Fitzgerald v Leonhardt

[1997] HCATrans 23

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Darwin   No D2 of 1996

B e t w e e n -

COLIN JOHN FITZGERALD

Appellant

and

F.J. LEONHARDT PTY LTD

Respondent

DAWSON J
TOOHEY J
McHUGH J
GUMMOW J
KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 7 FEBRUARY 1997, AT 10.20 AM

Copyright in the High Court of Australia

MR K.G. HORLER, QC:   If your Honours please, I appear for the appellant in this appeal.  Appearing with me is MR E.P. VAN HAEFTEN.  (instructed by Close and Carter)

MR J.B. WATERS:   If your Honours please, I appear with MR D.A. NORMAN for the respondent.  (instructed by Dennis Norman & Associates)

DAWSON J:   Yes, Mr Horler.

MR HORLER:   If the Court pleases.  Your Honours, in this appeal from the Northern Territory this Court will be called upon as the central and primary point of the appeal to consider the relevant Act which is the Water Act of the Northern Territory to which I will take your Honours to ascertain the purpose and intention of that statute.

McHUGH J:   Before you do, Mr Horler, are the submissions that have been filed on your behalf or that have been sent to the Court the submissions that you rely on?

MR HORLER:   Largely, yes, your Honour.

McHUGH J:   Mr Horler, I do not know whether you are aware of the practice direction that came into force this year, but neither your submissions nor those of the respondent comply with that practice direction.

MR HORLER:   If that be so, we made a number of inquiries, particularly in view of remarks of the Court made earlier in the week, to ascertain that we had in fact complied with the Rules, directions and the more recent ones.

McHUGH J:   Have you read the practice direction?

MR HORLER:   Yes, I have, but not in the last day or so, your Honour.

McHUGH J:   I must say I would not accept that they comply with the Rules, and the chronology certainly does not comply with the Rules.  There is no reference to page numbers, there is no reference to the events that really form the basis of the claim.  I do not want to embarrass counsel, but as Chairman of the Rules Committee of this Court I have some interest in this, as we all do.

MR HORLER:   Yes, and equally, for my part, we have an interest in complying.  Let me say in relation to the chronology, because I saw in the press what this Court said earlier in the week in relation to the immigration appeal, Your Honours, depending on how familiar you are with the papers, the factual matters concerning this contract dispute are not in dispute, so that the earlier draft, which I settled, contained a great deal of material which I excised as being irrelevant to this appeal relating to the drilling of bores and building work of that kind.

Your Honour, the respondent did the work.  There was no complaint below or now as to the price we were charged or the efficiency or the competence of the work.  The matter in issue is whether or not, on a proper construction of the relevant Northern Territory statute, the Water Act, the company that did the work is entitled to sue and recover his price given what we say is the illegality in performance of the contract and the prohibitions contained therein.

So that in settling as I did, and I take responsibility for the chronology, all I have put - and I think they are the first two items - the date when the contract was formed, and there is no dispute about its terms as such, and I should say at this stage, and it is in my submissions and there is no assertion made now or below, that the contract in its terms was illegal, that has never been put, and the second date in the chronology I inserted just so that your Honours would have some idea of the time frame work, was the date when the work was concluded.  What thereafter follows is a lawyer’s chronology, if you like, it is the history of the litigation.

KIRBY J:   The problem is that sometimes judges are a little suspicious and they like to look up the actual evidence.  It is an irritating feature of judicial life.  Unless we have the cross-reference to the transcript, that becomes a little difficult and sometimes you need a little elaboration of a fact baldly stated.  This is not directed so much to this case, which is fairly straightforward, but unless the Court makes this point, we will not have our practice direction conformed to.

DAWSON J:   I think, Mr Horler, the Court has made the point.  We are not asking you to justify yourself on this occasion but, no doubt, you have taken to heart what has been said.

MR HORLER:   Yes.  Let me say ‑ ‑ ‑

DAWSON J:   No, you do not have to justify yourself.  Perhaps we can get on with the appeal.

MR HORLER:   All right.  In relation to that while it is fresh in my mind, and I have just been adverting to it, just let me say this, because of the sparsity of the material and the lack of the cross-reference assistance that Justice Kirby has just mentioned, it was a simple written contract to do work.  There was no complaint about the physical performance of the work.  It is the illegality which is the central and perhaps the only point that falls to be decided in this appeal.  There was no argument about the price or the quantum, delay, or any of the other matters that sometimes attend upon a building contract.  That said, might I please take the Court relevantly to some of the sections of the Water Act of the Northern Territory.

GUMMOW J: We need to go to the regulations as well, do we not?  I say that because the regulations prescribe a form and seem to indicate that the application is made by the owner or occupier of the land, which will be your client.

MR HORLER:   Yes.  That, I think, from memory, is in the regulations ‑ ‑ ‑

GUMMOW J:   Regulation 7(1) and form 9.

MR HORLER:   Yes, on form 9, that is so, your Honour.  Other than that, I will not, for my part, be taking the Court to the regulations otherwise.  It was common ground, and your Honours will have seen that from the papers, that the statutory permit - I am sorry, I am using the wrong word - statutory authority, that is the language that is used in the Act, that neither my client, the landowner, or the respondent, the man who did the work, had the statutory permit that was required before the work could be legally done as provided by the Act.

TOOHEY J:   But do you say anything, Mr Horler, as to whose obligation it was to obtain the permit?

MR HORLER:   We say the primary obligation was that of the man who was to do the work, the respondent to this appeal.

TOOHEY J:   On what footing do you say that?

MR HORLER:   Your Honour, I take as the starting point what is to be found in section 56 of the Act, which is a prohibition on unlawful construction.

GUMMOW J:   That is a prohibition that applies to you as well, does it not?

MR HORLER:   Yes, it does.

McHUGH J:   And form 9 seems to indicate that it is owner, occupier or lessee of the property who has to make the application for the licence.

MR HORLER:   That is so, your Honour.  It was not done.

McHUGH J:   I know, but from a legal point of view, the significance of it is that the illegality, such as it is, might be said to derive from your client.

MR HORLER:   My answer to that would be if, on a view of the section and the regulations we were at fault, so was the driller, the respondent, equally.

TOOHEY J:   Do they just come back to the question as whose obligation it was, and the form may point, indeed does point, to the occupier as a signatory, but that, I do not suppose, can control the language of the Act.  If we start with the Act, what do you point to as imposing an obligation upon the driller to obtain a licence?

MR HORLER:   Your Honour, I would go, first of all, to the Act, section 56(1), which begins:

A person shall not, unless authorised by or under this Act, cause, suffer or permit -

The driller was the man who caused the various things that occur in the four subsections (a) to (d) that follow.  Equally, I would have to concede that my client, the landholder, was a person who suffered or permitted those things which cannot legally be done without authorisation to be done.

KIRBY J:   You say that the regulation and the form cannot read out of section 56 the duties that are imposed by that section upon the driller?

MR HORLER:   Yes, your Honour, I do say that.  It does emerge, I understand from my friend, that the driller, the respondent to this appeal, subsequently sought and obtained the necessary authority which he did not have at the time he began and throughout the time of his performance of the work, but that does not avail him here, and nor isit  relied upon, nor was it relied in the appeals below.

The situation one now finds is that the respondent driller, although he held a licence to drill generally, and that was common ground also, that was not enough, he had to have the requisite authority to do the work.  While there might have also been a situation where my client, had he wished to do so, could have - he did not do so - made application for a permit, that was not done, and if there be a failure by my client, that does not get the respondent driller off the hook because of what I say is his primary obligation before he commences the work.

DAWSON J:   Now, if that be so, the actual contract was not made illegal by section 56 was it?

MR HORLER:   No, and I do not come here to argue that; nor has it ever been ‑ ‑ ‑

DAWSON J:   The illegality you are alleging must be illegality of the contract in its performance.

MR HORLER:   That is exactly so, your Honour. 

DAWSON J:   If there was no obligation on the driller to obtain the authority, the illegality is yours, you being the person who caused the work to be done without an authority, on this view.  You really cannot say then that in its performance the contract was illegal.

MR HORLER:   No, but I would take issue with your Honour in the use of the verb “caused”.  The actual physical work - I am sorry if I am stating the obvious - was done by the respondent.  We suffered it to be done, but he caused and did the illegal thing in respect of which he now sues.

TOOHEY J:   You say it is illegal, and you may be right, but can you just tell us in terms of the Act those sections upon which you rely?  Is it section 56 only?

MR HORLER:   Sections 56, 57 and 90, your Honours.

TOOHEY J:   Section 57 empowers the controller on the application in the prescribed manner and form to:

grant to a person a permit in the prescribed form -

That might give some greater force to the form itself, than might otherwise be the case.

MR HORLER:   Yes, it may.

TOOHEY J:   The other section you say ‑ ‑ ‑

MR HORLER:   Is section 90, because those are the discretionary criteria which may be taken into account when a permit is granted or issued.  That is towards the end of the Act, your Honours - section 90 FACTORS TO BE CONSIDERED.  Section 90(1) says this:

In deciding whether to grant, amend or modify a permit, licence or consent under ‑ ‑ ‑

And there are there listed various sections, and the relevant one here is section 57, so that when the controller was deciding whether or not to have granted the permit to do the work which we say at threshold was illegal, there were a number of matters he was entitled to take into account.  I shall not weary you by reading them, but I will just pick up the key words because they do go to my central contention that the performance of the contract was illegal because of the essential nature of the statute to protect a vital resource in the Territory - namely, water.  I should say to your Honours before I just take you briefly through those criteria that the failure of the driller to apply for the permit to do the work he did prevented the relevant authority in the Northern Territory from either saying, no, or imposing such conditions in relation to the work he actually did.

DAWSON J:   What is being put to you at the moment is that it was not the failure of the driller, because he had no obligation to apply - it is your failure that resulted in this.

MR HORLER:   My short answer to that, your Honour, is that there was either a joint obligation, or an obligation on the person before he commenced to do the actual work to make that application himself.

DAWSON J:   The form, and section 57 read with section 56, do not suggest that.

MR HORLER:   Your Honours, I am not conceding that the only person or that the prime responsibility rested upon my client.  It would seem that the framework contemplated that either or both could have made the application.

McHUGH J:   Why do you say that the respondent could have made the application?

MR HORLER:   I am referring back to section 56 “A person shall not, unless authorised” and then the three categories follow “cause, suffer or permit”.  Now, the person who was causing the work to be done was the driller.

McHUGH J:   I know that, but the form seems to contemplate it has got to be an owner, occupier or a lessee of the property who complies and that is the prescribed form in accordance with section 57.

DAWSON J:   And under section 57 the power of the controller to grant a permit is conditioned upon an application in the prescribed manner and form.

TOOHEY J:   Can I just take you to section 90 for a moment, Mr Horler, because, again, it may throw some light on this question.  As you say, it identifies those considerations that the controller may take into account.  If you look at subsection (1)(c) and (d) - let us take (d) for instance, which refers to:

the quantity or quality of water to which the applicant is or may be entitled from other sources;

that would seem to point to the occupier, would it not?  I mean, the driller is not a person who relevantly is or may be entitled to water and if you look at (c), for instance, it speaks of:

adverse effects likely to be created as a result of activities under the permit, licence or consent on the supply of water to which any person other than the applicant is entitled -

a fairly strong pointer to the applicant being the person on whose property the drilling is to be carried out.

MR HORLER:   I would agree so far as subsection (d) is concerned.  That seems to contemplate only a person of the non‑driller category, although (c) would seem to contemplate both.

TOOHEY J:   I do not see why.  Subsection (c) is clearly looking at the effect that the drilling might have on adjoining owners or anyone in the area.  It does not seem to have much to say about the activities of the driller himself.

MR HORLER:   But what I am saying, your Honour, is this, that the failure by the driller, the man who did the work, to make an application himself, even if we were equally entitled to make an application, as a matter of public policy prevented those who would have issued the authority or the permit - it is called an authority - to put a cap or limit on the amount, position and so on.  That is why the protective nature of the statute is important when you ‑ ‑ ‑

DAWSON J:   But if it was only the occupier, lessee or owner who had an obligation to apply for a permit, then the performance of the work by the driller was not illegal.  In other words, he could not be prosecuted for doing what he did under section 56.

KIRBY J:   I take it you have to say that section 56 imposes a personal duty on the driller and that although the machinery provides also for procedures for the owner and occupier to make application, that the duty is still there cast by the generality of the words of section 56 and that that is still a duty that rests upon the driller for the high purposes of the Act, namely, the conservation of the scare resources of water.  That has to be your argument, right or wrong.

MR HORLER:   Yes.  Now, your Honours, in taking the Court to section 90, your Honours have properly put to me again this notion of whose obligation was it and I am not to be seen to be ducking that problem in my argument.  Why I wanted to take you to section 90 was to point out the various criteria in those subsections (a) to (k) which have a common characteristic of protection of water and imposing conditions, potentially quite stringent conditions, as to how the drilling might be done and the limits and the restraints upon the quantity of water and so on and that is why I rely upon it, together with the second reading speech when the Minister introduced it in 1991, to say that to this extent the situation in this appeal is to be distinguished from the situation that this Court found itself in in deciding the case of Yango.

DAWSON J:   I am not sure that it is because what you have got here is, assuming that the obligation was on your client to obtain an authority or permit, a situation in which generally speaking your client was in an illegal situation, that what was not forbidden was the particular thing which was done, namely, drilling by the driller, in the sense that he did not have to get a permit and in the sense that in doing what he did he was not liable to prosecution.

MR HORLER:   Your Honour, my answer to that is that the work done could not be done without the first obtaining of a statutory authority.

DAWSON J:   True, and a banking business could not be carried on without a licence.

MR HORLER:   Under section 8.

DAWSON J:   But the fact that a particular transaction was carried on to which the statute was not directed itself meant that that was not illegal, in the sense that it rendered it void.

MR HORLER:   Yes.  Let me just come back to an exchange a few moments ago.  I said to this extent the statute that your Honours have to consider - and the situation is different from that which the Court dealt with in Yango, and this is why I put that submission.  In Yango the blanket prohibition under the Banking Act, section 8, was a prohibition upon banking, of the generality of banking.  Your Honours will recall that in the judgment both of Mr Justice Mason and Acting Chief Justice Gibbs a distinction was made between a prohibition upon the generality of banking and whether or not, on the true construction, the Banking Act prohibited the lending upon security of the mortgage in a conventional way, which was the subject transaction that was sought to be described as illegal in Yango.  The difference between that aspect of Yango and this case is as I will now put to you.  The purpose of the Northern Territory statute ,the Water Act, is to set up a regime, a detailed, complicated regime to deal with the control and protection of water or various kinds in the Territory.

DAWSON J:   No doubt, but the way it does it is by not allowing land - by saying to landowners, occupiers or lessee, “You will not allow your property to be used for drilling without a permit.”

MR HORLER:   Equally, it says to builders and drillers, “Thou shalt not come on the land and do this sort of work which involves a potential for substantial interference with a valuable asset in the Territory without first telling us, getting an authority so that we may apply the criteria in section 90 in deciding when and how and upon what term.”

DAWSON J:   Where does it say that?

MR HORLER:   Because it contemplates, when you go to section 56 - I am not saying it is limited to the driller only but:

A person shall not, unless authorised -

I am reading from section 56 -

by or under this Act, cause, suffer or permit ‑ ‑ ‑

McHUGH J:   I know.  But the context, together with some internal indications in the section, seem to indicate it is only your client that has got the obligation; that a “person” there means, owner, occupier or perhaps lessee, because you start off in a context of section 55 being directed to the owner or occupier of the land.  Subsection (2) talks about a person who is obviously the owner or the occupier.  Then you have these curious words “cause, suffer or permit” which seem more apt to describe the owner of the land causing it, suffering it or permitting it, and then you have subsection (2)(b) making it offensive:

in the circumstances it was not reasonably practicable to apply for a permit under section 57.

And there can be little doubt, it seems to me at the moment, that section 57 is directed to owner, occupiers and lessees.  Put those things together it seems at least an arguable case that “person” in section 56 is really being directed to an owner, an occupier or a lessee and not the driller.

MR HORLER:   If the preamble to section 56 used only those passive words “suffer” and “permit”, then I would have no argument with what your Honour Mr Justice McHugh was putting to me.

GUMMOW J:   Even if you are right about that, Mr Horler, would it not then have been a term properly implied in the contract between the owner or the occupier and the tradesman that the owner or the occupier would take such steps as were necessary itself to seek and obtain the licence so that its contractor was not placed in breach of section 56 and you did not do so.  So you are setting up, in effect, your own default in answer to a claim for payment under the contract.

MR HORLER:   Well, as your Honours would have gathered, and particularly Justice Gummow, the contract was silent about that, otherwise there would be some reference to it in the appeal papers.  But the contract said nothing on that subject at all; it was silent.

KIRBY J:   Was such an implied term pleaded, or litigated in the trial?

MR HORLER:   No.

KIRBY J:   There is a suggestion, is there not, that the driller has to be licensed.  Is that correct?  It may be helpful to look at a wider focus of the Act, if there is a scheme whereby the driller has to be licensed.

McHUGH J:   Under section 49, is it not?

MR HORLER:   Section 49 deals with that.  Your Honour, the answer to that is to be found quickly by going to Division 2 of the Act, which is headed “Drilling licences.”  48 contains a prohibition of unlicensed drillers, and 49 deals with the grant of a drilling licence.  It was common ground that the respondent driller was relevantly licensed.

TOOHEY J:   Well, those sections really just aim to see that you do not have mavericks going around drilling holes all over the place.  You have got to have a licence and be a licensed driller in order to operate.  It does not really throw much light upon the obligation to obtain a permit.  The one thing that you, I take it, are not really prepared to face is that - perhaps that is a bit unfair.  I should put it to you another way.  If the obligation were only on the occupier, would your case still be that this was an illegality which precluded the driller from recovery?

MR HORLER:   I will respond to it, but can I just give some thought to that?

TOOHEY J:   Yes.

DAWSON J:   While you are giving it some thought, may I just point out in passing that section 48 does not talk about “causing to be drilled”; it is talking about an actual driller and says “shall not drill”.

MR HORLER:   Those three verbs that Justice McHugh has described as “strange” in the context of - rather more direct language is used in the system of licensing drillers in 48 and 49, yes.  But I get some assistance from 48 in relation to the argument I make in relation to the later sections - 56 and 57 - to this extent; if, as your Honour has just put to me, the clear intention is that the Territory does not want uncontrolled boring and taking of a valuable asset by cowboys who just turn up, then, equally, I am entitled to put that the intention in 56 and 57 is not only that the work be done by a licensed driller - and he was licensed, relevantly - but that before the work be done, that he, the driller, apply - being licensed, having a current licence - apply for the authority to do the particular job that he is contracted to do.

The fact that the land owner, or lessee of the land, might also have the right to make such obligation, in the absence of any term in the contract, or implied term that said, “Well, all right, owner, you do it.  You go into Darwin and do it, I have got other things to do,” then I am entitled to put to the Court that the absence of the authority at the point the licensed driller entered on the land to start putting his bores down, taints the contract with illegality.

DAWSON J:   Now, let us understand that.  You do not have any argument to put if the sole obligation to obtain a permit was upon the occupier, owner or lessee?

TOOHEY J:   I thought you had taken that under advisement.

DAWSON J:   You keep switching across.  We have got to know where we are.  If you do not want to put that argument, you can go to the other.

McHUGH J:   I think you have got to grasp the nettle, Mr Horler, because it is pretty central, because, at the moment, my thinking is that prima facie, subject to hearing you in detail, is that this is a contract where the default was your client’s, and that the driller has carried out work on land which should not have been done.  Where that leads you, I do not know, but ‑ ‑ ‑

DAWSON J:   You may have an argument that says, well, be that as it may, the contract was illegal, or, alternatively, the contract in its performance was illegal, and the result is exactly the same.

MR HORLER:   That is what I do want to urge.  Those propositions that have been put to me from the Bench this morning require me, given the language of 57, to make the concession that there was a power and an opportunity in the landowner or lessee to make that application.  He did not do so.  But what I do say in answer to the various matters being put to me is that the work was begun; whether it was my client’s fault solo or the fault of the driller and the landowner, that what was done was illegal and that the illegality, to the extent that the statutory authority had not been obtained, can be sheeted home when you look at the language of section 56 to both the owner and the driller, and that the contract in its performance was illegal.

DAWSON J:   You would not have much of an argument on the basis of ex turpi causa, would you?

MR HORLER:   No.

TOOHEY J:   When you say “sheeting home”, they are words but, in terms of the principles, I take from what you have just said that you would submit that if the obligation under the Act to obtain a permit lay solely upon the occupier, nevertheless, in the circumstances of this case there was an illegality which precludes the driller from recovery?

MR HORLER:   Yes.

McHUGH J:   That is a large proposition because it really means that if, for example, a householder does not get a development permit to have an extension put on the house, that the builder cannot recover his price.  You go that far, I take it?

MR HORLER:   No, I do not go that far because there are cases in New South Wales and in other States, but in New South Wales I think under section 317A, the North Sydney Swimming Pool Case and so on which I looked at, where the absence of that consent from the council did not shut out the builder from suing from his price.  He was vulnerable to other things.

KIRBY J:   It would depend on the legislation and the various case.  That is one of the points that runs through these cases, that you just have to try to construe the statute and what the legislature intends.  I think you were going to take us to something about the importance of water in the Northern Territory.

McHUGH J:   We are interrupting you a bit, I think, Mr Horler.  We will let you develop your arguments.

MR HORLER:   Your Honours, I have a problem, I concede, in relation to what your Honours seem to see as the threshold point as to whose obligation was it to have got the licence, the absence of which I complain about.  I say that in this appeal, if your view finally is that either could have applied or my client was the only person who could and should have applied, nevertheless - and this is my argument - the contract in its performance was illegal and contrary to the policy and intention when you look at the statute of the Northern Territory.  It was not just some ‑ ‑ ‑

DAWSON J:   So really your argument is the same whether or not the obligation to obtain the permit was cast upon the owner or the driller?

MR HORLER:   It would have to be, yes.

KIRBY J:   You said the contract was illegal, but I think your earlier answer to Justice Dawson was you did not assert the contract was illegal; its performanc ‑ ‑ ‑

MR HORLER:   No, it was drawn up by non‑lawyers, a single sheet of paper which basically dealt with price.  But I do not say, and it is has never been argued in our interest, that the contract in its terms was illegal.  It is a contract, if it has the ascription to it of illegality, it relates to its performance, a performance of something which was done in clear contradiction of the prohibitions and purpose and intention of the statute.  That is why, although we veered in other directions, I took the Court to section 90 which sets out in some detail the protective type of criteria that govern the grant of the very statutory authority that did not issue in this case.

KIRBY J:   Are there any paragraphs in section 90 which you say are of their nature such that a driller rather than the owner or occupier would have a concern or knowledge or expertise in them?  It is possible that (a) might be the kind of thing that ‑ ‑ ‑

MR HORLER:   Paragraph (a) is one, because if he is not put on terms that he can only take 1,000 gallons a day, say, and he takes as much or as little as he thinks his client wants, then that is something very much within the control of the man sinking the bore.  So, (a) is one; (b) probably is both, and perhaps contemplates more a continuing role of the landowner ‑ ‑ ‑

TOOHEY J:   I do not follow that.  It depends what the permit provides.  It may authorise the sinking of a bore to 60 feet, or 80 feet - I do not know how they work in the Territory - but does the form, itself, seem to contemplate that there is an authority to drill to a particular depth or just drill until you find water?

MR HORLER:   No, it is silent on it.

KIRBY J:   I know nothing about these wells; I have never seen one; I have absolutely no knowledge, do not assume I know anything about artesian wells.

MR HORLER:   Men with dirty hands put pipes in the ground, your Honour, and if they are lucky, water comes out.

KIRBY J:   But some of them are said to be drinkable and some of them are not, does that depend on how deep they go?

MR HORLER:   Sometimes it does.

KIRBY J:   Or is it the quality of the water; chance.

TOOHEY J:   It depends how much salt there is.

MR HORLER:   Or how much - the saline quality, yes.

KIRBY J:   Proximity to the sea, or - - -?

MR HORLER:   Those are relevant factors, yes.  The question I was answering, was, I think, which ones seem to be peculiarly appropriate to drillers and not the landowners.  Paragraph (a):  100 per cent; (b):  probably to both.

TOOHEY J:   I do not understand that.  Why?  The availability of water is really something which is going to determine whether a permit is granted or not.  How does that bear upon the driller as opposed to the occupier?

MR HORLER:   Because at the point of time he is given his authority, which is what it is called, that document, which is not to be within the limits of the sample form that is in the regulation, might very well say, “Driller, you cannot go below 60 feet and you cannot take more than 1,000 gallons a day because we are concerned ‑ ‑ ‑

TOOHEY J:   I thought you just said that the permit did not bear upon the depth to which the drill or bore could go, or I took you really to be implying the quantity of water.

MR HORLER:   No, your Honour.  The form, itself, does not have a box or place to say you can only drill to X feet or take so many gallons.  It does not provide specifically for a place for that limit to be put in, but there would be nothing to prevent, and indeed, probably the controller would be required to say to put some limits on the sorts of matters I have adverted to.

TOOHEY J:   I would have thought (a) really meant to the granting of a permit.  If the controller said, “There is not a lot of water in this area and we do not want any more tapped”, there would be no permit.

MR HORLER:   That is a situation that obviously can be contemplated.  But, equally, your Honour, within (a), the authority might say, “There is a shortage of water and there has not been much rain, we will let you do it, but on stringent terms.  We will let you go to so many feet, and we will let you take so many gallons”.

McHUGH J:   One would expect that it would, and clause 3 of the form provides for the following specific conditions will apply, and they deal in depth with all sorts of things.  But, if you look at the application form, it reinforces the view that it is only the occupier or lessee - for example, clause 2 of the application requires the intended uses of the proposed bore to be stated.  Clause 3 talks about existing bore; registered number of bores - everything seems to ‑ ‑ ‑

TOOHEY J:   There is a fairly significant piece of information at the top of page 18 under 1, because it actually says:

I am the *owner/*occupier/*lessee of the property.

What does the driller do when he fills that form in?

MR HORLER:   Logically he has to get his client, the owner, to sign it; or get him to fill it in.

DAWSON J:   In case you want to put any more on this to suggest that the obligation is cast on the driller as well as the owner, you really go on in the argument and say it does not matter, do you not?

MR HORLER:   Yes.  Given what the section or the regulations say, I have to put it that way.

KIRBY J:   There seems to be an added argument against your proposition about section 56 that where you look at the previous provisions, the ones immediately before it, say section 48, where it is intended by the legislature to impose duties on the driller, it is spelt out precisely.  I mean, it is clear section 48 is addressed to the driller.  Then when you look over at section 56 there is a sort of juxtaposition between that and, at least possibly, those words could address themselves only to the owner.

DAWSON J:   Unless you want to put some other argument which suggests that the obligation is cast on the driller to obtain a permit, then we can progress to the other part of the argument.

MR HORLER:   Yes, I will take eight words just to reply to Justice Kirby.  That might be so that the Act was serially dealing with categories, driller, then owner, but for the word “cause” in 56(1).

KIRBY J:   But an owner can, of course, cause.

MR HORLER:   An owner can cause.

GUMMOW J:   That is what happened here.

MR HORLER:   By hiring a man to come and ‑ ‑ ‑

GUMMOW J:   He made the other side contractually obliged to do it.

KIRBY J:   And at least arguably the scheme is that those who are permanently there in the Territory have had this obligation cast upon them, the owners, not the people who come backwards and forwards as drillers, and that they have the responsibility to ensure that the water level is not improperly depleted.

MR HORLER:   Yes.

DAWSON J:   Now, progressing to your arguments, I have some difficulty, and I am sure my brothers do not, in knowing what is meant by saying that a contract which is not illegal in itself may be illegal in its performance.  I have difficulty in distinguishing those cases where that is said to exist, and cases, for instance, where by way of example there is a contract for the carriage of goods and a person driving the motor vehicle does not have a licence.  I know that that is said to be a contract which is not illegal in its performance, but other contracts are.  Are you able to say what you mean by a contract being illegal in its performance?

MR HORLER:   Yes.  I am going to begin to answer that question by reference to an old English case which I would suggest would not be decided as it was today as it was then.  Your Honour, there is a case in my list of authorities where a moneylender had a licence, he had all the requisite licence and permits , and this was a case decided at about the time of the First World War in 1918 when there was ‑ ‑ ‑

GUMMOW J:   This is Cornelius, is it?

MR HORLER:   Cornelius, and it was a term of the statute that moneylenders could only enter into contracts to lend money and lend money at their registered offices and nowhere else and it would seem that the purpose of that was to stop unscrupulous moneylenders signing up clients to borrow at rates which may be unfair to the borrower in hotels and other addresses.  Now, in Cornelius the only point to be argued was, since the loan contract was signed up in fact in a public house, in a hotel, could the moneylender recover his loan and the interest.  It was said no because there was a breach of that term which made it illegal to lend money other than at the moneylender’s office and there are a number of cases like that.

Your Honour Justice Dawson has touched upon those carriage cases where a person carries the goods and does everything appropriate to the carriage but it is found out later when he sues for his price that the appropriate licence did not exist or that he did not follow the requisite route when that sort of cartage should have gone to Manchester by one way and not by the other way.  There was a whole lot of cases where the fact of the breach without much more was thought to disqualify and disentitle the workman or the carrier or the moneylender or the linseed oil salesman suing for his price.

Now, when you look at Yango and when you look, although it is not directly on point as to what was said by this Court in the Family Law dispute of the Nelsons that came to this Court, it is quite clear that I cannot and lawyers for someone seeking to set up illegality in performance comb through the statute and fasten upon some marginal and peripheral breach, a country being more and more beset with regulations and statutory requirements, and say, “There is a breach.  You are not entitled to sue for your price.”  I think the word “adventitious” was used in Yango by Justice Mason where it was sought to defeat the covenant to pay under the mortgage by reference to the blanket prohibition under section 8 of the Banking Act.

We say that this case and the statute is immediately to be distinguished when one sees the very detailed regime set up by the Act whose purpose and policy is to prohibit unauthorised - I use the word “unauthorised” because that is the word used in sections 56 and 57 - drilling is something that the statute has set its face against and made it very clear by the setting up, as your Honours are discovering, of a detailed regime with criminal sanctions.  In support of that, I am not going to read it out to you, but just ask your Honours if you do have a copy, it is about some four pages, of the second reading speech?  I believe it has been circulated

DAWSON J:   Yes.

MR HORLER:   Your Honours, what I am referring to is the second reading speech of 19 November 1991, when Mr Finch, the Minister for Transport and Works, gave the second reading speech.  I am just going to go through it reasonably quickly and just draw your attention to the statements by the Minister in the second reading speech that confirm the submission I am making, that the whole purpose and intention of this Water Act, when it came into force in 1991, was to protect and control a scarce and valuable asset and, indeed, that proposition does not seem to have been disputed.  Chief Justice Martin below drew attention to it as, indeed, did all the justices in the hearings below.

TOOHEY J:   It is pretty self-evident, is it not?

MR HORLER:   Yes.  Your Honours, it is self-evident to one.  I would hope that, on a quick reading of it, you would see what the purpose and intention of it is.  It is not fiscal, it is not a criminal statute, but it does provide, as you have seen in a number of places, criminal sanctions imposing fairly heavy penalties.  In the case of the unauthorised work in this case, a first offence, up to $5,000 fine, a criminal sanction.  For a second and subsequent offences there is an increase to a penalty of between $5,000 and $10,000.  The only way that the speech of the Minister makes sense at all is on the basis that here there was a continuing concern in the Territory, that it is wet at its northern end and dry in the centre, to conserve and to control how it is that water is dealt with in the Territory.  There are a number of matters in the speech which do not concern us at all, but that is the whole tenor of ‑ ‑ ‑

KIRBY J:   Does the speech indicate how quickly the ground water renews itself?  I mean, do you get it completely replenished when you get a flood, or does it take decades or centuries?  I just do not know.

MR HORLER:   There is two parts to your Honour’s question.  No, the speech does not say anything about that and I am not in a position to say so from the bar table and there is nothing in the evidence or material in the papers that would answer your Honour’s question.

KIRBY J:   Maybe I will look it up in the Australian encyclopaedia.

MR HORLER:   Yes, but whether or not the Minister’s four page speech is silent on that, in every paragraph there is a clear reference to the need to control and to control those who tap or bore for the water.  Paragraph 1 gives you a flavour of it.  Page 2 at the bottom in the final paragraph, these words:

The bill also addresses the way in which administrative control may be introduced when the need arises.

Page 3 at about point 2, the paragraph beginning:

Notwithstanding the controls referred to above.

The third paragraph on that same page, these words:

In addition, there is a general requirement that all commercial water bore drillers must hold a drilling licence appropriate to their experience and qualifications.

And your Honours would have in mind sections 48 and 49.  In that same paragraph, about six lines down, these words:

The proposed licensing system.....the need to protect aquifers from the harmful effects which can result from inexperienced operators.

The Minister opines that the bill is considerably broader in its potential scope than its predecessor.  He talks of, in the next paragraph:

of significant innovations which will increase the quality of planning for water resource development ‑ ‑ ‑

KIRBY J:   Is there anything in the Control of Waters Act that preceded this Act that gives an indication by the legislative history of a change of obligations or not?

MR HORLER:   I have looked at the earlier - there was an Act and ordinances, and the answer to your Honour’s question is no.

TOOHEY J:   Except that in the second-last paragraph on page 3493 of Hansard, there is reference to an earlier provision whereby the applicant may seek the advice, what is referred to as advice, bores, that is, advice as it were in advance as to where bores might successfully be sunk on his land.  That was repealed.

MR HORLER:   Yes, I am sorry.  When I answered Mr Justice Kirby’s question with a no I thought he was directing my attention to that which we were debating earlier concerning whose obligation it was to apply.

TOOHEY J:   Yes, so did I, which is why I drew attention to that earlier provision.

MR HORLER:   I am sorry, your Honour.  The bit you just read ‑ ‑ ‑  

TOOHEY J:   It is the last paragraph.  I mean, it is only in passing, as it were, but it suggests that under the previous legislation an applicant may have been confined to the occupier, because it speaks of getting advice in relation to bores being sunk on his land.  I am not suggesting it takes it anywhere, it is just part of the overall legislative history.

MR HORLER:   Yes.

TOOHEY J:   Yes.  What I am not quite clear about, Mr Horler, is quite how you are using the submissions in regard to the importance of water.  I accept those, of course, without question, but what does it say?  I mean, how do you then relate that to what is said to be the illegality?  I mean, I take you to be saying, “Well, the importance of the control is so great that even if the person whose obligation it is to obtain a permit fails to do so, there can be no recovery of moneys for performance of work which is prohibited.”

MR HORLER:   And I did assent to that when Justice Dawson put the proposition pretty much in those terms a moment ago.

TOOHEY J:   Yes.  You really have to be saying on your argument, do you not?

DAWSON J:   You would say in Cornelius’ Case ,if the boot was on the other foot, the transaction having taken place in a hotel and the borrower sought to enforce the agreement to lend money, he would be met by illegality just the same.

MR HORLER:   Yes.

DAWSON J:   The illegality affects both parties.  That is what you say, is it not?  Because the object of the statute is to eliminate this sort of situation.

MR HORLER:   In the Money Lender Case it was directed, I take it, to the vice of unscrupulous money lenders taking advantage of inexperienced persons and that some equality of bargaining is, it was thought, more likely to occur in an office than it would in the street or in a public house.  What I am saying - I will answer both questions, if I may, in this way - is that if you take as your starting point a clear intention, the primacy of protection and control of water resource, then when you come to the contract, which itself is not illegal in its terms or on its face, but which could only be performed in breach of the law, a breach which attracted the criminal law, then the plaintiff was not entitled to recover his money given the intention of the statute and that the breach related to something that went to the essence and the core of this statute, the Water Act, and there was not some marginal or adventitious breach that was discovered along the way.

TOOHEY J:   Wait a moment.  It cannot be right to say it could only be performed in breach of the Act.  It could have been performed in conformity with the Act if there had been a permit.

MR HORLER:   I am sorry.  My ‑ ‑ ‑  

TOOHEY J:   What I take you to be saying, Mr Horler, is that ‑ ‑ ‑  

MR HORLER:   Too elliptical I am sorry.

TOOHEY J:    ‑ ‑ ‑ the Act operated in such a way that - forget about whose obligation it was to get a permit.  If work is done in contravention of the Act, then there can be no recovery in respect of that work, irrespective of whose responsibility it was to get a permit.

DAWSON J:   Because that is what the Act is directed against, prohibiting this sort of work.

MR HORLER:   That is so.

DAWSON J:   You would contrast Yango and say, “Well, of course, in Yango a mortgage is not something which the Act is specifically directed at.  That can be carried out without any illegality.  What was made illegal was the carrying on of business.

MR HORLER:   Banking business.

DAWSON J:   Yes.  And that is not the situation here.  This is directed at drilling bores.

MR HORLER:   With a degree of specificity that you do not find in the general prohibition in section 8 of the Banking Act that this Court dealt with in Yango.  That is why to that extent this case - and construing this statute and its effect upon the contract - that makes it different from the situation that the Court was faced with in Yango.

KIRBY J:   It is possible that the argument also can be addressed to the meaning of section 56 that in order to effect the purposes that are established in the second reading speech that a wide and not a narrow construction of the section should be adopted, notwithstanding the machinery provision for applications, and that the word “cause” should fall upon the driller as well, because they are the sort of people who put the bores down and actually do tap the water that caused the loss of the water basin.

MR HORLER:   And have the potential to bring about the very vice the statute is, in clear terms, directed against.

KIRBY J:   It seems that that is what the borer thought he had to do.  The driller was the one who - and I think Chief Justice Martin mentions that the problem he saw was the driller would have to go backwards and forwards to town to get the application.  It seems to have been assumed that it was the driller’s obligation, not the householder’s.

MR HORLER:   That is so, and that seems to have been assumed throughout this litigation.

McHUGH J:   It was common ground, was it not, that both parties were in breach of section 56?

MR HORLER:   Yes, your Honour.

McHUGH J:   According to Justice Angel’s judgment.

MR HORLER:   Yes, and we adopt and agree with that.  Your Honours, I have put on my list of ‑ ‑ ‑

DAWSON J:   Well, there cannot be common ground to something that is not the law.

MR HORLER:   I understand, your Honour.  Well, there was no issue as to it, your Honour.

DAWSON J:   Yes.

MR HORLER:   Your Honours, I have put on my list of authorities a number of cases, the English cases mostly dealing with shipping contracts where there was some illegality and I will, if the Court asks me to, go to the line of cases which are well‑known, from Vita Foods and thereafter.

DAWSON J:   You must do what you feel supports your argument, Mr Horler.

MR HORLER:   Your Honour, it would seem to me that so far as they are relevant to this appeal, they say no more than the commonplace; that one must look at the terms of the statute to spell out what is the legislative intention, and I hardly need to take the Court to a number of cases to make good that proposition.

KIRBY J:   They also say you should not look at a mass of cases, that each case is different and depends on its own facts.

MR HORLER:   Yes.  Your Honours, what I will do, because it is more recent in point of time and it gathers together some propositions that emerge in Vita Foods, is to give your Honours a reference to - it is a shipping case also.  It was a case which in the last couple of days we put on our list:  Archbolds (Freightage) v Spanglett (1961) 1QB beginning at page 374.  That was a carriage case, I am sorry.  It was not a shipping case, it was a carriage case.  I want to give your Honours a short reference.  At page 388, about halfway down, the judgment of Lord Justice Develin, and I would like to read to the Court the analysis into three categories occurring at page 388 in Archbolds.

TOOHEY J:   Just before you do that, Mr Horler, this is a case, as I read it at a quick glance, in which it was the contract that was pleaded as being illegal.  Now, that is not the case here.

MR HORLER:   No.  But it is the wider analysis of how a court approaches the question of illegality and whether it vitiates the contract or not.  But what your Honour says to me is correct, and a further reading would show that to be so.

TOOHEY J:   Nevertheless, you say the principles are applicable here, do you?

MR HORLER:   Yes.  I am reading from page 388:

The effect of illegality upon a contract may be threefold.  If at the time of making the contract there is an intent to perform it in an unlawful way, the contract, although it remains alive, is unenforceable at the suit of the party having that intent; if the intent is held in common, it is not enforceable at all.  Another effect of illegality is to prevent a plaintiff from recovering under a contract if in order to prove his rights under it he has to rely upon his own illegal act; he may not do that even though he can show that at the time of making the contract he had no intent to break the law and that at the time of performance he did not know that what he was doing was illegal.  The third effect of illegality is to avoid the contract ab initio and that arises if the making of the contract is expressly or impliedly prohibited by statute or is otherwise contrary to public policy.

Your Honours, with those words fresh before you, can I give you ‑ ‑ ‑

GUMMOW J:   You do not fit in category 3 because that is talking about the making of the contract.

MR HORLER:   No.

GUMMOW J:   You do not fit in category 1 because there is not the intent to perform, and arguably you do not fit in category 2 either depending upon your construction of section 56.

MR HORLER:   We may very well be within 3:

The third effect of illegality is to avoid ‑ ‑ ‑

GUMMOW J:   But:

the making of the contract is expressly or impliedly prohibited ‑ ‑ ‑

DAWSON J:   You see, that statement seems, if I may say with the greatest respect, to muddle various concepts.  It is one thing to say the contract is illegal.  That involves statutory interpretation alone.  It is another thing to say that you cannot rely on your own illegal act to recover.  That invokes questions of public policy.  That is ex turpi causa and that is not a question of statutory construction.  It is the question of the performance of the contract being illegal which is the difficult one because it seems to straddle the two.

MR HORLER:   Yes, I agree with that and that identification of the difficulty.  In what I have read to your Honours, there is not the distinction made between a contract illegal in its terms, which is not the case here, and a contract which we say in its performance was illegal.

TOOHEY J:   I am sorry to interrupt you, but I notice that in the material in the appeal book there is the statement of claim but there was no defence.  It just seems a little curious since it is really the defence upon which this seems to turn.  It may not matter in the end because in the progress of the matter through the courts it has been accepted that it is not the contract which is said to be unlawful, but is the defence available, Mr Horler?

MR HORLER:   Your Honour, there were different solicitors in it.  I will just inquire.

TOOHEY J:   It is really a question that should be directed at you.

MR HORLER:   I am sorry, your Honour?

TOOHEY J:   It is just a piece of information that would ordinarily be included.  I wondered why it was not.

MR HORLER:   I cannot answer that question.  I will see if there is an answer.

TOOHEY J:   Anyway, I do not want to hold you up in your argument.

MR HORLER:   Your Honour, it is not a satisfactory answer but, when the file came to the new solicitors, there was no defence.  I am not saying one was never filed or ‑ ‑ ‑

TOOHEY J:   Obviously one was filed.  It may be reflected in the judgments below.  Do not worry about it for the moment.

MR HORLER:   It may not matter too much given, as your Honour said, the way in which the litigation proceeded.

TOOHEY J:   So long as it is clear that the contract itself is not said to be illegal; it is the work that was done under the contract that is said to contravene the statute.

MR HORLER:   And that is a theme that runs through the decisions below, your Honour, but so that there is no doubt in your Honour’s mind and in the Court’s mind, we do not argue and have never argued, even though there seems not to be a formal defence filed, that the work was done negligently, imperfectly or that the price was more than that which we contracted.  The sole issue was the effect, if any, of the illegality upon the right to enforce.

DAWSON J:   But you cannot rely upon the second of the categories there that Lord Justice Devlin is speaking about because that is ex turpi causa, that is public policy, and you have disclaimed any right to recover on that basis or any right to succeed in your defence, rather, on that basis.  In other words, if you were to say the driller cannot succeed because he has to rely on his own illegal act to make out his case, irrespective of whether the contract was itself illegal, then questions of public policy enter in and you would not succeed because, whatever view you take of this case, the merits are not exactly on your side.

MR HORLER:   Your Honour, just in answer to that, that the plaintiff cannot succeed because to succeed he has to set up his own illegality, my answer to that is to say that in this statute that would be the wrong test because it is the illegal absence of the statutory authority which taints the performance of the contract.

DAWSON J:   We are not talking about the performance of the contract or the contract at all in that category.  We are saying that, irrespective of what the contract said, the act of drilling was illegal and for that reason the driller cannot found an action on it to recover the price.  There seems to be three categories really:  was the contract itself illegal, in which case matters of public policy do not enter into it and you cannot recover; was the contract in its performance illegal, again, matters of public policy do not enter into it; and the third category, which is the illegal act not being able to form the basis of the action.  Now, you have disclaimed any defence under the third category as I put it.

MR HORLER:   Your Honour, I have a real difficulty - and I am not alone in this regard - in relation to public policy and attendant illegality that can be spelled out from that.  If the statute has clearly set its mind and its intention against unauthorised drilling and made unauthorised drilling illegal, a contract whose performance requires that very thing can arguably be said to be contrary to public policy because the performance, which is the prerequisite to the plaintiff suing ‑ ‑ ‑

DAWSON J:   You do not need to have recourse to public policy in that event and if the statute makes the contract illegal, full stop.

TOOHEY J:   But you do not maintain, as I understand it, and I do not see how you could maintain that this was a contract the performance of which had to be illegal.

MR HORLER:   Not had to be.

TOOHEY J:   I mean, at the time the contract was made there was no reason why a permit could not have been obtained.

MR HORLER:   None, your Honour, no.

TOOHEY J:   I am not sure why we are in that area at all.

MR HORLER:   Inexactitude of language.  When the driller did the work and then sued for his price, we say he can be met with the defence that the performance of the contract that he sues on was illegal in its performance and that is a category that the cases contemplate.

TOOHEY J:   Yes, I understand that.  I have no problem with that.

MR HORLER:   All right.  Well, that is it.

DAWSON J:   But that is clearly a matter of statutory interpretation, not public policy.

MR HORLER:   That is right and that is really what this case is.  Your Honours - Justice Dawson has remarked upon the difficulty of understanding the categories ‑ ‑ ‑

DAWSON J:   No, I understand the way you put it.  You say this Act is directed against this very sort of thing and if the contract allows itself to be performed in this way and it was performed in this way then that is the thing that this statute is directing itself to and it is illegal as a matter of statutory interpretation, a contract in its performance was something which was forbidden.

MR HORLER:   Then I can be brief in the citation I give you to Yango.  It is in the written submissions.  Yango Pastoral v First Chicago 139 CLR 410. The first judgment is that of the Acting Chief Justice, and at 413 at the top he sets out four categories, which I am sure the Court is familiar with. It is short. I will take you to it, if I may. At the top of page 413:

There are four main ways in which the enforceability of a contract may be affected by a statutory provision which renders particular conduct unlawful:  (1) The contract may do something which the statute forbids;  (2) The contract may be one which the statute expressly or impliedly prohibits;  (3) The contract, although lawful on its face, may be made in order to effect a purpose which the statute renders unlawful;  or (4) The contract, although lawful according to its own terms, may be performed in a manner which the statute prohibits.

KIRBY J:   This is category (4), is it not?  This is how this case has been litigated.

MR HORLER:   Your Honour, on the question of illegality and performance can I give you also a reference - still in the judgment of Acting Chief Justice Gibbs - page 417 at about point 7- this is in Yango this occurs - there is a reference there to St John Shipping Corporation v Joseph Rank Ltd:

The performance of a contract may turn it into the sort of contract that is prohibited by the statute, and the test is whether the contract, as made or as performed, is a contract that is prohibited by the statute.

DAWSON J:   And the difference between that sort of case and Yango, for instance, is that the statute did not prohibit mortgages, or the Carrying Case where if the driver does not have a licence it does not prohibit the carriage of goods in that situation; the statute is not directed to that situation.  But you say here the statute is directed to drilling without a permit.

MR HORLER:   Yes, your Honour.

DAWSON J:   So that this contract, although its terms did not require that, its performance involved that and, therefore, the contract was illegal.

MR HORLER:   Yes, your Honour.

McHUGH J:   This is one of the problems I have about this case, because I have got serious doubts whether there is any illegality here and I think the courts below have just overlooked the proper construction of these sections.  Let me tell you why.  The theory of illegality in this case is that they were given a bore construction permit and that permitted construction but not drilling.  If you look at the legislation you start with section 57, which is headed “Grant Of Bore Construction Permit” and it authorises a permit to carry out an operation referred to section 56, drilling, construction, altering, plugging, backfilling.  It is the prescribed form. 

If you go to the prescribed form it is an application for a bore construction permit; nothing to say about drilling.  When you go to the terms of the form paragraph 2 talks about, “Drill Or Construct A *New/*Replacement Bore”.  Paragraph 3 talks about “Work On An Existing Bore”.  There are various references to the “Nature of Work”.  Then when you look at the permit that comes out ultimately under section 57 it is headed “Bore Construction Permit”.  The plain intention of the legislation - I am sorry, I should not say the plain intention - but certainly an arguable construction of it is that if you get a bore construction permit under forms 9 and 10 that authorises you to carry out an operation referred to under section 56.  If you have got a bore construction permit, which was issued in this case, it authorises the activities necessary to construct that bore.

DAWSON J:   Including such number of drillings as is necessary to get to the point of construction.

McHUGH J:   However, this is an argument that does not seem to have been referred to at any stage of this case.

MR HORLER:   Your Honour, what you have just put is built upon the first building block that ‑ ‑ ‑

McHUGH J:   Is prescribed form.

MR HORLER:   On the form.

McHUGH J:   Yes.

MR HORLER:   And that there was relevantly in existence before this man turned one sod, a bore construction permit.

McHUGH J:   And that, as I understand it, is the case, is it not?

MR HORLER:   I am not sure where your Honour gets that from.

McHUGH J:   Well, I thought I got it from the facts.  For example, if you look at Justice Kearney’s judgment, I think - the permits are not there, are they, in the book?

MR HORLER:   No.

McHUGH J:   If you look at Justice Kearney’s judgment, for example, at page 32, in view of the dates of the three permits - if you start on 31 in the centre of the page, he says:

the fact that only 3 bore permits

had been constructed:

these were all “construction” permits, as opposed to “drilling” permits.

Then, in finding (4) you find that in respect of bore No 1 it was drilled two days after its permit.  No 6 drilled the day of its permit, and No 7 the day after its permit.

MR HORLER:   Your Honour, I am subject to correction on that.  What you are pointing to there, as I understand it, relates to the retrospective obtaining of the permits.

McHUGH J:   Am I?

MR HORLER:   I believe so, but I am subject to, because I have never seen the ‑ ‑ ‑

McHUGH J:   The article in the Bond Law Review talks - I do not know whether you have seen that - but that provides a chronology of events and says that the contract was made on 9 October, the landowner applied for permits on that date; on 13 October the Water Authority issued a single permit and then it sets out the various dates.

MR HORLER:   I took those dates to, bearing in mind what the magistrate said when the case was first heard, related to the obtaining after the event of permits, and that did not assist the driller at all.

GUMMOW J:   The permit that was granted on 13 October seems to have been for one bore.  That is the problem, is it not?

MR HORLER:   That is a problem, yes.

GUMMOW J:   Then there were more bores drilled, and then after the event, more permits.

MR HORLER:   Yes, I think that is the best you can do with it, and there is no precise date that I have been able to ascertain when the boring concluded, which is why I put in my chronology, no more than October 1992 the work finishes.

Your Honour Justice McHugh, what you are putting to me, the premise there may not be justified because of the vagueness of the meaterial which is not to be solved by anything that we have not put in the book.

McHUGH J:   Certainly two further permits were issued on 27 October, so I am just not quite sure where Justice Kearney got those dates from, because in summary in paragraph (4) at page 32 he talks about that No 6 was drilled the day of its permit.

TOOHEY J:   If you look at Justice Angel’s judgment, Mr Horler, on pages 90 and 91, he sets out, not so much a sequence of events, as those matters in respect of which the magistrate allowed recovery and those in respect of which he did not.  That seems to be structured on the basis that there was a permit for the construction of a bore but not for the drilling of a bore, and therefore the driller was entitled to recover what the magistrate describes as “mobilisation costs” - I suppose getting his gear ‑ ‑ ‑

MR HORLER:   Gear yes.

TOOHEY J:   ‑ ‑ ‑ on the property and getting ready to drill, but precluded recovery in the case of any of the drilling operations.

MR HORLER:   I have taken that - the distinction he made.

TOOHEY J:   Yes.

MR HORLER:   Yes, the plaintiff got a modest amount of something like $1,000 to $2,000 for getting his gear out there.

TOOHEY J:   But that seems to imply two different permits, does it not?

MR HORLER:   It does.

TOOHEY J:   One for construction and one for drilling, and yet that is a curious distinction to make.  Getting your gear on the property is just a preliminary step to drilling.  I would have thought that drilling in this context would include putting down your casing ‑ ‑ ‑

MR HORLER:   Yes, all that.

TOOHEY J: ‑ ‑ ‑ and doing the rods and everything else that is necessary to drill water from below.

MR HORLER:   But you would think that, ordinarily, merely to drive your truck out to some land and unload would not require any form and to do no more would not require any form of permit or authority, but it is the drilling and access to the rare resource, the water, which is the one that is the subject matter for control by the statute.

McHUGH J:   In any event, subject to anything that your opponent says, I think having regard to the findings of fact, we have got to proceed on the basis that there is illegality here, that the material is probably too obscure for us to ‑ ‑ ‑

MR HORLER:   To dig through it and try and make a case.

McHUGH J:    ‑ ‑ ‑ try and make any finding different to what seems to have been accepted below, but I am a bit sceptical as to the whole ‑ ‑ ‑

MR HORLER:   I would like to give you further references to Yango.  In the judgment of Mr Justice Mason, page 423, at about point 5, his Honour deals with - I will not read it to you - what the effect of section 8 of the Banking Act had on the instant mortgage transaction.  It begins, “The first question is”, and your Honours could refresh your memory as to how Mr Justice Mason construed the statute.  At 424, he deals with Cope v Rowlands and a number of the other older English cases where the courts were far more ready, having found an illegality, to prevent the enforcement of the contract.  Cope v Rowlands is dealt with and explained at 424 and 425.

Your Honour, on the question of the difference of intention between section 8 of the Bankruptcy Act in Yango and the regime that is set up, I give your Honour a reference to 426 in Yango, at the bottom of the page:

In this context there is little to be said for the view that the statute intends to prohibit contracts made by unauthorized banks in the course of carrying on banking business.  To do so would be to prejudice depositors, not to protect them.

And that notion of protection runs through Yango.  That does not arise here.  The protection is for the residents and ratepayers of the Northern Territory in relation to a resource and there is no ‑ ‑ ‑

GUMMOW J:   That resource is vested in the Crown, is it not, by section 9?

MR HORLER:   Yes, by the Act, yes, and there is no argument from inconvenience of the kind that the Court identified in Yango that is available to my friend in this case.  That is further dealt with by Mr Justice Mason, top of 429:

In this case the Act, as I have mentioned, is to a large extent directed to aiding the government in executing its fiscal policy rather than regulating the relationship between banker and customer -

Now, there is a proposition that follows which is referred to in some of the judgments.  My friend has put it in his submissions and I should deal with it.  At about line 8 this occurs - top of 429:

There is much to be said for the view that once a statutory penalty has been provided for an offence the rule of the common law in determining the legal consequences of commission of the offence is thereby diminished -

it does not say it disappears, but it is diminished, and I would commend to your Honours what follows.  There is the reference to the insurance and shipping cases down the rest of that page.  At 434, Mr Justice Jacobs, in construing the Banking Act, point 5:

A primary purpose of the Banking Act is to protect against loss depositors of money with a corporation -

and so on, and that is a basis for distinguishing, as a method of construction, Yango from the statute that has to be construed here.  Your Honours, I want to go now to a recent decision of this Court in the decision of Nelson and Another v Nelson and Others (1995) 184 CLR 538, and I want to just remind the Court of a portion of the judgment of Justice McHugh. Justice McHugh’s judgment in that decision begins at 598.

GUMMOW J:   The critical passage perhaps begins at 611, is that right?

MR HORLER:   Yes, I have got that noted, thank you, your Honour.  Yes, 611 is headed in italics, “The present need for the doctrine of illegality”.  There is a reference to Yango and the English decision of Tinsley, and then at 611, at about point 5, Justice McHugh sets out a number of categories, having prefaced his remarks by saying:

One of the most significant reasons for adopting a less rigid approach -

and so on, but I just take your Honours to what occurs there:

First, the statute may directly prohibit the contract or trust.  Second, while the statute may not prohibit making the contract or trust, it may prohibit the doing of some particular act that is essential to carrying it out.

That is the case here.  It prohibits unauthorised drilling:

Third, the statute may not expressly prohibit the contract or trust but the contract or trust may be associated with or made in furtherance of a purpose of frustrating the operation of the statute.  Fourth, the statute may make unlawful the manner in which an otherwise lawful contract or trust is carried out.

Just stopping there, applying that language to this case.  The Water Act makes unlawful, when you look at sections 56 and 57, the performance of a contract performed by an unauthorised or unpermitted, as it seems we may have to call him, driller.  So I am entitled to rely on that category.  His Honour went on to say:

His Honour went on to say:

It would be surprising if sound legal policy required each of these forms of illegality to be treated in the same way.

And, with respect, I agree with that.  Your Honours, further on in that same judgment - it is fairly lengthy.  I will just give you a context, if I may?  I am on page 612, at the bottom of the page, beginning:

First, the sanction imposed should be proportionate to the seriousness of the illegality involved.

In this case, up to $10,000 for a second offence, up to $5000 for a first offence.  His Honour goes on to say:

It is not in accord with contemporaneous notions of justice ‑ ‑ ‑

GUMMOW J:   The sanction his Honour is speaking about there is the sanction referred to in the penultimate paragraph on 612.  You see, Mr Horler, “property rights” - - -

MR HORLER:   “Property rights”, yes, I see that, your Honour.

GUMMOW J:   They necessarily impose a sanction.

MR HORLER:   Yes.  I wanted to take your Honours, finally, to page 613, at about point 6, the paragraph beginning:

Accordingly, in my opinion, even if a case does not come within one of the four exceptions to the Holman dictum to which I have referred, courts should not refuse to enforce legal or equitable rights simply because they arose out of or were associated with an unlawful purpose unless -

and his Honour then sets out some two categories, with subspecies within them, of the exception.  So, what follows is, after the word “unless”:

(a) the statute discloses an intention that those rights should be unenforceable in all circumstances -

My argument does not go that far, and I cannot ask your Honours to so construe it, or:

(b)(i) the sanction of refusing to enforce those rights is not disproportionate to the seriousness of the unlawful conduct -

I have trouble with the double negative:

the sanction of refusing to enforce those right is not disproportionate to the seriousness of the unlawful conduct -

I say that in this case, on a proper construction of the Act, we come within (b)(i).

DAWSON J:   But you do not, you are in the realm of contract.

MR HORLER:   I am sorry, your Honour?

DAWSON J:   This case did not have anything to do with contract.

MR HORLER:   No, but I take what his Honour - I am sorry, the ‑ ‑ ‑

DAWSON J:   This was not a contract matter.

MR HORLER:    ‑ ‑ ‑ the fib told to get the cheap money for returned servicemen.  No.

DAWSON J:   I took the view, in this case, the statute had nothing to do with it at all, because it was the fraud - the common law fraud - which was the illegality, but apparently the majority took the view that the statute did forbid this conduct in some way or another.  But it was not a question of whether a contract was enforceable or not.

MR HORLER:   That is correct, your Honour.

DAWSON J:   But that is where you are.  You are in the area of statutory construction in relation to a contract.

MR HORLER:   Yes, your Honour.

DAWSON J:   I do not really see how this helps you one way or another.

MR HORLER:   I suppose why I have dealt with it is that my friend, the counsel for the respondent, has put it on his list and relies upon it, and has excised portions of the ‑ ‑ ‑

DAWSON J:   Well, you can deal with it in reply, if that is so.

MR HORLER:   Your Honour, I will try and find if there is any reference that would answer Justice McHugh’s question.  I doubt that there is about that factual material, as to whether or not those dates were after the event and they were retrospective applications.  It is a point I have looked for.  I do not think it is there.  I do not say it is not there, but I do not think ‑ ‑ ‑

McHUGH J:   No.  In any event, there seems to be another point that - in this particular case, is the claim for the unsuccessful bores?  It is, is it not?

MR HORLER:   Yes.

McHUGH J:   Yes.

KIRBY J:   And the successful ones.

McHUGH J:   And the successful ones.

MR HORLER:   The boring activity.

KIRBY J:   And the magistrate found that but for the illegality he would have provided the entire sum.  That is what ultimately was provided.

MR HORLER:   The amount of the claim, yes.

KIRBY J:   The case does not seem to be dripping with merit, from your client’s point of view, but that may be just completely irrelevant.  If the statute has this ‑ ‑ ‑

MR HORLER:   It is not, because to use the languages of some of the cases in New South Wales - although it has not quite been put to me as baldly by the Bench - my client is taken to have got a windfall - in Hayes v Cable in New South Wales, and other case - if my construction of the Act that I contend for is the one that your Honours uphold.

TOOHEY J:   The Court did not think too much of windfalls in Nelson.

MR HORLER:   They did not, no.

TOOHEY J:   It seems a very tenuous basis upon which to argue.

KIRBY J:   In a sense, I put that to you because that is, in a way, a reaction to this application of the statute, that it seems an odd and extreme application of the statute that you are arguing for that results in this penalty, in effect, upon the respondent, and particularly if it was your client’s duty, and only your client’s duty, to put in the application and, therefore, you, as it were, retreat from that construction of the statute.

MR HORLER:   Yes.

KIRBY J:   Because one attributes to legislators in Australia a rationality and a justice in the way in which they intend their statutes to be enforced.

MR HORLER:   That is so, but the price of the greater public good of the control of the resource by being able to apply the section 90 criteria and impose limits and conditions is a greater good than the loss that the individual contractor would sustain, must sustain if my argument holds.

McHUGH J:   My judgment has been taken, I think, correctly as seeking to cut back the illegality doctrine, but even if one looks at it in terms of the standard exceptions to the Holman v Johnson dictum, what have you got to say about that?  For example, if you look at page 604 of my judgment in Nelson where I set them out, about five lines from the bottom, the illegality principle:

is subject to exceptions which allow relief to be granted despite the presence of illegality.  First, the courts will not refuse relief where the claimant was ignorant or mistaken as to the factual circumstances which render an agreement or arrangement illegal.

Now, is there any evidence that this driller knew about the illegality?

MR HORLER:   I believe there is a reference of Mr Justice Kearney.  I will see if we can turn it up.  Page 43 in the appeal book, at the bottom of that page Mr Justice Kearney says this:

In this case the parties clearly did not contemplate that their contract would be performed in a manner which would be illegal; that is to say, they did not contemplate that the drilling of the bores in Exhibit P1 would not be authorized -

but it does not quite answer entirely your Honour’s question.

McHUGH J:   No.

DAWSON J:   In the area I thought you said more than once that you are not reliant upon the fact that this claim is based upon an illegal act.  You are saying the contract was void for illegality and you are not progressing beyond that.  As I understood it, that is the way you put your case.

McHUGH J:   That is not your argument at all, is it?

DAWSON J:   It is the opposite.

MR HORLER:   No, but I thought I was doing no more than answering your question.

McHUGH J:   Answering my question, yes, but your point is not the contract was illegal.  You say it was perfectly legal, but it was its performance.

MR HORLER:   Yes.

DAWSON J:   Yes, but that is the contract is illegal in its performance.

MR HORLER:   Yes.

DAWSON J:   It is a matter of statutory interpretation.

MR HORLER:   Yes.

McHUGH J:   But you are answering what I was putting to you that if you do not take the absolute view you want to put, there is this fall‑back position which may save the respondent and then you are answering my question.

MR HORLER:   Yes.

McHUGH J:   You are not relying on anything in 604 in my judgment in Nelson, are you?  You were just dealing with it.

MR HORLER:   No, I am not.  I am just dealing with it.

McHUGH J:   Yes.

MR HORLER:   Yes.  Unless there is anything further, those are my submissions.

DAWSON J:   I want to get this clear.  You are not relying upon illegality as a matter of public policy.  You are relying on the invalidity of the contract as a matter of its statutory interpretation?

MR HORLER:   I want to be as clear as your Honours require me to be clear.

DAWSON J:   I am putting that to you as a question.

MR HORLER:   Yes, I do understand that.

GUMMOW J:   I thought you were relying on public policy, well, sometimes.

DAWSON J:   It is not a very strong ground, but ‑ ‑ ‑

MR HORLER:   Your Honour, to perform a contract of the kind that the respondent performed and then to call in aid the contract that he did and say, “Even if what I did was illegal in performance, I am nevertheless entitled to my price ‑ ‑ ‑”

DAWSON J:   We are getting very muddled, Mr Horler.  There are two ways in which you can say that the driller is not entitled to recover.  One is that the contract under which he purports to recover is void and void for illegality.  It may be void in two ways.  It may be void on its face as directed to the doing of an illegal act or it may be void because in its performance it is illegal.  In addition to that there is another principle which says that a person cannot rely upon an illegal act as the basis of recovery.  That is separate.  With the first notion of the voidness of a contract questions of public policy do not arise.  The contract is either void or it is not.  The second aspect, all of these notions which are adverted in Nelson, which are matters of public policy arise.  Now, I understood you to say right at the beginning that it was the first aspect of the case on which you relied, not illegality as a matter of public policy.

MR HORLER:   Your Honour, on public policy ‑ ‑ ‑

DAWSON J:   Is that true or is it not?  If you are going to say that you do rely upon illegality and public policy, then I will know where you are.

MR HORLER:   But the difficulty I have had in the exchange with your Honour is this, that it would seem to me - and I may misunderstand your Honour - that your Honour is putting in your questions to me public policy in the same box, the same compartment, as a causa which is turpis.

DAWSON J:   I am putting it outside statutory construction; it does not arise in that area.

MR HORLER:   Your Honour, I want to be clear about it.  I am certainly saying that in the first of the categories that your Honour put to me that it is unenforceable because of its illegality in performance.

DAWSON J:   What do you mean by “it”?

MR HORLER:   The contract sued on.

DAWSON J:   The contract is void, you say?

MR HORLER:   The contract in performance ‑ ‑ ‑

DAWSON J:   The contract is void because in its performance it is..... illegality.

MR HORLER:   Yes.

DAWSON J:   All right, I understand that.

KIRBY J:   What about the second point?

McHUGH J:   No doubt I am in error here, but I have a different understanding about the law of illegality from what Justice Dawson has put to you.  A contract may be void because it is illegal but on my understanding it may nevertheless be legal but you cannot sue on an act in performance of it because the act is illegal; it does not make the contract void.  That was my understanding and that may be wrong.

DAWSON J:   That does point it up and you may want to put argument as to this.  My categorisation might be quite wrong but it seems to me that it is one thing to be dealing with a question of statutory construction.  Does the statute forbid a contract in this form or a contract which is performed in this way?

MR HORLER:   The latter.

DAWSON J:   If it does, then the contract is void and you cannot recover.  It is a matter of statutory construction.  Public policy does not enter into it.

KIRBY J:   But the difficulty with that would be, would it not, assume everybody, the landowner and the driller, got the licence for a particular drill but did not in respect of a later drill.  Then the contract itself would be perfectly valid in respect of the first drilling, and to say that it is void simply because in performance in respect of the second drilling would be to extend the voidness for the illegality too far simply because the performance of it was illegal.

DAWSON J:   Then of course it may not be a contract which is forbidden by statute.  But questions of public policy cannot enter into statutory construction.  The statute either says or does not say that that kind of contract is illegal.  There is the other category of course, and I just want to know whether you rely on it.  Apart from any questions of contract, an illegal act is involved and you cannot found a claim on the basis of your illegal act ex turpi causa, however you want to express it.  In relation to that notion questions of public policy enter.  If you do not accept that categorisation - and Justice McHugh probably does not - perhaps you would address yourself to it.

McHUGH J:   I may be just wrong.

DAWSON J:   No, you may be not; you may be right.

TOOHEY J:   One of you is.

GUMMOW J:   Before you answer, Mr Horler, it may help a bit.  Can you look at Yango again at page 432. It is a paragraph in Justice Jacobs’ judgment beginning “In other cases”. Do you see that?

MR HORLER:   Yes.

GUMMOW J:   If one reads that, one sees how the notion of public policy comes out because it says:

contract associated with or in the furtherance -

then there is a passage from Lord Reid in Vita Food.

McHUGH J:   That is the distinction I always understood, or thought I did.

GUMMOW J:   There is also a reference to McCarthy in Sir Frederick Jordan’s judgment.

MR HORLER:   To apply that language I would be entitled to submit that this contract is associated with and/or in the furtherance of an illegal purpose, namely an unpermitted or unauthorised drilling.

McHUGH J:   Yes.

TOOHEY J:   I know the last thing you want is judges telling you what your argument is, but can I just say this to you, that it seemed to me you were using public policy perhaps a bit loosely as really pointing that the policy attached to controlling water in the Northern Territory was so important that the statute must be treated in that way.  It throws light upon the seriousness in which the legislature regards unauthorised drilling.

MR HORLER:   Yes, thank you for that correction.  I think that is what ‑ ‑ ‑  

TOOHEY J:   I am only offering it for what is worth.  It may not be worth very much.

MR HORLER:   I suppose I led myself into that making that confusion, because in pointing to what is the clear purpose of the statute I have used public policy, which is another category in the ‑ ‑ ‑  

KIRBY J:   But, Mr Horler, I still think you have to come back to Justice Dawson’s question, because as I understand the theory the first principle is that if it is illegal it will strike down the contract.  The second - and this is the public policy ex turpi causa principle - is that the courts will not lend their authority to enforcing some contracts because of a moral blemish or some other thing which may or may not attract the illegality but which is a separate principle of unenforceability.   Do you rely on that or not?

MR HORLER:   Yes, I do. 

KIRBY J:   How was that ‑ ‑ ‑  

MR HORLER:   But I do not have to use the words “it would be contrary to public policy to do so”, and I do not.

McHUGH J:   I am not sure about that.  Earlier you referred to the judgment in Archbolds (Freightage).  If you look at Lord Justice Pearce’s judgment in that case at 387 you will see that he makes the distinction that I have been putting to you earlier, that is the Court may come to the conclusion that the contract is forbidden by statute:

But if the Court makes no such implication, it still leaves itself with the general power, based on public policy, to hold those contracts unenforceable which are ex facie unlawful, and also to refuse its aid to guilty parties in respect of contracts which to the knowledge of both can only be performed in contravention of the statute or which though apparently lawful are intended to be performed illegally or for an illegal purpose.

GUMMOW J:    Can I just add to that, Mr Horler.  If you go back to Yango, that passage of Justice Jacobs in 432 goes on to pick up what Justice McHugh has just been putting to you from Archbolds.  It is at the bottom of 432 and over to 433.

DAWSON J:   But there is no doubt that in that passage there is a certain elision if you were to approach it the way I was approaching it, by putting things into separate categories.

MR HORLER:   That passage of Mr Justice Jacobs that is at the top of 433 would permit me to put the second submission of the kind articulated by Mr Justice Kirby a moment ago, that the courts will not assist a blemished or tainted plaintiff who has to set up ‑ ‑ ‑  

KIRBY J:   Was that litigated below?  Was that a second basis upon which you were contesting your obligations under the contract?  Because that raises other broader questions.

McHUGH J:   It must have been, must it not, in front of the magistrate, because the magistrate held the contract was enforceable.  He allowed the plaintiff to recover some money on the contract, so the contract was not void.  But it was in respect of other aspects that he would not allow the plaintiff to recover in respect of ‑ ‑ ‑  

MR HORLER:   I took that to be the case.

DAWSON J:   It is the reference to public policy in relation to statutory construction which is disturbing, because, I mean, I suppose in the broadest sense one can say the courts have decided as a matter of public policy that the contract forbids - if a statute forbids a contract of this sort they will not enforce it.  But that is not public policy which imports a discretion as it does in the other area of endeavour which is the ex turpi causa area.  And to say that nevertheless on grounds of public policy the courts would not enforce and if it could only be performed in contravention of a statute does not really introduce any notions of discretion at all.  It is a matter of construction.

MR HORLER:   I agree.  Your Honour, I think I was loose in language in relation to using that notion of public policy in relation to the construction point where a better phrase might have been “the public interest” or “the wider interest in water resources”.

McHUGH J:   Except “public policy” has been the expression used, I think, in a lot of the cases.  I mean, I regard - and I think Justices Gummow and

Deane also regarded Nelson as a case of a contract which was perfectly legal itself but was carried out for an improper purpose, an illegal purpose and, therefore, the argument was that public policy would prevent them relying on the purpose even though the agreement itself was perfectly proper, that is, the transfer of the house from one to the other.

KIRBY J:   Has there been any academic discussion of this aspect of Nelson that you are aware of?

MR HORLER:   I am not, and I do not think that that paper handed up this morning, which I have only just seen this morning - it collects usefully the cases but it has been extrapolated from the material that both counsel have.  It is not as though the learned author had any advantage of material that we would like ‑ ‑ ‑

McHUGH J:   I think there is some discussion of Nelson.  Justice Gummow probably recalls better than I do, either in the Law Quarterly Review or - - -

GUMMOW J:   There is a case note in the Law Quarterly Review ‑ ‑ ‑

McHUGH J:   The Law Quarterly Review.  There is a case note on it.

TOOHEY J:   Also in the Journal of Contract Law, is there not?  Yes; volume 11 of the Journal of Contract Law, Mr Horler, page 53.  I cannot recall whether it touches directly on this point.

MR HORLER:   Your Honours, having dealt with that question of nomenclature, I would like to think that I have clarified my position in relation to what our submissions are and I have nothing further that I wish to put to the Court.  Thank you.

DAWSON J:   Thank you, Mr Horler.  Mr Waters.

MR WATERS:   If your Honours please.  Firstly I apologise for not putting our submissions in the form that the Court - was appropriate  I do, though, say that we were happy with the form of the chronology and that the Court should not be embarrassed by the lack of particularity in that regard.  I am not sure I really should say this in light of the way the discussion has proceeded, but it did not appear to us at the time, at least, that the factual issues in the lower courts were vital.

GUMMOW J:   Are you able to throw any light on the missing statement of defence?  It seems to have been quite a complicated one, looking at the magistrate’s judgment.  It seems to have been a document with a number of paragraphs.

MR WATERS:   I have asked Mr Norman ‑ ‑ ‑

GUMMOW J:   Would it not be in the court file in the Northern Territory?

MR WATERS:   I feel sure it would be, your Honour.

TOOHEY J:   It is curious that it was not included, particularly as the statement of claim was and nothing much seemed to turn on the statement of claim but rather on the defence.

MR WATERS:   I was not part of settling the appeal book index, and I hope I would have picked it up.  I cannot explain why it was not.

DAWSON J:   There are pleadings in magistrates’ courts in the Northern Territory, are there?

MR WATERS:   Yes.

GUMMOW J:   The magistrate refers to a number of paragraphs of the defence.

MR WATERS:   I think we all became too focused on the end result rather than the method of getting there and did not approach that matter with sufficient care, if your Honours please.

GUMMOW J:   Can something be done?

MR WATERS:   Your Honour, I think I have found it in Mr Trigg’s summary of  - - -

DAWSON J:   Perhaps you can have a look at it over the luncheon adjournment and we can get on with the argument now.

MR WATERS:   I think there was a summary of the matters pleaded in Mr Trigg’s judgment.

DAWSON J:   Perhaps you can look at it over the luncheon adjournment and - - -

MR WATERS:   Thank you, your Honour, I will do that.  If your Honours please, firstly, to come to the issue which was agitated right at the outset, it would certainly be a submission that we would support in that a proper reading of section 56 and, indeed sections 55 and 90, and form 9, could only lead to the conclusion that the responsibility for obtaining the necessary authorisations under section 56 resided for every good reason solely with the owner/occupier and, of course, in this case, the appellant ‑ ‑ ‑

GUMMOW J:   Does not one begin with section 9, in a way?

MR WATERS:   The form 9, your Honour?

McHUGH J:   No, section 9, vesting waters in the Crown.

GUMMOW J:   And the definition of “ground water”.  These would be ground waters, would they, within the definition?

MR WATERS:   Indeed, your Honour.

GUMMOW J:   What is it that enables the citizen to utilise this Crown resource?  Is that section 14?

MR WATERS:   It is probably 10 gives them an entree and also ‑ ‑ ‑

KIRBY J:   I am not hearing your submissions, Mr Waters.  You will have to lift your voice.

MR WATERS:   I am sorry, your Honour.  Am I not loud enough?  The public rights seem to flow on from that statement of the public entitlement.  Private rights seem to flow on in sections 10, 11 and so forth and 14 give powers to owners and occupiers.

GUMMOW J:   Thank you.

MR WATERS:   So, shortly stated, because that argument was well canvassed in discussion, if your Honours please, we simply would assert that a proper reading of the section is that drillers are never authorised or could never be authorised by the scheme of the Act and in particular the form of Form 9 to do drilling and so since they cannot be authorised they could “cause, suffer or permit”.  So that the “cause, suffer or permit” referred to in section 56 must surely relate only to persons who are, in fact, authorised.  The authorisation provisions, not only the Form 9, but the scope and intent as set out in section 90, would make it clear that the only person who could be authorised could be an owner, occupier or lessee.  That being the case, my learned friend we say is forced back to his argument that there is no illegality flowing from any conduct by the driller as such in failing to obtain the necessary permits ‑ ‑ ‑

TOOHEY J:   Mr Waters, was the case ever conducted on the footing, that is, by the plaintiff, that the obligation rested solely on the occupier?

MR WATERS:   I do not know whether - it is clear enough that it was not so pleaded in those terms.  The summary ‑ ‑ ‑

TOOHEY J:   I am not asking you to take us through the material.  It is just that one does not get the impression, I think, reading the judgments below that that was at the forefront.

MR WATERS:   Yes, I agree with that.  Certainly at the appeal level it does not seem to have agitated anybody or even before Mr Justice Kearney.  It may be that there was some discussion before the magistrate and that there would be some evidence of that because fairly strenuous efforts were made to establish the factual circumstances under which the permits were applied for and obtained and so forth.

TOOHEY J:   Yes, so that one might have expected it to feature in the notice of appeal from the magistrate and it does not seem to be there.

MR WATERS:   No, it does not, your Honour, and I certainly cannot say that the courts below had a fair opportunity to consider the matter and this may well be the first time, apart from no doubt some agitation of it by the magistrate, that it has been properly advanced and that it will be obvious that it was not advanced in our outline of submissions either, but certainly we are content to say that the case certainly could not be pressed on the basis that any culpability for the offence rested with the driller and, indeed, it must have rested we say solely upon the person who could be the only person who was authorised to get the permit and did not:  the appellant.

If your Honours please, if that be so and my learned friend is brought to the proposition which I think he adopted for the purpose of balance his argument that irrespective of how the breach of the Act occurred, the contract itself was made void as a consequence of that breach and unenforceable and we certainly agree that in the clearest of cases this is not an issue which will need to concern itself with public policy if, as a matter of simple statutory consideration, the legislation prohibited the contract either specifically or impliedly and we agree that our starting point is as your Honour Justice Dawson said, a matter of straight statutory interpretation.

It is our submission though that the real issue as to the true nature of the effect of the lack of authorisation on the contract is not something which can be simply disposed of as my friend would say by saying, “It was something done in the prosecution of a contract.  Anything done in the prosecution of a contract which may be illegal has the effect of tainting it and as such it is illegal.”  Really we draw the issue right there.

We say that, in fact, the quality of the offence is really just of the same sort as was examined closely in Yango and that there really is not, as a matter of statutory interpretation, any particular point to be drawn which draws any proper distinction.  In Yango, there was a direct prohibition against banking.  In this case, there is a prohibition in a particular given circumstances, that is, the absence of a licence against drilling.

KIRBY J:   But what do you say about the suggested distinction that Yango was dealing with a case for the regulation of banking generally of which mortgages and so on would be just one little part, whereas this was a statute directed expressly, specifically and for a very high purpose, at the protection of the water basin and that, therefore, the act of drilling was exactly what the statute was directed to control; that, therefore, the two cases are distinguishable?

MR WATERS:   Your Honour, that is really to the nub of the issue, I concede that.  We say, firstly, section 56 is, of course, part of a scheme for the control and protection of water, but it is not the only cannon which the legislature has armed itself with.  In fact, of course, the total ‑ ‑ ‑

KIRBY J:   Did you ever argue below - I think this is Justice Toohey’s question, I am not sure of your answer - that section 56 did not apply to your client?

MR WATERS:   I am certainly going to adopt that argument and put it in a minute, but ‑ ‑ ‑

KIRBY J:   It is a question of law, but it is still of interest to know whether you have asserted that your client was not caught by the section?

MR WATERS:   Yes, I have sought Mr Norman’s views and he is not aware that was agitated, certainly before Justice Kearney or in the Court of Appeal, but I do not feel constrained not to pick it up because there is, we say, some proper evidential basis for the view that your Honour Justice McHugh took.  Would you prefer me just to deal with that now?  It is probably an order ‑ ‑ ‑

KIRBY J:   Pass that one by, but what do you say about the point that I put to you about the distinction of Yango?

MR WATERS:   Yes, I will go back to that.  Firstly, the Water Act provides numerous penalties for numerous of the matters it needs to regulate, penalties against the owner as well as the driller.  He, of course, has to have a permit to drill, permits against abuse.  There is also a fairly detailed powers regime given to the Controller of Water to stop bores and so on and so forth.

We say that, firstly, that section does not have some all‑encompassing or all‑embracing purpose, it is simply part of a scheme, and a fairly minor part of the scheme of the Act, which is heavily laced with other penalty provisions which would protect it.  What we say about Yango: we said in our outline of argument that, really, the idea that there is simply a general prohibition - that that somehow or other protects things done of a specific nature -is not a proper basis for the distinction.  In that case, the parties were engaged in things which are, as I described in the outline, as ineluctably tied up with the notion of banking, namely, mortgaging and lending.

The court was, in order to, we say, fit a rather big foot in a small slipper, perhaps, are left to come to the conclusion that a distinction should be drawn between a general prohibition and a prohibition against more specific conduct.  But we say in this case there is, as I have indicated, a multiplicity of different methods by which the water resources of the Northern Territory can be controlled by reference to this Act - the mere prohibition of drilling, save for authorisation, is only one of them - and that, as a matter of construction, one should not - and, indeed, we say one cannot draw any logical distinction between a prohibition against banking and a prohibition against drilling.

But more importantly, we say that a contract is really what has to be attacked by the prohibition in this Act and, even by implication, or even by - and certainly we say it is not directly attacked.  It is certainly not attacked by implication, to use (1) and (2) of the four headings used by his Honour Mr Justice Gibbs in Yango.  Perhaps I can just go to those.  They are on page 413 of Yango.  His Honour characterises the way in which enforceability of contracts may be effected in this way:

The contract may be to do something which the statute forbids -

Clearly ‑ ‑ ‑

TOOHEY J:   You really only have to meet that category which Mr Horler relies upon, do you not, Mr Waters?

MR WATERS:   Yes.  I think he relies on (4), that:

The contract, although lawful according to its own terms, may be performed in a manner which the statute prohibits.

TOOHEY J:   Well, that is as I understood it.  But it is hardly necessary for you to deal with categories upon which no reliance is placed by the appellant.

DAWSON J:   In relation to that category, what is the difference between that and the principle that a person may not rely on an illegal act as the basis of recovery?  I mean, why do you have to say that the contract is void because of the manner of its performance?

MR WATERS:   I do not know that I - well, I must confess, in the way you put it to me, your Honour, I do not know that I understand the question quite ‑ ‑ ‑

DAWSON J:   Well, it is said that he contract is not void, when you look at it as a contract but the manner of its performance - and that is not a manner which was required by the contract because, if it were, it would be void on its face - will not found an action for recovery, but will make the contract void.  Why do you need to go so far?

MR WATERS:   I agree with your Honour, with respect.  I just do not see how that would as a matter of logic make the contract void.  That is validly entered into.  It is no part of the terms of the contract that they will consciously deliberately breach any statutory terms.  The contract is for drilling which is not something which is ‑ ‑ ‑

DAWSON J:   And yet the cases make a distinction between that as a matter of contract and the ex turpi causa doctrine.

KIRBY J:   The theory may be that, because the contract is intended to operate within the law, within the legal system, and therefore compliant with the statute, to the extent that it contemplates a performance which is going to be in breach of the statute, then it either offends an implied term of the contract or is otherwise unlawful or something that the statute prohibits and that that is not a way the contract will be interpreted.  But you cannot get away from the issue because Mr Horler says, “Well, if I don’t get up on the illegality by the statute and the interpretation argument, I still say the Court should not lend its aid to the enforcement of this particular contract in the way it is performed because to do so is to completely undermine the high policy of the Water Act, the scarce resource, the elaborate scheme, licensing of drillers, obligations to make applications, all sorts of considerations to be taken into account and, if this contract is enforced, it just makes a farce of the delicate provisions that have been enacted by the representative of the people of the Northern Territory to protect a scarce resource”.  What do you say about that?

MR WATERS:   I think in a sense my job is an easier one when one comes to considering policy matters of that sort because we can certainly call in aid the view that was taken throughout this case as to the relatively minor nature of the infringement, its curability, the fact that it was cured, the fact that the regulatory - nobody seems to have been particularly offended in the regulatory sense by what at the best could be described as an omission and then balancing all those issues which can be determined under policy considerations against the rather extraordinary proposition which perhaps the public might think of a person benefiting, having the windfall of all this drilling done for free.

So certainly when all of the judges who have looked at this case - and, indeed, Mr Justice Miles in the case of Ross v Ratcliff came to look at it, they did not have any trouble in a balancing act as to the competing needs to respect the aims and objects of the statute with the fairness to the litigants and the commercial reality.  So if we get to that point - and I will take it that I have now got to that point - I think our task is a lot easier.  We simply say, look at the totality of the other forms of protection of the Act.  Certainly section 56 is part of a comprehensive scheme.  There are many other - there is nothing in section 56 which would point to some irretrievable loss.  It seems to be something that can and was remedied. 

The other sections, of course - for example, if it was illegally drilled, there are sections whereby the Controller of Water can say, “Well you can darn well plug the thing now.”  So the scheme does not seem to mean that an error or a conscious breach of section 56 would plunge the whole structure of the water preservation arrangements in the Northern Territory into chaos.  So on a policy valuation issue I probably would not say much more.  As recent authorities have pointed out, the courts tend to lean towards the protection of contracts against statutory prohibitions, especially, I suppose it could be said, because we have got nine enthusiastic legislatures all busily engaged in regulatory efforts, and the courts would say - and they have said in the authorities we have put forward - that one should be fairly slow to strike down contracts where there is just merely a regulatory interference. 

We would say, “Well, of course, this regulatory interference is not much different from any other.”  So it is along answer.  But certainly I do accept that to get to the point where there is a consideration of that issue we have to at least deal with this issue as to whether as a matter of pure statutory construction one can damn this contract because of the offence of the permit not being obtained.

We certainly say it is a strange thing in the way in which it has already been looked at but, like the curate’s egg, the contract appears to be good in part so far as the view taken by the magistrate is concerned and it also appears to have had the capacity to resurrect itself.  I do not want that remark to be too dense.  The magistrate found that the parties were entitled to enforce what was called their mobilisation costs for the contract and enforce that even though there was no separate divisible part of the contract, it all seemed to be part of the contract price.

So there were many curious aspects, but really this Court would have to decide into what category that drilling (unauthorised) came.  If it came into a category which meant that inevitably, unlike Yango, the contract was void then this contract would crash, so should the Ross contract and certainly as this Court - I have listed a number of the authorities, but certainly in the way in which Yango has been interpreted on numerous occasions since it has been brought in, almost invariably called in aid of excising illegality from any consideration where there has been a regulatory regime which has been offended, and I have listed those numerous cases in the list of authorities, but I will not refer to them in detail.  If your Honours please, I understand that the Court has to hand the article by Mr Forder in the High Court Review, volume 3, and those copies are to hand.  I have some.  That article is useful because Mr Forder ‑ ‑ ‑

DAWSON J:   I think we all have that, Mr Waters.

GUMMOW J:   I am not sure it is really.  It is written by someone who has not read Nelson v Nelson.

MR WATERS:   Yes, that is true too.  I am not going to sing its praises as being particularly useful and I was going to make only very limited use of it, your Honour, but it occurred to me that on page 7 - I am not sure whether ‑ mine is lifted from a database.  I am not sure whether your Honours have got the one lifted from the database or from the document itself, but there is a paragraph 4.2 refers to the Yango approach and I wanted to make use of his analysis as to the way in which we should characterise our illegality, that is, the performance without the licence.

4.2, it is either on page 8 or page 10, he says:

The correct attack is that in Yango.  There the Court was dealing with the question whether a mortgage loan was unforceable as a result of breaching a general prohibition on conducting a banking business without a licence.  It involved illegality at the time of making the contract (whereas we are concerned with illegality as a method of performance)......Jacobs J clearly asked three separate questions.  (Gibbs ACJ’s judgment was not quite so clear in this respect.) 

Certainly, I started off before Justice Kirby asked me that question, to deal with Mr Justice Gibbs’ characterisations, but as my outline would make clear, we say those characterisations are a bit unfortunate and certainly do not fit in with our view, or favourable view, from the respondent’s point of view of the way things should be but, more importantly, the characterisation of Acting Chief Justice Gibbs at that time does not seem to have been followed by Mr Justice Jacobs ‑ ‑ ‑

DAWSON J:   I am not at all sure, having just read what Justice Jacobs said, that he does express those three questions as clearly and separately as the author of the article seems to suggest.

MR WATERS:   I think your Honour may be right.  In fact, Mr Justice Mason restates the proposition in a number of ways which would support your Honours’ views, but I suppose I could be bold enough to say that he certainly does not adopt the four category views of his Honour Mr Justice Gibbs, and I hope Mr Forder is closer to getting it right.  It occurred to me that it was not a perfect analysis, but it is a useful one.

DAWSON J:   One thing is clear, that if the statute forbids the contract, it is not a matter of public policy that is void, it is a matter of ‑ ‑ ‑

MR WATERS:   Interpretation.

DAWSON J:   Interpretation in applying the statute.

MR WATERS:   Yes, your Honour, and I think we are all ad idem on that.

DAWSON J:   It is obviously so, but where your statute forbids the contract as performed, whether public policy enters into the question there or not, it would seem not if you pose the question that way.  In that sense, the author of the article is right, but there is some difficulty with the concept of making illegal the contract as performed.

MR WATERS:   Yes, there is.

DAWSON J:   That seems to be bringing together two concepts rather than speaking only of one, bringing in the concept of not being able to rely upon an illegal act to recover rather than looking at it as a matter of contract.  That is the difficulty I do have.

MR WATERS:   His middle criterion really is just one which we need not concern ourselves with anyway because it talks about whether by necessary inference or by implication prohibit the contract.  We would say in this particular case we really are not concerned with that.  There is nothing in the Act which would by implication ‑ ‑ ‑

DAWSON J:   I do not know.  A contract to drill without a permit expressly would be one that is forbidden by statute.

MR WATERS:   Absolutely, but of course - yes, I agree with that.

DAWSON J:   Then a contract which on its face is not to drill without a permit but which is performed by drilling without a permit, why is that not forbidden by the statute if that category is a valid category?

MR WATERS:   Well, because the contract was not in its - firstly, there was no agreement to breach the Act, there was no ‑ ‑ ‑

DAWSON J:   But that is ex hypothesi in the situation where the contract on its face does not involve illegality but its performance only involves illegality.

MR WATERS:   That is true.  There was no necessity for the parties to breach the Act as a consequence.  In other words, they may not have agreed but they may have been obliged to breach it, but clearly there was no necessity for them to do so, so it is not something they would have inevitably had to have done.  It could have been cured of course simply by getting the prohibition, by getting the authorisation.

DAWSON J:   So you say the fourth category of Justice Gibbs to just pick it out conveniently, the fourth category, the contract which is illegal in its performance although not on its face, that fourth category only covers situations where the performance of the contract necessarily involves illegality.  That is what you say?

MR WATERS:   Yes, that is what we say.  I really think that is at the nub of what I was going to get to, in fact, your Honour.

AT 12.46 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.16 PM:

DAWSON J:   Yes, Mr Waters.

MR WATERS:   Thank you, your Honour.  I will not pursue my argument by reference to Mr Forder’s document because your Honour Justice Gummow says it did not consider the more recent authorities and there is a better analysis to deal with it available to us.  If I can come back to Yango and Acting Chief Justice Gibbs’ discussion.  I think I indicated earlier we were a little bit uncomfortable with the way in which he divided matters up, but it should be stressed that even when simply interpreting the statute, his Honour made clear that it was not an absolutely simple exercise of simply deciding whether a particular Act was prohibited or not and then disposing of the matter on that basis.  He went on at page 413 and again on page 414 to stress that it is important to look at the overall objects of the statute and he touches at the top of page 414 - that of course the necessity for the protection of the public.  He goes on at about point 4 ‑ ‑ ‑

KIRBY J:   Why would not the overall object of this statute be to prevent indiscriminate drilling of bores which would tap the finite and precious resource of water in the Northern Territory without previous regulatory control to determine whether the particular bore, according to the criteria, was acceptable?  That seems to be the whole point, the very point, of the statute.

MR WATERS:   Yes, that is so.  If your Honours please, I did deal with that slightly before, but it has occurred to me that the best exposition is from Chief Justice Martin who did actually come to that issue with quite a degree of emphasis.  To some extent it has been subsumed in other discussions.  Perhaps I should refer the Court to that.  It is at pages 85, 86 and 87 of the appeal book.  In fact, the discussion starts a little earlier on page 84.  His Honour commences a comprehensive review of the objects and purposes of the Water Act.  I think I can be comforted from the view that he took.  I do not want to read his decision fulsomely, but at about point 2 on page 85 of the appeal book he takes us to Division 2, Part 6.  He recites sections 48 and 49.  He points to the fact that:

The Controller may, under s49, grant to a person a drilling licence on being satisfied that the person has the prescribed qualifications.  The licence may be subject to terms and conditions -

He refers to form 16 of the regulations as to the classes of licences and so forth, so he discusses the licensing of drillers.  Then he goes on at the foot of that page:

The importance to the public of the proper use, control, protection and management of water resources is further recognised by the factors which are prescribed to be considered by the Controller in deciding whether to grant, amend or modify various permits, licences or consents including permits under s57 -

He goes on to discuss those and section 90 which we have already looked to.  Then he says:

Beyond the regulating and permissive provisions, there lies a further regime designed to protect the water resources.  For example, under s20 of the Act the Controller or an authorised officer may enter and remain on land, take such measures or construct, maintain, repair, alter or remove such works as he or she thinks fit for the investigation, use, control, protection or management of water -

I will not read all that but, if your Honours please, it is - the reason I am ‑ ‑ ‑

KIRBY J:   Common sense tells you the preservation of scarce water is important.  The Minister says it is important.  The scheme of the Act which you have outlined in the Chief Justice’s judgment indicates that the legislature thought it was important.  Why should the parties by their private contract be able to put these public purposes at nought?  Why should not the law uphold the public purposes that are so clear in the statute and say, “Well, you can have your private contracts as much as you like, but they are unlawful when measured against this very detailed scheme and/the court will not enforce them because this is a very important public purpose made clear by the representative of the people of the Northern Territory”?

MR WATERS:   Clearly, if it could put the public purposes at nought, if their conduct could do that, then the ‑ ‑ ‑

KIRBY J:   It is hard on your client and I have a lot of sympathy for your client, but is that not the scheme of the Act?

MR WATERS:   The scheme of the Act is obviously to protect control of water for public purposes and private uses and certainly, as your Honour says, if their conduct or some Act was in effect to put at nought the scheme of the Act, the fundamental intentions of the Act, this Court would not read down the illegality issue to simply the question of penalty, which is what of course was done in Ross v Ratcliff and what was done here.  But what they did in drilling could not - and was certainly never intended to - put at nought the thrust and purposes of the Act.  The reason is because the Act has itself, if I can use this expression, a sort of Gatling gun of different methods by which to protect the public interest.  This is really what his Honour the Chief Justice comes down to.

TOOHEY J:   He comes to that at page 88 on the basis that the Act is so replete with provisions designed to protect its object, including monetary penalties, the power of the controller to dismantle a bore and so on, why, the Chief Justice asks rhetorically, should you take an extra step and deprive someone who has done the work of his capacity to recover

MR WATERS:   That is the exactly the point I was ‑ ‑ ‑

TOOHEY J:   That is an approach that one might agree with or disagree with but that is the approach which he took.

MR WATERS:   Yes, and that is the one I urge in response to his Honour Justice Kirby’s questions.  This Act is belts and braces from start to finish.  If there is a breach it can force remedy, it can demand correction, it can penalise in specific and precise ways the actual malefactors.  In a practical sense, the drilling of this bore could be cured obviously by directing that it be filled.  So we would say that, while the courts obviously would be rigorous in protecting the intentions of the Act, it would be a tough call, as they say, to say that this additional degree of sanction is necessary to protect the objects that the Act has armed itself with a Panzer regiment of different weapons.  It really does not need the assistance of this Court in the way that perhaps the earlier cases ‑ ‑ ‑

KIRBY J:   More like a lot of camels that are very ineffective when it really matters.  I mean, nothing was done to get the requisite consent on time and then it seems nothing will be done to say that has a consequence, on your submission.

MR WATERS:   I missed the very outset of what your Honour put.

KIRBY J:   I say it was more like a war with camels than with Panzers.

MR WATERS:   Yes, that is true.  It had a sort of a rural sort of casualness about it, which is pretty common.  I will not make apologies for the Territory in that regard, but that is absolutely so, your Honour.

GUMMOW J:   If we could just look at section 70 for a minute.  Suppose the controller gave the notice and it was not complied with, there would be a penalty under section 71.  Would you say there could also be an application for an injunction?

MR WATERS:   Yes, certainly, I would think.  I am sure that is in the armoury.

GUMMOW J:   Yes, one would have thought so.

MR WATERS:   Yes.  If your Honour pleases, I will not, then, try to contrast the way in which the interpretative provisions have been discussed by his Honour Mr Justice Mason and Mr Justice Jacob in that case, because I think your Honours have been taken to most of the remarks that were of merit and, in our submission, we - perhaps just to note, we clearly say that we fit within these sorts of distinctions that they draw - Mr Justice Mason at page 426.  I would not reread to you the passage read by my learned friend at page 429, his Honour Justice Mason, but we would rely upon that.  Perhaps it should be said that this is a passage where he said:

There is much to be said for the view that once a statutory penalty has been provided for an offence the rule of the common law -

it is clearly “role”, if your Honours please.  I am sure that is a typographical error.  The role:

of the common law in determining the legal consequences of commission of the offence is thereby diminished -

My friend stresses “diminished”, but it is clear that, in a modern view, one would not go beyond penalties unless the Act provided good reason.  Later, when I come to the discussion, which I will do now, of these cases, in Nelson it is clear that your Honours, Justice Toohey, Justice Gummow and Justice McHugh have identified that as being a rather more rigidly‑viewed aspect than otherwise.  In other words, if there is a penalty, one would have to look good, long and hard to impute into - absent the clearest intentions of the Act - an intention to go beyond the use of penalty in cases like this, and especially where, as here, we are dealing with essentially regulatory offences.  I do not want to get into regulatory - I might freely concede the criminality of the penalties, but it is what, in old times, used to be called regulatory offences.

Your Honours, before I come finally to Nelson where we say the water has been made clearer, Ross v Ratcliff has been referred to already.

DAWSON J:   What do you say Nelson says?

MR WATERS:   I think in respect of the - all I was concerned to refer it to you rather than to identify what it says is the views which various of your Honours took of the way in which one treats illegal acts in a contract context following Yango.  Is that what your Honour meant?  I do not know that your Honour wants me to discuss Bowmakers and all that sort of thing.

DAWSON J:   How it affects, for instance, the classification that was put forward by Acting Chief Justice Gibbs in Yango.

MR WATERS:   Yes.  May I do that?

DAWSON J:   Yes.

MR WATERS:   Justice Deane and Justice Gummow have used a different classification, in my respectful submission, although it is essentially the same as his Honour Justice Mason.  It starts at page 551 at about point 8.  At the foot there it says:

Difficult questions may arise in relating the alleged illegality in the constitution or performance of the trust to what, upon its true construction, is the operation of the statute in question.  Authorities in contract law such as Vita Food Products Inc v Unus Shipping Co Ltd and Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd suggest the drawing of a distinction between (i) an express statutory provision against the making of a contract or creation of a trust by fastening upon some act which is essential to its formation, whether or not the prohibition be absolute or subject to some qualification such as the issue of a licence -

I do not think we need be concerned with distinction (i).  (ii):

an express statutory prohibition, not of the formation of a contract or creation or implication of a trust, but of the doing of a particular act; an agreement that the act be done is treated as impliedly prohibited by the statute and illegal -

For that category to affect us there would have had to have been an agreement by the parties to drill without regard to the licence.

DAWSON J:   I have always been puzzled why Nelson is thought to be a case of contract at all.  It was whether you could rebut resumption of advancement.

MR WATERS:   Yes, your Honour, and I do not think I need engage that question because the discussion was of course predicated on the assumption that the principles in relation to contract as outlined in Yango were relevant.  So certainly I think the discussion that his Honour Justice Gummow and Justice Deane had is relevant even though, as your Honour says, it may well be that it may not have been essential to the disposal of the issue in that case for the reasons you say.  But it is nonetheless as a statement of principle, we say, sound and what is more - and sadly this is not the case in Yango - much clearer than it has been in Yango, the problem being - I will not go into that.

I am going to pass up in a minute, your Honour, the Greig and Davis discussion and, certainly, there is a critique of the difficult way in which this law has been understood by the generation since Yango and, of course, there are comments throughout some of those other authorities in the lists about the awkwardness of the language and the difficulties that people have.  Mr Justice Miles, I think, in Ross v Ratcliff, quotes Greig and Davis to that effect on page 67 of Ross v Ratcliff, and there are numerous other authorities in lower courts which express some degree of frustration but, if your Honour please, if I can just come back to the exposition on page 552.  I will just backtrack a minute - this is distinction (ii).  His Honour Justice Deane and Justice Gummow were saying:

an express statutory prohibition, not of the formation of a contract or creation or implication of a trust, but of the doing of a particular act; an agreement that the act be done is treated as impliedly prohibited by the statute and illegal;

We do not fall under that either because there would have to have been an agreement that the illegal act be done, that is, some agreement to actually perform the drilling without a licence.  No suggestion that that occurred.  There was certainly an agreement that drilling be done, but there was no agreement that the illegal conduct, drilling without a licence, be done.  So we would not be caught up by distinction (ii).  Distinction (iii):

contracts and trusts not directly contrary to the provisions of the statute by reason of any express or implied prohibition in the statute but which are “associated with or in furtherance of illegal purposes”.

His Honour has adopted what Mr Justice Jacobs said there and it is probably true to say ‑ ‑ ‑

GUMMOW J:   Justice Toohey did the same at 595.

MR WATERS:   Yes, he did, your Honour, indeed.

GUMMOW J:   That was on footnote 214.

MR WATERS:   Yes, I was going to bring the Court to that, exactly so, and indeed, Justice McHugh comes to it.  There is little difference in fact.  But the way in which your Honour has characterised it is important and mercifully it is clear, at least it is clearer than it perhaps could have been if one were left to deal with it by reference to Acting Chief Justice Gibbs’ analysis in Yango.  Clearly, our conduct would be brought in under your distinction (iii), your Honour, and the example you give makes that even clearer:

Examples in the third category include cases where the mode of performance adopted by the party carrying out the contract contravenes the statute, although the contract was capable of performance without such contravention.

That is exactly what has happened here.  There has been a mode of performance, that is, without reference to the authorisation and, of course, the contract was capable of performance without contravention had the authorisation been given, and your Honour has identified St John Shipping v Rank as the basis of that.  If your Honour please:

In this last class of case, the courts act not in response to a direct legislative prohibition but, as it is said, from “the policy of the law”.  The finding of such policy involves consideration of the scope and purpose of the particular statute.

So, of course, that is a test which is common to ordinary statutory interpretation, having looked at the policy to determine that, but your Honour goes on:

The formulation of the appropriate public policy in this case may more readily accommodate equitable doctrines and remedies and restitutionary money claims than is possible where the making of the contract offends an express or implied statutory prohibition.

In other words, there is a less compelling shackle on the courts and considerations obviously such as ex turpi and the public policy issues - and I use that word in a neutral way - can play a role.  So we say once we are into that field the respondent should in this case be relatively comfortable because one can look then at the conduct of the parties, that a degree of reprehensibility, the extent of loss, all those criteria which should exercise the judicial mind - in other words, it can then without being circumscribed exercise its prerogative fairness and we would say there is little doubt in this case where on the exercise of that prerogative the case would fall.  It would fall where it has fallen before Mr Justice Kearney in the Court of Appeal.

If your Honours please, because Justice Gummow has mentioned - I do not want to overlook it but, as your Honour said, Justice Toohey has also picked up on the approach of his Honour Justice Mason, not Mr Justice Gibbs, and at pages 594 and 596 has also we say drawn that distinction and we say that is a view that we say should govern this case and, if your Honours please, we would also rely on what His Honour Justice Toohey has said at the foot of 596 where he lays some emphasis on this observation:

To inquire into the circumstances in which the illegality occurred is not at odds with the courts’ approach to questions of public policy.

Then he quotes Vita Foods:

“Nor must it be forgotten that the rule by which contracts not expressly forbidden by statute or declared to be void are in proper cases nullified for disobedience to a statute is a rule of public policy only, and public policy understood in a wider sense may at times be better served by refusing to nullify a bargain save on serious and sufficient grounds.”

And, of course, we say that is what that principle should exercise the Court in this case as well.  If your Honours please, your Honour Justice McHugh at page 610 at about point 8 - I might say - and I know Bowmakers and the discussion in Tinsley v Milligan is really not to the point, but, of course, if the Bowmakers test were applied to this case we would pass it in the sense that we would not in pursuing our entitlement to recovery of our debt be obliged to rely upon or to plead our own illegality.  I know the Court would need to make comment on that, but certainly we would pass that test.  If your Honours please, at about point 7 his Honour is discussing Bowmakers and says:

A final criticism of the Bowmakers rule adopted by the majority in Tinsley is that it may often defeat the intention of the legislature.  Parliament almost invariably provides mechanisms for dealing with breaches of its laws.  Those mechanisms sometimes include a provision that makes unlawful and unenforceable an agreement ‑ ‑ ‑

TOOHEY J:   I am not sure why you are taking us to a discussion of Bowmakers when you say it has got nothing to do with it.

MR WATERS:   I do not really want to take you to the discussion of Bowmakers, and it does not have anything to do with it.  I suppose I was just ‑ ‑ ‑

GUMMOW J:   It is a case that has given rise to all sorts of debate.

MR WATERS:   Yes.

GUMMOW J:   You do not have to get into it.

MR WATERS:   I should not have loosed that arrow off, should I, your Honour, heaven knows where it might fall.  It is really just a comment that if that principle did have any legs in this country - and it would not appear to have - that we certainly did not breach it in our conduct, but I agree with what your Honour says.  Certainly from my reading of Nelson there is little point served in agitating it.  Perhaps I should not. 

I did understand that what his Honour Justice McHugh was saying at the foot at page 610 had a wider application because he is talking, if your Honours please, about the approach that Parliament should be regarded as making.  I have adverted to it, I will not read beyond.  At page 611, if your Honours please, under the heading “The present need for the doctrine of illegality”, his Honour comes to his discussion on Yango and Justice Mason’s views.  He says at about point 5:

One of the most significant reasons for adopting a less rigid approach to illegality than the bald dictum in Holman or, for that matter, the Bowmakers rule adopted in Tinsley is that statutory illegality can arise in a number of different ways. 

His Honour then says:

First, the statute may directly prohibit the contract or trust.  Second, while the statute may not prohibit making the contract or trust, it may prohibit the doing of some particular act that is essential for carrying it out.  Third, the statute may not expressly prohibit the contract or trust but the contract or trust may be associated with or make in furtherance of a purpose of frustrating the operating of the statute.

None of those would apply, we say:

Fourth, the statute may make unlawful the manner in which an otherwise lawful contract or trust is carried out. 

His Honour then says:

It would be surprising if sound legal policy required each of these forms of illegality to be treated in the same way.  There is, for example, a vast difference between the performance of a contract for carriage of goods by ship that is overloaded in breach of the law and the making of a contract for the carriage of goods where the making of the contract is specifically prohibited.

So, his Honour is firstly picking up his Honour Justice Mason’s views and clearly drawing a distinction and in terms of some sort of continuum, first is worst and fourth in that list would be least requiring of rigour in the interpretation that might be made.  We would fall, under that categorisation, into the fourth category.  His Honour then deals with circumstances where judicial discretion can be applied and on page 613 makes this caveat, too, about the use of other than the penalty provisions in any statute, at point 2:

Second, the imposition of the civil sanction must further the purpose of the statute and must not impose a further sanction for the unlawful conduct if Parliament has indicated that the sanctions imposed by the statute are sufficient to deal with conduct that breaches or evades the operation of the statute and its policies.

We say this is non‑exceptional statute.  It is certainly part of a scheme.  It is certainly part of a broad intention, as the second reading speech makes clear, to protect the water resources of the Territory, but it would be an improper extravagant jump from general assertions about a comprehensive Act and scheme to say that defined within it, absent some better argument, there is an intention to have it controlled other than by reference to its scheme of penalties.  The scheme of penalties are comprehensive and certainly are not insubstantial and one would be hard pressed to impute into

it an intention within the statute, absent specific words, that require something more than the penalties.  That is what his Honour is really saying, and we say our case is one of those.  My learned friend started to read Justice McHugh’s comments further down that page, but perhaps I had better finish it since he started.  He says:

Accordingly, in my opinion, even if a case does not come within one of the four exceptions to the Holman dictum -

TOOHEY J:   I hope you have a better reason than that, Mr Waters.

MR WATERS:   I think I was going to try and provoke your Honour Justice McHugh into tidying up that double negative in (b)(i), but that is not a very good reason either.  I understood - I will just come to it - (b)(i) says:

the sanction of refusing to enforce those rights is not disproportionate to the seriousness of the unlawful conduct;  (ii) the imposition of the sanction is necessary, having regard to the terms.....the statute does not disclose an intention -

I certainly interpreted that as meaning that there should be something in the Act which should make it clear that more than just the penalties set out should be imposed.  I understand that is what his Honour is saying, and really, that is what I think I just put in relation to the Act - that that is really the approach that one should do.  The Act should be given a good shake.  If there is something that is evident from its scheme or structure which requires it to go beyond the penalty regime, then one should look at it.  If not, the modern approach - it certainly would not have been the approach back when Cornelius and those other cases were being decided in 1918, 1932, but certainly since Mr Justice Devlin’s comments in Spanglett and in St John and certainly since Yango, and I do say with some confidence that the profession seems to have certainly seized on the exception, if that is indeed what was determined in Yango, with some vigour, because there are numerous cases where they have certainly grabbed with enthusiasm the out of saying, “Penalties are provided.  Absent anything else, that should be sufficient, we will leave it at that, and we will permit contracts to survive.”  If your Honours please, they are the matters I wish to raise.  I have no other matters.

DAWSON J:   Thank you, Mr Waters.  Mr Horler.

MR HORLER:   Briefly, your Honours, before my friend stood up to make his submissions, a question was put from the Bench to me, “Where is the defence to the action that was commenced before the magistrate in which the respondent/plaintiff was suing for his price?”.  Your Honours, I thought I had it but I do not.  All I can do is to give you some references to the appeal book which would show that which can now little be in doubt that the question of the statutory illegality through the absence of permits was a central and live issue.

DAWSON J:   Is it not possible to locate the defence?

TOOHEY J:   It must be on the file of the Supreme Court of the Northern Territory.

MR HORLER:   Somewhere, yes, one would think.  Your Honours, if this is a convenient course and if this Court decides to reserve this decision, Mr Van Haeften, who comes from Darwin, will make an inquiry on Monday.

DAWSON J:   Very well.  In the meantime you can give us these references.

MR HORLER:   Yes, to that end.

DAWSON J:   And if the inquiry reveals the defence, to let us have copies of it.

MR HORLER:   Yes, we will do our best but no warranties, your Honour.  I do not know why it is not ‑ ‑ ‑

GUMMOW J:   I would be surprised if the Supreme Court of the Northern Territory was unresponsive.

MR HORLER:   No, that is not the problem, but it would have been a document filed in the registry of the Magistrates Court and then made its way forward as the appeals progressed.  Your Honours, some references.  Page 13 in the appeal book at point 2 counsel for the defendant, as he then was, beginning “Ms Gearin submits, on behalf of the defendant ‑ ‑ ‑

DAWSON J:   There is no need to read them.  Just give us the reference.

MR HORLER:   Page 21 where the magistrate isolated the particular bores and the permits or the absence of the permits.  That goes over the page to 22.  I give you a cross‑reference to page 90 of the appeal book where Mr Justice Angel, the dissenting Justice in the decision appealed from, set out in a way that may be more comprehensible some of the same relevant material, 90 and 91.  On that this morning I mounted my argument at the beginning based on the alleged sole illegality of the contractor, I remind myself and just draw the Court’s attention to this, that when the matter was dealt with in the court below the question of the apportioning blame or fault did not arise and this is how Mr Justice Angel - true, he was in the minority, the dissenting Justice - says at the bottom of 89:

The appellant denied the claim saying that the contract was illegal and unenforceable because permits to drill the bores had not been obtained pursuant to s57 -

he did not, as I started to say, because the driller had failed to obtain.  It just said permits were not in existence.  Your Honours, I wanted to give you those references to show that was a live issue, the illegality issue.

KIRBY J:   What do you say in answer to the respondent’s point that they do not have to plead or rely on the illegality?  You have to do so in making good your defence and that the Court, if it comes to the second question as distinct from the effect of the statute as to whether the Court will lend its aid to this, would not lend its aid to you in a bootstraps argument to lift yourself up by relying on your own failure to get the permit.

MR HORLER:   I say to that, I suppose in the context of onus, the plaintiff brought his case and if in the plaintiff’s case it was established the absence of the permits and the illegality, the defendant might not need to go into evidence.

KIRBY J:   But you had apparently - in so far as one can make out what the defence was, you had raised a defence of illegality and unenforceability.

MR HORLER:   Yes, there was no doubt about that.

KIRBY J:   That sounds like the two categories:  illegality by the statute; unenforceability in the court by reason of public policy principles.

MR HORLER:   Yes, I accept that.

KIRBY J:   Now, if you raise those in your defence and if that is the matter for trial then you are the one who is seeking to put your own default before the court and to rely on it.  Why should a court listen to you to do so?

MR HORLER:   Because we are in locked step with another defaulter and what the statute is primarily concerned about is drilling without permits, not to say, “Well, you should have got it.”  “No, you should have got it.”  It is the drilling without permits, that fact, rather than some squabble about

whose job it was or, “You could have done it.”  “No, you should have done it.” 

Your Honours, the only other matter I wanted to raise, there was - I am not sure where it came from - passing reference to ABC v Redmore.  In that case - and I think it was in the New South Wales Court of Appeal - Mr Justice McHugh in drawing attention to the illegality of the ABC entering into rent contracts for greater than half a million dollars, being the explanation as to why the - I am sorry, the defence as to why the ABC should not pay the Redmore rent, my recollection is - I do not know whether it is in the Court of Appeal or picked up in the Commonwealth Law Reports said that while the ABC had a clear power to build building, rent buildings, spend large sums of money, the requirement of the ministerial approval said to be the threshold in illegality was, as I remember, regulatory rather than directory.

KIRBY J:   His Honour went through the same course as he went with you this morning.  He looked at the structure of the Act.  He looked at where the requirement for the Minister’s consent came in.  It did not come in in the powers of the commission, it came in in the provisions relating to finance and he said, therefore, by reason of its terms and its place in the Act, it was not meant to attack the validity of the contract, it was just a regulatory requirement.  I took a different view, but this Court upheld the view that Justice McHugh took.

MR HORLER:   Yes, I am aware of that.

GUMMOW J:   But Redmore was rather different, because the statutory prohibition said, in terms, “You shall not enter into a contract of a certain description.”

MR HORLER:   Yes.  I do not know that Redmore assists me, but there was an oblique and quick reference to it this morning, and I merely just wanted to complete that part of it.  Your Honours, subject to the search for the defence, consulting with the other side and getting it to the Court if it is found, that is all I wish to say by way of reply, and thank you.

DAWSON J:   Thank you, Mr Horler.

MR WATERS:   May it please your Honour, just on that issue, because I did seek some instructions myself and it may assist, we have not been able to locate a copy of the defence either.  But I am informed that the defence relating to the pleading of illegality under section 56 was not raised in the defence, but it was raised in the course of submission and argument, and

nobody has taken any point about the lack of formality in that regard.  So, when it turns up, it may be ‑ ‑ ‑

DAWSON J:   If any explanation is necessary, no doubt the parties can co‑operate and agree on what the explanation is.

MR WATERS:   I thought that might assist, if your Honour pleases.

GUMMOW J:   What you say seems to be supported at the top of page 13 of the appeal book.  The magistrate has very carefully gone through all the various defences, and then he just says that it is submitted “on behalf of the defendant that”, and then away it goes.  It does not refer to any paragraph.

MR WATERS:   Yes, you are right, sir.

DAWSON J:   No doubt the parties can co‑operate and apprise the Court of the real situation.

MR WATERS:   Yes.  But if it comes back blank, that is the explanation, if your Honour pleases.  In my argument, I did raise the discussion about the survivability of the old implied contractual prohibitions as discussed in Greig and Davis, and I have copies of Greig and Davis - the relevant passages - which I should have passed up, and I would like to do so now, if I may.

DAWSON J:   You can make them available to the clerk.

MR WATERS:   Thank you, your Honour.

DAWSON J:   Very well.  The Court will consider its decision in this matter.

AT 2.59 PM THE MATTER WAS ADJOURNED