District Court New South Wales Medium Neutral Citation: Derek Larsen as Trustee for the Larsen Superannuation Fund & Anor v Tastec Pty Ltd ACN 051516682 [2024] NSWDC 518 Hearing dates: 8-9 May 2024, written submissions closed 29 August 2024 Date of orders: 07 November 2024 Decision date: 07 November 2024 Jurisdiction: Civil Before: Cole DCJ Decision: (1) The plaintiffs' claim against the first and second defendants for relief under the Australian Consumer Law is dismissed. (2) I will hear the parties in relation to the costs of the proceedings in the District Court. Catchwords: CONSUMER LAW – misleading or deceptive conduct – basis for assessment of damages under s 236 Australian Consumer Law – basis for assessment of compensation under s 237 Australian Consumer Law – whether the plaintiffs have established that they have suffered loss or damage Legislation Cited: Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law Design and Building Practitioners Act 2020 (NSW) Trade Practices Act 1974 (Cth) Cases Cited: Bartlett v Weatherill [2017] NSWSC 31 Bellgrove v Eldridge (1954) 90 CLR 613; [1954] HCA 36 Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1; [1986] HCA 3 Henville v Walker (2001) 206 CLR 459; [2001] HCA 52 Larsen v Tastec Pty Ltd [2023] NSWCA 39 Malec v JC Hutton Pty Ltd (1990) 169 CLR 638; [1990] HCA 20 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69 Mistrinia Pty Ltd v Australian Consulting Engineers Pty Ltd [2020] NSWCA 223 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514; [1992] HCA 55 Category: Principal judgment Parties: Derek Larsen as Trustee for the Larsen Superannuation Fund (ABN 95 894 143 943) (First Plaintiff) Floyd Larsen as Trustee for the Larsen Superannuation Fund (ABN 95 894 143 943) (Second Plaintiff) Tastec Pty Ltd (formerly Wonders Building Company Pty Limited) (ACN 051 516 682) (First Defendant) Stephen Sainsbury (Second Defendant) Representation: Counsel: Mr I Roberts SC (Plaintiff) Mr M Gracie (Defendant) Solicitors: Mills Oakley (Plaintiff) Ad Valorem Law (Defendant) File Number(s): 2020/00083478 Publication restriction: Nil JUDGMENT 1. On 15 November 2018, the plaintiffs, Derek and Floyd Larsen, as trustees of the Larsen Superannuation Fund ("the Fund") entered into a contract with the corporate predecessor of Tastec Pty Ltd ("Tastec") for the supply and assembly of a house comprised of prefabricated components ("the house"). The house was to be constructed on a property owned by the Fund in Glen Alice, New South Wales ("NSW") ("the Property"). 2. Tastec supplied the house and assembled it on the Property. 3. The Larsens brought proceedings in the District Court of NSW in relation to the supply and assembly of the house against Tastec (the first defendant) and Stephen Sainsbury (the second defendant), who was, at all relevant times, a registered architect and a director of Tastec. The decision of the judge at first instance, dated 17 December 2021 ("the first instance decision"), was appealed to the Court of Appeal and the Court of Appeal remitted part of the Larsens' claim to the District Court. In the Court of Appeal judgment, Mitchelmore JA, with whom Ward P and Kirk JA agreed, set out the history of the proceedings to that stage (Larsen v Tastec Pty Ltd [2023] NSWCA 39 ("the Appeal decision") at [3] to [7]: 3 In their capacity as trustees of the Fund, the Larsens brought proceedings in the District Court alleging that the first respondent's supply and assembly of the house was defective as to the roof and wall components, and in relation to windows and doors. The Larsens also alleged that both respondents made misleading or deceptive representations about cladding material which caused the defective roof and wall cladding to be used, in contravention of ss 18 and 29 of the Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law ("ACL"). They sought damages against the first respondent for breach of contract, being the cost of rectifying the alleged defects, and damages and/or compensation under ss 236 and 237 of the ACL. The Larsens separately sought orders against Mr Sainsbury, on the basis that he engaged in the same contravening conduct as the first respondent, or was otherwise involved in the first respondent's contraventions. 4 The primary judge, S J Gibb DCJ, dismissed the Larsens' claims. Her Honour found that there was no contractual relationship between the Larsens and the respondents in respect of which they could bring a claim. Alternatively, her Honour held that their claim failed on various other bases, including that the Larsens had failed to establish either damage and/or causation in respect of their various contractual claims related to defects in cladding, windows and doors, and had also failed to establish that the respondents had made false or misleading representations on which they had relied to their detriment. 5 By their Amended Notice of Appeal, the Larsens have advanced six grounds of appeal. The focus of the appeal was the cladding of the house, with the Larsens contending that her Honour erred in dismissing their allegations that the respondents had made false or misleading representations about the cladding which they had relied on to their detriment (Ground 1A). Ground 3 also related to cladding, although Senior Counsel for the Larsens accepted that there was overlap between Ground 1A and Ground 3, such that Ground 3 may not need to be determined in the event that the Court upheld Ground 1A. 6 The Larsens also contended that her Honour had wrongly concluded that they had contracted with Tastec in their personal capacity and not as trustees of the Fund (Ground 1), which error affected her Honour's conclusion regarding the validity of the contract (Ground 2(a)). Further, the Larsens contended that her Honour erred in dismissing their allegations that the windows and external doors were not fit for purpose (Ground 4), and in dismissing their claim of breach of contract in relation to four of the internal doors (Ground 6). 7 The Larsens have also appealed the primary judge's failure to find that Tastec owed them a duty of care pursuant to the Design and Building Practitioners Act 2020 (NSW) (Ground 2(b)). In the course of the hearing, however, Senior Counsel for the Larsens accepted that even if correct as to the submitted failure, it would be difficult for the Larsens to obtain a different outcome on the issue of breach of the statutory duty, as success would rely on the expert evidence of Mr O'Mara, which was rejected. Senior Counsel accepted that the findings on the claimed defects were against the Larsens. These findings were not the subject of appeal. 1. Mitchelmore JA summarised the decision of the Court of Appeal at [8] to [10]: 8 For the reasons I set out below, I consider that Ground 1A should be upheld. The first respondent engaged in conduct that was misleading or deceptive or was likely to mislead or deceive, which the Larsens relied on in deciding to proceed with the cladding solution ultimately installed. In circumstances where the primary judge did not consider the correct comparative task in assessing the issue of damages, the appropriate course is to remit the matter to consider that issue. In light of my conclusion on Ground 1A, it is unnecessary to consider Ground 3. 9 As to Ground 1, I consider that the primary judge erred in her conclusion regarding the parties to the Contract. However, the Larsens' success on Ground 1 only has effect potentially as to costs, and also in so far as they maintained claims for breach of the Contract on the appeal, which was limited to the leaking claims (Ground 4). Were it necessary to determine the issue, I would uphold Ground 1. I consider that Ground 4 should be dismissed. I also consider that Ground 6 should be dismissed. 10 As to Ground 2 of the appeal, which raised the Design and Building Practitioners Act, it is an arid exercise to consider whether the primary judge failed to consider the claim made under the Act in circumstances where, in any event, the loss and damage claimed rested on evidence which her Honour rejected and that rejection is not challenged on appeal. The ground should be dismissed on that basis. 1. The orders made by the Court of Appeal are as follows: (1) Appeal allowed. (2) Set aside Order 1 of the orders of the District Court on 17 December 2021, and Order 4 of the orders of the District Court on 4 March 2022. (3) In lieu thereof, order that: (a) The Plaintiff's claim for damages for breach of contract against the First Defendant is dismissed. (b) The Plaintiff's claim against the First and Second Defendants for relief under the Australian Consumer Law (ACL) be remitted to the District Court, to a judge other than the primary judge, for the determination of: (i) what relief (if any) should be granted pursuant to s 236 and/or s 237 of the ACL, and (ii) the costs of the proceedings. (4) The respondents are to pay the appellants' costs of the appeal. 1. This is the decision on the remitter referred to in paragraph [8] of the Court of Appeal judgment, set out above at [4] and in order 3(b) of the orders of the Court of Appeal. 2. That part of the plaintiffs' claim which has been remitted to the District Court comprises the assessment of whether the plaintiffs should be awarded damages under s 236 or compensation under s 237 of The Australian Consumer Law ("the ACL") which is Schedule 2 of the Competition and Consumer Act (2010) (Cth) ("the Act"), and, if so, the quantum of such damages or compensation. 3. Until 1 January 2011, the Act was called the Trade Practices Act 1974 ("the Trade Practices Act"). It has been amended many times since then, but the provisions with which the remitter is concerned, being ss 18(1), 236 and 237 of the ACL remain similar or the same as their counterparts in the Trade Practices Act, which were ss 51(1), 82(1) and 87. The Plaintiffs' ACL Claim in the Amended Statement of Claim 1. The Amended Statement of Claim sets out the plaintiffs' claim for relief under the ACL: The Cladding Compatibility Representations 25 After the execution of the Contract and in the general course of discussions and correspondence about the Dwelling between Mr Sainsbury (representing WBC), other representatives of WBC, and the Trustees: a. Mr Sainsbury proposed the use of the Bonder 580 as a substitute for the Maxline 340 product for the roof and wall cladding. Particulars In an email to the Trustees on 14 December 2018 Mr Sainsbury said "They are aluminium alloy clad with option for anodising in colorbond colours - Monument here - the really good bit is that they are a 580mm panel width - so ridges at 580mm centres and excellent durability and compatibility with our alloy frame system. As opposed to the 340mm wide line [sic] product we have been chasing. This also comes as an integrated panel rather than having to be an add on..." In an email to the Trustees on 6 March 2019 Mr Sainsbury said "This is the 580mm Aluminium Bondor upstand seam profile we saw in the workshop. This is a unique new product. It looks wide in the office but on site it is quite elegant and appropriate to the wider vast landscape and open sky we believe, particularly in the long sheet. Can use this for wall panels also - though aligning roof and wall seams will be challenging - but worthwhile." b. The Trustees repeatedly rejected the use of the Bonder 580 and informed Mr Sainsbury and WBC that the Bondor 580 was not in accordance with the terms of the Contract. Particulars The Trustees rejected the Bonder 580: i. At a face to face meeting with Mr Sainsbury and Tim Woods of WBC at WBC's Blackwattle Bay warehouse on or about 24 January 2019 where the Trustees were shown a sample of the Bonder 580; ii. By email to Mr Sainsbury on 12 March 2019. c. Mr Sainsbury and WBC acknowledged the Trustees' rejection of the Bondor 580 and stated that WBC would procure the Maxline 340 product as required by the Contract. Particulars WBC letter to the Trustees dated 12 March 2019 including the following words "Noted - we will procure the cladding panels as specified as Maxline 340 in Monument colorbond". d. WBC sent email correspondence to the Trustees providing pictures of what WBC alleged was the Bondor 294 product being fabricated in its warehouse in Blackwattle Bay. Particulars Email from Joey McAuley of WBC (copying Mr Sainsbury) to the Trustees dated 10 May 2019 attaching various photographs and stating "This option uses the high-end alloy faced composite panel with a customised extra fin in Monument finish. The first image shows the profile you have specified for comparison of rib spacings and height. The second shows how the height of the rib fits perfectly with our extrusion on the building". e. The Trustees raised concerns with the pictures contained in the WBC email above at subparagraph (d) as appearing similar or identical to the Bondor 580 panels they had previously been shown and which they had expressly rejected at the face to face warehouse meeting set out above at the particulars to sub-paragraph (b) and reiterated that the Contract required the Maxline 340 to be supplied and installed. Particulars Email from the Trustees to Joey McAuley of WBC (copying Mr Sainsbury) on 20 May 2019 stating that "We have significant concerns with respect to the cladding product as presented. Is it the same product shown to us by Stephen in your Sydney office a few months ago? Because if so, we said clearly then that it was not the cladding solution we had always agreed on from the commencement of discussions." f. WBC did not respond to the Trustees' concerns and the email detailed at sub-paragraph (e) above and the particulars thereto other than to suggest that the product shown in the photos was appropriate and the best choice both aesthetically and functionally for the Dwelling. Particulars Email from Joey McAuley of WBC (copying Mr Sainsbury) to the Trustees on 22 May 2019 stating that "As per photos sent through to Floyd this morning of the roofing detail used here on King Island, I believe this to be the best choice both aesthetically and functionally for your build. . .I can confirm that the tray with [sic] is 294mm wide, and the ribs are 23mm high." g. Having received no response to their concerns set out at sub-paragraph (e) above, the Trustees again raised their concerns regarding WBC's apparent non-compliance with the Contract requirements. Particulars Email from the Trustees to Joey McAuley of WBC (copying Mr Sainsbury) on 23 May 2019 stating that "As far as we are concerned this is a significant variation to our original contract, and referencing emails as recent as April confirming that the finish was to be Maxline 340 (or similar) battened out across the whole building, so I'm sure you will agree that this change to the whole of the external finish is a major variation..." h. On 24 May 2019 Joey McAuley of WBC (copying Mr Sainsbury) emailed the Trustees in respect of the email set out above at subparagraph (g) stating that the cladding product being fabricated by WBC was not the Bondor 580 but was instead a different product, being one that was "custom" and was "refined by the manufacturer to double the amount of ribs to gain a 294mm spacing". Particulars In the email, Mr McAuley stated that "This is not the same as the option you were shown in Sydney. It was refined by the manufacturer to double the amount of ribs to gain a 294mm spacing, thereby meeting the Owners 'about 300mm' requirement. lt is a customised option, covered by the Bondor manufacturer's warranty…' i. Later on 24 May 2019 Mr McAuley sent a document titled "Variation 6" by email to the Trustees. Variation 6 contained a proposed substitution of the Maxline 340 roof and wall cladding for the Bondor 294 but contained no costing breakdown. Particulars Variation 6 contained a sub-heading "Cladding and Roofing Face Option - No Added Cost" with the words "Exchange Maxline 340 cladding arid roofing to Custom Bondor Shademaster Extraline 294 composite SIPS panels aluminium faced in coloubonded [sic]/Monument compatible finish with Bondor extended 15 year rural area Warranty. And Codemark certification. And covered by EcoShelta Statutory Warranty provisions for fit for purpose building systems." 26 By making the claims set out in paragraph 25 (d), (f), (h) and (i) Mr Sainsbury and WBC represented to the Trustees, that: a. WBC would not use the Bondor 580 roof and wall cladding product (which had been repeatedly rejected by the Trustees) on the Dwelling; b. instead, Bondor Shademaster had manufactured a customised product for the DweIling being the Bondor 294 that had ribs at 294mm; c. the Bondor 294 was a product covered by Bondor Shademaster's manufacturer's warranty; and d. the Bondor 294 was an equivalent or superior product to the Maxline 340 in terms of aesthetics and functionality (including the insulation role that the Maxline 340 was to perform) for the Dwelling and it would functionally satisfy the Building Work Obligations, the Statutory Warranties and the Contract Warranties, (together, the Cladding Compatibility Representations). 27 In reliance on the Cladding Compatibility Representations, the Trustees executed Variation 6 on or about 27 May 2019. 28 On 11 June 2019 WBC commenced the works at the Dwelling to be completed within 4 weeks in accordance with the Contract. 29 On 18 June 2019 the Trustees took delivery of the roof and wall cladding panels. Upon viewing the panels, the Trustees became aware that the panels delivered were the Bondor 580, not the Bondor 294 as specified by Variation 6. Particulars The Trustees sent an email to Mr Sainsbury and Mr McAuley at 1:04pm on 18 June 2019 stating that "… we received the first 2 packs of roofing panels today and on opening the packs we note that the pan width is circa 580mm wide and as we've agreed (attached) and had confirmed, we were to be in receipt of a pan width of circa 290mm (rather than the Maxline 340). We understood the manufacturer was able to produce the profile that we had agreed to and this was the order placed." 30 The WBC site foreman, Mr Taidgh Rowley stated to the Trustees that he had been instructed by Mr Sainsbury and/or Mr McAuley to glue/Sikaflex separately spray-painted t-strips onto the Bondor 580 panels after they had been installed on the roof and walls. Particulars a. On site meeting between the Trustees and Mr Rowley on 18 June 2019. b. Further particulars to be provided by way of evidence. 31 After hearing the matters pleaded and particularised at paragraph 30 the Trustees were so concerned that they immediately drove from the site to Sydney (an approximately six hour round trip) and attended WBC's warehouse in Blackwattle Bay that same afternoon on 18 June 2019. 31A After requesting an inspection of the panels at WBC's warehouse, the Trustees saw the Bondor 580 panels and then saw separate t-strips being spraypainted by WBC and a "mock-up' of the Modified Bondor 580 panels with the t-strips affixed being prepared. Particulars Further particulars including photographic evidence to be provided by way of evidence. 32 In response to a request for information posted by the Trustees on Bondor Shademaster's website, Bondor Shademaster confirmed on 14 October 2019 that "Bondor Shademaster have no such product referred to as Extraline 294... This product code does not exist in the industry." Particulars Particulars including screenshots of the relevant web pages will be provided by way of evidence. 33 Following the response from Bondor Shademaster detailed at paragraph 32 above the Trustees sent 2 emails to Metecno Pty Limited, the parent company of Bondor Shademaster seeking confirmation of Bondor Shademaster's position on the existence of the Bondor 294. Particulars Email from Floyd Larsen (copying Derek Larsen) to Geoff Marsdon arid Paul Adams dated 29 October 2019. Email from Floyd Larson (copying Derek Larsen) to Geoff Marsdon and Paul Adams dated 10 November 2019. 33A On 15 November 2019 Metecno responded by email to the Trustees stating that "Metecno Pty Ltd confirm that it has had no involvement in this matter and indeed has no knowledge of this matter, other than what you have told us in your emails." Particulars Email from Paul Adams to Floyd Larsen and Geoff Marsdon (copying Derek Larsen). 34 Mr Sainsbury and WBC made the Cladding Compatibility Representations (and then remained silent and failed to correct the Cladding Compatibility Representations) so as to induce the Trustees into agreeing to Variation 6 in circumstances where Mr Sainsbury, and consequently WBC knew, or ought to have known, that the Cladding Compatibility Representations were misleading and deceptive or false because: a. WBC was using the Bondor 580 roof and wall cladding product (which had been repeatedly rejected by the Trustees) on the Dwelling and simply retrofitting a superficial t-strip to the pre-fabricated Bondor 580 so as to give the appearance of a customised product with rib spacing aligned to the Maxline 340 product; b. Bondor Shademaster had never manufactured a customised product for the Dwelling being the Bondor 294 that had ribs at 294mm; c. neither the Bondor 294 (which did not exist) nor the Modified Bondor 580 as supplied, were products covered by Bondor Shademaster's manufacturer's warranty; and d. neither the Bondor 294 (which did not exist) nor the Modified Bondor 580 as supplied, were equivalent or superior products to the Maxline 340 in terms of aesthetics and functionality (including the insulation role that the Maxline 340 was to perform) for the Dwelling and they would not functionally satisfy the Building Work Obligations, the Statutory Warranties and the Contractual Warranties. 35 In reliance on the Cladding Compatibility Representations the Trustees agreed to Variation 6 to substitute the Maxline 340 for the Bondor 294. 36 The Cladding Compatibility Representations were made by WBC in trade or commerce. 37 Further, the Cladding Compatibility Representations were made by Mr Sainsbury personally in trade or commerce because: a. WBC was engaged in trade or commerce; b. the Cladding Compatibility Representations made by Mr Sainsbury were designed to induce the Trustees to agree to Variation 6; and c. in making the Cladding Compatibility Representations Mr Sainsbury was acting in the trade or commerce of a company (WBC) of which he was a director and company secretary. 38 The Cladding Compatibility Representations were misleading or deceptive or false and WBC and Mr Sainsbury or both contravened sections 18 and 29 of the ACL. 39 Alternatively, if Mr Sainsbury did not make the Cladding Compatibility Representations himself in trade or commerce and breach the ACL in that way as alleged in paragraph 37 above, Mr Sainsbury was a person actively involved in a contravention of sections 18 and 29 of the ACL by aiding, abetting, counselling or procuring WBC's breach of the ACL. Particulars Mr Sainsbury was aware of the matters pleaded above at paragraph 34 at all material times, he knew or ought to have known were misleading or deceptive or false and he still made the Cladding Compatibility Representations and/or failed to correct those representations. 40 In reliance on the Cladding Compatibility Representations the Trustees agreed to Variation 6 and have thereby suffered the loss and damage pleaded and particularised at paragraph 24 above. 40A Further or in the alternative, in breach of Variation 6, WBC failed to supply Bondor 294, as a result of which the Trustees have suffered the loss and damaqe particularised at paragraph 24 above. 1. The only loss or damage pleaded in paragraph 24 of the Amended Statement of Claim which could be related to the plaintiffs' ACL claim is as follows: 24.b. cost of rectification of the Cladding Deficiencies including but not limited to the installation of battens and outer aluminium panel in Maxline 340 or equivalent; 1. In paragraph 62 of the Amended Statement of Claim, the plaintiffs claim the loss or damage pleaded in paragraph 24 of the Amended Statement of Claim against both Tastec (less an amount of $4,704 "withheld as retention") and Mr Sainsbury. In paragraph 4 of the Amended Statement of Claim, the plaintiffs seek orders for damages under s 236 of the ACL against both Tastec and Mr Sainsbury and further, or in the alternative, seek an order for compensation under s 237 of the ACL against both defendants. 2. The term "Cladding Deficiencies" is described in paragraph 21 of the Amended Statement of Claim and includes what is referred to as "the Non-Conforming Cladding Supply", which is described in paragraph 20 of the Amended Statement of Claim. Paragraph 20 says: 20. The Modified Bondor 580 product that was ultimately supplied and installed by WBC was: … b. inconsistent with the Building Work Obligations because and insofar as it was not Maxline 340; and/or c. to the extent that the requirement for Maxline 340 was effectively varied by Variation 6 (as pleaded below), inconsistent with Variation 6 because and insofar as it was not "Custom Bondor Shademaster Extraline 294" (the proposed substitution product for Maxline 340 in Variation 6) – there being no such custom product ever manufactured by Bondor (Bondor 294). (the Non-Conforming Cladding Supply). 1. The only loss and damage pleaded which could be relevant to the remitter is the "cost of rectification of the Cladding Deficiencies including … the installation of … outer aluminium panel in Maxline 340 or equivalent", where the Cladding Deficiencies are confined to the Non-Conforming Cladding Supply. The Findings of Fact 1. The Court of Appeal found that Tastec made each of the representations in relation to the nature of the cladding that the plaintiffs alleged in the Amended Statement of Claim, which were, in summary, in the Appeal decision, described as follows at [102]: 1. The solution Tastec was offering did not involve use of the Bondor 580 that the Larsens had seen (and rejected) in Sydney. 2. The "Extraline 294" was a customised option which Bondor had refined and which had rib spacing at 294mm. 3. The Extraline 294 was covered by Bondor's manufacturer's warranty. 4. The Extraline 294 was an equivalent or superior product to the Maxline 340 in terms of aesthetics and functionality ("better, stronger [and] longer lasting" than the Maxline 340, was "the best choice both aesthetically and functionally for [the Project]", featured benefits which outweighed the functional use of the Maxline 340,), and carried "all installation warranties to Statutory warranty provisions as per Maxline 340". 1. The Court of Appeal determined that the representation to the plaintiffs that the product Tastec showed them in May 2019 was not the same as the Bondor 580 panel that they were shown in February 2019 was false or misleading (see the Appeal decision [107] – [111]). 2. The Court of Appeal further determined that the representation to the plaintiffs that Bondor was involved in refining the product to produce "Extraline 294" was false. The discussions between officers of Bondor and officers of Tastec concerning the production of "Extraline 294" "did not amount to any active involvement on the part of Bondor, and certainly not to a degree that warranted the description of the product as having been refined by the manufacturer" (see the Appeal decision at [112]). 3. The plaintiffs did not press, and the Court of Appeal did not find, that the representation that Extraline 294 was covered by Bondor's manufacturer's warranty was misleading or deceptive (see the Appeal decision at [114]). 4. The plaintiffs did not press, and the Court of Appeal did not determine, that the representation as to the relative functionality of Extraline 294 and Maxline 340 set out in paragraph 4, quoted above at [14], were false or misleading (see the Appeal decision at [116]). The representation with respect to the aesthetic impact of Extraline 294 relative to Maxline 340 set out in paragraph 4 quoted above at [14] was, however, misleading (see the Appeal decision at [118]). 5. As to the question of whether the plaintiffs relied upon the upon the misleading or deceptive representations, the Appeal decision said: 124. Tastec's Counsel emphasised the Larsens' email that preceded the RFI Response to which I have referred at [96]-[97] above, in which they said that they understood the need to move to an alternative product, and that they were "happy to proceed" with the alternative solution subject to the warranty and paperwork being sorted. Counsel submitted that at the point of entering Variation 6, the Larsens thus understood that the alternative solution, though not optimal, would alleviate the difficulties with the build that the Maxline 340 presented. Viewed in this context, the RFI Response presented a choice: the Larsens could proceed with the Maxline 340, albeit at the expense of resetting some of the walls and additional thickness on the roof. Alternatively, they could opt for what Tastec had presented as an alternative solution. The Larsens opted for the alternative solution. 125. Tastec is correct as to what the Larsens said in the email preceding the RFI Response. However, the RFI Response inaccurately answered the outstanding query of whether the proposed panel was the same as the one the Larsens had seen in Sydney, and it otherwise confirmed the representations that had previously been made in relation to the customised nature of the panel and its refinement in consultation with Bondor to create a 294mm panel seam. In putting the choice between the alternatives in the way that was done, the representations in the RFI Response were a cause of the Larsens' decision to enter into Variation 6. The primary judge erred in concluding to the contrary. 1. In relation to the issue of loss or damage, the Appeal decision said at [129] – [135]: 129. The loss and damage that the Larsens relied on in support of their ACL claim was the same as the loss and damage pleaded in the breach of contract claim. Consistently with the nature of the contractual claim, the loss and damage was framed on the basis of putting the Larsens back in the position that they would have been in had the Contract been performed, so far as money can do so: Robinson v Harman (1848) 1 Exch 850 at 855; 154 ER 363 at 365 (Parke B); Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; [2009] HCA 8 at [13] (French CJ, Gummow, Heydon, Crennan and Kiefel JJ). Thus, the focus of the loss and damage was the expert costs of investigating and identifying the cause of the Cracking Damage (ASOC [24(a)]), the cost of rectification of the Cladding Deficiencies (ASOC [24(b)]), and the cost of rectification of the Cracking Damage (ASOC [24(c)]). 130. The express claim for over-cladding the Bondor 580 with the Maxline 340 in the pleading was put as part of the rectification claim in respect of the Cladding Deficiencies in [24(b)]. However, it is apparent from the Larsens' submissions before the primary judge on the ACL claim that they raised the point they are running on the appeal, albeit in the context of a broader claim for damages. In their closing written submissions, the Larsens submitted that in reliance on the pleaded representations, they had entered into Variation 6 "and suffered loss or damage, which they are entitled to recover" (at [112]). They submitted that they were entitled to be put in the position they would have been in absent Variation 6, being the cost of over-cladding the Bondor 580 with the Maxline 340 (at [113]). In reply to Tastec's submission that this would be neither reasonable or necessary, the Larsens submitted, as they submit now, that neither proposition was correct and that they were entitled to be put back in the position that they were in before they relied on the or deceptive conduct (at [50]). 131. Her Honour did not strictly need to consider the issue of loss and damage, having found that there was no reliance. However, in so far as her Honour did consider the issue, her Honour did not make findings relevant to the position that the Larsens would have been in but for the contravening conduct. 132. In Sellars at 348, Mason CJ, Dawson, Toohey and Gaudron JJ said the following in relation to s 82 of the Trade Practices Act (which is the equivalent of s 236 of the ACL) (with the footnotes in square brackets): 16 "Under s 82(1), as under the common law, an applicant can only recover compensation for actual loss or damage incurred, as distinct from potential or likely damage [Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 526]. Loss or damage under s 82(1) is 'the gist of the action' under s 52 [Elna Aust Pty Ltd v International Computers (Aust) Pty Ltd [No 2] (1987) 16 FCR 410 at 418, per Gummow J]. The Act draws a clear distinction between loss or damage which may be recovered under the section and the likelihood of loss or damage which may be prevented or, if not prevented, reduced by one of the remedies under s 87 [Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 527]. 17 In the context of contraventions of s 52(1) in the form of misleading conduct constituted by misrepresentations, acts done by the representee in reliance upon the misrepresentations amount to a sufficient connexion to satisfy the concept of causation. And, if those acts result in economic or financial loss, it will ordinarily be recoverable under s 82(1). So, in a case such as the present, the applicant is entitled to recover 'a sum representing the prejudice or disadvantage [the applicant] has suffered in consequence of his altering his position under the inducement' [Toteff v Antonas (1952) 87 CLR 647 at 650; Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 526]." 133. In Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69 at [42], McHugh, Hayne and Callinan JJ described the comparison for the purposes of s 82 as being "between the position in which the party that allegedly has suffered loss or damage is and the position in which that party would have been but for the contravening conduct". If the loss or damage is shown to have been suffered or to be likely to be suffered, then orders of the kind prescribed by s 87 (of which s 237 of the ACL is the equivalent) may be made: at [43]. Consistently with the joint judgment in Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 526; [1992] HCA 55, their Honours stated that what is central "is that the plaintiff has sustained (or is likely to sustain) a prejudice or disadvantage as a result of altering his or her position under the inducement of the misleading conduct": at [46]. That reflects, in turn, the compensatory purpose of the provisions, which allow redress to be provided "for loss or damage flowing from conduct which contravenes a norm of behaviour in the statute": Harvard Nominees Pty Ltd v Tiller (2020) 282 FCR 530; [2020] FCAFC 229 at [39]. 134. The primary judge did not consider the question of prejudice or disadvantage from the perspective of the choice that the Larsens were offered in the RFI Response and earlier correspondence, when considering whether to enter into Variation 6. At that time, the Contract entitled them to the Maxline 340, cladded over a Bondor SIP. The evidence of both Mr and Mrs Larsen was that they would never have agreed to Variation 6 if they had been told that the panel for which the Maxline 340 and Bondor SIP was exchanged was the Bondor 580 with a glued-on t-strip down the middle of each panel. Her Honour proceeded on the basis of that evidence, but did not consider the issue of loss or damage with the relevant comparison in mind. The questions of feasibility or reasonableness on which Tastec sought to rely may come into play in quantifying the loss, but their submission that the house cannot be cladded over with the Maxline 340 proceeds on the basis of the wrong counterfactual. 135. It follows from what I have set out above that the matter will need to be remitted to the District Court, but limited to the assessment of relief under s 236 and/or s 237 of the ACL. It will be for that Court to determine on remitter whether, and if so to what extent, to allow any further evidence on the issue: note Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388; [2004] HCA 3 at [75]-[76]. The basis for an award of damages under s 236 and compensation under s 237 of the ACL in respect of a breach of s 18 of the ACL 1. The ACL provides, in ss 236 and 237: Division 3 -- Damages 236 Actions for damages (1) If: (a) a person (the claimant ) suffers loss or damage because of the conduct of another person; and (b) the conduct contravened a provision of Chapter 2 or 3; the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention. (2) An action under subsection (1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued. Division 4 -- Compensation orders etc. for injured persons and orders for non - parties 237 Compensation orders etc. on application by an injured person or the regulator (1) A court may: (a) on application of a person (the injured person ) who has suffered, or is likely to suffer, loss or damage because another person has engaged in conduct in contravention of a provision of Chapter 2, 3 or 4; or (b) on the application of the regulator made on behalf of, and with the consent in writing of, one or more such injured persons; make such order or orders as the court thinks appropriate against the person who engaged in the conduct, or a person involved in that conduct. Note: The orders that the court may make include all or any of the orders set out in section 243. (2) The order must be an order that the court considers will: (a) compensate the injured person, or any such injured persons, in whole or in part for the loss or damage; or (b) prevent or reduce the loss or damage suffered, or likely to be suffered, by the injured person or any such injured persons. (3) An application under subsection (1) may be made at any time before the end of 6 years from the day on which the cause of action accrued that relates to the conduct referred to in that subsection. 1. In the Appeal decision, the Court of Appeal determined that the defendant had committed a breach of s 18(1) of the ACL. Section 18(1) of the ACL is in Chapter 2, Part 2 of the ACL and a contravention of s 18(1) therefore falls within s 236(1)(b) of the ACL. 2. Under s 236 of the ACL, the plaintiffs may recover from the defendant "the amount of the loss or damage" suffered by them on account of the contravening conduct of the defendant. 3. Under s 237 of the ACL, if the plaintiffs are each a person who has suffered, or is likely to suffer, loss or damage on account of the contravention of the ACL, the court may make "such order or orders as the court thinks appropriate" against the defendant, subject to the proviso that the order must be an order that the court considers will compensate the plaintiffs, in whole or in part, for the loss or damage. 4. It is relevant in the consideration of the remedy sought that the building in relation to which the misleading or deceptive conduct occurred has been built and occupied. 5. The phrases "loss or damage" and "the amount of the loss or damage" and the words "loss", "damage" and "compensation" are not defined in the ACL or in the Act. 6. I bear in mind the decision in Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 ("Sellars"), paragraph [34] of which was set out in the Appeal decision and is quoted above at [20]. The High Court said in Sellars, at [34], that, if the acts of the defendant which are in contravention of s 52(1) of the Trade Practices Act (the equivalent of s 18(1) of the ACL) "result in economic or financial loss, it will ordinarily be recoverable under s 82(1)" of the Trade Practices Act (the equivalent of s 236 of the ACL). In other words, the High Court described the concept of "the amount of the loss or damage" under s 52(1) of the Trade Practices Act as being limited to economic or financial loss. 7. In Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at p11 ("Gates"), Mason, Wilson and Dawson JJ said: 10. The Act does not prescribe the measure of damages recoverable by a plaintiff for contravention of the provisions of Pts IV and V. Accordingly, it is for the courts to determine what is the appropriate measure of damages recoverable by a plaintiff who suffers loss or damage by conduct done in contravention of the relevant provisions. Two established measures of damages, those applicable in contract and tort respectively, compete for acceptance. In contract, damages are awarded with the object of placing the plaintiff in the position in which he would have been had the contract been performed - he is entitled to damages for loss of bargain (expectation loss) and damage suffered, including expenditure incurred, in reliance on the contract (reliance loss). In tort, on the other hand, damages are awarded with the object of placing the plaintiff in the position in which he would have been had the tort not been committed (similar to reliance loss). 11. The differences and the similarities between the two approaches are best illustrated by contrasting the damages recoverable for breach of contractual warranty on a purchase of goods with those recoverable for a fraudulent misrepresentation inducing entry into a contract for the purchase of goods on the assumption that the contracts are identical except that in one case the representation amounts to a warranty and in the other it is merely a non- contractual representation. For breach of warranty the plaintiff is prima facie entitled to recover the difference between the real value of the goods and the value of the goods as warranted. In deceit the measure of damages is the difference at the time of purchase between the real value of the goods, and the price paid (Potts v. Miller [1940] HCA 43; (1940) 64 CLR 282, at pp 289, 297; Toteff v. Antonas [1952] HCA 16; (1952) 87 CLR 647, at pp 650-651, 654; Gould v. Vaggelas [1985] HCA 85; (1984) 58 ALJR 560, at p 561; 56 ALR 31, at p 34). But this has been treated as a prima facie measure only, the true measure being reflected in the proposition stated by Dixon J. in Toteff v. Antonas (at p 650) in these terms: "In an action of deceit a plaintiff is entitled to recover as damages a sum representing the prejudice or disadvantage he has suffered in consequence of his altering his position under the inducement of the fraudulent misrepresentations made by the defendant." As his Honour then pointed out, it is a question of determining how much worse off the plaintiff is as a result of entering into the transaction which the representation induced him to enter than he would have been had the transaction not taken place. This entitles the plaintiff to all the consequential loss directly flowing from his reliance on the representation (Potts v. Miller, at pp 297-298; Doyle v. Olby (Ironmongers) Ltd. (1969) 2 QB 158), at least if the loss is foreseeable (see Gould v. Vaggelas, at p 563; p 37 of ALR). … 13. Because the object of damages in tort is to place the plaintiff in the position in which he would have been but for the commission of the tort, it is necessary to determine what the plaintiff would have done had he not relied on the representation. … 1. Gibbs CJ agreed, saying on p 6: 7. Actions based on ss.52 and 53 are analogous to actions in tort and the remedy in damages provided by s.82(1) appears to adopt the measure of damages applicable in an action in tort. That sub-section refers to loss or damage by the conduct of another that contravened a provision of Pt.IV or Pt.V; it therefore looks to the loss or damage flowing from the offending act of the other person. The acts referred to in ss.52 and 53 do not include the breach of a contract, and in awarding damages under s.82 for a breach of either of those sections, no question can arise of damages for loss of a bargain. The contractual measure of damages is therefore inappropriate in such a case. It has been held in the Federal Court in a number of cases that the measure of damages in tort, and not that for breach of contract, will apply in the assessment of damages under s.82 where there has been a contravention of s.52 or s.53: see Brown v. Jam Factory [1981] FCA 35; (1981) 35 ALR 79, at p 88; Mister Figgins v. Centrepoint [1981] FCA 15; (1981) 36 ALR 23, at p 59 and Brown v. Southport Motors (1982) 43 ALR 183, at p 186. This view is plainly correct. 1. In Wardley Australia Ltd v Western Australia ("Rothwells Loan case") [1992] HCA 55; (1992) 175 CLR 514, Brennan J said, at [1]: 1. The loss or damage for which an amount is recoverable under s.82(1) of the Trade Practices Act 1974 (Cth) ("the Act") is loss or damage by conduct that contravenes a provision of Pt IV or Pt V of the Act. It is loss or damage that would not have been suffered if the relevant conduct had not been engaged in. If the relevant conduct is misleading or deceptive conduct in contravention of s.52 of the Act consisting in false representations of fact, the conduct "is similar both in character and effect to tortious conduct, particularly fraudulent misrepresentation and negligent misstatement", as Mason, Wilson and Dawson JJ. pointed out in Gates v. City Mutual Life Assurance Society Ltd. ((45) (1986) 160 CLR 1, at p 14). Where economic loss or damage is caused by such conduct, the measure of damages in tort rather than the measure of damages in contract is ordinarily appropriate ((46) ibid., per Gibbs C.J. at pp 6-7; per Mason, Wilson and Dawson JJ., at pp 14-15). Assuming that the amount recoverable under s.82(1) in respect of false representations contravening s.52 is the same as the measure of damages in deceit ((47) Rather than the measure in negligence: see Wadsley, "Measures in Misrepresentation: Recent Steps in Awarding Damages", (1992) 55 Modern Law Review 698), the general principle is as Dixon J. defined it in Toteff v. Antonas ((48) [1952] HCA 16; (1952) 87 CLR 647, at p 650): … 1. In Marks v GIO Australia Holdings [1998] HCA 69; (1998) 196 CLR 494, when discussing the decision in Gates, the plurality judgment of McHugh, Hayne and Callinan JJ said, at [39] – [55]: 39. …Although Gibbs CJ held[42] that the measure of damages in tort, not contract, should apply in the assessment of damages under s 82 where there has been a contravention of ss 52 and 53, the other members of the Court said expressly that "[t]he courts are not bound to make a definitive choice between the two measures of damages so that one applies to all contraventions to the exclusion of the other."[43] Further, none of the members of the Court in Gates considered the circumstances in which relief under s 87 should be granted. 40. Nor do the later decisions of this Court in Wardley Australia Ltd v Western Australia[44] or Kizbeau Pty Ltd v W G & B Pty Ltd[45] hold that the remedies provided by ss 82 and 87 are to be confined by analogies, whether with tort or otherwise. 41. This is not to say that no help can be had from the common law in deciding what damages may be allowed under s 82 in cases of conduct contravening s 52. Very often, the amount of the loss or damage caused by a contravention of s 52 will coincide with what would have been allowed in an action for deceit. But that is because the inquiry in both cases is to find out what damage flowed from (in the sense of being caused by) the deceit or contravention. Leaving aside questions of remoteness of damages in assessing damages for deceit (a question that was left unresolved in Gould v Vaggelas[46]), the damages for deceit will be the sum representing the loss suffered by the plaintiff because the plaintiff altered its position in reliance on the defendant's misrepresentation[47]. But the analogy cannot be pressed too far. It should not be pressed to the point of concluding that the only damages that may be allowed under s 82 are those that would be allowed in an action for deceit. The question presented by s 82 is not what would be allowed in deceit, it is what loss or damage has been caused by the conduct contravening the Act. 42. It follows, then, that a comparison must be made between the position in which the party that allegedly has suffered loss or damage is and the position in which that party would have been but for the contravening conduct. And even this inquiry may not conclude the question. Analysing the question of causation only by reference to what is, in essence, a "but for" test has been found wanting in other contexts[48] and it may well be that it is not an exclusive test of causation in this area either. But that is not a question which we need to consider in this case. For the moment it is enough to say that s 82 requires identification of a causal link between loss or damage and conduct done in contravention of the Act[49]. 43. If loss or damage is shown to have been suffered or to be likely to be suffered, orders of the kind prescribed by s 87 may be made. Proof of loss or damage (actual or potential) is therefore the gateway to the s 87 remedies. But the identification of loss or damage is important in the operation of s 87 not only for this reason but also because the power to make orders under s 87 is limited to making orders "if the Court considers that the order or orders concerned will compensate ... in whole or in part for the loss or damage or will prevent or reduce the loss or damage ..."[50]. That is, the Court can make orders under s 87 only in so far as those orders will compensate (or will prevent or reduce) the loss or damage that is identified. 44. In Wardley the majority of the Court held[51] that "[u]nder s 82(1), as under the common law, a plaintiff can only recover compensation for actual loss or damage incurred, as distinct from potential or likely damage[52]" although, as their Honours noted[53] "[t]he Act draws a clear distinction in Pt VI between loss or damage which may be recovered under s 82 and the likelihood of loss or damage which may be prevented or, if not prevented, reduced by one of the remedies under s 87." 45. Thus, under s 87, actual loss or damage need not have been suffered before an order is made. Nevertheless, although "[s]87 of the Act confers a wide discretionary power on courts to make remedial orders in appropriate cases to ensure a fair result"[54], that power may be exercised only if a person has suffered or is likely to suffer loss or damage as a result of a contravention. 46. The loss or damage spoken of in ss 82 and 87 is not confined to economic loss. Section 4K makes that clear. But loss or damage caused by a contravention of the Act will often be economic loss. As was said in Wardley[55] "[e]conomic loss may take a variety of forms". But central to them all, when it is said that the loss was, or will probably be, caused by misleading or deceptive conduct, is that the plaintiff has sustained (or is likely to sustain) a prejudice or disadvantage as a result of altering his or her position under the inducement of the misleading conduct. 47. The bare fact that a contract has been made which confers rights or imposes obligations that are different from what one party represented to be the case does not demonstrate that the party that was misled has suffered loss or damage. The contrary view (which had been adopted by the Full Court of the Federal Court in Jobbins v Capel Court Corp Ltd[56]) was rejected by the majority in Wardley[57]. 48. A party that is misled suffers no prejudice or disadvantage unless it is shown that that party could have acted in some other way (or refrained from acting in some way) which would have been of greater benefit or less detriment to it than the course in fact adopted. Thus, the party that is misled will have suffered loss if a chose in action which was acquired was worth less than the amount paid for it. There may well be other ways in which it might suffer loss or damage. For example, consequential loss may be suffered. But no loss of that kind was alleged in this case and, putting that kind of loss to one side, we focus only on loss said to be suffered by the making of the contract. 49. It is necessary, then, to determine whether the value of what was acquired is less than what was paid. How is value to be assessed? It is to be assessed objectively, not according to what either or both of the parties to the contract believed that it would obtain from the contract. That is, the value of what in fact was acquired is to be identified according to what price freely contracting, fully informed parties would have offered and accepted for it[58]. It is only by comparison with the value assessed in this way that there can be an assessment of whether the party that is misled could have obtained some greater benefit or incurred less detriment. What is important is what that party could have done, not what it might have hoped for or expected. Some examples may serve to illustrate the point. 50. If a person agrees to pay $50,000 for goods which the vendor falsely represents are worth $100,000 but which are, in fact, worth $50,000, what loss has the purchaser who is misled suffered by agreeing to buy (assuming no more is known)? If a person agrees to pay interest at the rate of 10% for a loan which the lender falsely represents would ordinarily command interest at a rate of 15% but which, in fact, would ordinarily command interest at 12%, what loss has the borrower who is misled suffered by agreeing to borrow (again, assuming no more is known)? And so the examples could be multiplied. 51. The reason that neither of these persons suffers a loss is that viewed objectively each obtained rights having a value (a value determined objectively) at least equal to what it paid for those rights. It is only if some alternative (less detrimental or more beneficial course) were available, that it can be said that the contract which was made was less valuable to the party that was misled than had been represented - for it is only then that a comparison of value can be made. 52. The fact that each of the misled parties in the examples given may have thought that it was to obtain some advantage from the transaction is not to the point. The contravening conduct has left the party that was misled no worse off than it was before the contravention occurred. 53. Nor do we accept that the extension by s 4K of loss or damage to "injury" leads to any different conclusion. It may be that "injury" in s 4K is intended to refer to injury to the person but we do not need to decide if that is so. Even if "injury" is to be given some wider meaning than personal injury, we do not accept that a person suffers injury simply because a hoped for advantage does not materialise. The central inquiry is what consequence has the contravention of the Act had on the party in question. That requires comparison between the position in fact of the party which alleges loss and the position that would have obtained had there been no contravention. 54. This is not to be taken as confining the operation of s 87 to cases where loss or damage has been sustained. It is not confined in that way; it applies to cases in which it is shown that a person is likely to suffer loss or damage. But the inquiry remains an inquiry about whether it is likely that as a result of the contravention the party concerned will suffer some prejudice or disadvantage. If, as we consider to be the case, the bare fact that making a contract different from what was represented is not loss or damage, something more must be shown to be likely to occur in the future before it can be said that it is likely that loss or damage will be suffered. 55. Ordinarily this will present the plaintiff with no difficulty. It will be rare that the difference between what was represented and what was given will not be reflected in some difference in value or other manifestation of actual loss to the party that was misled either now or in the future. But if it does not, we consider that neither s 82 nor s 87 relief is available. To the extent that the contrary was held in Demagogue Pty Ltd v Ramensky[59], we consider it to be wrong. 1. More recently, in Mistrinia Pty Ltd v Australian Consulting Engineers Pty Ltd [2020] NSWCA 223, Ward JA, with whom MacFarlan JA and Leeming JA substantially agreed, said, at [96] – [98]: 96. In relation to a comparable (though, I emphasise, not identical) statutory prohibition in the United Kingdom (see s 2(1) of the Misrepresentation Act 1967 (UK)), it is well-established that the measure of damages is based in tort, not contract, and the prevailing view in the authorities is that the relevant tortious measure is that for deceit (see, for example, Royscot Trust Ltd v Rogerson [1991] 2 QB 297 (Royscot) at 304-5; [1991] 3 All ER 294 per Balcombe LJ). If the analogy to the tort of deceit be accepted, then it would arguably follow that the remoteness rules in deceit would apply (and, therefore, that no reasonable foreseeability delimitation ought to be imposed). 97. Having said this, I observe that the applicability, or otherwise, of principles from the tort of deceit was left open by Lord Browne-Wilkinson (at 267) and Lord Steyn (at 283) in Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254; [1996] 4 All ER 769. It has also been criticised, extra-curially, by, amongst others, Justice Edelman (who has described the approach in Royscot as "unfortunate" - see McGregor on Damages (20th ed, 2018, Thomson Reuters) at [49.056]). 98. I note, also, that the tort of deceit has been prominent in defining the scope of liability under the Australian statutory regimes (see, particularly, Henville v Walker at [19] per Gleeson CJ, [130]-[134] per McHugh J; Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69 at [41] per McHugh, Hayne and Callinan JJ, [102]-[103] per Gummow J, [137]-[138] per Kirby J; and HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640; [2004] HCA 54 at [65] per Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ; and see further Jeannie Marie Paterson and Elise Bant, 'Misrepresentation, Misleading Conduct and Statute Through the Lens of Form and Substance' in Andrew Robertson and James Goudkamp (eds), Form and Substance in the Law of Obligations (2019, Hart Publishing) 403). 1. In summary, when considering whether to award damages under s 236 of the ACL in respect of a breach of s 18(1) of the ACL under current Australian law it is necessary to ascertain what actual loss or damage was caused by the breach. As in the tort of deceit, the objective is to place the plaintiffs in the position that they would have been in had the misleading or deceptive conduct not occurred, or not influenced their choices. The specific remedies provided for in the ACL must be borne in mind, so the exercise is not precisely the same as in an action in tort. The loss is to be assessed objectively. The comparison is between the position the plaintiffs are in with the position they would have been in, but for the contravening conduct of the defendant. 2. The basis for an award of compensation under s 237 of the ACL is the same as for s 236 of the ACL except that an award under s 237 may relate to anticipated loss or damage as well as actual loss or damage. As this issue does not arise in this matter, the inquiry here in relation to the compensation sought is the same under the two sections. 3. In the Appeal decision, Mitchelmore JA indicated, at [134] (see [20], above), that the proper comparison in this matter, for the purposes of considering the question of damages, is the comparison between the position in which the plaintiffs find themselves as a result of what flowed from the misleading or deceptive conduct of the defendant and the position in which the plaintiffs would have been in had the misleading or deceptive conduct not occurred, or had it not influenced their decision to agree to portion of Variation 6 of their contract with the defendant. Mitchelmore JA found that, prior to entering into Variation 6 the plaintiffs were entitled, under the contract, to "Maxline 340, cladded over a Bondor SIP". A SIP is a structural insulated panel. A structural insulated panel system is sometimes referred to as a SIPS. The relevant portion of Variation 6 said: Cladding and Roofing Face Option No Added Cost Exchange Maxline 340 cladding and roofing to Custom BONDOR SHADEMASTER EXTRALINE 294 composite SIPS panels aluminium faced in colourbonded/Monument' compatible finish with BONDOR extended 15 year rural area Warranty. And Codemark certification. And covered by Ecoshelta Statutory Warranty provisions for fit for purpose building systems. 1. As I have said above, at [10], the relief claimed by the plaintiffs in their Amended Statement of Claim is the cost of the installation of battens and "outer aluminium panel in Maxline 340". 2. I note that it is common ground that Maxline 340 panels are made of steel and are not made of aluminium. The plaintiffs' argument 1. The plaintiffs argued, on the remitter, that immediately prior to agreeing to Variation 6 they were in the position of being entitled under their contract with the defendant to a house clad in Maxline 340 for the contract price. 2. In their written submissions, the plaintiffs set out their summary of the Appeal decision and then assert: 85. The correct counterfactual was the other option available at the time of Variation 6. That is, the Larsens' entitlement to remain with the Maxline 340, for the Contract price, as the Contract required. That is the context in which her Honour described in [135] what was to be remitted to the District Court. 1. In their written submissions, under the heading RETURNING THE LARSENS TO THEIR CONTRACTUALLY ENTITLED POSITION the plaintiffs argued: 87. The Bondor Shademaster, as the name might suggest, is for the purposes of outdoor areas such as patios. Nonetheless, that was the SIP that Mr Sainsbury and Tastec determined to use on the Larsen roof and walls. 88. It is not the type required by the Contract because that was a steel SIP. On one view returning the Larsens [to] their Contract position would require the Bondor Shademaster 580 that was used, according to Mr Sainsbury, in compliance with Variation 6 to be removed and replaced with a Maxline 340 clad over a Bondor SIP with steel skin. 89. However, in line with their obligation to mitigate their loss the Larsens have adopted a sensible approach, to clad the Maxline 340 over the existing Shademaster 580. 1. Further, in their written submissions, the plaintiffs say: THE PRIMA FACIE MEASURE OF DAMAGE 95. The prima facie measure of loss in cases of nonconforming building works is the well known proposition from Bellgrove v Eldridge that: (a) the measure of loss is the cost of the work necessary to produce conformity with the contract; (b) subject to the qualification that it is a reasonable course to adopt. Bellgrove v Eldridge (1954) 90 CLR 613 ("Bellgrove v Eldridge") is a decision of the High Court concerning damages for breach of contract. 1. The plaintiffs sought, by way of damages or compensation against both of the defendants (presumably jointly and severally) the cost of overcladding the external walls and roof of the existing, completed house with Maxline 340 steel cladding. 2. The plaintiffs acknowledged that the defendants were arguing that the increased thickness of the external walls, once overclad with Maxline 340, would create functional difficulties in relation to the movement of a door in each of the living room and the dining room and some windows. The risk of future galvanic corrosion arising from potential incompatibility between the aluminium Bondor Shademaster and the steel Maxline 340 had also been raised. The plaintiffs answer, in very brief summary, was that, in the event that I were to find that the functional difficulties arising from the overcladding proposed made the overcladding unreasonable, then the solution would be to award by way of damages the cost of removing the Bondor Shademaster and replacing it with a steel SIP overclad with Maxline 340. The defendants' argument 1. The defendants argued that the plaintiffs' case on remitter proceeded on the wrong counterfactual because "the plaintiffs were never entitled to have Maxline 340 clad over the existing Bondor Shademaster 580 SIPS". 2. The defendants also argued that it is neither a feasible nor a reasonable solution to overclad the walls and roof of the house with Maxline 340 panels, so that the Court should not order compensation by reference to such a solution. In the first instance decision, Judge Gibb determined that such an outcome would not meet the BASIX requirements as to insulation, and the installation of Maxline 340 panels on the walls over the Bondor Shademaster 580 SIPS would result in several doors being unable to open as they should (see the first instance decision at p 4). 3. The defendants argued, based upon Henville v Walker (2001) 206 CLR 459, that the comparison to be made is between the position in which the plaintiffs found themselves upon the completion of the house, and the position they would have been in had they not agreed to Variation 6. It was argued that the plaintiffs would have been in the same, or virtually the same situation under both scenarios. 4. It is necessary for the Court to ask, in relation to the second, hypothetical, scenario what would have happened between 23 May 2019 (the date of Variation 6) and the date of completion of the house if the plaintiffs had not agreed to Variation 6. The defendants argued that it should be predicted, in that hypothetical scenario, that the plaintiffs would have agreed to abandon their wish to have the house clad in Maxline 340 panels for reasons other than the misleading or deceptive conduct; namely because having Maxline 340 over a Bondor SIP (Lux Wall 100mm on the roof and Lux Wall 75mm on the walls, provided for in the contract) was not feasible. The contract would have had to have been amended in any event because the swing doors would not have opened properly from the living room and the dining room onto the verandah. The project would have had to have been amended in any event. 5. It was pointed out, in the defendants' submissions, that the plaintiffs were aware of the existence of other cladding products which could be an alternative to the Maxline 340 when they agreed to the use of the Bondor Shademaster 580 panels (see the first instance decision at pp 46-47). The defendants submitted that this suggests that, upon being confronted with the difficulties of using Maxline 340 with the Lux Wall SIP, the plaintiffs would, in the hypothetical counterfactual, have made the same decision they made in reality, in reliance upon the misleading or deceptive conduct. 6. The defendants submitted that the plaintiffs have failed to discharge their onus of proof because their sole "rectification scenario" is "not a relevant counterfactual and because it is not a factually possible one". 7. The defendants submitted that the plaintiffs bear the onus of establishing and then quantifying their loss, and that they have failed to discharge that onus. It was submitted that the damages ought to be assessed as nil. 8. The defendants went on to argue that the rectification proposal advanced by the plaintiffs was not a "reasonable and necessary" course to adopt and does not therefore meet the test in Bellgrove v Eldridge. 9. The defendants further argued that the plaintiffs have failed to mitigate their loss, because they became aware that the Bondor 580 had been delivered to the building site prior to it being used on the house, and so were in a position to prevent that from occurring. They did not take steps to stop the cladding being used on the house. The evidence on the remitter 1. On the remitter, both the plaintiffs and the defendants called evidence to supplement the relevant evidence adduced at the initial trial in this Court. The claim was a much broader claim at the time of the initial trial, involving allegations of breaches of the contract. The claims for breach of contract were unsuccessful at first instance and were not the subject of the Appeal decision. The only claims before me are the claims under the ACL. The remitter is for the purpose of making a determination of what relief (if any) should be granted pursuant to s 236 and/or s 237 of the ACL and for deciding the question of the costs of the proceedings. 2. The affidavits and reports adduced before me are contained in the Remitter Bundle (four volumes). Mrs Larsen gave oral evidence, and so did Mr Sainsbury. Expert engineers Mr Moisidis (instructed by the plaintiffs) and Mr Karsai (instructed by the defendants) gave evidence concurrently, as did expert quantity surveyors Mr Bolt (instructed by the plaintiffs) and Mr O'Donnell (instructed by the defendants). 3. In very brief summary, the evidence of the engineers indicated that it would be physically possible to overclad the Bondor Shademaster panels on the exterior walls and roof of the house provided that changes were made to the door assembly of the swing doors to the outdoors from the living and dining rooms. Neither of the engineers were aware of such overcladding involving these two types of panels being undertaken before, or of any testing of the various fixings, battens and flashings, for example, which the process would require. The visual effect of the process cannot be predicted precisely at this stage because detailed design work has not been performed. At the present level of detail, some risk remains to the weatherproofing of the house and there is a risk of the overcladding process giving rise to visual and performance consequences which cannot presently be foreseen on account of the lack of testing. It may be that the warranties upon which the plaintiffs can rely presently from Bondor and EcoShelta would be invalidated by the overcladding. 4. Again, in very brief summary, Mr Bolt estimated that the cost of the proposed overcladding would be $526,728.80 (as at December 2023). Mr O'Donnell estimated that the cost would be $277,021.21. The difference in the estimates is attributable to many things, including different estimates of rates and hours of work for aspects of the project, differences in anticipated preliminary costs and differences in allowances for overheads, professional fees and profit and contingencies. There are aspects of the cladding work which have not yet become clear. For example, Mr Bolt believes that it may be necessary to replace the windows to achieve waterproofing and visual consistency. Dr O'Donnell doubts that the replacement of the windows would be necessary. Dr O'Donnell believes that the overcladding works could be completed in six weeks and Mr Bolt estimates that it would take about 11 weeks, allowing for all of the purpose-made facias, trims and flashings. Mr Bolt was also concerned about the difficulties inherent in installing the Maxline 340 sheets so that the ribs are in the right place and the increase in thickness at various points can be dealt with by the design and fabrication of unique flashings as the need arises. Such issues may take time to address on site, with consequent increased labour costs. Consideration 1. As I have said, the plaintiffs seek damages under s 236 of the ACL or compensation under s 237 of the ACL, equal to the cost of installing Maxline 340 cladding on top of the existing Bondor Shademaster SIP which has been installed on the walls and roof of the house. 2. The plaintiffs seek damages or compensation calculated in this way to bring them into the position that they were entitled to be in under the contract prior to their agreement to Variation 6. 3. The plaintiffs have based their claims for damages and compensation upon an entitlement to damages applicable in an action for a breach of contract which, as I have set out in detail above at [21] – [37] is not the basis for a claim under the ACL. As the High Court said in Gates, the objective of damages in an action for breach of contract is to place the plaintiffs in the position they would have been in had the contract been performed. To that end, damages may be awarded for loss of bargain (expectation loss) and damage suffered, including expenditure incurred in reliance on the contract. In contrast, based upon but not identical to an action for damages caused by the commission of the tort of deceit, damages or compensation for a breach of s 18(1) of the ACL are awarded to place the plaintiffs in the position they would have been in had the breach not occurred. It is clear from the High Court authorities set out above, which are binding on the District Court, that expectation loss is not a basis for an award of damages or compensation under the ACL. The ACL is not concerned with the enforcement of contracts. It is concerned with the promotion of competition and fair trading and provision for consumer protection (see s 2 of the Competition and Consumer Act 2010 (Cth)). 4. In order to obtain an award of damages under s 236 of the ACL, the plaintiffs must show that they have suffered loss or damage because of the contravention of s 18(1) of the ACL. The quantum of damages will be calculated by reference to the amount of the loss or damage suffered by the plaintiffs. 5. The comparison to be made is the comparison between the position of the plaintiffs at the end of the construction of the house, after their agreement to Variation 6 on the one hand, and the position that they would have been in at the end of the construction of the house had they not been influenced by the misleading or deceptive conduct of the defendants to agree to Variation 6. 6. In considering the second, hypothetical, scenario, I bear in mind what was said in Malec v JC Hutton Pty Ltd (1990) 169 CLR 638 and quoted with approval in Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at [16]: 16. As the existence and assessment of the value of a valuable opportunity usually depend on an evaluation of hypothetical situations or future possibilities, it is clear that the manner in which a plaintiff discharges the onus of proving his case is different from the manner in which he would discharge it if an issue depended upon the existence of historical facts. In Malec v. J.C. Hutton Pty. Ltd. ((67) (1990) 169 CLR 638 at 639-640.) Dawson J and I observed: "Hypothetical situations of the past are analogous to future possibilities: in one case the court must form an estimate of the likelihood that the hypothetical situation would have occurred, in the other the court must form an estimate of the likelihood that the possibility will occur. Both are to be distinguished from events which are alleged to have actually occurred in the past." We cited what Lord Diplock said in Mallett v. McMonagle ((68) (1970) AC 166 at 176.): " The role of the court in making an assessment of damages which depends upon its view as to what will be and what would have been is to be contrasted with its ordinary function in civil actions of determining what was. In determining what did happen in the past a court decides on the balance of probabilities. Anything that is more probable than not it treats as certain. But in assessing damages which depend upon its view as to what will happen in the future or would have happened in the future if something had not happened in the past, the court must make an estimate as to what are the chances that a particular thing will or would have happened and reflect those chances, whether they are more or less than even, in the amount of damages which it awards." In Malec ((69) (1990) 169 CLR at 642-643.) Deane, Gaudron and McHugh JJ said: " When liability has been established and a common law court has to assess damages, its approach to events that allegedly would have occurred, but cannot now occur, or that allegedly might occur, is different from its approach to events which allegedly have occurred. A common law court determines on the balance of probabilities whether an event has occurred. If the probability of the event having occurred is greater than it not having occurred, the occurrence of the event is treated as certain; if the probability of it having occurred is less than it not having occurred, it is treated as not having occurred. Hence, in respect of events which have or have not occurred, damages are assessed on an all or nothing approach. But in the case of an event which it is alleged would or would not have occurred, or might or might not yet occur, the approach of the court is different. The future may be predicted and the hypothetical may be conjectured." These observations relate not so much to the standard of proof as to the way in which a court views the material bearing on the issues for determination. They can affect the determination not only of the issues of loss and its assessment but also the issue of causation. 1. Had the plaintiffs not been influenced by the misleading or deceptive conduct, they may have renewed their insistence upon the use of Maxline 340 panels. This would have necessitated a further change to the plans and specifications on account of the extra bulk which would have arisen from the use of the Lux Wall SIPs in the roof and walls. The Maxline 340 panels need to be affixed to a Structural Insulated Panel System, and the contract provided for that (see the first instance decision at [41]-[42]). 2. Alternatively, the scenario argued for by the defendants might have come to pass and the plaintiffs might have agreed to Variation 6 even had the misleading or deceptive conduct not occurred or not influenced them. 3. In either case, the house would have been built and would have been either very similar to the house they presently have or the same as that house. There is no suggestion that the plaintiffs would have sought to repudiate the contract. 4. There is no evidence before me that the plaintiffs have suffered economic loss or damage of the kind which may be the subject of an award of damages under s 236 of the ACL or an award of compensation under s 237 of the ACL. There is no evidence that the house which has been built is worth less than the contract price. There is no evidence that the house which has been built would be worth less than the house they may have had under either of the two alternative hypothetical scenarios set out in [63]-[64] or any other hypothetical counterfactual. 5. There is no allegation that the plaintiffs have suffered an injury compensable under s 237 of the ACL. It is clear that the plaintiffs are very upset that they did not get a house with the appearance that they wished for, however, the ACL does not provide for an award of damages or compensation for expectation loss. The plaintiffs are in an analogous situation to the situations discussed in Marks at [50]-[51] (see [31] above) (see also Bartlett v Weatherill [2017] NSWSC 31). 6. The plaintiffs have not established an entitlement to an award of damages or compensation under s 236 or s 237 of the ACL. Orders: 1. The plaintiffs' claim against the first and second defendants for relief under the Australian Consumer Law is dismissed. 2. I will hear the parties in relation to the costs of the proceedings in the District Court. ******** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 07 November 2024