Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 754 | Case summary

1 In reasons published on 7 April 2004 (Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 273), I dealt with a number of matters relevant to the determination of two proceedings, being 55035/01 and 55009/02. At paragraph 11 of those reasons, I set out an agreed statement of issues provided by the parties, noting their consensus that, apart from the defendant's claims under the Trade Practices Act 1974 (Cth) advanced in its cross-claim in 55035/01, decisions on those issues would lead to determination of the whole of their controversy. 2 My consideration of the identified issues proceeded on the footing that there was no dispute as to the applicability to the circumstances of the case of provisions of the Home Building Act 1989 brought into existence by the Home Building Legislation Amendment Act 2001 and, in particular, s.94(1A) inserted by that amending Act: "Despite section 92 (2) and subsection (1), if a court or tribunal considers it just and equitable, the contractor, despite the absence of the required contract of insurance, is entitled to recover money in respect of that work on a quantum meruit basis." 3 At the centre of the proceedings is the circumstance that, when a contract was made on 4 August 1998 under which Eddy Lau Constructions Pty Ltd ("the plaintiff") contracted to perform building work for Transdevelopment Enterprise Pty Ltd ("the defendant"), no contract of insurance was in force as contemplated by the provisions of the Home Building Act then existing. In answering certain questions for separate determination in December 2001, Einstein J held that, in the absence of that insurance, the plaintiff was precluded from recovering as against the defendant damages or other remedy in respect of a breach of contract or the recovery of money in respect of work done under the contract: see Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd [2001] NSWSC 1136. Relying on an effect of the amending Act of 2001, the plaintiff later commenced a new proceeding in which it sought to recover a quantum meruit sum for work done. That claim was instituted in 2002 and invoked s.94(1A) as introduced with effect from 10 August 2001. 4 After I had delivered reasons on 7 April 2004, the defendant sought to raise a new issue, namely, whether, upon a proper construction of the legislation as a whole, s.94(1A) applied in relation to a case such as the present where the relevant building contract had been entered into (and relevant default in respect of insurance had occurred) before s.94(1A) was enacted. That point had not previously been raised on the pleadings or otherwise. Eventually, the defendant sought leave to raise it by filing a further amended defence to summons in 55009/02. The plaintiff did not oppose the grant of leave, although reserving its position on costs. Leave was granted on 3 August 2004 and written submissions were directed. 5 The nature of the defendant's contentions appear from the material added to its defence by the amendment: "In further answer to the whole of the summons the Defendant says and it is the fact that:- (a) on 4 August 1998 the Plaintiff contracted with the Defendant to do residential building work at a time when no contract of insurance complying with the Home Building Act 1989 ('the Act') was in force contrary to section 92(1) of the Act; (b) section 94(1)(a) of the Act accordingly precluded the Defendant from enforcing any remedy in respect of such contract or otherwise seeking to recover any money in respect of work performed under it; (c) the subsequent repeal of sections 92(1) and 94(1)(a) as they stood at the time of the contract did not have retrospective effect; (d) the enactment of section 94(1A) of the Act in 2001 related only to those contracts that were affected by sections 92(2) and 94(1) in the form that those sections were then in; (e) accordingly, on its proper construction section 94(1A) is incapable of applying to any contract that was entered into before the commencement of the Home Building Amendment Act 1999 (being the legislation that introduced sections 92(2) and 94(1) in their relevant form). 6 Before addressing the defendant's arguments, I should trace the history of the relevant provisions. At the time the contract between the plaintiff and the defendant was made, relevant parts of ss.92 and 94 of the Home Building Act 1989 were as follows: " 92 Contract work must be insured (1) A person must not contract to do any residential building work unless a contract of insurance that complies with this Act is in force in relation to the proposed work. Maximum penalty: 100 penalty units. (2) A person must not contract to do any residential building work unless a certificate of insurance evidencing the contract of insurance, in a form prescribed by the regulations, is attached to the contract. 94 Effects on contract of contravention (1) A person who entered into a contract in contravention of section 92(1) or 93(1): (a) is not entitled to damages or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract or to recover money in respect of work done under the contract under any other right of action (including a quantum meruit action), but …" 7 By the Home Building Amendment Act 1999, the relevant provisions were put into the following form with effect from 30 July 1999: " 92 Contract work must be insured (1) A person must not do residential building work under a contract unless (a) a contract of insurance that complies with this Act is in force in relation to that work, and (b) a certification of insurance evidencing the contract of insurance, in a form prescribed by the regulations, has been provided to the other party (or one of the other parties) to the contract. Maximum penalty: 100 penalty units. (2) A person must not demand or receive a payment under a contract for residential building work (whether as a deposit or other payment and whether or not work done under the contract has commenced) from any other party to the contract unless: (a) a contract of insurance that complies with this Act is in force in relation to that work, and (b) a certificate of insurance evidencing the contract of insurance, in a form prescribed by the regulations, has been provided to the other party (or one of the other parties) to the contract. 94 Effect of failure to insure residential building work (1) If a contract of insurance required by section 92 is not in force in relation to any residential building work done under a contract (the uninsured work ), the contractor who did the work: (a) is not entitled to damages, or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, in relation to that work, and (b) is not entitled to recover money in respect of that work under any other right of action (including a quantum meruit)." 8 Amendments made by the Home Building Legislation Amendment Act 2001 caused the provisions to be as follows from 10 August 2001: " 92 Contract work must be insured (1) A person must not do residential building work under a contract unless: (a) a contract of insurance that complies with this Act is in force in relation to that work in the name of the person who contracted to do the work, and (b) a certificate of insurance evidencing the contract of insurance, in a form prescribed by the regulations, has been provided to the other party (or one of the other parties) to the contract. Maximum penalty: 200 penalty units. (2) Except as provided by section 94(1A), a person must not demand or receive a payment under a contract for residential building work (whether as a deposit or other payment and whether or not work under the contract has commenced) from any other party to the contract unless; (a) a contract of insurance that complies with this Act is in force in relation to that work in the name of the person who contracted to do the work, and (b) a certificate of insurance evidencing the contract of insurance, in a form prescribed by the regulations, has been provided to the other party (or one of the other parties) to the contract. 94 Effect of failure to insure residential building work (1) If a contract of insurance required by section 92 is not in force; in the name of the person who contracted to do the work, in relation to any residential building work done under a contract (the uninsured work ), the contractor who did the work: (a) is not entitled to damages, or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, in relation to that work, and (b) is not entitled to recover money in respect of that work under any other right of action (including a quantum meruit). (1A) Despite section 92(2) and subsection (1), if a court or tribunal considers it just and equitable, the contractor, despite the absence of the required contract of insurance, is entitled to recover money in respect of that work on a quantum meruit basis." 9 The Act of 2001 also inserted a Part 8 into Schedule 4 of the Home Building Act. That Part 8 included the following clause 66: "66 Effect of amendments relating to insurance (1) The amendments made to sections 92, 93, 94A(1), 96 and 96A by Schedule 6 to the amending Act do not apply to an insurance contract that is in force at the time of commencement of the amendments. (2) Sections 94(1A)-(1C) extend to a contract entered into before the subsections commence. 10 Of particular relevance, for present purposes, is clause 66(2) in Part 8 of Schedule 4. It says, in unambiguous terms, that s.94(1A) - the provision effective from 10 August 2001 upon which the plaintiff's quantum meruit claim is based - extends to a contract made before the commencement of s.94(1A). There is no dispute that the contract between the plaintiff and the defendant was made before the commencement of s.94(1A). However, the defendant's argument is that, despite clause 66(2), s.94(1A) does not extend to contracts made before ss.92(2) and 94(1) assumed their present form on 30 July 1999. In advancing that argument, the defendant focuses on the words "Despite section 92(2) and subsection (1)" appearing at the beginning of s.94(1A). 11 The defendant emphasises that ss.92(2) and 94(1) came into effect on 30 July 1999. Neither s.92(2) nor s.94(1) was, when so introduced, expressed to have retrospective operation. The thesis propounded by the defendant is that, because of its opening words ("Despite section 92(2) and subsection (1)"), s.94(1A), in the form in which it has existed from 10 August 2001, must be seen as operating only to overcome what would otherwise be the effect of ss.92(2) and 94(1) as enacted in 1999 - that is, as they existed when s.94(1A) came into effect. And because those versions of ss.92(2) and 94(1) never applied to or in relation to the circumstances of this case (which involves a contract made in 1998 and affected, at its inception, by ss.92 and 94 in a form displaced by the 1999 amendments), there is, in reality no foundation for the operation of s.94(1A). To put this another way, the "despite" specification means, in the defendant's submission, that s.94(1A) only deals with and makes provision in relation to cases which, but for that specification, would have been governed by s.92(2) or s.94(1) as applying from 30 July 1999. 12 The defendant's argument turns wholly on the meaning and effect of the "Despite" specification in the opening words of s.94(1A). In Attorney General of the Commonwealth v Oates (1999) 198 CLR 162, Gleeson CJ, McHugh J, Gummow J, Kirby J and Hayne J observed that, in modern legislative drafting, "despite" has the same meaning as "notwithstanding". The court regarded as applicable, in construing a provision introduced by the words "Despite anything in any other law", decisions and commentary on analogous earlier legislative provisions beginning "Notwithstanding anything in any other law" or "Notwithstanding anything in any Act". In the present instance, regard may thus be had to cases which have considered qualifications introduced by the word "notwithstanding". 13 The process of analysis to be followed in such cases was described by Irvine CJ, Cussen J and McArthur J in In re Bland Bros and the Council of the Borough of Inglewood (No 2) [1920] VLR 522: "As to the introductory words, the section should first be construed without them, and then, if there is anything in the other provisions of the Act inconsistent with the interpretation so arrived at, these other provisions must yield."

This, it was said, was the effect of what had been decided by all the justices of England in Sir Thomas Cecil's Case (1597) 7 Rep 18b; 77 ER 440. It was there observed by the Exchequer Chamber that the effect of such a "notwithstanding" provision is to make the subject matter to which it refers "no impediment" to the substantive enactment introduced by the "notwithstanding" provision. 14 The same approach was taken by Carter J, as a member of the Full Court of the Supreme Court of Queensland, in Price v J F Thompson (Qld) Pty Ltd [1990] 1 QdR 278. In the same case, Moynihan J said that the opening words "Notwithstanding any other Act or law or rule of law" had the sole consequence that the provision introduced by those words determined matters with which it dealt to the exclusion of any other provision which might otherwise deal with the same subject matter. 15 This process of construction is applicable not only to formulations using the introductory words such as "Notwithstanding anything in any Act" but also to those in which the "notwithstanding" directive refers to particular provisions. In Piper v Corrective Services Commission of New South Wales (1986) 6 NSWLR 352, the Court of Appeal (Kirby P, Hope JA and Samuels JA) was called upon to construe s.41 of the Probation and Parole Act 1983 beginning "Notwithstanding section 39(2) and (4)". The court held that the purpose and effect of the opening words were not to limit s.41 itself to cases of the kind with which ss.39(2) and (4) were concerned (a proposition equivalent, in the context, to that for which the defendant contends in the present case) but to "engineer consistency". Referring to the Bland Bros case, the court said that "orthodox approaches to the construction of a statutory provision commencing with words similar to those which open s.41 normally require that the section first be construed without those words. Only then, if there is anything in other provisions of the Act inconsistent with the interpretation so arrived at, must the full effect given to the words yield." 16 In the present case, therefore, the first step is to apply the part of s.94(1A) of the Home Building Act that follows the introductory words beginning "Despite". When that is done, it is found that, even though required insurance was not in place at the relevant time, the section creates an entitlement to recover upon a quantum meruit if a court or tribunal considers this to be just and equitable. The second step is to ask whether s.92(2) or s.94(1) detracts from that entitlement. In the case of s.92(2), the answer is that, in its present form, it does not (because of its opening words "Except as provided by section 94(1A)"); but that, in the form it possessed from 30 July 1999 and before 10 August 2001, it does (or did). In the case of s.94(1), the answer is that there is a detraction from the s.94(1A) entitlement. The third step, however, is to obey the "Despite" directive by ignoring what would otherwise be any detraction from the s.94(1A) entitlement wrought by s.92(2) or s.94(1). 17 When matters are approached in this way, it is seen that the entitlement conferred by s.94(1A) subsists whether or not s.92(2) or s.94(1) would otherwise deny it. Where one of those sections would deny the entitlement, the "Despite" specification causes it to be preserved. Where neither of the other sections denies the entitlement, there is nothing for the "Despite" specification to do and the entitlement prevails in any event. 18 In the circumstances of the present case, s.94(1A), expressed by clause 66(2) of Part 8 to Schedule 4 of the Act to extend to a contract entered into before its commencement, has a retrospective operation causing it to confer upon the defendant an entitlement to a quantum meruit if the court considers a quantum meruit to be just and equitable; and this is so whether or not s.92(2) or s.94(1), as in force since 30 July 1999, would, in the absence of the "Despite" phrase in s.94(1A), deny the entitlement. On this basis, the plaintiff's right to a quantum meruit sum in accordance with my earlier reasons (which dealt with the just and equitable question, among others) cannot be regarded as precluded by the arguments as to the operation and effect of s.94(1A) on which the defendant later sought to rely by way of its further amended defence to summons filed pursuant to leave granted on 3 August 2004. 19 I direct that the parties bring in an agreed statement of the directions and other steps the parties consider necessary to bring both proceedings to a conclusion or, if there is no agreement, each party's statement of the directions and steps it considers necessary. **********

Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd

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