Tonkin v Cooma-Monaro Shire Council

Tonkin v Cooma-Monaro Shire Council - [2006] NSWCA 50 - NSWCA 2006 case summary — Zoe

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The relevant provisions of the Noxious Weeds Act 5 Section 12 of the Noxious Weeds Act requires a private occupier of land to "control noxious weeds on the land, as required under the control category or categories specified in relation to the weeds concerned". The section provides a maximum penalty of 40 penalty units. 6 Section 18 provides: "(1) A local control authority may, by notice (a weed control notice ) given to an occupier of land (other than a public authority or a local control authority), require the occupier to carry out any of the occupier's obligations to control noxious weeds on the land, as required under the specified control category or categories, in the manner specified in the notice. (2) The notice may specify the time within which action is to be taken. (3) The local control authority may give a weed control notice only if satisfied that an occupier has failed to carry out any of the occupier's obligations under this Act to control noxious weeds. (4) … " 7 Section 19 provides that occupiers must comply with weed control notices given to them by a local control authority. The penalty for non-compliance is 100 penalty units. 8 A "local control authority" is the "council of the local government area" - as is a county council (s 35). I would add that the Western Lands Commissioner is, for certain areas, a local control authority, as is the Lord Howe Island Board (ss 35(2) and (3)). This is marginally relevant to one of the arguments raised, as I note below. 9 Section 20 provides: "(1) A local control authority may control noxious weeds on land, as required under the control category or categories specified in relation to the weeds concerned, if the occupier fails, or a predecessor in title to the occupier has failed, to comply with a weed control notice given by the authority in accordance with section 18. (2) Persons authorised in writing by a local control authority may control noxious weeds on behalf of the local control authority under this section and may enter premises for that purpose. (3) A local control authority must give 24 hours' notice of any proposed control of noxious weeds under this section to the occupier of the land concerned." 10 Section 26(1) provides: "Any reasonable expense incurred by or on behalf of the Minister or a local control authority in ascertaining whether a weed control notice given to an occupier, or a predecessor in title to the occupier, is being or has been complied with, and in taking action if it is not being or has not been complied with (including charges for any inspections of land), is payable by the occupier of the land concerned, on demand by the Minister or authority." 11 Thus, the Act imposes an obligation on occupiers of land to control noxious weeds on their land. It empowers local control authorities - by weed control notices - to require occupiers to control noxious weeds on their land as required under the "specified control category or categories". It obliges occupiers to comply with weed control notices. It empowers local control authorities to undertake weed control if occupiers fail to comply with weed control notices. It entitles local control authorities to recover "any reasonable expense incurred" by them in so taking action. 12 The expression "specified control category or categories" is explained by ss 7, 8 and 9 of the Act. By s 7 ((1) and (2)) the Minister may, by order, declare a plant to be a noxious weed. By s 8(1) the Minister should specify in the order that one or more "control categories" apply to the noxious weed concerned. Section 8(2) provides that the control categories for noxious weeds are W1, W2, W3 and W4. Section 9 relevantly provides: "The action required to be taken under this Act to control a noxious weed for which a particular control category is specified is the action set out below in relation to that control category: · … · For a W2 noxious weed, the weed must be fully and continuously suppressed and destroyed. · For a W3 noxious weed, the weed must be prevented from spreading and its numbers and distribution reduced. …"

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Each notice stated, "You are required to comply with this notice on or before 24 October 2000". 16 Section 25 of the Act provides for the lodging of appeals against weed notices with the Land and Environment Court. Mr Tonkin did not lodge any appeal. 17 On 31 October 2000 Mr Brooks carried out a further inspection of Mr Tonkin's land. He found that weeds were scattered throughout the area that he inspected. He found no evidence that any control measures had been taken since the issuing of the s 18 weed control notices on 6 June 2000. 18 As a consequence, Mr Brooks issued notices under s 20 of the Act and on that date caused them to be served on Mr Tonkin. The effect of the giving of these notices was to authorise "an inspector, authorised officer or other person authorised to enter premises" to enter Mr Tonkin's land and to "control noxious weeds on land". 19 On receipt of these notices Mr Tonkin telephoned Mr Brooks and inquired what chemicals the Council would use to deal with the weeds. Mr Tonkin was told that a mixture of Taskforce and Roundup would be used and that the Council's contractor usually charged $80 per hour plus the cost of chemicals. Mr Tonkin told Mr Brooks that the price was very reasonable and agreed to meet him on site on 20 November 2000 to enable the Council to gain access to the land. 20 On 15 November 2000, solicitors for Mr Tonkin wrote to the Council stating that Mr Tonkin did not dispute that the weeds existed on his land. The letter informed the Council that Mr Tonkin had engaged a local contractor to proceed with the weed control and Mr Tonkin expected that he would be able to comply with Council requirements within the next 30 days. The letter requested the Council to give Mr Tonkin until 20 December 2000 to undertake the work. 21 On 17 November 2000 the Council responded by stating that, as it had organised a contractor to undertake the work, it would be proceeding with the work on 20 November 2000. The Council pointed out that areas were heavily infested with the weeds, no work had been done, and the Council was concerned with the situation. 22 Further discussions took place between Mr Tonkin and Mr Brooks. These led to a written agreement that was signed by both parties on 28 November 2000. Prior to this, the Council's contractor, Buckleys, carried out work on the land for which it charged the Council $16,724.90. 23 The written agreement of 28 November 2000 recorded: "It is to be understood that the acceptance of this plan by Council is a concession granted to Mr Tonkin in an effort to reduce the cost of weed control work on his property. It also needs to be understood that acceptance of this plan by Council is to allow Mr Tonkin time to fulfil his legal obligation in regards to the existing s 18 weed control notices. If the work is not completed by the above date (or variation agreed to by both parties) then Council will have no option but to undertake the work necessary to fulfil the weed control notices." 24 Mr Tonkin agreed to pay the expenses incurred by the Council for weed control undertaken by Buckleys in November 2000. The Council agreed to accept instalment payments from Mr Tonkin until he received his wool cheque in December 2001. Mr Tonkin made payments of $2,000 in April, May, July and August 2001 and a further payment of $4,000 on 29 November 2001. 25 On 15 August 2001 Mr Brooks made another inspection of Mr Tonkin's land. Rolfe DCJ observed: "Mr Brooks' evidence was that in August 2001 serrated tussock and African lovegrass weeds remained scattered throughout the property. The only control measures Mr Brooks observed was the cultivation of some small areas to the front of [Mr Tonkin's land] near the railway line, but there was no evidence of any work having been done in the western section other than the work performed by Buckley's Rural Services on behalf of the Council in November 2000, which had not been completed because of the agreement entered into between the parties. Mr Brooks' evidence was that the level of infestation of serrated tussock and African lovegrass was heavy throughout the area inspected …" 26 On 24 August 2001 the Council served two more s 20(3) notices. These led to Buckleys re-entering the land and carrying out control work on it from 11 October 2001 to 19 December 2001. 27 As at 14 July 2005 the amount claimed by the Council for the charges made by Buckleys was $113,482.13. Mr Tonkin did not challenge the arithmetic and there appears to have been no challenge to the reasonableness of the charges made by Buckleys. 28 The judge took into account a further amount of $147.07 in respect of interest and granted a verdict and judgment for the Council against Mr Tonkin in the amount of $113,629.20.

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The argument that the s 18 notices were invalid 29 Mr Tonkin argues that the s 18 notices were invalid as they did not specify the "manner" in which Mr Tonkin, as occupier, was required to control noxious weeds on his land. 30 Mr Lindsay SC who together with Mr Sahade appeared for Mr Tonkin, pointed out that a failure to comply with a s 18 notice might have serious consequences to an occupier. These include the imposition of a criminal penalty, the service of a s 20 notice, civil liability in debt (once action is taken by a Council to control weeds), and a charge over land (s 60). 31 Mr Lindsay submitted that the operative words of s 18(1) "should be construed so as to require that a statutory notice provide precise guidance as to the action required to be undertaken on the land". He submitted that s 18(1) should be construed to require a degree of particularity beyond a mere paraphrase "of the abstract, generalised standards contained in ss 9 and 12 of the Noxious Weeds Act". He submitted that for a notice to be valid under s 18(1) it should specify "an objective standard against which compliance or otherwise with the notice can be judged". He submitted that the s 18 notices served by the Council contained merely "formulaic language" that "paraphrased s 18(1)" and did not comply with the requirements he submitted should be applied. 32 A weed control notice under s 18 must do two things. Firstly, it must require the occupier to control noxious weeds on the land "as required under the specified control category or categories". Secondly, it must require the occupier to control noxious weeds "in the manner specified in the notice". 33 Each weed control notice given by the Council properly indicated the specified control category in respect of which control was required. I have pointed out that the serrated tussock notice stated that the control category applicable was "W2" and the African lovegrass notice stated that the control category was "W3". The serrated tussock notice, by stating that the weed was in a W2 control category, indicated that it had to be fully and continuously suppressed and destroyed. The African lovegrass notice, by stating that the weed fell into the W3 control category, indicated that it had to be prevented from spreading and its numbers and distribution had to be reduced. 34 In the circumstances, the question is whether the weed control notices, by stating that Mr Tonkin, as occupier of the land, was required to control the weeds in question "by use of chemical, mechanical or cultural means, or a combination of these methods" properly specified the "manner" of the control that Mr Tonkin was required to carry out. 35 I do not accept the submission that the manner of control specified in the notices did no more than paraphrase s 18(1). Nothing akin to those words appears in the section (or in any other part of the Act). The Act says nothing about the manner in which control must be undertaken. The epithet "formulaic" takes the matter no further. 36 The words in the notice gave specificity to the obligation to undertake weed control. It indicated to the occupier (Mr Tonkin) the categories of methods that the he was entitled to use to control the weeds. It indicated that any one of the methods (or a combination of them) would be acceptable. 37 Mr Tonkin was not put at any disadvantage by being informed that he might employ any one of the methods stated, or by being afforded a discretion, within those methods, as to the particular means to be used. In fact, it might well have been to his benefit to be able to use whatever he thought the most suitable, convenient, or economic method. 38 The submission that the means specified in the notices did not provide an objective standard against which compliance or otherwise with the notice could be judged is without substance. By indicating the control category applicable the notices prescribed an objective standard. The serrated tussock had to be fully and continuously suppressed and destroyed. The African lovegrass had to be prevented from spreading and its numbers and distribution reduced. 39 The notices did not impose "uncertain legal obligations" upon Mr Tonkin, as Mr Lindsay submitted. The obligations in question were those stemming from s 9 that I have described in the preceding paragraph. 40 The notice adequately set out the manner in which Mr Tonkin was to comply with his statutory obligation to control noxious weeds. Objectively, there could have been no uncertainty on his part. Subjectively, he conceded he knew what work was required to control the weeds. 41 I accept, as Mr Lindsay submitted, that the test for determining the validity of a s 18 notice is objective and the subjective understanding of Mr Tonkin is irrelevant. Nevertheless, the fact that he had no trouble in understanding from the notices what he was required to do puts in context the argument advanced on his behalf in this respect. 42 The argument based on the validity of s 18 was not advanced at trial and was raised late on appeal. In my view it has no substance.

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The argument that the s 18 notice was spent 43 To recapitulate: on 6 June 2000 the Council served two s 18 notices on Mr Tonkin; on 6 November 2000 the Council served two s 20(3) notices on Mr Tonkin and on the strength of those Buckleys entered Mr Tonkin's land in November 2000 and carried out control work; on 24 August 2001 the Council served two more s 20(3) notices which led to Buckleys re-entering the land and carrying out control work from 11 October 2001 to 19 December 2001. 44 It was submitted on Mr Tonkin's behalf that, by the time the second set of s 20(3) notices were sent on 24 August 2001, the s 18 weed control notices that had been sent on 6 June 2000 were spent. 45 Mr Tonkin's argument was as follows: "… when a s 20(3) notice issues in consequence of and depending upon the non-compliance of the former s 18 notice, then the statutory authority to issue a s 20(3) notice has been spent. It was not the intention of the legislature to allow for an undefined number of s 20(3) notices at various and undefined times in the future (in this case nine months apart) to follow upon the issuing of one s 18 notice in the past. This interpretation should not be preferred. The preferable view is that one s 20(3) notice is entitled to be issued only after the issuing of the s 18 notice upon which it depends. Thereafter, a further and different s 18 notice must be served." 46 Rolfe DCJ dealt with this argument as follows: "Although it was submitted that after November 2000 Council should have issued fresh notices by reason of the events which had occurred, I reject this submission. The effect of the agreement dated 28 November 2000 was an acknowledgment by Mr Tonkin of a continuing breach as was his subsequent correspondence. Moreover, no question of waiver or estoppel was raised or pleaded by Mr Tonkin in reliance on the agreement date 28 November 2000 to resist Council's claims." 47 The obligation on an occupier of land to control noxious weeds on the land is a continuing one (s 12). Thus, it is to be inferred that once a notice is given under s 18(1) requiring an occupier to control noxious weeds, that notice remains of force and effect until the occupier has complied with it or the council indicates that it accepts that the occupier has done so. 48 There is nothing in the Act that suggests that only one s 20(3) notice may be given consequent upon an occupier's failure to comply with a s 18 notice. Such a construction would be contrary to common sense and might thwart the purpose of the Act. For example, a local control authority may give notice in terms of s 20(3) of its intention to carry out works on a particular day. Those works may not be complete at the end of that day. If the council were precluded from giving another s 20(3) notice as soon as possible (because it was obliged first to give a fresh s 18 notice), the time that might then expire might result in a damaging spread of the noxious weeds concerned. 49 By the agreement of 28 November 2000 the Council extended the time for compliance by Mr Tonkin with his obligations "in regards to the existing s 18 weed control notices". The Council then made it plain that it was not satisfied that Mr Tonkin had complied with the s 18 notices it had issued and he was required to fulfil his obligations in respect thereof. In my view those s 18 notices remained valid and of force when the Council issued its second set of s 18 notices on 24 August 2001. 50 Accordingly, I would reject Mr Tonkin's arguments that the s 18 notices given on 6 June 2000 were spent.

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The exceptions to contracts to which s 55 applies 55 Section 55(3) provides that s 55 does not apply to a number of categories of contracts. These include two in regard to which the Council submitted the Buckleys' contracts fell. 56 The first such category is a "contract for which, because of provisions made by or under another Act, a council is exempt from the requirement to invite a tender". 57 The second is a contract "involving an estimated expenditure or receipt of an amount of less than $100,000 or such other amount as may be prescribed by the regulations". 58 The Council's argument in regard to the first category was that the Noxious Weeds Act constituted a code to which s 55(1)(a) of the Local Government Act had no application. 59 This argument rested on two limbs. Firstly, Ms Webster, who appeared for the Council, referred to the fact that s 35 of the Noxious Weeds Act defines a local control authority as including the Minister, the Western Lands Commissioner and the Lord Howe Island Board. None of these is subject to s 55 of the Local Government Act, or the Regulation, or any equivalent statutory tendering regime. She submitted that the fact that s 55 and the Regulation did not apply to the Minister, the Western Lands Commissioner and the Lord Howe Island Board led to the inference that s 55 and the Regulation did not apply to a council (or a county council). 60 However, the fact that s 55(1) does not apply to the Minister, the Western Lands Commissioner or the Lord Howe Island Board does not detract from the intention of the legislature, apparent from the Local Government Act and the Regulation, that s 55 and the Regulation should apply to a council and a county council (see the dictionary to the Local Government Act, s 400(1) of that Act and cl 3(2) of the Regulation). 61 The next argument raised by the Council in support of the proposition that the Noxious Weeds Act contained a separate statutory regime (apart from the Local Government Act) was put this way: "The scope of the work involved in any potential tender for s 20 weed control work on [Mr Tonkin's] land in November 2000 or October 2001 could not be defined with any certainty. An occupier may be undertaking weed control work on his account at the same time as the local control authority enters to undertake work … Bearing in mind the statutory authority for entry on 24 hours notice, the delays inherent in requiring a tendering process under s 55 of the Local Government Act 1993 are inconsistent with the scheme for recovery of reasonable expenses of weed control work under s 26 of the Noxious Weeds Act." 62 It is difficult to accept this argument as there was in evidence a note by Mr Brooks to the effect that, towards the end of July 2001, he communicated with three spraying contractors and asked each for a written quotation to perform the Council's "s 20 entry work". According to this note, Mr Brooks requested the contractors to quote in respect of: "… hourly rates for a 2 man quick - spray type unit and for quad bikes and any other costs that the contractor would charge Council (such as travelling)."

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The effect of entering into the Buckleys' contracts without inviting tenders: Buckleys' contractual claim against the Council 66 There is no universal rule that can be applied to the construction of statutes in order to determine whether the effect of a failure to comply with a provision of a particular statute is to render a category of contracts (or an individual contract) to which that provision applied invalid or unenforceable. Each statute has to be considered as a whole and as a separate entity. 67 In Nelson v Nelson (1995) 184 CLR 538 Deane and Gummow JJ at 551 observed that difficult questions might arise in relating alleged illegality to what, upon its true construction, is the operation of a particular statute. Their Honours said at 551 to 552: "Authorities in contract law such as Vita Food Products Inc v Unus Shipping Company Ltd [1939] AC 277 at 293 and Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 at 429 to 430, 432 to 433, suggest the drawing of a distinction between (1) an express statutory provision against the making of a contract … by fastening upon some act which is essential to its formation, whether or not the prohibition be absolute or subject to some qualification such as the issue of a licence; (2) an express statutory prohibition, not of the formation of a contract …, but of the doing of a particular act; an agreement that the act be done is treated as impliedly prohibited by the statute and illegal; and (3) contracts … not directly contrary to the provisions of the statute by reason of any express or implied prohibition in the statute but which are 'associated with or in furtherance of illegal purposes'". 68 Mr Lindsay submitted that the contracts with Buckleys are illegal or prohibited because s 55(1)(a) (and the Regulation) required the Council to invite tenders (and in a particular way) before entering into those contracts and the Council did not do so. Thus, in the present case we are concerned with the first category mentioned by their Honours. 69 McHugh J at 611 in Nelson v Nelson (like Deane and Gummow JJ at 551) also observed that statutory illegality could arise in a number of different ways. His Honour, too, distinguished between statutes that directly prohibit a contract and statutes that contain other kinds of prohibitions or which create other forms of illegality. His Honour said: "It would be surprising if sound legal policy required each of these forms of illegality to be treated in the same way." 70 The general tenor of recent authority is that contractual illegality and voidness will less readily be found where a statutory provision prohibits the making of a contract on the ground that some act, which by that statute is essential to its formation, is absent. 71 The theory underlying the requirement that each case must be considered individually in accordance with its merits was stated by McHugh J in Nelson v Nelson at 612 to 613 as follows: "If Courts withhold relief because of an illegal transaction, they necessarily impose a sanction on one of the parties to that transaction, a sanction that will deprive one party of his or her property rights and effectively vest them in another person who will almost always be a willing participant in the illegality. Leaving aside cases where the statute makes rights arising out of the transaction unenforceable in all circumstances, such a sanction can only be justified if two conditions are met. First, the sanction imposed should be proportionate to the seriousness of the illegality involved. It is not in accord with contemporaneous notions of justice that the penalty for breaching a law or frustrating its policy should be disproportionate to the seriousness of the breach. The seriousness of the illegality must be judged by reference to the statute whose terms or policy is contravened. It cannot be assessed in a vacuum. The statute must always be the reference point for determining the seriousness of the illegality; otherwise the Courts would embark on an assessment of moral turpitude independently of and potentially in conflict with the assessment made by the legislature. Secondly, the imposition of the civil sanction must further the purpose of the statute and must not impose a further sanction for the unlawful conduct if Parliament has indicated that the sanctions imposed by the statute are sufficient to deal with conduct that breaches or evades the operation of the statute and its policies. In most cases, the statute will provide some guidance, express or inferred, as to the policy of the legislature in respect of a transaction that contravenes the statute or its purpose. It is this policy that must guide the Courts in determining, consistent with their duty not to condone or encourage breaches of the statute, what the consequences of the illegality will be. Thus, the statute may disclose an intention, explicitly or implicitly, that a transaction contrary to its terms or its policy should be unenforceable. On the other hand, the statute may inferentially disclose an intention that the only sanctions for breach of the statute or its policy are to be those specifically provided for in the legislation." 72 See also Fitzgerald v F J Leonhardt Pty Ltd (1997) 189 CLR 215 where McHugh and Gummow JJ said at 227: "Regard is to be had primarily to the scope and purpose of the statute to consider whether the legislative purpose will be fulfilled without regarding the contract as void and unenforceable." 73 It follows that close attention must be given to the scope and purpose of the relevant statute in order to determine whether it discloses an intention that a transaction contrary to its terms or its policy should be unenforceable or whether the statute discloses an intention that the only sanctions for breach are to be those specifically provided for in the legislation. 74 Proceeding with that exercise, the first point to notice is that s 55(1) focuses only on the obligation of a council to invite tenders before entering into contracts of the kind described. The section places responsibility on a council to invite tenders before entering into such a contract, and says nothing about the responsibility in this respect of other parties to the contract. 75 I have mentioned that cl 5(1) of the Regulation provides: "A council may enter into a contract to which this Regulation applies only in accordance with the provisions of this Regulation."

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Again, the focus of the Regulation is only on the power of a council and not the other party to the contract. 76 Clause 5(1) is to be contrasted with cl 5(2) which provides: "A contract to which this Regulation applies, and any variation or discharge of the contract, must be in writing and must be executed by or on behalf of the council." 77 The contracts with Buckleys were not in writing and did not comply with cl 5(2). Mr Tonkin did not rely on cl 5(2), but the Court drew attention to it during the course of argument and I shall comment on it below. At this stage, its relevance is that, unlike cl 5(1), it directs attention to the contract as a whole, and not merely the power of one party, namely, a council, to enter into a contract. 78 The Local Government Act provides no criminal sanction for a breach of s 55. The Act, also, does not expressly deal with the validity or effectiveness of contracts entered into in contravention of its terms. Other than by cl 5(1) of the Regulation, the legislation does not expressly prohibit the entering into of contracts in breach of s 55. 79 Division 2 of Part 5 of the Local Government Act contains a number of provisions relating to surcharging where a council incurs expenditure in contravention of the Act. It is sufficient to recount ss 435(1) and (2) of the Act which are in the following terms: "(1) If satisfied that any expenditure or transfer, or any entry in a council's accounts, has been incurred or made in contravention of this or any other Act or of any regulation in force under this or any other Act, a Departmental representative may: (a) disallow the expenditure, transfer or entry, and (b) surcharge the amount of the disallowance on the councillor, the general manager or any other member of staff of the council by whom the expenditure, transfer or entry was incurred or made or ordered to be incurred or made. (2) A Departmental representative may also surcharge on a councillor, the general manager or any other member of staff of the council the amount of: (a) any deficiency or loss incurred by the council as a consequence of the negligence or misconduct of the councillor, general manager or member of staff, or (b) any money which ought to have been, but has not been, brought into account by the councillor, general manager or member of staff." 80 Division 2 of Part 5 contains, therefore, a significant remedy against those who are responsible for a council entering into a contract in breach of s 55 or the Regulation. It is also to be observed that s 435 contemplates the validity of a completed contract made in contravention of the Act. 81 Part 2 of the Regulation lays down "pre-requisites for tendering". A council, wishing to enter into a contract to which s 55 applies, must decide which tendering method is to be used. If it decides to use the open tendering method it must publish an advertisement in the relevant newspapers inviting tenders for the proposed contract. The Regulation stipulates many provisions setting out what the advertisement must contain. A stipulated "deadline" must be specified in the advertisement. 82 If a selective tendering method is adopted, the council concerned must publish in the relevant newspapers an advertisement inviting applications from persons interested in tendering for the purposed contract. Clause 9(2) sets out details as to what each advertisement must include. A stipulated deadline is specified. A detailed procedure is laid down which a council must follow when considering the applications and in inviting tenders. Clause 11 sets out detailed provisions relating to what the tender documents must contain. Clause 12 and 13 set out detailed provisions concerning the tender period. 83 Part 3 of the Regulation contains detailed provisions concerning the submission and opening of tenders. Part 4 contains detailed provisions concerning the consideration and acceptance of tenders and the notification of acceptances. 84 The many detailed provisions contained in the Regulation give wide scope for potential contravention by a council. Any breach of the Regulation will be a breach of s 55(2) of the Local Government Act. Breaches may be of many kinds, some material and some trifling. 85 In these circumstances, it is difficult to imagine that Parliament intended that any breach of the Regulation, amounting in turn to a breach of s 55(2), would lead to a contract, entered into after such breaches had been committed, being illegal or unenforceable. In principle, there is no reason to distinguish between consequences attendant upon a breach of s 55(1) and those upon a breach of s 55(2). 86 Finally, but no less importantly, a finding that a contract with an innocent party, who does not know and could not reasonably have known that a council is entering into a contract with it in breach of s 55 or the Regulation, would often lead to grave injustice to such a party. Considerations of this kind have in recent years weighed heavily with courts in refusing to find particular contracts ineffective by reason of statutory prohibitions. 87 Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 is one such case. In Yango the High Court held that, although s 8 of the Banking Act 1959 (Cth) prohibited a body corporate from carrying on the business of banking without a licence, a mortgage and guarantee given to an unlicensed corporation in the course of carrying on that business were not void or unenforceable. Mason J (at 428) said: "In the present case the effect of relieving the defendants from their contractual obligation to repay money to the plaintiff would not be confined to the substantial detriment resulting to the plaintiff. The ability of the plaintiff to meet its obligations to its investors and other creditors depends, in part if not entirely, on its ability to enforce the terms of repayment of its contracts of loan with persons such as the defendant. To hold the contract unenforceable at the suit of the plaintiff would be to provide a windfall gain to the defendants and other borrowers in a similar position, and, although indirectly, to impose substantial hardship on those who originally made funds available to the plaintiff."

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Jacobs J at 434 said: "The avoidance of the contract would cause injury to depositors, particularly those who had deposited their money without the knowledge that the corporation had no authority to carry on the banking business." 88 The present case bears similarity to Fuji Finance Inc v Aetna Life Insurance Company Ltd (1994) 4 All ER 1025 where s 16(1) of the Insurance Companies Act (UK) prohibited insurance companies from carrying on activities other than in connection with their insurance business. A life insurance company issued a policy of general insurance in contravention of s 16(1). Nicholls V-C held that, although s 16(1) prohibited the insurance company from issuing the policy, Parliament was not to be taken to have intended to render the policy unlawful and unenforceable at the instance of the insured. His Lordship, amongst other things, was persuaded to this view by reason of there being alternative remedies in the legislation, the existence of problems with persons who would be "left high and dry without adequate recourse" against companies which entered into contracts contravening s 16(1), and the fact that default under s 16(1) was not a criminal offence. All these factors apply in the present case. 89 Deutsche Ruckversicherung AG v Walbrook Insurance Company Ltd (1996) 1 All ER 791 is another case in which the English Court of Appeal adopted this approach. A Belgian reinsurance company entered into reinsurance contracts in the United Kingdom without statutory authority to carry on insurance business there. In doing so it contravened s 2 of the Insurance Companies Act 1982 (UK) which provided, relevantly, that no person might carry on any insurance business in the United Kingdom unless authorised to do so. The Court of Appeal held that the effect of the prohibition was to make such a contract unenforceable only on the part of the reinsurer. The contract was held to be enforceable on the part of the insured. 90 The point is lucidly expressed in Anson's Law of Contract 27th ed, Beatson, at 334: "Frequently, however, a statute will in express terms or on its true construction render a contract unenforceable only by the party whose duty it is to observe the statutory requirement. In such a case, if that party contravenes the provisions of the statute, the contract will be unenforceable by him or her but may yet be enforced by the other party." 91 In my opinion, it is unlikely that the legislature would have intended that an innocent party, who contracts in good faith with a council that is in breach of s 55(1), is to be left with an unenforceable contract. Parliament has provided a remedy (s 435) that operates in respect of non-compliance with s 55(1). To paraphrase Mason J in Yango (at 429), it is not for the Court to hold that further consequences should flow with resultant loss to innocent contractors. 92 Mr Lindsay submitted that a contract entered into in disregard of s 55 is either unlawful as having been made without power or otherwise unlawful because it is in breach of s 55. He relied on Haynes v Sutherland Shire Council (1966) 83 WN (Pt 1) NSW 428 at 430 and Denton v Ryde Municipal Council (1953) 19 LGR 152 at 158 and (on appeal) 159 to 161. 93 These cases concerned cl 3 of Ordinance 23 made pursuant to s 516(3) of the Local Government Act 1919 (NSW). Clause 3 was in terms similar to cl 5(2) of the Regulation; that is to say, it provided that contracts entered into by a council must be made in writing and must be executed by or on behalf of the council. 94 Although Mr Lindsay submitted that the present case "is materially indistinguishable" from Haynes v Sutherland Shire Council and Denton v Ryde Municipal Council, there is a fundamental difference between s 55 of the Local Government Act and cl 5(1) of the Regulation on the one hand, and cl 3 of Ordinance 23 on the other. The difference lies in the fact that s 55 and cl 5(1) are directed only to the power of a council to enter into a contract, whereas cl 3 was directed to the contract as a whole. 95 I would add that the basis of the decision of the trial judge in Denton v Ryde Municipal Council, Kinsella J, was that the provisions of Ordinance 23 were mandatory and not directory "and consequently the defendant council could not validly make a contract to pay the plaintiff for the work and labour done and material supplied for the building of the houses in question" (at 158). Owen J agreed with Kinsella J and the other two judges in the Full Court did not deal with the issue. In Haynes v Sutherland Shire Council Street J followed the reasoning of Kinsella J. 96 The High Court has held in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 390 to 391 that the categories of "mandatory" and "directory" are "classifications that have outlived their usefulness". The High Court stated: "[These classifications] deflect attention from the real issue which is whether an act done in breach of the legislative provision is invalid. The classification of a statutory provision as mandatory or directory records a result which has been reached on other grounds. The classification is the end of the inquiry not the beginning. That being so, a court determining the validity of an act done in breach of a statutory provision, may easily focus on the wrong factors if it asks itself whether compliance with the provision is mandatory or directory and, if directory, whether there has been substantial compliance with the provision. A better test for determining the issue of validity is to ask whether it was a purpose of the legislation that an act done in breach of the provision should be invalid. This has been the preferred approach of courts in this country in recent years, particularly in New South Wales. In determining the question of purpose, regard must be had to 'the language of the relevant provision and the scope and object of the whole statute' ( Tasker v Fullwood [1978] 1 NSWLR 20 at 24)."

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