TUDOR DEVELOPMENTS PTY LTD v MAKEIG [2008] NSWCA 263 | Case summary

21 October 2008 TUDOR DEVELOPMENTS PTY LTD v MAKEIG Judgment 1 BEAZLEY JA: I agree with Basten JA. 2 BASTEN JA: The Home Building Act 1989 (NSW) prohibits a developer from entering into a contract for the sale of land subject to residential building work unless a certificate of insurance with respect to those works is attached to the contract of sale: s 96A(1). The appellant is a developer for the purposes of that provision. On 30 August 2002 it entered into a contract for the sale of land to the respondent, without attaching the required certificate of insurance. 3 The section further provides that such a contract is voidable at the option of the purchaser, before completion: s 96A(3). On 20 November 2003, the respondent, being the purchaser under the contract, sought to rescind the contract in reliance upon her statutory power. 4 On 8 June 2004 the appellant commenced proceedings in the Equity Division, seeking, amongst other orders, specific performance of the contract. 5 Despite some infelicities in the pleadings, and an absence of evidence, when the matter came before Young CJ in Eq on 24 September 2007, the parties invited his Honour to answer a separate question, namely "whether estoppel can validly be pleaded against a defendant for a plaintiff's non-compliance with s 96A of the Home Building Act 1989?" In a judgment delivered on 9 October 2007, his Honour answered the question "No": Tudor Developments Pty Ltd v Makeig [2007] NSWSC 1116 at [37]. The matter came back before his Honour on 16 October 2007, when final orders were made dismissing the proceedings brought by the appellant. 6 Although in the course of oral argument, the matters raised on the appeal appeared to range somewhat more widely than the arguments presented to the primary judge, the appellant made clear that it would be satisfied if the Court disposed of the matter by answering the question presented for determination in the Court below. Further background 7 As noted above, there was no evidence either before the primary judge or before this Court. However, both parties accepted that the Court could properly act on the facts asserted in the statement of claim which were admitted by the respondent. 8 On these facts there was a contract dated 30 August 2002 between the parties by which the appellant agreed to sell and the respondent agreed to buy "Lot 5 in an unregistered strata plan for the sum of $935,000.00". On the same day, the respondent paid an amount of $46,750 by way of deposit. 9 The appellant pleaded that on 20 November 2003 the respondent purported to rescind the contract, pursuant to special condition 17(c) of the contract. Rescission was admitted, although not pursuant to the contractual provision. By way of cross-claim, the respondent sought a declaration that the contract had been validly rescinded and an order for repayment of the deposit. By paragraph 9 of the amended cross-claim, the respondent pleaded: "9. Further or in the alternative, by operation of s 96A Home Building Act 1989, at all times prior to the completion of the contract the contract was voidable at the option of the cross claimant. Particulars The cross defendant entered into the contract when the contract did not have attached a certificate of insurance evidencing a contract of insurance required under s 92 of the Act." 10 The cross-claim further pleaded that the appellant was not entitled to exemption from the requirements of s 96A and that by reason of the operation of that provision, the respondent "was at all times prior to the completion of the contract entitled to rescind the contract and has prior to the completion of the contract rescinded the contract": paragraphs 10 and 11. 11 By a defence to the amended cross-claim, the appellant did not admit paragraphs 9 or 10 and denied the allegations in paragraph 11. By an amended statement of claim filed on 19 September 2007 the appellant contended that the purported rescission constituted a repudiation of the contract which, on 16 March 2007, the appellant accepted: paragraphs 11 and 13. 12 The primary judge noted that certain facts had been "suggested", as likely to be established if the matter went to trial (at [4]): "(a) that no certificate of insurance was provided; (b) that insurance in fact was effected to the knowledge of the defendant purchaser; and (c) that the defendant purchaser affirmed the contract after knowledge that no certificate was provided." 13 By way of further explanation, senior counsel for the appellant contended in this Court that the background to the case involved a sale of the land to the appellant by the previous owners, which were either the respondent and her husband, or perhaps one or other of them. It appears that the previous owners had obtained, or at least anticipated, approval of a development application providing for the construction of units on the land. The purpose of the sale was to allow the appellant, as developer, to construct the residential units. The value of the land might have been expected to reflect the difference between the sale price of the units once constructed and the costs of construction, with allowance for an appropriate profit by the developer. To justify the faith held by the previous owners in their assessment of the value, the respondent agreed to purchase one of the units for the sum referred to above. 14 None of the factual matters referred to above, other than those admitted on the pleadings, were proved and none were the subject of an agreed statement of facts. Accordingly, they cannot be relied upon as the facts which would be established in the case, if it went to trial. Their relevance for present purposes is merely by way of illustration (and, as the appellant contended, more extreme examples were also within contemplation) of the kind of injustice that might result from a strict application of the words of s 96A, unless ameliorated by the general equitable principles of estoppel. At the heart of the appellant's case was the contention that unless s 96A was read as subject to such amelioration under the general law, readily foreseeable injustice could arise which, it should be inferred, was not the intention of the legislature. Statutory scheme 15 The difficulties which can arise from the statutory proscription of particular forms of conduct without clear specification of the consequences of a contravention of the proscription is well-travelled territory in the courts. Even where the consequences are identified in the statute, a question may arise as to whether the statute is to be construed as conferring a benefit upon a particular individual or class of individuals (in which case any adverse consequences may be capable of being waived by the beneficiary) or whether the statute provides protection for a particular class of persons, in the public interest (in which case the statutory prohibition and its consequences will not be capable of waiver). It is inevitable that the answer to such questions will depend upon established principles of statutory construction and, in particular, attending to the language of the statute as it appears in its relevant statutory context. The proper resolution of such questions will often be informed by the statutory history and the purpose of the relevant provisions, identifiable from their terms and that history. 16 Despite these straightforward principles, limited assistance was provided to the primary judge in these respects. For example, limited attention appears to have been paid to the actual terms of the statutory provisions at the relevant time, or even to the identification of the relevant time. Greater emphasis was placed upon analogous case-law, dealing with statutory prohibitions found in other provisions and in other legislation. 17 The focus of attention must be Part 6 of the Home Building Act, which is directed to requiring that any person undertaking "residential building work" under a contract obtain a contract of insurance which complies with the requirements of the Act: s 92. The purpose is to ensure that purchasers of residential properties enjoy a degree of protection against inadequate construction work in cases where the developer is insolvent or no longer in the business when defects become apparent and is therefore not able to undertake rectification work or compensate the owner for the loss incurred as a result of the defective building work. Thus s 99(1) provides: " 99 Requirements for insurance for residential building work (1) A contract of insurance in relation to residential building work required by section 92 must insure: (a) a person on whose behalf the work is being done against the risk of loss resulting from non-completion of the work because of the insolvency, death or disappearance of the contractor, and (b) a person on whose behalf the work is being done and the person's successors in title against the risk of being unable, because of the insolvency, death or disappearance of the contractor: (i) to recover compensation from the contractor for a breach of a statutory warranty in respect of the work, or (ii) to have the contractor rectify any such breach." 18 As in force on 30 August 2002 (the date of the contract), s 96A read as follows: " 96A Obligations of developers in relation to insurance (1) A developer must not enter into a contract for the sale of land on which residential building work has been done, or is to be done, on the developer's behalf unless a certificate of insurance evidencing the contract of insurance required under section 92 by the person who did or does the work for the developer, in a form prescribed by the regulations, is attached to the contract of sale. Maximum penalty: 200 penalty units. (2) Despite anything to the contrary in section 3A, a reference in this Part to a person who does residential building work: (a) does not include a reference to a developer, and (b) includes a reference to a person who does the work on behalf of a developer. (3) If a person contravenes subsection (1) in respect of a contract, the contract is voidable at the option of the purchaser before the completion of the contract. (4) This section does not apply to a sale of the land more than 6 years after the completion of the work." 19 In addition, Part 6 included the following provision: " 103D Part may not be excluded A provision of a contract or another agreement that purports to restrict or remove the rights of a person under this Part is void." 20 Neither s 96A nor s 103D had changed between the date of the contract (30 August 2002) and the date of the purported rescission (20 November 2003). 21 The term "developer" was defined in s 90(1) in the following terms: " 90 Definitions (1) In this Part: … developer , in relation to residential building work, means an individual, partnership or corporation (other than a company referred to in section 3A(3)) on whose behalf the work is done in the circumstances set out in section 3A(2)." 22 The exclusion in s 3A(3) related to a company that owns a building under a company title scheme, and is not relevant for present purposes. Otherwise, s 3A provided that a corporation on whose behalf residential building work is done is a developer who does the work where, relevantly, as identified in sub-s (2): "(a) the residential building work is done in connection with an existing or proposed dwelling in a building or residential development where 4 or more of the existing or proposed dwellings are or will be owned by the … corporation …." Construction of s 96A 23 The prohibition contained in sub-s (1) covers both a class of contracts and a class of contracting parties. Thus the target of the prohibition is a contract of the specified kind, when entered into by a developer. As already noted, the appellant admitted it was a developer for the purposes of s 96A. The prohibition operates to impose a condition on entering into such contracts by such persons. The protected class are prospective purchasers of land under such contracts. 24 Contravention of the prohibition subjects the developer to liability for a penalty, with consequences dependent upon steps being taken to prosecute and the discretion of the Court in imposing a sentence. An additional and perhaps more powerful sanction lies in the power of the purchaser to avoid the contract before completion, although, at least in some cases, it is possible that the economic consequences may ultimately fall on the solicitor for the developer responsible for failing to attach a certificate. That possibility would not, however, undermine the purpose of the sanction which is to promote compliance with the condition mandated by the section. 25 The argument for the appellant as to the construction of the section was articulated in a number of ways. First, it was said that the conferral on the purchaser of a power to avoid the contract carried with it the implicit power to affirm the contract. That involved a power of election. If the purchaser elected to affirm, at least in circumstances where the affirmation was conveyed to the vendor and where the vendor acted in reliance upon the affirmation, the purchaser would be bound by his election and would no longer be entitled to avoid the contract. That conclusion was articulated in the Court below in terms of the equitable principle of estoppel. 26 The primary judge rejected that analysis on the basis that one cannot have estoppel "in the face of a statute", adopting the language of Viscount Radcliffe, delivering the judgment of the Privy Council in Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993 at 1017: see [2007] NSWSC 1116 at [5]. 27 Whether the appellant's argument should be accepted is ultimately a matter of statutory construction. Accordingly, the starting point for the analysis is the language of the statute. The first step in the appellant's argument obtains no direct support from the statutory language. The statute does not in terms confer on the purchaser a power of election, nor does it say anything about affirmation. In its terms, it confers a power of avoidance which is available up to the point of completion, but not thereafter. There is nothing expressed in sub-s (3) to suggest that the power may be lost at some earlier time, by conduct of the purchaser which may give rise to an estoppel. 28 There was some doubt during the argument of the appeal as to whether it would be sufficient for the appellant's purpose if the section were to be construed as providing a power to elect, without reference to the additional elements necessary to create an estoppel. At least in the law of contract, an election may be effective so long as the party electing has knowledge of the circumstances which would warrant the exercise of the right to avoid, as explained in Elder's Trustee & Executor Co Ltd v Commonwealth Homes & Investment Co Ltd [1941] HCA 31; 65 CLR 603 at 617-618 (Rich ACJ, Dixon and McTiernan JJ) dealing with the question of whether the holder of an allotment of shares under a voidable contract was entitled to disclaim the contract some years later. The joint judgment stated, referring to the approach of the Full Court of the Supreme Court of South Australia: "The doctrine upon which the Court acted is that, as a general rule, in order that a party may be precluded by his conduct from exercising an election, it is not necessary that he should have knowledge of the existence of his right to avoid the transaction, as well as of the facts upon which that right arises. This accords with the opinion of Jordan CJ expressed in the course of his judgment in O'Connor v SP Bray Ltd [(1936) 36 SR (NSW) 248 at 263], where the general subject of election is discussed in a very full and informative manner. His Honour said: - 'It has been urged that there must also be knowledge of the legal consequences of the facts and of the legal rights involved; but this is not borne out by the authorities, and the contention is, I think, based upon an attempt to import into ordinary cases of election rules which are peculiar to the equitable doctrine of election. This doctrine is referable to the principle that a person is not permitted both to approbate and reprobate an instrument." 29 In a statutory context, the conferral of an option on one party may mean that a step which would otherwise constitute an election may not be effective unless the party acts in the knowledge that there are alternative courses open and that he or she is making a choice between them: see Latter v Council of the Shire of Muswellbrook [1936] HCA 70; 56 CLR 422 at 433 (Latham CJ) and Young v Bristol Aeroplane Co Ltd [1946] AC 163, 173 (Viscount Simon), being the approach adopted by Handley AJA at [99]-[103] below. However, that approach appears not to have been the basis upon which the present case was presented at trial, or in this Court. 30 Counsel for the respondent objected to the manner in which the discussion of election had arisen on the appeal, noting that the case below was run purely on the basis of estoppel. In reply, counsel for the appellant affirmed his intention to rely only upon estoppel. Although that course would have required, at a trial, the establishment of additional facts, namely a representation and reliance upon it, those circumstances, at least hypothetically, provided a basis for the argument relevant to statutory construction, namely that unless a vendor could rely upon estoppel, the application of the section could give rise to arbitrary and unfair results. The existence of such possible results, which were eminently foreseeable, was said to provide the basis from which one could infer that the legislature could not have intended such an outcome and that the statutory provision was therefore not to be read as precluding a vendor from relying upon the doctrine of estoppel. 31 The appellant's argument, based on the potential for unfair results if estoppel were not available, faces three significant countervailing considerations. First, it does not sit well with the statutory avoidance (in s 103D) of any provision of a contract "or another agreement" that purports to restrict or remove rights of a person under Part 6, which must include a right in the nature of a power conferred by s 96A(3). No doubt s 103D would avoid a provision in the contract of sale by which the purchaser relinquished any power to avoid the contract before completion for failure to comply with the statute. However, there is no reason to suppose that it would not also apply to any other contract or agreement which had that effect. For example, if the parties had realised that the failure to provide a certificate of insurance had rendered the contract liable to avoidance pursuant to s 96A(3), but the purchaser had sought a concession from the vendor prior to completion, the vendor might have agreed to the concession subject to the purchaser relinquishing his right to avoid the contract. No argument was presented to the Court as to why such an express agreement would not foul of s 103D. However, if an express agreement to that effect is avoided, it would be illogical to conclude that an estoppel, arguably arising from the same circumstances, but in the absence of an express agreement, could validly remove or restrict the statutory power. 32 The second consideration which stands in the face of the appellant's submission is that harsh and putatively unfair results may flow from the operation of the section quite apart from any doctrine of estoppel. Thus, s 96A applies in circumstances where it is envisaged that residential building work is to be carried out on the land. It is not unlikely in such a case (which appears to include the present) that the parties will anticipate a lengthy period between exchange and settlement. In that period, an unforeseen fall in the market, or even a change of mind on the part of the purchaser, may make it attractive to the purchaser to rescind for a reason having nothing to do with absence of the certificate of insurance. Such a result, especially in a falling market, would be economically disadvantageous to the vendor. However, there is nothing in s 96A which suggests that the power to rescind is dependent upon the existence of a reason relating to the absence of the certificate of insurance. Nor was any such implied limitation suggested in the present case. Furthermore, the argument based on harsh consequences invites the question as to why, if such consequences were foreseeable and were not limited to cases where protection could be obtained through the doctrine of estoppel, the legislature did not also protect against those consequences. The absence of protection against harsh consequences generally, weighs against the inference that the legislature intended that a limited degree of protection would be available through the general law doctrine of estoppel. 33 A third difficulty faced by the appellant is that, although its argument was limited to the case of estoppel, a necessary part of the argument requires the existence of a right of election. If such a right is to be inferred from the statutory language, it is necessary to ask whether the legislature intended that general law principles relating to election should apply, absent conduct giving rise to an estoppel. If they were to apply, difficult factual questions could arise, of the kind illustrated by the judgment in Elder's Trustee & Executor Co Ltd. There is nothing in the statutory prohibition which supports the view that the legislature intended that the right conferred by sub-s 96A(3) should be subject to such a level of potential factual difficulty in determining its application. Statutory history 34 Although limited assistance was provided to the Court in this respect, it is appropriate to consider whether the appellant's argument obtains support from the history of the relevant provision. 35 Statutory requirements for insurance of residential building work have existed in this State at least since the commencement of the Builders Licensing Act 1971 (NSW) ("the 1971 Act"). Such insurance was originally provided by way of a deemed statutory contract between the Builders Licensing Board, constituted by s 4 of the 1971 Act, and the purchaser of land on which building work is to be or has been carried out: see s 34. In 1987, the Building Services Corporation was established: see Building Services Corporation Act 1987 (NSW). That skeletal Act was soon replaced by the Building Services Corporation Act 1989 (NSW), which introduced a new insurance scheme under which the Corporation was the insurer: s 91. Pursuant to that scheme, the holders of licences were required to pay a premium to the Corporation in respect of residential building work undertaken by them: ss 92-94. Sections 95 and 97, as passed, were precursors to the current ss 96A and 103D: " Notice to insured 95. A holder of a licence who contracts or commences to do any residential building work … must serve on the person for whom the work is to be done a notice in the form approved by the Corporation … within 30 days after: (a) so contracting to do the work; or (b) if a contract for sale of the land on which the work was so commenced is entered into within 6 years of the holder's so commencing to do the work, within 30 days after entering into the contract of sale. Maximum penalty: 10 penalty units. … Contracts not invalidated 97. A contract is not invalidated because of any failure to comply with a requirement made by this Part." 36 Major amendments in relation to the insurance scheme were introduced by the Building Services Corporation Legislation Amendment Act 1996 (NSW) ("the 1996 Act"). Thereafter, a contractor doing residential building work was required to take out a contract of insurance that complied with the Act, whether the work was done under contract or otherwise and included work done by a developer: ss 92 and 96. In particular the latter section provided: " 96 Insurance by developers and other persons … (2) A person who does residential building work otherwise than under a contract, or a developer who does residential building work, must not enter into a contract for the sale of land on which the residential building work has been done or is to be done, unless a certificate of insurance evidencing the contract of insurance, in a form prescribed by the regulations, is attached to the contract. Maximum penalty: 100 penalty units." 37 It may be seen that the first emanations of the current s 96A identified no consequence as resulting from contravention, other than the liability to a penalty. The 1996 Act also introduced s 103D preventing "contracting out" in the same terms as the current provision. Section 96(2) was subsequently amended, so as to divide it into two parts, dealing separately with persons doing residential building work otherwise than under a contract (sub-s (2)) and developers (sub-s (2A)): see Home Building Amendment Act 1999 (NSW) ("the 1999 Amendment Act"), Schedule 1 [13]. The 1999 Amendment Act also made significant amendments in relation to a failure to take out insurance. Sections 92(1) and (2) and 94(1) and (2) were amended to a form which largely reflects the present provision: " 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 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: 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 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. Maximum penalty: 100 penalty units. … 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). (2) However, the contractor remains liable for damages and subject to any other remedy in respect of any breach of the contract committed by the contractor." 38 These amendments reveal an increasing specificity of regulation and an increasing level of economic severity in the sanctions imposed for non-compliance with requirements as to insurance. 39 The requirement with respect to the certificate of insurance and a contract of sale entered into by a developer, originally included in s 96(2), then separated out in s 96(2A), was removed into its own separate section in 2000, being s 96A, by the Home Building Amendment Act 2000 (NSW), Schedule 1 [3] and [4]. At that stage, the section contained only two subsections. Subsection (1) was in its present form, except that the maximum penalty was 100 penalty units, later raised to 1,000 penalty units in the case of a corporation. The section also contained the current sub-s (2), providing a partial exception to the definitions in s 3A. 40 The next amendments to s 96A involved the insertion of sub-ss (3) and (4) in their current form, except that sub-s (4) set the time period for the operation of the section as extending to seven years after the completion of the work, rather than the present six years: see Home Building Legislation Amendment Act 2001 (NSW) ("the 2001 Amendment Act"), Schedule 6 [18]. That amendment, together with a doubling of the maximum penalty under s 96A(1), commenced on 30 November 2001. 41 The 2001 Amendment Act varied s 94, to deal with the consequences of a failure to obtain insurance by empowering a court, if it considered it just and equitable, to permit the contractor to recover money in respect of uninsured work on a quantum meruit basis and by specifying certain factors to which the court could look in determining what was "just and equitable": see s 94(1A)-(1C), inserted by the 2001 Amendment Act, Schedule 6 [9], which took effect on 10 August 2001. The fact that the legislature took the opportunity at that point to permit a court or tribunal to ameliorate the rigours of the operation of s 94, with respect to a contractor carrying out uninsured work, has significance for the operation of s 96A. Not only did the amendment provide support for the view that, absent such express statutory provision, equitable relief was not available to the contractor, but the fact that such relief was provided in respect of s 94 alone tends to imply that no need was identified to ameliorate the possible rigours of s 96A(3). 42 The 2001 Amendment Act also introduced a new sub-s 96A(1A) which required a developer "before entering into a contract" to give the other party a brochure in an approved form containing information explaining the operation of the contract of insurance. Breach of that provision contained a maximum penalty of only 10% of that for a breach of sub-s (1) and there was no equivalent to sub-s (3) prescribing any further effect of a contravention. It is the latter respect in which sub-s (1A) is significant, although it did not commence until 16 February 2004, after relevant events in the present case. 43 There were further amendments to the insurance provisions in 2001 and in 2002, but the only one of present relevance was that which reduced the period in s 96A(4) from seven years to six years: Home Building Amendment (Insurance) Act 2002 (NSW), Schedule 1 [2]. 44 Amendments made in 2004 by the Home Building Amendment Act 2004 (NSW) had two relevant consequences. First, the penalty for a corporation for breach of s 96A(1) was increased significantly to 1,000 penalty units: Schedule 4 [1]. Secondly, s 96A(3) was made subject to a new sub-s (3A), inserted by Schedule 6 [7], which provided as follows: "(3A) A contract is not voidable as referred to in subsection (3) if: (a) the person obtained a certificate of insurance evidencing a contract of insurance that complies with this Act in relation to the residential building work before entering the contract concerned, and (b) before completion of the contract, the person served on the purchaser (or legal practitioner acting on the purchaser's behalf) a certificate of insurance, in the form prescribed by the regulations, evidencing that contract of insurance." 45 New sub-s (3A) did not commence until 7 November 2005. Although referred to in the judgment of the primary judge as part of the section under consideration, its operation in relation to the present case was not explored either below or on appeal. Accordingly, it is not appropriate to explore the nature and scope of its operation. 46 The legislative history over more than 30 years demonstrates the various ways in which the government has sought to grapple with the need for insurance cover for residential building works carried out in the State. At all stages, the underlying legislative purpose has been to provide a satisfactory degree of protection for home owners in respect of recent residential building works. Various forms of insurance have been required, including both a scheme run by the Building Services Corporation and a scheme with prescribed cover provided by private insurers. Schemes for insuring defective building work notoriously need to grapple with limitation problems as defects are frequently not apparent for years after the work is completed. It is therefore important that home owners know the scope of the insurance cover, the person on whom, the manner by which and the time within which claims must be made. 47 It was suggested in the course of argument that one purpose of requiring that a certificate of insurance accompany the contract of sale was to ensure that the home owner was informed of the identity of the insurer. Whilst that may have been one purpose, it is unlikely to have been the primary purpose, as the requirement was first introduced at a time when the statutory corporation was the universal insurer. 48 Three more significant factors arise from the legislative history. The first is the increasing level of statutory regulation of the residential building industry for the clear purpose of protecting home owners from the cost of defective building work. Secondly, imposing a requirement of notification, by including a certificate of insurance with a contract of sale, was undoubtedly perceived to provide improved protection, as the requirement was imposed and refined over many years commencing long after the scheme of compulsory insurance. Thirdly, the tightening of the regime in respect of uninsured work indicates that the legislature was happy to impose on builders severe economic consequences when insurance had not been obtained, not merely depriving them of their right to sue under contract, but also removing any basis for a claim under the general law on a quantum meruit: cf Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; 162 CLR 221, considering the meaning of "not enforceable" in respect of a building contract not in writing as required by s 45 of the 1971 Act. 49 Overall, the legislative history provides little by way of support for the appellant's argument that the power conferred on the purchaser to avoid a contract of sale not accompanied by a certificate of insurance should be read subject to the general law of estoppel. Judicial consideration of similar legislation 50 It is necessary to consider further whether the appellant's contentions obtain support from the long history of judicial consideration of analogous statutory provisions. As the primary judge noted, it is convenient to commence that consideration with the reasoning of the Privy Council in Kok Hoong. That case involved a form of hire-purchase arrangement said to involve a money-lending transaction within the terms of the Malay Moneylenders Ordinance, which rendered the loans and interest unrecoverable if there were no written contract complying with the requirements of the Ordinance. Similarly, bills of sale over the machinery were also said to be void. The primary question was whether a default judgment obtained by the lender gave rise to an estoppel precluding the hirer from pleading reliance on the statutes. The Privy Council held that conduct amounting to an estoppel had not been made out, but nevertheless commented on the next step in the argument, had an estoppel been established. Their Lordships noted that a statutory proscription rendering a transaction void or unenforceable would not necessarily preclude the operation of the doctrine of estoppel, nor, on the other hand, was the unavailability of an estoppel limited to statutory proscriptions. Thus, an infant could not be estopped from relying upon his or her incapacity in resisting a claim for the price of goods: at 1015. Their Lordships continued at 1015-1017: "On the other hand, there are statutes which, though declaring transactions to be unenforceable or void, are nevertheless not essentially prohibitory and so do not preclude estoppels. One example of these is the Statute of Frauds …. It has been said that the question whether an estoppel is to be allowed or not depends on whether the enactment or rule of law relied upon is imposed in the public interest or 'on grounds of general public policy' (see In Re a Bankruptcy Notice [[1924] 2 Ch 76, 97] per Atkin LJ). But a principle as widely stated as this might prove to be rather an elusive guide, since there is no statute, at least public general statute, for which this claim might not be made. In their Lordships' opinion a more direct test to apply in any case such as the present, where the laws of moneylending or monetary security are involved, is to ask whether the law that confronts the estoppel can be seen to represent a social policy to which the court must give effect in the interests of the public generally or some section of the public, despite any rules of evidence as between themselves that the parties may have created by their conduct or otherwise. Thus the laws of gaming or usury … override an estoppel: so do the provisions of the Rent Restrictions Act with regard to orders for possession of controlled tenancies …. General social policy does from time to time require the denial of legal validity to certain transactions by certain persons. This may be for their own protection, as in the case of the infant or other category of persons enjoying what is to some extent a protected status, or for the protection of others who may come to be engaged in dealings with them, as, for instance, the creditors of a bankrupt. In all such cases there is no room for the application of another general and familiar principle of the law that a man may, if he wishes, disclaim a statutory provision enacted for his benefit, for what is for a man's benefit and what is for his protection are not synonymous terms. Nor is it open to the Court to give its sanction to departures from any law that reflects such a policy, even though the party concerned has himself behaved in such a way as would otherwise tie his hands." 51 The unavailability of estoppel in relation to the incapacity of an infant might be described today as an example of the principle of coherence; similarly, reference to the "general social policy" of the statute might today be encompassed within the principle of purposive construction. The statutory regulation of hire-purchase and consumer credit transactions has consistently been found to fall within the principle which would deny the effect of a waiver, acquiescence or conduct amounting to estoppel on the part of the consumer: see, eg, Considine v Citycorp Australia Ltd [1981] 1 NSWLR 657 at 662 (Wootten J) and Vital Finance Corporation Pty Ltd v Taylor (1996) 40 NSWLR 25 at 37 (Simos AJA, Handley JA agreeing). The same result has applied in relation to rent control statutes: see Barilla v James (1964) 81 WN (Pt 1) (NSW) 457 at 462-463 (Walsh J), 468 (Wallace J). 52 Cases of the present kind differ significantly from those where a statute prohibits a particular form of conduct without prescribing the consequences of contravention: see, eg, Australian Broadcasting Corporation v Redmore Pty Ltd [1989] HCA 15; 166 CLR 454 and Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd [1978] HCA 42; 139 CLR 410. In such cases, the consequences of rendering contracts void and unenforceable may be incompatible with the apparent purpose of the legislation. Thus, in Yango Pastoral, the High Court resisted the conclusion that a prohibition on carrying on a banking business without a licence should be understood to render each contract unenforceable or void, in circumstances where the statute did not expressly so require and the consequences for depositors and borrowers might be at odds with the apparent purpose of the statutory requirement: see, eg, at 415 (Gibbs ACJ), 426-427 (Mason J, Aickin J agreeing), 434 (Jacobs J) and 436 (Murphy J). 53 Further statements as to the proper approach where the making of a particular kind of contract is prohibited may be found in cases under the Trade Practices Act 1974 (Cth). As enacted, s 45(2) of the Trade Practices Act provided that a corporation "shall not … make a contract … in restraint of trade". Brennan J stated in Trade Practices Commission v Milreis Pty Ltd (1977) 29 FLR 144 at 158: "The trading practices provisions prohibit certain kinds of conduct, and the effect upon contractual relationships is consequential upon the prohibition. The legislature may, of course, define the effect which a statutory prohibition should have upon a contract made or given effect to in contravention of that prohibition. The general rule is that if the legislature prohibits the making of a contract, the making of the contract does not give rise to an enforceable right or obligation …." 54 That approach was affirmed by the High Court in Carlton & United Breweries Ltd v Castlemaine Tooheys Ltd [1986] HCA 38; 161 CLR 543 at 554, but the operation of these statements in relation to the present form of the Trade Practices Act, which now includes s 4L, must be understood subject to the analysis in SST Consulting Services Pty Ltd v Rieson [2006] HCA 31; 225 CLR 516 at [34] and [49] (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ) and at [102] (Kirby J): see now Master Education Services Pty Ltd v Ketchell [2008] HCA 38 at [34]. The joint judgment in SST Consulting asked, rhetorically, at [49]: "What then would be the basis upon which more general rules, intended to give effect to what is inferred to be 'the legislative intention regarding the extent and the effect of the prohibition which the statute contains', are to be regarded as relevant to, and delineating the field of operation of, a statutory provision expressly dealing with that very subject?" 55 In answering that question, the Court rejected the proposition that s 4L of the Trade Practices Act required resort to common law rules of severance. That section stated: "If the making of a contract after the commencement of this section contravenes this Act by reason of the inclusion of a particular provision in the contract, then, subject to any order made under section 87 or 87A, nothing in this Act affects the validity or enforceability of the contract otherwise than in relation to that provision in so far as that provision is severable." 56 One relevant consideration was the fact that, should common law rules apply, the expectation of severance would rarely be satisfied and the section would have little work to do. The Court concluded that the section, on its proper construction, required, rather than permitted, severance of offending conditions and general law principles were therefore not engaged: at [52]. 57 Consistently with this line of authority, the Court would not look to the general law to identify the consequence of a failure to comply with a statutory prohibition: the statute has prescribed the relevant consequence, namely that the contract is voidable at the option of the purchaser. On the other hand, the statutory identification of a relevant consequence leaves open a question as to whether there are implied limitations on the operation of the consequence. The answer to that question must be found in the particular statutory context, having regard, as appropriate, to the legislative history. 58 In Australasian Concrete Services v Multiplex Constructions Pty Ltd [1999] NSWSC 1140 Hunter J considered the effect of ss 92 and 94 of the Home Building Act in relation to the respective liabilities to obtain insurance, as between the head contractor and various sub-contractors, the complexity of which was compounded by the transitional provisions arising from amendments to the Act. If the sub-contractors were required to hold insurance under s 92 and did not, they were unable to recover their entitlements from the head contract. If it were held that a sub-contractor was required to have such insurance, a question then arose as to whether it could rely upon estoppel, as against the head contractor. As his Honour found in favour of the sub-contractor on the construction question, the latter question did not require to be resolved: at [45]. However, his Honour expressed some views as to the operation of the relevant legal principles. By reference to the penal nature of the prohibition in s 92, the prohibition on contracting out in s 103D and the severity of the consequences of contravention imposed by s 94, his Honour concluded that an estoppel could not run in the face of the statute: at [52]. On the other hand, he identified the public interest to be protected in the following terms: "48 The question to be addressed, in my view, is whether the provisions of Pt 6 of the Act, in particular ss 92 and 94, evince an intention to protect interests that may not be jeopardised by the agreement or the conduct of those bound by the legislation. The public interest in Pt 6 of this legislation is clear: the protection of an ultimate 'consumer' of a residential building, usually its owner, from shoddy or non-performance of residential building works by having in place statutory warranties and a contract of insurance indemnifying the beneficiaries under the Act from loss, inter alia, through non-performance or breach of those warranties. 49 Even if ss 18B and 92 of the Act are construed to impose statutory warranties upon ACS [the sub-contractor] for the benefit of Multiplex [the head contractor] and a requirement that there be in place a contract of insurance which complies with the Act indemnifying Multiplex as a beneficiary under the policy, I think such a scheme is only a servant of the underlying objective of protecting the ultimate consumer and one beyond the power of either Multiplex or ACS to circumvent, at least to the extent that the ultimate consumer's interests are involved. Beyond that, there is no public interest, in my view, in the protection of the interests of Multiplex under such a scheme of insurance." 59 It is apparent that the issues raised in Australasian Concrete Services were far removed from the present. Nevertheless, his Honour considered, obiter, the availability of estoppel in the following terms at [53]: "Whether these conclusions are an end of the matter depends upon the question which one addresses, namely, whether the estoppel acts to circumvent the operation of ss 92 and 94 of the Act, or whether the estoppel acts to circumvent the protection of the public interest which the sections are designed to provide. If the former then, clearly, in this case, ACS may not avail itself of the benefit of estoppel. If the latter, I think just as clearly, estoppel is available to it. I prefer the latter approach in a legal action of this kind. It permits an analysis or distilling of the essential interest at stake and permits recourse to the particular facts of a case in deciding whether, in that case, the estoppel will leave the subject public interest untrammelled." 60 It is not necessary for present purposes to determine how far the distinction drawn by his Honour should be taken to operate. On one view, it is only likely to arise in circumstances where the estoppel runs as between third parties and not as between the intended beneficiary of the statutory protection and the person whose conduct is prohibited. Indeed, the conclusion that such a distinction could be drawn might in turn provide support for the initial conclusion as to statutory construction, which rendered the question of estoppel hypothetical. 61 Blackman v Milne [2006] QSC 350; [2007] 1 Qd R 198, concerned the operation of s 365 of the Property Agents and Motor Dealers Act 2000 (Qld) which relevantly provided: " 365 When parties are bound under a relevant contract (1) The buyer and seller under a relevant contract are bound by the relevant contract when - (a) … the buyer or the buyer's agent receives the warning statement and the relevant contract from the seller or the seller's agent …." 62 The seller having failed to comply with the requirements of sub-s (2)(c), alleged that he was not bound by the contract and hence was entitled to accept a better offer. Unsurprisingly, Douglas J held that the statutory provision operated for the benefit of the buyer and that the seller could not rely upon his own failure to comply. However, his Honour went one step further and held that the buyer was entitled to "waive" the required conduct constituted by the seller's agent's breach: at [17] and [20]. 63 The latter conclusion was picked up in Juniper v Roberts [2007] QSC 379 at [14], in circumstances where the purchaser sought to rely upon his rights to terminate under the statute, and the seller argued that the buyer had elected to affirm the contract and was estopped by his conduct from relying upon his right to terminate. Douglas J stated: "None of the conduct alleged against him in performing work on the property, leasing it or advertising it for sale amounted to a representation that he would not rely upon his statutory right to terminate. I recognised in Blackman v Milne [2006] QSC 350 that it was open to a buyer to waive a breach of this legislation by a seller on the basis that s 365(2)(c)(ii) of this Act was a right created for a buyer's private benefit: see at [20]. It is, in my view, a long step to take from that conclusion to one preventing a buyer relying upon his statutory rights under s 366 and s 367 when he has not waived the sellers' breach nor made any representation that he would not rely upon his statutory rights. As was submitted for Mr Juniper, he had a right to terminate at any time before settlement and a decision to proceed with the contract at some earlier time cannot in itself amount to a representation that the right to terminate later would never be exercised. It was also argued that no detrimental reliance by [the sellers] was established …." 64 His Honour then referred to a decision of the South Australian District Court in South Esplanade Developments Pty Ltd v Astill [2007] SADC 24 in which the trial judge had expressed the view that unless general law principles, including waiver, election and estoppel could be relied upon "an unscrupulous buyer could convert the right to cool off into an instrument of commercial oppression": at [15] in Juniper. Douglas J continued at [16]: "Given the facts of this case, one can understand his Honour's concerns, but it seems to me that the legislature has taken the definite stance of giving a buyer the right to terminate for a relevant breach which is exercisable at any time before the contract settles. It may well have been preferable for the legislation to impose a time limitation on the exercise of that right to terminate, particularly where a buyer has affirmed the contract knowing of his or her rights. Parliament has chosen not to do that, however, but to express itself in uncompromising terms." 65 It will be necessary to return to the authority of Astill, but it is important to note in the present context that there is some apparent inconsistency between the statement in Blackman, repeated in Juniper, that a buyer could "waive" a breach by a seller prior to the time for completion, and the suggestion that the buyer could not "affirm" the contract, even knowing of his or her rights, so as to preclude a later exercise of the right to terminate. The apparent inconsistency may be resolved by treating the right to waive the breach, asserted in Blackman, as arising where there has been a repudiation of the contract by the seller and not as permitting the seller to rely on general law principles in other circumstances. In any event, the statutory terms differed in material respects from the present case: the requirement for a binding contract identified in the Queensland legislation involved no prohibition on any particular conduct, nor the imposition of any penal sanction. 66 The judgment in Astill, to which Douglas J referred, was subject to an appeal to the Full Court: see Astill v South Esplanade Developments Pty Ltd [2007] SASC 231; (2007) ANZ ConvR 534. As appears from the judgment of Doyle CJ, dissenting as to the outcome, the Land and Business (Sale and Conveyancing) Act 1994 (SA) included a number of interlocking provisions, the precise effect of which needed to be considered in order to determine whether a failure by a vendor to serve a statement in the required form on the purchaser could be waived or be the subject of an estoppel precluding the purchaser from relying upon the seller's breach. Doyle CJ, after considering the various provisions, concluded that "the scheme of the Act is inconsistent with the right to rescind under s 5(1) being lost, or being unable to be exercised, by reason of the conduct of a purchaser that would, but for the provisions of the Act, amount to an election to affirm the contract rather than to rescind, or that would give rise to an estoppel of a kind that would, somehow or other, prevent the purchaser from exercising the right to rescind": at [60]. That analysis was set out with clarity at [54]-[58]. 67 The majority, Bleby and Sulan JJ, came to a different conclusion, upholding the result below. At [80], their Honours stated: "The only circumstances where a vendor's statement need not be supplied is where the purchaser has given a formal waiver under and in accordance with the safeguards provided in s 16(c) of the Act. … Except in those circumstances, an accurate vendor's statement is regarded as essential for a purchaser to be placed in a position where he or she can make an informed decision about whether to enter into or to proceed with the contract." 68 However, their Honours later addressed the issue before them in the following terms: "91 … Has the Act thereby excluded any common law rules relating to the principle of election? There is nothing in the Act to suggest that it has. 92 Most purchasers will rely on the information contained in the vendor's statement. However, some may have made their own enquiries and may, independently, be fully informed of the relevant information despite a defective notice. If they do have full knowledge of all the material facts they will be aware of the relevant defects in the vendor's statement. In those circumstances there is no reason why they should not be able to elect either expressly or by their conduct to be bound by the contract." 69 On its face, there appears to be some inconsistency between the reasoning at [80] and that at [92]. Further, before reaching this conclusion their Honours did not address the operation of s 33, avoiding the effect of any "purported exclusion, limitation, modification or waiver of a right conferred, or contractual condition implied, by this Act". That section required to be read in the context of the other provisions, as their Honours noted: at [105]. With respect, the reason for concluding that nevertheless common law principles could apply to allow a purchaser to "waive" his right to give notice of rescission is not entirely persuasive. If it were necessary, I would be inclined to prefer the reasoning of Doyle CJ. However, the statutory scheme in the South Australian legislation is sufficiently removed from that presently under consideration that the reasoning is of no direct application. 70 Before returning to the present case, it is necessary to refer to a decision of this Court upon which the respondent placed some reliance. In Overmyer Industrial Brokers Pty Ltd v Campbells Cash & Carry Pty Ltd [2003] NSWCA 305; (2004) Aust Contract Rep ¶90-181 the Court considered the operation of s 42AA of the Property, Stock and Business Agents Act 1941 (NSW). That provision stated that a licensee was not entitled to any remuneration unless for services performed pursuant to an agreement in writing, signed by both parties and containing prescribed terms. The section also rendered ineffective any term in or applying to an agreement purporting to exclude or restrict the operation of a term required to be contained in it: s 42AA(3). Recovering or retaining remuneration to which a licensee was not entitled rendered the licensee guilty of an offence: s 42AA(5). As the Court (Young CJ in Eq, Meagher and Beazley JJA agreeing) recognised, the provision did not prohibit the making of such a contract, nor render it void, nor did it prohibit the provision of the contracted services. It merely precluded recovery of any form of remuneration. The licensee relied upon what was said to be a representation that should he be the cause of a sale of land, he would get a commission and that the vendor would not take advantage of s 42AA of the Act. His Honour noted that counsel, nevertheless, "did not put overmuch emphasis on the estoppel claim": at [44]. Having referred to Kok Hoong and Barilla, his Honour concluded at [55]: "It would seem to me almost unarguable that the legislature has made it as plain as plain can be that there is not to be recovery of the remuneration in the instant case and that no estoppel in the face of the statute will lie." 71 Ultimately the question whether the statutory power of avoidance can be lost by conduct which would give rise to an estoppel under the general law, is a question of statutory construction. On one view the conferral of an option necessarily involves an election. If, however, the operation of s 103D applies to post-contractual conduct, including an express agreement restricting or removing the right to avoid the contract, it seems inconsistent to allow the right to be restricted or removed by the creation of an estoppel. A purpose of s 96A(3), taken in combination with s 103D, is to protect purchasers from themselves. No doubt other purposes would be consistent with the purchaser having the right to make an irrevocable election to affirm the contract, but they must operate consistently with the effects achieved by ss 96A(3) and 103D. Furthermore, other policies would be consistent with an inability of a purchaser to elect irrevocably to affirm the contract, including the broader public policies underlying the statutory scheme as revealed by the legislative history. 72 Even accepting that an option to avoid necessarily permits a choice, it does not follow that any form of conduct can constitute an affirmation, nor that the affirmation will necessarily be binding. Arguably the permitted act of 'affirmation' is the completion of the contract, although the power to avoid the contract is lost on completion whether or not the purchaser was aware of the facts which would have permitted avoidance, or the existence of the statutory option. Conclusions 73 As explained in Kok Hoong, general law principles relating to estoppel do not apply universally in relation to statutory prohibitions or disabilities. Whether they can operate in a particular case will depend upon the construction of the particular statutory provision, in its context and informed by an understanding of its purpose. 74 Statutes rarely codify the law, so that their operation will often depend upon the continued application of some general law principles. On the other hand, they will also commonly vary the general law, so that inconsistent general law principles will no longer operate. 75 In the present case, s 96A of the Home Building Act imposed a statutory prohibition subject to a significant penalty for breach, with the purpose of providing protection for those who obtain the benefit of residential building works, usually home owners. Broadly understood, the section provides a form of consumer protection. In some cases, the availability of a severe penalty may be an indication that the penalty and not the invalidation of a contract made as a consequence of a breach was intended to be the machinery for enforcing the Act: see Hurst v Vestcorp Ltd (1988) 12 NSWLR 394 at 443 (McHugh JA). However that is not the present case, because s 96A(3) expressly renders the contract voidable at the option of the purchaser before completion. The power so conferred is not a power to make an irrevocable election, nor is there any express provision for loss of the power to avoid the contract, otherwise than by completion. Where the Parliament intended there to be some qualification of the unconditional operation of the Act, it expressly so provided, as in s 94(1A). Subsequent to the events relied upon in the present case, s 96A was also amended so as to ameliorate the apparent effects of sub-s (3), by the addition of the new sub-s (3A). The latter amendment, whatever its precise effect, was not expressed in the terms of the equitable principle relied on by the appellant. 76 This is not a case in which the statute clearly depends upon the continued operation of the general law to be effective. Section 96A expressly qualifies general law provisions which might otherwise have operated with respect to a contract for the sale of land. Where the statute further provides for the consequence of contravention, that provision should be allowed to operate in its terms, which do not import equitable principles from the general law. 77 The exercise by a purchaser of the power to avoid a contract may give rise to harsh consequences for the vendor in circumstances where the principles of estoppel would have no operation in any event: at [31]. Accordingly, it cannot be said that Parliament must have intended that those principles apply in order to ameliorate any harsh but foreseeable consequences. Nor is the operation of the section, according to its terms, likely to give rise to economic consequences disadvantageous to the group to be protected, namely purchasers. That is because the exercise of the power is placed in the hands of the purchaser. 78 It follows that the primary judge was correct in dismissing the claim by the appellant and ordering it to repay the amount of deposit together with interest. 79 At the outset of the appeal there was a question raised as to whether such orders were in any event appropriate because the deposit was held by a stakeholder. However, it was later accepted that, an application for a stay of the orders having been refused, the deposit had in fact been released to the respondent. No variation of the orders made below is required. 80 The appeal should be dismissed and the appellant ordered to pay the costs of the respondent in this Court. 81 HANDLEY AJA: In this appeal I have had the considerable advantage of reading the judgment of Basten JA in draft. He has set out the facts, and traced the history of the legislation. I agree with almost everything he has written, but on the critical question I have come to a different conclusion. 82 The appeal turns on the effect of s 96A(1) and (3) of the Home Building Act 1989 in force on 30 August 2002 when the appellant developer contracted to sell to the respondent a unit in a proposed strata building. Section 96A relevantly provided: "(1) A developer must not enter into a contract for the sale of land on which residential building work … is to be done on the developer's behalf unless a certificate of insurance evidencing the contract of insurance required under section 92 by the person who did or does the work for the developer, in a form prescribed by the regulations, is attached to the contract of sale. (2) … (3) If a person contravenes subsection (1) in respect of a contract, the contract is voidable at the option of the purchaser before the completion of the contract." 83 It was common ground that the appellant was a developer, that subs (1) applied, and that the required certificate of insurance was not attached to the contract of sale. It was also common ground that subs (3) applied and the contract was "voidable at the option of the purchaser before completion." 84 On 20 November 2003, before the contract had been completed, the respondent purchaser purported to exercise the power of avoidance conferred by s 96A(3). 85 The short question is whether the statutory power of avoidance under s 96A(3) subsists until completion regardless of any conduct by the purchaser in the meantime, or whether the section merely defines the maximum duration of the power by identifying the last possible moment for its exercise. One might ask whether the section discloses an intention to protect the purchaser from himself by preventing him electing to affirm the contract before completion. 86 The contract was voidable at the option of the purchaser but remained binding on the vendor. Under the general law a contract for the sale of land is voidable by the victim of an innocent or fraudulent misrepresentation by the other party. This means that the victim has the option or power of electing either to affirm or to avoid the contract. If he elects to affirm the contract becomes enforceable against him. If he elects to avoid, it is avoided ab initio. A power to rescind or avoid may also be conferred by an express term of the contract: Sargent v ASL Developments Ltd (1974) 131 CLR 634. (Sargent) 87 The victim of the misrepresentation loses the right to avoid the contract if he elects to affirm, and an election once made is irrevocable. A victim who has not made an election to affirm may become estopped from denying that he has. 88 A party with an express right to rescind or avoid the contract can also lose that right by electing to affirm or by becoming estopped from denying that he has made such an election: Sargant. 89 The principles under which an option or power to avoid a contract under the general law, or under its express terms, may be lost by election or estoppel do not necessarily apply where a statute makes a contract voidable at the option of one of the parties. This will depend on the construction of the statute. 90 Legislation for the protection of infants, borrowers from moneylenders, residential tenants, insolvent debtors, franchisees and the like is generally understood to give effect to a social policy which restricts the capacity of members of the protected class to surrender their statutory rights by contract or estoppel: Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993. 91 The policy behind s 96A(3) appears to have been to encourage developer vendors to comply with their obligations under s 96A(1) and to require their builders to comply with their own obligations to insure imposed by s 92. 92 Section 103D provides that a contractual provision that purports to restrict or remove the rights of a person under the Act is void. There was no such provision in the contract. The section, by necessary implication, also prevents the purchaser's statutory rights being affected by his or her pre-contractual conduct. 93 However unlike other legislation giving effect to a social policy, s 96A(3) does not appear to be intended to protect purchasers from themselves. The option to avoid the contract conferred by s 96A(3) may be lost by post-contractual conduct because the purchaser may elect to complete. A right or power or option to avoid a contract has a double aspect. It necessarily includes a right or power to affirm the contract. This is the fundamental difference between a contract which is voidable by a party and one that is void. 94 A right, power or option, under the general law to avoid a contract remains exercisable despite any conduct of the holder, short of an estoppel, until he or she has full knowledge of the relevant facts, or knows or believes that the right, power or option is exercisable: Commonwealth Homes and Investment Co. Ltd v Smith (1937) 59 CLR 443, 463 per Dixon J (Commonwealth Homes). In this case the only relevant facts were that the vendor was a developer who had arranged for residential building work to be done on his behalf and the required insurance certificate was not attached to the contract. 95 The fact that the certificate of insurance was not attached would be obvious to the purchaser's solicitor on or before exchange. His knowledge would be imputed to the purchaser: Sargent v ASL Developments Ltd (1974) 131 CLR 634. The other facts may have been known to the purchaser prior to exchange, or may have come to that knowledge, or the knowledge of her solicitor later. The statutory option on the other hand may not have been known to the purchaser or her solicitor until later. 96 The provisions of the Act as they affected this purchaser were matters of law and not material facts. An election to affirm a contract can occur under the general law if the person concerned, with knowledge of the relevant facts, but without being aware of his or her right or power to elect, asserts a right under the contract, or does some other unequivocal act which he or she is only entitled to do under the contract: Handley "Estoppel by Conduct and Election" pp 237-244. 97 However a right or option of election under a statute may be different, and knowledge of its existence may be required before the elector's conduct can affirm the contract so as to preclude a later election to avoid. 98 In Commonwealth Homes (1937) 59 CLR 443 the Court had to construe provisions in the Companies Act (SA) dealing with the minimum subscription under a prospectus which provided that an allotment in breach of those provisions "shall not be binding on the applicant". Dixon J said at pp 461-2: " … I think that section 226 should not be construed as depriving the allotment of shares … of all legal effect whatsoever. It cannot be the source of any obligation upon the allottee or applicant. But he may take advantage of it and by his assent given with knowledge bind himself to the obligations incident to the status of membership in respect of the shares allotted. In Western Australia, where there is a similar provision, it was construed … as making the allotment voidable at the instance of the allottee, a voidability which ceases on winding up." 99 A different construction was given to Workers Compensation legislation which provided that the worker "may at his option proceed under this Act or independently of this Act." In Latter v Muswellbrook Corporation (1936) 56 CLR 422, 433 Latham CJ said: "In my opinion the words 'at his option' mean that the worker must exercise a choice between the two alternatives which the law allows to him. The mere adoption of one alternative without knowledge that the law permits another alternative is not an act of choice between the two alternatives. Therefore, in my opinion, the worker cannot be held to have exercised an option unless he knew that there were two alternatives. This does not mean that he must fully understand the meaning of the provisions of this section … It means simply that he must know that there are two courses open and that, with such knowledge, he adopts one of them. The contrary view, namely, that knowledge of his right is irrelevant, appears to me to ignore the words 'at his option' There is … a very real difference between … (1) The worker may proceed under this Act or independently of this Act; and (2) The worker may at his option proceed under this Act or independently of this Act … The significance of a provision such as (1) would be that if the worker did one thing he was precluded from doing the other. On any other construction the provision would meant nothing … The words 'at his option' add to the meaning of the provision. They introduce an additional element. This additional element must be that there should be knowledge that the alternatives exist and a choice between them." 100 The same view was taken of an equivalent provision in Young v Bristol Aeroplane Co. Ltd [1946] AC 163, 173 where Viscount Simon said: "Here we are dealing with a statutory 'option', in its setting in the section, and I am willing to adopt the view, which has constantly been expressed and enforced, that the workman does not lose his alternative remedy merely because he accepts some payments under the Act, when the option is unknown to him." 101 Under the general law a party to a voidable contract can avoid it or affirm it. In the language of Latham CJ. in Latter's case (above) he could do one thing or the other, but if he did one of them he could not do the other. That would have been the position if s 96A(3) had simply made the contract voidable by the purchaser. 102 The section however made the contract voidable "at the option of the purchaser" adding, as Latham CJ said "an additional element" which attracted the distinction he drew. 103 In my opinion the construction adopted In Latter's case should be applied to s 96A(3) and it should be held that the purchaser could affirm the contract prior to completion if she was aware of the alternatives and intended to choose between them. 104 While this construction would allow the appellant to establish that the purchaser made a deliberate election to affirm the contract with knowledge of the choice, it leaves no room for an estoppel against the purchaser if she did not have that knowledge and intention. An estoppel in those circumstances would contradict the section. 105 In my judgment the appeal should be allowed and the Court should answer the preliminary question by declaring that s 96A(3) on its true construction does not prevent a purchaser with the option referred to in that section making a binding election to affirm the contract prior to completion if, at the time, the purchaser was aware of the alternatives and intended to choose between them. 106 Basten JA comments in para [29] of his reasons that election was not the basis of the case presented by the vendor at the trial or on the appeal. This is undoubtedly correct but the point was taken by the Court during argument and was not disclaimed by the appellant. The separate question heard by Young CJ in Eq only raised estoppel as an answer to the purchaser's reliance on the statute, but the negative answer to that question led the Chief Judge to make a final order dismissing the vendor's action for specific performance.

TUDOR DEVELOPMENTS PTY LTD v MAKEIG

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Judgment (35 paragraphs)

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Legislation Cited (14)

Cases Cited (23)

Cited By (11)