

(c) claims would then be made by the registered installer to the Commonwealth for payment based on homes serviced;

(d) households would be able to access information (1800 number, website etc.) about registered installation businesses servicing their area;

(e) statistics would be available regarding penetration by area, allowing targeted intervention and other business models by the Commonwealth if and where required;

(f) there would a clear requirement for audit and inspection of a sample of installation businesses and installations; and

(g) the current rebate scheme would continue in parallel.

(a) the 'nature of the registration requirements/standards to become an authorised installer under the Program' (with PMC proposing only a light touch);

(b) the 'identity of the party administering the mechanics of the Program'; and

(c) the 'extent of the service provided to households by the central national 1800 number'.

201 PMC noted that, in assessing the identity of the party administering the mechanics of the HIP, an option would be for DEWHA to build the function internally as DEWHA did not at that point have the capacity to undertake what was contemplated (and ultimately implemented).

202 PMC delivered a presentation, also on 31 March 2009, entitled 'Energy Efficient Homes Package: PM&C Proposed Delivery Model' that stated that the HIP had 'multiple objectives and constraints within a very tight timeframe'. In explaining the virtues of the Direct Model, the presentation identified two potential risks said to be mitigated by the choice of this model - the potential for profiteering and scamming and 'government risk'. Safety and installation issues (including the risks of fire and installer safety) were not identified.

203 A meeting that would include KPMG to discuss the proposed business models was scheduled at the Boathouse restaurant on 1 April 2009. KPMG was invited to consider the 'PM&C proposed delivery model', which referred to the Direct Model. KPMG received a working paper that set out the scheme in the following terms:

If the householder suspects that they are eligible for the Homeowner Insulation Program. The information pack will advise that the Government has compiled a list of qualified installers who are authorised to install the insulation. Householders can either get a list of providers in their area by accessing the website, calling the Hotline, or simply using the Yellow Pages and calling local installers (due to the incentive of this program and expected uptake, it is likely that all installers will be attempting to get on the list). The householder then contacts an installer to arrange a measure and quote. If the householder is happy with the quote, and advised by the installer that they meet eligibility criteria, they can then organise for installation to occur.

Following installation, the householder and installer then jointly complete and sign the required paperwork, and if the cost is less than $1600 the installer sends the paperwork and a copy of the receipt to the Program Delivery Manager (possibly Centrelink) for payment. If over $1600, the householder pays the difference.

The Program Delivery Manager will then verify the claim and arrange payment of the claim. (As most installation companies are expected to be SMEs a 30day processing /payment target must be enforced.)

The details of the transaction will be entered into a database to ensure no double dipping etc.

204 At the 1 April 2009 meeting, PMC, OCG and DEWHA resolved that the HIP be rolled out by the Direct Model.

205 The change in the delivery model from the Regional Model to the Direct Model took place:

(a) without prior consultation with DEWHA and contrary to previous recommendations;

(b) without identification or consideration of the risks that would attend such a new model;

(c) without any consultation with the states or territories;

(d) without any consultation with or of the Insulation Industry; and

(e) with no input from KPMG.

206 On 2 April 2009, DEWHA briefed Minister Garrett that South Australia had raised safety concerns about risks with ceiling insulation. The Minister was briefed with responses to use if he was asked what he was doing to manage safety risks. He was briefed that he could respond that his department was working with industry, the states and regulatory bodies to ensure that existing building and safety protections applied to the insulation rollout. The basis for this statement was not apparent.

207 DEWHA also briefed Minister Garrett in anticipation of his meeting with Senator Arbib the following day. The briefing note advised that DEWHA had contracted KPMG 'to assist us to develop business models', and that a 'separate model has been proposed by PMC'. The briefing note recommended that the Minister 'note the business models being considered'. In fact the decision had been made, without input from KPMG, to adopt the Direct Model.

208 On 3 April 2009 at a Technical Advisory Group workshop in Canberra conducted by DEWHA and attended by, among others, representatives of the Australian Building Codes Board (ABCB) and the research, testing and consulting for building and construction organisation in New Zealand (BRANZ), it was noted that the HIP posed a high likelihood of catastrophic consequences, being death or serious injury and fire risk. The minutes recorded:

the work involved in installation could result in a high level of exposure for the government due to hazards of existing buildings, hazardous materials and occupational health and safety. The program poses a high likelihood of catastrophic consequence (death or serious injury).

209 Advice about fire risk provided at this Technical Advisory Group workshop resulted in a recommendation that 'a fire retardant should be mandated for inclusion in the program', but the recommendation was not adopted.

210 No representative of Minter Ellison Consulting was present at the Technical Advisory Group workshop or any other industry consultation meetings, nor was any other person providing risk management services. However, following the Technical Advisory Group workshop, DEWHA recognised the key points arising from the meeting to be that:

(a) there was a 'high likelihood of catastrophic consequence (death or serious injury)';

(b) a risk plan was needed to cover 'working at heights, dangers in existing (and old) buildings, hazardous materials, fire, electrical and OHS';

(c) 'products with low entry cost (loose fill and polyester) have high fire danger (double whammy)';

(d) a key action was to conduct 'a Risk Assessment Process specifically for the process of installing ceiling insualtion [sic]'; and

(e) a further key action was to undertake a 'risk assessment to guide minimum training requirements for all installers and workers'.

211 There was no evidence that these concerns were conveyed to Minter Ellison Consulting or Coaldrake. The Risk Register was not updated to include those risks. The outcomes from the Technical Advisory Group workshop were at no time included on the Risk Register or any other formal risk identification document prepared for the HIP.

212 On 6 April 2009, a Cabinet paper prepared for the SPBC expressed concern about the finalisation of the business model of the HIP. The report stated:

We retain concerns about the timing of the finalisation of the business model for the home insulation program. DEWHA has undertaken a risk assessment which reveals a large number of critical risks for the Energy Efficient Homes Package. Many of these risks cannot be adequately managed in the lead up to the 1 July start date. In response, PM&C is taking a more active role in the development of this package and is assisting the OCG in providing oversight of the package.

213 Explicit risk information was not provided to SPBC.

214 On 8 April 2009, KPMG reported to DEWHA. The KPMG report assumed that a Program Office (PO) would be created, either within or external to DEWHA. KPMG assumed that the PO would 'undertake audit and monitoring responsibilities either on its own, using external agencies or a combination of both'. KPMG assumed that the PO would 'accredit suitable installers and products. These providers will be accredited or licensed by Government as participants in the scheme'. KPMG also assumed that the PO would 'work with state agencies and key stakeholders to maximise delivery capability, mitigate risks and maximise longer term industry viability'.

215 KPMG assessed delivery models by reference to the following policy preferences:

(a) employment value (maximise jobs created for invested funds);

(b) emissions reductions (maximise the performance of each installation);

(c) value for money (maximise the number of installations);

(d) equity for householders and/or businesses (maximise the number of households and businesses); and

(e) administrative simplicity (minimise the costs and risks in managing the program).

216 None of these policy preferences incorporated notions of installer or household safety or appropriate training. KPMG had not been briefed on those topics, and was not provided with a copy of any iteration of the Minter Ellison Risk Register.

217 From 8 April 2009, a Project Control Group (PCG) was formed and assigned responsibility for the oversight and strategic direction of the HIP including with respect to managing risk. It comprised public servants and consultants retained by the defendant, representatives from PMC and OCG, DEWHA, DEEWR, Medicare Australia (Medicare), the Australian Taxation Office, Everything Infrastructure Services Pty Ltd (Everything Infrastructure) as project management consultants (from 15 April 2009) and Minter Ellison Consulting as risk advisors (from 8 May 2009). It was a large group of around 40 members and attendance at meetings by members appears to have been inconsistent.

218 The PCG made key decisions in respect of the HIP, including periodically considering the Risk Register and monitoring risks to the HIP. The plaintiffs questioned the efficacy of the decision-making process and the reasonableness of decisions made by the PCG.

219 The PCG met weekly and minutes were kept. A version of the Risk Register was presented at each meeting, the content and formatting of which changed over time. The first complete Risk Register was discussed at the meeting on 16 April 2009. Although by 16 April 2009 the HIP was to be implemented by Direct Model, the Risk Register was not updated to reflect this fundamental change. However, Levey believed DEWHA advised the Minister's office that the risk management plan was being finalised and updated to reflect the business model.

220 The version of the Risk Register then disclosed that:

(a) there was a significant risk that the time available to develop and deliver the program in a properly controlled way may be inadequate and that early termination could result if this risk eventuated;

(b) there was a risk that the quality of installation/control by installers and compliance structures may be inadequate, including a risk to 'safety-house fire/damage' and that early termination could result if this risk eventuated; and

(c) there was a risk that 'governance and planning gaps may reduce the capacity of the project to deliver' and that early termination could result if this risk eventuated.

221 Risks to installers and the risk of inadequate training were not identified.

222 The Risk Register's content changed over time. For example, although many versions of the Risk Register identified inadequate access to training, fire and safety issues and the unsafe installation of the insulation product causing fire/damage as risks, it was only after Fuller's death that the Risk Register identified the risk of injury or death to installers arising from the unsafe installation of product as a risk.

223 On 9 April 2009, Minter Ellison Consulting provided the completed Risk Register to DEWHA. It took no account of the change in delivery model. It did not include any reference to installer safety, despite the Technical Advisory Group workshop. Minter Ellison Consulting proposed a workshop to obtain substantive comments on the draft register prior to finalisation. In anticipation of that workshop Coaldrake noted:

(a) there was extremely limited time to determine and implement effective program methodology post 1 July;

(b) the scale of the procurement task was new to DEWHA;

(c) there were tight timeframes to develop all elements of the program's delivery model by 1 July;

(d) there was a risk to safety - house fire/damage;

(e) governance and planning gaps may reduce the capacity of the project to deliver;

(f) there was ineffective internal decision making, resource allocation and ownership; and

(g) industry structure was not properly addressed.

224 The workshop did not eventuate; Coaldrake was told that it was not possible for DEWHA staff to attend due to people's diverse priorities.

225 After Minter Ellison Consulting completed the Risk Register on 9 April 2009, it had no further involvement of any substance. Coaldrake commenced attending PCG meetings on 8 May 2009.

226 On 9 April 2009, PMC stated to DEWHA 'now that you have broadly settled on the model for the rollout of the HIP can you please advise on when you will be able to provide PM&C with a document that outlines the business model' and inquired whether DEWHA would 'seek Minister Garrett's endorsement of the business model or just ask him to note it'. DEWHA intended at that stage only to seek the Minister's notation of the change and did not intend to seek ministerial approval of the change in model.

227 Minister Garrett saw a ministerial briefing note on 16 April 2009 that stated that the outline of a preferred business model was emerging through discussions with PMC. DEWHA informed Minister Garrett that 'development and selection of the business model is being informed by a comprehensive risk assessment, facilitated by Minter Ellison Consulting, to identify and manage the full range of risks in successful implementation of the Project'. Quite why DEWHA briefed the Minister in these terms was not clear from the documents, because Minter Ellison Consulting was not reviewing the risk assessment following the change in model. DEWHA informed the Minister that detailed discussions were progressing with Medicare to build and manage the online register of approved insulation installers and electronically receive and process invoices from installers, with DEWHA to provide policy direction and business rules. The Minister noted that the advantages of the model being suggested included a reduced time for procurement by dealing with Medicare, a true end-to-end service would be provided where the householder was not out of pocket, householders would be able to choose their preferred installer and the option was provided for all companies regardless of size and mode of operation to participate either as a registered installer, or as a subcontractor or employee of a registered installer and choose their marketing strategy.

228 This brief recognised that residual risk around fraud, complaints, and installer and household safety remained to be dealt with through developments in the business model or on an ongoing basis after the business model was put in place. When Minister Garrett noted the contents of this brief, the risk management strategies for the new Direct Model had not been tested through Insulation Industry consultation, and risk assessment had excluded any consideration of the risk to installer safety.

229 I accept Mrdak's observation in evidence that industry consultation confirmed that industry was keen to retain the current market structure, such that firms currently providing home insulation into the retrofit market not be disadvantaged by the design of the program.

230 On 15 April 2009, DEWHA retained Everything Infrastructure to provide strategic project management assistance for the HIP. No project plan guided the provision of these services, nor was any specific project manager appointed. A representative attended a number of PCG meetings.

231 I accept that the issue of installer training was raised early in the defendant's design of the HIP. The VEET scheme was known to the defendant from an early stage.

232 On 16 April 2009, DEWHA responded to a letter received from NECA, acknowledging a risk of new installers not being appropriately trained in procedures to satisfy legal requirements. DEWHA proposed that to ensure that all installers were appropriately trained, a training program for new entrants to the Insulation Industry be developed based on existing units in the current nationally endorsed training package. Tradespeople with no insulation experience making a shift to insulation installation would require a two-day supplementary training course. Less than a month later the defendant decided to only require that supervisors undertake insulation-specific training or hold other competencies.

233 On 21 April 2009, the Construction and Property Services Industry Skills Council (CPSISC) submitted a proposal to DEWHA to develop support resources for training materials for the installation of ceiling insulation.

234 By 23 April 2009, DEWHA was aware that fire safety was an issue that would likely arise at some point.

235 At an industry meeting held on 29 April 2009, DEWHA outlined the purpose of the Installer Provider Register by describing the conditions that installers needed to meet to register as an installer provider. One representative attendee commented that 'the scale of the Commonwealth's program would change the dynamics of the existing market conditions for insulation and that this in turn would increase the risk of poor installation from unskilled labour,' and other attendees agreed with that comment.

236 On 30 April 2009, DEWHA's Risk Register identified an extreme risk that 'the compliance and regulation framework is not effective in supporting program outcomes'.

237 Also on 30 April 2009, the EEHP weekly report stated, contrary to the fact, that the risk management report (i.e. the Risk Register) had been updated to reflect the change from the Regional Model to the Direct Model. The item was deleted from the next EEHP weekly report.

238 On 1 May 2009, Senator Arbib informed DEWHA that PMC's approach to the HIP will be a 'light touch' to facilitate access for installers to registration, with a correspondingly tighter approach to auditing and assessment as the program rolled out.

239 On 6 May 2009, DEWHA asked Minister Garrett to approve the Medicare business model and the Phase 2 guidelines.

240 On 8 May 2009, the PCG agreed to a set of minimum competencies for insulation installation businesses, which required only that supervisors of insulation installation, rather than the actual installers (those who would be physically working in the roof spaces), would be required to hold competencies. The decision taken by the PCG was that installers did not need to receive training in insulation installation, or to hold a specified competency, if they were supervised by a person who had been so trained or held that competency. The only requirement would be that installers would need to hold an Occupational Health and Safety White Card.

241 The PCG's decision appeared to be based on a briefing from DEWHA on 31 April 2009, which stated in relation to installer training:

Clause 2(a) relates to an installer (and their employees and subcontractors) having an appropriate level of competency in installing insulation. Given the lack of current industry standards for insulation the Department has adopted a minimalist approach and will refer providers to the content outlined at Attachment B providing guidance on what installers should have.

The Group should note that this approach could give rise to installer quality issues and complaints. The Department will seek to minimise these through compliance processes and audit, and communications and education for households. The Department has removed all references to endorsing installers, skilled installers or preferred installers. The Installer Provider Register is effectively simply a list for households to source one or more installers from. The Department has engaged with DEEWR to progress training and competency levels for the Insulation Industry. Should the industry requirements change then the competency guidelines will change and registered installers advised.

242 That same day, an industry workshop concerning training was attended by representatives of ICANZ, ACIMA, MBA and others, the purpose of which was ostensibly to deal with issues being decided by the PCG at the same time. There was clear agreement across all industry participants, irrespective of product, that installer training should be provided, although the minutes recorded that while a mandatory training requirement would be beneficial it would not be possible by 1 June 2009.

243 The workshop was chaired by Kimber who also attended the PCG meeting. Kimber recorded that the following was discussed at the meeting:

• Enterprise Training Unit (non-mandatory course for New Entrants);
• Range of views on the number of days for insulation specific training;
• MBA, ICANZ and Fletchers agreed new entrants would need one day OHS, plus 2 days insulation specific training (three days in total);
• ACIMA felt strongly that it would need to be at least a week;
• All participants felt that a 3 day $500 (or more) course would not be a barrier, as employers would pay for the cost of the training as a necessary investment to avoid much greater 'make good' costs from shoddy work in future, (eg, one foot through the ceiling costs $500 to fix).

244 At this time, CPSISC had not completed preparation of training materials and the 'Pocketbook' it was producing, about which I will say more later, was not ready to be sent to installers. Further, there was never any clarity in the HIP guidelines on participation criteria as to what was meant or required by 'supervision'. The defendant did not develop or implement any measure to give any structure or content to the requirement that installers who did not personally hold a relevant competency were 'supervised'.

245 Herbert recorded other statements made at the meeting in an email to Arblaster and other ACIMA members on 10 May 2009:

(a) 'DEWHA announced that it appeared likely that the HIP would continue past 31 December 2011 ...';

(b) 'Barriers to entry will be relatively low, despite warning from ACIMA and AICANZ that the cowboy element is already in full swing during the current EIG phase. DEWHA confirmed that it expected fraud & that houses '.... May even burn down ...' but these problems should not stop the HIP's goal to insulate as many homes as possible in the time available';

(c) 'ICANZ have argued against the 1 quote proposal, on the basis that it will lead to rampant fraud';

(d) 'Overall, it became clear early in the meeting, that Messrs Rashleigh & Hannam were the only persons present who understood the general installation problems on-site',

246 On 11 May 2009, DEWHA briefed Minister Garrett, and on 12 May 2009, Minister Garrett issued a media release that encouraged householders to take advantage of the HIP as it was rolled out over the 'next few years'.

247 On 14 May 2009, a report on risk management prepared for the PCG meeting identified five primary risks to be reported against on a weekly basis. None of the primary risks contained a reference to either installer safety or fire risk.

248 On 18 May 2009, a meeting between OCG, DEWHA and DEEWR noted the need to ensure appropriate training for new entrants. The notes of the meeting recorded that:

(a) it was expected that there would be a large increase in the workforce which brings a requirement to have appropriate training available to give people the skills to undertake the work;

(b) it was a largely unregulated industry and the availability of appropriate training, especially with regard to OHS matters and safe installation of ceiling insulation, was an important part of the overall implementation strategy;

(c) CPSISC had outlined that the work required to develop a training program fell into two streams: first, the development of an 'enterprise unit of competency' that would bring together the requirements to undertake installation of insulation under the HIP and, second, the materials development process which, due to 'time constraints', had to be developed in two phases;

(d) CPSISC's work on these streams was well underway; and

(e) DEWHA was considering options, including:

(i) moving responsibility for all aspects of the training development and implementation for the program to DEEWR;

(ii) running a pilot in Gladstone Queensland in June 2009 and seeking assistance from DEEWR in establishing the training and locating a registered training organisation and likely trainees; and/or

(iii) seeking advice on possible ways of measuring job creation as a result of the HIP.

249 On 18 May 2009, MEA published a media release warning of the risk of fire if insulation is installed incorrectly, or too close to light fittings.

250 On 19 May 2009, CPSISC's first set of training materials was circulated internally between DEWHA and the OCG. It was followed by an Assessment Guide, a Delivery Guide and Learning Summary booklets in June 2009, and a draft Pocketbook. The draft Pocketbook was not circulated for comment until mid-July 2009, well after Phase 2 was underway.

251 On 19 May 2009, Coaldrake facilitated a 'risk owners' workshop.

252 On 22 May 2009, a meeting was held between the Commonwealth and state and territory Energy Coordinators. The minutes of the meeting recorded in relation to safety and training:

Minimum training competencies for those people wishing to be trained in the industry. All installers of insulation must have an OH&S 'ticket'-this is a core competency for tradesmen. Already employed in the Insulation Industry will be required to produce evidence similar to a [recognised prior learning] arrangement. Others may provide a referee report attesting to the applicant's ability.

253 On 28 May 2009, DEWHA briefed Minister Garrett and Senator Arbib seeking Minister Garrett's agreement to the Installer Provider Register (for installation businesses) and minimum competency requirements. The briefing paper did not identify the proposed change limiting the requirement for minimum competency requirements from all installers to only supervisors.

254 On 6 June 2009, Minister Garrett approved the competency requirements agreed by the PCG on 8 May 2009 in reliance on that briefing paper, which stated that:

(a) the terms and conditions and minimum competencies for installation businesses to be included on the Installer Provider Register, have been designed in consultation with DEEWR, the full suite of Insulation Industry associations, the Housing Industry Association ... and Master Builders Australia;

(b) the Insulation Industry had indicated that the minimum standards are appropriate when combined with the strong audit support for the program, and the development of training packages for national roll out; and

(c) Spotless, an insulation installation company had indicated it would undertake a 'roadshow' approach to insulation opportunities in remote and regional locations.

255 No formal audit process was in place for the HIP as at 28 May 2009. It was not until October 2009 that the Installer Advices recorded that site inspections were being carried out.

256 On 11 June 2009, DEWHA produced version 1.3 of the HIP project plan.

257 On 12 June 2009, Coaldrake proposed a milestone review of HIP management. The milestone review recorded that:

(a) the risk assessment should have been done earlier in the design phase;

(b) the PCG approved all significant changes to the delivery model, project schedule, risk profile etc on the basis of papers presented to its weekly meetings;

(c) there was constant, rapid change in the design parameters and the detail of the program but no 'change requests' were completed;

(d) change management for HIP/LEAPR remained a real issue with more and better conversation and formal decision making required within the branch, particularly at section level;

(e) the operational phase 'requires ... delineation of roles and responsibilities';

(f) the PCG is satisfied that HIP/LEAPR are ready to implement on 1 July 2009. To achieve this, the program management in the design has clearly made tradeoffs between the various elements;

(g) the team and other stakeholders needed to come to grips with the large scale of the program;

(h) the team recognised that certain departmental services were not fully equipped to deal with the fast pace of the scale of requirements; and

(i) the team felt that project management methodology could have been introduced earlier.

258 On 16 June 2009, DEWHA recommended to Minister Garrett that he defer the commencement of aged care facility installations from 1 July to 1 September 2009. This recommendation was the only recommendation at any time to defer any aspect of Phase 2 of the HIP. Minister Garrett accepted the recommendation and the commencement of aged care facility installations was deferred.

259 On 17 June 2009, DEWHA held a workshop to brainstorm lessons learnt from Phase 1 of the HIP. The attendees recognised that certain departmental services were not fully equipped to deal with the fast pace and scale of requirements.

260 On 29 June 2009, DEWHA held a further industry consultation meeting attended in part by Minister Garrett. The minutes of the meeting recorded that industry attendees informed DEWHA and Minister Garrett that 'supply lines could be a potential problem particularly when some larger companies have standing orders for materials which are subsequently not required, causing peaks and troughs in product availability'. The minutes also recorded that 'price creep' was becoming an issue due to 'materials availability'. Industry attendees were urged to invest in their activities so as to overcome the difficulties caused by a lack of product supply. They were told that the HIP would run until the end of 2011 or until the funding had been exhausted, and that they would be informed and consulted prior to the conclusion of the HIP to enable a proper transition back to normal operations.

261 On 1 July 2009, Medicare and DEWHA entered into a service agreement under which Medicare provided services in administration of Phase 2 of the HIP and other aspects of the EEHP.

262 From 1 July 2009, a registered installer who complied with the requirements of the HIP was entitled to submit a work order form and a request for payment with respect to each home in which it had installed insulation in accordance with the requirements of the HIP. On receipt of a work order form that evidenced compliance with the requirements of the HIP, the defendant would pay the installer a sum with respect to each eligible instance of installation of home insulation.

263 The PCG Risk Summary as at 1 July 2009 for the meeting to be held on 2 July 2009 did not identify installer injury or death as a risk. The Risk Summary reported as one of the extreme risks: 'installation and quality by installers is poor'. The 'consequence' was noted to include 'fire/safety issues - litigation'. Risk treatment for this risk was reported to be:

(a) training competency checking in administration audits;

(b) liaise closely with DEEWR on management of installers skills;

(c) put in place assurance mechanism re installer insurance; and

(d) all companies to be responsible for ensuring supervision of staff in their employ.

264 The risk treatments listed were said to reduce the risk from 'extreme' to 'high' if implemented. However, no part of the risk treatments involved the identification of electrical safety risk potentially leading to fire or injury, or training of installers in relation to such risk. It was not part of the risk management strategy to ensure the training provided included training to equip those who would be working in the roofs of old houses with outdated wiring to detect and to deal with such safety issues.

265 Version 2 of the HIP Guidelines published on 1 June 2009 took effect from 1 July 2009.

266 Version 2 of the Guidelines applied to installations between 1 July 2009 and 31 December 2011 (Phase 2) and provided for installation businesses who were registered on the Installer Provider Register to be paid by the defendant for the installation of insulation by the process that I just described.

267 This version of the Guidelines stated that in order to be eligible to obtain a payment, the installation business was required to ensure that the insulation was:

(a) installed in a dwelling that did not have ceiling insulation or had ceiling insulation of negligible effectiveness (i.e. because it was at or below 0.5 R-value);

(b) installed between 1 July 2009 and 31 December 2011;

(c) resulted in the relevant living area being insulated to the specified minimum R-value;

(d) new ceiling insulation material;

(e) installed in an existing dwelling;

(f) installed at a householder's principal place of residence in Australia;

(g) installed by a person registered on the Installer Provider Register;

(h) installed to Australian Insulation Standard AS 3999-1992;

(i) compliant with the insulation product standard AS/NZ 4859.1:2002; and

(j) compliant with the minimum R-value standard included in a table set out in the relevant version of the HIP Guidelines.

268 Those Guidelines contained statements that the defendant reserved the right to change the amount of the assistance provided or any other aspect of the Guidelines. The defendant did not endorse any installer on the Installer Provider Register or their work, and did not accept liability for any loss, damage, injury or cost incurred as a result of, or relating to, the installation of ceiling insulation or the installation process.

(a) the householder and the installer were responsible for entering into a contractual arrangement for the installation of ceiling;

(b) the householder was responsible for any costs in excess of $1,600;

(c) the householder should be satisfied with the work done before they signed the work order form;

(d) to be eligible for assistance, the insulation must be installed by an installer or an individual who was working for or contracted by an installer registered on the Installer Provider Register;

(e) the installer must comply with all relevant laws in relation to installing ceiling insulation (which included relevant state and territory occupational health and safety laws), including any licencing requirements; and

(f) the insulation was required to comply with specified Australian Insulation Installation Standards and comply with specified Australian Product Standards.

270 DEWHA communicated changes to these requirements, and to Phase 2 of the HIP generally, by Installer Advices (set out further below) that were published on the website and emailed to stakeholders, other email communication, and by updates to the Guidelines.

271 The HIP Guidelines consistently stated, on the first page, when describing the HIP, that it would run until 31 December 2011, with latter versions of the HIP Guidelines (from September 2009) adding a rider 'or until the date when Program funds have been full allocated'. I have noted that there were ultimately five versions of the HIP Guidelines, with the last version being released on 1 December 2009.

272 Eligible installation products were not specified by name in the Terms and Conditions of Installation. Instead, reference was made to AS 4859, the 1992 Insulation Standard and to insulation products falling outside the scope of the 1992 Insulation Standard but falling within specified provisions of the Building Code of Australia (BCA). In this way RFL was incorporated as an eligible product. General requirements were specified for eligibility, including a requirement for registrants to comply with the HIP Guidelines (as updated from time to time), to maintain insurance cover and to indemnify the defendant against faulty insulation or any breach of the terms and conditions. These terms and conditions are discussed in greater detail below at [721] and following.

273 On 9 June 2009, DEWHA's Installer Provider Register opened for online registrations in advance of the commencement of Phase 2 of the HIP. Any installation business that wanted to participate in Phase 2 of the HIP was required to register, including Phase 1 participants. Terms and conditions of registration were published by the defendant. 'Competencies' were specified in a direction on a government website. On 10 June 2009, Minister Garrett announced in a media release that the eligible installer businesses could register online from that date.

274 On 29 June 2009, DEWHA issued Installer Advice 1 on the EEHP website and by email to all registered installation businesses. There would be a further 22 Installer Advices issued during the life of the HIP with the last, Installer Advice 23, being issued on 9 February 2010.

275 Both Installer Advice 7 (1 September 2009) and Installer Advice 13 (1 November 2009) included statements that the HIP would continue until 31 December 2011 or until the funds that had been set aside for the HIP were fully allocated or expended.

276 Installer Advice 7 included the following statement:

Under the original Energy Efficient Homes Package, the Homeowner Insulation Program was scheduled to run until 31 December 2011 and the Low Emission Assistance Plan for Renters was to run until 30 June 2011. The $2.7 billion Home Insulation Program will now run until 31 December 2011 or until Program funds have been fully allocated.

277 Installer Advice 13 outlined some changes to be introduced to the HIP in order to add extra safety precautions and consumer protections and reduce the maximum subsidy under the program. These changes included:

From 2 November 2009, the maximum subsidy under the [HIP] will be reduced from a maximum of $1,600 per dwelling to a maximum of $1,200 per dwelling. ...Program funding has been capped at $2.45 billion. The program will conclude when funds are fully expended or on 31 December 2011 whichever occurs first.

278 Hannam stated that he would have received Installer Advice 7, he recalled reading Installer Advice 13 and that he received regular updates. When he received advices, he read them front to back himself, and often his senior staff would also read them front to back. I accept that it is probable that the plaintiffs received the Installer Advices but no aspect of the plaintiffs' evidence corroborated the remainder of these assertions.

279 By the commencement of Phase 2 on 1 July 2009, 3,000 installation businesses were registered on the Installer Provider Register.

280 On 1 July 2009, the Ceiling and Insulation Installation Training Program devised by CPSISC commenced.

281 On 2 July 2009, Minister Garrett and Senator Arbib issued a joint media release titled 'Energy Efficient Home Agreement to create job opportunities'. The media release announced the signing of a memorandum of understanding between: the Australian Government, the National Employment Services Association, MBA, the HIA and the Construction Forestry Mining Energy Union. Under the memorandum of understanding, the parties agreed that the government, industry and job service providers would work closely together to ensure job seekers were connected to job opportunities under the EEHP. That same day the Commonwealth entered into a memorandum of understanding with the states and territories.

282 On 9 July 2009, the Risk Register (under risk reference number 1.5) noted that Keeffe had responsibility for the risk treatment that all companies would be responsible for ensuring supervision of staff in their employ.

283 On 17 July 2009, Fletchers provided critical feedback on the draft Pocketbook prepared by CPSISC and released for consultation, stating: '[s]tapling through aluminium products is an unacceptable risk. A practice recently stopped in NZ due to electrocution deaths'. Despite this and earlier warnings concerning the use of RFL products, such products were allowed for use in the HIP. No Installer Advice was issued giving notice of the risk. The Pocketbook was not then revised on the basis of the express warning from Fletchers.

284 At this time, the Insulation Industry was increasing production of insulation product and installer businesses were expanding to meet the demand being created by Phase 2 of the HIP. On 20 July 2009, an email from DEWHA to DEEWR noted:

Across the insulation sector, insulation manufacturers and installers are reporting that they are rapidly expanding their operations to meet very strong demand from households. This includes expanding production and putting on more staff.

285 By 1 July 2009, DEWHA developed an audit and compliance program to support the HIP. This was based on work commissioned from Ernst and Young. The program was not confined to site inspections. As part of the design of the IT platform for the HIP database, the work orders submitted by installers could be checked, reviewed, audited and investigated at both a micro and a macro level.

286 The HIP compliance team undertook verification checks prior to payment of HIP subsidies (which included checking installer details and the addresses of claimed job locations). It also reviewed data which enabled it to target suspiciously high numbers of claims by installers (by hours, day or distance apparently travelled). The team also reviewed complaints from householders and interrogated the database in order to review suspect claims or suspect installer practices. The compliance team was able to conduct desk-top audits and follow up intelligence which came through from a householder complaints line. It investigated complaints pertaining to product quality, service, payment and safety.

287 Medicare maintained the Installer Provider Register for Phase 2 that was available on DEWHA's website. Installers were provided, on registration, with a 'Welcome Kit', user identification and password to access the online claims system.

288 On 11 August 2009, a stakeholder management workshop was held within DEWHA and attended by external advisors like Coaldrake and Everything Infrastructure. Following the workshop, a representative of DEWHA reported to attendees:

I would like to elaborate on the reasons for the workshop. In the past 3 weeks while I have subb'd in for Kevin I have been asked a bunch of interesting questions about installers, householders, manufacturers and other parties to our program. I have been able to answer these questions using advice from you, my own knowledge of the program and what I have found out myself. However, it has been clear that whenever I asked for information on a particular issue or person it has been a re-invention of work each and every time-there has been no strategy to it, no process and there has been no central point for me to go to on issues or· stakeholders. Further when we got the information required it is not clear to me where that information goes to after that or whether we would start from scratch again if I was asked the question again.

289 On 7 August 2009, an industry consultation meeting reviewed how the Insulation Industry was responding to the unprecedented demand created by the HIP. On 12 August 2009, DEWHA noted the key outcomes in an email:

(a) Minister Garrett informed attendees via speakerphone from Darwin that the need for imports to meet the appropriate Australian Standards could not be overstated; and

(b) DEWHA informed attendees that the last available monthly HIP installation numbers were 64K nationally, of which 71% went to batts, with 12% to cellulose to which Herbert, in response, commented that such a high rate of batt installation (i.e. 45K approx. of the 64K nationally) did not bode well for the HIP's success, given that the great majority of those installation would have to have been done by inexperienced batt installers.

290 There were a number of significant changes made to the HIP during its period of operation. For example, Installer Advice 6, published on 27 August 2009, announced that the LEAPR programme would be shut down and folded into the HIP. Installer Advice 7, published on 1 September 2009, changed arrangements about the assistance plan for renters that ceased due to low uptake and was rolled together into the HIP.

291 On 28 August 2009 Minister Garrett announced a new program of enforcement measures. On 1 September 2009, Version 3 of the HIP Guidelines was published. It stated:

The Home Insulation Program, which incorporates the Homeowner Insulation Program and the Low Emission Assistance Plan for Renters, which ran from 3 February 2009 to 31 August 2009 is capped at $2.7 billion. This booklet provides guidelines for installations from 1 September 2009 until 31 December 2011 or until the date when the Program funds have been fully allocated whichever occurs first. Date applicable: 1 September 2009 to 31 December 2011 (or until funds have been fully allocated). The Australian Government reserves the right to change the amount of the assistance provided or any other aspect of these guidelines.

292 Hannam stated that he recalled receiving the Version 3 HIP Guidelines, and that he would have read them front to back. I accept that the plaintiffs received the document.

293 On 14 September 2009, Senator Arbib prepared a report concerning the progress of the programs initiated as part of the Nation Building and Jobs Plan that noted that 11% of the funding for the HIP had been committed at that stage.

294 On 24 September 2009, DEWHA briefed Minister Garrett regarding deregistration of installers and businesses that had breached the program's terms and conditions.

295 On 29 September 2009, Installer Advice 9 referred, for the first time, to a potential safety issue from lack of sufficient clearances around downlights and other electrical fittings.

296 In August and September 2009, members of MEA reported concerns to their industry body about the use of RFL by installers operating under the HIP. On 30 September 2009, MEA published a stark warning about the risk of electrocution from foil insulation in the Master Electrician Magazine. Neither MEA nor any like electricity industry organisation was consulted prior to or as part of the design or implementation of the HIP. Richards, the CEO of MEA, gave evidence that if MEA had been consulted earlier, it would have warned of the risk and advised against including RFL in the program. Richards met with Minister Garrett that day.

297 By the end of September 2009, the rate of installation under Phase 2 was accelerating rapidly. The number of registered installation businesses had reached 9,163 (from 6,682 in July) and the number of installations had risen from 82,973 in July and 115,805 in August to 148,179 in September.

298 The 30 September 2009 version of the Risk Register noted: 'high demand uses up budget more quickly than expected', 'businesses caught unaware by early program closure', 'unexpected job losses in industry', and 'consider policy options to slow demand'.

299 On 8 October 2009, DEWHA noted that the Queensland Electrical Safety Office (ESO) was concerned about the potential for insulation to be installed incorrectly, leading to fires.

300 Installer Advice 10, issued on 9 October 2009, referred to the audit program being undertaken on households where ceiling insulation was installed in order to ensure compliance.

301 On 12 October 2009, DEWHA convened a further industry consultation meeting in Canberra. Attendees included D'Arcy, Skelton, Mr Anthony Tannous, Executive General Manager of CSR (Tannous), Herbert, Hannam, Rashleigh and Zuzul. Mr Malcolm Forbes (Forbes) was the senior DEWHA representative who chaired the meeting. The plaintiffs contended that, at this meeting, DEWHA representatives stated that the HIP would run until mid-2011 and industry representatives stated that it was imperative for participants to know when the HIP would end. The minutes recorded that industry had geared up their manufacturing capacity to endeavour to meet demand, and that in the context of increased rates of insulation installation, Zuzul of the Polyester Insulation Manufacturer's Association (PIMA) referred to heavy investment being made to meet demand and that it was 'imperative to know when the program will end'. DEWHA was asked whether it had projections regarding the likely length of the HIP given the current rates of completion. DEWHA stated 400,000 installations had been completed since February. ACIMA attendees stressed the need for a closely managed rundown of the HIP so as to protect those who had invested heavily and so they would not be extremely financially disadvantaged.

302 DEWHA's version of the minutes of the meeting recorded that in response to the question from industry, 'how long will program run?,' attendees were told until mid2011 but given the rate of uptake, funds may be used before then and government could not allow the commitment to go past the cap. To date $0.5 billion had been spent from the $2.7 billion budget. 400,000 installations had been done since February 2009. DEWHA agreed to update the statistics each week so that the industry could monitor the program.

303 Hannam vaguely recalled the topic of how long the program would run. In context, this vague recall appeared evasive. Hannam was clinging to a belief that the HIP would run until at least mid-2011, because he was being questioned about his reliance on these statements when making decisions affecting his businesses. Arblaster, with whom he and other ACIMA members would regularly discuss this issue, had calculated that the HIP had about 38 weeks to run, which was until mid-2010.

304 D'Arcy stated that the only occasion that he could recall the topic was raised with industry stakeholders was late in October at a meeting in Canberra. He gave the following evidence:

that the HIP might terminate before the money ran out, the date had been achieved, or the number of houses had been achieved.

where the run rate was going so fast that we looked as though we were gonna complete all the homes before the time, and I think they said if that happened, well, the program would finish. But apart from that, no. Personally, I don't recall it ever being said that the program could be stopped short of the original timeframes that was given.

The question was raised - Malcolm Forbes, yes - the question was raised that the run rate was, you know, double, heading towards triple what we thought it would be, and if you extrapolated that out, obviously we were going to complete the 2.7 million homes before - I'm not sure at that point whether it was 2.7 or 2.2 or 1.9, because they did change the levels, whether or not that was the reason the comment was made: 'If you keep this run rate up obviously we'll run out of money or we'll have insulated all homes before the original timeframe.' I think that's what it referred to.

305 Herbert noted in an email to various ACIMA members that Forbes was asked if DEWHA had any projections regarding the likely length of the HIP, given the current rate of completions, and the likely heavy financial impact on insulation companies in managing the run-down of the HIP by 31 December 2011. Throughout the afternoon, this topic was revisited many times with DEWHA either not able or not prepared to forecast this time frame with any validated accuracy.

306 Subsequently, on 2 February 2010, a brief prepared for Minister stated:

Issue 1 - need to check records of roundtable from 12 October in relation to this claim from Tino Zuzul: Zuzul - said he asked Minister a direct question on 12 October in a roundtable phone conference as to whether there would be any changes to the scheme, given the polyester industry was investing heavily, and the Minister indicated the scheme would run through unchanged until the money ran out.

307 The Minister was advised in the brief that he made no commitments regarding the program.

308 On 14 October 2009, Fuller died after being electrocuted while installing insulation in a ceiling cavity in Meadowbrook, Queensland.

309 At the time of his death, Fuller had been laying metal-based insulation sheeting. He was employed by QHI Installations Pty Ltd (QHI), which had only commenced operation on 1 October 2009 and which was a subcontractor to Vision and Network Australia Pty Ltd (trading as Countrywide Insulation) which had been registered as an installer under the HIP. He had only commenced working for QHI on 2 October 2009. He had completed the minimum White Card training requirement. The circumstances of this incident are discussed later in these reasons.

310 On 15 October 2009, the PCG met and considered a report analysing compliance and audit risks that noted the consequence 'unsafe or incorrectly installed product leads to fire/damage, injury or death', sourced from 'inadequate access to training', and described as the risk that 'installation and quality by installers is poor'.

311 On 16 October 2009, MEA published a media release urging the government to remove foil insulation from the HIP. DEWHA opposed Minister Garrett taking such a course and he responded in accordance with DEWHA's advice. DEWHA prepared speaking points for Minister Garrett. One line prepared for Minister Garrett was that DEWHA was 'working closely with the Queensland authorities and the Master Electricians organisation, and if there are any lessons to be learned from this awful incident we will not hesitate to act upon them'. DEWHA proposed that it contact the MEA CEO to open a dialogue.

312 The 'holding line' provided to Minister Garrett, that DEWHA was 'working closely' with organisations, was, at best, preemptive. DEWHA believed that the AFIA was going to put out a media release defending the use of RFL and stating that if installed properly, the death should not have occurred.

313 Richards wrote directly to Minister Garrett, stressing the significant threat to life and property, advocating directly for the removal of RFL from the HIP, and recommending that the initial training of participants include electrical safety issues (particularly in respect of downlight covers and stapling RFL) and that completed jobs be audited on an ongoing basis.

314 On 19 October 2009, DEWHA sent a draft Installer Advice to Richards for his views in relation to electrical safety issues.

315 Installer Advice 11, published on 19 October 2009, stated that installers were required to ensure that only 'trained and competent installers' entered roof spaces, that the power supply was turned off and circuit breakers were fitted. Cables were required to be located prior to starting work and identified as not in the way of any staples or fixings to be used. The Installer Advice also included reminders in relation to the potential for heat-related illnesses by reason of the temperature in roof cavities.

316 Minister Garrett stated that his primary focus was that the HIP was safe. Richards told him that foil was not normally used in retrofitting insulation. Garrett told Richards that he would take advice from DEWHA. In advance of the meeting with Richards, DEWHA had briefed Minister Garrett that Richards wanted a ban on foil, and DEWHA did not recommend this. Levey's evidence was that the Minister was concerned that RFL might be unsuitable for the HIP both before and after the meeting with Richards.

317 Richards met with Minister Garrett on 20 October 2009. Following that meeting Richards confirmed to DEWHA that MEA's key recommendation was that the rebate should be removed from RFL products. He referred to the three fatalities in New Zealand in a similar program. He highly recommended that householders be advised to engage an electrical contractor to ensure safety.

318 On 22 October 2009, DEWHA briefed Minister Garrett about a response to Richards, proposed changes to the guidelines to limit staples to plastic, mandatory use of covers for electrical fittings, requiring a pre-installation risk assessment by installers and for an industry consultation meeting scheduled for 23 October 2009. Minister Garrett responded to DEWHA, declining to approve a decision not to ban RFL. Levey recalled that the Minister was not convinced by the DEWHA briefing and noted the need for ongoing discussions with relevant industry organisations. The Minister noted his response as 'further discussion' to the DEWHA follow-up briefing recommending that he not ban the use of RFL products as part of the HIP. Minister Garrett remained concerned that training was limited to supervisors, and workers with no training were installing insulation. He suggested there was a need for installers to be trained.

319 Installer Advice 12, published on 26 October 2009 and entitled 'Special Issue on Safety', emphasised the requirements of OHS laws. The Advice specifically warned that:

the process of stapling conductive foils in ceiling spaces where cables are present is highly dangerous. .... Non conductive securing practices are highly recommended such as taping or nylon stales. Turning off Main switches and safety switches are good practices but do not eliminate the risk.....

320 After an industry consultation meeting on 27 October 2008, at which calls were again made to ban foil, on 28 October 2008 DEWHA again recommended that the Minister not ban foil, and instead ban the use of metal staples. Minister Garrett accepted this recommendation.

321 The Pocketbook was first referred to in Installer Advice 12. The Pocketbook was not sent, in hardcopy form, to installation businesses until December 2009.

322 From 27 October 2009, DEWHA retained CPSISC and EE-Oz to undertake a gap analysis of existing training in relation to electrical safety and to work jointly on installer training, including preparing a joint statement on installer training standards. No joint statement could be agreed between CPSISC and EE-Oz and none was ever finalised.

323 The death of Fuller in Queensland led to increased contact between DEWHA and the ESO. On 22 October 2009, DEWHA briefed Minister Garrett that it had engaged in detailed consultations with the ESO and, at that time, there was no recommendation from the ESO to the Queensland Minister that foil should be banned in Queensland. DEWHA reported that whilst foil represented 5% of insulation installed under the HIP, Queensland accounted for 92% of all foil under the HIP having been used by 217 installation businesses of more than 7,500 businesses nationwide.

324 On 1 November 2009, Minister Garrett issued a media release titled 'Insulation changes: safety, consumer protections and value for money' advising of the ban of the use of metal fasteners with RFL. Minister Garrett also announced important changes to the HIP, including a reduction in the rebate from $1,600 to $1,200 and a reduction in the funding allocated to the HIP from $2.7 billion to $2.45 billion, effective 2 November 2009.

325 These two changes were also announced to the industry by Installer Advice 13 on 1 November 2009. The changes did cool the industry to some degree, and reduced the average cost of installations. In Installer Advice 13, DEWHA also promised to make available a budget gauge so that industry could track the program's expenditure progress, but there was no evidence that a budget gauge was ever published on DEWHA's website.

326 Minister Garrett also announced that DEWHA would perform electrical safety inspection of 10% of foil insulated homes. PricewaterhouseCoopers (PWC) was contracted on 29 September 2009 to complete this audit and they subcontracted the foil insulation electrical safety inspection work to UGL United Energy Group. No changes were made to installer training requirements and installation businesses continued to be eligible to participate in the HIP without their installers having to undertake insulation-specific training, including in relation to electrical safety and including where foil was the product to be installed.

327 On 2 November 2009, training organisations met to discuss training and safety issues under the program. Representatives from EE-Oz, CPSISC, MEA and regulatory agencies from both QLD and the NSW Home Building Section of Fair Trading attended.

328 On 2 November 2009, Version 4 of the HIP Guidelines confirmed that: '[t]he HIP is capped at $2.45 billion and will continue until 31 December 2011 or until funds have been fully allocated.' It included the statement 'the Australian Government reserves the right to change the amount of the assistance provided or any other aspect of these guidelines.' Hannam gave evidence that he received the Version 4 HIP Guidelines and read them from front to back. I accept that the plaintiffs received the document.

329 Installer Advice 14, published on 6 November 2009, explained the decision to reduce the maximum subsidy per installation job:

From the commencement of the Program the Guidelines have consistently indicated that the Australian Government reserves the right to change the amount of the assistance provided or any other aspect of the Guidelines.

As the economy continues to recover and consumer confidence picks up, the Government has re-calibrated the level of subsidy, meaning that in some cases, there may be a small co-payment.

330 On 12 November 2009, a record of a meeting of training organisations, industry and regulators regarding training and safety issues under the HIP noted that the issue of confirmation that the supervisor needs to be physically present was 'taken offline for further discussion and clarification'. A marked-up comment in relation to this note, which I attribute to DEWHA, stated:

not sure we actually agreed to this; commercial decision and different for every business; thought it was more about the person signing off on the job and their responsibilities, physically on site or not...

331 On 13 November 2009, Installer Advice 15 informed the industry of statistics regarding the rate of demand for installers. By that time 544,066 claims had been made under the HIP, including 469,620 claims made in the first four months of Phase 2. Assuming each claim was for the maximum amount, a rough calculation would have been that $870.5 million had already been paid out under the HIP.

332 On 18 November 2009, Mr Rueben Barnes (Barnes) died after being electrocuted while installing insulation in a ceiling cavity in Stanwell, Queensland.

333 At the time of his death, Barnes had been laying fibreglass insulation batts. He was employed from 28 October 2009 by Arrow Property Maintenance Pty Ltd (Arrow) (which was registered as an installer under the HIP in or around June 2009). Barnes had completed a year of a carpentry apprenticeship and 10 units of training at the Central Queensland Institute of TAFE. There is no evidence that Barnes had done training specific to insulation installation. The circumstances of this incident are discussed later in these reasons.

334 After the death of Barnes, the Queensland Attorney-General wrote to Minister Garrett urging that training be strengthened.

335 On 19 November 2009, Minister Garrett responded to Richards' letter of 16 October 2009. The Minister stressed that safety was an absolute requirement of the program and noted the changes that were made to the program on 1 November 2009.

336 Installer Advice 17, published 27 November 2009, reiterated that insulation must not be installed with use of non-insulated metal or conductive implements (such as poles). The Advice contained further reminders in relation to working in the heat; minimising risk of electric shock; the obligation to abide by OHS laws and the new requirement to perform a risk assessment before each installation job.

337 On 21 November 2009, Mr Marcus Wilson (Wilson) died from heat exposure which was a complication from hypothermia that he suffered after installing insulation at a house in St Clair, New South Wales.

338 Around the time of his death, Wilson had been installing top-up cellulose insulation for Pride Buildings NSW Pty Ltd (Pride), a company registered under HIP. Wilson had replaced another employee of Pride on that job. Wilson had completed some training at TAFE in insulation but had little practical insulation experience. The circumstances of this incident are discussed later in these reasons.

339 On 25 November 2009 DEWHA briefed Minister Garrett, responding to his request for advice on the implications of introducing mandatory training for installers. The brief recommended Minister Garrett note its contents; that he agree to await the results of an audit of competencies before making any decision on mandatory installer training; and that there be discussions with the states and territories. Minister Garrett signed off, noting that he did not agree to the DEWHA's 'do nothing' approach.

340 On 27 November 2009, installers were required to acknowledge and sign up to the revised terms and conditions of the HIP, changes that came into effect during November and were noted in Installer Advices 13-15.

341 On 30 November 2009, the Queensland Government banned the use of metal fasteners for foil.

342 Also on 30 November 2009, Minister Garrett issued a media release titled 'Insulation program safety standards to get a further boost', in which, among other things, new mandatory training and minimum skill requirements were foreshadowed for the HIP, in addition to a requirement for a formal risk assessment be completed for every installation.

343 On 1 December 2009, Version 5 of the HIP Guidelines was published that reiterated new requirements including:

(a) an obligation to obtain two quotations;

(b) performance of a risk assessment using an approved template;

(c) the requirement to comply with Australian Standards;

(d) not to use metal staples or fasteners;

(e) not to use non-insulated metal or conductive implements to place insulation;

(f) the obligation to comply with OHS laws;

(g) the requirement to mitigate risk of electric shock by turning off power supply to all circuits; and

(h) the requirement to read the Construction Industry Pocket Book developed for the program (booklet available online).

(a) 'The Home Insulation Program is capped at $2.45 billion and will continue until 31 December 2011 or until funds have been fully allocated';

(b) 'Date applicable: 1 December 2009 to 31 December 2011 (or until funds have been fully allocated)'; and

(c) 'The Australian Government reserves the right to change the amount of the assistance provided or any other aspect of these guidelines'.

345 On 1 December 2009, DEWHA prepared a risk management report showing that the following risks were significant risks after treatment as at 1 December 2009 with a 'likely major = extreme red' rating:

(a) the HIP and EEHP programs are inappropriately accessed for financial gain;

(b) internal capacity to develop staff to control and deliver the Program is insufficient;

(c) program complexity and /or changing policy goals hamper the delivery of the HIP;

(d) rapid change to 'Policy direction / Incorrect interpretation of Policy Direction'; and

(e) inconsistent information acts as barrier to program delivery.

346 No risk management strategies were identified against these extreme risks. Installation being of poor quality was identified as a 'high' risk, again with no strategy to manage the risk identified. Loss of program credibility was identified as a 'high' risk. The identified strategy action was to 'collect and analyse information on fires before 2009 DH - Requests for information sent to States/Territories in the week beginning 23 November'. The Risk Management Report did not specify the risk of further installer deaths and injury despite the recent history.

347 The PCG considered this risk management report circulated within DEWHA at its 3 December 2009 meeting. The minutes of that PCG meeting recorded that there was a discussion concerning the utility of the Risk Register, and that it required 'clearer presentation for identifying who is responsible, what action has been taken, by whom and when that reflects changes in the ratings'.

348 On 4 December 2009, DEWHA further briefed Minister Garrett regarding electrical and safety enhancements for the HIP, audits, and insulation quality.

349 By 22 January 2010, 389 electrical safety inspections had been completed and PWC had undertaken an interim analysis of these inspections. By 11 February 2010, when an updated analysis was supplied by PWC, 756 inspections had been performed. Potential electrical safety issues linked to installation of foil insulation were identified in 3.03% of homes. In addition, there were potential fire hazards linked to installation of foil insulation in 5.62%, of homes meaning there were safety issues in 8.65% of homes in total.

350 The PWC analysis also disclosed that there were potential electrical safety issues not related to RFL insulation in 20.46% of the same sample of homes inspected, and potential fire hazards not caused by RFL insulation in 1.15% of homes. This meant that there were safety issues in 21.61% of homes inspected in total.

351 PWC reported on roof inspections of homes that did not have RFL insulation installed (10,081 completed installations) and on 11 February 2010 PWC reported that the proportion of safety risks identified from the inspections of RFL insulation undertaken (8.65%) was consistent with the proportion of safety risks identified from roof inspections in relation to all other insulation types, at 9%. The PWC audit confirmed that there was no evidence that RFL insulation installations had given rise to a greater risk of electrical safety issues or fire safety issues than any other insulation product used during the HIP.

352 On 1 December 2009, new Terms and Conditions of Registration implementing Version 5 of the HIP Guidelines took effect, which installation businesses were required to accept by 15 December 2009.

353 On 2 December 2009, Installer Advice 18 set out the recently strengthened compliance regime, the need to follow those requirements or risk deregistration, and that the deregistered list would be published.

354 Between 5 and 15 December 2009, 2,866 installation businesses either declined to accept the new Terms and Conditions or did not respond and were de-registered. A further 417 installers voluntarily de-registered. The result was that by December 2009, there were approximately 7,570 registered installers. By end of January 2009, there were approximately 7,513 registered installation businesses. By the time the HIP was suspended, 3,376 businesses had been deregistered and 7,477 remained registered.

355 On 16 December 2009, DEWHA briefed Minister Garrett about changes in training and competency requirements. On 17 December 2009, Minister Garrett issued a media release titled 'Update on insulation training requirements' that stated, among other things, that changes to the HIP would require every person installing insulation to meet minimum training and skill requirements by 12 February 2010.

356 Installer Advice 19 confirmed the introduction of the new training requirements for the HIP. This announcement was the first recognition by the defendant since it removed the requirement for installer training on 8 May 2009 that, to ensure the safety of installers, mandatory skills training for all who worked in roofs installing insulation under the program and specific insulation installation training (including in electrical safety) was essential.

357 On 23 December 2009, Installer Advice 20 set out an approved list of insulation products.

358 On 27 January 2010, Coaldrake prepared a 'Home/Insulation Program Exit Strategy' scenario analysis. In that document she identified increased risks of death and injury and of a rush to complete, and the risk of a class action against the defendant for the loss of income arising from the HIP being forced to end early.

359 On 29 January 2010, Senator Arbib was briefed with a note of the key findings of the survey of employers in the Insulation Industry. The vast majority of businesses stated that demand for their services had increased since the introduction of the EEHP, and more than 40% were not able to meet the level of demand. Only 42% of businesses had a member of their business undertake the 'Install Ceiling Insulation Training Package' and of those businesses, 21% reported that it did not meet the needs of the industry, most commonly because it was not practical or in-depth enough or did not cover all the different types of insulation adequately.

360 Installer Advices 21 and 22 (published 12 January 2010 and 4 February 2010 respectively) reiterated the requirement to provide proof of competency of installers.

361 On 3 February 2010, Minister Garrett and officers of DEWHA met with industry representatives in Brisbane. DEWHA briefed Minister Garrett about the major issues to be discussed at the industry roundtable in advance of it. Minister Garrett explained his primary concern was for the safety of installers and he stated the Commonwealth's commitment to seeing 1.9 million homes insulated. ICANZ made the point that training was an additional cost to installing and that there needed to be certainty about the program including that the amount of assistance will not decrease and the commitment to insulate 1.9 million homes would not change. A note of the meeting records that ICANZ made the point that 'it is important to give the industry adequate notice of proposed changes to the program as planning is essential for business management' and '[i]ndependent manufacturing' made the point that 'it is important to ensure that businesses are kept up to date with any proposed program changes to assist with forward planning'. PIMA made the point that entry requirements for installation businesses needed to be strengthened to ensure installers understood the safety requirements.

362 Minister Garrett was briefed prior to this meeting that:

The Department expects that the issue of the life of the program will be raised by installers. The Department intends to use current installation numbers as an update for members and to seek members views on the information they would like to have access to in order to ensure they can plan for their businesses after the end of the program. This information will then be used to inform the Department's exit strategy for the insulation program.

363 In evidence were an attendee list, a document titled 'meeting outcomes' prepared by the Commonwealth, notes from the meeting prepared by Hawker Britton Pty Ltd (Hawker Britton); and a typed file note made by Levey. The attendee list shows that D'Arcy, Tannous, Herbert, Hannam and Rashleigh were present and the record of 'meeting outcomes' includes the following statement:

The Minister explained that his primary concern is for the safety of installers and householders. He indicated the Government's commitment to seeing the program achieving the target of 1.9 million homes insulated, and thanked the industry participants for their ongoing support.

364 Hannam recalled attending this meeting and the Minister making statements to this effect.

365 The notes prepared by Hawker Britton recorded that ICANZ requested that the industry be given a guarantee that the program will continue until the date it was specified to end. The Minister gave a guarantee that the program would continue as per the government's original goals for the program, but noted that programs do change and that the government reserved its right to make changes as appropriate. The Minister mentioned that as a Minister, he acts on advice from the Department, and as a Minister in the Cabinet, he is subject to the rules of the Expenditure Review Committee, the Budget, and the decisions of Cabinet.

Minister says the guarantee that we will continue to deliver the program as per the government's goals for the program. Started from dot on a blank page. Issues have arisen. Safety is a huge concern to me, particularly in the second half of last year. Will not give you a 90-day notice guarantee. Will make immediate changes, if required, again. Continue taking advice on the product quality issues raised. Will reserve our rights, as governments do, to make changes at the appropriate time and in an appropriate way.

...

Anthony Tannous says that makes it extremely difficult to plan. No good faith. Reducing from 1600 to 1200 or running down to 800. The Minister says the commitment is to employment for people in households energy savings. I can see that there are differentials about the amounts of different products represented here. As Minister, I make decisions based on advice from the department and bound by the rules of Cabinet and ERC.

...

The Minister says our commitment is to see the program work in line with its goals, will take advice and improve the scheme, if required.

COUNSEL: Do you recall anything that the Minister said about the duration of the program or the Government's commitment to the program?---I think this was the last meeting of industry that Peter Garrett attended, and in that meeting a question from my memory was raised again about the length of the program. I think Peter Garrett took the standard line that, well, the program will meet its commitments but subject to advice from his department I think, and subject to Cabinet decisions and subject to budgetary advice. And there was some discussion at that meeting where he made the point and I don't believe it's in the minutes, but I remember being quite - I remember it pretty clearly, where he said there is a provision within this whole contract that the Government has no obligation to - that they can cancel the program at any time but, you know, it is technically a provision that's in any of these programs.

368 On 4 February 2010, Mr Mitchell Sweeney (Sweeney) died after being electrocuted while installing insulation in a ceiling cavity in Milla Milla, Queensland.

369 At the time of his death, Sweeney had been laying RFL insulation as a subcontractor to Titan Insulations Pty Ltd (Titan), a registered installer under the HIP, but whose directors had not had any experience with insulation prior to the HIP. Sweeney had commenced working for Titan on about 29 September 2009 and had completed insulation training on 2 October 2009, during which he had not been told to turn power off during installations. The circumstances of this incident are discussed later in these reasons.

370 On 9 February 2010, Minister Garrett banned the use of foil insulation and all RFL products as part of the HIP. Installer Advice 23 on 9 February 2010 repeated information that was in the media release regarding the suspension of the use of RFL under the program. The following day the defendant announced safety inspections for RFL installations.

371 On 13 February 2010, the first assistant secretary in PMC responsible for the HIP noted about the use of RFL:

Email at bottom is saying foil retro-fit is inherently unsafe - should never be done whether under this program or privately. Well that is not the current law - States could have banned the practice whenever they wanted but haven't. We went with the current industry practice esp given contact from foil industry associations saying don't leave us out of the program. Similarly Garrett's office and backbenchers at the time were getting lots of calls from small business saying don't leave us out of the program, don't just give it to a few big firms. Not sure you can say all that now but it is useful background...

372 On 15 February 2009, DEWHA briefed Minister Garrett regarding outcomes from an electrical workshop meeting the previous day. He was further briefed on 17 February 2009.

373 On 18 February 2010, the Prime Minister was briefed that:

(a) the HIP was originally funded to a cap of $2.7 billion with the aim of installing ceiling insulation in up to 2.9 million, to run until 31 December 2011 or until all funds are fully committed;

(b) in relation to DEWHA:

(i) the process of risk assessment in relation to the program was the proper responsibility of DEWHA as the implementing agency;

(ii) DEWHA had responsibility for implementing the HIP and risks were being managed by DEWHA;

(i) warning of safety risks from insulation installation and electrical wiring on 8 March 2009;

(ii) warning from NECA on training on 9 March 2009;

(iii) warning on safety hazards made to DEWHA officials from industry experts at industry consultation meeting; and

(iv) warning from state fair trade authorities of the risk of sub-standard insulation.

(i) early indications were that uptake of the HIP may have slowed following changes to the program implemented on 1 December 2009. There was evidence of a fall from the peak of 235,000 in November 2009 to 136,000 and 139,000 in December 2009 and January 2010 respectively;

(ii) to 7 February 2010, just over 1 million households had been insulated and around $1.42 billion paid;

(iii) 7,389 confirmed installers were registered as at 7 February 2010 and were active businesses that had accepted the terms and conditions of registration; and

(e) until 12 February 2010, insulation installation training was required to be completed only by the business/contractor (i.e. a supervisor rather than a worker).

374 During Phase 1, 74,446 installation jobs were rebated by the defendant at an average of about 14,889 jobs per month. Demand increased during Phase 2. Dr Williams, an economist who gave expert opinion evidence for the defendant, noted that the rate of installations per month during Phase 2 increased over the period July 2009 to November 2009. The rate decreased in December 2009 but was continuing to increase through to February 2010. The monthly average for installations during Phase 2 was 152,373.

375 By early November 2009, the HIP had generated very high levels of demand from householders. As of 30 October 2009, over $730 million had been claimed under the HIP. DEWHA advised Minister Garrett that the funds appropriated for the HIP would be exhausted by the end of 2009. The rate of expenditure had put pressure on DEWHA's budget and necessitated bringing forward an urgent supplementary appropriation bill. On 5 November 2009, Minister Garrett wrote to the Prime Minister seeking to bring forward allocated funds.

376 Installer Advice 15, published 13 November 2009, advised the industry that 544,066 claims had by that time been made under the HIP, including 469,620 claims made in the four months between July and October. These figures confirmed that given the reality that $730 million had already been claimed, if the rate of demand remained the same, the HIP's budget of $2.45 billion would be exhausted well before 31 December 2011. The issue of when the allocated funds would have been exhausted is discussed later in these reasons.

377 During Phase 2 there were 1,170,324 installations. The HIP resulted in the injection into the economy of funds of $1.5 billion. As early as August 2009, it became clear that the stimulus measures implemented by the defendant had had a significant impact on the economy. Amongst OECD nations, Australia had the fastest growing economy and the second lowest unemployment level of the major advanced economies. A progress report published by the OCG credited the National Building and Jobs Plan with having 'soften[ed] the blow of the global recession on our workers and small businesses'.

378 In a paper published on 5 August 2010, Nobel Laureate economist Professor Joseph Stiglitz, an international commentator of high standing, expressed the view that the stimulus measures had worked and that 'Australia had the shortest and shallowest of recessions of the advanced industrial countries'. In Professor Stiglitz's view, the measures were 'one of the best designed Keynesian stimulus packages of any country in the world'.

379 On 14 February 2010, Minister Garrett was deeply concerned about audit and compliance in the HIP. On 17 February 2010, DEWHA briefed Minister Garrett that in a meeting held with industry representatives, NECA, MEA, ESO and unions, information had been supplied in relation to electrical safety. The attendees could not agree on suitable options for ensuring safety as none of the options canvassed would sufficiently reduce the risks associated with foil to allow it back into the program. Further, there were significant additional fire issues associated with bulk insulation products.

380 The Minister noted significant concerns in response to this advice at the foot of this brief and he requested that Kruk, the Secretary of DEWHA, come forward and give urgent advice on the action required.

381 Kruk advised on 17 February 2010 that the risks in relation to implementation had been identified on establishment of the HIP. She noted that in response to compliance and audit activities during Phase 2, certain additional measures had been introduced in order to manage 'emerging risks'. These measures included banning metal staples, the introduction of mandatory downlight covers, the introduction of mandatory minimum competencies, and she described a number of other measures. She recounted the recently reported results of inspections and audits conducted by PWC and acknowledged that the building industry has an inherent level of risk.

382 Next, Kruk noted that 'there has been a very low rate of complaint in relation to the installation of insulation in over 1 million homes. However, public confidence in the Program has been damaged by the operation of more unscrupulous elements of the industry and the increasing tendency for rival providers to make claims about the safety of competing products'.

383 She then recounted some additional measures that might be introduced in relation to house fire risk. Kruk concluded that in her assessment:

These measures in concert with the earlier measures which you have introduced, take the Commonwealth to the limits of its existing powers to mitigate public safety risk.

A revised risk management strategy is required that which [sic] addresses the most recent data on non-compliant installations and addresses the engagement of states, both at the level of inspections and prosecutions.

On balance, and while acknowledging the considerable achievement of the Program to date and low level of customer complaint about the quality of installations, I am of the view that it is not appropriate to continue the program in it [sic] current form until there is a more detailed scrutiny of the data emanating from the current audit and compliance program and a revised risk management strategy developed to deal with safety and other compliance related matters.

I therefore recommend the immediate suspension of the Program to enable further enhancement of targeted safety initiatives and independent review of the Program design in light of recent compliance and audit analysis findings regarding safety. This could involve commissioning an external reviewer.... Any review should also examine the interface with State regulatory authorities and identify any necessary changes in this regard.

384 The advice of a group named Taskforce VI, reporting to the SPBC, was that:

(a) the SPBC should note budget and program design risk, notably safety risk, associated with the Home Insulation Program and the need for an exit strategy;

(b) recent decisions on remediation required for electrical faults associated with foil insulation installations may create additional pressure for the Commonwealth to take on liability in other circumstances, for instance, home assessment and remediation for faulty non-foil insulation installation under the [HIP];

(c) the SPBC may wish to consider terminating the program, with any residual funding used to offset the Foil Insulation Program and other audit and inspection activities having regard to the significant safety issues raised and the uncertainty about the extent and nature of the problems; and

(d) the SPBC may wish to put in place an inspection program to address risk and safety concerns.

385 I noted the contents of a brief to the Prime Minister above at [373].

386 Mr Rudd's evidence was that the first time he was told of safety risks associated with the HIP by the public service was when Taskforce VI came back with a report on or about 19 February. That report, he said, formed the basis of the decision to terminate the HIP. The SPBC made the decision on behalf of the Cabinet.

387 On 19 February 2010, the defendant suspended the HIP to be replaced by a Renewable Energy Bonus Scheme (REBS) to commence operation on 1 June 2010. Installer Advice 25, released 19 February 2010, informed installers of the closure of the HIP, noting that concerns about safety and compliance were a major part of the decision. By its defence, the defendant admitted that Cabinet decided in the national interest that the HIP would no longer be government policy, for the reasons noted in the Installer Advice.

388 During a press conference on 19 February 2010, Minister Garrett said that he had acted on advice supplied to him in relation to measures 'in order to acceptably manage risks'. He noted that by reason of the fact that unscrupulous installers had not observed the guidelines, the risks identified in the program at that time could not 'be managed to an acceptable level'. Minister Garrett said that while he had acted on advice to assure him that risks could continue to be managed acceptably, on the basis of the most recent information, 'I am no longer of the view that that is the case.' The Minister's media release said the changes announced were aimed at boosting safety for households and for the workers whose employment was funded by the important environmental programs.

389 On 22 February 2010, DEWHA briefed Minister Garrett that on 19 February 2010 SPBC had determined to close the HIP on the basis of safety concerns emerging from DEWHA's roof inspection program.

390 On 24 February 2010, at an industry consultation meeting, Minister Garrett indicated the HIP was closed as the advice provided in regards to safety was unambiguous. Minister Garrett had been briefed in preparation for this industry consultation that industry was concerned at the abrupt end of the HIP, the lack of notification to allow them to plan ahead and the resulting negative impact on jobs and the viability of businesses between then and when the new scheme commenced. Industry participants told Minister Garrett they had been hard-hit by the suddenness of the government's announcement to cease the HIP and start a new Renewable Energy Bonus Scheme by 1 June 2010, and that the closure of the HIP created major problems for a range of insulation-related businesses particularly installers, manufacturers and distributors. Minister Garrett responded that the government would consider further appropriate transitional arrangements as required prior to the new program commencing.

391 On 26 February 2010 the ESO briefed the Queensland Attorney-General, recommending that he write to recently appointed Environment Minister Greg Combet (Minister Combet) forwarding the ESO's safety recommendations. The briefing note recorded that when ESO representatives met with Minister Garrett and senior representatives of DEWHA and PMC on 25 February 2010, DEWHA officers asked for definitive advice on what to do in regard to RFL installed in homes as part of the HIP. The ESO recommended that the safe removal of RFL from the ceiling space of those homes provided the greatest level of electrical safety.

392 On 5 March 2010 the Queensland Attorney-General wrote to Minister Combet, noting the context of an electrical safety alert in relation to the removal of RFL published on 23 February 2010, and urging the Minister to convene a meeting of all state and territory electrical safety and workplace health and safety regulators to provide advice on any new scheme and the residual safety issues under the HIP, particularly RFL insulation.

393 At the time that the HIP was suspended, there were approximately 6,000 registered installation businesses participating in the HIP.

394 Following the termination of the HIP, a number of assistance packages were instituted in order to aid employees and businesses in the Insulation Industry impacted by the termination of the program. These were:

(a) the Insulation Industry Assistance Package (IIAP) which was announced on 1 April 2010;

(b) the Insulation Workers Adjustment Package (IWAP) also announced in April 2010; and

(c) the HIP Industry Payment Scheme (HIP IPS).

395 The HIP IPS made payments to pre-existing installer businesses which demonstrated to the defendant that the closure of the HIP had an adverse financial impact upon them. Under this scheme, 92 such businesses were paid a total of $13,347,090. Eligibility requirements included that the installer had not committed any substantial breach of the HIP Guidelines and had provided proof of adverse financial impact. Businesses seeking to make claims under the HIP IPS were required to submit financial documentation that was assessed by Deloitte.

396 One of the businesses owned by Hannam, ESNI, was paid $1 million under the HIP IPS. Arblaster's business Enviroflex also received such a payment.

397 The IIAP provided cash payments to assist with costs of inventory held by businesses at the time the HIP ended. The payments were capped at $500,000. Payments made under the IIAP represented 15% of the holding value of excess ceiling insulation stock (on an approved list of products, which did not include foil products) held at the time the HIP ended. To be eligible, businesses were also required to have performed at least 10 installations under the HIP and to be able to demonstrate they had not been subject to any serious non-compliance investigation in relation to the HIP guidelines.

398 Hannam's business ESNI was also a beneficiary of the IIAP and received a payment of $65,817. Matsuh also received a payment of $101,502.

399 The IWAP supported the retention of insulation workers in the industry by providing assistance to find alternative employment or access to training. The funds were devoted to assisting installer and manufacturer businesses to retain staff and to fund training places.

400 There had been 224 fire incidents associated with insulation installed during the period the HIP was in operation.

401 The programs that followed the HIP had some notable features, including the appointment of experienced external project managers to design and implement the programs and a focus on safety that was lacking from the HIP, such as the use of electricians to oversee all work involving RFL.

402 On 1 April 2010, Minister Garrett announced the Home Insulation Safety Plan to 'help restore confidence and address the impact that the termination of the HIP has had on the industry', the key elements of which were described as:

(a) a Home Insulation Safety Program (HISP);

(b) a Foil Insulation Safety Program (FISP);

(c) industry assistance; and

(d) strong fraud and compliance measures.

403 The HISP program envisaged safety inspections of a minimum of 150,000 homes with non-foil insulation, targeted at homes most likely to have safety issues. The defendant intended to contract a national organisation with experience in managing large-scale programs to oversee and manage the HISP. It was anticipated that organisation would source other companies experienced in the insulation and inspection industry to complete the work.

404 Under the FISP, the 50,000 homes that had RFL insulation installed under the HIP had the option of having it removed or, on the advice of an electrician, having safety switches installed. MEA was engaged to oversee the FISP program.

405 The defendant also committed to a $15 million package to assist in meeting the cost of insulation stock-holdings for firms that participated in the HIP to meet the costs associated with the storage of their stock while the industry recovered. The industry assistance package commenced on 6 May 2010. Assistance payments were made on the basis of 15% of stock holding dollar value up to $500,000.

406 On 15 April 2010, industry installer representatives met in Sydney. By this time, Minister Combet was the relevant minister. Dr Allan Hawke (Dr Hawke) was retained to prepare a review of the administration of the HIP and to advise in relation to the implementation of REBS.

407 On 22 April 2010, Minister Combet announced that following advice received from Dr Hawke in his review of the administration of the HIP, the government had decided not to proceed with the insulation component of the REBS. The Minister's media release stated that:

The report by Dr Allan Hawke into the Home Insulation Program (HIP) was a key determinant in the Government's decision to not proceed with this component of REBS.

Dr Hawke has advised the Government that he has 'grave concerns about the wisdom of proceeding with any further government supported home insulation program.'

In his report he notes that 'the safety and quality risks cannot be fully abated and both the Government's efforts and those of reputable industry players will be largely deployed on the Government's rectification program, which must proceed as soon as possible.'

Dr Hawke further advised in his report that if the Government did take the decision to proceed, significant risk mitigation policies would be required. The implementation of these policies would cause a significant delay to the 1 June start date.

It is because of these concerns about the development of an appropriate risk management framework in regards to safety and compliance issues that the Government has made the decision that REBS will proceed without the insulation component.

408 Minister Combet also noted that the government had already committed $56 million to assist insulation workers and companies affected by the closure of the HIP.

409 I pause to note that it is of significance to the plaintiffs' counterfactual, discussed later in these reasons, that in April 2010 the view had clearly been taken by decision makers that safety and quality risks could not be fully abated and that the 1 June 2010 start date for the REBS was unrealistic.

410 Information retrieved from the Home Insulation Program database (HIP database) showed that by 30 June 2009, more than 4,000 new installer businesses had registered on the installer register. Of the 10,853 businesses that ever registered during the period of operation of the HIP, only 7,730 businesses were active by the measure of having received one or more payments for at least one work order.

411 As I noted earlier, in December 2009, installers were required to accept revised terms and conditions for registration as an installer. The number of installers on the register when the HIP terminated was culled to 7,477 by deregistration and removal processes. By another measure, installer businesses were required to submit proof of competency on the part of their installers by 12 February 2010. The HIP database disclosed 8,023 'competent' installers across 3,191 installer companies that had demonstrated their competency as at 16 February 2010.

412 These figures provided one measure of the substantial increase in demand that the HIP was designed to achieve.

413 Dr Williams and Dr Mayraz, another economist who gave expert opinion evidence for the defendant, opined that economic theory predicted a large increase in demand if the supply of retrofit insulation installation was mostly free to householders as occurred during the HIP. Dr Mayraz explained that the demand for retrofit insulation was a function of two factors. First, the extent of potential demand, measured by the stock of uninsulated dwellings suitable for retrofit installation; and secondly, the rate at which such homeowners decided to commit to a retrofit installation, which was the rate at which potential demand converted to actual demand. The HIP subsidy dramatically affected this conversion rate as it rendered installation of insulation free for the majority of householders and at a very low cost for the remainder. Behavioural economics explained free installation (a price of zero) created much higher demand than installation at an extremely low price.

414 Economists have observed this phenomenon of the 'zero-price effect' in different market settings. Consumers are much more likely to acquire free goods or services that they would not otherwise acquire. Dr Mayraz explained that increase in demand is likely to be much greater than the increase that would result from an equivalent price reduction that still required some payment for the good or service. This economic phenomenon was operational because the HIP rebated $1,600 when the average installation cost was about $1,200.

415 Accordingly, economic theory became reality. As already noted, prior to the HIP, about 50,000 Australian homes were retrofitted annually, or about 4,166 installations a month. In contrast, during Phase 1 of the HIP, installations increased to about 14,800 installations a month. The impact of direct payment rather than rebate was more striking in Phase 2, with about 150,000 installations per month for the period of almost eight months that Phase 2 of the HIP was in operation. The HIP accelerated the demand in the insulation market from about 50,000 installations a year to 1,225,216 installations in about one year, which equated to 26 years demand.

416 I accept Dr Williams' opinion that, without the intervention of the HIP, it is likely that the rate of insulation retrofit would have continued at approximately the same rate (i.e. of 4,166 installations a month) throughout 2009 to 2010 and for some years thereafter.

417 Dr Hird, engaged by the plaintiffs, accepted that some of the increase in installation rates during the period of the HIP are sales brought forward from the future into the subsidy period. Householders intending to insulate brought forward that decision during the HIP because the insulation was effectively free. There was also latent demand. Other householders would never have insulated on the basis of cost, but did so once a subsidy was offered. Dr Hird accepted that, absent the HIP, there was no particular reason to think that the pre-existing monthly rate of 4,166 installations would have been much above that in 2009 and 2010. Dr Hird described the effect of the HIP as the cannibalisation of future demand.

418 Drs Mayraz and Williams disputed Dr Hird's proposition. Dr Mayraz rejected the proposition that the HIP either brought forward future demand, or extinguished preexisting demand. Demand that would not have existed but for the HIP was properly characterised as 'new demand'. Dr Mayraz estimated 'new demand' at 95.7% of the total demand during the HIP.

419 I prefer the analysis expounded by Drs Mayraz and Williams. I find that the HIP caused a huge increase in demand for retrofit insulation that was not explicable as future demand brought forward. That future demand was about 50,000 householders paying for their installation. The HIP created an entirely new pool of householders with an immediate demand to be satisfied, by reason of the fact that installation was rendered free or virtually free.

420 The above analysis contradicts the plaintiffs' assertions that pre-existing installer businesses had to take certain expansionary steps in order to avoid the risk that the demand for retrofit installation which they might have expected or predicted to persist at the end of the HIP would be extinguished. In reality, during the HIP, pre-existing installers had access (like all the new entrants to the market) to a new pool of householders demanding insulation installation, who would not ever have done so absent the HIP subsidy. In short, those who registered to participate in the HIP enjoyed access to a profit bonanza - to which they would not otherwise have had access at all.

421 Although I will need to return to the facts to say more about matters that were the subject of detailed evidence thus far glossed over, these findings are sufficient to now address the key questions about the basis of the claims advanced by the plaintiffs.

422 The proceeding is a matter in federal jurisdiction,[7] which is relevant when determining the law applicable to the controversy.[8] That the procedural law to be applied in this proceeding is that of Victoria, being the Evidence Act 2008 (Vic) and, to an extent, the Wrongs Act 1958 (Vic) was not in dispute.

423 The parties disagreed as to the proper substantive law to be applied to the torts of negligence and negligent misstatement. The parties agreed the lex loci delicti is the governing law for torts involving an interstate element.[9] However, how the place where the tort occurred is to be determined, and the result of that determination, were contentious. The parties each contended for different substantive laws being applicable in this case, with a possible consequence that the substantive laws applicable to the claims of group members could differ from the finding in respect of the lead plaintiffs.

424 The defendant submitted that the correct conclusion in relation to the negligence claim was that the place of the tort was where each installer or manufacturer was located in early 2009. In the case of the lead plaintiffs, this was Queensland. It submitted that although the evidence was that the design, administration and implementation of the HIP took place in Canberra, it was necessary to ask where the damage was suffered. The defendant submitted the location of the business that suffered economic loss will be determinative as the lex loci delicti is, in the case of negligence, the law of the place where the cause of action accrues, being, in this proceeding, the place where the economic loss has crystallised. The defendants cited, while acknowledging the different context, the Victorian Court of Appeal in Bodycorp Repairers Pty Ltd v Holding Redlich ('Bodycorp')[10] where the court stated that '[a] cause of action in negligence accrues when the plaintiff first suffers damage caused by the defendant's breach of duty'.[11]

425 In the case of negligent misstatement, that place is where the alleged negligent misstatement was read or heard, and relied on. The defendant's primary position in respect of negligent misstatement is that the plaintiffs have failed to prove reliance - an argument considered elsewhere in these reasons - and the issue need not, and cannot, be resolved. Putting that submission to one side, in the case of representations made to Hannam in Canberra, if proven, the law of the ACT (the common law) would apply. If the representations were read by Hannam at his workplace, the law of Queensland would apply. Reliance by group members is not a common question.

426 This nice question may have little practical operation. Each state has enacted civil liability Acts,[12] and the applicable provisions that are significant in the context of this proceeding are in very similar terms. The defendant noted that each of the civil liability Acts contain provisions in the same or substantially similar language in respect of:

(a) causation;[13]

(b) in relation to breach, requiring the court to take into account, when determining whether a person has breached a duty to take reasonable care, a number of considerations including the social utility of the activity that creates the risk of harm;[14] and

(c) in relation to obvious risks and materialisation of inherent risks.[15]

427 The plaintiffs submitted that the principles enunciated in Voth v Manildra Flour Mills Pty Ltd ('Voth')[16] applied and, as the substance of the torts occurred in Canberra, the common law was the proper substantive law to be applied.

428 In reply, the defendant cited the observations of the majority in Dow Jones & Co Inc v Gutnick:[17]

Reference to decisions such as Jackson v Spittall, Distillers Co (Biochemicals) Ltd v Thompson and Voth v Manildra Flour Mills Pty Ltd show that locating the place of commission of a tort is not always easy. Attempts to apply a single rule of location (such as a rule that intentional torts are committed where the tortfeasor acts, or that torts are committed in the place where the last event necessary to make the actor liable has taken place) have proved unsatisfactory if only because the rules pay insufficient regard to the different kinds of tortious claims that may be made. Especially is that so in cases of omission. In the end the question is 'where in substance did this cause of action arise?' In cases, like trespass or negligence, where some quality of the defendant's conduct is critical, it will usually be very important to look to where the defendant acted, not to where the consequences of the conduct were felt.[18]

429 In Voth, the majority affirmed the approach in Jackson v Spittall ('Jackson')[19] and Distillers Co (Biochemicals) Ltd v Thompson ('Distillers').[20] In Jackson, the task was described as identifying the act on the part of the defendant which gives the plaintiff his cause of complaint.[21] In Distillers, Lord Pearson, adopting the approach taken in Jackson, framed the question as 'where in substance did this cause of action arise?'.[22] In Voth, the majority observed that Distillers did no more than identify a commonsense approach to ascertain 'the act' on which the Jackson test is focussed.[23]

430 Voth concerned accounting advice provided by an accountant (the defendant) practising in Missouri, USA. The plaintiffs were companies incorporated, and based, in NSW. Their claim against the defendant was for damages for professional negligence - both acts and omissions - in the conduct of his accounting practice in Missouri. Neither plaintiff was itself a client of the defendant, whose client was the operating company of the plaintiffs' corporate group (MMC). In short, the plaintiffs asserted that the defendant negligently failed to draw MMC's attention to various taxation requirements imposed in the United States by the IRS, resulting in, inter alia, adverse consequences for the plaintiffs in relation to Australian income tax.

431 The defendant, relying on the observations of Lord Pearson in Distillers, argued that the claim was a foreign tort because the acts and omissions complained of (as opposed to the damage accrued) occurred outside NSW. Lord Pearson stated:

In a negligence case the happening of damage to the plaintiff is a necessary ingredient in the cause of action, and it is the last event completing the cause of action. But the place where it happens may be quite fortuitous and should not by itself be the sole determinant of jurisdiction.[24]

One thing that is clear from Jackson v. Spittal and from Distillers is that it is some act of the defendant, and not its consequences, that must be the focus of attention. Thus, in Distillers the act of ingestion of the drug Distaval by the plaintiff's mother was ignored, the place of that act being treated like the place of the happening of damage, as one that might have been 'quite fortuitous'.[25]

433 The majority observed that it made no sense to speak of the place of an omission, but it was 'possible to speak of the place of the act or acts of the defendant in the context of which the omission assumes significance and to identify that place as the place of the "cause of complaint"'.[26]

434 The majority then turned to the issue of representations. They said:

In some cases an act passes across space or time before it is completed. Communicating by letter, telephone, telex and the like provide examples. In Diamond v. Bank of London & Montreal Lord Denning M.R. stated that a representation or a statement effected by telephone or telex takes place 'where the message is received - wherever it is heard on the telephone by the receiver or tapped out by the telex machine in the receiver's office'. In the view of Stephenson L.J. the situation was like the publication of a defamation or the act charged as an offence in Director of Public Prosecutions v. Stonehouse in that although initiated outside the country it 'operates on persons and property in this country'.

In The 'Albaforth' it was said by Ackner L.J. and by Robert Goff L.J. that it had been held in Diamond that the substance of the tort of negligent misstatement is committed where the statement is received and acted upon. That is accurate so far as it reflects the facts considered in that case. But there is not and cannot be any such general rule, for a statement may be received in one place and acted upon in another. And The 'Albaforth' provides no basis for a conclusion that it is the place where the statement is acted upon which determines the place at which the statement was made. That place may have no connexion at all with the place where the statement was initiated or the place where it was completed. And the place where it is acted upon may be entirely fortuitous.

If a statement is directed from one place to another place where it is known or even anticipated that it will be received by the plaintiff, there is no difficulty in saying that the statement was, in substance, made at the place to which it was directed, whether or not it is there acted upon. And the same would seem to be true if the statement is directed to a place from where it ought reasonably to be expected that it will be brought to the attention of the plaintiff, even if it is brought to attention in some third place. But in every case the place to be assigned to a statement initiated in one place and received in another is a matter to be determined by reference to the events and by asking, as laid down in Distillers, where, in substance, the act took place.[27]

435 Turning to the particular circumstances of the case, the majority noted the impugned conduct could be characterised as either a failure to advise (an omission) or as a negligent misstatement of fact (an act), although the conduct in truth fell within that class of case in which the failure to draw attention to a matter is for practical purposes the same as a positive statement regarding that matter. The majority concluded that properly analysed, the cause of complaint was the act of providing accountancy services, as any omission takes its significance from that same act. The majority said:

That act is in no way comparable to an act, such as that in Diamond and in The 'Albaforth', which passes across space to be completed in some place different from the place where it was initiated. The act of providing accountancy services was an act complete in itself, or, if not complete in itself, one that was initiated and completed in the one place. That place was Missouri. The fundamental significance of that simple fact is not diminished merely because it may be possible, for the purpose of legal classification, to treat that act as equivalent to a statement that was received or acted upon in Australia.[28]

436 Accordingly the majority found the alleged tort was committed in Missouri.[29]

437 What must be determined is the essential act that caused the damage that gives the plaintiffs their cause for complaint in the particular circumstances of this case. This case differs from Bodycorp. The location where the damage was suffered is not determinative of the lex loci delicti.

438 The particulars of the alleged negligence are generally described at [764] in these reasons. Given the national scope of the HIP, the place where the damage occurred would be entirely fortuitous. All acts complained of have taken place in the ACT. The defendant's submission would mean that centralised acts of negligence could be governed by different substantive law depending on the State in which the group member was based.

439 I find that the essential acts that caused the damage that gives the plaintiffs their cause for complaint occurred in the ACT.

440 My findings about the alleged negligent misrepresentations (the statements) are set out elsewhere in these reasons beginning at [563]. In essence, the misleading representation said to arise from the statements was that the defendant would not reconsider its decision to fund the HIP until 31 December 2011, or until allocated funds were exhausted. The statements consist of:

(a) a written statement made in a media release on 3 February 2009, which was associated with the launch by the Prime Minister and the Treasurer of the Nation Building and Jobs Plan;

(b) an oral statement by a public servant from DEWHA at an industry consultation meeting in Canberra on 18 February 2009;

(c) an oral statement by Minister Garrett at an industry meeting on 20 March 2009 in Canberra; and

(d) the repetition of that statement in media releases and in two meetings on 29 June 2009 and 3 February 2010.

441 Media releases and program guidelines were issued out of the Minister's office or by DEWHA in Canberra. They could be read anywhere in Australia as the publication in Canberra was part of the function of national government. The meetings on 29 June 2009 and 3 February 2010 occurred in Brisbane.

442 By reference to those findings, I conclude that, assuming any statement was relied on, that in the context of the HIP, neither the place where that statement was acted on nor the fact that two industry consultation meetings occurred in Brisbane dissuades me from concluding that Canberra was, for the purposes of the cause of action in negligent misrepresentation, the place of the cause of complaint.

443 The agreed common questions for determination were -

(CQ 3) - Did the defendant owe a duty to any or all of the owners, installers, manufacturers and/or suppliers to take reasonable care to avoid economic harm to them in the design, implementation and administration of the HIP?

(CQ 7) - Are the merits of the adoption (or change or abandonment) of government policy a non-justiciable matter as alleged in [32(c)] of the defence?

444 It is a question of law whether, on the evidence in this case, duties of care existed.[30] Part of that question necessarily involves defining the duty being relied on and another part necessarily involves characterising the nature of the plaintiffs' loss. The starting point is the duty pleaded by the plaintiffs.

445 The plaintiffs' pleading was not elegant. They contended that the defendant owed a duty as follows:

The Commonwealth had a duty to take reasonable care in the design and/or implementation and/or administration of the HIP, which was a duty it owed:

(a) to the Plaintiffs and Owners;

(b) further or in the alternative, the First Plaintiff and Installers;

(c) further or in the alternative, the Second Plaintiff and Manufacturers;

(d) further or in the alternative, the Plaintiffs and Suppliers.

446 By reason of the conjunctive/disjunctive options in the phrase 'the design and/or implementation and/or administration of the HIP', the plaintiffs alleged numerous separate duties. Mostly, nothing turned on these options, save for the distinction between policy and operational decisions that I will come to in due course. For the moment, I discuss the design and/or implementation and/or administration of the HIP compendiously using the expression 'the defendant's conduct'. Leaving to one side for the moment the duties alleged to be owed to any particular plaintiff, I will refer to the plaintiffs and group members (comprising owners, installers, manufacturers and/or suppliers) collectively as 'the Insulation Industry'.

447 When defining the alleged duties, the pleading did not explicitly identify the risk of harm in respect of which the defendant owed duties. In Woolcock Street Investments v CDG Pty Ltd ('Woolcock'),[31] Gleeson CJ, Gummow, Hayne and Heydon JJ accepted that the general rule of the common law is that damages for pure economic loss, which is not consequential upon damage to person or property, are not recoverable if all that is shown is that the defendant's negligence was a cause of the loss and the loss was reasonably foreseeable.[32] An exception to this rule is where, in cases of negligent misstatement, the plaintiff proved an assumption of responsibility by the defendant and known reliance on the defendant by the plaintiff.[33]

448 It was evident from the pleaded loss that the duty was to avoid inflicting pure economic loss. The pleaded loss comprised loss of profits, costs thrown away or losses of investments made in a business, loss in the value of stock or storage, leasing and on-costs, diminution in the value of a business, employee costs and other consequential losses (that are analysed in depth later in these reasons). The case at trial was conducted on this basis. I bear in mind that courts are cautious about expanding the categories of cases in which a duty to avoid inflicting economic loss will be found.[34]

449 The plaintiffs effectively defined the duties by their pleadings as the obligation to take reasonable care in the design and/or implementation and/or administration of the HIP to avoid inflicting pure economic loss on the plaintiffs and persons in the nominated categories.

450 However, the plaintiffs' case, notwithstanding the manner of pleading the existence of the duties, was not that the design, implementation and administration of the HIP was the limit of the defendant's alleged conduct. The plaintiffs submitted that the alleged duties of care must be understood in the context of the defendant's further conduct, namely its sudden termination of the HIP on 19 February 2010. The plaintiffs alleged that the termination was without warning and was early. Significantly, it was not in breach of a duty, rather it was contrary to an expectation. The HIP was expected by the Insulation Industry to continue until 31 December 2011, or until earlier dissipation of the funds ($2.8 billion, later $2.4 billion) that had been appropriated for the HIP.

451 On premature termination of the HIP, payments for completed installations ceased and the plaintiffs contended that the cessation of payments caused them to suffer economic loss.

452 Although a hotly contested issue at trial, the plaintiffs contended that the sudden, early termination of the HIP was caused by the defendant's breach of the alleged duties. Breach of duties and causation of loss are discussed in due course, but assuming breach and causation as alleged for present purposes, a central tenet of the plaintiffs' argument that duties of care existed was that the defendant owed those duties so that the plaintiffs and the Insulation Industry would have continued to receive the HIP payments for insulation installation. The concept of continuing distribution of taxpayer funded payments to the Insulation Industry for insulation installation was a central, if unstated, premise for the alleged duties of care. As long as funds continued to flow under the HIP to the Insulation Industry there was no risk of harm through economic loss. No member of the Insulation Industry would suffer compensable loss, being protected from that risk by the profits generated by participation in the HIP in accordance with the expectation. The essential causal link contended for was that had the defendant prudently designed, implemented and administered the HIP, it would not have terminated the HIP when it did and insulation installation work would have continued as expected.

453 The plaintiffs did not contend that there could be economic loss before the defendant terminated the HIP, however the plaintiffs did not allege that the defendant owed a duty of care not to terminate the HIP. It will become clear why such an allegation, had it been made, would be unsustainable. The plaintiffs' pleaded contention was different: that it was reasonably foreseeable that the plaintiffs would act in reliance on information the defendant provided about the HIP and would suffer economic loss if such information was retracted.

454 At trial, the plaintiffs essentially defined the duties alleged as being that in its conduct in the design, implementation, and administration of the HIP, the defendant owed the Insulation Industry duties to take reasonable care not to inflict economic loss on its members by early termination of the HIP. Had it exercised reasonable care in the design, implementation and administration of the HIP, it would not have been terminated on 19 February 2010 and would have run its full term. The plaintiffs and group members suffered economic loss because the HIP did not run its full term and was suddenly and prematurely terminated.

455 The parties agreed that the plaintiffs sought recognition by this court of novel duties of care, there being no case that has considered whether in the exercise of its executive power in the sense identified in Pape,[35] the defendant owed duties of care to a class of persons within the community or a section of the community. All of the authorities thus far have concerned the exercise or omission to exercise statutory power. That context is both material and significant. The first question it raised is by what test or criteria should I assess whether the law recognised the duties alleged by the plaintiffs.

456 For several decades until Sullivan v Moody,[36] the High Court searched for unifying principles that would allow a ready solution to novel problems about when the law recognised that a duty of care existed. In Sullivan v Moody, the court eschewed any attempt at formulating a general test for determining the existence or non-existence of a duty of care for the purposes of the law of negligence, an approach accepted by the court in subsequent cases.[37]

457 In Sullivan v Moody, the Court[38] described the principled approach to be taken as follows:

Different classes of case give rise to different problems in determining the existence and nature or scope, of a duty of care. Sometimes the problems may be bound up with the harm suffered by the plaintiff, as, for example, where its direct cause is the criminal conduct of some third party. Sometimes they may arise because the defendant is the repository of a statutory power or discretion. Sometimes they may reflect the difficulty of confining the class of persons to whom a duty may be owed within reasonable limits. Sometimes they may concern the need to preserve the coherence of other legal principles, or of a statutory scheme which governs certain conduct or relationships. The relevant problem will then become the focus of attention in a judicial evaluation of the factors which tend for or against a conclusion, to be arrived at as a matter of principle.[39]

458 The court must apply the factors for judicial evaluation, now commonly referred to as the salient features. This approach clearly emerged in the judgment of McHugh J in Crimmins v Stevedoring Industry Finance Committee ('Crimmins'),[40] and has been applied and explained in cases such as Sullivan v Moody, Graham Barclay Oysters Pty Ltd v Ryan ('Graham Barclay Oysters')[41] and Tame v New South Wales ('Tame').[42] As the existence of a novel duty of care is here alleged, the parties were in broad agreement that this approach was proper.

459 While each case involves questions of fact and degree, and cannot be used as precedent, the reasoning is particularly instructive in two of these decisions when searching for the proper approach to establishing novel duties. In Crimmins, the plaintiff's claim was that a statutory authority supervising stevedoring operations at Australian ports negligently exposed a waterside worker to asbestos dust, the inhalation of which eventually caused the terminal lung disease mesothelioma. The plaintiff's verdict for damages was set aside by the Victorian Court of Appeal. The majority of the High Court held that the statutory authority did owe a duty of care.

In my opinion, therefore, in a novel case where a plaintiff alleges that a statutory authority owed him or her a common law duty of care and breached that duty by failing to exercise a statutory power, the issue of duty should be determined by the following questions:

1. Was it reasonably foreseeable that an act or omission of the defendant, including a failure to exercise its statutory powers, would result in injury to the plaintiff or his or her interests? If no, then there is no duty.

2. By reason of the defendant's statutory or assumed obligations or control, did the defendant have the power to protect a specific class including the plaintiff (rather than the public at large) from a risk of harm? If no, then there is no duty.

3. Was the plaintiff or were the plaintiff 's interests vulnerable in the sense that the plaintiff could not reasonably be expected to adequately safeguard himself or herself or those interests from harm? If no, then there is no duty.

4. Did the defendant know, or ought the defendant to have known, of the risk of harm to the specific class including the plaintiff if it did not exercise its powers? If no, then there is no duty.

5. Would such a duty impose liability with respect to the defendant's exercise of ''core policy-making'' or ''quasi-legislative'' functions? If yes, then there is no duty.

6. Are there any other supervening reasons in policy to deny the existence of a duty of care (eg, the imposition of a duty is inconsistent with the statutory scheme, or the case is concerned with pure economic loss and the application of principles in that field deny the existence of a duty)? If yes, then there is no duty.

If the first four questions are answered in the affirmative, and the last two in the negative, it would ordinarily be correct in principle to impose a duty of care on the statutory authority.[43]

461 In Graham Barclay Oysters, Gummow and Hayne JJ (Gaudron J agreeing) said of a claim against a statutory authority:

An evaluation of whether a relationship between a statutory authority and a class of persons imports a common law duty of care is necessarily a multifaceted inquiry. Each of the salient features of the relationship must be considered. The focus of analysis is the relevant legislation and the positions occupied by the parties on the facts as found at trial. It ordinarily will be necessary to consider the degree and nature of control exercised by the authority over the risk of harm that eventuated; the degree of vulnerability of those who depend on the proper exercise by the authority of its powers; and the consistency or otherwise of the asserted duty of care with the terms, scope and purpose of the relevant statute. In particular categories of cases, some features will be of increased significance.[44]

462 In Graham Barclay Oysters, the High Court considered whether local and state governments were liable for failing to exercise statutory powers to prevent risk to class members who had consumed contaminated oysters, after commercial oyster production operated by Graham Barclay Oysters had been infected with hepatitis A by reason of exposure to the polluted waters of Wallis Lake. The Court concluded that a public authority has no duty to take reasonable care to protect other persons merely because the legislature has invested it with a power the exercise of which could prevent harm to those persons. Consequently, in most cases, a public authority will not be in breach of a common law duty by failing to exercise a discretionary power that is vested in it for the benefit of the general public. However, if such an authority has used its powers to intervene in a field of activity and increased the risk of harm to persons, it will ordinarily come under a duty of care.

463 In Caltex Refineries (QLD) Pty Ltd v Stavar ('Stavar'),[45] Allsop P (as his Honour then was, with Simpson J agreeing) extracted from the authorities a non-exhaustive list of considerations of the kind relevant to the evaluative task of imputation of a novel duty and the identification of its scope and content.[46] This analysis that has been approved and adopted in subsequent decisions. The President stated:

The High Court has rejected its previously enunciated general determinant of proximity, the two stage approach in Anns v Merton London Borough Council based on reasonably foreseeability, the expanded three stage approach in Caparo Industries Plc v Dickman and any reformulation of the latter two, such as in Canada in Cooper v Hobart...

This rejection of any particular formula or methodology or test the application of which will yield an answer to the question whether there exists in any given circumstance a duty of care, and if so, its scope or content, has been accompanied by the identification of an approach to be used to assist in drawing the conclusion whether in novel circumstances the law imputes a duty and, if so, in identifying its scope or content. If the circumstances fall within an accepted category of duty, little or no difficulty arises. If, however, the posited duty is a novel one, the proper approach is to undertake a close analysis of the facts bearing on the relationship between the plaintiff and the putative tortfeasor by references to the 'salient features' or factors affecting the appropriateness of imputing a legal duty to take reasonable care to avoid harm or injury.

These salient features include:

(a) the foreseeability of harm;

(b) the nature of the harm alleged;

(c) the degree and nature of control able to be exercised by the defendant to avoid harm;

(d) the degree of vulnerability of the plaintiff to harm from the defendant's conduct, including the capacity and reasonable expectation of a plaintiff to take steps to protect itself;

(e) the degree of reliance by the plaintiff upon the defendant;

(f) any assumption of responsibility by the defendant;

(g) the proximity or nearness in a physical, temporal or relational sense of the plaintiff to the defendant;

(h) the existence or otherwise of a category of relationship between the defendant and the plaintiff or a person closely connected with the plaintiff;

(i) the nature of the activity undertaken by the defendant;

(j) the nature or the degree of the hazard or danger liable to be caused by the defendant's conduct or the activity or substance controlled by the defendant;

(k) knowledge (either actual or constructive) by the defendant that the conduct will cause harm to the plaintiff;

(l) any potential indeterminacy of liability;

(m) the nature and consequences of any action that can be taken to avoid the harm to the plaintiff;

(n) the extent of imposition on the autonomy or freedom of individuals, including the right to pursue one's own interests;

(o) the existence of conflicting duties arising from other principles of law or statute;

(p) consistency with the terms, scope and purpose of any statute relevant to the existence of a duty; and

(q) the desirability of, and in some circumstances, need for conformance and coherence in the structure and fabric of the common law.

There is no suggestion in the cases that it is compulsory in any given case to make findings about all of these features. Nor should the list be seen as exhaustive. Rather, it provides a non-exhaustive universe of considerations of the kind relevant to the evaluative task of imputation of the duty and the identification of its scope and content.[47]

464 In my view, no different approach is called for where the features that make the duty of care alleged a novel duty include that the 'statutory authority' is the Commonwealth of Australia and the inquiry is directed to the acts and omissions of public servants under the direction of Ministers of the Crown exercising executive power under s 61 of the Constitution. The parties principally addressed the salient questions identified by McHugh J in Crimmins, namely foreseeability, control, vulnerability, knowledge, the policy/operations function and other supervening factors. I will address how those factors are to be approached on the evidence but first it is appropriate to make some observations about the function or power subject to the duties, which require that the fifth question posed by McHugh J in Crimmins (set out at paragraph [460] above) be answered in the affirmative.

465 When it is said that a public authority owes a duty of care in the performance or exercise of a function or power, it is necessary to identify the function or power that is the subject matter of the alleged duty. Having done that, it is necessary to address whether the existence of that duty would give rise to inconsistent obligations in the performance of that function or conflicting claims upon the exercise of the power.[48] These questions are an element of 'the prospective inquiry as to the existence and content of the duty'.[49]

466 As elsewhere explained, a significant feature was that the defendant's conduct (being the design and implementation of the HIP, and its termination) involved acts of executive power under s 61 of the Constitution without recourse to statutory power. In Pape,[50] the High Court considered the defendant's first fiscal stimulus package and the validity of exercise of the Commonwealth's executive power in response to the GFC. French CJ said:

The executive power of the Commonwealth conferred by s 61 of the Constitution extends to the power to expend public moneys for the purpose of avoiding or mitigating the large scale adverse effects of the circumstances affecting the national economy disclosed on the facts of this case, and which expenditure is on a scale and within a time-frame peculiarly within the capacity of the national government.[51]

that there is a global financial and economic crisis is not contested in this proceeding. It can hardly be doubted that the current financial and economic crisis concerns Australia as a nation. Determining that there is the need for an immediate fiscal stimulus to the national economy in the circumstances set out above is somewhat analogous to determining a state of emergency in circumstances of a natural disaster. The Executive Government is the arm of government capable of and empowered to respond to a crisis be it war, natural disaster or a financial crisis on the scale here. This power has its roots in the executive power exercised in the United Kingdom up to the time of the adoption of the Constitution but in form today in Australia it is a power to act on behalf of the federal polity.[52]

468 There is a preliminary question of whether the exercise (or non-exercise) of executive power is non-justiciable. The defendant contended that the issue is captured in different expressions of the relevant considerations. The distinction between policy and operational functions postulates that the policy function when exercising executive power is non-justiciable. McHugh J's sixth question in Crimmins captures the notion of non-justiciability, as does the notion of the 'political arena' discussed by Gleeson CJ in Graham Barclay Oysters.

469 The plaintiffs placed some limits on the phrase 'design, implement and administer'. It did not include the decision to embark on the HIP, which the plaintiffs accepted as a policy decision that was beyond challenge. As I have noted, the plaintiffs also did not include the decision to terminate the HIP. The category of decision that was nonjusticiable was, in the plaintiffs' submissions, quite limited. In its practical operation, the plaintiffs did not challenge the decisions of the Cabinet, the SPBC or of Ministers. They focussed attention on public service decisions and actions (or omissions) particularly the DEWHA.

470 The plaintiffs' argument was developed in the following way. Mason J recognised in Southerland Shire Council v Heyman ('Heyman')[53] that courts can apply a standard of negligence to operational decisions when determining whether a duty of care has been breached that cannot be applied to a policy decision.[54] Possibly, a duty of care may exist in relation to discretionary considerations that stand outside the policy category in a division between policy decisions and operational decisions. Mason J continued:

The distinction between policy and operational factors is not easy to formulate, but the dividing line between them will be observed if we recognise that a public authority is under no duty of care in relation to decisions which involve or are dictated by financial, economic, social or political factors or constraints. Thus budgetary allocations and the constraints which they entail in terms of allocation of resources cannot be made the subject of a duty of care. But it may be otherwise when the courts are called upon to apply a standard of care to action or inaction that is merely the product of administrative direction, expert or professional opinion, technical standards or general standards of reasonableness.[55]

471 The plaintiffs noted that in Heyman, Mason J considered there was no reason why a public authority 'should not be subject to a common law duty of care in appropriate circumstances in relation to performing, or failing to perform, its functions, except in so far as its policy making and, perhaps, its discretionary decisions were concerned'.[56] Mason J made these observations in the context of statutory power or duty being exercised by a public authority pursuant to a statute that prescribes its functions and objectives. That of course is not the case in this matter.

472 The plaintiffs noted that Toohey J visited the distinction in Pyrenees Shire Council v Day ('Pyrenees Shire Council').[57] In that case, Toohey J observed that it is both fair and reasonable for there to be a duty of care in circumstances where governmental acts relate to a vulnerable class of person, where the admission by the authority 'is not a result of policy considerations such as lack of funds or resources, but is more properly viewed as within the "operational" sphere of that authority's activities'.[58] However, what Toohey J was considering when making these observations was a concept of general reliance within the notion of proximity as the basis for a duty of care owed by a public authority.

473 The plaintiffs submitted that in Pyrenees Shire Council Gummow J considered the distinction between policy and operational matters redundant as a separate and specific threshold test for determining whether a duty of care is owed by a governmental entity, criticising it as not useful.[59] The plaintiffs submitted that any governmental immunity in negligence ought be limited to 'core policy making functions', a submission that finds support in the authorities.[60] I agree. This concept is reflected in McHugh J's fifth question in Crimmins and is relevant to a number of the 'salient questions' identified in Stavar.

474 The plaintiffs contended that a discernible trend emerged in the authorities towards addressing questions of governmental policy when determining whether there has been a breach of a duty, rather than at the anterior point of determining whether the duty was owed. In Pyrenees Shire Council, Gummow J opined that

questions of resource allocation and diversion, and budgetary imperatives should fall for consideration along with other factual matters to be 'balanced out' when determining what should have been done to discharge a duty of care.[61]

The plaintiffs noted that in Crimmins, McHugh J stated that 'it seems preferable to accommodate the distinction at the breach stage rather than the duty stage'.[62]

475 This submission went too far. What McHugh J was suggesting be accommodated at the breach stage was not the whole question of policy/operational function. McHugh J was prepared to reserve functions and powers which can be described as part of the 'core area' of policy-making, or which are quasi-legislative or regulatory in nature, as not subject to a common law duty of care. Compared with the scope of operational decisions that may turn on discretions as to whether to act, the extent of statutory functions, allocation of funding and resources, and so forth, 'core policy-making functions' appear on the facts of most of the authorities to be narrowly defined. That said, as the defendant noted in argument, the policy/operational function distinction has work to do on both the question of duty and that of breach.

476 The plaintiffs submitted that the answer to the defendant's contention that the merits of policy choices made by government could not be interrogated by a court was that the defendant's decision to embark upon the HIP was not challenged. The challenge was properly and deliberately limited to the steps that were taken by the defendant through the relevant public servants after that core policy decision had been made. The plaintiffs contended that all steps taken by public servants, in distinction to Ministers of the Crown, were operational in nature and these included all steps taken in designing, implementing and administering the HIP.

477 This submission squarely raised fact-sensitive questions about whether such steps involved or were dictated by financial, economic, social or political factors or constraints and the related question of identification of the boundaries of 'core policymaking' functions.

478 The plaintiffs pressed the seriously considered dicta of Gaudron, McHugh and Gummow JJ in Brodie v Singleton Shire Council (Brodie),[63] which rejected the submission that governmental entities merit special consideration. Their Honours said:

Appeals also were made to preserve the 'political choice' in matters involving shifts in 'resource allocation'. However, citizens, corporations, governments and public authorities generally are obliged to order their affairs so as to meet the requirements of the rule of law in Australian civil society. Thus, it is no answer to a claim in tort against the Commonwealth under s 75(iii) of the Constitution that its wrongful acts or omissions were the product of a 'policy decision' taken by the Executive Government; still less that the action is 'non-justiciable' because a verdict against the Commonwealth will be adverse to that 'policy decision'. Local authorities are in no preferred position. Yet it is submitted that those bodies which answer the description 'highway authority', distilled from the case law, merit and require a special consideration which only statute may displace. That submission should be rejected.[64]

479 The plaintiffs contended that these statements of principle permit that the defendant can be subject to liability in tort for its negligence in designing, implementing and administering the HIP. It was no answer to say that the HIP was a policy program purportedly required to stimulate the economy. That fact, submitted the plaintiffs, can be accepted, but the decision that a policy program was required to stimulate the economy does not immunise the defendant from all liability in respect of the operation of the HIP. This contention failed to afford full force to the distinctions between the present circumstances and the circumstances in Brodie, where the validity of the misfeasance/nonfeasance rule[65] was under consideration.

480 The plaintiffs submitted that the traditional demarcation between cases in tort against the government has been between positive acts and omissions in respect of statutory powers. In Crimmins, McHugh J noted:

In many cases involving routine events, the statutory authority will be in a no different position from ordinary citizens. Where the authority has alleged to have failed to exercise the power or function, more difficult questions arise.[66]

481 The plaintiffs submitted that a rough demarcation was found between cases where the government has positively exercised its executive or statutory power as opposed to cases where the government has chosen not to exercise a power or discretion. The plaintiffs submitted that the failure to exercise a power or discretion has generally been viewed as falling within the sphere of political conduct that is immune from liability in tort. I do not accept this rough demarcation as presently useful. There is no authority for including the exercise of executive power in the identified demarcation. It cannot be said by that demarcation how an exercise of executive power in the Pape sense is more likely to found a duty of care than a failure to do so.

482 Again advancing as valid the analogy between a local council invested with statutory power and the executive power of the Commonwealth in the Pape sense, the plaintiffs cited the Victorian Court of Appeal's explanation in Berrigan Shire Council v Ballerini ('Ballerini') that followed Graham Barclay Oysters.[67]

483 The point of the plaintiffs' submission was that in Ballerini there was a positive intervention by the public authority that gave rise to a duty of care. That may be compared with Graham Barclay Oysters, where the factual circumstances that might have, but did not, give rise to a duty of care involved the nonexercise of a discretionary statutory power.

484 The plaintiffs sought to extend this analogy to the present circumstances. They submitted that they did not challenge an exercise of discretion or the nonexercise of a statutory power. Rather, when the defendant positively exercised its executive power to embark upon the HIP, it rendered its conduct following the making of that decision justiciable. The defendant's positive use of its executive power was an unprecedented intervention by it in the retrofit insulation market by as a means of achieving economic stimulus and energy efficiency aims. The plaintiffs submitted this conclusion was consistent with the general rule explained by Gummow J in Pyrenees Shire Council, when he said:

when statutory powers are conferred they must be exercised with reasonable care, so that if those who exercise them could by reasonable precaution have prevented an injury which has been occasioned, and was likely to be occasioned, by their exercise, damages for negligence may be recovered.[68]

485 Accordingly, the plaintiffs contended that there was no principle of law that rendered their claims nonjusticiable or that would immunise the defendant from liability and negligence for its deficiencies in designing, implementing and administering the HIP. Further, in submissions that I will outline in due course, they contended that the duties of care that they alleged, and their scope and content, emerged on the evaluative analysis of the evidence required by the salient features approach.

486 The defendant contended that the plaintiffs' duties of care as defined would require it to act in favour of the economic interests of one sector of the community, rather than in the national interest, the interests of the community as a whole. Imposing such duties of care to protect the economic interests of the Insulation Industry would constrain the exercise of its executive powers in the interests of the nation as a whole. That constraint was fatal to the contention that duties of care were owed to one sector of the community, the Insulation Industry. Moreover, the authorities show a cautious approach to the imposition of a novel duty of care to avoid pure economic loss. While the High Court has recognised that government authorities are not immunised against liability in negligence, the distinction between policy and operational decisions remained relevant and the defendant's conduct fell within the proper boundaries of core policy making functions. These submissions found support in the authorities.

487 Gleeson CJ explained why this was so in Graham Barclay Oysters:

Citizens blame governments for many kinds of misfortune. When they do so, the kind of responsibility they attribute, expressly or by implication, may be different in quality from the kind of responsibility attributed to a citizen who is said to be under a legal liability to pay damages in compensation for injury... people who sue governments are seeking compensation from public funds. They are claiming against a body politic or other entity whose primary responsibilities are to the public...they are inviting the judicial arm of government to pass judgment upon the reasonableness of the conduct of the legislative or executive arms of government; conduct that may involve action or inaction on political grounds. Decisions as to raising revenue, and setting priorities in the allocation of public funds between competing claims on scarce resources, are essentially political. So are decisions about the extent of government regulation of private and commercial behaviour that is proper. At the centre of the law of negligence is the concept of reasonableness. When courts are invited to pass judgment on the reasonableness of governmental action or inaction, they may be confronted with issues that are inappropriate for judicial resolution, and that, in a representative democracy, are ordinarily decided through the political process. Especially is this so when criticism is addressed to legislative action or inaction. Many citizens may believe that, in various matters, there should be more extensive government regulation. Others may be of a different view, for any one of a number of reasons, perhaps including cost. Courts have long recognised the inappropriateness of judicial resolution of complaints about the reasonableness of governmental conduct where such complaints are political in nature.[69]

488 Gleeson CJ also cautioned that 'it may be a very large step from foreseeability of harm to the imposition of a legal duty, breach of which sounds in damages, to take steps to prevent the occurrence of harm' and '[i]ssues as to the proper role of government in society, personal autonomy, and policies as to taxation and expenditure may intrude'.[70]

489 Gleeson CJ accepted the 'first principle' that the tortious liability of governments is, as completely as possible, assimilated to that of citizens. However, the Chief Justice recognised that there are limitations on the extent to which that is possible:

They arise from the nature and responsibilities of governments. In determining the existence and content of a duty of care, there are differences between the concerns and obligations of governments, and those of citizens. Such differences led to an attempt to distinguish between matters of policy and operational matters. That distinction was never rigorous, and its validity and utility have been questioned. Even so, the idea behind it remains relevant in some cases, such as the present.[71]

490 One of the reasons why policy matters are inappropriate as subjects of curial judgment about reasonableness is that they involve competing public interests in circumstances where there is no criterion by which a court can assess where the balance lies between the weight to be given to one interest and that to be given to another. The extreme example is the reasonableness of legislative or quasi-legislative activity. The difficulty will not lie in the existence of power but the identification of a duty, since a:

conclusion that such a duty of care exists necessarily implies that the reasonableness or unreasonableness of the inaction of which complaint is made is a legitimate subject for curial decision. Such legitimacy involves questions of practicality and of appropriateness. There will be no duty of care to which a government is subject if, in a given case, there is no criterion by reference to which a court can determine the reasonableness of its conduct.[72]

491 McHugh J in Graham Barclay Oysters acknowledged that a public body invested with a discretionary statutory power may be in breach of a common law duty of care if it fails to exercise the power for the benefit of an individual or class of individuals.[73] In such cases, the word and policy of the relevant legislation are critical. However, McHugh J observed that although discretionary powers are often vested in public authorities, the common law does not seek to convert the statutory discretion into a positive common law duty to exercise it for the benefit of the public or one of its members. McHugh J affirmed what he said in Crimmins that where a plaintiff claims that a public authority owed him or her an affirmative duty of care in a situation that has not yet been recognised by the common law, the court must examine a number of matters to determine whether the duty existed (set out above).[74]

492 Gummow and Hayne JJ in Graham Barclay Oysters, when concluding that the State was not under a common law duty to conduct sanitary surveys of Wallis Lake, noted that the applicable regulations reflected a political decision by the executive government of the State to enlist shellfish industry participants in a system of industry funded selfregulation or co-regulation, rather than to impose on that industry a publicly funded regulatory regime. Their Honours continued:

A decision of that nature involves a fundamental governmental choice as to the nature and extent of regulation of a particular industry. It is in a different category to those public resource allocation decisions which, in the manner described in Brodie v Singleton Shire Council, may be considered in determining the existence and breach of a duty of care by a public authority.

Once the nature of the decision by the State is appreciated, its observance by agents of the State in respect of any particular region falls outside the scope of any common law duty of care that may otherwise arise.[75]

493 The evidence in this proceeding from the former Prime Minister, Mr Rudd, former Finance Minister, Mr Tanner, and Treasury Secretary Dr Henry, discussed elsewhere in these reasons, show the Chief Justice's observations to be apposite in this proceeding. The defendant submitted that the plaintiffs manipulated the policy/operational function classification of the defendant's conduct in an artificial way. Their purpose in doing so was to render analogous application of that analysis, which was made in the cases based on the exercise or non-exercise of statutory powers or discretions, to the exercise of executive power. Properly understood, the defendant's conduct in respect of the HIP was a policy decision taken by the defendant exercising executive power as an urgent fiscal stimulus measure. The positive exercise of executive power was incapable of categorisation as 'operational' in order to invoke the analogy with the cases relied on by the plaintiffs.

494 In Graham Barclay Oysters, Gleeson CJ observed that Mason J's remarks in Heyman remained relevant. In Heyman, Mason J's distinction was founded on the classification of powers as involving either policy making or operational matters, because policy making involved or was dictated by 'financial, economic, social or political factors or constraints' that do not admit a standard amenable to application by courts in distinction to operational decisions.[76] Deane J distinguished the exercise of policymaking powers and functions of a quasi-legislative character from powers and functions that are of a routine administrative or 'operational' nature.[77]

495 The issue is complex and fact sensitive. It will not always be the case that decisions at an operational level do not involve, at least in part, policy or public interest considerations.[78] Conversely, decisions at a policy level, at least in this case, involved the national interest which could be inconsistent with the interests of sections of the community.

496 In Crimmins, the majority confirmed that functions and powers which are part of the 'core area of policy making, or which are quasi-legislative or regulatory in nature', are not subject to a duty of care.[79] This was the fifth of the questions identified by McHugh J. Focussing on that question, the defendant submitted that this proceeding provided a paradigm example of a plaintiff attempting to impose liability with respect to the defendant's 'core policy making' functions. The merits of the adoption (or change or abandonment) of current government policy cannot be regulated by the norms of negligence, and is not justiciable.

497 The defendant developed this contention, submitting that the present circumstances were most closely analogous with Graham Barclay Oysters. Gleeson CJ noted that the nature and extent of State government involvement in oyster quality control possessed the following features: involvement was a matter of policy, it received attention at the highest level, it had substantial budgetary implications; and it involved government concern to encourage an important primary industry.[80]

498 The evidence showed that the HIP was designed by a Cabinet sub-committee as part of an overall fiscal stimulus program implemented in response to the GFC, with significant budgetary, financial and economic implications. Further, this examination showed a considerable blurring of the line between policy and operational function in those features of design, implementation, and administration identified from the plaintiffs' particulars of breach. Those features of implementation and administration alleged to be negligently performed identify features of design that were the qualities of the HIP that attracted the defendant to it as a policy response by a fiscal stimulus program.

499 In Graham Barclay Oysters, Gummow and Hayne JJ (in the minority) also concluded that the decision of the New South Wales Government not to require sanitary surveys of a particular type in oyster growing areas was a decision which involved 'a fundamental governmental choice as to the nature and extent of regulation of a particular industry,'[81] an observation said by the defendant in this case to be apposite. The defendant contended that the elaborate and detailed architecture of a 'non negligent' HIP for which the plaintiffs contended by their counterfactual, which is explained later in these reasons, demonstrated the pervasive regulatory regime that they asserted the HIP ought to have involved.

500 The defendant submitted that application of these principles to demonstrate a policy decision that was immune from the imposition of a duty of care was evident in Dansar. In that case the plaintiffs contended that the council owed them a duty of care to avoid economic loss when making decisions concerning the allocation of spare sewerage capacity that caused a refusal or delay in the grant of a land development approval. Rejecting the proposition, the trial judge concluded that there was a disconformity between the asserted duty and the council's statutory functions and obligations that were to be exercised in the public interest and involved considerations of public health and environmental impact; that as between the parties there was no relevant reliance or assumption of responsibility; and that the appellant was not 'vulnerable' in the relevant sense.

501 A majority of the NSW Court of Appeal dismissed the developer's appeal and emphasised that:

(a) the claim was for 'pure economic loss made against a statutory authority responsible for the care and management of a public utility and the provision of an essential service to members of the public living in the local government area for which it is responsible';[82]

(b) it was not a case in which the council had exercised its statutory powers to prevent or avert a risk of harm of which it had some knowledge and over which it had a measure of control, but failed to do so with reasonable care;[83]

(c) Dansar had not relied on the accuracy of information or advice that the council provided;[84] and

(d) where (as Dansar accepted) 'the council had no duty in formulating, from time to time, the policies it would put in place for allocating the limited sewerage capacity, which necessarily were approximate, contestable and liable to change at any time and without notice' it was difficult to see 'how there could be a duty to take reasonable care in the implementation of those policies so as to avoid pure economic loss'.[85]

502 Bearing in mind that critical to the plaintiffs' claims was the context of departure from policy through the decision to terminate the HIP, the defendant referred to observations of Brennan J in San Sebastian Pty Ltd v Minister Administering Environmental Planning & Assessment Act 1979 (NSW) ('San Sebastian'):

When persons chart their conduct in the expectation that a public authority will exercise in accordance with a policy a discretionary power which it is bound to exercise in the public interest, they have no justification for complaint if the public authority, without fraud or breach of contract, alters its policy and disappoints the expectations which the policy engendered, even if the reason for alteration is that the policy was carelessly prepared.[86]

503 The defendant further submitted that the existence of the pleaded duties should be denied, as the sixth question posed by McHugh J in Crimmins should also be answered in the affirmative. I have already noted the defendant's contention that the supervening reason in policy to deny the existence of a duty of care is that it would constrain the defendant to act in the economic interests of the Insulation Industry rather than the interests of the community as a whole and in the national interest.

504 Further, the defendant contended that in these circumstances imposing a duty on it would have a chilling effect on all future policy design by the national government because in addition to the duties owed by public servants as part of their employment,[87] public servants would be constrained by duties owing to innumerable public interest groups and businesses in the community at large. The defendant contended that when the plaintiffs settled on the case theory that the defendant was responsible for the negligent conduct of public servants when advising or briefing Ministers, the imposition of a duty of care on the defendant owed to the Insulation Industry was inconsistent with the duties of public servants.

505 The Australian Public Service Values (APS Values), identified in s 10 of the Public Service Act 1999 (Cth), include the obligation to provide advice which is frank, honest, timely and based on the best available evidence.[88] The APS Values confirm that the public service is accountable to the Australian community under the law and 'within the framework of ministerial responsibility'.[89] That obligation had particular meaning for public servants obliged to give frank and fearless advice in relation to the most appropriate mode for implementing an urgent government response to an economic crisis affecting the nation. It is not consistent with, and is diminished by, a duty of care to avoid inflicting economic loss on members of the Insulation Industry.

506 The affirmative answers to the fifth and sixth factors identified in Crimmins deny the duties of care contended for by the plaintiffs. It is strictly unnecessary to consider other salient features. However, for the sake of completeness, I will briefly consider the other salient features identified as relevant by the parties.

507 The parties developed particular submissions in relation to the salient features identified in Crimmins, notably foreseeability, knowledge, control and vulnerability and I will identify the arguments and express my views.

508 In the case of public instrumentalities or officials, mere foreseeability of harm even when coupled with the power to avert or minimise the harm is not sufficient to attract a duty of care. Gummow, Hayne and Heydon JJ stated in Stuart v Kirkland-Veenstra ('Kirkland-Veenstra'):

The co-existence of a knowledge of a risk of harm and power to avert or minimise that harm does not, without more, give rise to a duty of care at common law.[90]

509 The plaintiffs submitted that the following circumstances supported a finding of a duty:

(a) the defendant's conduct intentionally interfered with the existing market for insulation materials and installation services which were supplied by group members;

(b) at the material times, the defendant knew or ought to have known that the plaintiffs and group members would be induced to invest in and expand their businesses by its conduct;

(c) at the material times, the defendant knew or ought to have known that the HIP would if fully implemented extinguish most of the market for the insulation materials and installation services which were supplied by the plaintiffs and group members;

(d) at the material times, the defendant intended that the plaintiffs and group members would be induced (or encouraged) by its conduct to invest in and expand their businesses; and

(e) the defendant could not have administered the HIP without that investment and expansion.

Accordingly it was reasonably foreseeable that the plaintiffs and group members would act in reliance on information provided about the HIP by the defendant and would suffer economic loss if such information was 'retracted'. I will return to this allegation.

510 The defendant contended there were particular difficulties with the plaintiffs' foreseeability argument. The defendant did not contest that a limited subsidy of the type administered by the HIP would create a 'boom and bust cycle', which was selfevidently intended because the HIP formed part of a policy directed at shortterm fiscal stimulus. The defendant contended that what the plaintiff had not established was the foreseeability of any specific risk of economic loss being suffered by the plaintiffs or group members at the time when public servants were consulting with the Insulation Industry as part of the design process or determining the competency standards for participant installers.

511 The plaintiffs' submissions in this regard were curious. The plaintiffs alleged that what was reasonably foreseeable was that the Insulation Industry would act in reliance on announcements and information about the HIP and would suffer economic loss if such information was retracted, but this allegedly foreseeable specific risk fell away. The plaintiffs' contention became that the foreseeable specific risk was the risk of economic loss through premature cessation of payments for installations. The claim clearly tied the economic loss suffered by the plaintiffs to the early termination of the HIP and not directly to its negligent design and administration and in that way to announcements and information about the HIP. Consequently, the claim assumed, rather than proved, that the plaintiffs' losses were reasonably foreseeable at the time the HIP was being designed and implemented.

512 So much was evident from the counter-factual introduced during the running of the trial that opened with the words 'a reasonably competent government administration, charged with the design, implementation and administration of the HIP foreseeing the risk of economic harm to the plaintiffs and group members of an early termination of the HIP would have...' (emphasis added).

513 The relationship between foreseeability of the relevant risk and the impugned conduct of the defendant remained obscure, because foreseeability of a specific risk of loss of the type that eventuated was not articulated.

514 The announcements and information communicated by the defendant to which the plaintiffs refer were communications of core policy decision-making rather than operational matters. The communications relied on, also set out above at paragraph [440] and considered in detail beginning at paragraph [563] below, were not in dispute.

(a) On 3 February 2009 the defendant announced that from 1 July 2009 for the following period of two and half years it would provide funds of $1,600 per home under the HIP to fund the installation of ceiling insulation.

(b) On 18 February 2009 that commitment was repeated on the basis that it would run until 31 December 2011 or until the funds that the defendant had allocated to the HIP had run out.

(c) From time to time after 18 February 2009, DEWHA in the course of administering the HIP repeated or undertook that the defendant would continue to fund the installation of ceiling insulation on the this basis.

(d) On 20 March 2009 the Minister for the Environment responded to a question at a consultation meeting with representatives of the Insulation Industry stating that the HIP will run for the full term or until the money runs out adding 'you can take my word for that'.

(e) From time to time after 20 March 2009 the Minister for the Environment and the Services Delivery Parliamentary Secretary repeated this statement on numerous occasions.

515 What could not emerge from these allegations was how it was said that the economic loss actually suffered was reasonably foreseeable when the conduct which was alleged to have been negligent took place. The defendant contended that the issue cannot be resolved by considering whether the public service or Cabinet knew that the effects of a time limited program such as the HIP might tend to create a 'boom and bust cycle' in the Insulation Industry.

516 Factually, the issue of foreseeability was not without complexity, particularly as the trial was conducted without any real demarcation between design, implementation and administration. I have discussed elsewhere that the evidence showed that Phase 2 was designed in the period from late January 2009 till late June 2009, when the temporary Phase 1 operated. Although Phase 2 was being administered and implemented during the period from July 2009 to February 2010, design work continued.

517 Notwithstanding deficiencies in the manner of pleading the duty, the question of foreseeability must be decided on the evidence. The defendant contended, with some force, that the plaintiffs conflated evidence that public servants and Ministers knew that fiscal stimulus causes a boom and bust cycle, which in essence was intended, with the need to demonstrate that public servants briefing the Minister ought to have foreseen the consequence of economic loss being suffered by a plaintiff when the breach conduct occurred.

518 The questions became 'did the plaintiffs prove in either of the periods just identified that it was reasonably foreseeable that':

(a) if foil were permitted to be used in the HIP and/or certain minimum competency requirements were imposed and/or if the supervision and training requirements were calibrated in a particular manner (for example breach events), then the Insulation Industry would be flooded with businesses which would not comply either with extant laws in relation to occupational health and safety or with a number of the HIP's own eligibility requirements; and

(b) as a result, a number of installer deaths and house fires would occur associated with the work done under the HIP; and

(c) the occurrence of these events would cause DEWHA to advise the Minister that it no longer held the view that those safety risks could be managed in a manner that was acceptable; and

(d) this, in turn, would cause the Minister to give certain advice to Cabinet concerning safety risks; and

(e) the provision of this advice would, in turn, lead to the early cancelation of the HIP; and

(f) group members who had overinvested in creation or expansion of capacity would have sunk costs which were unable to be recovered by continuing to derive profits from the HIP and would therefore suffer economic loss?

519 Taking this example, for foreseeability to be a salient feature supporting the existence of a duty of care, the plaintiffs must in specific terms, rather than by inference from foreseeability of a 'boom and bust cycle' in the Insulation Industry, postulate foreseeability during the design phase as a chain of connected events showing foreseeability of economic loss of the kind suffered.

520 The defendant contended that this complex chain of connected foresights was improbable, noting Chief Justice Gleeson's observation in Commissioner of Main Roads v Jones about the distorting effect of litigious hindsight:

When a foreseeable risk has eventuated, and harm has resulted, the particular risk naturally becomes the focus of special attention. Yet, if it was only one risk among many, there may have been no reason, at the time of the allegedly tortious conduct, to single it out.[91]

521 I was not persuaded that foreseeability, as a salient factor, was shown to support the duty of care claimed to have been owed.

522 Turning next to the salient feature of control, the initial consideration was identifying precisely what it was that must be the subject of control. In Modbury Triangle Shopping Centre Pty Ltd v Anzil,[92] Gleeson CJ observed that 'where there is a problem as to the existence and measure of legal responsibility, it is useful to begin by identifying the nature of the harm suffered by a plaintiff, for which a defendant is said to be liable'.[93] The nature of the harm suffered in this case was economic loss and the direct and immediate cause of the plaintiffs' economic loss was the cessation of payments for insulation installations on termination of the HIP. The plaintiffs contended that they made business decisions that involved continued or increased expenditure by them and that they did so on the basis of continuing revenue returning to their businesses through the HIP.

523 The relevant questions must primarily focus on the extent of the defendant's control over the risks of economic loss in the conduct of the plaintiffs' decision making processes in their businesses. The analysis of risk was complex. First, the defendant did not, as an aspect of the exercise of its powers in respect of the HIP, require or direct that any business make an investment or expenditure decision. Any such decision was a voluntary choice of the business decision makers and was directly under their control. Control of the risk of a poor decision that might cause economic loss was exercised by the decision maker identifying the corporate objective to be achieved by the decision, having properly analysed the parameters governing the decision, and being properly informed about the financial risks to the business inherent in the decision. The makers of such decisions could be, and were, assisted by independent advisers and were free to make such assessments of risk in the decisions as they considered appropriate. Any failure to properly interpret the business and economic conditions affecting the decision or the parameters of the factors that would determine where in the decision the risks that it might be unsuccessful lay were not controlled by the defendant.

524 The plaintiffs contended that I should accept that the defendant was under a duty of care by reason of that degree of control which it exercised over the retrofit insulation market.[94] The plaintiffs contended the defendant was able to exercise control to avoid the relevant harm. They submitted that the defendant exercised control through determining features of the HIP that affected the market for insulation installation, and which defined the parameters of some factors relevant to the decisions. The plaintiffs submitted that when the defendant intervened in the retrofit insulation market, determined the training arrangements that would apply, determined the entry requirements for participants and did so in the knowledge that the HIP would involve a 'boom/bust' outcome in relation to the market, the defendant established significant if not absolute control over that market.

525 This is not the present issue and, as Gleeson CJ observed in Graham Barclay Oysters, it is, at best, an over-simplification and one which takes the debate into the area of political judgment. The like question was postulated by the Chief Justice about regulation of oyster farmers - by what criterion can a court determine the reasonableness of a government's decision to determine the proper measure of regulation for an industry?[95]

526 Control over the retrofit insulation market in general is different from control over the risk of a poor expenditure or investment decision by an individual business. The plaintiffs, in contending the defendant could control the relevant risk, drew an analogy with the capacity of local government to safeguard against the risk of fire evident in Parramatta City Council v Lutz ('Lutz').[96] In that case, Lutz had repeatedly complained to the local municipal council about the derelict condition of a property adjacent to her own. The council advised that it was taking action with reasonable expedition to protect her. Due to delay in the execution of a demolition order, Lutz's property was destroyed by a fire which commenced in the adjacent property.

527 In particular, the plaintiffs sought to isolate from its factual foundation McHugh JA's (as his Honour then was) observation (in a dissenting judgment) that there was:

much to be said for the view that a public authority should be under a duty to take affirmative action when the control of conduct or activities has been ceded to it by common understanding or when it receives some benefit from the conduct or activities.[97]

[i]f in addition to the right of control the authority knows or ought to know of conduct or activities which may foreseeably give rise to a risk of harm to an individual, the authority should be under a duty to prevent that harm.[98]

528 McHugh JA determined that Lutz had, to her detriment, relied on the defendant council's negligent representation. However, McHugh JA was not prepared to adopt the notion of control as the touchstone of a duty in a public authority to take affirmative action. The case is not presently helpful.

529 The plaintiffs submitted that in Crimmins, McHugh J and Gummow J (separately) focussed on both control and vulnerability. McHugh J said:

the factor that points compellingly to the Authority owing an affirmative duty of care is that the Authority directed the waterside workers where they had to work and that the failure to obey such a direction could lead to disciplinary action and even deregistration as a waterside worker. That factor points so strongly to the existence of a duty of care that it should be negatived only if to impose the duty was inconsistent with the scheme of the Act. It can seldom be the case that a person, who controls or directs another person, does not owe that person a duty to take reasonable care to avoid risks of harm from that direction or the effect of that control.[99]

Crimmins was a case of explicit control, authorised by statute and evidenced by the power of the authority to direct the conduct of the waterside workers. The plaintiffs developed the submission that, by analogy with the road authority cases, a public authority's statutory powers may give it such a significant and special measure of control over the safety of the person or property of citizens as to impose upon the authority a duty of care.[100]

530 The plaintiffs contended by analogy that the evidence supported the finding that the defendant had significant, if not absolute, control over that market, as discussed above at paragraph [524]. The conclusion that the plaintiffs invited was that the defendant was under a duty of care by reason of the degree of control it exercised over the retrofit insulation market. For reasons explained elsewhere, I do not accept that the defendant exercised significant, if not absolute, control over the retrofit insulation market, but if I assume it to be so for the present submission, I cannot accept the plaintiffs' control submissions.

531 The plaintiffs have attempted to equate two different concepts of control - managerial control of the risk of a failed investment/expenditure decision by an Insulation Industry business, and regulatory control of the risk of termination of the income stream of householder payments under the HIP. That the defendant controlled the regulatory risk does not mean that it controlled the managerial risk.

532 At its highest, the plaintiffs contended that defendant's control of the retrofit insulation market equated to control over the continuation of householder payments under the HIP, which directly affected the income stream available to the business contemplating an investment or expenditure decision. The defendant did not dispute that it exercised control over the continuation of the HIP and the householder payments. It could terminate the HIP at any time and for any reason. The cessation of householder payments terminated the income stream essential to the success of the investment/expenditure decision. The plaintiffs understood that consequence, which is why what was critical to their argument was their reliance on the expectation that householder payments would continue. Their expectation must operate as a fetter on the defendant's exercise of control over the termination of the HIP. So much is clear because the plaintiffs do not challenge the decision to terminate the HIP, which was the direct exercise of control over the householder payments. The defendant could not be, and was not said to be, liable for the loss to the plaintiffs of the income stream from the householder payments under the HIP.

533 It became clear that the plaintiffs' contentions about control are based in its want of control of regulatory risks that if not properly controlled generated, in turn, a risk that the HIP would be suddenly and prematurely terminated. In that sense, control was exercisable by conducting itself as a prudent government administration would, in order to control risks, other than the managerial risk of economic loss to the plaintiffs, that could result in termination of the HIP on an operational rather than a policy function basis.

534 On the other hand, the manager of the business was well able to anticipate and consider the possibility of premature termination of the HIP and to determine an investment and expenditure strategy that protected the business from adverse risk. As is later explained, control of the risk of economic loss was exercised by the second plaintiff in precisely this fashion.

535 In Graham Barclay Oysters, Gleeson CJ declined to equate government regulatory control with managerial control. The Chief Justice said:

The proposition that the New South Wales government exercised substantial managerial control over the Wallis Lake oyster industry requires further analysis. If taken at face value, it virtually forecloses further debate. Control is a well-established basis for the existence of a duty of care in a public authority or a private citizen. Managerial control, if it existed, would seem to equate the position of the State with that of the Barclay companies, which admittedly owed a duty of care. But what exactly does it mean to say, in a market economy, that the State has substantial managerial control over an industry conducted by private enterprise?... In order to understand the legal implications of various aspects of governmental control, it is necessary to examine the legislative and regulatory structure set up by the State Parliament, and the executive... The assumption that a State government owes to individual citizens a legal duty to care for the health and safety of all citizens, or all consumers of food, or all consumers of oysters, by exercising its regulatory powers to the extent judged reasonable by a court, has far-reaching implications.[101]

The powers and functions of the government of a polity are generally invested for the benefit of the general public. In the absence of a statutory direction, the mere existence of such a power in that government imposes no duty to exercise it for the protection of others. In that respect, its situation is analogous to a private citizen who, absent special circumstances, has no duty to take affirmative action to protect another person from harm. Nor does the bare fact that the Executive government has exercised its powers from time to time create any duty to exercise its powers. Such exercises of power do not constitute 'control' of an activity in the sense that that expression is used in the law of torts. They are merely particular exercises of powers that were invested in the Executive government for the benefit of the general public to be exercised at the discretion of the Executive government. Unless a particular exercise of power has increased the risk of harm to an individual, the Executive government of a polity does not ordinarily owe any common law duty to take reasonable care as to when and how it exercises its powers. No doubt circumstances may arise where conduct of the government, short of increasing a risk of harm, creates a duty of care. But such cases are less likely to arise than in the case of other public authorities. In particular, knowledge of specific risks of harm or the exercise of powers in particular situations is less likely to be a factor in creating a duty than in the case of an ordinary public authority. This is because the powers and functions of the Executive government are conferred for the benefit of the public generally and not for the benefit of individuals.[102]

537 McHugh J did not accept that the exercise of statutory powers or the capacity to do so constituted control of the oyster farming industry in the manner identified by the trial judge. The existence of legislation that enabled the supervision and management of fisheries in New South Wales was not determinative. McHugh J identified supervision management or control in this sense or for this purpose to be different from the sorts of control that in other cases concerning public authorities have caused the courts to find that a duty of care existed. His Honour pointed to the examples of Crimmins and Brodie.

538 The defendant submitted, and I agree, that each of Crimmins and Brodie was distinguishable from the present circumstances. The statutory power in Crimmins to direct waterside workers cannot be compared with the circumstances in this case in which the plaintiffs made decisions to invest in order to earn profits from a government subsidy. In Brodie, the council exercised significant and exhaustive physical control over the state of the roads. In the present circumstances, to address the way the notion of control of risk was being put, the defendant submitted it possessed no legislative powers in relation to matters of occupational health and safety in the context of private businesses. While that may be so, more significantly, it exercised no control over the investment decisions of private companies. At its highest, the defendant had no more than the power of persuasion.

539 Significantly, the defendant contended that the plaintiff sought to impose a duty that would attach to an industry conducted by private interests. It was beside the point that the defendant controlled the funding of the HIP and the eligibility requirements to participate in the scheme. It did not control the risk of inappropriate expenditure or investment decisions being made by an individual business.

540 When close attention is paid to the circumstances of the decisions that the plaintiffs contended caused their loss, an analysis undertaken elsewhere in these reasons, the defendant's submissions must be accepted. It cannot be said that the exercise by the defendant of the power to design and/or implement and/or administer the HIP increased the risk of economic loss to an individual business. To the contrary, it created an opportunity for profit; in some cases, substantial profits. The prospect of a loss or sudden loss to a business of its income stream from the HIP was both foreseeable and, at least generally, foreseen. Decisions in the operation of a business are controlled by its managers and the defendant's powers and functions were not exercised for the benefit of those individual businesses. The defendant was not exercising control over the risk of individual businesses suffering economic loss through investment and/or expenditure decisions because such decisions always remained controlled by the managers of the businesses.

541 I am not persuaded that the defendant had, or exercised, power to protect the plaintiffs and members of the Insulation Industry from a risk of harm when making investment and/or expenditure decisions in the form of economic loss that might later be suffered when the parameters affecting that decision altered. On this basis, there cannot be duties of care owed by the defendant to carefully exercise powers and functions conferred for the benefit of the public generally.

542 The plaintiffs pleaded that Insulation Industry members were vulnerable in that they could not protect themselves from the defendant's want of reasonable care in its conduct about the HIP, including in the making of statements and dissemination of information about the HIP.

543 Although the plaintiffs alleged their vulnerability in these terms, at trial their claimed vulnerability emerged in a particular way. The plaintiffs were not vulnerable to a risk of economic loss absent premature and sudden termination of the HIP. The HIP permitted the plaintiffs and the Insulation Industry to enjoy an enhanced financial return from their businesses, by reason of the payments made on behalf of home owners for completed installations. The evidence about how the plaintiffs benefitted from the HIP is set out elsewhere in these reasons. Much was made of the plaintiffs' expectations engendered by the defendant's conduct. However, what was critical for the present purpose of defining the duties being alleged was that the plaintiffs alleged that they expended funds or invested in their businesses to capitalise on the opportunity for maximised returns through the operation of the HIP.

544 The plaintiffs alleged that the defendant intended they did so to create an immediate, and significant, fiscal stimulus. The defendant was implementing a scheme that would effectively exhaust the supply of houses available for retrofit insulation, which in turn would later destroy their businesses.

545 The plaintiffs submitted that the Insulation Industry was unable to protect itself from the consequences of the defendant's want of reasonable care either entirely or at least in a way which would cast the consequences of loss on the defendant.[103] The plaintiffs contended that they were significantly vulnerable because they faced the stark choice between participating in the HIP or ceasing their operations. The fact that a single, dire, option was available to them is insufficient to render them vulnerable.

546 This last contention must be rejected. The stark choice postulated was a mirage. There was no evidence that any business ceased operations rather than participate in the HIP. To do so would be irrational. The householder payments were generously set and simply continuing to run an existing business was likely to generate significantly greater profits than was otherwise possible. The plaintiffs or any Insulation Industry business were not forced or obliged to participate in the HIP. Rather, they were encouraged or enticed to do so. It was always open to them to heed the lesson learned by Odysseus and take the advice of Circe when seeking to hear the Sirens' song.

547 Multiple choices faced the plaintiffs and the Insulation Industry. New entrants were not obliged to participate like the workers in Crimmins. They were entitled to ignore the profits on offer through participation in the HIP. Pre-existing businesses were often mixed businesses that included, for example, new build work. Roo Roofing's business was general roofing, repairs and other construction work. Although its work shifted to retrofit installation during the HIP, it later returned to its general business.

548 The members of the Installation Industry could expand their businesses to cater to the increased demand generated by the HIP and they could do so with no more than an eye to increased profits and an 'eat, drink, and be merry, for tomorrow we die'[104] philosophy. Alternatively they could be much more circumspect in their business and investment decisions with an eye to increased profits from the HIP and a focus on sustainability of their business in the post-HIP era as well. Another alternative was to derive such profit from work that came their way without gearing up at all towards the HIP. I presume the plaintiffs and group members had common sense, unlike a donkey with a carrot dangling in front of its face.

549 The object of the HIP was to increase retrofit insulation fifteen-fold, from a base of an annual average of 65,000 - 70,000 installations, by offering a very healthy subsidy. The dramatic increase in demand would not destroy businesses since it offered substantial increased profitability that presented opportunities for re-investment to confront the challenge of the decline in retrofit installation when the scheme was completed.

550 I accept the defendant's contention that the plaintiffs and members of the Insulation Industry were not vulnerable in the requisite sense. Their circumstances were readily distinguishable from those of the wharf workers in Crimmins. Group members decided for themselves whether to participate in the HIP and whether to invest in or expand their businesses. All group members possessed the capacity to make business or investment decisions which adequately safeguarded them against the reality that the HIP was always structured as a temporary fiscal stimulus measure. Such decisions were taken by group members knowing that a time limited subsidy was being proposed that could be amended or withdrawn at any time.

551 As Gummow and Hayne JJ observed in Graham Barclay Oysters, the common law is 'particularly hesitant' to recognise the existence of a duty of care where the authority in question is empowered to regulate conduct relating to a 'risk-laden field of endeavour which is populated by self-interested commercial actors who themselves possess some power to avert those risks'.[105] That hesitation is particularly apposite in this case.

552 A relevant salient feature is the defendant's knowledge (either actual or constructive) that its conduct will cause economic loss to the plaintiff. The plaintiffs did not address this issue in final submissions, although the defendant's counsel commented on the ambiguity of their pleaded position at trial. Again, the first question is knowledge of what?

553 The plaintiffs did not clearly plead that at the time the defendant was making various particular decisions - concerning the design, the delivery model, the timing and nature of the HIP, which are identified in the pleadings by reference to the allegations of breach of duty and the counterfactual - that it was known (by any person in particular) that group members were at risk of economic harm, if certain decisions were made or certain consequences eventuated.

554 As I have noted, the plaintiffs contended that the risk of economic harm was that they made business decisions to continue or increase expenditure by way of sunk costs and investments and that they did so on the basis of a continuing revenue stream returning to their businesses through the HIP. The direct and immediate cause of the plaintiffs' economic loss was the cessation of payments under the HIP. The indirect or protracted causal chain was that the sudden termination of the HIP was caused by the defendant's negligence in the design, implementation and administration of the HIP in two distinct periods - Phases 1 and 2, each of which raised different issues. A critical assumption related to this issue of knowledge was that absent the defendant's negligent conduct, the HIP would have continued.

555 The plaintiffs' case, by closing submissions, was premised on an absence of knowledge on the part of Cabinet, Cabinet sub-committees, and Ministers of the particular risks inherent in the HIP to its continuation for the proposed full term and of the factors that contributed, whether directly or indirectly, to their existence. It was only when Minister Garrett became aware of unmanageable and unacceptable safety risks to installers and to homes that the Minister set in train steps that led to the termination of the HIP by the SPBC. The plaintiffs contended that public servants were expressly informed of, and understood, the risk of sudden, early termination through maladministration and the risk that the Insulation Industry would face a risk of economic loss through termination in that way. It will be necessary to look carefully at the evidence in support of this contention.

556 From the way the case was run at trial, the answer to the question - whose knowledge of what? - must be the knowledge of those responsible for advising the Minister, and it must be knowledge of the risk of economic harm to members of the Insulation Industry from investment and/or expenditure decisions affected by a premature and sudden termination of the HIP, such that the defendant would be under a duty to avoid premature termination of the HIP by the exercise of reasonable care in its design and/or implementation and/or administration.

557 Unless the plaintiffs have shown that those public servants responsible for advising/briefing the Minister knew, or ought to have known, of the risk of economic harm to members of the Insulation Industry consequent on premature termination of the HIP if they failed to act prudently in its design and/or implementation and/or administration, the plaintiffs will have failed to prove a necessary salient feature for the existence of the duties.

558 The defendant's criticism that the plaintiffs did not plead, let alone prove, who knew what when, was well founded. Supposition was required to link breach events that might identify a risk of premature termination with knowledge on the part of the public servant briefing the Minister of the consequent risk of economic loss to Insulation Industry members from non-recovery of sunk costs and investments. The defendant in final submission gave this example. The PCG decided in May 2009 to alter the competency standards for installers to permit less experienced installers to meet the standard through supervision. The defendant contended that the plaintiffs must prove that it was known at the time by those who would brief the Minister that amendment of the supervision requirement would create a risk of installer injury, which risk might materialise in circumstances in which installer deaths might occur. When the risk materialised, DEWHA would recommend to the Minister the early termination of the HIP and that advice would be accepted. The early termination of the HIP would lead to economic loss for the installers and manufacturers.

559 There was evidence of warnings of such matters from different sources, for example given at consultation meetings, and there was evidence of contemplation by senior public servants of some such matters, for example at PCG meetings. Determining whether the plaintiff had established the salient feature of knowledge, McHugh J's fourth question in Crimmins, requires careful analysis of the evidence. This is a task that the defendant correctly submitted was rendered impossible by the problems of aggregation and timing of the relevant knowledge. I was unassisted by the plaintiffs' failure to untangle issues such as the public servants who gained each of the types of knowledge about which allegations are made; the public servants who advised the Minister; and when, in relation to ministerial briefings, knowledge was gained by the public servants preparing or authorising the briefing.

560 I am satisfied that on consideration of the salient features arising on the evidence, the defendant did not owe the plaintiffs the duty of care they alleged.

Negligent misrepresentation/misleading and deceptive conduct

561 The common questions identified by the parties in the context of the claim for negligent misrepresentation were as follows.

(a) (CQ 9) - Did the defendant engage in the conduct, or any of it, pleaded in [5], [6], [8], [12] and [12A] of the TFASOC ('the representations');

(b) If yes to any part of (a), did the defendant:

(i) by engaging in that conduct, represent to the Owners, Installers, Manufacturers, and Suppliers or any of them, that it would not reconsider its decision to operate the HIP until the 'Expiration Date' as alleged in [43] of the TFASOC?;

(ii) make the representations in order to encourage the Owners, Installers, Manufacturers and Suppliers or any of them to invest or continue to invest as alleged in [44] of the TFASOC?;

(c) (CQ 10) - If the representations were made, did the defendant owe a duty to any or all of the Owners, Installers, Manufacturers and/or Suppliers to take reasonable care in making the representations or in correcting them?;

(d) (CQ 11) - Did the defendant owe a duty to take reasonable care to any of the Owners, Installers, Manufacturers and/or Suppliers in making or announcing or to correct announcements of government policy as alleged in [49] of the Defence?;

(e) (CQ 12) - To the extent the representations are found to have been made, were those representations:

(i) negligently made (as alleged in TFASOC [55]);

(ii) not corrected as soon as practicable thereafter, such that the failure to correct was negligent (as alleged in TFASOC, [56])?;

(f) (CQ 13) - If the answer to question (e)(i) or (e)(ii) is yes, was it reasonable for the plaintiffs or any of the group members to rely upon the representations?;

562 The common questions identified by the parties in the context of the claim for misleading or deceptive conduct in breach of s 52 of the Trade Practices Act 1974 (Cth) (TPA) were as follows.

(a) (CQ 14) - Was the defendant, through the HIP, engaged in 'carrying on a business', as alleged in TFASOC, [3D] to [3F], within the meaning of section 2A of the Trade Practices Act 1974 (Cth)?;

(b) (CQ 15) - Did the defendant make the alleged representations or any of them in trade or commerce?;

(c) (CQ 16) - If the defendant made the alleged representations or any of them:

(i) by doing so, did the defendant engage in conduct that was misleading or deceptive or likely to mislead or deceive?;

(ii) were the representations or any of them: (aa) representations with respect to future matters; (bb) representations made by the Commonwealth in the absence of reasonable grounds and thereby constituting conduct that was misleading or deceptive or likely to mislead or deceive (TFASOC, [59A])?.

563 The plaintiffs pleaded and relied on a number of distinct statements alleged to have been negligently made. The essence of the allegations was that all statements, whether considered individually or collectively, necessarily implied that the defendant represented that it would not reconsider its decision to fund the HIP (the representation) until 31 December 2011 or until allocated funds were exhausted (the expiration date). It did so to encourage the Insulation Industry to invest, or continue investments, in the industry.

564 The plaintiffs submitted that an explicit representation was made to an Industry Consultation Meeting on 3 February 2010, and relied on the minutes of the meeting. I note that this meeting was a couple of weeks before the HIP ended. It played no role in the plaintiffs' reliance case and is unlikely to greatly assist any reliance case to be advanced by group members. The minutes did not disclose this explicit representation, recording:

The Minister explained that his primary concern is for the safety of installer and householders. He indicated that Government's commitment to seeing the program achieving the target of 1.9 million homes insulated, and thanked the industry participants for their ongoing support.

Neither these minutes nor any other evidence adduced by the plaintiffs supported the submission that the defendant explicitly made statements to the effect that it would not revisit the terms of the HIP in relation to the originally stated period of time and amount of money allocated to the HIP.

565 Absent an explicit representation in the evidence to this effect, the plaintiffs claimed that the defendant, by its conduct in making these statements, impliedly made the representation. That conduct was five pleaded misstatements that were undisputed to the extent they were found in printed material. The defendant disputed whether on proper interpretation this material necessarily implied the representation that was fundamental to the plaintiffs' claims.

566 The plaintiffs alleged that the representation was a statement as to future matters, being a representation that something would not occur until some identified point in time in the future. The defendant was negligent when making the representation because it did not have, or failed to ensure that it had, a proper basis for it. The plaintiffs also submitted that the defendant owed a duty to correct the representation as soon as practicable after it realised it was false or it had reason to doubt its accuracy.

567 The defendant published the first statement in a media release and fact sheet on 3 February 2009 when the HIP was announced. The statement made was that the HIP would run for two and a half years, or until the money ran out, announcing $2.7 billion as allocated to the program. In the media release the statement appeared:

For a time-limited period of two and a half years, from 1 July 2009, owner-occupiers without ceiling insulation will be eligible for free product and installation (capped at $1,600) simply by making a phone call.

In the fact sheet there were references to 'time-limited program of initiatives', '1 July 2009 until 31 December 2011' and '$2.7 billion'. Other than Arblaster (who is not a group member) who said he recalled the media release, no witness in the proceeding gave evidence of having read the media release or of having relied on it in any particular way.

568 The second statement on 18 February 2009 was allegedly made orally at an industry consultation meeting in Canberra. The statement was that the defendant (by a public servant from DEWHA):

gave an undertaking that [it] would fund [the HIP]' until 31 December 2011 or until the funds ran out.

569 Minutes kept of that meeting did not record the alleged statement. D'Arcy, from ICANZ, and in less detail Ruz, from Fletchers, recalled a Mr Andrew Wilson saying (in effect) that the HIP had very defined financial and timing restraints; was inflexible; and would run for the allocated time - until all houses were insulated, or until the money ran out, whichever came first. There was no evidence of any communication from persons in attendance at the meeting to the plaintiffs or of any reliance by any person on this statement.

570 The third statement alleged was that DEWHA repeated, or undertook, that the defendant would fund the installation of ceiling insulation until the completion date. This statement was drawn from various HIP Guidelines documents that revealed that from the start of 2009, the defendant informed installers it anticipated 2.2 million households would be insulated by the end of the program in December 2011. The HIP Guidelines repeatedly reserved the defendant's right to change the amount of the assistance provided or any other aspect of these early installation guidelines. Later HIP Guidelines explicitly announced the program would end when all the money was spent, the maximum subsidy was being reduced to $1,200 per dwelling, and the program funding was capped at $2.45 billion. These documents do not express in terms the pleaded statement. Further, other than Hannam's general reference to having read 'every' program document and made investment decisions in his businesses as a consequence of the various announcements, there was no evidence of specific reliance by him or any of the plaintiffs' advisors on the third statement or any of the documents from which it was drawn.

571 Minister Garrett allegedly made the fourth statement at an industry meeting on 20 March 2009. The fourth statement was alleged to be that the HIP 'will run for the full term or until the money runs out. You can take my word for that'. The minutes do not record the comment and no witness at the trial heard the statement made at the meeting. I was not persuaded that the fourth statement was made.

572 The plaintiffs alleged that the fifth statement was the fourth statement repeated in media releases and in two meetings on 29 June 2009 and 3 February 2010. There was no evidence concerning the media releases, which do not contain the statement in the terms alleged and no witness specifically relied on the statement. I was not persuaded that the fifth statement was made.

573 The minutes of the 29 June 2009 meeting, described by D'Arcy as accurate, recorded that the Minister indicated that 'the program aims to achieve 2.9 million households with ceiling insulation, hopefully by the current program termination date of 31 December 2009.' Closely following that minute, D'Arcy recalled that Minister Garrett indicated that the 'aim' of the program was to insulate 2.9 million homes 'hopefully' by 31 December 2011. Levey's notes recorded that 'The Minister said, his commitment is to a program - is to 2.9 million uninsulated homes. There will be no commitment over and above that but this commitment will be met.' The minutes record that Mr Keefe made a similar statement. Hannam was at this meeting but gave no evidence of hearing, or relying, on the statement.

574 The minutes of the 3 February 2010 meeting revealed the following:

The Minister explained that his primary concern is for the safety of installers and householders. He indicated the Government's commitment to seeing the program achieving the target of 1.9 million homes insulated, and thanked the industry participants for their ongoing support.

D'Arcy said that at that meeting Minister Garrett stated that subject to advice from his department and subject to Cabinet decisions and budgetary advice, the program would meet its commitments. D'Arcy said he remembered pretty clearly that the Minister referred to 'a provision within this whole contract that the Government has no obligation to - that they can cancel the program at any time but, you know, it is technically a provision that's in any of these programs'.

575 Levey's note contradicted the proposition that the pleaded representation was made by the minister at this meeting. His note was:

Minister says the guarantee that we will continue to deliver the program as per the government's goals for the program. Started from dot on a blank page. Issues have arisen. Safety is a huge concern to me, particularly in the second half of last year. Will not give you a 90-day notice guarantee. Will make immediate changes, if required, again. Continue taking advice on the product quality issues raised. Will reserve our rights, as governments do, to make changes at the appropriate time and in an appropriate way.

576 I was not persuaded that the pleaded representation was made at the meetings, or that the plaintiffs relied on what was said at those two meetings when making decisions in relation to expenditure and investments in their business.

577 The plaintiffs based two causes of action on these statements.

578 First, the plaintiffs alleged that by making the representations the defendant engaged in conduct that was misleading or deceptive or likely to mislead or deceive the plaintiffs and group members in contravention of s 52 of the TPA.

579 Secondly, the plaintiffs contended that the defendant owed them and the group members a duty to take reasonable care in making the representations, or alternatively, a duty of care to correct the representations once it became aware that they were false or that circumstances existed to question their accuracy.

580 The plaintiffs contended that the defendant's common law duty arose due to the following facts:

(a) the defendant made the representations in order to encourage the plaintiffs and the group members to invest and expend in their businesses;

(b) it was reasonably foreseeable that the plaintiffs and group members would act in reliance on one or more of the representations;

(c) the representations, if false, would cause the plaintiffs and group members loss; and

(d) the representations concerned matters of which only the defendant had knowledge.

581 Additionally for some group members, the defendant owed a duty to take reasonable care in making these representations because the defendant knew, or ought to have known, that the HIP would extinguish most of the retrofit housing market. The defendant was interfering with the existing market for goods and services in which these group members operated their businesses.

582 A contravention of s 52 of the TPA is established by conduct that is misleading or deceptive or likely to mislead or deceive.[106] Conduct is likely to mislead if it is capable of leading a person into error.[107] This requires the conduct to result in more than 'confusion or wonderment'.[108] Conduct will be likely to have this effect if there is a 'real or not remote chance or possibility, regardless of whether it is less or more than fifty percent'.[109]

583 The question whether conduct is misleading, or likely to mislead, is objective in nature and no intent to mislead need be demonstrated.[110]

584 In the present circumstances, the practical distinction between conduct by representations made to an individual person and by representations made to a class of persons arose. Relevantly, in the latter category of case:

The initial question which must be determined is whether the misconceptions, or deceptions, alleged to arise or to be likely to arise are properly to be attributed to the ordinary or reasonable members of the classes of prospective purchasers.[111]

585 The defendant correctly contended that the TPA was not engaged because the plaintiffs failed at the threshold issues. The defendant was neither relevantly 'carrying on a business' within the meaning of s 2A of the TPA, nor was it engaged in trade or commerce. Further, any representations made concerning the HIP were not statements that bore a commercial character. Rather, they were of a purely governmental nature. The development and announcement of national fiscal policy was purely a governmental and not a commercial activity.

586 The plaintiffs contended that the course of conduct undertaken by the defendant in relation to the HIP constituted the 'carrying on of a business' for the purposes of s 2A(1) of the TPA, such that the defendant was liable under s 52 of the TPA. The plaintiffs contended that s 2A confirmed 'the application of the general Crown immunity, but to provide for its partial abrogation insofar as the Crown carries on business, either directly or by an "authority of the [defendant]".'[112]

587 The plaintiffs contended that the conduct of public servants in various departments fell outside the ambit of s 2A because the defendant was carrying on a business when those various government departments designed, implemented and administered the HIP. No point was taken that each department and its public servants were not to be treated as the 'Crown' for the purposes of s 2A. The purpose of s 2A 'was to ensure that [the defendant] should, in its commercial activities, be subject to the same regime as corporations.'[113]

588 Accepting that a distinction is to be drawn between those functions of a government which are purely governmental or regulatory and those functions which entail the carrying on of business,[114] the plaintiffs submitted that the proper application of the principles supported the conclusion that the defendant was carrying on a business within the meaning of s 2A of the TPA.

589 The defendant submitted that the purpose of s 2A was evident from the Second Reading Speech of the Competition Policy Reform Bill 1995, and was to apply the relevant provisions of the TPA to publically owned businesses. The extension of the reach of the TPA to government was limited to circumstances in which the government was in competition with the private sector to earn revenue or profits. It was not to make the TPA generally applicable to the Crown.

590 The plaintiffs submitted that, from 3 February 2009, the defendant engaged in a business of retrofitting home insulation to homes constructed across Australia prior to 2003. Prior to this date, the plaintiffs submitted that the defendant engaged in preparatory acts and planning for carrying on that business.

591 The course of conduct was alleged to have occurred over a two and half year period and involved the defendant's conduct in:

(a) Phase 1, establishing a system of registration of pre-existing installers and funding the retrofitting of insulation via the interim arrangement of a payment of rebates to householders; and

(b) Phase 2, entering into direct contracts with eligible registered installers for insulation to be retrofitted in an anticipated up to 2.7 to 2.9 million homes over 2.5 years, with direct payment made by the Commonwealth to installers.

592 The plaintiffs referred to a number of circumstances, considered in greater detail earlier in these reasons, including that the defendant:

(a) designed and implemented systems for the registration of installers;

(b) designed and implemented payment systems and protocols to pay installers under the HIP;

(c) specified the required standard of insulation required in order to meet the HIP criteria;

(d) paid installers, on a repetitive basis, through until 19 February 2010 as each individual home insulation installation was carried out by such installers under Phase 1 and Phase 2;

(e) arranged for and funded the installation of HIP eligible houses in the same way as a private citizen or trader would carry on such a business;

(f) established and maintained a website for promotion of the HIP and for interaction with it by installers and householders; and

(g) from time to time until the HIP was terminated, revised and modified its requirements, informing installers by Installer Advices, emails, SMS and on its website.

593 The plaintiffs emphasised that the scope of the defendant's conduct:

(a) involved individual contracts between the defendant and 7,541 individual installers of 10,834 registered installers;

(b) involved communicating changes to the contracts through Installer Advices, emails and ministerial media releases by Commonwealth Ministers to the Insulation Industry; and

(c) included, in Phase 1, the Installer Provider Register, registration on which was a prerequisite to participation in the program.

594 The plaintiffs submitted the business was a demand-driven business and was a commercial enterprise delivered by the defendant. They referred to the Australian National Audit Office (ANAO):[115]

Demand‐driven programs are challenging to manage and require time, market knowledge and substantial investment to forecast demand with any accuracy. The design options available to DEWHA did not give the department sufficient capacity to adjust the program to meet significantly higher than expected demand. This put considerable pressure on staff and on the budget, and contributed to the requirement for the bring‐forward of funds that occurred in 2009-10.

595 The defendant submitted that the HIP was an administrative scheme it implemented in reliance on the executive power. The defendant exercised its powers in the national interest and by reference to macro-economic and other policies. The establishment, administration and funding of the HIP involved the performance of governmental functions only. It was only one component of the Nation Building and Jobs Plan, which the defendant implemented in pursuance of its policy goals. The defendant did not manufacture, buy or sell, or carry on the business of installing, insulation products or services. The defendant did not earn revenue or make profit, nor engage in a commercial enterprise, in respect of the installation of insulation. The design and implementation of the HIP bore no similarity with the commerce or trade that a private citizen or trader might undertake.

596 The authorities show that the following principles relevantly apply:[116]

(a) The 'carrying on of a business' refers to activities undertaken in a commercial enterprise or as a going concern. The activities must constitute trade, or commercial transactions or engagements. A business activity is an activity which takes place in a business context and which, of itself, bears a business character;

(b) The term 'business' ordinarily connotes activities engaged in for the purpose of profit on a continuous and repetitive basis. Such activities will usually constitute a course of conduct involving the performance of a succession of acts with system and regularity, not the effecting of a solitary transaction;

(c) On the other hand, mere repetitiveness is insufficient. The less commercial the character and objectives of an organisation, the greater the degree of system and regularity required to establish that it carries on a business. A 'business' for the purposes of the TPA can includes a business not carried on for profit. The business in question may relate to only a part, even a small part, of activities of the Commonwealth which, when considered as a whole, are plainly the provision of government services and not a business;

(d) There must be present some element of commerce or trade such as a private citizen or trader might undertake; and

(e) Where the Commonwealth or a Commonwealth authority engaged in an activity, the purpose of the activity will be a relevant consideration.

597 Courts have noted that the word 'business' is an 'etymological chameleon' and 'takes its meaning from the context in which it appears and from the purpose of the statute in which it is found.'[117] The Victorian Court of Appeal said in Murphy:

'business' in the context of s 2A of the Trade Practices Act 1974 (Cth) was a wide and general word which was further widened by the inclusion in the definition of 'business' in s 4(1) of 'a business not carried on for profit'. Ultimately, its meaning was informed by the purpose of s 2A of that Act which was to ensure that the Commonwealth Government should, in its commercial activities, be subject to the same regime as corporations.[118]

in order to constitute the carrying on of a business, the activities in question must present some element of commerce or trade such as a private citizen or trader might undertake; and that, as is established by authority, there is a distinction between those functions of a government which are purely governmental or regulatory and those which may entail the carrying on of business, it is important to keep in mind that, in some cases, the two may co-exist. So, for example, while to plan and provide for the regulatory framework for the construction of State infrastructure might be thought to be a purely governmental or regulatory activity, whereas in contrast, as NT Power shows, to carry on an operation for the generation and sale of electricity is regarded as essentially if not exclusively a commercial undertaking, between those extremities conceivably lies a range of possibilities of mixed governmental and business activities which, depending on all the facts and circumstances of the particular case, may yield a conclusion the State is carrying on a business in conjunction with or at the same time as discharging its purely governmental functions.[119]

599 The Court of Appeal observed that the trial judge had been in error in concluding that the defendant's attempt to inform and engage the community was devoid of any business or trading character. The Court opined that 'there is nothing of itself about informing and engaging the community concerning the supposed benefits of an anticipated infrastructure project which renders the exercise an essentially governmental activity.'[120] As the court concluded, 'both governments and private organisations publish large amounts of propaganda in order to attune the hearts and minds of the public to the supposed benefits of projects which they propose to construct. It depends on the nature of the project whether the propaganda is entirely governmental or imbued with a commercial flavour'.[121]

600 Four features of the Court of Appeal's analysis are brought into sharp relief on the facts in this proceeding:

(a) the activities involved in carrying on a business 'must present some element of commerce or trade such as a private citizen or trader might undertake';[122]

(b) there may be a co-existence between the undertaking of governmental activity and the carrying on of a business, so that the fact that the defendant is undertaking a governmental activity does not preclude the conclusion that it is also carrying on a business;

(c) there is a range of possibilities of mixed governmental and business activities which may yield a conclusion that the defendant is carrying on a business; and

(d) there is nothing inherent in the defendant informing and engaging the community about the HIP that would mean that its activities were devoid of a business character.

601 The proper place to start is to identify with precision the activities that the plaintiffs alleged formed the business carried on.[123] They defined the business as 'procuring the retrofitting of insulation to homes constructed prior to 2003'. Careful analysis fails to identify that business. What the evidence reveals is the activity of government.

602 Key features of the HIP relevant to this question included:

(a) the defendant funded the subsidy paid in respect of eligible retrofit installation jobs;

(b) it did so to achieve policy objectives in the national interest;

(c) the defendant implemented a system of registration of installers that governed their eligibility to claim and receive the subsidised payments;

(d) the defendant determined installer eligibility and competency; and

(e) the defendant implemented payment systems and protocols to pay installers under the HIP for eligible jobs.

603 Nothing about setting certain eligibility requirements for installers to become and remain registered to participate in a rebate scheme converted the administration of that scheme into conduct of a commercial character by the defendant. The defendant did not contract or subcontract with any businesses to provide insulation installation services. As is apparent from an analysis later in these reasons, the contract between the defendant and installers was of a different kind. Each installer business provided the service of installing insulation directly to the householder. Householders were free to select their own installer. The householder and the installer would fix their own rate for the job, which could vary from the subsidy amount. The defendant paid a sum (in Phase 1 in the form of a rebate to the householders, and in Phase 2 a sum paid directly to installers) in respect of each eligible installation of insulation by a registered installer for the householders' benefit. Each eligible installation of insulation involved a contract between the installer and the householder. That was the essential commercial transaction in the business of insulation installation.

604 The plaintiffs pointed to the following features of the defendant's activities as supporting their contention that the defendant's conduct went beyond the realm of purely governmental or regulatory activity and the defendant was carrying on a business in conducting the HIP. Those features were:

(a) the defendant intervened substantially in the retrofit insulation market;

(b) the defendant determined the way in which the market operated by setting entry and participation requirements so as to effectively determine the nature and operation of the retrofit insulation market;

(c) the defendant advertised the HIP to encourage consumers to have their homes retrofitted with the work having to be completed by an approved installer registered as such with the defendant;

(d) the defendant paid installers directly for the work that they performed, and part of the defendant's management of the HIP involved determining which claims were paid and which claims were rejected; and

(e) during Phase 1, until the change to delivery model used in Phase 2, the activities that the defendant performed in Phase 2 were activities intended to be undertaken by experienced and large installer businesses so that, in performing those activities, the defendant should properly be viewed as having carried on a business.

605 For reasons explained elsewhere, propositions (a), (c), and (d) may be accepted as fact, but these propositions fall short of establishing that the defendant was carrying on a business. I do not accept as appropriate the characterisation in proposition (b), whilst proposition (e) is misconceived.

606 Dealing first with proposition (b), there was no change in the nature and operation of the retrofit insulation market effected by the HIP. Consumers still contracted with installers for installation work. Installers procured materials from suppliers that in turn dealt with manufacturers. Within that unchanged market structure, the defendant stimulated demand by introducing the installer payments of $1,600. The defendant's participation substituted for the consumer's obligation to pay the installer, the system of payments to registered installers that was administered by Medicare. The defendant's activities changed the operation of the forces of supply and demand within the market. The entry and participation requirements set by the defendant governed the circumstances in which an installer could qualify for an installation payment but did not alter the nature and operation of the retrofit insulation market.

607 By proposition (e), the plaintiffs contended that it was significant that the defendant initially contemplated allocating to private businesses the role and functions in the HIP that it actually engaged in once Phase 2 commenced, which made good the contention that the defendant's activities in the administration of the HIP involved an element of trade or commerce that a private citizen or entity might undertake. The fact that the defendant undertook these activities to achieve the goal of an urgent fiscal stimulus did not preclude characterising its conduct as carrying on a business. Further, the defendant was not exercising any statutory function[124] when it agreed to pay for the installation of insulation in more than 2 million homes and designed the process and set the terms and conditions upon which it would make those payments.

608 I reject these contentions. As I have noted, the defendant was exercising executive power in response to the GFC in a manner approved by the High Court in Pape. Salvation Army (NSW) Property Trust v Commonwealth,[125] cited by the plaintiffs in support of this submission, is not helpful because a materially different enabling basis for the Commonwealth's actions was evident. More significantly, it was irrelevant that during the temporary Phase 1 the defendant contemplated, but did not proceed with, a delivery model that might have outsourced to private industry some of the functions that were ultimately delivered through DEWHA and Medicare. The defendant cannot be said to have carried on a business by contemplation of a prospective delivery model that it did not adopt, nor does the fact that functions of government might be contracted out to private enterprise deprive them of their character as governmental functions. The terms and conditions on which installer payments would be made did not alter the nature and operation of the retrofit insulation market. What they did alter was the operation of the forces of demand and supply within that industry.

609 A government subsidy to those who supply particular services does not constitute either procurement or engagement in a business in that industry. That proposition is altogether too broad and would suggest that the defendant procures, for example, medical services, child care services and aged care services by reason of its funding of subsidies to private providers in those fields. There are many examples of the allocation of taxpayer funding by government that are plainly governmental functions and not private business.

610 The plaintiffs submitted that cases cited by the defendant[126] concerning whether the defendant was carrying on a business when involved in government procurement of goods and services to perform its functions should be put to one side as inapposite in the present circumstances. The plaintiffs drew on the observations of Finn J in GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd.[127] Finn J considered himself bound by J S McMillan but, expressing his disquiet, said:

It is somewhat surprising, that when the State enters the market place to acquire goods or services, it should exempt itself from those norms of conduct considered appropriate to the conduct of trade and commerce that it has imposed upon the private sector as of course - the more so given the 'business-like' manner in which the Executive government commonly professes it conducts its affairs both internally and in its dealings with the community.[128]

611 The plaintiffs submitted that Finn J's observations cogently underscored the logical difficulties in the position taken by the defendant in this proceeding. I do not characterise the defendant as entering the market place to acquire insulation and installation services and gain no assistance from Finn J's observations, with which I would otherwise respectfully agree. Insulation and installation services under the HIP were acquired by householders and the norms of conduct appropriate in trade and commerce remained applicable to the transaction between a householder and an installer. The defendant's conduct, as revealed on the evidence in the proceeding, was concerned with the distribution of government (taxpayer) funds into the community to provide an economic stimulus and Finn J's observations do not underscore any logical difficulty. I understood the defendant to refer to the procurement cases as part of the line of authority that has informed the development of the principles in relation to the TPA that I have set out above.

612 Whether the defendant was carrying on a business within s 2A of the TPA is to be resolved by reference to those general principles, and not by analogous reasoning from cases decided in a very different context. The application of those principles supports the conclusion that the defendant, in undertaking the HIP in the unique and distinct way that it did, was not carrying on a business within the meaning of s 2A of the TPA. Rather, it was engaged in governmental activity in the interests of the nation. The plaintiff's contrary submission is rejected.

613 While the pursuit of profit is not an essential characteristic of a business (and while a business may still be carried on when activities are purely altruistic or charitable in nature),[129] the relevant government departments have not undertaken activities in a commercial enterprise or as a going concern.

614 The defendant derived no commercial benefit from these payments. The commercial transactions were conducted entirely between the householder and the installer business. The benefit inured to the installer (who earned remuneration for a service that included supplying material) and the householder (who received the insulation). The defendant derived a benefit in the form of achieving a policy objective for the good governance of Australia by a distribution of money into the economy to stimulate demand. This was what, as a matter of policy, was intended and it is not a trading or commercial activity.

615 The defendant correctly submitted that the design and implementation of a policy, by way of governmental regulation, to create fiscal stimulus in a targeted sector of the economy or a particular market was conceptually different from participating in that market. The fact that the HIP stimulated commercial activity in a segment of the economy (the Insulation Industry) did not amount to the defendant itself engaging in commercial activity.

616 There are many examples of government policy affecting businesses and markets. One is the pharmaceutical benefits scheme that contributes to increased demand for a particular drug when added to the scheme. In that case, it cannot sensibly be said that the defendant is carrying on a business selling or marketing pharmaceuticals.

617 In Saitta Pty Ltd v Commonwealth[130] the plaintiff operated nursing homes governed by the National Health Act 1953 (Cth). The plaintiff claimed that the defendant had engaged in misleading and deceptive conduct by representing in a funding circular that any approved application for funding would result in the plaintiff receiving significant funding over a 10 year period. The plaintiff failed to obtain the funding it sought. The claim was premised on the defendant having carried on a business.

618 The plaintiff's claim in that proceeding was struck out. Beach J observed that:

the provision by the [Commonwealth] of pharmaceutical, sickness and hospital benefits, and of medical and dental services in accordance with the provisions of the National Health Act cannot be described as carrying on a business. It is not a trading or commercial activity. It is not something engaged in by the defendant for the purpose of profit. The administration of an Act of Parliament such as the National Health Act is quite distinct from carrying on a business.[131]

619 In an interlocutory summary dismissal or strike out application in this proceeding, I commented that the defendant's role seemed to approximate that of a financier and suggested that:

the prospect that the court may conclude that the governmental functions that were the emphasis of the Commonwealth's submissions coexisted with conduct that entailed the carrying on of a business that might be described as financing retrofitted insulation enjoys more than a fanciful prospect of success. The Commonwealth may have chosen to achieve policy goals by active participation in a sector of an industry in order to manipulate the forces of supply and demand other than by advancing generally applicable fiscal policy. Concentrating on the governance aspect of the Commonwealth's conduct emphasises those features of its conduct that the authorities recognise as taking conduct outside the realm of carrying on a business or acting in trade of commerce.[132]

620 On the basis of the evidence at trial, there is no analogy to be drawn between the financing of retrofit installation services (in the sense of lending funds for the activity to be carried out) and the provision of government funding to be deployed in the form of a subsidy to householders who are provided with retrofit insulation by private providers. It could not be said that a credit union providing a loan to a householder to pay an insulation installer was carrying on the business of retrofit installation. Providing a rebate or subsidy pursuant to an administrative scheme implemented with the intended effect of reducing the cost to the homeowner of installing retrofitted insulation does not constitute the defendant carrying on a business. The defendant was not financing insulation and installation services in the accepted commercial sense.

621 The defendant was not competing with private installers. It was not earning revenue or profit in relation to insulation services. The activities of the HIP were not undertaken in a commercial enterprise or by DEWHA or Medicare as a going concern. The defendant was, rather, engaged in applying funds appropriated to provide fiscal stimulus. This purpose for its activities was not commercial. It was in pursuit of an economic strategy designed to protect the economy for the benefit of the nation. Although the conduct of the HIP was not divorced from business, the business was plainly carried on by others, a common feature of governmental activity.

622 Accordingly, I hold that the defendant was not carrying on a business within the meaning of s 2A of the TPA. It follows that the TPA is not applicable to the defendant's activities in the design, implementation and administration of the HIP and the plaintiffs' claims pursuant to the TPA cannot be maintained.

624 Section 52 of the TPA proscribes conduct which is misleading or deceptive 'in trade or commerce'. In Concrete Constructions (NSW) Pty Ltd v Nelson (Concrete Constructions),[133] a majority of the High Court concluded that the phrase 'in trade or commerce' concerned dealings in the course of trading or commercial activities or transactions 'which, of their nature, bear a trading or commercial character'. I cannot accept the plaintiffs' contentions that the conduct of the defendant in making the representations about the term of the HIP were in trade or commerce for the following reasons.

625 The plaintiffs cited the following observation of Murphy J in Hi-Rise Access Pty Ltd v Standards Australia Ltd:

words such as 'trade' and 'commerce' have 'about them a chameleon-like hue, readily adapting themselves to their surroundings, different though they may be'. It is though well-established that they are terms of common knowledge of the widest import, and they are to be given a broad meaning. The phrase 'trade or commerce' is commonly used to denote operations of a commercial character by which a trader provides goods or services to customers for reward, but the meaning is not restricted to arms-length dealings on an open market, and 'trading' may include activities which, while being commercial in character, are not within the mainstream of ordinary commercial activities and which do not have a dominant objective of profit-making.[134]

626 The plaintiffs contended that representations made 'in trade or commerce' may include 'promotional activities in relation to, or for the purpose of, the supply of goods or services'.[135] Further, 'statements made by a person not himself or herself engaged in trade or commerce may answer the statutory expression if, for example, they are designed to encourage others to invest, or to continue investments, in a particular trading entity'.[136]

627 Whether conduct was in trade of commerce is closely linked to the question of whether that conduct was in carrying on a business. The plaintiffs submitted that, if I accept that the defendant was carrying on a business, it followed that the representation was made in trade or commerce, because the purpose of the representation was to encourage (and to induce) the plaintiffs and group members to expand their operations by investing in their businesses so as to meet the demand created by the defendant. In this respect, the plaintiffs repeated the matters identified in paragraph [604] above in support of their submission. However, I have not made that finding.

628 In Unilan Holdings Pty Ltd v Kerin (Unilan Holdings)[137] Hill J stated, about Minister Kerin's speech to an international wool conference, that the conduct complained of on which the plaintiff purported to rely was a speech by the Minister dealing with governmental policy that impinged directly on the international trade in wool. It was not conduct which of itself had a trading or commercial character.

629 In Durant v Greiner,[138] the plaintiff claimed, in reliance on the Fair Trading Act 1987 (NSW) (FTA), that the defendants had knowingly misrepresented that a particular school would not be closed down. The plaintiff alleged he had suffered harm, including financial loss, occasioned by the need to purchase a new home near an alternative school. Rolfe J stated that:

In my opinion a reading of the Act indicates that it is intended to protect consumers... in the course of a commercial or trading relationship between the consumer and some other party, which may, in an appropriate situation, include the Crown... It seems to me difficult to extract from the provisions of the Act an intention that it was to regulate statements made by politicians as to their intentions on matters of policy.[139]

630 Rolfe J also addressed the need for the conduct complained of to be 'in trade or commerce'. The plaintiffs argued that the 'business' in which the NSW government was engaged was the administration of State schools, a proposition that Rolfe J rejected noting that the provision by the government of schools is a 'service to the community provided by the Government' rather than an activity capable of being characterised as a business.[140] Finally, Rolfe J considered whether the statements made concerning plans for school closure could, in any event, be characterised as misleading or deceptive and concluded they could not:

To succeed on this submission it would be necessary, in my view, for the plaintiffs to be able to satisfy the Court that the statement made by the first defendant...was a statement that at no time in the future and in no circumstances in the future would [the school] be closed. I do not consider that the statement can be given that effect.[141]

631 The plaintiffs asserted that the defendant's representation concerned the trade or commerce of the installers, but it is not sufficient that the representation concern the trade or commerce engaged in by the plaintiffs and group members. So much was made clear by the majority in Concrete Constructions:

As a matter of language, a prohibition against engaging in conduct 'in trade or commerce' can be construed as encompassing conduct in the course of the myriad of activities which are not, of their nature, of a trading or commercial character but which are undertaken in the course of, or as incidental to, the carrying on of an overall trading or commercial business...Alternatively, the reference to conduct 'in trade or commerce' in s. 52 can be construed as referring only to conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character. So construed ... the words 'in trade or commerce' refer to 'the central conception' in which corporations may engage in the course of, or for the purposes of, carrying on some overall trading or commercial business.[142]

The majority concluded that the phrase 'in trade or commerce' was to be construed as having the latter meaning, being restricted to conduct towards a person with whom the defendant has or may have dealings in the course of its trading or commercial activities or transactions which, of their nature, bear a trading or commercial character.[143]

632 While a representation can be made by a party in the trade or commerce of another person or party, that representation must still bear the requisite character of being made in trade or commerce.[144] Thus, statements made in circumstances where there is no trading or commercial relationship between the representor and the party to whom or about whom the representation is made will not suffice to engage the TPA.[145]

633 In Village Building Company Ltd v Canberra International Airport Pty Ltd (Village Building),[146] Canberra International Airport had reported estimated forecasts of aircraft noise levels near the airport up until 2050. At the time these forecasts were made, there was an ongoing public debate as to whether land to the south of the airport (Tralee) should be re-zoned as residential land. The plaintiff argued that the defendant had inflated its forecasted noise levels to advance its interests in preventing the planning authorities from re-zoning the land as residential, which would have inhibited the defendant's operation of the airport. At first instance, it was held that the conduct was not in breach of s 52 of the TPA, as it was not conduct 'in trade or commerce' within the meaning of that section, and this decision was upheld on appeal.

634 In determining whether the conduct of the Airport was 'in trade or commerce' in accordance with Concrete Constructions, the Court observed:

Some of the representations were made by [the defendant] to the Minister in the course of requesting and then withdrawing a request for Ministerial approval of a draft variation to the Year 2020 Master Plan for Canberra Airport...The relationship between the Minister and [the defendant] was not of a trading or commercial character; if anything, it was a relationship between a regulator and a regulated industry or business ...

...

The remaining representations relied on by [the plaintiff] were made by [the defendant] to members of the public and to elected councillors and parliamentarians as part of a campaign to resist the application to rezone Tralee to facilitate residential development. There was no relevant trading or commercial relationship between [the defendant] and the persons to whom the representations were made...The representations could not be described as promotional activities designed to persuade consumers to use the services offered at Canberra Airport. Nor were they made as part of a process designed to secure approval to a commercial transaction or dealing, such as the sale of a component of [the defendant's] business...[147]

635 For the reasons given when determining that the defendant was not carrying on a business, there was no trading or commercial relationship between the parties to this proceeding. The statements were made in relation to trade or commerce rather than in trade or commerce. That was because the statements were made in pursuit of the defendant's fiscal stimulus policies.

636 Having concluded that the defendant was neither carrying on a business nor engaged in trade or commerce, the claims made under the TPA must be dismissed. It is unnecessary to deal with a number of other submissions made on the basis that each of these elements of the claim had been established.

637 However, some further conclusions may be briefly stated. The satisfaction of the threshold requirement would direct attention to whether the representation amounted to misleading or deceptive conduct. The impugned representation was a representation by the defendant that it would not reconsider the operation of the HIP until the earlier of 31 December 2011 or the exhaustion of the funding allocated to the HIP. The plaintiffs contended that this representation was a statement as to future matters. The relevant inquiry then would be whether the defendant had reasonable grounds to so represent at the time it did so.

638 The plaintiffs submitted that the defendant did not have reasonable grounds because, from at least April 2009, the defendant knew or ought to have known that it had reason to reconsider its decision to operate the HIP until the termination date because:

(a) the HIP entailed the risk of personal injury to installers who lacked adequate training and/or supervision;

(b) the HIP entailed the risk of damage to the property in which insulation was installed by persons without adequate training and/or supervision; and

(c) the defendant had been informed that the HIP entailed such risks and that, in the event they materialised, the 'early termination' of the HIP could follow.

639 The defendant's knowledge of these risks, and its knowledge of significant safety risks and poor quality installation, intensified over the course of the HIP (commencing before the start of Phase 2). Yet despite accumulating an even greater body of knowledge giving it reason to reconsider the duration of the HIP, the defendant continued to repeat the representations.

640 The evident consequence, the plaintiffs submitted, was that the defendant, when it made the representations, was aware or ought to have been aware that it did not have reasonable grounds for the representation. The defendant elected not to inform the plaintiffs and group members of the true position because it required the inducements it proffered to each of them to continue to invest in and expand their businesses so as to meet the household demand generated by the HIP. The losses incurred by the plaintiffs and group members in reliance on the representations were, for this reason, recoverable.

641 The defendant submitted, and I accept, that the representation, if found, was a statement as to current government policy, and not a statement as to what the government's policy would be in the future. I will set out my reasoning about the nature of the representation in due course.

642 However, if I be thought to be incorrect in this conclusion, I am satisfied that the defendant did have reasonable grounds for believing that it would continue to fund the HIP until February 2010. In the context of the representation, the plaintiffs are necessarily referring to the defendant in its capacity as decision maker about government policy, not in its capacity as designer, implementer and administrator of a predetermined government policy. That must be so because the appropriated funds had not been exhausted in February 2010 and it was the expressed policy of the defendant that the HIP continue until February 2010 immediately prior to its termination. The plaintiffs contended that the knowledge of the risks they adverted to was located with public servants and was disconnected, until February 2010, from the knowledge of the decision makers responsible for government policy and for announcing it, namely the members of the SPBC. The latter group had reasonable grounds for the belief by reason of the briefings they had received from the public service and the plaintiffs did not contend otherwise.

643 To recap, the plaintiffs and group members alleged that, in making the statements set out above at [567] - [576], the defendant represented to the plaintiffs and group members that the defendant would not reconsider its decision to operate the HIP until the expiration date. The plaintiffs contended that the defendant owed a duty to them and the group members to take reasonable care in making these statements and the representation or, alternatively, a duty of care to correct the representation once it became aware that it was false or that circumstances existed to question its accuracy.

644 The plaintiffs submitted that the defendant's duty arose because:

(a) it made the representations to encourage the plaintiffs and the group members to invest or continue to invest in their businesses;

(b) it knew or ought to have known that the plaintiffs and group members would act in reliance on one or more of the representations by making investments and expanding their businesses;

(c) it intended that the representations would induce the plaintiffs and group members to so invest;

(d) the representations, if false, would cause the plaintiffs and group members loss; and

(e) the representations concerned matters of which only the defendant had knowledge.

645 With respect to pre-existing installers, manufacturers, and suppliers, the plaintiffs submitted that the defendant's duty to take reasonable care in making these representations also arose because the defendant knew or ought to have known that the HIP would extinguish most of the retrofit housing market and the defendant was interfering with the existing market for goods and services in which these group members operated their businesses.

646 For the principles that identify a duty to exercise reasonable care in making a statement, the starting point in Australian law is the statement of Barwick CJ in Mutual Life & Citizens' Assurance Co Limited v Evatt ('MLC') that a duty to take reasonable care in making a statement arises:

whenever a person gives information or advice to another...upon a serious matter...and the relationship of the parties arising out of the circumstances is such that on the one hand the speaker realises or ought to realise that he is being trusted... to give the best of his information or advice as a basis for action on the part of the other party and it is reasonable in the circumstances for the other party to seek or accept and in either case to act upon that information and advice.[148]

647 Mason and Aickin JJ in L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) ('Shaddock')[149] accepted this as a correct statement of principle. Mason J clarified that 'the existence of a duty of care does not depend upon knowledge on the part of the speaker of the precise use to which the information will be put'.[150] It is sufficient to attract the duty to take reasonable care 'if he knows, or ought to know, that the inquirer is requesting it for a serious purpose, that he proposes to act upon it and that he may suffer loss if it proves to be inaccurate'.[151]

648 San Sebastian stated the general rule as follows:

where a statement is made for the purpose of inducing the plaintiff, or the members of a limited class including the plaintiff, to commit themselves financially upon the basis that the statement is true, and the plaintiff acts in reliance on the statement, the law will impose a duty of care on the maker of the statement.[152]

The plurality in San Sebastian rejected the notion that liability for negligent misstatement was confined to circumstances where the relevant statements were made in response to the plaintiff's request.

The maker of a statement may come under a duty to take care through a combination of circumstances or in various ways, in the absence of a request by the recipient. The author, though volunteering information or advice, may be known to possess, or profess to possess, skill and competence in the area which is the subject of the communication. He may warrant the correctness of what he says or assume responsibility for its correctness. He may invite the recipient to act on the basis of the information or advice, or intend to induce the recipient to act in a particular way. He may actually have an interest in the recipient so acting.[153]

649 The plaintiffs emphasised that liability in negligent misstatement arose here because a statement was made with the intention to induce the recipient to act in a particular way, and in particular, because the speaker had an interest in the recipient 'so acting'.

650 In Tepko Pty Limited v Water Board ('Tepko'),[154] Gleeson CJ, Gummow and Hayne JJ stated that Barwick CJ's in statement of principle in MLC regained vitality after its consideration in Shaddock. Barwick CJ referred to various features of the special relationship in which the law will import a duty of care in utterance by way of information or advice that were restated by Brennan J in San Sebastian.[155] Two of the points made by Barwick CJ are, as they were in Tepko, presently of significance:

(a) first, the speaker must realise, or the circumstances must be such that the speaker ought to have realised, that the recipient of the information intends to act on that information in connection with some matter of business or serious consequence; and

(b) second, the circumstances must be such that it is reasonable in all the circumstances for the recipient to seek, or to accept, and to rely upon the utterance of the speaker.

651 The 'circumstances' referred to in the second limb include, non-exhaustively, the nature of the subject matter, the occasion of the interchange, and the identity and relative position of the parties as regards knowledge (actual or potential) and relevant capacity to form or exercise judgment which are all factors relevant to the reasonableness of the acceptance of, and of the reliance by the recipient on, the words of the speaker.[156]

652 Proof of these two matters establishes an assumption of responsibility or known reliance that is sufficient for a duty to be imposed.

653 More recently in Woolcock, Gleeson CJ, Gummow, Hayne and Heydon JJ observed that the negligent misstatement cases

can be seen as cases in which a central plank in the plaintiff's allegation that the defendant owed it a duty of care is the contention that the defendant knew that the plaintiff would rely on the accuracy of the information the defendant provided.[157]

654 By contrast with liability in negligence, 'the concept of indeterminacy has no, or no separate, role in cases of negligent misstatement'.[158] Further, 'vulnerability is the consequence of, not an additional criterion of, knowledge (actual or which a reasonable person would have) of reasonable reliance by an ascertainable class of persons.'[159]

655 A statement will attract a duty of care when the recipient of information is part of a class to whom the statement is directed and reliance on the statement by a member of that class is consistent with the substance or the purpose for which the statement was made.[160] As was said in San Sebastian:

In cases of negligent misstatement, reliance plays an important role, particularly so when the defendant directs his statement to a class of persons with the intention of inducing members of the class to act or refrain from acting, in reliance on the statement, in circumstances where he should realise that they may thereby suffer economic loss if the statement is not true.[161]

656 Although reliance plays a central role in delimiting the circumstances in which a duty will arise, the reasonableness of the reliance may not be the 'critical factor' if the defendant 'intends the statement to operate as a direct inducement to action'.[162] However, in other cases, 'the defendant's appreciation of the reasonableness of reliance will be relevant'.[163]

657 The defendant contended that it was neither reasonably foreseeable nor reasonable that the plaintiffs would act in reliance on representations made as to the duration of the HIP, because they were, or ought to have been, aware that the HIP could change as a matter of government policy. The HIP's status as government policy or a government program meant that it was subject to change on a whim. The HIP Guidelines repeatedly stated that the defendant 'reserved the right to change the amount of subsidy under the HIP and any other aspect of the HIP'. The caveat in the HIP Guidelines acted as a disclaimer absolving it of liability. The defendant developed this submission.

658 First, it contended that it did not make the representation in the terms alleged. No representation was made, and neither could it reasonably be inferred, that the defendant undertook not to revisit the decision to fund the HIP or to fund it for a particular time or to a particular level. It may be accepted that, in terms, those words were never said. It contended that the statements that were made were not statements of fact, but rather statements of what constituted current government policy. What was a reasonable inference from the statements made and the circumstances in which they were made are factual matters analysed elsewhere in these reasons.

659 The defendant contended that the two circumstances that defeated the appellants' claim in San Sebastian were present here: impermanence and the discretion on the part of the government to depart from the plan or policy. These features deprived the impugned statements of a character capable of providing the foundation for a duty of care. In San Sebastian, Gibbs CJ, Mason, Wilson and Dawson JJ, after discussing the nature of development plans in the administrative and political process, said:

There are, accordingly, two relevant characteristics of a development plan of the kind in question. First, there is the element of impermanence and capacity for modification and revocation. Secondly, the plan does not diminish the overriding discretion of the responsible authority to depart from the proposals incorporated in the plan when determining individual applications for development approval.

These characteristics point to the conclusion that, in the absence of indications to the contrary, it will not readily be inferred that a plan intended to serve as a guide to future development contains an assurance that it will be continuously and inflexibly applied in the future. Rather it is an expression of present intention and future expectation which would in ordinary circumstances deter developers and businessmen from relying on it as a solid and unchangeable foundation for development approvals. Instead, they make their own assessment and rely on their advisers and consultants, recognizing that the function of the public documents is to provide a general and flexible planning framework within which developers and businessmen are expected to make their own judgments.[164]

When persons chart their conduct in the expectation that a public authority will exercise in accordance with a policy a discretionary power which it is bound to exercise in the public interest, they have no justification for complaint if the public authority, without fraud or breach of contract, alters its policy and disappoints the expectations which the policy engendered, even if the reason for alteration is that the policy was carelessly prepared. Nor have they justification for complaint if a public authority which has adopted a policy to guide its exercise of such a discretionary power informs the public of the policy without first taking care that it is feasible. The public interest in knowing what policy has been adopted prevails over a private right to insist that reasonable care be taken in its preparation or adoption.[165]

660 Because the alleged representation was drawn from statements as to present government policy, those statements carried with them, at least by implication, a qualification that the policy may change at any time, in the national interest, having regard to the political and economic exigencies. The program documentation on which the third statement was based expressly made that statement. This qualification precluded an inference of a representation that the HIP would run until the expiry date. The authorities recognise this feature of statements as to present government policy.

661 I referred earlier to observations of Rolfe J in Durant v Greiner.[166] In Unilan Holdings,[167] Hill J declined to strike out a claim in negligent misrepresentation brought against the Minister for Primary Industry and Energy, who had in a speech to the International Wool Textile Organisation promised that a recent drop in the reserve price of wool, directed by him pursuant to his powers under the Wool Marketing Act 1987 (Cth), would not be repeated as a matter of government policy. Later, the price of wool slumped following amendments to the Act and the plaintiff, which was engaged in the international wool trade, claimed losses alleged to have been caused by reliance on the Minister's promise. Hill J observed that it may be argued at trial that the promise was not to be construed as 'a prediction of future government action, but as a statement of existing policy subject to change, having regard to the political and economic exigencies of the time'.[168] Hill J expressly rejected the proposition that a Minister:

Could, free from the constraints of a civil suit, lie with impunity, notwithstanding that he was aware that in so doing listeners would rely on the truth of what he was saying, that he intended that they so do and as a result they suffered loss.[169]

662 At trial, in Unilan Holdings Pty Ltd v Kerin,[170] Lockhart J, assuming that a duty of care existed, held that the Minister did not breach any such duty and the plaintiff had not relied on the promise and could not succeed in its claim. About the promise Lockhart J observed:

it could not rationally be assumed that it was other than a statement of belief at the time. Many considerations including those of a political nature in Australia could have led to a change in attitude by the Australian Government and any person attending the conference should, in my view, have known or assumed that. Certainly persons were not entitled to trade on the basis that any profits made thereafter would be theirs and any losses would be borne by the Australian Government. The statements were not of this character at all.[171]

663 Dismissing an appeal,[172] the Full Court (Neaves, Ryan and Gummow JJ) noted that while the trial had proceeded on an assumption that a duty of care may exist in circumstances where a Minister makes statements about the future policy of the government, the court preferred to leave for consideration on another occasion, the anterior question of whether there existed a duty of care at all.

664 Secondly, the defendant contended that for like reasons there could not be reasonable reliance on the implied representation had it been made. The plaintiffs submitted that the defendant's plea that the plaintiffs should have known that at any time it could depart from statements that it made because the HIP was government policy did not, on the evidence, support a contention that there was a want of reasonable reliance. Their contention went further. Assuming their reliance on the defendant's statements was not reasonable, that conclusion does not require that there was no duty of care. Because the defendant made the statements directly to induce increased investment and expansion of economic activity in the Insulation Industry to achieve its policy goal of economic stimulus, reliance was not, in this case, a critical factor. Deliberate inducement, not reasonable reliance, was the critical second limb factor in the present circumstances. The plaintiffs contended there was an overwhelming body of evidence that the defendant knew of and, in fact, induced the plaintiffs' reliance on the representation. This submission focussed on the factual issue of the circumstances of the statements in the context of the HIP discussed above.

665 The plaintiffs submitted that the defendant's contention reduced to the proposition that it could not be trusted and the plaintiffs acted unreasonably in assuming that it was to be trusted. This proposition not only does considerable violence to 'the oldfashioned traditional, and almost instinctive, standard of fair play to be observed by the Crown in dealing with subjects,'[173] it also leads to asymmetry between private liability and governmental liability for negligent misstatement. As observed by Mason J in Shaddock, 'there is no persuasive reason for saying that the citizen who sustains damage as a result of information negligently given by a government department or authority has no remedy, although the citizen who sustains similar damage as a result of information negligently given by an investment adviser has a remedy.'[174]

666 The plaintiffs accepted, as a general principle, that the fact that government made the representation might affect the reasonableness of relying on that representation. They contended that a government representation can reasonably be relied on by a class of persons and that government representations are inherently capable of being relied on to render the government liable in respect of its representations.

667 The plaintiffs contended there is no unifying principle precluding the defendant's liability for representations simply by virtue of its status as a body politic and Cooke J had confirmed as much in Meates v Attorney-General:

Ministers of the Crown do not as such carry on a business or profession, but they necessarily hold themselves out as having special knowledge and authority in the fields of their own portfolios or, in the case of the Prime Minister, the major fields of his Government's policy. If they undertake to give specific advice regarding the application of Government policy in given cases, in circumstances where they should know that their advice will be relied on, it seems consistent with the majority judgment in the MLC case to hold that they are bound to be reasonably careful.[175]

The plaintiffs cited Dansar[176] as more recent authority confirming that in ordinary cases a plaintiff is entitled to rely upon representations made by public authorities as to how policies may be implemented.

668 The plaintiffs further contended that the defendant's references to San Sebastian, Unilan v Kerin and Unilan Holdings were inapt in the circumstances of this proceeding. They contended that the reasonableness of the plaintiffs' reliance on the defendant's representations during the HIP fell to be assessed by reference to ordinary principles - whether the plaintiffs' reliance was reasonable in all the circumstances[177] - and not by some special consideration applicable by reason of the fact that the defendant is the Commonwealth of Australia exercising executive powers.

669 A pillar of the plaintiffs' contentions was that San Sebastian was distinguishable from the present circumstances, and the obiter remarks of Brennan J in San Sebastian concerning the reasonableness of reliance on political pronouncements were inapplicable for three reasons:

(a) drawing on an observation of the plurality in San Sebastian, while reliance is ordinarily a condition of a successful claim of negligent misstatement, the reasonableness of the reliance will not be a critical factor 'where the defendant intends the statement to operate as a direct inducement to action'.[178]

(b) the purpose of the relevant 'policy' in San Sebastian was to guide the exercise of discretion,[179] a claim that postulated a party aggrieved by the failure of a public authority to exercise a discretion in accordance with policy guidance.[180] Brennan J's remarks were directed to a case of nonfeasance, not a positive case as is presently before the court; and

(c) the fundamental, and presently inapt, finding in San Sebastian was that the plaintiffs were not able to establish the alleged representation.[181]

Thus, the statements in San Sebastian concerning whether reliance on political statements can be reasonable have only peripheral relevance to the issues to be determined by this Court in this proceeding.

670 Further, the Unilan[182] decisions concerned representations made by a Federal Minister at an international wool conference in circumstances that prompted Lockhart J to observe that when making the statements the relevant Minister was advocating for a cause. The statements were hyperbolic, and it was obvious that circumstances could arise in the future to make continuation of the scheme impossible. As to this last reason, it was significant, as Lockhart J found, that there could be a change of government and that it would be financially impossible to continue with the scheme if the floor price was to remain significantly above the market price.

671 I am not persuaded that these aspects of the factual matrix in that litigation make it plain that the circumstances are readily distinguishable from this proceeding.

672 I have found that the HIP was, as the defendant asserted, a policy program designed to achieve an economic stimulus and energy efficiency goals through stimulation of the retrofit insulation market. The HIP was conceptually quite different to a guidance policy (as the plaintiffs described the development plan in San Sebastian). On the other hand, Minister Kerin's promise in Unilan Holdings was not conceptually different to the implied representation alleged by the plaintiffs. I reject the submission that these cases are not helpful in assessing whether the representation can properly be inferred and, if so, whether it could reasonably have been relied on.

673 A central pillar of the plaintiffs' submissions was that the question of reliance on the defendant's statements and the representation ought to be determined by reference to the defendant's intention. Did the defendant, when making the representations, intend to induce the plaintiffs and the group members to act in the manner that they allege caused their loss?

674 I do not accept that characterisation of the intention of the defendant to induce participation in the HIP. It was necessary for the plaintiffs to put the issue of reliance in this way as the evidence of actual reliance by the plaintiffs on any of the statements or the representation was not proved, discussed below at [1684] and following paragraphs.

675 The plaintiffs submitted that inexorably their reliance on the defendant's statements was reasonable for these reasons:

(a) the HIP was designed to stimulate the economy, and that design depended on the participation of, and investment by, insulation installers, manufacturers and suppliers in their businesses;

(b) the HIP operated by direct intervention in the retrofit insulation market by which the defendant knowingly created a 'boom/bust' scenario;

(c) the representations were expressly designed by the defendant to induce the participation of the plaintiffs and group members, and were regularly repeated to continue to induce participation; and

(d) the defendant knew that participants in the insulation market were expanding their operations, hiring staff, purchasing stock and importing stock from overseas suppliers to continue to meet the demand stimulated by the defendant's HIP that the defendant required to be met.

676 I did not understand the defendant to contest the substance of the first contention, at least in relation to participation. The defendant distributed, or planned to distribute a massive cash injection of $2.4 billion into the economy to stimulate economic activity by encouraging participation in the retrofit Insulation Industry. There were alternative policy responses adopted by other aspects of the defendant's response to the GFC such as the cash bonus payment to households. Undoubtedly, participation was encouraged to achieve the distribution. The defendant's objective was to inject funds into businesses in the building industry as it was an industry hit hard by the downturn. To that end it encouraged participation in the HIP to claim the revenue that the scheme payment generated.

677 However, moving beyond participation to inducing investment by industry participants, the plaintiffs' contention was not persuasive. The extent to which any individual business drew an enhanced revenue stream from participation in the HIP was a matter for that business. The proprietors of any given business were uniquely placed to assess whether to invest in, or sink costs into, the business in the pursuit of an enhanced revenue stream. The defendant was not. In its design, the HIP did not depend on investment by individual businesses on a basis that resulted in the losses claimed by the plaintiffs. The scheme did not mandate any investment choices for individual businesses, nor the extent to which any individual business chose to draw revenue from the scheme. No aspect of the scheme prevented an individual business from prudently assessing whether and to what extent participation in the scheme was in the best interests of its proprietors.

678 Clearly there was encouragement through financial incentives, employing fundamental economic psychology, but nothing was mandated and a business was free to choose from a range of responses ranging from declining to participate at all and developing alternate business opportunities to recklessly chasing the maximum possible revenue stream that might be earned from the HIP. Beyond that encouragement to participate, the statements identified by the plaintiffs fit the Victorian Court of Appeal's description in Murphy.[183] They are propaganda to attune the hearts and minds of citizens to the benefits of participation in the HIP, directed to householders as well as the insulation installation industry. Where statements were directed to the Insulation Industry, particularly through the HIP Guidelines, the right of the defendant to change any aspect of the HIP was expressly reserved.

679 That is not to deny that the HIP was designed to induce the participation of the plaintiffs and group members in the scheme or to deny that the defendant was interested in, and advantaged by, them determining to participate in order to distribute a fiscal injection of $2.4 billion into the economy. It is to reject the contention that the defendant realised, or ought to have realised, that in making statements to encourage participation by Insulation Industry operatives the defendant was inviting the plaintiffs and group members to commit themselves financially, not to simply earning an attractive revenue stream but to investments and expenditure in pursuit of a greater revenue stream that carried risk through uncertainty about the future viability of some of the parameters of those investment/expenditure decisions.

680 It is trite to state that government policy is liable to be changed at any time in the national interest. Predictive statements about the operation or continued operation of government policies which are inherently susceptible to change (including by reason of political, administrative or economic circumstances) are to be understood in that context. It is a well understood commercial risk.

681 Thus, in circumstances where the representations alleged to have been made were statements of present government policy, it was not reasonable for the plaintiffs to rely on the statements in the manner alleged. There could be no reasonable reliance if a party decided to assume away business and commercial risk by assuming representations by government in relation to what constitutes government policy were immutable.

682 The remarks of Brennan J in San Sebastian remain apposite:

When persons chart their conduct in the expectation that a public authority will exercise in accordance with a policy a discretionary power which it is bound to exercise in the public interest, they have no justification for complaint if the public authority, without fraud or breach of contract, alters its policy and disappoints the expectations which the policy engendered, even if the reason for altercation is that the policy was carelessly prepared. Nor have they justification for complaint if a public authority which has adopted a policy to guide its exercise of such a discretionary power informs the public of the policy without first taking care that it is feasible. The public interest in knowing what policy has been adopted prevails over a private right to insist that reasonable care be taken in its preparation or adoption.

...

Therefore it is unreasonable for a person contemplating a course of action which involves a risk of loss if a public authority does not exercise its discretion in a particular way to rely on the feasibility of a policy affecting the discretion when the discretion is one which must be exercised in the public interest. If that person were able to rely on a representation of feasibility of that policy, the public authority would be constrained to adhere to the policy to keep faith with him. The duty which the public authority would owe to the individual would conflict with the duty it owes to the public. The latter duty must prevail. Accordingly, a person who would act on such a statement of policy must form his own view as to its feasibility, and the remedy for carelessness in the preparation or adoption of such a policy must be found in the public arena not in private litigation.[184]

683 A statement of government policy by a Minister or an official cannot ordinarily reasonably be understood or relied upon as anything other than a statement of what the current policy is. Any such statement is, therefore, always contingent upon changes in policy. Where that statement is relevant to the assessment of a parameter in an investment decision, it is incumbent those with responsibility for that decision to identify the risk factors capable of affecting the decision

684 The defendant pleaded that the decision to terminate the HIP constituted the materialisation of an inherent risk (namely the risk that government policy may change at any time). Section 55 of the Wrongs Act (Vic) recognises a defendant is not liable for harm suffered by a plaintiff that is the result of the materialisation of an inherent risk, something which cannot be avoided by the exercise of reasonable care. Section 54(1) of the Wrongs Act (Vic) provides that a person who has suffered harm is presumed to have been aware of a risk, unless the person proves on the balance of probabilities that they were not aware of the risk. As is later explained, Hannam was clearly aware of the risk that the government policy could be changed.

685 The plaintiffs did not allege that the impugned statements and the representation did not constitute the government's policy, or that the government did not, at the time any such statements were made, intend to implement the policy. None of the risks to the longevity of the HIP on which the plaintiffs' relied in their negligence case (risks said to arise from the competency and training requirements adopted, or from the inclusion of foil insulation products) could prove that the defendant did not genuinely and reasonably intend, at the time the impugned statements were made, that the HIP would endure until 31 December 2011 or until the allocated funds were spent.

686 The defendant contended, with some force, that the plaintiffs' negligent misstatement and negligence case are for all practical purposes indistinguishable. The matters upon which the plaintiffs relied in order to prove that the statements concerning the duration of the HIP were negligently made or maintained mirror the matters said to constitute the want of reasonable care which is the focus of the negligence case.

687 I accept that the defendant knew that Insulation Industry participants were expanding their operations, hiring staff, purchasing stock and importing stock from overseas suppliers to continue to meet the demand stimulated by the HIP. There was evidence of statements to that effect made by industry participants in consultation with public servants and, plainly, that response was intended by the defendant to achieve a fiscal stimulus. However, that being so does not require the conclusion that it was reasonable for Insulation Industry participants to wilfully and blindly accept the impugned statements as reliable and as a basis for a reasonable assessment that any future risk that the potential income streams to be derived from participation in the HIP might not continue could be discounted.

688 The plaintiffs have not persuaded me that the defendant owed them, or a class of persons of which they were members, a duty to take reasonable care when making the statements or the representation or a duty to take reasonable care to correct the statements or the representation to avoid inflicting pure economic loss on the plaintiffs or the class of persons of which they were members. The defendant's conduct was not intended to induce decisions of the kind that resulted in the loss claimed by the plaintiffs. Further, for reasons explained below, when making those decisions the plaintiffs did not rely on the statements or the representation alleged. If they had done so, such reliance would not have been reasonable.

689 Two common questions are relevant to the plaintiffs' claim in contract:

(a) (CQ1) Was there a contract of the kind and with the terms alleged in [24] to [26] of the 3FASOC and at [2(d)] of the Reply between the Commonwealth and any of the installers?

(b) (CQ2) Did the termination of the HIP by the Commonwealth constitute repudiation of the contract(s) alleged in the 3FASOC?

690 The plaintiffs' case was that there was a fixed term contract between the defendant and each registered installer until 31 December 2011, or until the funds allocated to insulate 2.2 million homes ran out (the termination date).

691 The plaintiffs contended that by its conduct the defendant offered to pre-existing installers from 3 February 2009 and to new and pre-existing installers from 1 July 2009, that it would enter into a contract on certain terms. The alleged terms were largely stated in the Terms and Conditions of Registration and the HIP Guidelines (collectively, the formal documents). In substance, the defendant would (in Phase 2) pay the installer a sum for installation in consideration of the installation of ceiling insulation in eligible homes between 1 July 2009 and 31 December 2011. The defendant had the right to fix the maximum sum that it paid to an installer for an installation. Installers had the right to fix the sum to be paid for the installation.

692 In order to qualify to accept the defendant's offer, in each of Phase 1 and Phase 2 installers were required to agree to the Terms and Conditions of Registration and were required to be registered on the Installer Provider Register established and maintained by the defendant. From 1 July 2009, each participating installer was required to adhere to terms and conditions that the plaintiffs characterised as distinctively contractual in nature. Installers had to comply with the HIP Guidelines and all relevant laws and regulations, demonstrate relevant skills, experience and training competencies specified by the defendant, install insulation with a specified R-value in accordance with the 1992 Insulation Standard and specified Building Codes. Further, there were administrative obligations such as keeping records, submitting documentation in a particular form, maintaining nominated levels of insurance cover. In addition, installers agreed to indemnify the defendant to the extent of any cost, loss, liability or injury caused by the negligence, unlawful or wilful act or omission, or the use of faulty or unsuitable materials by the installer or its employees, officers, subcontractors, agents or volunteers in relation to the installation of ceiling insulation or a breach of the terms and conditions.

693 The defendant denied that there was any contract. In the alternative, the defendant contended for an alternative construction of the formal documents, such that they constituted a contract of a fundamentally different nature. The defendant offered a unilateral contract to pay the level of subsidy published in the HIP Guidelines from time to time. A registered installer who completed an insulation installation could accept the offer and submit a claim for payment. On a claim made by a registered installer in accordance with the Guidelines, the defendant was liable to pay to the installer the lesser of the installation cost or the maximum amount of the program subsidy. The defendant was free to alter any or all of the terms of the offer or withdraw the offer at any time.

694 The plaintiffs contended that the defendant's sudden termination of the HIP on 19 February 2010 was repudiatory because, by terminating the HIP, the defendant was evincing an intention to no longer perform the terms of its contract with the first plaintiff and the installer group members. The first plaintiff and the installer group members accepted the repudiation and their election to do so was evidenced by the commencement of this proceeding. The defendant contended there was no contract capable of being repudiated by such conduct.

695 It was not contentious that the defendant would pay a sum to an eligible installer in consideration for insulation installation and had the right to fix the maximum sum that it would pay for each installation pursuant to the HIP.

696 The critical issues in dispute on the contract claim were:

(a) whether there was a contract at all (as to which the key point appears to be whether there was a mutual intention to create legal relations);

(b) if there was a contract, what the contractual terms were;

(c) if there was a contract, whether the defendant's offer was accepted by registration on the Installer Provider Register, or by the completion of an insulation installation and submission of a claim for payment. Put another way whether any contract was over-arching (as the plaintiffs contended) or limited to a single installation claim (as the defendant contended);

(d) if there was a contract, whether the contract was of fixed duration until the termination date;

(e) if there was a contract, whether there was a term that the defendant was free to alter any or all of the terms of the offer or withdraw the offer at any time;

(f) if there was a contract, whether the defendant repudiated the contract; and

(g) if there was a contract and that contract was repudiated, whether the plaintiffs accepted the repudiation as terminating the contract.

697 The plaintiffs' contentions as to the applicable principles can largely be accepted for present purposes. The defendant did not dispute the following general statements of principle put by the plaintiffs in their final submissions.

698 The defendant had the capacity to enter into contracts with Roo Roofing and the installer group members as alleged. There was no statutory contract and no applicable statutory scheme to consider. The general principles of the law of contract apply to government contracts.[185]

699 The plaintiffs submitted that the threshold question of intention to enter into a contract does not need to be asked in commercial contracts because there is a strong presumption that the parties do intend to create legal relations if they have otherwise satisfied the requirements of contract formation.[186] The same presumption applies to contracts entered into by the government.[187]

700 The defendant contended that it did not enter into a contract with installers in the global and vague terms pleaded. No intention to enter into contractual relations could exist in such circumstances. It was untenable to suggest that the defendant intended to enter a contract of the kind alleged, which would have operated to fetter its capacity to change government policy in the national interest, for reasons already discussed.

701 In contending that the fundamental requirements of contract formation significantly overlapped with the defendant's intention to create a legal relationship with the first plaintiff and installer group members, the plaintiffs argued that the reasoning of the High Court in Australian Woollen Mills Pty Ltd v The Commonwealth ('Australian Woollen Mills')[188] was cogent. In that case, the appellant argued a contract existed between it and the Commonwealth in relation to a subsidy on wool offered by the Commonwealth during the Second World War. The plaintiff submitted that when the Commonwealth refused to pay the subsidy beyond a specified period, it breached that contract. The High Court, rejecting this argument, identified that there 'must subsist between the parties, so to speak, the relation of a quid pro quo':[189]

In cases of this class it is necessary, in order that a contract may be established, that it should be made to appear that the statement or announcement which is relied on as a promise was really offered as consideration for the doing of the act, and that the act was really done in consideration of a potential promise inherent in the statement or announcement. [190]

702 The court observed that its analysis referred to a principle which is fundamental to any conception of contract, namely that there must be 'a voluntary assumption of a legally enforceable duty'.[191] The court further explained that a test applied in such cases is to ask whether there has been a request by the alleged promisor that the promisee shall do the act on which the latter relies, such request capable of being expressed or implied.[192] The presence of an implied or express request was identified by the court as having been material in a number of cases, including Carlill v Carbolic Smokeball Co.[193]

703 The plaintiffs contended that the reasoning in Australian Woollen Mills had particular cogency in the factual circumstances of this proceeding. By contrast with the factual matrix before the court in Australian Woollen Mills, the evidence in this proceeding established the existence of a request (which was repeated on a number of occasions) by the defendant to the plaintiffs and group members to invest and expand their businesses to meet the demand to be generated by the HIP. Such requests or inducements were necessary for the defendant to achieve its dual policy aims of economic stimulus and achieving greater energy efficiency outcomes.

704 The plaintiffs submitted it would defy logic to assert that the defendant had not requested that the plaintiffs act on its promises. Further, it could hardly be said that the steps taken by the plaintiffs were for reasons other than to meet the demand generated by the HIP as requested by the defendant. In this way, there is a direct correlation, and relationship, between the request made by the defendant and the actions of the plaintiffs in response to that request.

705 I do not accept this contention. It fudges the nature of the 'request', it being unclear whether the reference is to a contractual context, which would be the formal documents, or a tortious context, which would include ministerial statements and the like. The defendant provided an opportunity to installers, in contractual language an invitation to treat, that was plainly intended to encourage installers to respond to the financial incentives on offer. No requests were made to the first plaintiff and installer group members to invest and expand their businesses to meet the demand to be generated by the HIP in the sense that there was a voluntary assumption of a legally enforceable duty. Whether they did so was a matter for them. The quid pro quo was payment from the defendant for each installation. That process of providing a positive financial return was not a request to invest in a business. As will later appear, Roo Roofing did not do so.

706 Roo Roofing's actions in response to what it identified in this context as the 'request' was to perform installations to earn profits, nothing else, as was evident from a damages claim that was contingent on the termination of the HIP.

707 In Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd,[194] the High Court recently restated the broad and uncontroversial principle that the terms of a contract are to be construed objectively, by reference to the commercial purpose sought to be achieved by the agreement. The court approaches the task of construction of a clause on the basis that the parties intended to produce a commercial result, one which makes commercial sense. More specifically, in construing a contract, the 'rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.[195]

708 It is necessary to ask what a reasonable businessperson would have understood a term in a contract to mean.[196] This inquiry requires consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.[197] Recourse to events, circumstances and things external to the contract may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating' or where there is a constructional choice.[198] To that end, what may be considered include events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating.[199]

709 The plaintiffs stressed in submissions that unless a contrary intention appears, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption 'that the parties ... intended to produce a commercial result'.[200] That is, a commercial contract should be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'.[201]

710 I apply these observations in interpreting the formal documents and the relevant surrounding circumstances in assessing whether they had contractual force and if so in what precise context.

711 A repudiatory breach of contract which gives rise to a right to termination occurs when the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it.[202]

712 The term 'repudiation' is used in different ways.[203] Two of these ways have particular relevance in the field of contract, although the overlap between the two has been observed to appear 'conceptually untidy'.[204] First, repudiation may refer to 'conduct which evinces an unwillingness or an inability to render substantial performance of the contract'.[205] This may be thought to reflect an intention by a party to no longer be bound by the contract or to fulfil it in a way that is inconsistent with its obligations.[206] It has been observed that repudiation of this kind may be termed 'renunciation'.[207] The test for determining whether a contract has been renounced is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it.[208] The second way in which 'repudiation' may be used is to refer to any breach of contract which justifies termination by the other party.[209] In Koompahtoo, the majority observed in relation to cases falling within this second category:

There may be cases where a failure to perform, even if not a breach of an essential term (as to which more will be said), manifests unwillingness or inability to perform in such circumstances that the other party is entitled to conclude that the contract will not be performed substantially according to its requirements.[210]

713 The ordinary remedy for breach of contract is an award of damages. The plaintiffs are entitled to be placed in the same situation as if the contract had been performed.[211] The fact that the loss may be difficult or impossible to quantify with precision is not a basis for refusing an award of damages.[212]

714 I pause at this point to note a fundamental flaw in the plaintiffs' claim. Their submission, as I have just noted, drew a distinction between renunciation and repudiation. The plaintiffs then submitted that the defendant had by conduct repudiated the contract they alleged. Assuming the contract to be in the terms they alleged and that the defendant repudiated it by the termination of the HIP on 19 February 2010, the contention that the installers other than the first plaintiff accepted the repudiation by instituting these proceedings was misconceived. Other than the plaintiffs, the group members did not take any positive step to institute proceedings. They became group members by reason of the class definition in an open class group proceeding.

715 As for Roo Roofing, I reject the proposition that it acted reasonably to accept the defendant's supposed repudiation by its conduct in instituting these proceedings. I accept that a party not in breach of a contract may terminate it by electing to do so through its conduct in instituting proceedings seeking that relief. Once a reasonable time had passed in which the first plaintiff had not elected to reject the contract, the first plaintiffs' conduct was inconsistent with it retaining a right to terminate the contract by acceptance of an act of repudiation. These proceedings came years after the act of repudiation relied on. In the intervening period, none of the following events caused the first plaintiff to elect to terminate the contract it alleged by reason of the sudden termination of the HIP.

716 First, the REBS scheme to replace the HIP was proposed and then the defendant announced that it would not proceed with it. Next, the date passed when the funds would have run out had the HIP not been prematurely terminated. Then the original date when it would have ended come what may, 31 December 2011, passed. The plaintiffs' related company and the principal installer company in the Hannam group of companies, ESNI, was subject to an adverse tax audit. The ATO issued a revised tax assessment that ESNI could not pay and it was liquidated. A Royal Commission into the HIP followed, which reported on 29 August 2014. This proceeding was instituted on 30 June 2015.

717 It was not open for the first plaintiff to contend for the first time on 24 April 2018 that its conduct in commencing this proceeding could reasonably be interpreted as its acceptance that the contract it alleged had been repudiated on 19 February 2010 was terminated on that date.

718 In Peter Turnbull & Co Pty Ltd v Mundus Trading Co Australasia Pty Ltd, Kitto J observed:

If A persists in his refusal [to perform the contract], B may at any time while the refusal continues elect to treat the contract as at an end and sue for damages; but unless and until he does so the contract remains on foot, and A may withdraw his refusal and require B to perform the contract on his part, subject only to giving B reasonable notice of his change of intention; or he may take advantage of any supervening circumstances of such a character as to discharge the contract. (Emphasis added.)[213]