Larsen as trustee for the Larsen Superannuation Fund v Tastec Pty Ltd (formerly Wonders Building Company Pty Ltd)

1. [1]

   ADAMSON JA: The appellants, Derek and Floyd Larsen as trustees for the Larsen Superannuation Fund (the Larsens), appeal against orders made on 7 November 2024 by Cole DCJ (the primary judge) in the District Court (the Court below), dismissing their claim for relief under ss 236 or 237 of the Australian Consumer Law (the Law) against the first respondent, Tastec Pty Ltd (Tastec), and the second respondent, Stephen Sainsbury, for the respondents’ misleading or deceptive conduct.

2. [2]

   The procedural history is lengthy but can be shortly summarised. Tastec supplied and erected a house on the Larsens’ land under a fixed price building contract which specified that the roof and walls be clad with Standard Insulated Panels (SIP) covered by Maxline 340 sheeting. The respondents proposed a variation (Variation 6) which specified different materials for that purpose, to which the Larsens agreed. The Larsens commenced proceedings against the respondents in the Court below. Their claims were dismissed on 17 December 2021 by Gibb DCJ. The Larsens’ appeal to this Court was allowed on the basis that the Larsens had agreed to Variation 6 in reliance on various false or misleading representations made by the respondents to the Larsens regarding the substitute materials: Larsen v Tastec Pty Ltd [2023] NSWCA 39 (CA 1) at [102], [108], [113]-[116], [118] and [125] (Mitchelmore JA, Ward P and Kirk JA agreeing).

3. [3]

   As Gibb DCJ had not determined what the Larsens would have done but for the respondents’ misleading or deceptive conduct, this Court remitted the question of relief under the Law to the Court below for determination.

4. [4]

   On remitter, the Larsens claimed the cost of rectifying their residence to bring it into compliance with their contract with Tastec. That is, they claimed the cost of installing the Maxline 340 to the residence.

5. [5]

   The primary judge on remitter was not satisfied that the Larsens had established an entitlement to damages or compensation under ss 236 or 237 of the Law as the Larsens had not shown that the value of their residence with Maxline 340 would be worth more than it would be without it. Accordingly, her Honour dismissed the claim for relief without making any findings as to the cost of rectification (which was the subject of expert evidence). The Larsens appealed to this Court.

6. [6]

   The Larsens have identified the following issues for determination on this appeal, the short answers to which follow in italics:

   1. (1)

      is the cost of the work to return the Larsens substantially to the position they would have been in but for the contravening conduct a kind of loss or damage for which an amount may be recovered in an action for damages under the Law? (Grounds 1, 4(a) and 4(b)) Yes.

   2. (2)

      is loss of a bargain (expectation loss) a kind of loss or damage for which the Larsens may be compensated in an action for damages under the Law? (Grounds 1(a), 1(b), 1(d) and 4(a)) Yes.

   3. (3)

      is the measurement of loss or damage in the present case confined to the difference between the contract price and value? (Grounds 1(b), 1(c), 1(d) and 4(b)) No.

   4. (4)

      is the loss of the right to receive cladding materials specified in the contract and the costs of rectification to obtain the specified cladding a form of economic loss? (Grounds 1(c), 1(d) and 4(b)) Yes.

   5. (5)

      is the loss of the specified use of a product a form of loss or damage within the meaning of ss 236 and 237? (Grounds 2, 3(b) and 4(a)) Yes.

   6. (6)

      was there a real (not negligible) possibility the Larsens would have agreed to vary the materials in any case if the misleading or deceptive conduct had not occurred? (Ground 3(a)) No.

   7. (7)

      would the Larsens have received the benefit of the cladding specified in the original contract if the misleading or deceptive conduct had not occurred? (Grounds 3(b) and 3(c)) Yes, if Tastec had performed its contract.

   8. (8)

      have the respondents demonstrated that installing the specified cladding was not a reasonable course to adopt? (Grounds 4(c) and 4(d)) No.

7. [7]

   The answers to these questions depend on the evidence adduced in the Court below as well as the findings of this Court. Accordingly, it will be necessary to summarise these matters before turning to the questions.

The reasons of this Court for remitter

1. [8]

   In CA 1, Mitchelmore JA set out the history of the matter and made findings before remitting the matter to the Court below. Rather than paraphrase her Honour’s reasons, I propose to extract them for ease of reference:

2. [9]

   In CA 1, Mitchelmore JA outlined Tastec’s three attempts to get the Larsens to agree to use a different cladding product than Maxline 340. The first two were unsuccessful; the third achieved its aim but only because the Larsens relied on Tastec’s misleading or deceptive conduct. The first attempt was as follows:

3. [10]

   The second attempt was as follows:

4. [11]

   The panel structure prior to Variation 6 was confirmed in an internal Tastec email dated 12 April 2019 (which resulted from a request from Lithgow City Council of Mr Larsen regarding his application for a construction certificate) which was sent on to the Larsens, referred to in CA 1 at [79]:

5. [12]

   Tastec continued to look for other solutions because of the cost and difficulties of construction which they considered would arise if the panel structure for which they had contracted were installed. Mr Sainsbury’s proposal is evident from his email to Mr McAuley (also of Tastec) which is included in [86]-[87] of CA 1:

6. [13]

   Tastec’s third attempt to get the Larsens to abandon the Maxline 340 cladding commenced with an email sent to the Larsens on 10 May 2019 in which Tastec represented that the proposal would be a “high end alloy faced composite panel with a customised extra fin in Monument finish”. Instead, the proposed panel was in fact the Bondor 580 panel (which the Larsens had already rejected twice) and the so-called “customised extra fin” was a separate piece which had to be glued onto the composite panel (CA 1 [88]).

7. [14]

   On 14 May 2019, Tastec issued an invoice to the Larsens for half of the cost of the parts production for the project (CA 1 [92]). It also sent an email setting out the cladding option proposed, together with an image, and sought the Larsens’ approval to that option (CA 1 [91]-[92]). On 20 May 2019, the Larsens made various enquiries including whether the cladding proposed was the same as the one they had rejected and expressed considerable concerns about it (CA 1 [92]). Mr McAuley’s email response did not expressly address the question whether the cladding was the same as the one they had rejected. Rather, he represented that the tray width was 294mm high and the ribs were 23mm high (CA 1 [95]).

8. [15]

   On 24 May 2019, Tastec sent to the Larsens a document, entitled “Construction RFI [request for information] Response” dated 23 May 2019. In relation to cladding, Tastec said (as set out in CA 1 [99]):

9. [16]

   Tastec also set out in this document, under the heading, “Cladding Options”, a proposed solution described as “BONDOR Special Order – Customised ExtraLine 294mm spacing Standing Seam Aluminium Full Composite Panel – Joint venture special customised system developed by Ecoshelta and Bondor – for this project only”. It set out various attributes of the “solution”. In the following passage from the document, Tastec represented that its solution was better than the Larsens original contractual specification but represented that it could still do what they had contracted to do, if required. They said:

10. [17]

    As Gibb DCJ had not made findings about representations or whether they were misleading or deceptive, that task fell to this Court under s 75A of the Supreme Court Act 1970 (NSW). Mitchelmore JA said in CA 1:

11. [18]

    Each of the first three representations was found to be misleading or deceptive: (1) at CA 1 [108]; (2) at CA 1 [109]-[113]; (3) at CA 1 [114]-[115]. Representation (4) was found only to be misleading or deceptive in respect of the alleged superior aesthetics, which overlapped with representation (1) ([116]-[117]), having regard to the unchallenged findings of Gibb DCJ.

12. [19]

    This Court dealt in the following paragraphs with the respondents’ submission that the Larsens had not established reliance:

13. [20]

    This Court found that the Larsens had relied on Tastec’s representations to enter into Variation 6. At CA 1 [125], Mitchelmore JA found:

14. [21]

    Mitchelmore JA summarised the Larsens’ claim for relief as follows:

15. [22]

    Gibb DCJ did not assess loss and damage arising from reliance. Accordingly, this Court remitted the question of relief to the primary judge. In CA 1, Mitchelmore said as follows:

The proceedings in the Court below

1. [23]

   The Larsens commenced the proceedings in the Court below by filing a statement of claim on 16 March 2020. In paragraphs 24-30 of their pleading, they alleged, inter alia, that the respondents had engaged in misleading or deceptive conduct (by making the “Cladding Compatibility Representations”), on which the Larsens relied and, as a consequence, had suffered loss and damage.

2. [24]

   The Larsens claimed by way of damages for misleading or deceptive conduct the “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” (paragraphs 24b and 40 of the amended statement of claim filed on 24 July 2020). Both these paragraphs were the subject of a bare denial by Tastec and Mr Sainsbury in their defences. In the course of the appeal, Mr Gracie, who appeared for the respondents, insinuated in his submissions that the claim for the cost of rectification on the basis of misleading or deceptive conduct was a recent invention. I reject this submission, having regard to the fact that it was expressly pleaded from the outset.

3. [25]

   Further, the way in which the Larsens had put their claim for damages for Tastec’s contravention of the Law was expressly, precisely and concisely articulated by this Court in CA 1 [129]-[130]. This was what was remitted to the Court below and therefore what was required to be determined by the primary judge, as confirmed in CA 1 [130].

4. [26]

   On remitter, the parties tendered all the documents which had been before Gibb DCJ and the transcript of the 13-day hearing before her Honour (none of which was referred to in the parties’ submissions in the Court below as to the relief to be granted). They also adduced further evidence, including expert evidence and joint expert reports following a conclave, all of which, apart from the contract, were contained within the appeal books in this Court (except the building contract dated 15 November 2018 between Tastec and the Larsens, which was provided to this Court during the course of the appeal). Mrs Larsen and Mr Sainsbury gave evidence at the remitter hearing. Two sets of two experts prepared joint reports and gave concurrent evidence: Mr Moisidis (instructed by the Larsens) and Mr Karsai (instructed by the respondents), both engineers, gave evidence within their expertise and two quantity surveyors, Mr Bolt (instructed by the Larsens) and Mr O’Donnell (instructed by the respondents) also gave evidence. Some of the documentary evidence which was before the Court below is not in the appeal books (see further below).

5. [27]

   Clause 3 of the contract provided that the cost of the works set out in the Schedules “will be fixed for the duration of the project” subject only to adjustments such as design changes beyond the control of Tastec or a variation requested by the Larsens. The contract otherwise required Tastec to complete the project to “lock up” for a fixed price.

6. [28]

   The Works under the contract comprised five schedules. Schedule 3, an illustrated fit-out schedule, specified the project finishes. It, relevantly, specified:

7. [29]

   Schedule 4 set out a list of works to be included in the project and, relevantly, included:

8. [30]

   It was common ground that the contract did not specify the SIP which was to be used under the Maxline 340 cladding beyond specifying that it was to be made of steel.

9. [31]

   If the contract had been performed according to its terms (and without Variation 6), the Larsens would have received a house clad with Maxline 340 for the contract price.

10. [32]

    Of relevance to the questions in this Court regarding election and alleged failure on the part of the Larsens to mitigate their loss, Mrs Larsen was cross-examined about what she and her husband had done when they found out that the T-strips had been applied to the Bondor 580. In response, Mrs Larsen recalled that they had driven to Sydney to the factory where Tastec was spray-painting “the T-strips”. At the factory she was told by a member of Tastec’s staff that there would be T-strips glued in the middle of every single panel “to give us the look at a … 30ml panel.” She confirmed that they rejected that solution “[a]bsolutely.”. The following exchange ensued:

11. [33]

    Mrs Larsen was cross-examined about whether she would have the Maxline 340 installed in the following passage:

12. [34]

    Mrs Larsen gave evidence that, in November 2023, she contacted Ben Pirie (a builder), to obtain “scope input and a quotation for the supply and installation of Maxline 340”. She provided him by email dated 7 November 2023 with a detailed document, to which she attached quotations (including from Revolution Roofing, the supplier of Maxline 340) and referred to an onsite meeting with him the following day “to step through the attached Request For Proposal information”.

13. [35]

    The document reproduced one of Mr Sainsbury’s drawings which depicted a Bondor Shademaster SIP panel being attached to Maxline 340 with what were described as “timber support battens” (strips of solid material used, typically, to provide a fixing point for roofing or cladding materials).

14. [36]

    The document said of the reason for the request, the drawing and the scope of works requested as follows:

15. [37]

    This document, together with the engineering report referred to below, were also sent to two other builders, Matt Cover and Heath Dyer, who also attended the site inspection on 8 November 2023. Mr Pirie’s tender price provided on 30 November 2023 was $455,617.92. Mr Dyer’s tender price (which was valid for 90 days from 30 November 2023) was $472,025.97.

16. [38]

    The Larsens, through their solicitors, also obtained an engineering report dated 29 November 2023 from Richard Noonan, registered civil and structural engineer, entitled “Roof and Wall Re-Cladding – Structural Engineering Assessment”. Mr Noonan also attended the site inspection on 8 November 2023.

17. [39]

    In cross-examination, Mr Sainsbury agreed that after the Development Application (DA) drawings had been prepared and lodged, he started to work on drawings for a construction certificate, which were required to be more detailed than for the DA. He agreed that he had to perform extensive detailing to incorporate into the Ecoshelta system the Maxline 340 cladding on the roof and walls of the Larsens’ dwelling. The following exchange ensued in his cross-examination:

18. [40]

    The response which Mr Sainsbury sent to the Larsens to justify what he was charging for the construction certificate drawings said in part:

19. [41]

    Mr Sainsbury accepted in cross-examination that his response expressed “the reasons for the additional costs being the additional required time for the detailing and the extra documentation to deal with that very thing, the incorporation of the Maxline cladding and roofing into the Ecoshelta system”. He also agreed that he had represented to the Larsens that he had actually spent “a lot more time” than he had charged them because the creation of the construction certificate design set required an extensive amount of work and documentation.

20. [42]

    When he was taken through the construction certificate “design set” dated March 2019 in cross-examination, Mr Sainsbury agreed that his structural notes specified as SIP panels the 100mm Bondor Shademaster panel for the roof and the 75mm Bondor LuxeWall composite structural wall panel for the walls with “Monument [a colour] COLOURBOND clad over the top”. He accepted that the cladding was identified as Maxline 340. It was common ground that the Bondor 580 has a thickness of 100mm.

21. [43]

    At the remitter hearing, the engineers gave evidence that it was feasible to clad the panels on the walls and roof of the house with Maxline 340 although it would be necessary to make adjustments to the doors and windows to allow for the increased thickness of the walls. At the conclusion of their oral evidence, Mr Bolt’s costing for the cladding was $526,728.80 (as at December 2023) and Mr O’Donnell’s costing for the cladding was $277,021.21.

22. [44]

    The Larsens put their claim for damages on the basis of the cost of rectification. They submitted that, on one view, they were entitled to have the Bondor 580 removed from their dwelling and have it replaced with a steel SIP, as specified in the contract. However, they submitted that, in accordance with their duty to mitigate their loss, they accepted that the Maxline 340 ought be installed as cladding over the Bondor 580 which had already been installed.

23. [45]

    The Larsens also pointed to the respondents’ “shopping list of reasons, most of which have never been raised before, why cladding over the existing panels will be problematic, difficult or requiring additional work.” They submitted further:

24. [46]

    Of present relevance, the respondents submitted that rectification cost was not an appropriate measure of damages:

25. [47]

    The primary judge characterised the Larsens’ claim for damages as follows:

26. [48]

    The primary judge then rejected that claim on the basis that expectation loss could not be awarded for contravention of the Law. Her Honour said:

27. [49]

    The primary judge said further:

Consideration

1. [50]

   The measure of damages for breach of the Law usually equates to damages in tort: Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1; [1986] HCA 3 (Gates). Thus, broadly speaking, it is said that the victim of misleading or deceptive conduct is entitled to an award of damages sufficient to put that person in the position they would have been in had the misleading or deceptive conduct not occurred. However, it is plain from Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69 that Gates is not to be construed as requiring courts to disregard expectation losses, which are commonly associated with damages for breach of contract.

2. [51]

   Expectation losses may still be relevant in circumstances, such as Gates itself, where a victim of a contravention alleges that, but for the contravening conduct, they would have entered into a different contact. In that event, if all integers can be proved, the victim is entitled to damages to put them in the position they would have been in had they entered into the different contract. This process is akin to the process of assessing damages in tort because of the relevant comparison, but it involves an assessment of loss on an expectation basis, which is generally apposite for damages for breach of contract. This application of methods from different areas of the common law is useful for assessing damages. Indeed, the High Court in HTW Valuers (Central QLD) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640; [2004] HCA 54 said at [62] (Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ):

3. [52]

   The principle is illustrated by Berry v CCL Secure Pty Ltd (2020) 271 CLR 151; [2020] HCA 27 (Berry) in which Mr Berry was induced to sign a document terminating an agency agreement. He and his company sued for damages under the Law for the amount of the commission they would have received under the agency agreement had it not been terminated. The plurality (Bell, Keane and Nettle JJ) said, at [26], that the loss and damage by reason of being tricked into signing the termination letter, “was and is properly cognisable as the loss of [the applicants’] legal rights” under the agreement.

4. [53]

   It said further at [33]:

5. [54]

   Berry concerned the value of a commercial opportunity which the injured party had lost because of the wrongful conduct of the other contracting party (the opportunity to earn commissions pursuant to the Agency Agreement). Thus it is not factually similar to the present case where the contractual right lost was the right to have the house constructed in accordance with the contract. In the present case, there was no element of chance or opportunity such as arose in, for example, Malec v JC Hutton Pty Ltd (1990) 169 CLR 638; [1990] HCA 20, Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54 or Sellars v Adelaide Petroleum NL; Poseidon Ltd v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4.

6. [55]

   In order to ascertain damages on the basis outlined in Gates, it is important to identify the relevant counterfactual. That is, it is necessary to posit the question: what would have been the victim’s position but for the contravening conduct? Thus the effect of the contravening conduct and the circumstances in which it occurred are relevant to the assessment of loss.

7. [56]

   Where a victim of contravening conduct purchases property, whether real or personal, in reliance on misleading or deceptive conduct, the question of the value of the property is relevant to the assessment of loss. As long as the price paid is at least equivalent to the value of the property, the victim will have suffered no loss. Thus, for example, in Argy v Blunts and Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112; [1990] FCA 57 (Argy), the applicant couple recovered no damages for the respondent real estate agent’s contravening conduct in representing that property was “waterfront” when it was not, since the value of the property equated to what they paid for it.

8. [57]

   However, although this way of measuring loss is apposite in circumstances such as arose in Argy, it does not follow that this is the only measure of damages for contravening conduct under the Law: Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388; [2004] HCA 3 at [31] (Gleeson CJ, McHugh, Gummow, Kirby, Hayne, Callinan and Heydon JJ). In that case the High Court held that the undertaking of additional financial obligations in reliance on misleading or deceptive conduct constituted recoverable loss, which did not depend on there being a difference between the price paid under a lease agreement and the value of the property at the date of the agreement. The Court said at [46] that in each case it is necessary to “identify the detriment which is said to be the loss or damage which has occurred”.

9. [58]

   The principles of election and waiver, or their analogues in the context of the Law, are also relevant. The respondents submitted that, by permitting them to install the Bondor 580 panels, the Larsens had elected not to insist on the installation of the Maxline 340 cladding or had waived their right to require it to be installed.

10. [59]

    The significance of election and waiver is different where an injured party has suffered as a result of conduct that contravenes the Law. In Warwick Entertainment Centre Pty Ltd v Alpine Holdings Pty Ltd [2005] WASCA 174; (2005) 224 ALR 134 (Warwick), the Western Australian Court of Appeal said at [71]:

11. [60]

    In the present case, but for the contravening conduct, the Larsens would not have agreed to Variation 6 (CA 1 [134]). This is a compelling inference based not only on the Larsens’ direct evidence to that effect. It also arises from the circumstance that Tastec had tried twice before to induce the Larsens to abandon their entitlement under the contract for Maxline 340 and that it required misleading or deceptive conduct on the part of Tastec to induce the Larsens to relinquish this right.

12. [61]

    Had the Larsens not agreed to Variation 6, they would still have had an enforceable contractual right to require Tastec to install Maxline 340 on the roof and walls. In those circumstances, the purpose of the award of damages is the amount required to install Maxline 340 on the roof and walls of the Larsens residence, subject to questions of proportionality. This is the value of the right they surrendered as a result of Tastec’s contravening conduct: it is an identified and quantifiable economic loss resulting from the loss of a legal right and of what, on the evidence, would actually have been received upon performance of the contract.

13. [62]

    The respondents submitted that the Larsens were not entitled to the cost of rectification because they had engaged another builder to construct their carport with Bondor 580 without Maxline 340 and also used panels with the same profile as Bondor 580 made from Corten (a steel alloy which develops a rust-like patina when exposed to the elements) for other parts of the exterior of their home. The respondents submitted that these acts indicated that aesthetics were not important to them and that, if awarded damages for the cost of rectification, they would not use the damages to have the Maxline 340 cladding installed. Mr Gracie submitted orally:

14. [63]

    I reject this submission. The Larsens’ conduct referred to above has established how significant aesthetic considerations were for their residence and the importance of Maxline 340 to provide their desired effect. While Mr Gracie deprecated the Larsens’ concerns by describing them as “purely aesthetic”, this description does not assist the respondents since that is precisely why the Larsens insisted on Maxline 340 to clad their house.

15. [64]

    Mr Gracie submitted that it was noteworthy that the Larsens had not adduced any architectural evidence on the remitter and therefore they could not prove that the design was feasible. I reject this submission for the reasons given by the Larsens in paragraphs 91-93 of their written submissions in the Court below (extracted above). It is telling that Mr Sainsbury was prepared to have Tastec enter into a contract whereby Maxline 340 would be clad over SIP panels and that he charged for design and construction work as to how the panels and the Maxline 340 could be installed. In these circumstances, if the construction for which the contract provided was not feasible, impractical or unworkable, then it is to the respondents’ account. It ill-behoves them to denigrate, for their own forensic purposes, the very specification which Tastec contractually bound itself to build.

16. [65]

    Mr Gracie relied on Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 (Ferrcom) at 418-419 in support of his submission that an adverse inference ought be drawn against the Larsens because they did not call an expert architect to give evidence. Ferrcom has no application in the present case since it applies to the failure by a party to ask a witness (that is, someone who has been called to give evidence) questions in chief. In those circumstances, if the most natural inference from the failure is that the party feared to do so, the inference is available that the witness’ testimony on that topic would not have assisted the party calling the witness. In Jones v Dunkel (1959) 101 CLR 298 at 320-321; [1959] HCA 8, the High Court held that, if a party fails to call as a witness someone in their “camp”, the inference is available that the witness’ evidence would not have assisted the party’s case. Mr Gracie did not submit that the inference ought be drawn because of the Larsens’ alleged failure to call a particular architect but rather their alleged failure not to call any expert evidence from an architect at all. Accordingly, I reject Mr Gracie’s submission that either a Ferrcom or Jones v Dunkel inference is available against the Larsens.

17. [66]

    Before turning to the grounds by reference to the list of issues set out above, I propose to address particular errors in the primary judge’s reasons.

18. [67]

    It is evident from J [59] that the primary judge treated the Larsens as having put their claim for damages (which was helpfully summarised by Mitchelmore JA at [129]-[130], extracted above) as a claim for damages for expectation loss. Her Honour rejected the claim on the basis that expectation losses were only recoverable in a claim for damages for breach of contract (J [59] and [67]). In this respect, her Honour appears to have led herself into error. This is also evident from the primary judge’s correct, but inapposite, comment at J [41] when referring to the Larsens’ submission, by reference to Bellgrove v Eldridge (1954) 90 CLR 613; [1954] HCA 36 (Bellgrove), that Bellgrove “is a decision of the High Court concerning damages for breach of contract.”

19. [68]

    Further it appears that the primary judge was also misled by the respondents’ submission that it was material that the Larsens’ house was worth no more with Maxline 340 than it would be without. As is evident from the authorities referred to above, the comparison of price with value is relevant when the contravening conduct has induced the victim to buy property but is not determinative in a case such as the present. People, including victims of contravening conduct, are entitled to overcapitalise their residences. The circumstance that the contracted-for Maxline 340 did not add monetary value to the residence was not something that had to be taken into account for the benefit of the wrongdoer, although it is relevant to the question of reasonableness (discussed below). Thus the primary judge was in error to require a differential in value to be proved before damages could be awarded to the Larsens (J [66]).

20. [69]

    Maxline 340 cladding may have added nothing to the market value of the Larsens’ residence. Because of Tastec’s contravening conduct, the Larsens relinquished the right to have Maxline 340 applied to the roof and walls of their residence over the underlying panels, for which they had contracted, as they preferred the aesthetic it created. In J [64]-[65], the primary judge appears to have sought to impose an unidentified aesthetic by regarding a house constructed with Maxline 340 cladding as “very similar” or “the same” as the house the Larsens presently have which lacks such cladding, a view self-evidently not shared by the Larsens.

21. [70]

    Given that the loss in the present case is the loss of entitlement to performance of the contract (absent the variation), the reasonableness of loss is to be assessed by reference to the nature and purpose of the contract.

22. [71]

    In Bellgrove, defective foundations threatened the stability of the plaintiff’s house. She was held to be entitled to recover the cost of demolition and re-erection because damages in such an amount provided her with the means of obtaining the performance which she was entitled to receive under the contract. In those circumstances, the primary measure of loss was the cost of the rectification work. The High Court (Dixon CJ, Webb and Taylor JJ) said at 617:

23. [72]

    In Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344, the appellants contracted to build for the respondent a swimming pool and enclosure. The contract specified that the depth ought be 7 feet 6 inches deep. However, the appellants only constructed it to be 6 feet deep. It was common ground that 6 feet was deep enough for diving and the pool was otherwise perfectly serviceable. There was no adverse effect on the value of the property. The cost of rebuilding the pool to the specification was £21,560. The trial judge found as a fact that the respondent’s avowed intention of rebuilding the pool would not persist after the litigation had been concluded (referred to by Lloyd LJ at 372).

24. [73]

    The House of Lords (Keith, Bridge, Jauncey, Mustill and Lloyd LJJ) found that the expenditure was out of proportion to the benefit to be obtained and therefore the cost of rectification was neither reasonable nor necessary and was, therefore, not recoverable. The respondent was permitted to retain, by way of damages, the £2,500 for loss of amenity which the trial judge had awarded.

25. [74]

    Lord Jauncey said that the reasonableness that is to be taken into account is in relation to the particular contract. He said, at 358:

26. [75]

    His Lordship also addressed the question whether the injured party was actually going to spend the money as follows at 359:

27. [76]

    Lord Mustill contemplated a situation not unlike the present at 360 and said:

28. [77]

    Lord Lloyd, at 372-373, addressed the relevance of the intention of the injured party and said that, as the trial judge had positively found that the respondent had no intention of rebuilding the swimming pool, his loss ought not, in the circumstances of that case, be assessed as being the cost of rectification.

29. [78]

    In Westpoint Management Ltd v Chocolate Factory Apartments Ltd [2007] NSWCA 253, Giles JA (McColl and Campbell JJA agreeing) summarised the relevant principles for breach of a contract for performance of building work as follows:

30. [79]

    This Court also said at [48]:

31. [80]

    In Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (2008) 166 FCR 494; [2008] FCAFC 38, the appellant lessor sued for breach of a negative covenant in the lease not to alter its property. The respondent tenant made substantial alterations to the foyer without the lessor’s approval. The primary judge found that the tenant had breached the covenant but did not award the cost of rectification on the basis that the value of the reversion was not substantially diminished. The Full Federal Court allowed the appeal, finding that the tenant had not displaced the prima facie measure of calculating damages: the cost of reinstatement. Finkelstein and Gordon JJ said of present relevance:

32. [81]

    The tenant’s appeal to the High Court was dismissed: Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; [2009] HCA 8. The High Court confirmed that the measure of damages for breach of contract required the injured party to be put in the same situation, not the same financial situation, as far as money can do it, as if the contract had been performed. While diminution of value was said to be appropriate for the breach of contract relating to the acquisition of marketable property, it would not restore the injured party to the status quo ante: [13] (French CJ, Gummow, Heydon, Crennan and Kiefel JJ). After referring to Bellgrove and Ruxley, the Court said, at [17]:

33. [82]

    In Owners SP 92450 v JKN Para 1 Pty Ltd [2023] NSWCA 114, the builder designed and constructed a multi-storey building in Parramatta by agreement with the first respondent, the then owner and developer. The cladding attached to the building was not fire-resistant. The strata plan was registered and the appellant became the owner of the common property. The appellant claimed the costs of reinstatement. This Court held that the burden of proof for establishing loss lies on the claimant. By contrast, the party in breach of contract has an evidentiary onus of displacing the cost of reinstatement (the prima facie rule for assessing damages in such a case), by showing that reinstatement would be unreasonable: [71]-[79]. As the respondents did not establish an alternative solution, they did not discharge the evidentiary onus of proving that the costs of rectification would be unreasonable: [80]-[93]. By installing cladding which did not comply with the Building Code of Australia’s requirements for fire resistance, the building which the respondents constructed for the appellant did not comply with the contract: [102]-[110].

34. [83]

    The prima facie measure of the Larsens’ loss is the cost of achieving that which Tastec bound itself by contract to do. In order to displace this measure, Tastec must show that the cost of rectification (installing the Maxline 340 cladding) is unreasonable in all the circumstances.

35. [84]

    Mr Gracie submitted that it was unreasonable because it was neither feasible nor proportionate to apply Maxline 340 cladding to the residence. He relied on a litany of difficulties which would be occasioned by an attempt to do so.

36. [85]

    There are several difficulties with Tastec’s present position, the principal of which is that it is inconsistent with its contemporaneous conduct at the time of entering into and performing the contract.

37. [86]

    The incontrovertible or admitted evidence demonstrates the following:

    1. (1)

       Tastec was prepared to enter into a fixed price contract with the Larsens which specified Maxline 340 as cladding over an unspecified SIP;

    2. (2)

       for the purposes of preparing the construction certificate, Mr Sainsbury prepared detailed design drawings which specified Maxline 340 with a Bondor base;

    3. (3)

       when challenged by the Larsens about the amount Mr Sainsbury charged them for preparing the drawings, he represented that the drawings were necessary to integrate the Maxline 340 into the Ecoshelta structure and that he had spent more time on it than that for which he had charged; and

    4. (4)

       even when Tastec was misleading the Larsens about its alternative proposal, it continued to make statements and representations, including to the Larsens, that Maxline 340 was workable.

38. [87]

    I regard the respondents’ contemporaneous conduct as an implied, if not express, admission that Maxline 340 could, as a matter of practical feasibility, be applied as cladding to the Larsens’ residence. Tastec’s aversion to the use of Maxline 340 as cladding was that it was expensive (which affected its interest as the contract was, in the main, a fixed price contract) and that there were complications which arose by reason of there being additional thickness around doors and windows as a result of the additional layer (which also affected Tastec for the same reason), which were exacerbated by its self-interested selection of Bondor 580 panels, which were relatively thick compared with available alternative SIPs.

39. [88]

    Further, the respondents had a choice of which SIP would be selected to go under the Maxline 340. As part of their misleading and deceptive conduct the respondents chose Bondor 580, with a view to reducing the tray width by means of a glued-on strip in order to create some resemblance to Maxline 340. However, as soon as the Larsens saw the product (which only occurred when it was brought to the site), they appreciated that it was neither what they wanted nor what had been represented. It appeared to be common ground that Bondor 580 is thicker than other SIPs and therefore problems with thickness arising from the need to apply Maxline 340 cladding to it would be exacerbated by the inherent thickness of Bondor 580. This was a problem of the respondents’ own making.

40. [89]

    In any event, the overriding impediment to acceptance of Tastec’s submission that it is not feasible to install Maxline 340 is that, in the Court below, the parties’ experts agreed that it was possible to install the Maxline 340 cladding and costed this option (which would have the effect of providing, in money terms, what Tastec promised by way of contract) accordingly.

41. [90]

    As to whether the cost is unreasonable, the issue between the parties (and, it would appear, the only remaining issue for determination) is what figure between $277,021.21 and $526,728.80 ought be allowed as damages. I am not persuaded that either of these figures, or any figure in the range between them, is unreasonable or disqualifies the Larsens from obtaining relief equivalent to the cost of rectification. The remaining issue to be determined is what figure ought be allowed for this cost.

42. [91]

    For the reasons given above, the questions posed by the appellant should be answered as follows:

43. [92]

    The answer is yes: see Gates, Berry and Murphy v Overton Investments Pty Ltd, addressed above.

44. [93]

    The answer to this question is, in theory, yes in so far as damages under the Law may be calculated in the same way as expectation loss where what has been lost is a contractual benefit. In the present case, expectation loss for breach of contract was not claimed but reliance loss under the Law produces the same result. The amount required to put the Larsens in the position they would have been in had they not been induced by the respondents’ contravening conduct to relinquish their rights under the contract by agreeing to Variation 6 is the same as the value to them of the contractual benefit of being entitled to performance of the contract according to its terms. In both cases, the prima facie measure of damages is the cost of reinstatement: Bellgrove and Tabcorp.

45. [94]

    The answer is no. The prima facie measure of damages in a case such as the present is the cost of rectification, otherwise termed the reinstatement cost: Tabcorp.

46. [95]

    The answer to this question is yes, since the Larsens are entitled to the amount required to put them in the position they would have been in had the contract been performed, since this corresponds with the position they would have been in but for the contravening conduct of the respondents.

47. [96]

    The answer to this question is yes. The Larsens had contracted with Tastec to have Maxline 340 cladding on the roof and walls of their residence. They lost that contractual right as a consequence of the respondents’ misleading and deceptive conduct. They are entitled to have the cost of the cladding and its installation by way of damages.

48. [97]

    The answer to this question is no. It has been said, many times, that the best guide to the future is the past. The High Court (Brennan CJ, Dawson, Toohey, Gaudron, McHugh and Gummow JJ) put it thus in Minister for Immigration and Ethnic Affairs v Guo (1997) 191 CLR 559 at 575-576; [1997] HCA 22:

49. [98]

    The reason the choice of cladding was important to the Larsens was that they liked and insisted on a particular aesthetic, which the Maxline 340 could provide. The respondents’ first two unsuccessful attempts to get them to shift from this position were unsuccessful which led the respondents to engage in misleading or deceptive conduct to get the Larsens’ agreement to forego Maxline 340, which was successful. It can be inferred that the respondents endeavoured to mimic Maxline 340 by sticking a strip in the middle of each flat surface on Bondor 580 because they appreciated the importance to the Larsens of that particular aesthetic. In these circumstances, the only reasonable inference is that this was important to the Larsens and they were not to be deflected. Their conduct in obtaining detailed tenders from builders to perform the work provides some support for this inference although it was done in the context of legal proceedings.

50. [99]

    Having regard to the previous answer, the answer to this question is also yes. If the misleading and deceptive conduct had not occurred, the Larsens would not have agreed to Variation 6 and they would have retained their rights under the contract. If Tastec had not performed the contract according to its terms, the Larsens could have sued them for breach of contract. The damages for which they would have been entitled would have been the cost of rectification, which equates to the damages to which they are entitled in the present case.

51. [100]

    The answer to this question is no, for the reasons given above.

52. [101]

    Accordingly, all of the grounds of appeal have been made out. It is necessary to address the notice of contention.

53. [102]

    The respondents filed a notice of contention and set out three bases which they contended were sufficient to upholding the judgment.

54. [103]

    The first ground of the notice of contention alleges, in substance, that the Larsens did not prove that their “proposed method and scope of rectification” was reasonable and necessary.

55. [104]

    The answer to this contention is that, as the authorities outlined above establish, it is not for the injured party to prove that the cost of rectification is reasonable, but rather for the wrongful party to show that it is unreasonable. However, even if (contrary to the authorities referred to above), it were for the Larsens to prove it, they have done so for the reasons given above. Of most significance is the fact that Tastec contractually agreed to apply Maxline 340 cladding to unspecified SIPs and that Mr Sainsbury took the time to prepare (for which he charged the Larsens) drawings for the construction certificate which set out how the Maxline 340 could be attached with wooden battens to a SIP.

56. [105]

    Accordingly the first ground of contention has not been made out.

57. [106]

    This matter was addressed by this Court in CA 1 [129]-[130]. For the reasons given above, the claims in contract and for contraventions of the Law were separate and distinct. The way in which the loss was claimed was the same. There is nothing unusual about this since, as discussed in the authorities referred to above, where what has been lost as a result of misleading or deceptive conduct is a contractual right, the damages for the contravention in the law resembles damages for breach of contract (otherwise referred to as expectation loss). The dismissal of their claim to damages for breach of contract did not disentitle the Larsens to damages measured on the same basis for conduct which contravened the Law.

58. [107]

    Accordingly the second ground of contention has not been made out.

59. [108]

    If this ground amounts to a reiteration of the respondents’ submission that the Larsens had not relied on the contravening conduct, it is answered by CA 1 [121]-[125] above. If it amounts to a different submission – that the Larsens would not have agreed to delay the project by insisting on Maxline 340 being attached to Bondor 580 before the Bondor 580 was installed and ought thereby be taken to have elected to forego the Maxline 340 – different considerations arise. The primary judge did not address the question of election in her reasons. The evidence which Mrs Larsen gave in cross-examination, which is relied on by the respondents as amounting to an election, is set out above.

60. [109]

    The doctrine of election, which applies to contracts, does not apply to victims of conduct which contravenes the law: see the discussion of Warwick above. When the Bondor 580 panels were delivered to the site, the Larsens saw for the first time that a strip had been stuck down the middle of some of the panels. They rejected this “solution” and said that it ought be removed. However, they had paid the whole of the contract price except $4,000 and had been left with a site which was far from complete. They had other tradespeople coming to do the inside work on the site, which was relatively remote. Had they refused the installation of the panels, they would not have been able to live in the dwelling because it would have been no more than a shell. There would also have been substantial delay. Whether or not the Larsens insisted on their contractual rights to have Maxline 340 as cladding at the time the Bondor 580 panels were installed is beside the point. Furthermore, the contract contemplated that the cladding would be applied to SIP panels, which is what the Bondor 580 panels (which Tastec had selected and, by its misleading and deceptive conduct, foisted on the Larsens) were. Thus, in accepting the installation of the panels, they cannot, in my view, be taken to have elected to forego the Maxline 340 cladding.

61. [110]

    While the conduct of the Larsens in allowing the Bondor 580 to be installed could not reasonably be regarded as negligent or careless, it is important to recall that the protection of the Law is not readily to be withdrawn, including on such a ground. As Gleeson CJ said in Henville v Walker (2001) 206 CLR 459; [2001] HCA 52 at [13]:

62. [111]

    In those circumstances, I am not persuaded that there was any relevant election or waiver which has the effect of preventing the Larsens from relying on their right to damages under the Law.

63. [112]

    Accordingly the third ground of contention has not been made out.

Conclusion

1. [113]

   It follows that the appeal ought be allowed and the respondents ordered to pay the appellants’ costs of the appeal.

Whether the matter ought be remitted to the Court below or concluded in this Court

1. [114]

   The further question arises as to whether the matter ought be remitted to the primary judge for re-hearing or whether this Court could undertake the task itself.

2. [115]

   The parties’ positions changed in the course of the hearing of the appeal. The Larsens’ original position, as expressed in their notice of appeal and amended notice of appeal, was that the matter needed to be remitted, in part because the appeal books did not contain all of the relevant documents which had been referred to in submissions in the Court below. However prior to the conclusion of the oral hearing, Mr Roberts SC, who appeared with Mr Allen for the Larsens, informed the Court that the Larsens would prefer the Court of Appeal to deal with the matter finally. However, he submitted that this could not be done “on the current materials”. Mr Roberts estimated that the further documents might comprise a further appeal book.

3. [116]

   Mr Gracie indicated in the course of the hearing that his preference would be for the additional material to be brought to the Court and dealt with by this Court rather than by a remitter. However, he said that it would be necessary for this Court to have the ten volumes which were before the Court below which comprised the material (I gather evidence and transcript) before Gibb DCJ.

4. [117]

   At the conclusion of the hearing, the Court directed the parties to provide either a joint position or their respective positions within 7 days.

5. [118]

   The Larsens’ position, as expressed in their position paper, is that the amended notice of appeal was broad enough to put the respondents on notice that all matters were in issue in this Court. While Mr Roberts accepted that they had sought remitter on the question of damages, he also pointed to the fact that they had also sought “such further or other orders as the Court determines to be appropriate”.

6. [119]

   The Larsens submitted that, in the event that the appellants are successful in having the primary judge’s orders set aside, it would be appropriate for this Court to assess damages in the exercise of the power under s 75A of the Supreme Court Act to bring the dispute to an end. They submitted that a determination without a further hearing would save time and costs. Further, they submitted that the assessment of damages would require the Court to weigh the evidence of expert quantity surveyors, who have prepared a joint report and who provided concurrent evidence and were cross-examined. They also submitted that there was no suggestion of any credibility or reliability issues affecting any of the expert witnesses and that the Court is in as good a position as the primary judge to analyse the expert evidence, both documentary and oral: Williams v Fraser [2022] NSWCA 200 at [64] (Simpson AJA, Macfarlan and Gleeson JJA agreeing).

7. [120]

   Mr Roberts also relied on a schedule which had been prepared in support of the submission which listed the documents referred to in the parties’ written closing submissions and in the transcript of the remitter hearing in the Court below. He submitted, including by reference to the schedule that:

   1. (1)

      the appeal books contain all affidavits read and all expert reports tendered into evidence before the District Court on the remitter;

   2. (2)

      there are certain documents, amounting to 375 pages, which are not contained in the appeal books in this Court, but which were referred to in the parties’ submissions in the Court below which are listed in the schedule and can be included in a supplementary blue book;

   3. (3)

      the only document referred to by the respondents on the remitter in relation to the assessment of damages, that is not in the appeal books, is an extract from a report of Dr Leon Jacob, the effect of which was described to the expert quantity surveyors in concurrent evidence (and is recorded on the transcript) although the document itself was not tendered;

   4. (4)

      the only further additional document is the Project Management Contract (marked MFI 3 in this Court) which was handed up at the hearing and was the subject of submissions by the parties at the hearing in this Court; and

   5. (5)

      the parties addressed quantum in their closing written submissions on the remitter.

8. [121]

   Contrary to the position which Mr Gracie took in the oral hearing in this Court (that this Court could and should deal with the matter finally), the respondents’ position in its position paper was that this Court should not exercise its discretion under s 75A of the Supreme Court Act and should, instead, remit the matter to the Court below. They submitted that:

   1. (1)

      the Court below was in the best position to determine the matter finally, having heard and observed the expert witnesses give evidence and summarised it (although her Honour made no determination in respect of it) in her reasons;

   2. (2)

      the Court below was also in the best position to assess the evidence of Mrs Larsen and Mr Sainsbury;

   3. (3)

      it would be inefficient for this Court to determine damages because this would require “select items of that extensive evidence [before the Court below to be] belatedly put before this Court, after submissions have closed and when the written and oral submissions have only dealt with the limited material that was originally before this Court”;

   4. (4)

      a remitter should be determined on the papers with no party being permitted to adduce further evidence and submissions limited to the specific issues identified by this Court to be remitted; and

   5. (5)

      if the Court does not accept the respondents’ position that the matter ought be remitted to the Court below, all of the evidence before the primary judge should be placed before this Court.

9. [122]

   The respondents attached to their position paper two indices of evidence: the first being the bundle on remitter and the second being the exhibits which were tendered in the hearing before Gibb DCJ.

10. [123]

    I consider that this Court ought determine the question of quantum finally and not remit that matter to the primary judge for determination. The powers of this Court under s 75A of the Supreme Court Act are sufficient for this purpose. Had the appellant not sought a remitter, this question would have fallen for determination by this Court on the appeal in any event. Further, to the extent to which the primary judge might be thought to have had an advantage in seeing and hearing witnesses, that advantage has been considerably diluted by the passage of time since the evidence was heard over two days on 7 and 8 May 2024, as well as the circumstance that the primary judge made no findings about the evidence and therefore can be taken not to have weighed the evidence at the time it was fresh in her memory. Further, there was no suggestion that there were issues of credibility relating to the experts and, in so far as Mrs Larsen and Mr Sainsbury gave evidence before the primary judge, their evidence arises for assessment in this Court in any event.

11. [124]

    In these circumstances, I consider the preferable course to be to afford the parties an opportunity to provide documents and submissions to the Court with a view to all outstanding issues being dealt with either exclusively on the papers or, if thought necessary or desirable, with a short oral hearing at which submissions can be made. By this means, the parties will have the same opportunity they would have had, had the appellants not sought remitter but rather sought an order that this Court determine quantum pursuant to s 75A of the Supreme Court Act.

12. [125]

    There is, as is evident from the parties’ position papers, a dispute as to identification of documents germane to this Court’s task of quantification of damages. As referred to above, the Larsens have identified the documents referred to in the submissions of both parties which are not in the appeal books and which can be included in a supplementary appeal book of 375 pages. The respondents have not had an opportunity (since the position papers were provided simultaneously) to check the schedule or to identify any other documents which they contend are relevant to the assessment of quantum, beyond their ambit submission that this Court ought have the ten volumes of material which were before Gibb DCJ (an ambitious submission when the vast majority of such documents were not referred to at all in the remitter hearing, much less in the parties’ submissions in the Court below on quantification of damages). I propose directions (set out below) to afford the respondents the opportunity to identify any further documents beyond those on the appellants’ schedule on which they propose to rely on the question of quantification and which were referred to in their submissions on the remitter in the Court below.

Orders and directions

1. [126]

   For the reasons given above, I propose the following orders and directions:

   1. (1)

      Allow the appeal.

   2. (2)

      Set aside the order of Cole DCJ made on 7 November 2024 dismissing the plaintiffs’ claim for relief under the Australian Consumer Law.

   3. (3)

      Set aside the costs orders made by Cole DCJ on 19 February 2025.

   4. (4)

      Direct the appellants to file and serve within 7 days an amended notice of appeal deleting, other than in the alternative, their claim for remitter, and inserting a prayer for an order that this Court determine the relief, including quantum, to which the appellants are entitled.

   5. (5)

      Note that the intent of this Court is, pursuant to s 75A of the Supreme Court Act 1970 (NSW), to quantify the relief to which the appellants are entitled on the basis of submissions made to Cole DCJ and evidence referred to in those submissions, together with any further documents and submissions filed by the parties as provided for in the orders that follow and, if necessary or desirable, at a further short oral hearing.

   6. (6)

      Direct the respondents to provide a schedule of any further documents beyond those identified in the appellants’ schedule provided to this Court on 5 June 2025 (the appellants’ schedule) on which the respondents relied in the Court below in support of any submission made to the Court below on quantification of damages, together with the Black Book reference to the submission referring to the additional document or documents within 7 days.

   7. (7)

      Subject to (8) below, direct the appellants to prepare a supplementary appeal book in accordance with the appellants’ schedule, together with any further documents identified by the respondents in their schedule prepared in accordance with (6) above within 14 days.

   8. (8)

      If the respondents seek that more than 100 pages of further documents be provided to this Court, they are to prepare a separate supplementary appeal book containing all further documents on which they seek to rely and provide it to the Court within 14 days.

   9. (9)

      Direct the appellants to file and serve within 14 days hereof any further submissions on:

   10. (10)

       Direct the respondents to file and serve within 28 days hereof any further submissions on:

   11. (11)

       Direct the appellants to file and serve any submissions in reply within 35 days hereof.

   12. (12)

       Reserve the costs of the appeal pending determination of quantum by this Court.

2. [127]

   STERN JA: I agree with Adamson JA.

3. [128]

   PRICE AJA: I agree with Adamson JA.