Australasian Concrete Services v Multiplex Constructions

[1999] NSWSC 1140

CITATION:	Australasian Concrete Services v Multiplex Constructions [1999] NSWSC 1140
CURRENT JURISDICTION:	Equity Division Construction List
FILE NUMBER(S):	55014/99
HEARING DATE(S):	4.11.1999
JUDGMENT DATE:	25 November 1999
PARTIES :	Australasian Concrete Services Pty Ltd v Multiplex Constructions Pty Ltd
JUDGMENT OF:	Hunter J

COUNSEL :	Plaintiff: Mr G Sirtes Defendant: Mr P Biscoe QC Mr N Nicholls
SOLICITORS:	Plaintiff: Luchetti & Co Defendant: Minter Ellison
CATCHWORDS:	Building Contract; Head Contract entered into before commencement of Home Building Act 1989; Sub-contract entered into after that commencement; Construction of transitional provisions s 91, cl 39 Sched 4 of the Home Building Act; Whether s 92 of Act applied to sub-contract; Whether sub-contract unenforceable by reason of s 94 of Act; Whether head-contractor estopped from reliance upon s 94.
ACTS CITED:	Building Services Corporation Act 1989 Home Building Act 1989
CASES CITED:	Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993 Barilla v James (1964) 81 WN (Pt 1) (NSW) 457 Beckford Nominees Pty Ltd v Shell Co of America Ltd (1987) 73 ALR 373 Clark Equipment Australia Ltd v Covcat Pty Ltd (1987) 71 ALR 367
DECISION:	Sub-contractor not prohibited by s 92 of Home Building Act 1989 from entering into sub-contract : Part 6 of the Building Services Corporation Act 1989 applied to the sub-contract works.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CONSTRUCTION LIST

HUNTER J

THURSDAY 25 NOVEMBER 1999

55014/99 AUSTRALASIAN CONCRETE SERVICES PTY LTD v MULTIPLEX CONSTRUCTIONS PTY LTD

REASONS FOR JUDGMENT

1 On 20 August 1999 Rolfe J made an order pursuant to Pt 31 r2 of the Supreme Court Rules (the Pt 31 order) for the separate determination of the following questions (the separate questions):

“1.1Whether or not the plaintiff was a person required to have in force a contract of insurance in compliance with Part 6 of the Home Building Act 1989 upon the entry
into of the Subcontract with the defendant dated 14 June 1997 the subject of the
proceedings.
1.2 If the answer to 1.1 is ‘yes’ then:
(a) Whether the plaintiff can reply on an estoppel as pleaded in the Reply filed herein; or
(b) Whether there was a waiver by the defendant as pleaded in the Reply filed herein”.

It will be seen that, having regard to my view as to the proper construction of s 92 in Pt 6 of the Home Building Act 1989 (the Act), this question, as formulated by the parties, involves a misconception of the operation of Pt 6 of the Act. 2 For the purposes of the determination of the separate questions, the parties are agreed upon the following facts:

“Agreed Statement of Facts for the Purposes of the Preliminary Question

1. Sydney Park Developments Pty Limited and Sydney Park Pty Limited were at all material times the joint owners of the land which is the site of the townhouse development known as 177-219 Mitchell Road, Alexandria and is comprised in Lot B in Deposit Plan 416610 and Lot 3 in Deposited Plan 230024. (Refer to the Head Contract p.3 definition of development land).
2. Prior to 1 May 1997 (the date upon which Part 6 of the Home Building Act 1989 NSW came into effect) Multiplex:

(a) entered into contracts with Sydney Park Developments Pty Limited in respect of demolition work and external work on the site, which contracts are referred to as ‘Early Works Agreement’ and the ‘External Works Agreement’. (Refer to the Head Contract p.9 clause 4.3 and 4.4); and
(b) commenced work on the project known as Sydney Park Village.


3. On 9 April 1997 Multiplex, as required by section 94(1)(a) of the Building Services Corporation Act 1989 paid to the Department of Fair Trading insurance premiums totalling $122,430 being the prescribed insurance premium in respect of building work for units upon the site.

4. By Agreement dated 30 April 1997 between Multiplex and Sydney Park Developments Pty Limited (the Head Contract) Multiplex agreed to construct 371 units upon the site and Sydney Park Developments Pty Limited agreed to pay Multiplex $53,167,367 subject to the terms of the Head Contract for the performance of the work (Head Contract p. 64). The agreement included the performance of the work required in the ‘Early Works Agreement’ and the ‘External Works Agreement’.

5. Australasian Concrete Services Pty Limited (ACS) entered into a sub-contract with Multiplex on or about 17 June 1997 to, inter alia, supply and install Rapidwall Panels on Stage 1 of the project (‘ the Subcontract’ ).

6. The supply and installation of Rapidwall panels formed part of the head contract works to be performed by Multiplex.

7. Multiplex engaged in negotiations with ACS prior to the execution of the Subcontract. During the negotiations Multiplex did not require ACS to take out any insurance pursuant to or in compliance with Part 6 of the Home Building Act 1989 NSW and the regulations appurtenant thereto.

8. The Multiplex subcontract required that ACS have in place and maintain during the performance of the work policies of insurance, including workers compensation, public liability and contractors’ risk insurance. At no time prior to or during the performance of ACS’ works did Multiplex require, direct or demand ACS to effect any further insurances.

9. Multiplex requested ACS to provide certificates of currency of policies of insurance in compliance with the terms of the Subcontract, as part of each monthly progress claim submitted to Multiplex.

10. ACS provided to Multiplex with each monthly progress claim, certificates of currency in respect of workers compensation and public liability insurance policies that the Subcontract had required ACS to effect. Multiplex made monthly progress payments to ACS from July 1997 to about May 1998 on account of the adjusted contract sum. After the execution of the Variations Claims Agreement on 4 June 1998 Multiplex made payments to ACS fortnightly. The progress payments included monies for both Subcontract works performed pursuant to the Subcontract and variations to the Subcontract. The quantum of some of the payments made were disputed by ACS.

11. In September 1997 Multiplex issued a variation to ACS for the supply and erection of Rapidwall to Stage 2 of the project in the amount of $1.5M. At the time of issuing this variation, Multiplex did not require ACS to effect any additional insurances or further insurances other than those ACS were required to provide pursuant to the Subcontract.

12. During 1998, disputes arose between Multiplex and ACS in respect of the
entitlement of ACS to further adjustments to the Subcontract sum.

13. On 4 June 1998 Multiplex and ACS executed a document entitled ‘Variations
Claims Agreement’ whereby Multiplex agreed to pay amounts specified in the agreement.

14. Multiplex, during the performance of the work:

(a) paid ACS, as part of its progress payments, amounts in relation to a
number of variations which are the subject of the plaintiff’s claim in these proceedings; and

(b) paid, pursuant to the Variations Claims Agreement, amounts identified in
the Variations Claims Agreement.
15. Multiplex did not raise at any time prior to the commencement of these proceedings:


(a) The alleged requirement that ACS effect insurance under section 92 of the
Home Building Act and the regulations appurtenant thereto;

(b) Alleged non compliance by ACS with section 92 of the Home Building
Act;

(c) the argument that it was not obliged to pay ACS any amounts in respect of
the subcontract or the work performed as a result of section 94 of the Home
Building Act.

16. Had ACS been advised by Multiplex prior to, at the time, or subsequent to,
executing the Subcontract that:

(a) ACS was required by Multiplex to take out a policy of insurance in
compliance with part 6 of the Home Building Act; and/or

(b) Multiplex would not make any payment to ACS under the Subcontract, on
account of contractual works and/or variations, unless and until insurance
complying with part 6 of the Home Building Act was in place,
ACS would have immediately taken steps to take out such insurance and, if the subcontract had already been entered into, would have attempted to agree with Multiplex to discharge the subcontract and to execute a new subcontract for the remainder of the Subcontract work.

17. Neither party turned its mind to the application of Part 6 of the Home Building Act
to ACS until after the commencement of these proceedings.

18. ACS, in performing the works, being the Subcontract works and variations, relied
upon:
(a) its Subcontract with Multiplex, as set out in paragraph 5 hereof;
(b) Multiplex’s conduct in making monthly progress payments to ACS from
July 1997 to about May 1998, and payments made pursuant to the
Variations Claims Agreement, as set out in paragraph 10 hereof;
(c) Multiplex’s conduct in not directing ACS to procure any further insurances
other than those required by the Subcontract.”

3 In the course of these reasons I have adopted some of the terminology of the agreed facts. In particular, “Multiplex” refers to the defendant; “the head contract” refers to the contract between Multiplex and Sydney Park Developments Pty Ltd of 30 April 1997 for the construction of 371 residential units and “the head contract works” refers to that work; “ACS” refers to the plaintiff; “the sub-contract” refers to the sub-contract between ACS and Multiplex of 17 June 1997 for the performance of a portion of the head contract works by ACS, namely, the supply and installation of wall panels, and “the sub-contract works” refers to that sub-contract work. 4 The Act is, in substance, the amended form of the Building Services Corporation Act 1989 (the former Act), the amendment being effected by the Building Services Corporation Legislation Amendment Act 1996 (the amending Act). 5 The amending Act introduced significant changes to the insurance provisions of the former Act in terms of Pt 6 of the Act. Those provisions took effect in relation to residential building work “done or… to be done… under a contract made on or after [1 May 1997]”, the day after the head contract was entered into. 6 It is the contention of Multiplex that ACS entered into the sub-contract in contravention of s 92 of the Act, which is in the following terms:

“92 Contract work must be insured

(1) A person must not contract to do any residential building work unless a contract of insurance that complies with this Act is in force in relation to the proposed work.

Maximum penalty: 100 penalty units.

(2) A person must not contract to do any residential building work unless a certificate of insurance evidencing the contract of insurance, in a form prescribed by the regulations, is attached to the contract.

Maximum penalty: 100 penalty units.

(3) This section does not apply if the contract price does not exceed $5,000 or (if the contract price is not known) the reasonable market cost of the labour and materials involved does not exceed $5,000.

(4) If the same parties enter into two or more contracts to carry out work in stages, the contract price for the purposes of subsection (3) is taken to be the sum of the contract prices under each of the contracts.

(5) The regulations may prescribe another amount for the purposes of subsection (3) and an amount so prescribed is to apply in the place of the amount referred to in that subsection.”

Contravention of s 92(1) has the following further consequence under the Act:

“94 Effects on contract of contravention
(1) A person who enters into a contract in contravention of section 92(1) or 93 (1):
(a) is not entitled to damages or to enforce any other remedy in respect of a
breach of the contract committed by any other party to the contract or to
recover money in respect of work done under the contract under any other right of action (including a quantum meruit action), but

(b) is liable for damages and subject to any other remedy in respect of a breach of the contract committed by the person.”

7    The thrust of Multiplex’s contentions is that: Pt 6 of the former Act applies to the head contract works, while Pt 6 of the Act applies concurrently to the sub-contract works. 8    It is agreed that Multiplex complied with the insurance provisions of the former Act by due payment of the prescribed premium. It is common ground that there was no obligation upon ACS under the former Act to pay any further premiums. 9    If the argument of Multiplex is correct, it had no obligation to comply with Pt 6 of the Act while of all of its sub-contractors, who entered into a sub-contract on or after the commencement date of the Act, had an obligation to insure pursuant to the provisions of Pt 6 of the Act: on any view of it, an absurd result and one to be avoided if the Act and the amending Act is open to a construction that leads to a more sensible result. 10    S 102 of the Act provides as follows:

“102 General requirements for insurance

(1) This section applies to all contracts of insurance required to be entered into by or under this Part.

(2) The insurance must be of a kind approved by the Minister and be provided by an insurer approved by the Minister.

(3) The contract of insurance must provide for cover of not less than $200,000, or such other amount as may be prescribed by the regulations, in relation to each dwelling to which the insurance relates.

(4) Any limitations on liability under the contract of insurance must comply with any requirements of the regulations.

(5) The contract of insurance must comply with any other requirements of the regulations.

(6) A contract of insurance may provide that the insurer is not liable for such amount (not exceeding $500) of each claim as is specified in the contract.”

Presumably, that would mean, according to Multiplex’s argument, that ACS, and each of Multiplex’s sub-contractors similarly affected, had an obligation to effect an insurance cover for not less than $200,000 in relation to each of the 371 units in the subject works, or “such other amount as may be prescribed”.

11 It is noted that the s 94 point is taken after a period of some sixteen months of construction work during which Multiplex took advantage of ACS’s performance of the sub-contract, issued instructions for a variation in the amount of $1,500,000 and entered into the Variations Claims Agreement under which it agreed to make certain payments to ACS. Clearly, as between Multiplex and ACS, there is no public interest consideration in holding the sub-contract unenforceable against Multiplex by reason of the operation of s 94 of the Act, and, if it is open to the court so to do, the Act should be construed to preserve the enforceability of the sub-contract against Multiplex.

12 Under the former Act the insurance regime was vastly different from that prescribed under the Act. The scheme under the former Act was known as the BSC Insurance and was a statutory scheme under which the Building Services Corporation (the Corporation), constituted under the former Act, was the insurer. There were two schemes of insurance: one known as the BSC Comprehensive Insurance Scheme and the other, the BSC Special Insurance Scheme. The BSC Comprehensive Insurance protection automatically applied to residential building work where the holder of an appropriate licence contracted to do the work; where the cost exceeded $1000; where the work was of a kind that required building approval under the Local Government Act 1919 and where the work was not performed under an owner-builder permit. Under s 94 it was an offence if the prescribed premium for the BSC Comprehensive Insurance was not paid within thirty days after the holder of an appropriate licence contracted to do residential building work to which the BSC Comprehensive protection applied. Significantly, in the context of this litigation, s 97 of the former Act provided that a contract was not invalidated because of any failure to comply with its insurance requirements. 13 The Building Services Corporation Regulation made under the former Act prescribed the form of the BSC Comprehensive Scheme in terms of Form 4 as specified in cl 3 of the Regulation. Form 4 provided for a statutory scheme of insurance. Under cl 2 of Form 4 the scheme was described as covering “insured building work”, which was defined by cl 1 as meaning “residential building work, … contracted to be done… by the holder of an appropriate licence”. Under the former Act, residential building work was defined to mean:

“any work involved in, or involved in co-ordinating or supervising any work involved in: (a) the construction of a dwelling; or
(b) the making of alterations or additions to a dwelling; or
(c) the repairing, renovation, decoration or protective treatment of a dwelling.”
“[D]welling” was defined to mean:
“a building or portion of a building that is designed, constructed or adapted for use as a dwelling…”

14    Under the statutory scheme, cl 4 of Form 4, of the Regulation identified the beneficiaries as:

i) the owner of the land on which the residential building work was done;
ii) the person other than the owner who contracted to have the residential building work done; and
iii) the successor in title to the owner.

It excluded the licence holder who carried out the residential building work.

15    Cl 5 of Form 4 was the indemnity provision and it provided that the Corporation would indemnify the following losses:

i) the deposit paid under a contract to do the work;
ii) the difference between payment made under the contract and the reasonable market cost of the work;
iii) the cost of completion;
iv) the cost of rectification of defects.

16    Under the Act the statutory scheme of insurance has been replaced by a scheme based upon a conventional contract of insurance. The form of the contract of insurance required to satisfy s 92 is provided for in s 99 of the Act as follows:

“99 Requirements for insurance for residential building work
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 or death of the contractor or because of the fact that, after due search and inquiry, the contractor cannot be found, and
(b) a person on whose behalf the work is being done and the person’s
successors in title against the risk of loss arising from a breach of a statutory warranty in respect of the work.”

17    The statutory warranties referred to are those prescribed by s 18B of the Act as warranties that the work will be performed in a proper and workmanlike manner and in accordance with the contract: that all materials will be good and suitable for the required purpose and, unless otherwise stated, will be new: that the work will be done in accordance with the general law: that the work will be done with due diligence: that the work will result in a dwelling reasonably fit for occupation and that materials will be reasonably fit for the specified purpose, where that purpose is made known to the holder of the licence. 18    Under cl 42 of the Regulation made pursuant to the Act, the prescribed insurance contract “must provide that the beneficiaries under the contract are:

(a) a person:
(i) on whose behalf residential building work covered by the contract is done or is to be done, or
(ii) …
(iii) …

(b) a successor in title to any person referred to in paragraph (a) (i), (ii) or (iii).”

19    Cl 43 of the Regulation provides that the insurance contract must indemnify the beneficiaries from loss or damage resulting from non-completion and for breach of the statutory warranties. Par 3 of that clause provides further that the contract must indemnify the beneficiary for the following:

“(a) loss or damage resulting from faulty design, where the design was provided by the
contractor or supplier, or

(b) loss or damage resulting from non-completion of the work because of early termination of the contract for the work because of the contractor’s or supplier’s wrongful failure or refusal to complete the work or supply, or
(c) the cost of alternative accommodation, removal and storage costs reasonably and necessarily incurred as a result of an event referred to in subclause (1) or (2), or

(d) loss of deposit or progress payment due to an event referred to in subclause (1) or (2).”

20    Par (4) of cl 43 provides as follows:

“(4) The insurance contract must state that the risks indemnified include the acts and omissions of all persons contracted by the contractor, supplier, owner-builder or other person to perform the work resulting in loss or damage of a kind referred to in this clause.”

If the Act had applied to the head contract works, compliance with such a provision would result in an insurance contract which covered the “acts and omissions” of ACS. It seems anomalous in relation to that insurance contract that ACS would also be required to have in place a separate contract of insurance under s 92. 21 In my view, the answer to the separate questions is provided by the provisions of s 91 and cl 39 of schedule 4 to the Act. 22 Multiplex submits that the combined operation of s 91 of the Act and cl 39 of schedule 4 to the Act has the dual effect of Pt 6 of the former Act applying to the head contract works, and Pt 6 of the Act applying to those parts of that residential building work where a sub-contract to perform any of those parts was entered into on or after 1 May 1997. The way in which it was put on behalf of Multiplex was as follows:

“15 …:-

(a) clause 39 is a savings provision. It is not a transitional provision in the sense that it
assists the new 1996 scheme of private insurance of new risks.
(b) clause 39 says that the “work” insured under the old automatic statutory insurance scheme in relation to work covered by the old scheme before 1 May 1997, continues to be insured under the old scheme. The risks covered by the old scheme were all defined by reference to the “work”. Clause 39 has nothing to say about the new risks and the new private contract of insurance required for the new risks defined under the new 1996 legislation which are referable to the specific contractor, in this case the plaintiff: see s.99 and Part 2C particularly s.18B (see para 5(b) above). Clause 39 has nothing to say about s.92 by which a person such as the plaintiff is prohibited from contracting to do any residential building work unless a contract of insurance that complies with the new Act is in force. Under the old Act there were no contracts of insurance.
(c) the consequence of the plaintiff’s argument is that the new risks under the 1996 legislation are uninsured.”

In my view the distinction sought to be drawn between the subject matter of “residential building work” and the subject matter of a “contract to do any residential building work” is without substance. 23 The incidence of operation of both s 91 of the Act and cl 39 of schedule 4 to the Act is upon residential building work. The continued application of Pt 6 of the former Act to residential building work is provided for in cl 39 of schedule 4 to the Act as follows:

“39 Former insurance schemes
(1) Part 6 , as in force immediately before the commencement of Schedule 4[3] to the amending Act , and any other provisions of this Act or the regulations relating to insurance under this Act as so in force, applies to work insured , or existing work required to be insured, under that Part before that commencement , in the same way that those provisions applied immediately before that commencement.” (emphasis added)

24 The application of the amended Pt 6 to residential building work in the Act is provided for in s 91 of the Act in the following terms:

“91 When Part applies

(1) This Part, as amended by the Building Services Corporation Legislation Amendment Act 1996, applies to residential building work or owner-builder work only to the extent that it is done or is to be done or has been done under a contract made on or after the date of commencement of this section or, if it is done otherwise than under a contract, only to the extent that it is commenced on or after that commencement.” (emphasis added)

25 There is no dispute that Pt 6 of the former Act applied to each of the 371 units comprised in the residential building work, the subject of the head contract, which was entered into 30 April 1997. Under the former Act, Pt 6 automatically put in place a statutory scheme of insurance to cover the whole of the works including the works the subject of the ACS sub-contract. Under that statutory scheme of insurance the principal under the head contract with Multiplex was indemnified against loss, including the cost of rectification of ACS’s work performed as part of the head contract work (Cl 5 of the Regulation under the former Act). The emphasised portion of cl 39 of schedule 4 to the Act is unambiguous in its expression of legislative intention that the insurance provisions of the former Act, including principally Pt 6, applied to the performance of the 371 unit residential building works, the subject of the head contract. 26 In my view, s 91 of the Act is equally clear in its intention to exclude residential building works from the operation of Pt 6 of the Act where those works are the subject of a contract for their performance made before 1 May 1997. It is the complementary provision to cl 39 of schedule 4 and “only” applies where the contract to perform the residential building work was made on or after 1 May 1997. The “residential building work” referred to in each of those provisions does not change in the turning of pages in the Act from s 91 to cl 39 of schedule 4. It is comprised in the 371 units and every part of that residential building work including the sub-contract works. 27 I think the wording of those two provisions is unambiguous and offers no support for the distinction sought to be drawn on behalf of Multiplex. 28 In my view the answer to question 1.1 of the separate questions should be answered in the negative and the question in 1.2 does not call for an answer. 29 While it is unnecessary to consider other arguments advanced by the parties in relation to the questions for separate determination, it may be of some benefit to offer my view on the operation of Pt 6 of the Act. 30 It was submitted on behalf of ACS that s 92 of the Act did not apply to sub-contractors and that Pt 6 of the Act does not call for a “multi-hyphened tiered insurance” structure to be put in place in relation to a residential building work. Support for that contention was said to be found in the provisions of s 98 of the Act which is in the following terms:

“98 Employees and others not required to insure

Nothing in this Part:

(a) requires a person who carries out work for a person required by this Part to obtain insurance in respect of that work to obtain insurance, or

(b) makes the first-mentioned person liable for an offence for failing to do so.”

31 In the written submissions on behalf of Multiplex reliance was placed upon the heading to the section as evidencing a legislative intention to restrict the ambit of s 98 to employees “and others of that ilk, such as consultants”, relying upon the operation of s 35(4)(b) of the Interpretation Act 1987. However, during the course of oral submissions that proposition was abandoned, that is, to the extent that it relied upon the terminology of the heading to the section. However, in my view, whether one has regard to the heading or not, the section should not be construed to have the limited operation advanced on behalf of Multiplex. It is wide enough to embrace a sub-contractor for works in respect of which the head contractor is required to obtain insurance pursuant to Pt 6 of the Act. However, I do not think that it follows that s 92 has no application to sub-contractors generally. 32 It was submitted on behalf of Multiplex that one should contrast the phrase “work for” where used in s 98 with the phrases “on behalf of” or “on whose behalf” residential building work is done, where those phrases are used in ss 4 and 99 of the Act, respectively. It is said that the term “work for” is “suggestive of persons in a different relationship to licensed contractors - such as employees and the like”. I am unable to read that distinction into the different terminology adopted in those sections and s 98. The use of phrases “work for” or “on behalf of”, in my view, is merely an alternative use of terminology to denote contractual relationships in relation to residential building work without seeking to draw any nicer distinctions within those relationships. 33 Further, it was submitted on behalf of Multiplex that s 4 of the Act clearly applied to sub-contractors and, accordingly, that s 92 had a similar ambit. S 4 is in the following terms:

“4 Unlicensed contracting
A person must not contract to do:
(a) any residential building work, or

(b) any specialist work,

except as or on behalf of an individual, partnership or corporation that is the holder of a licence authorising its holder to contract to do that work.
Maximum penalty: 100 penalty units.”

34    I think all that s 4 is saying is that residential building work must be performed by the holder of a licence under the Act, and anybody contracting to do that work, must do so as, or on behalf of, such a holder of a licence. I accept that that provision would extend to a sub-contractor contracting to perform residential building work and that such a sub-contractor must be a holder of a licence under the Act. In my view that has nothing to say about the operation of s 92. 35    As it happens, I think s 92 is capable of extending to sub-contractors, but not in the way submitted by Multiplex. That section prohibits a person from contracting to do any residential building work “unless a contract of insurance that complies with [the] Act is in force in relation to the proposed work” (emphasis added). S 92(1) does not say that the contract of insurance is one that is required of the sub-contractor under a head contract where the head contractor is obliged to insure under s 92. All that is required is that there be a contract of insurance in force in relation to the work. That requirement is satisfied by the head contractor’s contract of insurance. That construction has to be read in conjunction with s 92(2). I think the latter subsection is satisfied in the last mentioned situation where the head contractor’s certificate of insurance is attached to the sub-contract. That construction, in my view, is also consistent with the obligation of a sub-contractor, who is engaged in the performance of residential building work, to hold a licence under the Act. 36 That construction of s 92 is consistent with the operation of s 98 as advanced in these reasons and is also consistent with the limited operation of s 94 which is concerned with a “person who enters into a contract in contravention of section 92 (1)…”, pointedly, I think, omitting any reference to s 92 (2): pointedly, because the operation of s 92 (1) and (2) which I have advanced would lead to an anomaly if s 94 (1) precluded enforceability of a sub-contract by a sub-contractor, where the head contractor, under an obligation not to contract without having in place a contract of insurance in relation to the head contract works, had failed to attach the certificate of insurance to the sub-contract. 37 It will be seen that the construction of s 92 as presented in these reasons is at odds with the form of the question in par 1.1 of the separate questions. If s 92 applied to ACS, it would not be “required to have in force a contract of insurance in compliance with Pt 6 of the …Act”. The section would prohibit ACS from contracting to do “residential building work unless a contract of insurance that complies with [the] Act [was] in force in relation to the proposed work”. If under a head contract there is “a contract of insurance…in force in relation to the proposed work” of a sub-contactor there is no prohibition against the sub-contractor contracting to do that work. 38 Expressed shortly, the s 92 requirement is to have in place a contract of insurance which complies with the Act in relation to the proposed work. It is silent as to the manner in which that insurance is put in place. Hence, the requirement in relation to sub-contract works is satisfied by there being in place the requisite contract of insurance in relation to the head contract works. Although not germane to my construction of s 92, that construction is underscored by cl 41 of the Regulation under the Act which is in the following terms:

“41 Persons who may arrange insurance contracts
An insurance contract may be entered into for the purposes of Part 6 of the Act by a contractor or supplier, or by a beneficiary in respect of the work done or kit home supplied, and may be arranged by any such person.”

39 Multiplex relied upon the express exemption of sub-contractors from the requirements of s 6 of the former Act, requiring residential building contracts to be in writing, as indicative of the intention in Pt 6 of the Act to include sub-contractors in the obligations to insure: pointing to the absence of any express exemption of sub-contractors. This exemption was provided by cl 11 of the Regulation under the former Act (as amended under the Building Services Corporation Amendment Regulation 1997). An exemption in similar terms, is provided for in cl 13 of the Regulation under the Act. That regulation commenced on 1 September 1997, after the parties had entered into the sub-contract. In any event, I see no significance in the absence of an express exemption of sub-contractors from compliance with Pt 6 of the Act. On the construction of Pt 6 advanced in these reasons, sub-contractors may well be embraced within the operation of the insurance provisions of the Act. As I read s 92 the obligation is cast upon a party contracting to perform residential building work, whether as head contractor or sub-contractor, to ensure that there is in place a contract of insurance, “in force in relation to the proposed work”. 40 It was submitted on behalf of ACS that Multiplex was a developer within the meaning of s 3A of the Act. The evidence does not permit such a finding. In any event, the reliance by ACS on the operation of s 96, requiring a contract of insurance to be in place where residential building work is undertaken by a developer, does not add to the construction of s 92 of the Act advanced on behalf of ACS. 41 It was also submitted on behalf of ACS that the description of beneficiaries under the required contract of insurance is indicative of a legislative intention that the benefit of the insurance provisions is for the consumer and has no application to a head contractor/ sub-contractor relationship. There is some support for this in the second reading speech for the Building Services Corporation Legislation Amendment Bill 1996 (the bill). 42 The same observations may be made in relation to the explanatory memorandum which accompanied the bill and which is silent on the relationship of head contractor and sub-contractor in the performance of residential building work. 43 Similar support for the position of ACS is found in the form of the contract of insurance required under the Act and which requires an indemnity in respect of loss arising from breach of statutory warranties some of which are of a kind that one would not normally associate with the performance of work by a sub-contractor under a head contract for the performance of residential building work. However, in my view, it does not follow that the prohibition in s 92 does not apply to a sub-contractor. Nor does it mean that the s 18B warranties are not implied in the sub-contract, however inappropriate that implication may be in a particular case. 44 It is my view that it is not necessary to construe Pt 6 of the Act as having no application to a sub- contractor. Clearly Pt 6 of the Act is designed to ensure that in the performance of residential building work there is in place a contract of insurance complying with the provisions of the Act and while the primary responsibility for effecting that insurance will, in nearly all such cases, fall upon the shoulders of the head contractor, nevertheless, it remains the obligation of a sub-contractor not to contract to do any residential building work under a head contract, without being satisfied that a contract of insurance is in place. 45 In considering the separate question in par 1.2 of the separate questions I think it has to be approached on the basis that my construction of the transitional and insurance provisions of the Act is erroneous: that question 1.1 should be answered in the affirmative: that Pt 6 of the former Act applies to the whole of the head contract works and that, additionally, Pt 6 of the Act applies to the sub-contract works. 46 In my view, on the basis of the agreed facts, there is really only one matter that calls for attention, namely, whether public policy considerations preclude ACS from relying on waiver or estoppel to preclude Multiplex’s reliance on the provisions of s 94 of the Act. Otherwise, the facts of the case readily satisfy the requirements of estoppel as identified by Brennan J in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 428-429. It has been submitted on behalf of Multiplex that there is no element of unconscionability in its conduct in relying upon ss 92 and 94 of the Act on the facts of this case. I disagree and see no point in elaborating upon that conclusion other than to observe that:

1. The unconscionability involved in Multiplex’s conduct in reliance upon s 94 of the Act is, in my view, embarrassingly obvious, and
2. The fact that Multiplex did not turn its mind to the operation of Pt 6 of the Act prior to the commencement of these proceedings is, in my view, irrelevant in the context of its unconscionable conduct.

47 Whether the question is approached as raising an issue of estoppel or waiver is immaterial, in that either path, if they are separate ones at all in this case, converge at the point of public interest. 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 for the benefit of Multiplex 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. 50 Part of the difficulty in examining the availability of estoppel to preclude reliance by Multiplex upon ss 92 and 94 of the Act lies in the absurdity that results from the application of s 92 as construed by Multiplex to residential building works of the magnitude of the head contract works. In modern construction practices it would result in a multiplicity of contracts of insurance, each indemnifying the head contractor from loss resulting from defective sub-contract works. I fail to see any public interest in providing such protection to major building contractors who themselves would have in place a contract of insurance, in compliance with the Act, for the benefit of the ultimate consumer in respect of the whole and each part of the works. 51 If I am entitled to look at the effect of the successful application of estoppel in the context of the facts of this case then, in my view, there is no disservice to the public interest, which is protected under Pt 6 of the Act, in precluding Multiplex from relying upon ss 92 and 94 of the Act. 52 However, the penal nature of the s 92 prohibition, the provision against contracting out in s 103D and the severity of the consequences of contravention of s 92 imposed under s 94 of the Act, I think are clear enough legislative indications of the public’s vested interest in the adherence to the provisions of s 92 and of the legislative intention that the operation of s 92 is not to be circumvented by agreement, conduct of the parties or otherwise. I think that line of reasoning accords with the authorities, see: Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993 at 1016 -1017; Barilla v James (1964) 81 WN (Pt 1) (NSW) 457, a decision of the Full Court, particularly at 461- 464 in the judgment of Walsh J; and cf Beckford Nominees Pty Ltd v Shell Co of America Ltd (1987) 73 ALR 373 at 378-9 and Clark Equipment Australia Ltd v Covcat Pty Ltd (1987) 71 ALR 367 at 371. 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. 54 Accordingly:

The question in par 1.1 of the Pt 31 order is answered in the negative.
The question the subject of par 1.2 of that order does not arise.
The defendant is ordered to pay the plaintiff’s costs of the separate determination of
those questions.

***********

Last Modified: 12/08/1999