Larsen v Tastec Pty Ltd - [2023] NSWCA 39

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation: Larsen v Tastec Pty Ltd [2023] NSWCA 39
Hearing dates: 22-23 June 2022
Date of orders: 9 March 2023
Decision date: 09 March 2023
Before: Ward P at [1]
Mitchelmore JA at [2]
Kirk JA at [167]
Decision:
(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 Plaintiffs’ claim for damages for breach of contract against the First Defendant is dismissed.
(b) The Plaintiffs’ 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 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.

Catchwords:
CONSUMER LAW – misleading or deceptive conduct – where appellants engaged first respondent for the supply and assembly of a pre-fabricated house – where representations made by respondents regarding the cladding material to be used under the contract – where appellants, in reliance on the representations, agreed to a contractual variation regarding cladding material – whether cladding representations were misleading or deceptive – whether appellants suffered loss or damage as a result of agreeing to contractual variation in reliance on cladding representations
CONTRACTS – breach of contract – breach of express terms – defective performance – whether respondents breached express terms of contract related to supply and installation of doors and windows
CONTRACTS – parties – where dispute as to whether appellants entered into contract in their personal capacity or as trustees of their superannuation fund – whether appellants’ claim, which was brought in their capacity as trustees of their superannuation fund, could be maintained

Legislation Cited:
Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law, ss 18, 29, 236, 237
Design and Building Practitioners Act 2020 (NSW)
Home Building Act 1989 (NSW)
Trade Practices Act 1974 (Cth), s 52, 82, 87

Cases Cited:
Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25
Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45; [2000] HCA 12
Harvard Nominees Pty Ltd v Tiller (2020) 282 FCR 530; [2020] FCAFC 229
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109; [2002] HCA 41
Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; [2008] NSWCA 206
Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69
Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388; [2004] HCA 3
Robinson v Harman (1848) 1 Exch 850
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; [2009] HCA 8
WardleyAustralia Ltd v Western Australia (1992) 175 CLR 514 at 526; [1992] HCA 55
Zong v Wang [2022] NSWCA 80

Category: Principal judgment
Parties: Derek Larsen as trustee for the Larsen Superannuation Fund (ABN 95 894 143 943) (First Appellant)
Floyd Larsen as trustee for the Larsen Superannuation Fund (ABN 95 894 143 943) (Second Appellant)
Tastec Pty Ltd (formerly Wonders Building Company Pty Limited) (ACN 051 516 682) (First Respondent)
Stephen Sainsbury (Second Respondent)
Representation:
Counsel:
I Roberts SC / J Wright (Appellants)
M Gracie (Respondents)
Solicitors:
Mills Oakley (Appellants)
Whitfields Solicitors (Respondents)

File Number(s): 2021/363142
Publication restriction: Nil
Decision under appeal

Court or tribunal:

District Court of New South Wales

Date of Decision:

17 December 2021

Before:

S J Gibb DCJ

File Number(s):

2020/83478

HEADNOTE

[This headnote is not to be read as part of the judgment]

The appellants, Floyd and Derek Larsen, are the trustees of the Larsen Superannuation Fund (the “Fund”). The Fund is the owner of a property in Glen Alice, NSW. In 2018, the Larsens entered into a contract with the first respondent, Tastec Pty Ltd (“Tastec”), for the supply and assembly of a pre-fabricated house on the Glen Alice property. The second respondent, Stephen Sainsbury, is a registered architect and a director of Tastec.
The contract initially contemplated that the roof and walls of the house would be clad in a product called “Maxline 340”. However, following discussions with the respondents regarding their concerns as to the availability and feasibility of the Maxline 340 product, the parties executed a variation to the contract. By that variation, the parties agreed to change to a different cladding system using a product the respondents referred to as “Extraline 294”. It was common ground that the cladding manufacturer did not produce a cladding product under that name. Instead, the product was a different panel product, which the Larsens had rejected on a previous occasion, with the addition of a t-strip glued down the centre of each panel. The Larsens first became aware that the Extraline 294 was the previously rejected product with a glued-on t-strip when it was delivered to the Glen Alice property. After inspecting the product, they instructed Tastec to proceed using the unmodified panels (without the t-strip), being the product that they had previously rejected.
In the proceedings below, the Larsens alleged that the first respondent’s supply and assembly of the house was defective as to the roof and wall components, the windows, and the doors. They also alleged that both respondents had made misleading or deceptive representations about the cladding material, which caused the defective cladding product to be installed. They sought damages against the first respondent for breach of contract, and damages and/or compensation under the Australian Consumer Law. They separately sought orders against Mr Sainsbury in relation to the same contravening conduct as the first respondent, or for his involvement in that conduct.
The primary judge dismissed the Larsens’ claims, finding 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 the Larsens’ claims failed for various other reasons, including that they had failed to establish damage and/or causation in respect of the contractual claims, and failed to establish that the respondents had made false or misleading representations on which the Larsens had relied to their detriment.
On appeal, the Larsens contended that the primary judge erred by dismissing their allegations that the respondents had made false or misleading representations about the cladding on which they had relied to their detriment. They also submitted that her Honour made further errors in respect of her findings on the loss and damage related to the cladding. The Larsens argued that her Honour erred by concluding that they had contracted with Tastec in their personal capacity, and not as trustees of the Fund, such that their claim in contract could not be maintained. They further contended that her Honour erred in dismissing their allegations that the windows and external doors were not fit for purpose, and in dismissing their claim for breach of contract in relation to four of the internal doors. Finally, they appealed against 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).
The Court (Mitchelmore JA, Ward P and Kirk JA agreeing), allowing the appeal, held:
As to the cladding representations:

When determining whether the first respondent’s conduct was misleading or deceptive, it is necessary to objectively consider and determine the character of that conduct in relation to the appellants, bearing in mind what matters of fact each knew, or may be taken to have known, about the other as a result of the nature of their dealings and the conversations between them. The conduct of the person alleged to have engaged in the misleading or deceptive conduct must be viewed as a whole: [103].

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60; Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25; Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45; [2000] HCA 12 considered.

In relation to the question of reliance, there is no requirement that the contravening conduct be the sole cause of loss or damage. It will suffice that the conduct “make some non-trivial, material, or substantial, contribution to the decision of a claimant to act in a particular way”: [122].

I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109; [2002] HCA 41; Zong v Wang [2022] NSWCA 80 applied.

Contrary to the primary judge’s conclusions, the first respondent engaged in conduct that was misleading or deceptive or was likely to mislead or deceive, which the appellants relied on in deciding to proceed with the cladding solution ultimately installed: [8], [102].
The primary judge erred by failing to assess reliance at the time when the appellants executed the variation to the contract which led to the change in cladding material. This error also infected her Honour’s conclusions as to the loss or damage sustained by the appellants: [123], [133].

Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4; Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69; Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 526; [1992] HCA 55; Harvard Nominees Pty Ltd v Tiller (2020) 282 FCR 530; [2020] FCAFC 229 considered.

As to whether the Larsens had contracted in their personal capacity or as trustees of the Fund:

In circumstances where the Fund was the owner of the land on which the house was built, the appellants could have had no capacity to enter into the contract with the respondents other than as trustees of the Fund. The primary judge erred in concluding to the contrary: [9], [139].

As to the claims relating to the internal doors, windows and external doors:

The primary judge did not err in the respects advanced by the appellants in dismissing their claim for loss and damage in relation to the external doors and windows. There was also no error in her Honour’s conclusion regarding the claim for breach of contract in relation to the internal doors: [9], [151], [155]-[157].

As to the claim under 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: [10].

Judgment

WARD P: I agree with Mitchelmore JA.
MITCHELMORE JA: Floyd and Derek Larsen are the trustees of the Larsen Superannuation Fund (“the Fund”). The Fund is the owner of a property in Glen Alice, NSW (“the Property”). On 15 November 2018, the Larsens entered into a project management contract (“the Contract”) with the corporate predecessor of the first respondent, Tastec Pty Ltd, for the supply and assembly of a house comprising prefabricated components on the Property. The second respondent, Stephen Sainsbury, is a registered architect and a director of Tastec. For convenience I will refer to the appellants collectively as the Larsens. Some caution, however, is needed in referring to the respondents collectively as Tastec, given the allegations made against them to which I will come.
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.
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.
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.
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).
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.
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.
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.
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.

Background to the proceedings

It is best to consider the detail of the dealings between the parties in the context of the grounds of appeal, in particular Ground 1A. However, some introductory background is useful to identify some of the construction products and concepts in issue.
Tastec is the licensed fabricator of the proprietary Ecoshelta prefabricated modular building system. According to Mr Sainsbury, the Ecoshelta system is a flat pack frame and panel system, which uses factory welded, prefabricated aluminium alloy, post and beam frame parts, together with composite panel floor panels, wall panels and roof panels, door and window systems. The components are shipped to site as a flat pack, for manual assembly.
The Contract identified the parties as Wonders Building Company Pty Ltd, which later became Tastec, and “Floyd and Derek Larsen”, who were specified as “the Owner”. Pursuant to the Contract, Tastec undertook to provide Project Management Services to the Larsens for an “Ecoshelta system three Pavilion, four pod with end extensions, Accommodation Cabin at [the Property]”.
The pods and extensions were specified in the Contract to be “with custom Maxline 340 ‘Monument’ Colorbond finish cladding system in 3 pavilions”. In his affidavit, Mr Sainsbury explained that the Maxline 340 product is a steel sheet with 340mm spacing between the ribs at the sheet junctions. As a sheet product, the Maxline 340 needs to sit on top of a structural base panel system. These structural panels were referred to in the proceedings as structural insulated panels, or SIPs. Tastec contracted to use products manufactured by Bondor as the SIP for the walls and the roof, to which the Maxline 340 would be affixed.
Central to the proceedings below, and the appeal, was the execution by the parties of a variation to the Contract known as Variation 6, on 23 May 2019. I will address the course of correspondence leading up to its execution below, but sufficiently for present purposes, under the heading “Cladding and Roofing Face Option”, Variation 6 provided:

“Exchange Maxline 340 cladding and roofing to Custom BONDOR SHADEMASTER EXTRALINE 294 composite SIPS panels aluminium faced in colourbonded/Monument’ compatible finish with BONDOR extended 15 year rural area Warranty. And Codemark certification. And covered by Ecoshelta Statutory Warranty provisions for fit for purpose building systems.”

It was common ground that Bondor did not manufacture a product called “Extraline 294”. Instead, Tastec used a Bondor SIP product called the Bondor Shademaster 580 (“Bondor 580”), which it customised by affixing a t-strip to the centre of each panel with an industrial adhesive in an upside-down position, so as to create the appearance of the panel having an extra seam running down its length. This was the purpose of affixing the t-strip, with a view to accommodating the Larsens’ aesthetic preference for a narrower panel. In the Amended Statement of Claim (“ASOC”), the Larsens described this modified product as the “Modified Bondor 580” and that is how I will refer to it below.
Tastec had previously shown the Larsens the Bondor 580 panel and they had rejected it, consistently with their wish for narrower spacing between the panel seams (or ribs). The Larsens first became aware that Tastec had used the Modified Bondor 580 when panels were delivered to the Property on 18 June 2019. On delivery, some of the panels had the t-strips glued on and some did not.

After inspecting the Modified Bondor 580 at Tastec’s warehouse the next day, the Larsens instructed Tastec to proceed using unmodified Bondor 580 panels (that is, without affixing the t-strip). Both of the Larsens gave evidence that if they had known that the Modified Bondor 580 product comprised the Bondor 580 and a glued-on t-strip, they would not have agreed to the variation to that product.

The allegations before the primary judge

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

The Contract claim

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

The ACL claim

As I have noted above, the ACL claim was made against both respondents. The respondents filed separate defences, each of which contained bare denials of the claim under the ACL. The respondents were jointly represented and filed joint submissions in support of dismissal of the ACL claim as against them both, without drawing any distinction between them as to where liability rested in the event that it be established. For the purposes of considering the ACL claim I will proceed, as did the primary judge, on the basis that there is no relevant distinction as between the two respondents and will refer to them collectively as Tastec. I note that no submissions were made on the appeal that if the Court were to uphold Ground 1A, it should do so only against one respondent and not the other.
The Larsens’ ACL claim turned on a series of interactions following the execution of the Contract between them and Mr Sainsbury (and other representatives of Tastec), in the course of which Tastec and Mr Sainsbury were alleged to have made the following representations:

“(a)   [Tastec] would not use the Bondor 580 roof and wall cladding product (which had been repeatedly rejected by the Trustees) on the Dwelling;
(b)   instead, Bondor Shademaster had manufactured a customised product for the Dwelling being the Bondor 294 [to which I have referred above as the Extraline 294] that had ribs at 294mm;
(c)   The Bondor 294 was a product covered by Bondor Shademaster’s manufacturer’s warranty; and
(d)   The Bondor 294 was an equivalent or superior product to the Maxline 340 in terms of aesthetics and functionality (including the insulation role that the Maxline 340 was to perform) for the Dwelling and it would functionally satisfy the Building Work Obligations, the Statutory Warranties and the Contract Warranties.”

The Larsens contended that they executed Variation 6 in reliance on these representations (“the Cladding Compatibility Representations”); that the Representations were made to induce them to agree to the variation; and that, to the knowledge of Tastec and Mr Sainsbury, they were misleading or deceptive or false because:

“(a)   [The respondents were] using the Bondor 580 roof and wall cladding product (which had been repeatedly rejected by the Trustees) on the Dwelling and simply retrofitting a superficial t-strip to the pre-fabricated Bondor 580 so as to give the appearance of a customised product with rib spacing aligned to the Maxline 340 product;
(b)   Bondor Shademaster had never manufactured a customised product for the Dwelling being the Bondor 294 that had ribs at 294mm;
(c)   neither the Bondor 294 (which did not exist) nor the Modified Bondor 580 as supplied, were products covered by Bondor Shademater’s manufacturer’s warranty; and
(d)   neither the Bondor 294 (which did not exist) nor the Modified Bondor 580 as supplied, were equivalent or superior products to the Maxline 340 in terms of aesthetics and functionality (including the insulation role that the Maxline 340 was to perform) for the Dwelling and they would not functionally satisfy the Building Work Obligations, the Statutory Warranties and the Contractual Warranties.”

The Larsens alleged that by reason of this conduct, which was in trade and commerce, Tastec and Mr Sainsbury had contravened ss 18 and 29 of the ACL. Alternatively, Mr Sainsbury was actively involved in Tastec’s contraventions of ss 18 and 29 of the ACL by aiding, abetting, counselling or procuring its breach of those provisions. The loss or damage that the Larsens alleged they suffered as a result of agreeing to Variation 6 in reliance on the Cladding Compatibility Representations was “the loss and damage pleaded and particularised at paragraph 24 above”, which I have summarised at [23] above.

Supply and installation of defective windows and external doors

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

Supply and installation of inappropriate and defective doors

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

The decision of the primary judge

Witnesses

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

Assessment of the Larsens’ claims

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

Cladding Compatibility Representations

The primary judge next considered the Cladding Compatibility Representations. Before considering whether the pleaded representations were made and whether, if made, they were false, her Honour concluded that the Larsens “did not act on anything said by the defendants in respect of the ‘Custom bondor shademaster externalline (sic) 294’”, being the Modified Bondor 580 product. Her Honour relied on the Larsens having rejected that product and directed Tastec, on 19 June 2019, “to proceed with the unmodified Bondor panels (without Maxline 340)”. Referring to passages from Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 (“Sellars”) about reliance and causation, her Honour stated:

“Putting aside the contractual complexity (where the contractual ‘promise’ about Maxline 340 was made to the Larsens personally, not the plaintiff) the starting position (from which the Larsens changed position) was an entitlement to a steel product, a ‘Maxline 340 Sheet faced composite foam panel roofing’ sheet. They got an aluminium faced composite foam panel roofing sheet with a 15 year warranty.”

This passage repeats her Honour’s misunderstanding that the Contract provided for a single “‘Maxline 340 Sheet faced composite foam panel roofing’ sheet”, rather than a Maxline 340 sheet that was fixed to a Bondor SIP.
Her Honour found that the aluminium panel that was ultimately installed was stronger than “the Maxline 340 Sheet faced composite foam panel” (being a steel product). Her Honour also inferred that the foam panels “would have been less thick than those supplied, (or not thicker) and thus to supply less insulation or at least no more”. The Larsens contended that this inference was contrary to the evidence.
In relation to the Cladding Compatibility Representations, her Honour’s starting point was that the Contract did not require Tastec to supply “additional insulation or the Bondor Aluminium Faced Composite Panel”: it “contemplated steel faced composite panels, and left insulation (and linings) to the owners”. In so far as this observation suggested that the Contract did not make provision for insulated panels in the form of SIPs, that involved the misunderstanding of the Contract that the Larsens drew attention to and to which I have referred.
Her Honour considered that at the point when “the Bondor aluminium panels were under discussion”, the talk about the different pan size was “about a customised product that was being adapted to produce the look sought by the Larsens”. Her Honour accepted that Tastec went “too far” in describing the product, in correspondence with the Larsens, as “refined by the manufacturer” or the product of a joint venture with them. Nonetheless, her Honour considered that it was true to say that the result doubled the amount of ribs on the Bondor 580; and that the manufacturer was involved in discussions about placing the extra ribs, referring to evidence of Tastec’s interactions with the State Manager for Bondor, Mr Da Silva, to which I will come in due course.
Her Honour stated that a lot of time was spent in the proceedings “proving what the defendant said in the first place: this was to be [a] customised product.”. The critical issue for her Honour in this context was reliance, stating:

“At best, the Larsens ‘reliance’ is thus relevant only to a series of discussion and steps in which they agreed to a changed look, where there is no evidence that the changed ‘look’ per se sounds in so much as $1 of loss; the Larsens expressly chose the look and directed installation of the panels without alteration; and the reliable opinion is that the Larsens obtained a better product that (sic) had been offered in the November 2018 contract.” (Emphasis in original.)

In relation to the changed look, her Honour found that the change from a span of 300mm between the rib seams (being the Larsens’ preference) to 580mm (being the Bondor 580), was “discussed early in the piece”. Her Honour relied in this respect upon the following:

Tastec raised the Bondor aluminium composite panels with the Larsens by email on 14 December 2018.

Mr Larsen’s evidence was that he was shown the Bondor 580 at the Tastec workshop in February 2019 and rejected it because the seam width was not acceptable, and he asked if the spaces could be narrower so they looked like the Maxline 340.

The schedule of external finishes in the development consent stamped on 18 February 2019 included “Bondor Aluminium Faced Composite Panel Colourbond, Monument Clad BONDOR 580 Structural Insulated roofing panels”, which her Honour described was “obviously agreed” but not part of the Contract.

In an email exchange in March 2019, the Larsens “had indicated that they liked the product”, although, as her Honour noted, in a subsequent email the Larsens stated that they remained committed to the “original specs”.

Mr Larsen was said to have made plain his commitment to the Bondor 580 in an email dated 9 April 2019. I note that although that email was sent by Mr Larsen, he merely passed on information he had obtained from Mr Sainsbury, following a request from the Council for further information on the development application. The information Mr Larsen provided was also consistent with the contractual specifications regarding the original Bondor SIPs; it did not refer to the Bondor 580.

The Council’s response, on 10 April 2019, requested clarification of the roofing system to be used, which Mr Larsen forwarded to Mr Sainsbury. Her Honour considered it significant that both Mr Larsen and the Council referred to “roofing systems” and external face cladding, “not under roof insulation systems”.

Her Honour found that there was some tension in the evolving plans, with one plan issued on 5 March 2019 referring to the Maxline 340 as the external cladding, while another plan of the same date referred to:

“100mm BONDOR SHADEMASTER ALUMINIUM COMPOSITE PANEL Sheet faced composite foam panel roofing elements WITH MONUMENT COLOURBOND finish R4.5 min roof insulation.
75mm BONDOR LUXEWALL composite structural wall panels, R2.5 min wall insulation.
External MONUMENT COLORBOND Faced Cladding panels to match roof.”

As the Larsens contended, properly understood both plans incorporated the Maxline 340 cladding over a Bondor SIP, for which the Contract provided. On that basis, there was no tension between the evolving plans. Her Honour’s misunderstanding is also apparent from her statement that the Larsens “took the view that without modification of the contract price they should have both Bondor Aluminium Faced Composite Panels and Maxline 340 colourbond roofing and cladding on top of it”. Implicit in that statement is the mistaken assumption that the Larsens were not contractually entitled to a Bondor SIP, to which the Maxline 340 product would be fixed. Her Honour did refer to Tastec’s email to the Larsens, of 12 April 2019, which stated that Tastec had ordered Bondor panels that were to be clad externally in the Maxline 340. However, her Honour considered that this was a “post contractual ‘offer’ of an extra layer” (emphasis added). That was not in fact the case.
Her Honour then turned to one of the issues that Tastec emphasised on the appeal, namely, that installing the Maxline 340 “over the Bondor” “would not have worked without some adjustment of the overall design because of its profile when installed”. Leaving to one side her Honour’s misdescription of the combination of the Maxline 340 “with the Bondor Aluminium Faced Composite Panels” as “a contractual addition”, her Honour noted that the combination meant that the doors would not open. Her Honour had referred to this issue in the introductory comments to her reasons, in addressing the Larsens’ damages claim in so far as it was quantified by the cost of installing the Maxline 340 over the existing structure.

In so far as the Larsens contended that they were rushed into agreeing to Variation 6, her Honour found that at the time the variation was agreed there was no construction certificate, and that a stop work order was in place. Further, “[t]he Bondor was discussed from December 2018, and the modification (addition of a rib) was raised plainly on 14 May 2019”. Her Honour considered that the Larsens’ complaint that they were forced into accepting the panels on 18 June 2019 “faced the same difficulty”, with the stop work order preventing them from finishing the foundations let alone starting any building.
Her Honour considered that a colour photograph of the Modified Bondor 580 that Tastec had included with its email to the Larsens dated 14 May 2019 “could not have been more plain” in so far as “[t]he additional seam or rib is shown adhering in about the middle of the panel”. Acknowledging that photographs were “always complicated”, her Honour considered it was obvious from the photo that the additional seam was “stuck on” to the panel in the middle. This was relevant, in her Honour’s opinion, to the issue of whether there was misleading conduct or misrepresentation. After referring to a number of cases, her Honour stated that “[t]here was nothing in the impugned conduct viewed as a whole [that] has a tendency to lead a person into error”:

“It is difficult to know what more could have been done to illustrate that which the defendant said about ‘doubl[ing] the amount of ribs to gain a 294mm spacing’ in a 580mm panel. Basic arithmetic says that something is being added to the panel. There was no suggestion that shorter panels were being substituted. On 23 May 2019 the defendant made the position quite plain, saying that a standing seam was being customised.”

In so far as Tastec stated in its email of 23 May 2019 that the customised product “is not the same as the option you were shown in Sydney”, because this was a discussion about the appearance of the panel, rather than anything structural, her Honour stated that this “matters little”.
The position “became complicated” with the decision to add the ribs on site rather than in the workshop. At that point, the Larsens objected to the Tastec employee on site that the panels “were not the customised ones”. They also did not like the look of the product when they saw it in the workshop. However, there was “no reliable evidence of any relevant deficiency in the product as modified by the addition of a standing seam/rib in the middle of each panel”.
The primary judge also accepted Tastec’s submission that if the Larsens were misled and did not want the Modified Bondor 580, they became aware that that was the product they were receiving when they travelled to Sydney for a discussion with Mr Sainsbury on 19 June 2019. In light of their decision to proceed with the Bondor 580 panel, her Honour considered that the Larsens were in the position of a party who becomes aware of the truth about a misrepresentation or is indifferent to it and proceeds with a course of conduct nonetheless. Citing Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; [2008] NSWCA 206 at [607]-[610] per Ipp JA, her Honour concluded that the Larsens were not entitled to claim damages for being misled.
Her Honour rejected the Larsens’ arguments regarding Tastec making representations about warranties and whether there was a joint venture with Bondor. In her Honour’s opinion, none of that mattered “where the modified panel was [not] used because the Larsens did not like the look”. That said, her Honour considered it was relevant that evidence of a discussion between the Larsens and Bondor’s National Sales Manager, Mr Da Silva, in October 2019, “confirmed both the manufacturer’s acceptance of the modification and the Larsens’ focus on the look”.

Loss and damage

Her Honour noted that whether the claim was in contract, negligence or by way of representation, the damage pleaded was “focused upon the selection of the cladding applied to the roof and walls and cracking and complains (sic) about water leakage and flashings”. Despite the Larsens’ focus on the look prompting “extensive discussion of modification”, there was, in her Honour’s opinion, “no evidence that the ‘look’ sounds in any economic loss”.
After setting out [24] of the ASOC, and acknowledging that the cladding issues were complex, her Honour concluded that the claims about the Cladding Deficiencies and the Cladding Compatibility Representations went “nowhere”. Her Honour accepted in this respect a number of submissions that Tastec advanced, to the effect that the Larsens:

had not explained how they were entitled to be returned to the position they would have been in but for Variation 6 when the proposed product would not allow the doors to open, and would create a thick roofing profile and flashings which would not comply with BASIX insulation values;

had failed to establish that they had suffered any loss or damage even if the claims of misleading or deceptive conduct were made out;

had not adduced any evidence that the cost of installing the Maxline 340 or similar was necessary or reasonable to accommodate the thermal movement of the structure; and

had not established that the defects and rectification claimed were the result of the Maxline 340 not being installed.

Earlier in her Honour’s reasons, her Honour had concluded that none of the pleaded defects had been established. The Larsens’ claims in this regard relied primarily on the evidence of Mr O’Mara, and her Honour comprehensively rejected his evidence. In response to the Larsens’ further claim regarding fitness for purpose, her Honour found that there was no reliable evidence to support that claim. Her Honour referred in this context to the corporate brochure for the Bondor composite panels which described them as having been designed for all options of structure, including fully enclosed structures, with which this case was concerned. In so far as the Larsens’ expert, Mr O’Mara, took a contrary view, her Honour rejected his evidence.
Specifically in relation to the Cracking Damage, her Honour found that the cause of the cracking was the failure of the builder to install insulation and comply with manufacturer instructions, so as to allow for movement tolerances in the building materials, rather than any conduct on the part of Tastec. Her Honour also considered that cracking may have been caused by the Larsens’ addition of retaining walls, fill, and landscaping, a matter given little to no consideration by the expert witnesses who gave evidence on their behalf.

The internal doors

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

The windows and external doors

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

Notice of Appeal: extension of time

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

Ground 1A (and Ground 3): Cladding representations

In light of what I have said about the position of the respondents on the ACL claim, for the purposes of this ground of appeal I will refer to them collectively as Tastec, save where otherwise stated.
By Ground 1A of the Amended Notice of Appeal, the Larsens alleged that in dismissing their claim under the ACL in respect of the Cladding Compatibility Representations, the primary judge erred in the following respects:

“(a)   failing to determine whether the representations were made by [Tastec] in the documents particularised and submitted;
(b)   failing to determine whether the representations were false;
(c)   determining that there was nothing in the impugned conduct viewed as a whole that had a tendency to lead a person into error;
(d)   failing to find that the representations were relied on by the [Larsens] in agreeing to Variation 6; and
(e)   failing to find that the representations caused the [Larsens] to suffer loss.”

Ground 3 is related to Ground 1A in so far as it took issue with her Honour’s findings on the loss and damage related to the cladding. The Larsens contended that her Honour erred in finding that the Contract provided for a single metal composite foam panel and not a two tier system (Grounds 3(a) and (b)), and that they ultimately got better strength and insulation than had been secured under the Contract (Grounds 3(c) and (d)). The Larsens also took issue with her Honour’s findings as to fitness for purpose, the absence of defects and that the Cracking Damage was inevitable (Grounds 3(e)-(g)).
As I noted above, at the hearing of the appeal Senior Counsel for the Larsens indicated that if they were to succeed on Ground 1 there would not be a need to deal with Ground 3. Additionally, however, the Larsens did not press their challenge to her Honour’s finding on the Cracking Damage, because it necessarily depended on Mr O’Mara’s evidence.
Turning to Ground 1A, the Larsens submitted that rather than addressing the evidence that each misrepresentation had been knowingly made by Tastec, the primary judge “dealt with limited matters, in a limited way, and in doing so made a number of other errors”. Those errors included the determination that there was nothing in Tastec’s conduct which could tend to lead a person into error; and that the Larsens had not relied upon any representations so as to have suffered loss as a result. By reference to a detailed review of the communications between the parties, the Larsens submitted that her Honour should have concluded that the Cladding Compatibility Representations had been made, were false or misleading, and were relied upon by the Larsens to their detriment. Although the pleading relied on both ss 18 and 29 of the ACL, the focus of the Larsens’ submissions was s 18, which is the statutory successor of s 52 of the repealed Trade Practices Act 1974 (Cth).
Tastec denied having made misleading or false representations in naming the panels Extraline 294 or describing them as customisations and as maintaining their Bondor warranty. Further, the Extraline 294, and the unmodified product ultimately used, were fit for purpose, and Tastec submitted the primary judge was correct to reject the Larsens’ expert evidence to the contrary. In this respect Tastec objected to the misrepresentation case as argued on appeal, contending that it focused on the change in “look” rather than the defects and therefore departed significantly from the way in which the Larsens put their case to the primary judge.
In terms of the feasibility of the panel and cladding system for which the Contract provided, Tastec submitted that the Larsens had failed to prove that they were misled or deceived into abandoning installation of the Maxline 340 and agreeing to Variation 6, when that approach was agreed by the parties in light of the unfeasibility of using the Maxline 340.
Tastec submitted that her Honour gave proper consideration to all relevant matters, including whether false representations were made, whether they would tend to lead a person into error, and whether they were relied upon and resulted in loss. Her Honour properly concluded that the Tastec had not misled the Larsens, and in any event upon deciding to proceed with the unmodified Bondor 580 panels, they could not claim to have been misled about what they were receiving. Tastec submitted that there was no relevant economic loss referrable to the misleading or deceptive conduct, and that the Larsens ignored that the rectification for which they sought damages (overcladding the house with Maxline 340) was neither feasible nor a solution to the cracking issues.
As I have noted above, the focus of the primary judge’s reasoning on the Larsens’ misrepresentation case was the issue of reliance. Although that approach arguably involved an assumption that the representations were made and were misleading, her Honour did separately find that there was nothing about Tastec’s conduct that could have led a person into error. I will focus first on the Contract and the course of correspondence that led to Variation 6 as it is relevant to the issues of whether the pleaded representations were made and if they were false, and also to the issue of reliance.

The Contract

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

Events following execution of the Contract

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

The Larsens relied on these internal documents to support a submission that Tastec was motivated by financial considerations to change the cladding product. However, subsequent correspondence suggests that there was another issue regarding the suitability of the Maxline 340 for the project.
On 9 April 2019, an officer from Lithgow City Council emailed Mr Larsen in relation to the application for a construction certificate, requesting the relevant specifications for the SIP for the wall and roof cladding. Mr Larsen sent an email the same day setting out the details that he had received from Mr Sainsbury in March 2019 (see [71] above). This is the email that the primary judge described as making “plain” Mr Larsen’s commitment to the Bondor 580. However, the information that Mr Larsen provided did not refer to the Bondor 580; rather, it referred to the two Bondor SIP products that were to sit underneath the Maxline 340 on the walls and the roof respectively. Mr Sainsbury confirmed the correctness of this panel structure on 12 April 2019, stating in an internal email to Mr McAuley, a Tastec employee, which Mr McAuley sent on to the Larsens:

“The Bondor elements ordered for the project are
Roofing – Bondor ‘SolarSpan’ – (100mm)
Walling – Bondor ‘Bondor Panel’ – (75mm)
These are both to be clad externally in the Maxline 340 product in a ‘Monument’ colour on the battens.”

Mr Larsen gave evidence that in the period from about late April 2019 to mid-May 2019, he and Mrs Larsen had several phone meetings with Mr Sainsbury and Mr McAuley in which they were told that Tastec was “having issues sourcing the imperial standing seam product [being the Maxline 340] in the Contract or anything equivalent to that”. In cross-examination, Mr Sainsbury said that he could recall telling the Larsens in about early April 2019 that he was having trouble sourcing the Maxline 340. However, he also gave evidence that by early May 2019, he and the Larsens had held numerous discussions about the functionality of the Maxline 340 and had agreed “that it was not a functional product”.
The reason that the Maxline 340 was not functional, according to Mr Sainsbury, was that it “required an under clipping system that had a great deal of thickness to it”. One issue with the thickness, at least in so far as the walls were concerned, was that when the SIPs were cladded with the Maxline 340, the doors were not able to move and slide right back out of the way. It also created an aesthetic issue in terms of a thick roof and wall profile. In cross-examination, Mr Sainsbury accepted that the roof thickness did not affect any aspect of the pod, apart from the aesthetics.
The difference in the parties’ evidence led to differing explanations for an email that the Larsens sent to Mr Sainsbury on 2 May 2019, which included photographs of other roof cladding systems which Mr Larsen had obtained from his daughter in Melbourne. Mr Larsen said he was prompted to obtain the samples because of the difficulties Tastec was having in sourcing the product. Mr Sainsbury’s evidence was that the email was prompted by an awareness on everyone’s part of the need to source an alternative product because the Maxline 340 “simply didn’t work”.
Noting the primary judge’s findings regarding the evidence of Mr Larsen, to which I have referred above (at [30]), support for Mr Sainsbury’s account lies in the content of the email that the Larsens sent on 2 May 2019. In that email, the Larsens appear to address Mr Sainsbury’s functionality concerns when describing one of the alternative options as being the most similar to the Maxline 340, while also eliminating the need for clips and fixings. The email further stated that “[a]t the end of the day, as we originally stated, we are aiming for this type of look/finish” (emphasis added). The “look/finish” they were referring to was the photo from the original brochure they had shown Mr Sainsbury in August 2018, which they reproduced in this email. The Larsens also referred, again, to their preferred panel width of 300mm.
An internal email that Mr Sainsbury wrote dated 7 May 2019 was also consistent with his evidence about a functional issue with the Maxline 340 having been identified by this time. In that email Mr Sainsbury wrote that the owners had come back with alternatives for the cladding system “as they are not keen on the 185mm roof thickness”. Mr Butler, who was tasked to make inquiries about the alternatives, noted in his email of the same date that using one of the proposed products would make for a 158mm thick roof. With the flashings added it would still be “very thick”. He also expected that it would not be much cheaper than the Maxline 340. Mr Sainsbury gave evidence that at a meeting at the workshop at around this time, the Larsens “agreed … that [the sample products] all had the same problem, that they would all be too thick and they did not like the under clipping systems, the bulk that they produced on all of that item. That was it, a discussion.”
The trial judge found that it was “common ground” that the Maxline 340 was not functional, referring to Mr Larsen’s evidence. It is likely that her Honour was referring to the cross-examination of Mr Larsen, in which he stated that the Maxline 340 was not too thick in itself, but the timber back to which it was required to be attached “may make it too thick”. Although Mr Larsen maintained that the resulting increased height of the roofline did not present a problem for him or his wife, he accepted that there was a buildability problem with the door openings on to the verandas.
On 9 May 2019, Mr McAuley sent construction certificate drawings to the Larsens and stated that “SS and the workshop crew are currently refining the roofing and cladding detail and will meet with you soon to discuss”. This reference to refining the cladding again suggests that the parties were aware of the need to make changes. Later the same day, Mr Sainsbury sent an email to Mr McAuley and others within Tastec, referring in the subject line to “[Property] cladding option” and writing in the body of the email, “I suggest we put this to the [Property] clients”. The suggested material was as follows:

“First image shows the profile they have specified for comparison of rib spacings and height.
This is an excellent technical solution – it is Custom Made, One Off, Standing Seam, Alloy Face profiled composite panel system – using a specially custom modified ShadowMaster aluminium panel with a centre seal (sic seam) added – specifically developed for their project…
The alloy T can be bonded on with the same glue system as the panel – we still have that here. Wont (sic) need any visible fixings as it will have them top behind the track sill and bottom fixings will be the standard base screws we always use. Roof fixings go through the pan and will go through the T flange to fix it off – we can get this T in 6m lengths so no joints needed…
If we use this we get a simple one piece 125mm angled edge shallow profile roof edge flashing (not the 185mm (min) with all the extra battens and clips and layers needed for the other systems) and the wall panels fit in the 76mm slots so the doors can fully slide past – as intended. Far superior technical and installation option if they approve the aesthetics no need for all the fussy flashings everywhere – and it all works with the Ecoshelta system got the 15 year alloy ShadowMaster guarantee from BONDOR.” (Emphasis added.)

Although the Larsens placed emphasis on the description of the product as “ShadowMaster” (Mr Sainsbury’s evidence was that this was a misspelling of “ShadeMaster”, which was a Bondor product) this was an internal email and there is no suggestion that it was ever sent to the Larsens. Of more significance is the express description in the email of the “excellent technical solution” involving adding a “centre sea[m]” to a composite panel system, by “bond[ing]” an “alloy T” on to an aluminium panel “with the same glue system as the panel”. Noting that the purpose of the email was to inform Mr McAuley of what should be “put” to the Larsens, the emphasised passages highlight an awareness on the part of Mr Sainsbury of the importance to the Larsens of the aesthetics of the cladding.
The email that Mr McAuley sent to the Larsens the next morning, copied to Mr Sainsbury, referred to Mr Sainsbury working with the workshop crew to put together “some cladding options to finalise the decision which will allow us to order the material in time for the job”. He then proposed, as an option, a “high end alloy faced composite panel with a customised extra fin in Monument finish” (emphasis added). Mr McAuley did not specify that the “high end alloy faced composite panel” was the Bondor 580 panel which the Larsens had previously rejected. Nor did he explain that the “customised extra fin” was a separate piece that was glued on to the composite panel. Indeed, the documents before the primary judge were consistent with Mr Larsen’s evidence that he and his wife were never expressly told that a t-strip would be glued on to a pre-fabricated panel.
In Mr McAuley’s email to the Larsens dated 10 May 2019, he attached the three images that Mr Sainsbury had sent with his internal email. The first image showed two panels, one blue and one black, and was said to show the profile that the Larsens had specified for comparison of rib spacings and height. The second image was said to show how the height of the rib fitted with the extrusion on the building. On the basis of the first and second images, it appeared that the black panel was the new “option”, and the blue panel was the Maxline 340 or similar product. Tastec submitted, and her Honour found, that the photographs of the “option” that it provided to the Larsens made clear what was not expressly stated, namely, that the t-strip was glued onto the proposed panel.
Tastec next referred to the option it was proposing as a solution in responses to an RFI (request for further information) that the Larsens had sent, dated 14 May 2019. Under the heading “Cladding Options”, Tastec stated:

“Cladding Options – BONDOR Special Order – Customised Standing Seam Aluminium Full Composite Panel.
a.   We believe this is the optimal solution and will save considerable on site time and costs –
b.   Single element without extra flashings and extra depth for battens and ridging –
c.   120mm thick vs 185mm plus.
d.   Allows doors to slide past – no bulky corner and opening flashings.
e.   More costly to prefab but considerably less site assembly time
f.   These can be done as prefab panels.
g.   Better, stronger, longer lasting – compatible materials – 40yr warranty from BONDOR.
h.   Owners to confirm option approval.”

Immediately following this text was another image of the proposed panel. In his evidence, Mr Sainsbury accepted that while there was nothing in the email that said that the panel would have something stuck to it to achieve the look the Larsens wanted, the photo “was attached for the very specific reason of making that clear”. The primary judge reproduced this image in her reasons and found that it clearly depicted that the t-strip was glued on. Mr Larsen, on the other hand, gave evidence that the t-strip was nowhere near as clearly or as obviously glued on in the photos provided to him and his wife as it was in the photos that were shown to the Court.
On 14 May 2019, the Larsens were issued an invoice for half of the cost of the parts production for the project. On 20 May 2019, upon their return from New Zealand, and in response to an email from Mr McCauley following up and advising that an immediate answer on the cladding (and payment of the invoice) was required, the Larsens sent an email in which they expressed “significant concerns with respect to the cladding product as presented”. They asked if the product was “the same product shown to us by [Mr Sainsbury] in your Sydney office a few months ago”; they reiterated that this was not the cladding solution to which they had agreed; and they referred back to having identified the finish they wanted from the outset and having been told that there would be “no issues swapping [Tastec’s] traditional corrugated cladding finish with this product”.
The Larsens raised a number of fundamental issues with the proposed product, the first of which was that “the panel width (‘pan’) dimensions are nearly double that as agreed (our requested width to be circa 300)”. The Larsens were also concerned that the fixing mechanisms did not appear to be hidden, as they would be with the Maxline 340. Additionally, the Larsens stated that they were happy with “the type/style of flashings as shown in the catalogue photo above, and do not consider them to be too thick” – the catalogue photo was from the brochure they had taken to their first meeting with Mr Sainsbury.
The first fundamental issue that the Larsens raised suggests that, leaving aside the centre seam, they appreciated that the width of the panel was close to 600mm. Their query as to whether the panel was the same as what they were shown in Sydney (being the Bondor 580) also suggests an appreciation on their part that the panels being presented as the “option” were wider than they wanted. It is in this context that Tastec’s response to that specific query is significant in terms of the misrepresentation case.
Mr McAuley replied by email on 22 May 2019 stating that he believed that the option referred to in the 14 May email was “the best choice both aesthetically and functionally for your build”. He made no direct response, in this email at least, to the Larsens’ question about whether the panel was the Bondor 580 they had already been shown. However, he stated that “the tray with [sic width] is 294mm wide, and the ribs are 23mm high”.
In an email sent the following day, the Larsens expressed the view that the roofing and wall cladding was “a significant variation to our original contract”, and referred to Tastec’s April emails in which ordering the Maxline 340 was discussed. The Larsens then said:

“Whilst we understand your need to now move to this revised/replacement product, it is not our optimum solution as it has exposed fixings which are located at the bottom of the pan, which in the event of coming loose could lead to water penetration, unlike corrugated iron finish where the fixings are elevated.
Please confirm, by return, that there is warranty on this new product with respect to any water penetration and consequential damage, as this is not an issue with our originally specified a (sic) contracted cladding product.
We are genuinely surprised that it is this late in the production process for this issue to be addressed, and as such we have serious concerns about warranty and a proven system. So please respond accordingly to allay our concerns.
To ensure all variations from both sides are appropriately documented and costed, can you please send us a variation letter, including cost differences/ considerations, as you have done with every other variation from our side to-date.
…
Noting the need for quick progression, we are happy to proceed once warranty confirmation relating to our concerns above are addressed and all paperwork relating to all variations are in order.” (Emphasis added.)

On the appeal, Tastec highlighted the two passages I have emphasised in the above extract. It relied on the Larsens’ statement that they understood that Tastec needed to move to the revised or replacement product as evidence of their awareness of the buildability issue with the Maxline 340, and their acceptance of a need to change the product. They relied on the Larsens’ statement that for reasons of timing they were “happy to proceed” with the revised product (subject to Tastec addressing their warranty concerns), as an answer to the Larsens’ reliance on the correspondence that Tastec sent to them on 24 May 2019, to which I will now turn.

The RFI Response and the alleged representations

Mr McAuley sent the Larsens an email on 24 May 2019, which attached a document dated 23 May 2019 and titled “Construction RFI Responses”, signed by Mr Sainsbury (“RFI Response”). Although the RFI Response was central to the Larsens’ misrepresentation case, they relied on the correspondence that preceded it as providing necessary context. They also relied on the covering email, in which Mr McAuley relevantly stated that the change in material was “noted and understood” but that “in order to use a more appropriate profile to better suit the job, we have worked to develop the custom aluminium cladding”, the benefits of which “[outweigh] the functional use of the Maxline 340 as outlined in the attached RFI responses”.
The RFI Response referred to “the issues raised in the Owners email RFI of the 21^st May” but appears to respond to the issues the Larsens raised in their email of 20 May 2019, to which I have referred above at [92]. In relation to cladding, the RFI Response provided as follows:

“The mock-up issued is of the proposed customised extraline 294 mm spaced standing seam – all in aluminium alloy. The rib spacings are at 294mm centres double the typical product and about the same spacing as the proposed 304mm NailStrip product. This is not the same as the option you were shown in Sydney. It was refined by the manufacturer to double the amount of ribs to gain a 294mm spacing, thereby meeting the Owners ‘about 300mm’ requirement. It is a customised option, covered by the Bondor manufacturer’s warranty, and worth the higher base product cost we believe, which can be offset against site costs and time and materials costs to batten and overclad all elements.
We are having a full sized sample prototype prepared to demonstrate flashing systems.
The product will allow for the usual Ecoshelta 75mm wall thickness which allows the main glass doors to slide past full opening as intended. The Maxline 340 and other high profiles with clip systems and hidden fixings will project some 74mm past the wall and column lines and will stop the doors sliding past – or we can reset the wall panels to allow the deep profile to sit flush with internal linings projecting in from column alignments on the front facades only, which would be minimally noticeable.” (Emphasis added.)

Under the heading “Cladding Options”, the RFI Response described the proposed solution as “BONDOR Special Order – Customised ExtraLine 294mm spacing Standing Seam Aluminium Full Composite Panel. – Joint venture special customised system developed by Ecoshelta and Bondor – for this project only”. Above two photographs of the “Extraline 294mm”, Tastec set out the following nine points:

“a.   We believe this is the optimal solution and will save considerable (sic) on site time and costs offset against higher panel base costs.
b.   Single element without extra depth for battens and ridging.
c.   125mm thick vs 185mm – 255mm
d.   Allows doors to slide past – no bulky corner and opening flashings.
e.   More costly to prefab but considerably less site assembly time.
f.   These can be done as completely prefab panels.
g.   Better, stronger, longer lasting – compatible materials – extended 15 yr warranty from BONDOR. All installation warranties to Statutory warranty provisions as per Maxline 340 etc.
h.   Highly resistant to corrosion, hail and mechanical damage.
i.   Owners to confirm option approval.”

After noting that it had no examples of flashings for the Maxline 340 cladding but that they could be procured if needed, Tastec stated that it would set up a full-sized sample panel of “the Bondor ShadeMaster Extraline 294” in the Sydney workshop and send through images. The document continued:

“We are proposing the customised Bondor system as an optimal solution following the Owners request to explore fully bonded imperial standing seam options and can still do the owner’s suggested cladding systems if preferred. Using the Nail Line (58mm ribs) on Ply (19mm) on Timber Battens (45mm) on a base structural roof and wall panel (100mm-138mm) giving a roof thickness of 222mm (or possibly 260mm if extra longways battens are needed). We can taper the roof flashings but they will still be visually broad. It is estimated that the flashings in the image you have sent through as approximately 80-90mm thick. The ones we would need to use would be around 250mm thick, nearly three times the width – a bit less than the width of the ridge spacings in the image.

“We don’t say pull the [Bondor] 580 off and put another type of SIP on as it was originally contemplated. A sensible approach would be to clad over what is there. That has been costed, and I accept what my learned friend says as part of a larger costing exercise, but having regard to the narrower case on appeal, if that were to go back, that would need to be costed.
That can be done because Mr O’Mara said it can be done. I accept that his evidence was criticised and rejected, but the proposition that one has to cost that doesn’t undermine the fact that somebody could come up with the way in which that would be done and then a quantitative surveyor could cost that [a]lone, excluding the other aspects that we claimed in the Court below.”

Counsel for Tastec submitted that the case that the Larsens ran below was one about cladding defects, whether constituting a breach of contract or s 18 of the ACL, or a claim under the Design and Building Practitioners Act. Counsel submitted that the claim for the Cracking Damage in ASOC [24(c)] related directly to the Cladding Deficiencies in ASOC [24(b)], of which it was alleged to be the consequence. In circumstances where the Larsens did not press the claim in [24(c)] in relation to the Cracking Damage, and none of the Cladding Deficiencies to which [24(b)] referred had been established, Counsel for Tastec submitted that the Larsens could not now advance a separate claim based on a representation case that related to the look of the panel alone. Further, the feasibility of over-cladding the existing panel was not supported by evidence from any person at the trial (aside from Mr O’Mara, whose evidence was rejected by her Honour).
Putting that case on appeal, Counsel submitted, presented difficulties because it was not run on that basis, with no cross-examination of the quantity surveyor about the cost of only installing the Maxline 340 having occurred. In any event, Counsel submitted, what the authorities required was that the party be put back in the position they were in “if it’s reasonable and necessary” to do so; and the requirement of reasonableness could not be satisfied “if it can’t be done”: Further, the removal of the Maxline 340 did not cost more, and in its place the Larsens obtained a better product; additionally, their claim that it was not fit for purpose was rejected and not challenged on appeal.
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)]).
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 misleading or deceptive conduct (at [50]).
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.
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):

“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].
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].”

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].
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.
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].

Ground 1: Identity of contracting parties

By Ground 1 of the Amended Notice of Appeal, the Larsens alleged that the primary judge erred “in finding that the Larsens entered into the contract in their personal capacity and not as trustees for the Larsen Superannuation Fund”. Apart from the question of costs, this ground of appeal can only be relevant to the extent that the breach of contract claim is maintained on appeal. That claim is now limited to the leaking of the windows and doors, which is the subject of Ground 4. The Larsens’ claim relating to the doors arose out of Variation 6, which her Honour found was a collateral contract to which the Larsens were parties in their capacity as trustees. In circumstances where I have found, for the reasons outlined below, that the Larsens have not made out Ground 4, it is unnecessary to determine this ground of appeal. However, as it may also be relevant to costs, I will deal with it briefly.
The Larsens submitted that, as they owned the Property as trustees of the Fund, it was only in that capacity that they, as “owners”, could have entered into the Contract with Tastec. The absence of the words “as trustee” from the Contract was not determinative. This position was said to align with the pre-contractual facts and the post-contractual conduct of the parties, as evidenced by (among other things) the invoice that Tastec issued shortly after the Contract was executed, which referred to them as trustees of the Fund. They also relied on Variation 6, which was prepared by Mr Sainsbury and which described the Larsens as trustees of the Fund. The Larsens submitted that the variation could only vary a Contract to which the Larsens were a party as trustees of the Fund. It followed, in their submission, that the primary judge erred in finding that they had no contractual relationship with Tastec pursuant to the Contract, and that as a result no statutory duty of care was breached (or, indeed, owed).
Tastec did not make any oral submissions on this ground. In its written submissions, it argued that the primary judge correctly applied the principles of contractual construction to the evidence in determining that the Larsens had entered into the Contract in their own right, rather than as trustees of the Fund. Counsel for Tastec pointed to a number of factors to support this conclusion, including the Larsens’ self-identification as plaintiffs in the statement of claim before it was amended; the multiple references in contractual and property documents to “Floyd and Derek Larsen” without reference to the Fund; the absence of evidence of the Contract being novated or assigned to the Larsens as trustees; and the absence of evidence of the Fund having purchased the Property.
As I noted above at [35], her Honour found that the Fund was the owner of the land. In those circumstances, the Larsens could have had no capacity to enter into the Contract with Tastec other than as trustees of the Fund. The fact that they were identified as the “Owners” in the Contract does not operate to change their legal status in relation to the land, still less does the manner in which they styled themselves in the original pleading. Thus, were it necessary to determine the issue, I would uphold Ground 1.

Ground 4: Windows and glazed external doors

The Larsens alleged that in respect of the windows and external doors that Tastec supplied, the primary judge erred:

in failing to determine whether the windows and external doors were fit for purpose;

in finding that their expert, Mr Smithson, made various assumptions that were not correct, including that all windows were assembled off-site before delivery to the Property; and

in finding that there was no defect in the windows despite their failure to comply with the conditions of the development consent.

Although the Larsens alleged these three errors, they did not address the third (relating to the development consent) in their written or oral submissions on this ground. Their main complaint was that the primary judge erred in dismissing their claim that the windows and external doors were without defect, when there was evidence of water leakage on two separate occasions in February 2020. Relying on Part 3.6 of the Building Code of Australia, and the Guide to Tolerances, they submitted that water entry was not permitted. It followed that Tastec had breached the Contract (assuming Ground 1 was made out) and the statutory warranties in the Home Building Act 1989 (NSW).
The Larsens took particular issue with her Honour’s qualification that there had been no evidence of leakage “other than some water ingress observed after two significant rain events”. Senior Counsel for the Larsens submitted that the leaking during the two rain events was indicative of precisely the defect about which they complained; whether that occurred when it rained heavily was neither here nor there. In reply, he relied on a statement of Mr Larsen during cross-examination, that “the house was leaking”, as demonstrating that leaking had occurred beyond those two rain events.
In response, Tastec submitted that the windows complied with the proper standards for the location of the house, and were not defective. The two occasions of water leakage on which the Larsens relied occurred during extreme weather events far exceeding the normal conditions that the windows were designed and required to withstand.
The primary judge made a finding that in the course of the significant rain events on 8 February 2020 and 11 February 2020, there was water entry into the house constructed on the Property. That finding was consistent with the evidence of Mr Sainsbury: in response to the evidence of Mr Larsen about the events of those dates, he accepted that water ingress may have occurred. In so far as the Larsens relied additionally on the statement of Mr Larsen that “the house was leaking”, that evidence was given under cross-examination and no further detail was elicited.
As her Honour stated, it did not follow inexorably from the finding of water ingress that the windows and external doors were not fit for purpose or were defective. Part 3.6 of the Building Code of Australia provides that Parts 2.1.1 and 2.2.2 of the Code are satisfied for glazing and windows (and doors) in external walls if the windows and doors are designed and constructed in accordance with Australian Standard AS2047. There was a dispute between the parties’ experts at trial as to whether or not AS2047 was applicable. In any event, however, it is apparent from the terms of Parts 2.1.1 and 2.2.2 of the Code that the protection from water entry that compliance with those clauses is intended to provide is not absolute.
Part 2.1.1 of the Code (“Structural stability and resistance to actions”) provides that a building or structure during, relevantly, use, “with appropriate degrees of reliability”, must “perform adequately under all reasonably expected design actions” and “withstand extreme or frequently repeated design actions”, and “be designed to sustain local damage”. Part 2.2.2 (“Weatherproofing”) provides that an external wall (including openings around windows and doors) must prevent the penetration of water that could cause:

“(a) unhealthy or dangerous conditions, or loss of amenity for occupants; and
(b) undue dampness or deterioration of building elements.”

As I have noted above, what was significant to her Honour was that despite the Larsens residing at the Property for 65 per cent of the time, there was no evidence of water ingress, and no evidence of the source of any relevant leak, beyond the events of 8 and 11 February 2020. In so far as the lack of evidence was concerned, the central difficulty for the Larsens was that they relied substantially on the evidence of Mr O’Mara. Her Honour was critical of Mr O’Mara as a witness, and was particularly critical, as Counsel for Tastec pointed out, about the test he adopted to assess water leakage. Mr O’Mara described his test as a “bespoke” modelling of the one adopted by the American Architectural Manufacturer’s Association (“AAMA”), but her Honour considered there were substantial differences between his test and the AAMA’s:

“In effect Mr O’Mara bluntly directed water at pressure on windows until he forced water into the frames. It was, as he said, a ‘test’ made to order and designed to create a leakage by the directing water at pressure into a window until it overwhelmed the seal and he managed to force the water into the framing and photograph it….”

In rejecting his evidence, her Honour observed that Mr O’Mara’s expertise in relation to windows was so limited that he failed “to take into account that (aside from the extreme weather event) there was no evidence of leakage other than that which he created”. Her Honour also rejected the expert evidence of Mr Smithson, who gave evidence on this subject for the Larsens, describing him as having misapprehended his role in various respects, and his generalisations and assumptions as being “of so little assistance that it is questionable whether his opinion should have been admitted at all”.
As to the Larsens’ contention that her Honour erred in describing Mr Smithson’s assumption “that all windows were assembled off site” as an example of his making incorrect assumptions, it was in fact the case that not all windows were assembled off site. The Larsens rely on the evidence of Mr Rowley in this respect, but in cross-examination he accepted that there were some windows – admittedly, very few – that were not fully assembled at the workshop. Having regard to that evidence her Honour did not err in finding that Mr Smithson’s assumption was incorrect.
Further, and in any event, Mr Smithson relied on the assumption in support of his contention that testing of the window and door products was required in accordance with Australian Standard AS2047. As to that Standard, her Honour accepted the evidence of Mr Flett, who was qualified as an architect and had considerable practical experience as a builder. He disagreed with both Mr O’Mara and Mr Smithson that there was water ingress through the doors and windows. Referring to the Australian Glass and Window Association Fact Sheet, Mr Flett stated in his report that even if Australian Standard AS2047 applied, an important feature of that Standard was that it did not always represent real life situations and did not guarantee against exposed locations and storm events. Her Honour referred to this aspect of his report, and to the contents of the Fact Sheet.
Her Honour did not err in the respects that the Larsens advance in dismissing their claim for loss and damage in relation to the external doors and windows. Ground 4 should be dismissed.

Ground 6: Internal doors

Finally, the Larsens alleged that in respect of the internal doors, the primary judge erred in:

finding that the requirement for “solid timber” in the Contract was for sliding doors, not swing doors;

finding that the four solid timber internal swing doors were not part of Tastec’s contract; and

failing to find that Tastec breached the requirement to supply solid timber swing doors.

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

In relation to two of the doors, which were intended for the bedrooms, the face sliding doors were substituted “with swing door systems including standard passage latch handle”.

For the other two doors, intended for the bathrooms, the face sliding doors were substituted “with Cavity Slider doors systems”.

Further detail about the doors was provided in the Door Schedule that accompanied the plans lodged with the Council, dated 31 May 2019. Both the “Swing Door” and the “Internal Cavity Slider” were described in the Schedule as comprising a “Solid Core” panel; an earlier version of the Door Schedule, dated 14 May 2019, had described the “Swing Door” and the “Internal Top Hung Slider” as comprising a “Hollow Core” panel. In my view, the description in the Door Schedule crystallised that the “solid timber internal doors” (emphasis added) to which the Contract referred were not solid timber doors, but solid core timber doors. Significantly, no complaint was made at the time the Door Schedules were prepared. Nor was any issue raised at the time of Tastec’s offer to change the doors from sliding doors to swing doors. In the RFI response document that Tastec sent to the Larsens on 14 May 2019, for example, Tastec noted that “solid core doors were agreed and specified in the contract”.
I would dismiss this ground of appeal.

Conclusion

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

on the ordinary basis up until 7.10pm on 22 July 2021; and

on the indemnity basis as and from 7.10pm on that date (save for the costs of the respondents’ motion of 30 December 2021, which the Larsens were to pay on the ordinary basis).

In making those orders, her Honour concluded that by a Calderbank letter the respondents had made a genuine offer of compromise which sought to bring a commercial solution to a building dispute where the responsible builder was not joined to the proceedings; and were thwarted when they pressed for a settlement conference. Her Honour also found that the offer was a sensible and a reasonable proposal to bring the proceedings to an end, and that the Larsens’ joint and several rejection of it was not reasonable.
In circumstances where the question of relief under the ACL remains outstanding, I consider it necessary to set aside the order that her Honour made as to costs below, and for that issue to be considered afresh following resolution of the outstanding issue, including as to indemnity costs.
I propose the following orders:

Appeal allowed.

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.

In lieu thereof, order that:

The Plaintiffs’ claim for damages for breach of contract against the First Defendant is dismissed.

The Plaintiffs’ 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 determination of:

what relief (if any) should be granted pursuant to s 236 and/or s 237 of the ACL, and

the costs of the proceedings.

The respondents are to pay the appellants’ costs of the appeal.

KIRK JA: I agree with Mitchelmore JA.

**********

Decision last updated: 09 March 2023

Medium Neutral Citation:	Larsen v Tastec Pty Ltd [2023] NSWCA 39
Hearing dates:	22-23 June 2022
Date of orders:	9 March 2023
Decision date:	09 March 2023
Before:	Ward P at [1] Mitchelmore JA at [2] Kirk JA at [167]
Decision:	(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 Plaintiffs’ claim for damages for breach of contract against the First Defendant is dismissed. (b) The Plaintiffs’ 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 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.
Catchwords:	CONSUMER LAW – misleading or deceptive conduct – where appellants engaged first respondent for the supply and assembly of a pre-fabricated house – where representations made by respondents regarding the cladding material to be used under the contract – where appellants, in reliance on the representations, agreed to a contractual variation regarding cladding material – whether cladding representations were misleading or deceptive – whether appellants suffered loss or damage as a result of agreeing to contractual variation in reliance on cladding representations CONTRACTS – breach of contract – breach of express terms – defective performance – whether respondents breached express terms of contract related to supply and installation of doors and windows CONTRACTS – parties – where dispute as to whether appellants entered into contract in their personal capacity or as trustees of their superannuation fund – whether appellants’ claim, which was brought in their capacity as trustees of their superannuation fund, could be maintained
Legislation Cited:	Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law, ss 18, 29, 236, 237 Design and Building Practitioners Act 2020 (NSW) Home Building Act 1989 (NSW) Trade Practices Act 1974 (Cth), s 52, 82, 87
Cases Cited:	Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45; [2000] HCA 12 Harvard Nominees Pty Ltd v Tiller (2020) 282 FCR 530; [2020] FCAFC 229 I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109; [2002] HCA 41 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; [2008] NSWCA 206 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69 Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388; [2004] HCA 3 Robinson v Harman (1848) 1 Exch 850 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; [2009] HCA 8 WardleyAustralia Ltd v Western Australia (1992) 175 CLR 514 at 526; [1992] HCA 55 Zong v Wang [2022] NSWCA 80
Category:	Principal judgment
Parties:	Derek Larsen as trustee for the Larsen Superannuation Fund (ABN 95 894 143 943) (First Appellant) Floyd Larsen as trustee for the Larsen Superannuation Fund (ABN 95 894 143 943) (Second Appellant) Tastec Pty Ltd (formerly Wonders Building Company Pty Limited) (ACN 051 516 682) (First Respondent) Stephen Sainsbury (Second Respondent)
Representation:	Counsel: I Roberts SC / J Wright (Appellants) M Gracie (Respondents) Solicitors: Mills Oakley (Appellants) Whitfields Solicitors (Respondents)
File Number(s):	2021/363142
Publication restriction:	Nil
Decision under appeal	Court or tribunal: District Court of New South Wales Date of Decision: 17 December 2021 Before: S J Gibb DCJ File Number(s): 2020/83478