“You’ve got the Look”: High Court won’t disturb an award for costs of rectification to restore aesthetic finish altered due to builder’s misleading variation

In declining a special leave application brought by a pre-fab builder in the case of Larsen v Tastec¹, the High Court has effectively confirmed that the cost of rectification (as opposed to loss in market value) may be an available measure of loss for misleading or deceptive conduct in construction and property cases.

The undisturbed judgment in the NSW Court of Appeal confirms an expansive and flexible approach to proving loss under the Australian Consumer Law. It also provides a salutary lesson for builders and architects: clients who are misled into signing variations (even if the change is merely cosmetic) will be entitled to the full costs of restoring them to that earlier contractual position. Personal liability may attach to those directly making misleading representations, as occurred in this case.

The facts in Larsen v Tastec

Mr and Mrs Larsen as trustees for their self-managed super fund (The Larsens)and Tastec Pty Ltd (previously known as Wonders Building Company) (Tastec) signed a contract in 2018 for Tastec to supply and assemble a prefabricated house on the Larsens’ property in Glen Alice, New South Wales for the Owners.

The contract

The roof and walls were to be externally cladded with Maxline 340 sheeting which the Larsens preferred for its spatial and aesthetic characteristics (particularly the spacing between raised rib finishes). As a consequence, Maxline 340 was specified in the contract as the external cladding finish.

Attempts by the pre-fab builder to change the product

To save on costs, Tastec recommended that the Larsens use an alternative Bondor 580 sheeting (an insulated base panel wider spacing between the ribs). The Larsens rejected the Bondor 580 sheeting as an external facing product and insisted on the Maxline 340 sheeting as per the contract.

Misleading representations by the pre-fab builder

Tastec then engaged in a series of attempts to convince the Larsens to change from the Maxline 340. Tastec indicated to the Larsens that with the Maxline 340 there would be issues with the sliding doors and a thicker roof and doors requiring a redesign and instead recommended a new product called “custom Bondor Extraline 294”.

Tastec, and specifically Mr Sainsbury (the architect and director of Tastec), represented to the Larsens that the Bondor Extraline 294 sheeting was “refined by the manufacturer to double the amount of ribs” and that it was functionally superior to the Maxline 340 sheeting.

Reliance and variation to contract

The Larsens, relying on those representations, agreed to sign a variation under the contract (known as “Variation 6”) where their right to have Maxline 340 sheeting was replaced with a right to have the new Bondor Extraline 294.

Tastec failed to inform the Larsnes that the manufacturer did not, in fact, manufacture any product called Bondor Extraline 294. Instead, Tastec was simply modifying its preferred Bondor 580 sheeting with ‘aluminium T-strips’ glued onto panels and then spraypainted to mimic the look of the Maxline 340.

When the Larsens saw the poor quality of the ‘custom’ material, they complained and instructed Tastec not to affix the T-Strips, however, they did not stop Tastec from installing the Bondor 580 as the exterior panel.

A summary of the litigation history

There were a number of judgments from different courts before the matter made its way to the High Court on application for special leave, briefly summarised as follows:

1. NCAT: In 2019, Tastec brought a claim in NCAT against the Larsens for unpaid amounts under the supply and install contract totalling just over $4,000.
2. District Court 1 (trial): The Larsens then counter-claimed bringing proceedings in the District Court arguing misleading and deceptive conduct by Tastec with hearing and judgment being delivered in 2021 and a finding in favour of Tastec, the pre-fab builder.
3. Court of Appeal 1 (liability and entitlement to damages): The Larsens successfully appealed to the NSW Court of Appeal with unanimous finding (Mitchelmore JA, Ward P and Kirk JA agreeing) in their 2023 judgment² that Tastec and Mr Sainsbury were each in breach of the Australian Consumer Law by reason of misleading and deceptive representations made to the Larsens regarding the substitute materials. The NSW Court of Appeal returned the issue of “the amount of loss if any” to be considered and determined by a different judge of the District Court.
4. District Court 2 (quantum of loss): On remitter, Cole DCJ determined that the Larsens could not establish any entitlement to damages because the use of replacement Bondor Extraline 294 did not diminish the value of the property. Rather, the cladding only had aesthetic implications.³
5. Court of Appeal 2 (quantum of loss): The Larsens’ appealed again to the NSW Court of Appeal, and before a different panel of judges, were successful with the NSWCA (Adamson JA, Stern JA and Price A-JA agreeing) delivering two judgments on entitlement to loss and reasonableness⁴ and quantum of loss⁵ respectively in 2025.
6. Special leave to High Court: Tastec and Mr Sainsbury then sought special leave to appeal to the High Court with the High Court delivering its refusal to grant leave on 5 February 2026.⁶

Legal principles from Larsen v Tastec

Restoring the injured party to the position prior to the contravening conduct

Cole DCJ held that misleading or deceptive conduct arose from the tort of deceit which required proof of loss via diminution in market value. Her Honour characterised the Larsen’s claim as ‘expectation loss’ and distinguished Bellgrove v Elderidge⁷ (the authority for rectification costs being preferred over loss in value) as being only applicable to breach of contract cases.

The NSWCA held that Cole DCJ had erred in her interpretation and application of the relevant legal principles. In particular, the NSWCA clarified that inquiry into the value of a property or works is not the only relevant method of assessing loss for damages for misleading or deceptive conduct under sections 236 or 237 of the Australian Consumer Law.

The NSWCA returned to first principles in calculating damages for breaches of the Australian Consumer Law. The NSWCA reiterated that the assessment of damages should aim to put the plaintiff, so far as money can do, in the position the plaintiff would have been in had the contract been performed properly. In so doing, the NSWCA declined to adopt a restrictive interpretation of the authorities and instead emphasised the flexibility in the High Court’s position in Tabcorp that:

“the measure of damages for breach of contract required the injured party to be put in the same situation, not the same financial situation, as far as money can do it, as if the contract had been performed. While diminution of value was said to be appropriate for the breach of contract relating to the acquisition of marketable property, it would not restore the injured party to the status quo ante”.⁸

In applying this test, the NSWCA affirmed that the diminution in value of the property (or lack thereof) was not determinative of the loss suffered by the Larsens:

“Maxline 340 cladding may have added nothing to the market value of the Larsens’ residence. Because of Tastec’s contravening conduct, the Larsens relinquished the right to have Maxline 340 applied to the roof and walls of their residence over the underlying panels, for which they had contracted, as they preferred the aesthetic it created”.⁹

Instead, the NSWCA looked to Larsen’s positions with respect to the legal or contractual obligations that had previously existed prior to the contravening conduct and this was the ‘counter-factual’ position from which it was appropriate to calculate their loss.

The decision confirms that the Bellgrove principles regarding reasonable rectification costs are not confined to breach of contract and can also apply to damages for misleading representations.

Expectation loss is claimable - Rectification costs

The NSWCA found that the purpose of damages can include consideration of expectation losses where a victim of a contravention alleges that they would have entered a different contract. In the Owners’ case, there was already a pre-existing contractual right which was changed. The NSWCA held that on reliance of Tastec’s misleading and deceptive conduct, the Owners forfeited their contractual right to have Maxline 340 sheeting used on the works.

Whilst the Owners did not claim expectation losses for breach of contract, the NSWCA held that reliance loss damages would produce the same result. Hence, the NSWCA concluded that:

“the amount required to put [the Owners] in the position they would have been in had they not been induced by the respondents’ contravening conduct to relinquish their rights under the contract by agreeing to [the variation] is the same as the value to them of the contractual benefit of being entitled to performance of the contract according to its terms. In both cases, the prima facie measure of damages is the cost of reinstatement.”¹⁰

Unreasonableness of Rectification Costs

As per Bellgrove v Elderidge, the onus was on Tastec to demonstrate that the cost of rectification was unreasonable.

Tastec argued that the rectification proposed was unreasonable because it was neither feasible nor proportionate to apply Maxline 340 cladding to the residence and relied on a litany of difficulties which would arise in that event.

The NSWCA disagreed, finding that the problems complained of by Tastec were not consistent with the contemporaneous conduct of Tastec and Mr Sainsbury during the performance of the contract and that any complications were in any event self-inflicted.¹¹

Tastec focused on the ‘purely aesthetic’ motivations of the Larsens and submitted that the damages would be unreasonable:

“The anticipated costs of the remedial scope of works proposed by the Larsens is out of all proportion with the purely aesthetic interest that the Larsens seek to vindicate with an award of compensation or damages under ss 236 or 237 of the ACL. To cast the submission in the language of Bellgrove, it is entirely unreasonable and unnecessary to award damages in a sum of either $277,021.21 to $526,728.80 on the basis that the Larsens would partially demolish and rebuild their perfectly sound home some 4 and a half years after completion, having had full use of it, for purely for aesthetic reasons.”¹²

However, the NSWCA rejected that position:

“The Larsens’ conduct […] has established how significant aesthetic considerations were for their residence and the importance of Maxline 340 to provide their desired effect. While Mr Gracie deprecated the Larsens’ concerns by describing them as “purely aesthetic”, this description does not assist the respondents since that is precisely why the Larsens insisted on Maxline 340 to clad their house.”¹³

“…In J [64]-[65], the primary judge appears to have sought to impose an unidentified aesthetic by regarding a house constructed with Maxline 340 cladding as “very similar” or “the same” as the house the Larsens presently have which lacks such cladding, a view self-evidently not shared by the Larsens.”¹⁴

Unreasonableness test - Application for special leave

Tastec’s application for special leave focused on this aspect of the NSWCA decision and sought to impugn the decision on the argument that the Court of Appeal failed applying the correct test for ‘unreasonableness’ in the eight factors elucidated by Doyle J in Stone v Chappel¹⁵ (which was not cited by the Court of Appeal).

Stone v Chappel involved a claim for the costs of a ceiling that was built 48mm lower than the contract requirement and it was found that it was unreasonable to raise the ceiling. It presents in a similar way to the slightly too-shallow swimming pool Ruxley v Forsyth¹⁶ that also didn’t sound in loss given the unreasonableness of replacing the whole pool to achieve the contract requirement.

The Larsens argued that Stone v Chappel did not provide a unified framework of the so-called test of unreasonableness and did not provide a more structured and principles-based approach than other relevant authorities applying the test in Bellgrove. Further, it was distinguishable on its facts particularly having regard to the case in Wilshee¹⁷ (limestone cladding of inferior quality to what was required under contract) which was cited in both cases with approval and which was distinguished on the basis that “the external cladding of a house is quite obviously a matter of great significance and importance to its owner”.

Special leave was denied with costs with the High Court citing that Tastec’s appeal would have insufficient prospects of success.

Key takeaways for players in the construction industry

• The loss of a contractual entitlement caused by misleading or deceptive conduct in the construction context is a loss which may be compensated by damages.
• When calculating damages, the critical approach is to ask, “what would have been the victim’s position but for the contravening conduct?” rather than relying wholly on the conventional approach of calculating the diminution in the value of the relevant property or works.
• Unreasonableness of rectification costs will only be satisfied in exceptional circumstances and aesthetic factors are not inherently less valuable than other factors - the test will be determined on the facts of each case.
• Care needs to be taken to avoid any misleading or deceptive statements when builders or designers are explaining and justifying variations they want to make to the contractual requirements.
• Personal liability can often attach for breaches of the Australian Consumer Law by architects and builders who make misleading representations, enhancing the risks compared to breach of contract claims against the company.