John M Kelly (Builders) Pty Ltd v The Capricornia Electricity Board

[1991] HCATrans 365

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Brisbane No B25 of 1991

B e t w e e n -

JOHN M. KELLY (BUILDERS) PTY
LTD. ,,,;,. , . ' ~.

Applicant

and

THE CAPRICORNIA ELECTRICITY

BOARD

Respondent

Application for special leave

to appeal

BRENNAN J
DAWSON J

MCHUGH J

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TRANSCRIPT OF PROCEEDINGS

FROM BRISBANE BY VIDEO LINK TO CANBERRA

ON FRIDAY, 13 DECEMBER 1991, AT 11.05 AM

Copyright in the High Court of Australia

MR P.A. KEANE, QC:  May it please the Court, I appear for

the applicant with my learned friend,

MR M.K. CONRICK.	(instructed by Cooper Grace &
Ward)

MR V.K. COPLEY, QC:  May it please the Court, I appear with

my learned friend, MR A.S. MELLICK, for the

respondent. (instructed by Connolly Schirmer &

Batts)

BRENNAN J: Yes, Mr Keane.

MR KEANE:  Your Honours, in this case it was held by both

courts below that the respondent, which is an

electricity board cor~tituted under the Electricity

Act 1976, is entitlea ~o specific performance of a

contract for the sale by it of land. The courts

below held that the contract was made without

complying with the statutory requirement which is

to be found in the record at pages 67 to 69. The

requirement, as Your Honours will see if

Your Honours turn to page 67 of the record, is

stated at page 68 in section 251(9), which is at

line 35 on page 68. It is in these terms:

Before any contract .....

(c) For the sale of land

is entered into by an Electricity Board, it

shall -

observe the tendering procedure prescribed by the

statute or it may seek to pursue some of the

alternative modes of proceeding to a contract for

the sale of land by the electric authority.

Your Honours, the courts below held that one

could not discern from the language of the Act or a

consideration of its objects a prohibition on the
subject contract.	Your Honours, that appears in

the judgment of His Honour Mr Justice de Jersey at

page 56, lines 45 to 47 of the record, following

the judgment at first instance of Mr Justice Byrne,

which we found in the record at page 12, line 10
and through to page 14, line 5.

Your Honours, Justice Shepherdson agreed in the Full Court with Justice de Jersey, and

Mr Justice Williams agreed on this point with

Justice de Jersey as well. Your Honours, we submit

that Their Honours reached that conclusion, that is

to say that one could not discern a prohibition, by

asking whether the statute intended that the effect

of non-compliance with section 251(9) is that the

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contract made in contravention of it is void or

otherwise unenforceable.

Having found, on a view of all the provisions of the Act that were of relevance or thought to be
of relevance, no provision that non-compliance

should result in voidness or unenforceability, they

concluded that there was no prohibition of the

contract in section 251. That appears -

McHUGH J: Not no prohibition, but that it was in fact void.

MR KEANE: Your Honours, in our respectful submission, they

did indeed conclude that because there was no

express or implied provision identified by them
rendering the contract void or unenforceable, they

concluded then that that indicated that the

contract was not prohibited on a fair construction

of section 251(9).

BRENNAN J: What do you mean by the contract not being

prohibited?

MR KEANE:  Your Honour, it is our submission that on a fair

construction of section 251 the language of the

section, by making exhaustive provision for the

permitted modes of contracting, necessarily

prohibits the making of a contract otherwise than

in accordance with those prescriptions.

BRENNAN J: You mean it prohibits the Electricity Board from

entering into a contract?

MR KEANE:  Yes, otherwise than in compliance with those provisions.

BRENNAN J: And if the Electricity Board otherwise than in

compliance with those provisions does enter into a

contract, what then is the effect of that section

upon the contract so entered into?

MR KEANE:  Your Honours, it is our submission that the

effect of a prohibition upon the entering into of

the contract is, prima facie, that the contract is

illegal, void and unenforceable unless one can
discern from the statute by express language or
necessary implication the intention that
notwithstanding the prohibition which one has ex
hypothesi identified, the contract should

nevertheless be enforceable.

McHUGH J: That turns the test on its head, does it not?

MR KEANE: In our respectful submission, Your Honours, the

approach which the courts below have pursued turns

the test on its head, or rather confuses, in our

respectful submission, the issue of whether there

Kelly 13/12/91

was on the statute proper~y construed a prohibition

on the entering into of t::e contract with the

question which arises after one has identified a

prohibition, namely, whether there then can be

discerned an intention that the contract should

otherwise be enforceable.

McHUGH J: Section 102 gave the Board power to dispose of

property, so it had the power to do it?

MR KEANE; Indeed, Your Honour.

McHUGH J: And it has entered into a contract which has a

prohibition in. The question is whether that

contract is then void because it has not been

complied with. What is the difference between this

case and ABC v Redmore?

MR KEANE:  Your Honours, can we say two things, with

respect, about ABC v Redmore: the first is that we

would submit that, with the greatest respect, the

proper statement of principle is in the judgment of

Justices Brennan and Dawson at page 462 of the

report of the decision in 166 CLR.

BRENNAN J: That is the dissenting judges.

MR KEANE:  Your Honours, we appreciate that. We are alive

to that, Your Honours. We refer to it because we

apprehend that the statement of principle to which

we refer is orthodox in the sense that it is a

reflection of the same statement of principle that

one finds in the judgment, for example, of

Justice Jacobs and Chief Justice Gibbs in Yango

Pastoral. The passage is at page 462, the first

full paragraph of text:

Prima facie, when a statute prohibits the

making of a contract, the making of it is both

illegal and criminal and being illegal, is

void.

As Mr Justice Jacobs said in Yango Pastoral - we
will not need to take Your Honours to it.	We can

simply state the proposition that Mr Justice Jacobs

stated and we submit that it represents orthodoxy,

that:

When a statute expressly prohibits the making

of a particular contract, a contract made in

breach of the prohibition will be illegal,

void and unenforceable unless the statute otherwise provides either expressly or by implication from its language.

Now, Your Honours, it is our submission that

firstly that passage in ABC v Redmore to which we

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have referred is orthodox, and that there is

nothing in the majority approach to contradict it.

McHUGH J: Well, what about the passage at 457 at about

point 8 in the majority approach?

If the statutory direction to the ABC not to

enter into a contract of the specified kind

without the approval of the Minister has the

effect either of confining the actual powers

of the ABC or of invalidating any

contract ..... it must be by reason of a

legislative intent to be discerned in the

words of the sub-section construed in the

context of the Act as a whole.

MR KEANE:  Yes, Your Honour.

McHUGH J: That is why I said that your proposition turned

the proper test on its head.

MR KEANE:  Your Honour, with respect, the second thing we

wish to say about ABC v Redmore is that the present

case, in our respectful submission, or the present

relevant statutory requirement, is not, on its

proper construction, as was that with which the

majority was there concerned in the passage to which Your Honour has referred, with a section

which is directory in terms to the Board and that,

that that is so does appear, in our respectful

submission, in the passage at page 457 above that

from which Your Honour has just read.

In the passage beneath the citation of

section 70, Your Honours:

As the judgments in the courts below

demonstrate, the question whether

section 70(1) should be construed as confining

power or as directory of the manner of its

exercise is a finely balanced one. The words

of the sub-section are not compelling either

way. In strict terms, they are directory.

They speak of the exercise ("shall not ... enter

into a contract"), rather than the existence,

of power. Their direction is to the ABC and

not to an innocent outsider having contractual

dealings with the ABC, who would be likely to

act on the basis that the ABC would have

complied with any statutory duty to obtain the
approval of its responsible Minister before
purporting to enter into a contract of a kind

which required such approval.

Now Your Honours, we - - -

Kelly	13/12/91
BRENNAN J:	Mr Keane, if you compare the language of

section 70(1) of the ABC Act with section 251(9) of

the Electricity Act, one would think that this is

an a fortiori case in comparison with ABC, because

it deals with the situation of what the Board must

do before entering into a contract and then, when

one goes to subsection 10, one sees subsection 9 as

being referred to as a procedure. That can hardly
be equated with the prohibition that was in

section 70(1) where it says:

corporations shall not enter -

MR KEANE:  Your Honour, we submit that they cannot be

equated.	We do make the submission that the two
provisions cannot be equated.	We submit that

section 70, with which the Court was concerned in

ABC v Redmore, was indeed directed and directory to

the ABC, and it was on that footing that the
majority concluded that it was not possible to
regard it as directed to prohibiting the making of

the contract. In our respectful submission,

section 251(9) is intended, on a fair construction,
to lay down pre-conditions to the entry into a

contract and it is, in terms, before any contract

is entered into by the Board.

So that, in our respectful submission, it is

possible to distinguish the approach of the

majority, in ABC v Redmore, on two bases: the

first, that it is not in terms directory but lays

down pre-conditions to contract; and secondly, to

take up what was said in the passage we have cited,

that it is not an innocent outsider, as it was in

ABC v Redmore, who seeks to enforce this contract

made by the Board in breach of conditions addressed

solely to it, but it is the Board which seeks to

enforce its contract made, as we would submit,

outside its charter.

And Your Honours, we submit, with respect,

that the statute makes exclusive provision for the

conditions of entry into contracts of this class

and to take up once again the refrain from, we

admit, the dissenting judgments in ABC v Redmore,

it must have some real effect. And, in our

respectful submission, the public interest, in

insisting upon observance of the exclusive mode of

contracting, is readily apparent.

McHUGH J: What about the public interest in holding those

to their contract who have entered into it and then

seek to get out of it by reference to what might be

fairly regarded as technicality?

MR KEANE:  Your Honour, in this case we say two things about

that, with respect. The first is that the public

Kelly 13/12/91

interest is best expressed by the Parliament and if

the Parliament has fairly expressed its intention
that the contract be prohibited then intention

should be given to that effect by the courts. The second thing we wish to say, with respect, is that

in this case the second point in respect of which
we would seek leave is that in the contract itself

the Board expressly promised, in clause 22 of the

contract, that section 251 had been complied with.

Now, the court below held that that promise - - -

McHUGH J: It was a warranty, not a condition.

MR KEANE:  It was a warranty on a condition that promise in

respect of which my client saw to exercise a right

to determine the contract, was held not to be a

condition of its obligations. That approach by the
Court below was said to reflect the inclination of

the courts to construe a term as a warranty rather
than a condition, and in that respect both the

courts below took support from a joint judgment of

this Court in Ankar Pty Ltd v National Westminster

Finance (Australia) Ltd, 162 CLR, and in particular

at the passage at 556.

In our respectful submission, that approach is to, once again with the greatest respect, confuse

the approach which this Court has suggested should
be taken. The inclination, we would submit, should

be understood not as a governing principle but as a

manifestation of a more general principle, and that

is the Court's preference for performance rather

than the avoidance of bargains, and that means
giving full effect to terms which, upon breach,

confer a right. In this case the only relevant

remedy would have been a right of termination; the

alternative is to give it no effect at all. And

can we simply refer, Your Honours, in Ankar's case,

to the circumstance that it itself was concerned

with breach of conditions which gave rise to no

sensible right to damages in the event of breach

and that that itself was a consideration which led

the Court to characterize the provisions as

conditions rather than warranties.

The relevant passage, Your Honours, is in the

joint judgment in 162 CLR at 557, in the first

paragraph at the top of 557:

Three factors favouring an interpretation

of ell. 8 and 9 that gives them the status of
conditions may be mentioned. First, in the
event of breach, neither clause is readily
enforceable by way of an action for damages.

Damages for breach would be difficult to prove.

Kelly 13/12/91

Your Honours, in the present case there can be,

with respect, no doubt that a remedy in the way of

damages for breach of clause 22 is entirely

nugatory. The only way in which the courts can

give effect to that provision is to regard it as

creating a condition of the purchaser's obligation

to perform its contract.

BRENNAN J: Why is that, Mr Keane? If you have suffered any

damage by the breach of clause, why could you not

have proved it?

MR KEANE:  Your Honour, perhaps the better way to put it is,

that it is inconceivable that it is the type of

provision that would give rise to damage; it is the
type of provision which, by its very nature would
only be exercised by reliance upon breach of it to
terminate the contract. It is not the type of

provision which could be expected to survive

completion.

BRENNAN J: But if, for example, the Board had sought to

rely on its incapacity in the way in which you have

indicated, could you not then have sought damages?

MR KEANE:  Yes, that is so, Your Honour.

BRENNAN J: So, there is a very good reason why it should

find its place in the contract and why you could

recover the damages under it.

MR KEANE:  Except that in the events which have happened,

the only way that can be given effect, the only way

that that term can take effect - - -

BRENNAN J: But Ankar is speaking about the nature of the

term without respect to the events that have

happened.

MR KEANE:  Yes, Your Honour. Your Honour, we accept that.

Your Honours, the construction point - the

section 22 point - is the second point we seek to

agitate.

BRENNAN J: Yes.

MR KEANE:  If we may refer to the first point which we seek

to agitate, and we referred to the second point

when we did, because of the apprehension which we
were concerned to seek to allay if we might, that

this was simply an attempt to dredge up some point

after contract with a view to·getting out. Of

course it was a point that commended itself to the
parties at the time and, notwithstanding the

warranty, as events turned out, it is established

in the judgments below that the authority had not

complied with its obligations or with the

Kelly 13/12/91

pre-conditions to the making of a valid contract,

in our submission. And the point which we wish to

agitate, if leave is granted, is, that once it

appears fairly that there is a prohibition on

contract then the question is whether one can

discern expressly or impliedly the intention that the contract should none the less be enforceable.

Your Honours, those are our submissions.

BRENNAN J: Yes, thank you, Mr Keane. We need not trouble

you, Mr Copley. The applicant relies on the effect

of section 251(9) of the Electricity Act (1976)

Queensland, to render the contract between the

parties illegal and void. In the way this

submission stands, the decision of this Court in

Australian Broadcasting Corporation

v Red.more Pty Ltd, (1989) 166 CLR 454. The

possibility of distinguishing the statutory
provision in this case from the provision

considered in the ABC v Red.more, does not give rise

to a question of general public importance which

justifies the grant of special leave.

As to the construction of clause 22 of the

contract, this gives rise to a question which turns

upon the particular terms of the contract and does

not give rise to any question of general public

importance. Accordingly, special leave will be

refused.

MR COPLEY:	May it please the Court, we ask for costs.
BRENNAN J:	Mr Keane, do you have anything to say about

that?

MR KEANE:	No, Your Honours.
BRENNAN J:	The application will be refused, with costs.
AT 11.27 PM THE MATTER WAS ADJOURNED SINE DIE

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