Seeley International Pty Ltd v Millennium Electronics Pty Ltd (in Liq) (No 3)

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
SEELEY INTERNATIONAL PTY LTD v MILLENNIUM ELECTRONICS PTY LTD (IN LIQ) (No 3)

[2021] SASC 63
Judgment of the Honourable Justice Livesey

TRADE AND COMMERCE - COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION
SALE OF GOODS - SALE OF GOODS LEGISLATION - ACTIONS FOR BREACH OF CONTRACT
TORTS - NEGLIGENCE - GENERALLY
DAMAGES - GENERAL PRINCIPLES
The applicant claims in tort, contract and under Schedule 2 of the Competition and Consumer Act 2010 (Cth) (the Australian Consumer Law) for losses which it alleges it sustained as the result of the failure by the respondent to supply it with a properly working electrical element which the respondent designed, manufactured and supplied pursuant to the Design and Development Agreement.
The defective design of this electrical element, the “flame sense circuit”, within the Integrated Control Panel caused repeated malfunctioning of more than 23,000 TQ Series ducted gas heaters over a period of two years, for which the applicant claims damages in the range of $15 million to $19 million, in addition to interest and costs.
After the respondent company went into liquidation, the claim was undefended at trial.
Held, allowing the applicant’s claim and assessing damages at $13,277,000.00 in addition to interest and costs:
Breach of contract
1.      The respondent breached the express and implied terms of the contract between it and the    applicant by designing and supplying Integrated Control System boards which were not in         accord with the respondent’s contractual warranties and not fit for their intended purpose.
2.      The ordinary measure of loss in a claim for damages for breach of contract is that the        applicant is entitled to be put, so far as damages can, into the position it would have been had     the contract been performed. That requires that damages be assessed on the basis that the    respondent’s warranties were accurate.
3.      The respondent knew the use to which the Integrated Control Systems were to be put, and knew the nature of the applicant’s business, with the result that it knew that in the event of a      design flaw resulting in malfunctions that could not be immediately identified and rectified,     customers of these products would be exposed to the risk of injury, death or property damage. The respondent knew that the applicant would likely suffer loss and damage detecting,     repairing and replacing defective Integrated Control Units as well as a loss of market share.
Negligent breach of duty
4.      There were flaws in the respondent’s design which were caused by the respondent’s failure to conform to the standards to be expected of a reasonably competent electrical engineer         professing expertise in the design of Integrated Control System boards for use in residential heaters. The respondent’s negligent breach of duty was ongoing throughout the period of    supply until the identification and remedy of the defects.
5.      The respondent knew, or ought to have known, that in the event of defective design and     malfunctioning of the Integrated Control System units, customers of these products would be      exposed to the risk of injury, death or property damage, and that the applicant would in         consequence be exposed to the cost and burden of detecting, repairing and replacing defective    Integrated Control Units. In addition, the respondent knew, or ought to have known, that      repeated malfunctioning of the applicant’s heaters would expose it to loss of market share.
6.      These potential risks and losses were reasonably foreseeable to an electrical design engineer        in the position of the respondent.
7.      The applicant reasonably relied on the respondent’s design expertise and was not guilty of contributory negligence.
8.      The ordinary measure of loss in a claim for damages in negligence is that the applicant is     entitled to be put, so far as damages can, into the position it would have been had there been     no breach of duty. In an appropriate case, this extends to consequential losses, provided they        are not too remote.
The Australian Consumer Law
9.      The applicant relied on the respondent’s representations regarding the quality of the design services and the performance of the heaters in connection with the initial release of the heaters        and later representations following the release of each version of the Integrated Control System which were to the effect that the faults had been fixed.
10. The representations made by the respondent were false or misleading and the applicant is entitled to recover damages on account of the loss and damage occasioned by the respondent’s conduct pursuant to s 236 of the Australian Consumer Law.
The Assessment of Loss and Damage
11.    The applicant’s conduct in mitigation of its loss and damage was reasonable, particularly in         light of the potential risks posed to life and property by malfunctioning heaters.
12.    The evidence demonstrates that losses were reasonably incurred in rectifying heaters and     addressing a marked and deleterious impact on the applicant’s market share of heater sales.        The steps taken by the applicant to mitigate this damage, whilst reasonable and necessary,        did not entirely address the loss of goodwill and confidence in the market.
13.    While the applicant’s evidence is accepted, it is untested and there may have been other     factors which might have impacted market share and sales more generally. In the     circumstances, it is appropriate to be cautious, if not conservative, about the calculations     upon which the applicant bases its claims.
14.    The assessment must recognise the scope for adverse contingencies. In addition, it is        necessary to have regard to the degree of probability of losses being sustained given      uncertainties in proof of future events, which particularly affect the assessments of damages     for future replacement costs and loss of margin.
Competition and Consumer Act 2010 (Cth) Schedule 2, s 18, s 55; Sale of Goods Act 1895 (SA) s 14(a), referred to.
Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; Hadley v Baxendale (1854) 156 ER 145; Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; Robinson v Harman (1848) 1 Ex 850, discussed.
Australian Securities and Investments Commission v Infomercial Management Group Pty Ltd [2002] VSC 262; Banco de Portugal v Waterlow & Sons Ltd [1932] AC 452; Banque Commerciale SA (in liq) v Akhil Holdings Ltd (1990) 169 CLR 279; Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653; Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588; Fazlic v Milingimbi Community Inc (1982) 150 CLR 345; Ferenczfy v Johnsondiversey Australia Pty Ltd [2012] SADC 22; Fox v Wood (1981) 148 CLR 438; Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1; Gwam Investments Pty Ltd v Outback Health Screenings Pty Ltd (2010) 106 SASR 167; Hotson v East Berkshire Area Health Authority [1987] AC 750; HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640; Hungerfords v Walker (1989) 171 CLR 125; Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413; Koufos v C Czarnikow Ltd [1969] 1 AC 350; Livingstone v Rawyards Coal Co (1880) 5 App Cas 25; Malec v JC Hutton Pty Ltd (1990) 169 CLR 638; Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388; Perre v Apand Pty Ltd (1999) 198 CLR 180; Ramsay v Watson (1961) 108 CLR 642; Rogers v Whitaker (1992) 175 CLR 479; Seeley International Pty Ltd v Millennium Electronics Pty Ltd (in liq) (No 2) [2020] SASC 211; Seeley International Pty Ltd v Millennium Electronics Pty Ltd [2020] SASC 205; Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; Sullivan v Moody (2001) 207 CLR 562; Sykes v Midland Bank Executor & Trustee Co Ltd [1971] 1 QB 113; Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528; Wenham v Ella (1972) 127 CLR 454; Wynn v NSW Insurance Ministerial Corporation (1995) 184 CLR 485, considered.

SEELEY INTERNATIONAL PTY LTD v MILLENNIUM ELECTRONICS PTY LTD (IN LIQ) (No 3)
[2021] SASC 63

LIVESEY J:

Introduction

The applicant, Seeley International Pty Ltd (Seeley), claims in contract, tort and under statute for losses which it alleges it sustained as the result of the failure by the respondent, Millennium Electronics Pty Ltd, now known as ACN 081 014 208 Pty Ltd (in liq) (Millennium), to supply a properly working electrical element which it designed, manufactured and supplied to Seeley.
The electrical element, the “flame sense circuit” within what is described as an electronic control board, or the “Integrated Control System”, caused repeated malfunctioning of the TQ Series ducted gas heater product (heater). The defective design of this element is claimed to have caused the faulty operation of more than 23,000 heaters over a period of some two years.
Seeley’s claims broadly lie in the range of $15 million to $19 million, in addition to interest and costs. As will be seen, I have assessed Seeley’s claim for damages at $13.277 million, in addition to interest and costs.
Procedural history – an undefended trial
This litigation has been managed by a Judge of this Court in the Special Classification List since 11 May 2018. An initial trial date was aborted, but pursuant to an order made by Parker J on 28 January 2020, the trial was relisted to commence on 2 November 2020. I assumed the management of this case on 26 March 2020. At hearings in June and August 2020, the parties were confident that the trial would proceed as listed on 2 November 2020.
However, at the last directions hearing before the trial commenced, the legal representatives for Millennium sought permission to withdraw, their instructions having been terminated the night before the hearing. At the same directions hearing, the applicant sought ex parte Mareva (or asset freezing) orders. I made those and ancillary orders, initially on an ex parte basis.[1] At a subsequent hearing, the liquidator of Millennium was represented and, despite his opposition, orders were made on an interlocutory basis.[2]
[1] Seeley International Pty Ltd v Millennium Electronics Pty Ltd [2020] SASC 205 (9 October 2020).
[2] Seeley International Pty Ltd v Millennium Electronics Pty Ltd (in liq) (No 2) [2020] SASC 211 (30 October 2020).
I granted Seeley leave to proceed with the action pursuant to s 500(2) of the Corporations Act 2001 (Cth), in circumstances where the liquidator neither consented to nor opposed that order, making it clear that he did not wish to brief legal representatives to appear at the trial.[3]
[3] Seeley International Pty Ltd v Millennium Electronics Pty Ltd (in liq) (No 2) [2020] SASC 211.
Accordingly, Millennium did not appear at the trial of this matter. Pursuant to r 145.1 of the Uniform Civil Rules 2020 (SA), the Court has power to enter default judgment, or to hear the trial and determine the claim, notwithstanding the absence of the respondent, or to make such other or further order as it thinks fit.
Senior counsel for Seeley opened the trial on the basis that his client sought to proceed with the trial by way of a hearing on the merits, notwithstanding the absence of Millennium and its liquidator.
In response to an enquiry from the Court, senior counsel for Seeley addressed the significance of Millennium’s pleaded defence. He relied on Banque Commerciale SA (in liq) v Akhil Holdings Ltd for the proposition that the Court could not ignore the pleaded defence, but could instead consider whether there is evidence in proof of any matter pleaded and, if there is none, then there is no basis for a finding in favour of the matter pleaded.[4] By contrast, if in the course of its own evidence the applicant supplied proof of any matter pleaded in the defence, the Court must give consideration to the defence. This is said to be consistent with the approach taken in subsequent cases where a trial has proceeded on an undefended basis.[5]
[4] Banque Commerciale SA (in liq) v Akhil Holdings Ltd (1990) 169 CLR 279, 282-283 (Mason CJ and Gaudron J), 303-304 (Toohey J).
[5] Australian Securities and Investments Commission v Infomercial Management Group Pty Ltd [2002] VSC 262, [17]-[19] (Byrne J); Miletich v Murchie (2012) 297 ALR 566, [2], [15] (Gray J).
Speaking generally, it is the submission of Seeley that a close review of the Millennium defence demonstrates that the evidence adduced by Seeley does not support any of the matters pleaded by Millennium in its defence. On this basis, Seeley submits that this Court “can safely ignore” Millennium’s defence. I shall address aspects of the defence in the course of my factual findings, before turning to damages.
One final issue concerning the way in which this matter proceeded at trial is that Seeley took the view that it was not necessary to proceed with evidence which addressed various of the affidavits, signed statements and expert reports served by Millennium, but not adduced by Millennium at the trial of this matter. Seeley submitted, and I think rightly, that in those circumstances, none of that material from Millennium formed part of the evidence before the Court. Nonetheless, that approach necessitated various amendments and excisions from the affidavits and signed statements adduced by Seeley. I required that certain of those be addressed in further, supplementary affidavits. That was done.
This trial proceeded over four days during November 2020, during which the Court received 42 affidavits or signed statements and 15 other documents, together with four expert reports and two multi-volume tender books in proof of Seeley’s case.
I have made factual findings in the usual way on the balance of probabilities, recognising that the evidence has not been subjected to any testing by way of cross‑examination or argument, as would ordinarily be expected if Millennium had appeared. I have also proceeded to assess damages in the ordinary way without, naturally enough, the benefit of any argument, evidence or other contradiction of Seeley’s claims.
In what follows, my recitation of the factual basis for Seeley’s claims represents my findings made on the balance of probabilities.
Seeley International Pty Ltd
Millennium
The Seeley heater
The flame sense circuit
The engagement of Millennium by Seeley: designing the Integrated Control System
Millennium’s initial representation regarding design
An overview of Seeley’s complaints regarding Millennium’s design
An explanation of the flame sense circuit faults
The Integrated Control System design process
The commencement of faults and Millennium’s responses
The conduct of Seeley in mitigation of loss
The causes of action relied upon by Seeley
Breach of contract
Negligent breach of duty
Misleading and deceptive conduct
The Millennium defences
The assessment of loss and damage
Actual replacement costs
Future replacement costs
Loss of margin
Actual marketing costs
The assessment of damages for future loss in this case
The award of damages in this case
Seeley International Pty Ltd
Seeley manufactures and sells heating and cooling products throughout Australia and overseas. The Seeley heater is sold under various brand names including the name “Braemar”.
Seeley’s heaters are sold principally in Victoria, the Australian Capital Territory, New South Wales, South Australia and New Zealand. Seeley sells its products to dealers and distributors rather than directly into the retail market to customers. In addition, Seeley has supply contracts with various builders. Under these supply arrangements, builders commit to installing Seeley heaters in homes under construction and the builder purchases the heater from a dealer. The builder then receives a rebate from Seeley.
Some dealers sell Seeley products exclusively, whilst others sell them in conjunction with products offered by competitors of Seeley. Seeley products sold by dealers enjoy a warranty offered by Seeley to the end user or customer.
In the heater market, Seeley’s major competitors are Climate Technologies (Bonaire) and Brivis Climate Systems. Minor competitors are Heatcraft Australia (Lennox), Omega Climate Systems and Kaden (manufactured by Brivis/Rinnai for Reece Australia).
Seeley manufactures products in Lonsdale, South Australia (primarily cooling products) and in Albury, New South Wales (primarily heating products). In addition, Seeley owns and operates an after-sales-service division. “Seeley Service” technicians attend homes in connection with warranty and non‑warranty call‑outs, as well as to perform regular services on Seeley products. As well, Seeley is affiliated with a number of third party service agents (service agents). Where a service agent attends to the warranty repair of a Seeley product, a service fee is charged back to Seeley.
Seeley says that its long history of manufacturing and selling heating and cooling products is backed by a culture of continuous investment in research and development. Seeley also claims that its innovation, energy efficiency, quality and reliability have made it a market leader in its field.
Millennium
In so far as is relevant to this case, Millennium, now in liquidation, designed, developed and manufactured electronic control units for use in heaters.
Millennium supplied electronic control units to Seeley for Seeley’s heater products for a number of years.
Millennium’s predecessor, Newtronics, had also designed, manufactured and sold electronic control units to Seeley for its heater products for some years before that. Millennium and Newtronics shared a common engineer, Mr Eric Au.[6]
[6] Seeley International Pty Ltd v Newtronics Pty Ltd [2001] FCA 1862, [88] (O’Loughlin J).
I find that Millennium and its personnel were familiar with Seeley’s heater products, including the requirements for their safe control. That extends to the manner by which an electronic control unit is integrated with, and intended to control, other components in the heater.
The Seeley heater
A Seeley heater comprises a number of components placed inside a steel cabinet. The heater unit is typically installed into the roof space, against an outside wall or on the ground underneath the floor of the residence of a customer.
The components of the Seeley heater include an electronic control board, a gas inlet valve, a combustion chamber (containing a number of burners), a heat exchanger compartment and a fan.
Natural gas supplied to the heater from a gas main or LPG gas cylinder is burned in order to generate heat. The process of burning commences with the gas supply being turned on and an electric spark generated so as to ignite the gas in the main burner. This ignition process and the regulation of gas flow through the gas valve is electronically controlled by a control board within the heater cabinet.
The heater is activated and disabled remotely. That is done by means of a wall-mounted controller. When a heater is turned on using the wall-mounted controller, a start-up process is initiated. As mentioned, apart from the energising of the gas valve so as to start gas flow to the burners, the initiation commences with the generation of an ignition spark.
Once gas is ignited, air is drawn into the heater unit from the residence by means of ducting and a centrifugal fan. Importantly, if ignition is successful and a flame is sensed by the electronic control board, the gas valve will remain open supplying gas and the heater will continue to operate. I will return to this phenomenon because it is the malfunction of this that underpins Seeley’s claims against Millennium.

Then, air from inside a residence is drawn by the fan through “return’ duct work into the heater unit. Inside the heater, the air is passed into a chamber containing a series of metal tubes known as the “heat exchanger” which heat the air. The Seeley heater uses a series of gas burners to heat the heat exchanger and, thereby, the air. The heated air is expelled from the heater into the residence through ducts. This “supply” air ducting connects to outlets or vents in the floor or ceiling of the residence, through which the air heated by the Seeley heater enters the residence.
The effect is that the residence is heated with recycled air.
All gas by-products from the combustion of gas are drawn through the heat exchange tubes by the combustion fan, then into a flue so that they may be safely expelled outside the residence. During this process, air from the area surrounding the heater cabinet is drawn in through air inlet louvres located on the heater cabinet, outside the combustion chamber.
As may be obvious, because a heater is fuelled by combustible natural gas there are risks posed to the occupants of a residence. Examples include the problem of a gas valve remaining open but the gas which flows through it is not ignited, exposing occupants inside the residence to a volume of potentially toxic and flammable gas. Another risk is posed where the heater is permitted to heat indefinitely, because the resulting heat could generate a fire, for example, in the roof space.
In these circumstances, the safe control of a heater is regulated by strict standards which incorporate “failsafe measures” intended to ensure that the heater will turn off if a flame is not ignited or once the safe operating temperature has been reached. These standards inform the software used inside the control unit as well as the sensors used inside the steel heater cabinet. The safe operation of a control unit inside a Seeley heater is, as might be expected, a critical feature of the safe and reliable use of the heater.
The flame sense circuit
It follows from what I have just described that the flame detection function of a heater is imperative to its safe operation.
The Seeley heater’s ability to detect a flame is based on the principle known as “flame ionisation”, or “flame rectification”, a principle used for decades within the heating appliance industry. The principle rests upon the proposition that hydrocarbon gas flames conduct electricity because charged species or ions are formed by the chemical reaction between fuel and air.
Within the electronic control board is a “flame sense circuit”. Connected to the flame sense circuit is a “flame sense electrode”. The tip of the flame sense electrode sits within the flame. When an electric field is passed across the flame using the flame sense electrode, it causes free ions to pass through the flame. The effect of this is to create a circuit which includes the flame sense electrode and the flame. That circuit conducts electricity and acts as a diode or rectifier due to the chemical properties of flames.
By a process of flame rectification, the alternating current passing through the flame is converted to a direct current which is then sensed by the flame sense electrode.[7] Because gas alone does not conduct electricity absent a flame, if there is no flame, no current is detected by the flame sense electrode and so the heater will shut down and the gas valve will close so as to prevent the flow of unburned gas.
[7] See Exhibit AM55.
The flame sense electrode used in the Braemar heater since 2009 has comprised a stainless-steel electrode tip with a copper wire and connector, allowing it to be connected to the flame sense circuit of the electronic control board inside the heater’s steel cabinet.
For many years, the Seeley heater has been ignited by a spark initiated by the electronic control unit: this process is described as “flame roll out”.
By this ignition process, gas flows through a rail running through the combustion chamber. The flame sense electrode is positioned at the end of that rail. So as to detect and measure the flame signal, the current passing through the flame is converted into a measurable quantity of voltage. In the case of the flame sense circuit inside the electronic control unit, or Integrated Control System, the voltage is both produced and measured by a micro-controller incorporated into the flame sense circuit. If a minimum signal level is not detected, the heater shuts down.
A number of manufacturers design and supply proprietary or “off-the-shelf” flame sense circuits for use in gas appliances. These represent standalone components which must then be integrated with the electronic control unit of the appliance concerned. One of these was sold by an entity called Fenwal. Seeley used the Fenwal device in the TH Series heater, a predecessor to the TQ Series heater.
The electronic control unit in the TH Series heater, which was operated in conjunction with a Fenwal device, was described by Seeley as “Braemar Smart Control”. Millennium designed and manufactured the Braemar Smart Control for Seeley. The design of the Braemar Smart Control by Millennium necessarily involved linking the Fenwal device and its functions to the electronic control unit.
Predecessors to the TH Series were the TX, TE and TG Series Braemar heaters. The electronic control units used in these were described by Seeley as the “multi point ignition” or later, as “single point ignition”. These were designed and manufactured by Millennium’s predecessor, Newtronics. They featured in-built flame sense circuits which had been custom designed by Newtronics. The multi point ignition and single point ignition units both used a 240 Volt AC power supply.
I find that the flame sense circuit used in the single point ignition electronic control unit designed by Millennium for use in Seeley heaters had a supply voltage of 240VAC.
The intended enhancements in the TQ Series, when compared with the TH Series, included one-stage, two-stage and modulating models that incorporated a range of functions including the control of gas rates, combustion fans, room fan motors and different zones. The enhancements also included the introduction of what Seeley described as the “MagIQtouch controller”. This gave the operator or customer control of the functions just mentioned.
The engagement of Millennium by Seeley: designing the Integrated Control System
In September 2012, Seeley approached Millennium regarding the design and manufacture of an electronic control unit for its proposed new TQ Series heater which was intended to incorporate enhancements to the existing TH Series heater.
Millennium expressed interest and, on 20 June 2013, the parties entered into a written contract being the “Design and Development Agreement”. By this agreement, Millennium agreed to:
1.Design the Integrated Control System in compliance with agreed specifications. This entailed the production or preparations of designs, drawings, schematics, failure mode effect analysis, software, tooling and all other required, related information.
2.Provide to Seeley design assistance concerning the Integrated Control System and, when doing so, procure or make the jigs, text fixtures, stencils and tooling required for manufacture based on Millennium’s design.
Millennium’s initial representation regarding design
The MagIQtouch controller was described by Seeley as a “significantly more sophisticated remote-control device” than the previous, wall-mounted remote Seeley had used with the TH Series heater.
The MagIQtouch required its own control board to be installed within the heater unit. Seeley preferred to avoid multiple control boards. Accordingly, when it approached Millennium to commission the design of the electronic control unit for the proposed new TQ Series heater, Seeley’s research and development engineering manager, Mr Allwood, asked Millennium if it could design and incorporate into the control unit a flame sense circuit as part of the overall circuitry.
In email correspondence between Mr Allwood and Mr Eric Au (a director and engineer of Millennium) during September and October 2012, Mr Au told Mr Allwood that Millennium had previously successfully completed designs incorporating the flame safeguard and the ignition function in the Braemar Smart Control Board. He told Mr Allwood that these designs met the “EN298 and ANSI Z21.20-2005” standards. Accordingly, as he reassured Mr Allwood, “we do not foresee any issues with the design and compliance of the ignitor function” incorporated in the Braemar Smart Control Board.
On this basis, the specifications for the electronic control unit to be designed by Millennium for the TQ Series, otherwise referred to as the Integrated Control System, required an integrated flame sense circuit.
The specification also required that software for the Integrated Control System generate specific fault codes referrable to faults which it was anticipated may manifest, including when no flame was detected when a flame ought to be present.
An overview of Seeley’s complaints regarding Millennium’s design
Utilising various causes of action, Seeley pursues claims for losses sustained as a consequence of what it claims were repeated malfunctions of the TQ Series heater caused by Millennium’s defective design of the flame sense circuit used in the Integrated Control System.
In overview, the TQ Series was initially released on a limited basis of around 1,300 units to selected dealers commencing in May 2015. This was, in effect, a preliminary release to the market.
Almost immediately, Seeley started receiving reports from dealers that many of the TQ Series heaters were experiencing unexplained shutdowns or failures to start. These heaters were generating a range of fault codes, although the principal one was Fault Code 7.
Fault Code 7 indicated a flame detection error. The difficulty was that although a flame was usually present, it was not being detected by the flame sense circuit.
Accordingly, as a flame was present, but not detected, the unit shut down.
Seeley requested that Millennium investigate and resolve these faults. Millennium’s initial response was that, by making adjustments to the software it had designed and programmed, it had increased the sensitivity of the flame sense circuit and that this was the cause of these faults.
Millennium issued a revised version of the Integrated Control System. It reassured Seeley that appropriate adjustments had been made to the second iteration of the Integrated Control System. In effect, Millennium represented that it had resolved the issues encountered during the initial, limited release.
On this basis, Seeley directed that the Integrated Control System boards on each of the 1,300 units installed in various locations around Australia, principally in Victoria, be replaced.
Nonetheless, similar faults continued despite the installation of revised Integrated Control System boards.
Millennium made further attempts to modify the Integrated Control System board.
Seeley likewise took steps to address the problem. Mr Frank Seeley AM, Chairman of Seeley, became aware that customers had heaters which had faulted a number of times. In his evidence, which I accept, he was concerned that these ongoing problems were eroding, if not destroying, customer satisfaction and confidence in the Braemar heater product. Faults continued.
It was not until mid-June 2017, over two years after the TQ Series was first released, that Millennium finally resolved the flame sense issues with the release of its ninth revision of the Integrated Control System board.
Having lost all confidence in Millennium’s capacity to design and manufacture a reliable electronic control unit, Seeley then determined to have the Integrated Control System boards manufactured overseas.
Over 23,425 Integrated Control System boards manufactured and supplied by Millennium and installed by Seeley in the TQ Series heater have had to be replaced.
Mr Seeley’s evidence is to the effect that, as chairman of Seeley, he adopted a strategy of “damage control” which involved replacing those versions of the Integrated Control System boards which were known to be faulty. He also said that, because Millennium was Seeley’s only supplier of Integrated Control System boards, he was slow to cast responsibility onto Millennium for what he ultimately determined was a serious product fault because he was concerned that Millennium may refuse to supply boards, leaving the Seeley business in a difficult and precarious position.
An explanation of the flame sense circuit faults
In essence, the malfunctioning of the TQ Series heaters was caused by two fundamental flaws in the Millennium design of the Integrated Control System.
The first flaw was Millennium’s decision to design the flame sense circuit in the Integrated Control Systems with only a 24VAC power supply. This had the effect that the circuit was unable to reliably detect a flame if the flame sense rod was contaminated by silicon oxide. This is a well-known and familiar by-product of many typical, household chemicals, including hairspray. I shall return to explain some other features of that design flaw.
The second fundamental flaw emerged in connection with the redesign of the Integrated Control System to increase the power supply to 240VAC. In the redesigned Integrated Control System, Millennium failed to recognise that the flame sense circuit became liable to interference from a nearby relay on the Integrated Control System board. This interference, or “noise”, mimicked the signal sensed by the Integrated Control System from a flame, with the result that the software detected the presence of a flame at a point in the programmed ignition sequence when there ought not to have been a flame. In consequence, the ignition process aborted and the heater shut down. This generated a different fault code, being a Fault Code 6.
Returning to the first flaw, the use of the lower power supply and silicon oxide contamination resulted in flame detection problems that had never previously been experienced by Seeley other than in heaters which had been in use for some years. In that event, the extent of the contamination build-up was noticeable and severe.
The power supply used for the flame sense circuit had previously always been 240VAC. Millennium alone determined to use a lower power supply for the flame sense circuit designed for the TQ Series heater. The decision appears to be a curious one where this flame sense circuit was similar to an earlier flame sense circuit designed by Newtronics for use with single point ignition which had also used a 240VAC power supply. For whatever reason, the change in power supply was not initially recognised as contributing to the faults. It was not until September 2016, after six revisions to the Integrated Control System, that Millennium finally decided to increase the power supply to the flame sense circuit from 24VAC to 240VAC.
Whilst this resolved the earlier failures in the flame sense circuit to reliably detect a flame, it produced the second fundamental flaw, being the liability to interference from a nearby relay on the Integrated Control System board when the generation of Fault Code 6 faults emerged. Whilst the incidence of Fault Code 6 occurrences in the Integrated Control System was lower than the incidence of Fault Code 7 occurrences, the cause was not initially obvious. It took some further months to identify the source of these ongoing faults.
Millennium ultimately resolved the Fault Code 6 faults by reprogramming the Integrated Control System to introduce a delay in the ignition sequence so that the flame sense rod was no longer programmed to sense a flame until after the relay which caused the interfering “noise” had opened.
However, by this time, Seeley, its dealers, its service agents and its ultimate customers had already had the Integrated Control System boards in their heaters replaced, sometimes many times. There had been many complaints and expressions of frustration and disappointment over the TQ Series heater. Dealers were inundated with complaints. Some customers had complained publicly on product review websites. Some dealers had refused to deal with Seeley products. Some exclusive dealers had refused to remain exclusive dealers of Seeley products. They commenced to distribute the products of Seeley’s competitors.
In the view of Mr Seeley, and a number of Seeley staff, the industry’s high regard for the Seeley product and name was damaged and confidence had been lost in Seeley’s ability to manufacture reliable heating products and to resolve faults.
The Integrated Control System design process
It is now necessary to return to the design of the MagIQtouch controller, and the flaws earlier mentioned, in order to make more specific findings about the design process.
In the email correspondence exchanged between Mr Allwood and Mr Au, Mr Au had referred to “EN298”. That is a British standard for automatic burner control systems in appliances burning gaseous fuels. Annex B to that standard, “Fault Modes of Flame Sensors”, refers to the need to consider “increased surface resistance of the flame rod by pollution; influence on the signal by pollution …”. This standard informed the specifications developed for the Integrated Control System which Millennium was required to design and manufacture for the TQ Series heater.
The first version of that specification was sent to Mr Au on 7 February 2013. These were reviewed and then progressively revised by Mr Allwood. Some of the amendments were responses to comments made by Millennium regarding the hardware it proposed to use. However, the specification did not purport to dictate to Millennium the hardware to be used, nor how the software was to be programmed.
The initial draft specification required compliance with EN298. That remained a consistent feature of the specification despite other changes.
Although it was suggested that Seeley was required to apprise Millennium of the contamination risk, and to conduct its own physical testing, I reject that proposition. The risk was well-understood and properly formed part of the design brief, particularly having regard to the respective roles of manufacturer and customer.[8]
[8] See the ISO9000 Quality Systems Handbook, p 378.
I accept the evidence of the expert retained by Seeley, Mr Thomas Bajzek, as well as the evidence of Mr Allwood regarding his reliance upon Millennium’s judgment and expertise in connection with the design of the requisite circuitry. Mr Bajzek is an electrical engineer and principal and director of Engineering Systems Inc in Aurora, Illinois. He holds a Bachelor’s degree in Physics and a Masters degree in Electrical Engineering from the Illinois Institute of Technology. He has more than 30 years’ experience in electrical and electronic systems design and analysis. Mr Bajzek is well-qualified to express the opinions set out in his evidence. In addition, I accept that his opinions are supported by the evidence Seeley has led in proof of its case.[9] I accept Mr Bajzek’s evidence.
[9] See Aide Memoire AM48, Ramsay v Watson (1961) 108 CLR 642 and Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588.
As a corollary, I also accept that none of the Seeley specifications dictated the particular supply voltage to be used to the flame sense circuit of the Integrated Control System. Again, that was a matter for Millennium’s design, judgment and expertise. The selection of 24VAC was a matter for Millennium alone, not Seeley.
Following entry into the Design and Development Agreement on 20 June 2013, Mr Allwood met with Millennium representatives on 18 July 2013. Mr Allwood’s evidence, which I accept, is that one of the Millennium representatives told him that they were intending to use the same or a similar circuit design as that used for the single point ignition unit. Millennium has never explained the decision to use the lower voltage supply even though the earlier unit used 240VAC and that voltage supply remained available.

Design notes dated 22 July 2013 disclosed by Millennium in its discovery reflect recognition of the potential contamination problems:
Although this circuit should operate under normal conditions, the operating range of the circuit needed to be improved in order to allow for increased surface resistance of the flame rod due to pollution as per Table BB.1 of EN298.
These notes, prepared by Mr Spirovski, a Millennium engineer, explain internal testing which had been undertaken concerning the flame detection capabilities of the circuit. They also explain Mr Spirovski’s attempts to increase the sensitivity of the circuit.
In its defence, Millennium contends that Seeley ought to have warned Millennium about the potential for contamination or pollution build-up and that it was, therefore, incumbent upon Seeley to stipulate a higher voltage power supply for the flame sense circuit.
As with the risk on contamination, on the evidence made available to me, I reject that contention. Not only is it inconsistent with the evidence to which I have already referred, it is inconsistent with a proper understanding of the design role that Millennium assumed, as is implicitly conceded by Mr Spirovski’s own design notes. Again, this was a matter for Millennium, not Seeley.
By 25 November 2013, Mr Allwood had approved Millennium’s proposed design for the Integrated Control System and requested a delivery date for prototypes. These were delivered for bench testing by Seeley on 29 January 2014.
At that stage, one of Seeley’s engineers, Mr Scott Beeton, sent an email to Mr Spirovski questioning why the Integrated Control System flame current was one-third of the Fenwal flame current. He asked what could be done to increase the range in line with the Fenwal circuit. On 10 February 2014, another Seeley engineer, Mr Boris Combeau, sent another email to Mr Spirovski reporting ignition failure faults during the start-up phase when testing the Integrated Control System board on the test rig.
Millennium said that it had made adjustments to the software so as to overcome these issues.
Separately, Seeley took steps to have the electronic flame safeguard system certified to the requisite standard by the British Standards Institute, the Australian Gas Association, SGS Laboratories, Austest Laboratories and EMC Technologies. The Integrated Control System prototypes were found to comply with the requisite standards by these testing houses.
There was, in addition, internal testing of the Integrated Control System prototypes in Seeley’s Albury laboratory, as well as later durability testing involving a number of TQ Series heaters fitted with an Integrated Control System unit being operated through several thousand cycles of normal start-up, run and shutdown phases.
Mr Allwood, for Seeley, approved the Integrated Control System design for manufacture by Millennium in March 2015.
On 22 April 2015, two of the TQ Series models were the subject of a limited release into the field. These were fitted with what was designated as “Version 1.00” of the Integrated Control System.
The commencement of faults and Millennium’s responses
As mentioned, by June 2015 Seeley was receiving reports from its service team that there were a number of faults detected in TQ Series heaters which had been installed in residences.
Generally, the faults were a Fault Code 7 or a Fault Code 11. As mentioned, Fault Code 7 signifies “ignition failure”. That occurs where no flame is sensed during the ignition sequence and the heater remains shut down until a manual reset is undertaken. Fault Code 11 is related to Fault Code 7. It signifies a “loss of flame signal” when the flame signal measured by the Integrated Control System unit falls below the lowest acceptable limit when the heater is operating.
Millennium responded with various software adjustments. These resulted in a new version of the integrated control system being released by Millennium described as “Version 1.01”.
Seeley was, independently, itself attempting to identify the cause of these problems. Initial speculation centred on the possibility that faulty flame sense electrodes had been fitted. That hypothesis was later rejected. However, the incidence of failures was so high that it was discussed by Seeley’s General Management Team on 21 July 2015 and by the Seeley Board the next day.
Mr Mitchell, a Seeley employee, directed service agents to clean the flame sense probes which temporarily restored the flame sensing ability, albeit that this soon failed. He issued a technical bulletin to all service personnel.
When a Seeley service employee or a third-party contractor attended in response to a request by a customer, various documents were created. These included a pro forma service repair record. Over the next two years, thousands of service repair records were completed concerning TQ Series heater faults.
Other engineers in the Seeley team were engaged to attempt to understand the reasons for the flame sense faults.
On 17 August 2015, the operations manager of Seeley Albury, Mr de Koeyer, emailed Mr Allwood a link to a US patent which discussed a constant flame ionisation circuit design, with a variable power supply, to increase voltage as contamination build-up occurs on a flame sensor electrode. Eventually Seeley’s investigation led to the discovery that the contamination was caused by silicon oxide from household chemicals. This was disclosed to Millennium.
Concurrently, Millennium was attempting to make further changes to the Integrated Control System to increase the sensitivity of the flame sense circuit.
Seeley was developing a testing regime to compare the flame sense response in the new Integrated Control System to that in the former Fenwal, hoping that Millennium might make further software changes. Millennium, in response, made further modifications to the flame sense circuit in the Integrated Control System.
Each time Millennium modified the Integrated Control System, Seeley was required to have the modified Integrated Control System re-certified by the independent testing houses previously mentioned.
The incidence of faults was so high that Mr Chisholm, Seeley’s general manager of sales, issued an update on TQ Series heaters to selected dealers chosen for the limited release during the Winter of 2015. He explained that faults had been resolved by Millennium’s software changes.
Version 1.02 of the Integrated Control System was formally approved on 13 November 2015. Seeley then issued a technical bulletin (A11/15) to service personnel, setting out the procedure required to replace the Integrated Control System and the flame sense electrode in the TQ Series heaters. However, this was shortly followed by the release of Version 1.03, later that month.
Internally, Seeley decided that there was little choice but to replace all Version 1.00 and Version 1.01 Integrated Control System boards in the field in all TQ Series heaters that had been installed during the Winter of 2015. This was referred to in Seeley’s December 2015 Board Report, considered at the January 2016 Board meeting. It referred to approximately 1,300 units requiring field replacements as at 15 January 2016. At the General Management Team meeting on 29 January 2016, Seeley’s management team noted a direction made by the chairman, Mr Seeley, that all 1,300 units then in the field had to be reworked.
By 17 February 2016, a further TQ Series heater update was issued to all dealers requesting details so as to assist locating every TQ heater for rectification at Seeley’s cost.
On 18 April 2016, the Managing Director made a formal presentation to the Board regarding the Integrated Control System problems. Seeley sent personnel to attend at dealer warehouses where uninstalled TQ Series heater stock was still on the shelf. It was necessary to open each box and replace or re-programme the Integrated Control System in each unit.
By the commencement of Winter 2016, Seeley started to receive reports of a Fault Code 7 fault in TQ Series heaters incorporating Versions 1.03, 1.04, 1.05 and 1.06 of the Integrated Control System. The latter three revisions incorporated changes which were not attributable to any flame sense malfunction. These faults were therefore occurring in TQ Series heaters which had been installed in Winter 2015 and in which the Integrated Control System had been replaced with Version 1.03, or higher.
The highest number of Fault Code 7 failures was experienced during the Winter of 2016. Mr Chisholm received adverse feedback from many dealers in the period commencing April 2015.
I accept and find that, during this period and subsequently, there were email exchanges and other interactions during which dealers expressed frustration with Seeley’s failure to resolve the flame sense faults in the TQ Series heaters. In particular, I accept and find that Mr Simon Middleton of the Middleton Group decided that his company would no longer sell Braemar heaters because of these ongoing faults, unless a customer insisted on the Braemar product.
On 15 August 2016, Mr Beeton emailed Mr Spirovski requesting Millennium’s assistance to resolve the increased frequency of Fault Code 7 and Fault Code 11 faults. During late July and early August 2016, discussions between Seeley representatives and Mr Spirovski resulted in Mr Spirovski suggesting, for the first time, that Millennium would change the input voltage for the flame sense circuit from 24VAC to 240VAC.
At around the same time, Seeley engaged Mr Paul Zuodar, an electronics engineer with experience in flame sense circuits, to provide an independent analysis and advise Seeley about the testing of various flame sense circuits to compare their sensitivities. By 13 September 2016, Mr Zuodar published the first of three reports. In his first report, he compared the flame current sensitivity of Millennium’s proposed 240VAC design to the existing 24VAC design and concluded that the proposed 240VAC design represented a significant improvement. Flame failure was not recorded in testing using a contaminated electrode. As it transpires, Millennium was also independently undertaking 240VAC flame sense simulations.
Seeley sent flame sense electrodes removed from faulty TQ Series heaters for independent laboratory testing. This confirmed that white residue found on these electrodes was silica and sodium sulphate.
Mr Zuodar’s second report on 11 November 2016 discussed flame sense resistance caused by silicon dioxide contamination. He explained that this resulted in a non-linear relationship between the applied voltage and the flame current. He measured the result in a test using contaminated electrodes which revealed that changing from 24VAC to 240VAC yielded an approximate increase of 30:1 in flame current rather than the expected 10:1 from the voltage change alone. The expert witness, Mr Bajzek, explained the same phenomenon.
During the Summer of 2016-2017, Millennium produced a prototype Integrated Control System within an integrated 240VAC supply to the flame sense circuit and wrote the associated, necessary software code.
During November 2016, Mr Zuodar undertook further testing to compare the Millennium 240VAC (denoted Version 1.07) to “off the shelf” flame sense circuits, including the Fenwal. His testing revealed that the Integrated Control System with 240VAC demonstrably outperformed all other units. Mr Zuodar’s conclusions were not reduced to writing until March 2017.
In its second defence, Millennium pleads that the source of the silicon oxide contamination was silicon sealant applied by Seeley in the assembly of the housing of the heaters. This assertion is made without any documentary backing or other evidence. I prefer and accept the evidence from Seeley rejecting that contention.
Similarly, Millennium’s second defence asserts that Seeley is guilty of contributory negligence by failing to ensure that installers of the heater did not use silicon when sealing the housing of the unit. Again, I reject the assertion in the absence of any evidence to support it. I prefer the Seeley evidence led against it.
By March 2017, Version 1.07 of the Integrated Control System was released and Seeley’s direction remained that, in any case where a Fault Code 7 or a Fault Code 11 was observed, the attending service technician was to swap out the Integrated Control System board with a Version 1.07 Integrated Control System and replace the flame sense electrode. These developments and the damage suffered by Seeley to its brand reputation was observed and noted during the Seeley board meeting on 27 April 2017.
As it turns out, that same day, senior management at Seeley were notified of increasing reports of Fault Code 6 faults in the TQ Series heaters even though these featured Version 1.07.
On 3 May 2017, Mr Scott Beeton of Seeley attended a site visit accompanied by Mr Spirovski from Millennium. They inspected a TQ Series heater which was experiencing a Fault Code 6. Mr Spirovski expressed the hypothesis that the Fault Code 6 faults were the product of short circuiting occurring on the board caused by moisture. Seeley undertook laboratory testing and concluded that the suspected short circuiting was in fact caused by Millennium’s failure to apply sufficient conformal coating during the manufacturing process.
Nonetheless, the Fault Code 6 issues experienced with the Version 1.07 Integrated Control System boards resulted in Seeley taking the interim step of fitting Version 1.06 to heaters where faults occurred, even though Version 1.06 Integrated Control System boards were prone to manifest Fault Code 7 faults. This was done in the expectation that it would take time for the flame sense electrode to become contaminated and yield a Fault Code 7 failure.
On 2 June 2017, Mr Allwood emailed Mr Spirovski, requesting an urgent meeting to discuss the Fault Code 6 issues. On 6 June 2017, representatives of Seeley met with Mr Spirovski and Mr Conci of Millennium and discussed a number of potential solutions.
On 8 June 2017, Mr Zuodar suggested that the cause of the Fault Code 6 faults was inadequate conformal coating or electrical noise interference.
By then, however, dealer dissatisfaction had significantly increased.
Commencing in June 2017, Millennium progressively released Version 1.08 and then Version 1.09.
Mr Spirovski told Mr Beeton that Version 1.08 had resolved the Fault Code 6 issues by adjusting the timing and the software. This altered when the fault was detected. However, Mr Spirovski did not explain the cause of the Fault Code 6 issues or how it was initially attempted to be rectified by Version 1.08, but only finally rectified by Version 1.09.
In the opinion of Mr Bajzek, the true cause of the Fault Code 6 issues was electrical “noise” caused by a relay on the circuit board near the flame sense circuit which mimicked the noise of a flame in the pre-purge phase when the Integrated Control System board was programmed to search for a flame. Millennium’s engineers had fixed this problem by simply introducing a brief delay in the software to allow the offending relay to open before the Integrated Control System searched for any flame. The delay programmed into Version 1.08 was insufficient and so an additional delay was programmed into Version 1.09.
It was at this stage that Seeley engaged an alternative supplier and the faults which had been experienced in the Millennium produced Versions 1.00 to 1.08 Integrated Control System boards were no longer encountered.
Quite apart from the strength of the inference arising from the sequence of events just described,[10] I accept the expert opinion evidence on this point from Mr Bajzek.
[10] Adelaide Stevedoring Co Ltd v Forst (1940) 64 CLR 538, 563 (Rich ACJ), admittedly a case involving medicine rather than electrical engineering: “I do not see why a court should not begin its investigation, i.e., before hearing any medical testimony, from the standpoint of the presumptive inference which this sequence of events would naturally inspire in the mind of any common-sense person uninstructed in pathology”.
In summary, Mr Bajzek attributes the cause of the Fault Code 7 problems in Integrated Control System Versions 1.00 to 1.06 to the design decision by Millennium to use a 24VAC power supply to the flame sense circuit which was not powerful enough to overcome contamination on the flame sense electrode used in the heaters. The use of a 24VAC power supply to the flame sense circuit in the Integrated Control System was, in his opinion, neither reasonable nor appropriate because the Millennium flame sense circuit had insufficient sensitivity and did not function properly at that lower power supply level.
I accept Mr Bajzek’s evidence that Millennium, as the designer of the Integrated Control System, ought to have appreciated and designed for the possibility that the flame sense rod or electrode connected to the Integrated Control System might become contaminated. In consequence, it was necessary to design the flame sense circuit by increasing the voltage of the power supply to the flame sense circuit and the flame sense rod.
I am also satisfied that Mr Bajzek has not merely used hindsight reasoning given the number of research publications which explain the nature of the issues encountered, published before Millennium designed the Integrated Control System. The phenomenon of contamination was well-recognised. Mr Bajzek also cites a 1998 paper by the Gas Research Institute of the United States which describes the effect of certain organosilicons present in residential environments lodging on the surface of flame sense electrodes and reducing the capacity to pass current. The paper cites warranty repairs due to low flame ionisation currents causing “system lockout even though a flame is present”.
Importantly, the requirement for compliance with British Standards Institute, English Standard 298: 2012 “Automatic burner control systems for burners and appliances burning gaseous or liquid fuels”, required that Millennium consider Annex BB which explicitly recommended giving consideration to “increased surface resistance of the flame rod by pollution; influence on the signal by pollution”, quite apart from the other literature available on that topic.
In short, and I find, that before June 2013, a reasonable and competent electrical engineer would have appreciated that a reduction in power voltage would cause a decrease in flame detection sensitivity associated with contamination, necessitating “proper circuit testing and proper design methodology [which] would have resulted in a design capable of reliable performance for all anticipated conditions including rod contamination”.
As Mr Bajzek explains, the only relevant change between the earlier Integrated Control Systems deploying the multi point ignition and single point ignition boards which exhibited no substantial issues with flame sense resistance, and the TQ Series heaters, was the unexplained reduction in voltage from 240VAC to 24VAC. As I have already found, this occurred without the knowledge of, or direction from, Seeley. Unsurprisingly perhaps, in those circumstances, Mr Bajzek concludes in his third report:
Design defects in ICS Versions V1.00 through V1.06 caused insufficient flame sense circuit sensitivity which resulted in frequent Fault Code 7 occurrences. Comparing the schematics from the Newtronics SPI design dated 21 February 2003 and the Millennium ICS design V1.00 dated 29 February 2014 reveals that the same type of flame signal amplifier circuit was used in the two designs. It can therefore be concluded that Millennium used their earlier SPI circuit design but, unknown to Seeley, changed the voltage in that circuit from 240VAC to 24VAC. This resulted in a design defect … causing the Fault Code 7 issue.
I accept the opinion of Mr Bajzek, and find, that the design defects described by him should have been discovered by Millennium during design verification testing as part of the design process undertaken by Millennium. In particular, using a 24VAC power supply “was not reasonable and appropriate”. These design defects represent a failure by Millennium to conform to the standards expected of a reasonable and competent electrical engineer in the position of Millennium in around June 2013. They also ensured that the Integrated Control Systems supplied to Seeley were not reasonably fit for their intended purpose.

Similar findings are appropriate in the case of the Fault Code 6 failures encountered with Versions 1.07 to 1.08. I accept Mr Bajzek’s opinion that the electrical “noise” pulses generated by the relay mimicked the electrical signal of a flame and therefore falsely detected the presence of a flame and generated a Fault Code 6 failure even when a flame was not present. I also accept Mr Bajzek’s opinion that Millennium, as the designer of the Integrated Control System, ought to have recognised and designed for the introduction of electrical noise on the circuit when the voltage was increased from 24VAC to 240VAC. This could have been done through the use of an oscilloscope and the fault rectified by, either, eliminating the noise or by adding a delay to the software (as ultimately occurred).
In particular, I find that this should have been anticipated and designed against before it had occurred in the period from June 2013.
In the result, I accept the opinion of Mr Bajzek that Millennium did not, as the designer of the Integrated Control System, conform to the standards expected of a reasonably competent electrical engineer, nor provide a product that was reasonably fit for its intended purpose.
Lest it be overlooked, I also accept Mr Bajzek’s opinion that the conformal coating thickness applied to various Integrated Control System units manufactured by Millennium did not meet the requirements for IPC610 and IPC222 for minimum conformal coating.
Similarly, I accept his opinion, based as it is on his experience and expertise, that exclusive reliance on computer simulation when determining the adequacy of the design of the Integrated Control System circuit board is not best practice. Software cannot anticipate all the behaviours of circuit components such as noise or stray conductive paths and bias currents. These exist in physical circuits under actual physical conditions and it is, accordingly, necessary to test in the field.
Accordingly, I accept Mr Bajzek’s opinion that a reasonable and competent electronics designer would not have limited circuit testing to computer simulation. Testing ought be conducted under all expected conditions and, on the evidence available to me, Millennium failed meet the standard of a reasonable and competent electronics designer.
The conduct of Seeley in mitigation of loss
The question is ultimately whether the steps taken by Seeley to identify problems with the Integrated Control System, as well as to shore up its position in the market, can be described as reasonable conduct in mitigation of loss and damage.[11]
[11] Fox v Wood (1981) 148 CLR 438; Fazlic v Milingimbi Community Inc (1982) 150 CLR 345.
In overview, it took some two years or so for the problems with the Integrated Control System boards to be explained and for the solutions to be identified.
In the meantime, Seeley, principally at the direction of Mr Seeley, determined:
1.Whenever a customer reported a Fault Code 7 or a Fault Code 11, Seeley caused the Integrated Control System board to be replaced with the latest updated model and, in many cases, this was associated with the replacement or the cleaning of the flame sense electrode. This work was undertaken by one of Seeley’s service employees or service agents.
2.As for stock on hand with dealers, Seeley caused the Integrated Control System board to be replaced with the latest version or to have the software updated to the latest version. The same was done in connection with spare parts stock and any TQ Series heater stock at the Albury facility, that is, the Integrated Control System board was replaced with the latest version and the software was updated with the latest version. The same steps were taken in relation to the manufacture of TQ Series heaters, ensuring that the latest version of the Integrated Control System board and software was installed.
3.Seeley used the opportunity of a service visit by a service employee or service agent for matters unrelated to these problems to replace the Integrated Control System board in TQ Series heaters with the latest board.
4.Seeley engaged an external consulting engineer, Mr Paul Zuodar, to investigate and Seeley acted on his advice. Initially, the advice was to increase the power supply which assisted with eliminating Fault Code 7 and Fault Code 11 issues, but it threw up Fault Code 6 issues. In order to deal with these, Seeley required that Millennium apply additional conformal coating to its Integrated Control System boards to protect them against the presence of moisture even though, ultimately, this was not the cause of the issue. On the same basis, Seeley undertook to apply additional conformal coating.
5.Before the Fault Code 6 issues were resolved by Millennium, Seeley replaced Version 1.07 Integrated Control System boards manifesting Fault Code 6 issues with earlier versions because Seeley took the view that the Fault Code 6 issue was a more serious safety concern than the Fault Code 7 or Fault Code 11 issues. That is, the Fault Code 7 and Fault Code 11 issues suggested the presence of a flame when there should not be a flame. This ensured that customers’ heaters were kept operating until any Fault Code 7 or Fault Code 11 issue arose. The Fault Code 6 issue was problematic for around four months before it was resolved by Millennium, utilising software changes in Version 1.09 of the Integrated Control System board.
6.The software change involved in altering the preignition start-up sequence resolved the issue though this was not known by Seeley, and not disclosed by Millennium, until Mr Thomas Bajzek provided advice to Seeley.
In the course of this conduct, Seeley kept a comprehensive record of the costs and expenditure occasioned. I shall return to that in connection with addressing Seeley’s claims for loss and damage.
In my view, this conduct represented reasonable conduct in mitigation of Seeley’s loss and damage. Seeley was entitled to view these issues very seriously for at least two reasons. The first and most important reason is that these issues were recognised as affecting an essential safety feature in the Seeley TQ Series heater. The risk of damage to life or property caused by malfunctioning heaters required, at each stage, a speedy and decisive response. It was accordingly appropriate to swap out earlier components with the latest, whenever the opportunity arose. The second reason is that it soon became clear that the ongoing malfunctioning of the TQ Series heater was damaging the Seeley brand and reputation. Seeley could not ignore the obvious threat posed to its commercial interests by taking anything other than a swift response.
It is inappropriate to review this conduct after the event with an eye to finding fault. Seeley is entitled to recoup reasonable expenditure incurred when acting reasonably in the protection of its legitimate interests and those of its dealers and ultimate customers:[12]
Where the sufferer from a breach of contract finds himself in consequence of that breach placed in a position of embarrassment the measures which he may be driven to adopt in order to extricate himself ought not to be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty. It is often easy after an emergency has passed to criticize the steps which have been taken to meet it, but such criticism does not come well from those who have themselves created the emergency. The law is satisfied if the party placed in a difficult situation by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedial measures, and he will not be held disentitled to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken.
[12] Banco de Portugal v Waterlow & Sons Ltd [1932] AC 452, 506 (Lord Macmillan).
The causes of action relied upon by Seeley
Seeley claims damages for breach of contract, for negligent breach of duty and for contravention of the Australian Consumer Law.
Breach of contract
So far as the breach of the Design and Development Agreement dated 20 June 2013 is concerned:
1.Seeley asserts a breach of the requirement to perform the Design Services so as to design the Integrated Control System to meet the initial Integrated Control System Specifications, as well as the amended Integrated Control System Specifications; and
2.Seeley asserts a breach of the warranty contained in clause 6 that:
Millennium warrants that (i) it will use sound and professional principles and practices consistent with best practice industry standards for the performance of the Design Services and the manufacturing and/or supplying of the New Products, and that its personnel shall person those services with professional knowledge, skill and judgment, …
Clause 9.8 of the Design and Development Agreement contemplated that:
Upon receipt of a purchase order (“Purchase Order”) from Seeley, Millennium shall manufacture for Seeley and supply it with New Products in accordance with the quantities, date(s) and price(s) specified in the Purchase Order, and in accordance with the Designs approved by Seeley. …
Seeley also pleaded that, by reason of s 14(a) of the Sale of Goods Act 1895 (SA) and s 55 of the Australian Consumer Law,[13] it was an implied term of the Design and Development Agreement that:
12.1the Design Services would be fit for the purpose of enabling the manufacture and supply of New Products to consumers as part of a [heater];
12.2the Tooling would be fit for the purpose of enabling the manufacture and supply of New Products to consumers part of a [heater];
12.3the New Products that would be manufactured and supplied pursuant to the DDA would be fit for the purpose of use as a [heater] to be used by consumers.
[13] Although not pleaded by Seeley, by s 3(2) of the Australian Consumer Law Seeley is a “consumer” for the purposes of the Australian Consumer Law.
This pleaded claim was not addressed in any detail in Seeley’s oral or written submissions. Seeley simply relies upon the terms implied under statute so as to import into the Design and Development Agreement an implied term that the Millennium design would ensure that the Integrated Control System units manufactured by it would be fit for purpose. Though Millennium has pleaded that the terms implied by statute were ousted by the terms of the Design and Development Agreement, I reject that proposition absent terms explicitly addressing the statutes in question. Moreover, in so far as Millennium asserts that Seeley was not a consumer within clause 3(2)(a) of Schedule 2 to the Australian Consumer Law because the goods designed and supplied by Millennium were intended for resupply, I am not prepared to make that finding in circumstances where I must assume that Seeley is a consumer unless “the contrary is established” by Millennium, and it has not done so.[14]
[14] See clause 3(10) of Schedule 2 to the Australian Consumer Law and Seeley International Pty Ltd v Newtronics Pty Ltd [2001] FCA 1862, [168]-[169] (O’Loughlin J).
I am satisfied that what was supplied was not fit for its intended purpose and, by whatever route, this entailed a breach of contract by Millennium.
That is, Millennium’s supply of defective Integrated Control System units to Seeley was in breach of the express and implied terms of the Design and Development Agreement dated 20 June 2013.
Accordingly, Millennium is liable to Seeley in damages for breach of contract.
The general rule is that an award of damages for breach of contract should place Seeley into the position it would have been, so far as money can do it, as if the contract had been performed.[15] That is, damages for breach of warranty are assessed on the premise that the warranty was accurate. In Robinson v Harman, Parke B explained:[16]
… where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with the respect to damages, as if the contract had been performed.
[15] Robinson v Harman (1848) 1 Ex 850, 855 (Parke B); Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272, 286 (French CJ, Gummow, Heydon, Crennan and Kiefel JJ).
[16] Robinson v Harman (1848) 1 Ex 850.
Following Hadley v Baxendale,[17] it is usual to ask whether damages are the presumed or the known consequence of a breach of contract. These are sometimes described as general or special loss, or “first limb” and “second limb” claims.[18] The so-called “limbs” of Hadley v Baxendale are intended to delineate the types of loss that may be claimed by a party to the contract, depending upon whether the loss can be said to have arisen naturally, according to the usual course of things, as distinct from whether the loss arose from special circumstances actually known to the defendant.
[17] Hadley v Baxendale (1854) 156 ER 145.
[18] Hadley v Baxendale (1854) 156 ER 145. See also Wenham v Ella (1972) 127 CLR 454, 471 (Gibbs J).
A “first limb” claim permits a plaintiff to recover those damages that may fairly and reasonably be considered to have arisen naturally (that is, according to the usual course of things) from a breach of contract, and which are necessary to put the party who sustained loss in the same position as if the contractual obligation had been performed.[19] As Lord Reid explained in Koufos v C Czarnikow Ltd:[20]
The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation.
[19] Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, 80-82 (Mason CJ and Dawson J).
[20] Koufos v C Czarnikow Ltd [1969] 1 AC 350, 385.
As for a “second limb” claim, it was explained in Hungerfords v Walker that:[21]
The object of the second limb in Hadley v. Baxendale was to include loss arising from special circumstances of which the defendant had actual knowledge when that loss does not fall within the first limb because it does not arise from “the ordinary course of things” of which the defendant has imputed knowledge: see Victoria Laundry.[22]
[21] Hungerfords v Walker (1989) 171 CLR 125, 142 (Mason CJ and Wilson J).
[22] Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528, 539 (Asquith LJ).
The High Court has emphasised that what was in the contemplation of the parties invariably “depends upon a consideration of the terms of the contract in the light of the matrix of circumstances in which it was made”.[23] Indeed, whilst it is sometimes unnecessary to determine whether a loss falls under the first limb or the second limb of Hadley v Baxendale,[24] it will usually assist a plaintiff to be able to point to what the defendant was told or apprised concerning the reason for the contract at the time of entry into it.
[23] Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, 92 (Mason CJ and Dawson J).
[24] Wenham v Ella (1972) 127 CLR 454, 472 (Gibbs J); Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653, 673 (Brennan J).
In the particular circumstances of this case, Millennium knew the use to which the Integrated Control System units were to be put, and it knew the nature of Seeley’s business with the result that, in the event of a design flaw and malfunctions which could not be immediately identified and remedied, Seeley would likely suffer loss and expense in replacing units, losing sales and dealing with brand damage amongst its dealers and other customers in the Australian market.
There are authorities recognising that loss of repeat orders and loss of “goodwill” are appropriate heads of damage in certain circumstances.[25] These authorities are consistent with the decision of the High Court in the Commonwealth v Amann Aviation.[26]
[25] Harvey MacGregor, MacGregor on Damages (Sweet & Maxwell, 18^th ed, 2009) 837, citing GKN Centrax Gears Ltd v Matbro Ltd [1976] 2 Lloyd’s Rep 555 (CA); Britvic Soft Drinks Ltd v Messr UK Ltd [2002] 1 Lloyd’s Rep 20.
[26] Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, 80-81 (Mason CJ and Dawson J).
Negligent breach of duty
So far as the case in negligence is concerned, it is uncontentious that Millennium owed Seeley a duty of care in and about the design and manufacture of the Integrated Control System units.
I have no difficulty finding that Seeley relied upon Millennium to exercise due care and skill in the provision of the Design Services for which it bargained in the Design and Development Agreement.
On the findings I have made, there were flaws in design caused by the failure of Millennium to conform to the standards to be expected of a reasonably competent electrical engineer professing expertise in the design of Integrated Control System boards for use in residential heaters.[27]
[27] Rogers v Whitaker (1992) 175 CLR 479, 483 (Mason CJ, Brennan, Dawson, Toohey and McHugh JJ).
Seeley accepts that its pleaded claim in relation to manufacture is effectively subsumed by the claim for defective design because the products as manufactured and supplied were only defective in so far as they were defectively designed. Other criticisms concerning manufacture are no longer pressed.
Whilst I accept that the courts will generally proceed by reference to recognised and established categories of case,[28] I have no difficulty accepting that this is a case involving, at least by analogy, the well-recognised relationship of an expert consultant designer and its client or customer. Though this is a case involving the residential heater industry, there are many other similar analogies, for example, where a designer has been rendered liable to its client or customer in the automotive industry.[29]
[28] Perre v Apand Pty Ltd (1999) 198 CLR 180; Sullivan v Moody (2001) 207 CLR 562, [50]-[51] (Gleeson CJ, Gaudron, McHugh, Hayne and Callinan JJ).
[29] For example, Gwam Investments Pty Ltd v Outback Health Screenings Pty Ltd (2010) 106 SASR 167.
Millennium knew that Seeley would be relying upon its design expertise, and utilising the product it designed and manufactured, in the products it was supplying to dealers, and ultimately customers, in the residential heating market. Millennium knew, or should have known, that in the event of defective design and malfunctioning Integrated Control System units, the occupants of residences would be exposed to the risk of injury, death or property damage, and Seeley would in consequence be exposed to the cost and burden of detecting, repairing and replacing defective Integrated Control System units.
I have no difficulty finding that, in addition, Millennium knew or should have recognised that the repeated malfunctioning of Seeley’s heaters would expose Seeley to damage and injury in the relevant Australian marketplace.
In my opinion, these potential risks and losses were reasonably foreseeable to an electrical design engineer in the position of Millennium.
Moreover, on the evidence, I find that a reasonably competent electrical designer in the position of Millennium would have appreciated the scope for the risks and flaws that were eventually uncovered and, as Mr Bazjek has explained, address those potential flaws before the TQ Series heaters were manufactured, supplied and installed in Australian residences. Though the case is not pleaded in this way, I am also prepared to find that Millennium’s negligence did not end when Integrated Control Systems were first supplied to Seeley. The breach of duty was ongoing throughout the period until Millennium eventually identified all of the flaws in its design. The consequence was that the recoverable damage was, therefore, ongoing throughout the period. The same may be said of Seeley’s conduct in mitigation, which I have accepted was reasonable.

The ordinary measure of loss in a claim for damages in negligence is that Seeley is entitled to be put, so far as damages can, into the position it would have been had there been no breach of duty.[30] In an appropriate case, this extends to consequential losses, provided they are not too remote.
[30] Livingstone v Rawyards Coal Co (1880) 5 App Cas 25, 39 (Lord Blackburn).
Misleading and deceptive conduct
The claim in damages for misleading and deceptive conduct is based upon s 18 of the Australian Consumer Law.
Seeley pleads that representations regarding the quality of the Design Services were made, initially, in connection with the initial release of the TQ Series heaters incorporating Version 1.00 of the Integrated Control System. It then relies upon the representations that followed each subsequent version of the Integrated Control System when it was supplied, to the effect that the faults had been fixed.
That is to say, representations were made following Version 1.00 for each subsequent, modified version from 1.01 through to 1.09. At each stage, Millennium assured Seeley, expressly or impliedly, that the change would resolve the Fault Code 7 or Fault Code 11 problems and later, the Fault Code 6 problems.
At each stage, Millennium knew that Seeley was relying upon Millennium to resolve the faults and, in consequence, relying upon its representations. These various iterations were accompanied by dealings between, at least, Mr Beeton and Mr Spirovski, with Mr Spirovski successively modifying the code and sending the “fixed” code to Mr Beeton by an email. Whether explicit or implicit, the sending of these codes amounted to reassurance that the version fixed whatever problem was being discussed.
I have no difficulty in finding, on the evidence which I have already reviewed, that Seeley did rely upon Millennium and, in particular, it relied upon each, successive explicit and implicit representation that the Integrated Control System, at each stage, utilised a design which accorded with the contractual specifications and, where it did not, the successive “fixes” ensured that the flame sense circuit would operate in accord with the contractual specifications and without malfunctioning.
On the findings I have made, those representations were false or misleading and Seeley is entitled to recover damages on account of the loss and damage occasioned by that conduct pursuant to s 236 of the Australian Consumer Law.
The Millennium defences
I have, in the course of my reasons, addressed the more important of the matters pleaded by way of defence by Millennium. I should briefly indicate may views about some of the other matters pleaded.
The first is the case on estoppel which goes only to the case based on the failure to effect insurance which was not pressed before me.
The second concerns the contributory negligence case. That is pleaded by reference to s 7(2) of the Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA). Apart from the matters to which I have already referred and rejected, there is a plea that Seeley failed to “integrate the design of the Integrated Control System within the design of the [heater] unit generally”. It is difficult to know what that assertion means in the absence of evidence adduced to support it. In so far as it is suggested that the Seeley heater unit did not properly incorporate the Integrated Control System, there is no evidence to suggest that this was of any moment. The deficiencies in the Millennium design were internal to what it designed, manufactured and supplied and, to the extent that this was affected by external matters, such as household contaminants, that was a risk well-known to Millennium which ought to have been addressed by its design.
Finally, there is an allegation that Seeley failed to mitigate because it knew of problems by August 2015 but continued to order Integrated Control Systems and failed to conduct laboratory and field testing (as alleged generally in paragraph 47 of the Second Defence). This has effectively already been addressed. Seeley reasonably relied on Millennium’s expertise and, most importantly, its repeated assurances. Whilst it eventually obtained its own advice, there is no suggestion that Seeley and Millennium were operating on any basis other than that the design flaws were the responsibility of Millennium. In addition, I have found that Seeley’s conduct in mitigation, and the expenditure incurred, was reasonable.
I reject the Millennium defences.
The assessment of loss and damage
Whether the matter is addressed as loss and damage for breach of contract, or as damages for negligence or damages for misleading and deceptive conduct, Seeley submits that the method of assessment is the same, despite any theoretical differences between expectation and reliance loss.
In some cases, such as cases involving negligent valuation, the relationship between the parties and the duty assumed warrant the view that the claim in tort is “equivalent to contract”.[31] In addition, on the evidence available to me, there is no suggestion but that the Integrated Control System could have been designed without the flaws which emerged for the fee Millennium was paid by Seeley. In other words, this case does not present problems of the kind encountered in Gates v City Mutual Life Assurance Society Ltd, where it could not be shown that the policy was not worth what was paid for it and there was no proof that what the plaintiff wanted was available in the market.[32]
[31] Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413, [44] (McHugh J), citing Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465, 529-530, (Lord Devlin); Spring v Guardian Assurance Plc [1995] 2 AC 296, 324 (Lord Goff); Hill v Van Erp (1997) 188 CLR 159, 233 (Gummow J) and [71], [80] (Gummow J), citing Hill v Van Erp (1997) 188 CLR 159, 233; Spring v Guardian Assurance Plc [1995] 2 AC 296, 324
[32] The plaintiff took out a life policy, thinking that he would be covered for disability precluding work as a builder. The claim was made under the Trade Practices Act 1974 (Cth), applying the approach taken to damages in tort. See Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1, 12-14 (Mason, Wilson and Dawson JJ).
While early decisions of the High Court concerning awards of compensation made under the Trade Practices Act 1974 (Cth) drew on principles relating to the awards of damages made in tort and equity, the High Court has since cautioned against drawing analogies between the Australian Consumer Law and the general law. The text of the Australian Consumer Law is not to be limited by analogy with the general law. As was said in Marks v GIO Australia Holdings Ltd, in the context of the Trade Practices Act 1974 (Cth):[33]
… there is nothing in s 82 or s 87 (or elsewhere in the Act) which suggests either that the amount that may be recovered under s 82(1), or that the orders that may be made under s 87, should be limited by drawing some analogy with the law of contract, tort or equitable remedies. Indeed, the very fact that ss 82 and 87 may be applied to widely differing contravention of the Act, some which can be seen as inviting analogies with torts such as deceit or with equity but others of which find no ready analogies in the common law or equity, shows that it is wrong to limit the apparently clear words of the Act by reference to one or other of these analogies.
[33] Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494, [38] (McHugh, Hayne and Callinan JJ), [100]-[102] (Gummow J), [147]-[148], [152] (Kirby J).
That is, the relief available under statute is not confined by the relief available under the general law:[34]
Not only is it misleading to speak of “expectation” loss and “reliance” loss in the context of s 82, but there is no basis for thinking that relief under s 82 is to be confined by analogy either with actions in contract or in tort. With regard to that last matter, all members of the court are agreed.
[34] Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494, [17] (Gaudron J). See also Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388, [44] (Gleeson CJ, McHugh, Gummow, Kirby, Hayne, Callinan and Heydon JJ) and HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640, [65] (Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ).
In these circumstances, I am prepared to proceed on the basis contended for by Seeley.
The Seeley case on damages has been reviewed by Mr Brian Morris.
Mr Morris is a principal of the firm Morris Forensic, with considerable experience in forensic accounting and valuations. The structure of this aspect of the case is that, as with Mr Bajzek, assumptions have been made based on the lay evidence led by Seeley which is then used as the basis upon which Mr Morris has expressed his various opinions.[35]
[35] See Aide Memoire AM49.
Mr Morris has approached the quantification of the Seeley claims by reference to four heads of loss which it is said flow from the faulty Integrated Control System boards designed and manufactured by Millennium, supplied to Seeley and installed by Seeley in its Braemar TQ Series heaters.
The four heads of loss are:
1.The actual costs incurred by Seeley associated with the tending to the inspection, service and replacement of faulty Integrated Control System boards between 1 June 2015 and 30 September 2018. This is otherwise described as “actual replacement costs”. It is clear that Mr Morris has, on this aspect of the case, relied upon the evidence of Mr Howell and Mr Dobell. In fact, Mr Howell and Mr Dobell have updated these costs through to the end of August 2019.
2.The estimated future costs to Seeley of tending to the service and replacement of faulty Integrated Control System boards installed into Braemar TQ Series heaters, commencing from 1 October 2018. This head is otherwise described as “future replacement costs”. Again, these estimated costs have been updated, or perhaps more accurately, amended, so as to commence from September 2019 given the longer period now claimed for actual replacement costs.
3.The estimated loss of gross margin on heater sales which Seeley has not made, but which Seeley attributes to the faulty Integrated Control System issues in the period October 2016 to September 2023. This head is otherwise described as “loss of margin”. It is presented on the basis of two alternatives:
a.The first assumes that, but for the faulty Integrated Control System issues, Seeley would have retained its existing market share. This is described as Scenario 1.
b.The second alternative assumes that, but for the faulty Integrated Control System issues, Seeley would have continued to increase its market share on an annual basis. This is described as Scenario 2.
4.The actual marketing and related costs incurred by Seeley in endeavouring to maintain its reputation and relationships with various dealers, distributors and customers across Australia affected by the faulty Integrated Control System issues. This head is described as “actual marketing costs”.
These claims, as indicated, have been formulated by Mr Morris, but depend upon the evidence of Mr Brenton Dobell, Mr Rodney Howell, Mr Paul Schwarz and Mr Frank Seeley. In a number of respects this evidence supplements and, in some cases, enlarges the claims laid out in the evidence of Mr Morris.
The Seeley claims may be tabulated in the following way:

Head of Loss Scenario 1 Scenario 2

Actual replacement costs $4,421,666.16 $4,421,666.16

Future replacement costs $1,423,817.00 $1,423,817.00

Loss of margin $8,855,814.00 $12,793,485.00

Actual marketing costs $41,080.00 $41,080.00

Total damages claim $14,742,377.16 $18,680,048.16

It can be seen that the difference between the amounts claimed under Scenario 1 and Scenario 2 relates to the assumption that Seeley would have continued to increase market share, but for the Integrated Control System issues. I shall return to that.
It is appropriate to make some more specific findings regarding these heads of loss.
Actual replacement costs
As foreshadowed, Mr Morris’s opinion depends upon the evidence of Mr Graham Pfitzner, Seeley’s former Project Manager – Service and Spare Parts – regarding his analysis of the actual costs Seeley incurred in the relevant period attending to the service and replacement of the Integrated Control System boards. According to Mr Pfitzner, in the period June 2015 until 30 September 2018:
1.16,234 Integrated Control System boards were replaced in 13,373 Braemar TQ Series heaters. As might be obvious, some units required multiple service calls and multiple replacements.
2.Of the total service calls which related to the faulty Integrated Control System boards, 35% were performed by Seeley service technicians and 65% by external service agents.
3.On occasions, components associated with the Integrated Control System boards were replaced, although the Integrated Control System board was itself not replaced. As well, other components were sometimes replaced at the same time as the Integrated Control System board.
Mr Pfitzner’s evidence explains that he calculated the costs incurred by Seeley by reference to Seeley’s actual costs incurred for the Integrated Control System Boards together with any other related components replaced. These may be referred to as “parts costs”. In addition, if a Seeley service technician attended, then the labour costs associated with that attendance were included. However, if an external service agent attended, the actual costs charged to Seeley were incorporated, generally comprising the service agents’ labour, handling fee, freight costs and travel costs.
Mr Pfitzner explains that, when quantifying the parts costs, Seeley emphasised that the quantification of the parts costs in connection with the service calls attended by external service agents was undertaken without reference to any profit component derived by Seeley from its supply of parts to service agents. That is to say, it was only the actual cost to Seeley for each item, or the “standard cost”, rather than the amount charged to Seeley by a service agent for those calls, or the “job cost”. Only the standard cost was used in calculating Seeley’s loss for these purposes.
Reference has already been made to the evidence from Mr Pfitzner. It is appropriate to explain in a little more detail from where Mr Pfitzner’s information has been sourced. With the assistance of Seeley’s General Manager – Engineering, Mr Paul Schwarz, Mr Pfitzner used the Seeley “Pronto system” to extract, distil and then sort the relevant information. Using Pronto, specific stock codes for items correlating to the Integrated Control System manufactured and supplied by Millennium for the Braemar TQ Series were selected. This material was then reviewed with a view to excluding components which were unrelated to the faulty Integrated Control System boards. Ultimately, a total of 16,027 service calls were identified, of which 5,634 were responded to by Seeley service technicians and 10,393 were responded to by external service agents.
In addition, a further 1,374 service calls were identified where components associated with the Integrated Control System were replaced (such as the flame sense electrode) but where the Integrated Control System board itself was not replaced. 440 of these were responded to by Seeley service technicians and 934 by external service agents. For each service call, individual line item costs relating to that call were identified.
In this way, the costs incurred by Seeley in relation to the replacement of the faulty Integrated Control System boards and related components were calculated at a total of $3.393 million. However, for those service calls where parts associated with the Integrated Control System were replaced, but the Integrated Control System board was not replaced, Seeley’s loss totalled $153,000.00, the majority of which comprised labour costs.
For the period June 2015 until 30 September 2018, the total actual replacement costs comprising replacement parts and costs associated with Seeley service technicians or service agents undertaking the relevant replacement and repair works was therefore $3.55 million. Mr Morris has expressed the opinion that this analysis undertaken by Mr Pfitzner represents a reliable calculation of the loss incurred by Seeley. Whilst I am prepared to accept that opinion, it is far from decisive.
In order to update the analysis, as mentioned, Mr Howell and Mr Dobell reviewed the Pronto system and extended the analysis to August 2019. Ultimately, the total number of service calls concerning faulty Integrated Control System issues was enlarged to 19,261, rather than 16,027. The same cost categories were then utilised, as was the same approach to “standard costs”, in order to remove any profit element when considering the calls attended to by external service agents rather than Seeley service technicians. The increased costs claim for that period was $4,131,573.52 comprised as follows:

Cost Item Total Service Calls Total Costs

Directed replacements 790 $146,322.07

Precautionary replacement 8,664 $2,037,482.22

Flame sense Integrated Control System change 7,269 $1,599,262.14

Flame sense Integrated Control System not changed 1,901 $228,840.83

Fault Code 6 Integrated Control System changed 523 $107,130.16

Fault Code 6 Integrated Control System not changed 114 $12,536.10

Totals 19,261 $4,131,573.52

Seeley claims a series of additional costs concerning the replacement of Integrated Control System boards in heaters located in the warehouses of Seeley and some of its dealers, which is additional to those Integrated Control System replacements undertaken by way of service calls for which account has already been taken. These costs total $290,092.64, comprising:
1.An amount of $26,456.96 incurred by Seeley in relation to replacements and updates to the Integrated Control System in the Braemar TQ Series heater stock located in Seeley’s Albury warehouse, together with stock held by some dealers, in the period April to June 2016. These costs are calculated by reference to Seeley’s own internal labour ($21,446.48), as well as external contracted labour hire ($5,010.48) sourced from Australian Business Solutions Group and Strathbrook Regional Services.
2.An amount of $263,635.68 concerning replacement of previous versions of the Integrated Control System board with Version 1.09 in the Braemar TQ Series heaters stock located in Seeley’s Albury warehouse, as well as the stock held by some dealers in the period June to August 2017. These amounts comprised the cost of replacing Integrated Control System boards ($223,172.63), together with Seeley’s own internal labour costs ($33,266.12), as well as external contracted labour hire ($7,196.93) from Randstad Contractors.
It is by tallying these amounts that the total amount for actual replacement costs claimed by Seeley is formulated.
Future replacement costs
As with actual replacement costs, the calculation undertaken by Mr Morris of future replacement costs turns on the analysis undertaken by Mr Pfitzner, as assisted by Mr Schwarz and using Pronto, concerning the costs which Seeley expects to be required to meet in the period 1 October 2018 until 30 September 2023.
The methodology involves assumptions about anticipated Integrated Control System failure rates, as well as the resulting number, type and cost of each service call, whether Integrated Control System boards and other replacements will be required, as well as the manner in which those calls are likely to be responded to, as well as by whom. This is all drawn from the actual replacement costs incurred by Seeley in the period to November 2018.
Using these failure rate estimates, and the total number of Braemar TQ Series heaters manufactured by Seeley containing the faulty Integrated Control System boards, Mr Schwarz has estimated the quantity of the Integrated Control System boards and related replacements that will likely be necessary in the future and provided those assumptions to Mr Pfitzner for the purposes of his calculations. On these bases, the claims are calculated as follows:
1.Seeley will be required to replace a further 10,650 faulty Integrated Control System boards in Braemar TQ Series heaters out of the 34,097 total which has not yet been addressed in any other calculations.
2.Future failures are likely to occur in respect of each of the four types of boards containing the faulty Integrated Control System in a proportion similar to the historical failures; and
3.Those further replacements will be undertaken by both Seeley service technicians and external service agents in the same ratio of approximately 35% to 65% respectively, consistent with what has occurred to date, utilising the same cost categories as earlier set out.

On these bases, Mr Pfitzner has estimated total future replacement costs for the period 1 October 2018 to 30 September 2023 at $2.08 million. Again, and for what it is worth, Mr Morris has expressed the view that this analysis by Mr Pfitzner provides a fair estimate of the costs that Seeley is likely to incur. As before, I accept that evidence.
As foreshadowed, further information regarding the actual level of replacement costs has come to hand, and which is the subject of further analysis by Mr Howell and Mr Dobell, for the period until August 2019. Accordingly, additional analysis was undertaken by Mr Schwarz so as to “update” the position due to the passage of time. Mr Schwarz’s analysis reveals that the number of Millennium-supplied Integrated Control System boards actually replaced in 2018, 2019 and 2020 is not too dissimilar from that which was predicted and incorporated in the analysis undertaken by Mr Morris. If anything, the number of actual units replaced during 2018 and 2019 is greater, whereas for 2020 the total number of Millennium manufactured Integrated Control System boards will likely total 2,082, around 780 less than was predicted.
The updated claim, based on Mr Schwarz’s further analysis, is a little lower at $1,423,817.00.
Loss of margin
This head of claim has been considered by Mr Morris based on lost heater sales which Seeley attributes to a decline in Seeley’s market share which, it says, results (or will result) from the faulty Integrated Control System issues in the period October 2016 to September 2023, or until Seeley anticipates it will have recovered its market share.
As has been seen, this is based on Scenario 1 and Scenario 2, the difference being whether Seeley would have retained existing market share or, by contrast, increased its market share by an annual average of 1.36%, which is said to be referable to earlier annual increases.
As might be expected, Mr Morris’s analysis is based on assumptions furnished by evidence from witnesses such as Mr Chisholm to the effect that the decline in Seeley’s sales of the Braemar heater from and after October 2016 is directly attributable to the reputational damage caused by the faulty Integrated Control System board designed, manufactured and supplied by Millennium. I am prepared to act on that evidence where, as will be seen, the conclusion that Seeley’s loss of market share was caused by problems with the TQ Series comes not merely from Seeley, but also from its dealers.
However, Mr Morris has also assumed that Seeley’s heater sales are expected to recover. That is to say, that the loss of margin is not permanent and will likely recover by 2023.
In arriving at his calculations, Mr Morris has used Seeley’s recorded annual sales of Braemar heaters in the 2011 to 2018 financial years, as well as market research data published by “Growth from Knowledge” determining the market for heaters in Australia, generally, in the period January 2011 to December 2016. This indicates that Seeley’s share of the heater market during that period sat at an average of 43% to December 2016. It also shows that the majority of Australian heater sales were in Victoria (more than 80%), which broadly correlates with Seeley’s own sales of heaters over the same period which were also centred on Victoria in a similar, though higher, ratio of 87.1%.
Of total heater sales in Victoria each year, around 40% are installed in newly constructed residences whereas 60% are sold into the renovation market. Based on the sales data already mentioned, as well as other publicly available data from the Australian Bureau of Statistics concerning newly constructed residences and expenditure on alterations and additions, or “renovation expenditure”, for the five years to December 2016 in Victoria, Mr Morris calculated that heaters were installed in 73.9% of newly constructed residences and around 13.49 heaters were installed for every $1 million of renovation expenditure.
Mr Morris has had regard to further ABS data concerning the total number of newly constructed residences and renovation expenditure made in the period June 2018, as well as the publicly available forecast data published by the Master Builders Association concerning new house constructions and renovation expenditure in the period to 2023.
Mr Morris undertook calculations concerning the total size of the Victorian heater market in the years ending September 2017 and September 2018, as well as the total anticipated heater sales in the Victorian market in the period to September 2023.
Scenario 1 assumes that, for the relevant period to September 2023, Seeley would have retained its market share of 43% of total sales in Victoria which was based upon the average market share for the 12 months to December 2016. So far as Scenario 2 is concerned, Mr Morris assumed, as an alternative, that in that relevant period to September 2023, the Seeley market share would have increased by an annual rate of 1.36% based upon its average rate of growth in market share in Victoria during the two years to December 2016.
In connection with each of these scenarios, Mr Morris calculated loss of sales for the 2017 and 2018 financial years based on the difference between the anticipated sales that would have been made but for the issues encountered with the faulty Integrated Control System, and Seeley’s actual sales. For the 2019 to 2023 financial years, he calculated the difference between the anticipated sales that would have been made in that period but for the issues encountered with the faulty Integrated Control System, and the sales that Seeley will likely now make as its level of sales and market share recovers to the level it is assumed it would otherwise have achieved during the same period.
Utilising the loss of sales sustained by Seeley by reference to the Victorian market, and then extrapolating for national sales, the total loss of national sales is then calculated. It will be recalled that Seeley’s experience was that Victorian sales accounted for around 87.1% of its national sales for each relevant year.
Utilising this methodology, Mr Morris calculated lost sales for Seeley during the financial years 2017 to 2023 as follows:

Year Scenario 1 (constant market share) Scenario 2 (increase in market share)

September 2017 2,573 2,945

September 2018 3,270 4,635

September 2019 3,565 5,272

September 2020 3,310 4,879

September 2021 2,343 3,601

September 2022 968 1,716

September 2023 194 390

Totals 16,224 23,437

Mr Morris used these assumed lost sales figures, and an average sale price per heater of $1,114.00 (being the average price per unit during the 12 months to September 2016 according to the evidence of Seeley’s former finance manager, Mr Bradley O’Malley). He then assumed an average gross margin on sales of 49%, and that actually making the lost sales would not have had any deleterious impact on other operating costs (again based on the evidence of Mr O’Malley). Mr Morris then calculated Seeley’s loss of gross margin for this seven-year period until September 2023 at $8.85 million for Scenario 1 and at $12.79 million for Scenario 2.
As mentioned, given the passage of time since Mr Morris prepared his evidence, further analysis has been undertaken, considering the actual heater sales for the period since his evidence.
This evidence, which I accept, discloses that the loss of margin on lost sales attributable to a decline in Seeley’s market share resulting from the faulty Integrated Control System issues in the TQ Series heater has largely accorded with the estimates earlier made. Whilst Seeley submits that Mr Morris’s calculations presented “a conservative view”, I need not go so far.
Actual marketing costs
Finally, the sum of $41,080.00 is claimed for actual marketing and related expenditure which Seeley claims was incurred “dealing with the issues” caused by the faulty Integrated Control System boards.
This is made up of $21,080.00 incurred in the production of promotional videos in early 2018 so as to support sales of the Braemar heaters for the Winter 2018 season. The purpose of these was to reinforce what Seeley was doing to manage the repeated failures, together with purchasing gifts (boxes of Haigh’s chocolates) for around 200 customers who had experienced repeated problems with their Braemar heaters.
In addition, a sum of $20,000.00 was incurred by Seeley in connection with advertising support provided to one of Seeley’s key dealers, National Heating and Cooling, so as to avoid a claim by that entity against Seeley arising out of the repeated failures.
Whilst I am prepared to accept that these sums were reasonably incurred by way of mitigation, I accept that there might have been other reasons to incur what was effectively marketing expenditure had there been no design flaws.
The assessment of damages for future loss in this case
Before indicating my conclusions regarding the assessment of damages in this case, it is appropriate to say something more about the evidence adduced by Seeley in support of its claim for loss of margin. I emphasise this claim because it is necessarily concerned with a claimed loss of the opportunity to make sales into the future.
That is to say, it is a case involving proof on the balance of probabilities that some substantial loss or damage has occurred,[36] and the question is whether that loss will be higher or lower according to events about which there can be no certain proof because they are both future events and concerned with hypothetical trading under different commercial conditions.[37]
[36] Sykes v Midland Bank Executor & Trustee Co Ltd [1971] 1 QB 113, 124 (Harman LJ), 128-129 (Salmon LJ); Hotson v East Berkshire Area Health Authority [1987] AC 750, 782; Sellars v Adelaide Petroleum NL (1994) 179 CLR 332.
[37] Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, 83, 90-98 (Mason CJ and Dawson J), where allowance was made for the “strong prospect” of the renewal of an agreement and an assessment of the possibility of the future cancellation of that agreement at 20 per cent was not regarded as “erroneous”.
In Sellars v Adelaide Petroleum NL, the High Court held that damages for the deprivation of a commercial opportunity will depend upon proof on the balance of probabilities that there is some loss or damage sustained, being the loss of a commercial opportunity which had some value, and that the damages will then be ascertained by reference to the degrees of probability or possibility associated with the manifestation of future events.[38]
[38] Sellars v Adelaide Petroleum NL (1994) 179 CLR 332, 355 (Mason CJ, Dawson, Toohey and Gaudron JJ). See also Seeley International Pty Ltd v Newtronics Pty Ltd [2001] FCA 1862, [350]-[353] (O’Loughlin J) regarding discounts made for “commercial contingencies”.
In this case, the question is whether Seeley would have, with a new product, made increasing sales in the markets in which it and its dealers and builders operated. One must then contrast that with the sales it in fact made to determine the likely loss sustained by reason of the flawed Millennium design.
Seeley adduced evidence from a number of its dealers and service agents, as well as from its National Sales Manager during the relevant period, Mr Chisholm, concerning the adverse feedback received regarding the TQ Series heaters during the relevant period.
As earlier indicated, Mr Chisholm’s evidence is that Seeley’s market share was growing before these events and was considered by customers to have a reputation of innovation, reliability and durability concerning its products.
The early complaints following the initial field release in April 2015 and the cessation of sales are backed by evidence from Seeley dealers explaining why they ceased buying Braemar heaters from Seeley. The evidence shows that residential customers tended to deal with dealers who, in turn, sought explanation and reassurance from Seeley. Mr Chisholm explains the process of reassurance and disappointment that followed each iteration of the Integrated Control System fixes published by Millennium. By the time of the Fault Code 6 faults, Mr Chisholm’s interaction with dealers was souring. Dealers told him that they were considering no longer selling any Seeley products and efforts were made to try and resolve this ongoing discontent within the dealer network. Mr Chisholm also explains that there were dealings with major building companies who had been party to preferred supplier arrangements for heating and cooling products and that a number of these arrangements were not renewed because of the flame sense failures being experienced in the TQ Series heaters.
Similarly, Mr Chisholm had dealings with Middletons and Comfort Heating and Cooling, two major Victorian dealers, who significantly reduced and eventually ceased their heater purchases because of these ongoing problems. Another major dealer in Victoria, Efficient Air, had described the previous TH Series model as “bullet proof”, whereas the TQ Series was described as “rubbish”. This was associated with a dramatic reduction in purchases by Efficient Air.
Seeley, through Mr Chisholm, took a number of steps in order to try and mitigate loss and restore confidence. Mr Chisholm’s awareness of the market was informed not merely by direct contact with dealers, but also by considering publicly available information which enabled him to track Seeley’s market share, particularly the reduction in market share commencing in the Winter of 2015.
Mr Chisholm’s evidence is corroborated by the evidence obtained directly from dealers operating across Australia in Victoria, New South Wales and South Australia.
On the strength of this evidence, I am prepared to find that there was a marked and deleterious impact on Seeley’s market share of heater sales and that a number of the steps taken by Seeley, as Mr Chisholm explains, whilst reasonable and necessary, did not entirely address the loss of goodwill and confidence. A number of dealers simply chose to end their relationships with Seeley. Others commenced dealing with Seeley’s competitors.
Whilst I accept this evidence, I do not overlook that the evidence is untested and that there have been other issues, perhaps also the COVID-19 pandemic, which may or may not have impacted on market share and sales more generally. Whilst I do not overlook Mr Seeley’s views and optimism, I do not have up-to-date figures or analysis on matters such as new housing and renovation expenditures.[39] Whilst I have no evidence about these and other matters, such as adverse commercial contingencies, I must do the best I can to take them into account when assessing damages:[40]
The settled rule, both here and in England, is that mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them as best it can.[41] Indeed, in Jones v. Schiffmann[42] Menzies J went so far as to say that the “assessment of damages ... does sometimes, of necessity involve what is guess work rather than estimation”. Where precise evidence is not available the court must do the best it can.[43] And uncertainty as to the profits to be derived from a business by reason of contingencies is not a reason for a court refusing to assess damages.[44]
[39] Trial Transcript, p 107-115.
[40] Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, 83 (Mason CJ and Dawson J).
[41] Fink v Fink (1946) 74 CLR 127, 143; McRae v Commonwealth Disposals Commission (1951) 84 CLR 377, 411-412; Chaplin v Hicks (1911) 2 KB 786, 792.
[42] Jones v Schiffmann (1971) 124 CLR 303, 308.
[43] Biggin & Co Ltd v Permanite Ltd (1951) 1 KB 422, 438 (Devlin J).
[44] See McGregor on Damages (Sweet & Maxwell, 15^th ed, 1988), paragraphs 357-359.
At best, regarding past events, I can make findings on the balance of probabilities and, so far as the future is concerned, make findings and allowances having regard to the degree of probability that the future would have unfolded in the way Seeley contends:[45]
A common law court determines on the balance of probabilities whether an event has occurred. If the probability of the event having occurred is greater than it not having occurred, the occurrence of the event is treated as certain; if the probability of it having occurred is less than it not having occurred, it is treated as not having occurred. Hence, in respect of events which have or have not occurred, damages are assessed on an all or nothing approach. But in the case of an event which it is alleged would or would not have occurred, or might or might not yet occur, the approach of the court is different. The future may be predicted and the hypothetical may be conjectured. ... If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring.
[45] Malec v JC Hutton Pty Ltd (1990) 169 CLR 638, 642-643 (Deane, Gaudron and McHugh JJ).
Whilst I am prepared to find that Seeley had a reasonable opportunity of increasing market share over the relevant period to 2023 and that, by reason of the ongoing problems with the Integrated Control System boards in TQ Series heaters, that opportunity was thwarted for a time, there can be no certainty about any prediction concerning what might have occurred in the future.
In my view, there is some scope for adverse contingencies in respect of all heads of damage, that is, commercial contingencies which could have affected trading and expenses, even if the Integrated Control System boards in the TQ Series heaters had not repeatedly malfunctioned. I accept that not all contingencies are adverse.[46] For losses to date, the scope for adverse contingencies appears limited.[47] It is nonetheless difficult to be confident about the likely trading and expenses associated with a new product in the period to trial and judgment. The potential for adverse contingencies and uncertainties in proof particularly affect future losses, such as the assessments of damages for future replacement costs and loss of margin. The formulation of these claims by Seeley gives an appearance of precision and certainty where, in truth, there can be neither precision nor certainty about the future. I think that it is appropriate to be cautious, if not conservative, about the calculations upon which Seeley bases its damages claims.
[46] Wynn v NSW Insurance Ministerial Corporation (1995) 184 CLR 485, 497 (Dawson, Toohey, Gaudron and Gummow JJ), “as Windeyer J pointed out in Bresatz v Przibilla, "[a]ll 'contingencies' are not adverse: all 'vicissitudes' are not harmful”.
[47] Examples, albeit in a personal injury context, include: Walker v Circelli (unreported, Supreme Court of South Australia, Mullighan J, 18 December 1992), O'Brien v Seminutin (unreported, Supreme Court of South Australia, Doyle CJ, Millhouse and Williams JJ, 3 April 1996), Pene v Murphy [2004] WASCA 103, [44] (EM Heenan J) and Ferenczfy v Johnsondiversey Australia Pty Ltd [2012] SADC 22, [272]-[273] (Nicholson J).
Accordingly, I have made my assessment based upon, but not ultimately determined by, the amounts claimed by Seeley.
The award of damages in this case
In all of these circumstances, I assess Seeley’s damages as follows:

Head of Loss Damages

Actual replacement costs $4,000,000.00

Future replacement costs $925,000.00

Loss of margin $8,315,000.00

Actual marketing costs $37,000.00

Total damages award $13,277,000.00

I will hear from Seeley regarding interest and costs.

Head of Loss	Scenario 1	Scenario 2
Actual replacement costs	$4,421,666.16	$4,421,666.16
Future replacement costs	$1,423,817.00	$1,423,817.00
Loss of margin	$8,855,814.00	$12,793,485.00
Actual marketing costs	$41,080.00	$41,080.00
Total damages claim	$14,742,377.16	$18,680,048.16

Cost Item	Total Service Calls	Total Costs
Directed replacements	790	$146,322.07
Precautionary replacement	8,664	$2,037,482.22
Flame sense Integrated Control System change	7,269	$1,599,262.14
Flame sense Integrated Control System not changed	1,901	$228,840.83
Fault Code 6 Integrated Control System changed	523	$107,130.16
Fault Code 6 Integrated Control System not changed	114	$12,536.10
Totals	19,261	$4,131,573.52

Year	Scenario 1 (constant market share)	Scenario 2 (increase in market share)
September 2017	2,573	2,945
September 2018	3,270	4,635
September 2019	3,565	5,272
September 2020	3,310	4,879
September 2021	2,343	3,601
September 2022	968	1,716
September 2023	194	390
Totals	16,224	23,437

Head of Loss	Damages
Actual replacement costs	$4,000,000.00
Future replacement costs	$925,000.00
Loss of margin	$8,315,000.00
Actual marketing costs	$37,000.00
Total damages award	$13,277,000.00

[2021] SASC 63

31 May 2021