Being defectable makes them ILLEGAL. They dont write a law for every individual possible modifaction to a vehichle. It simply falls under the Road traffic act.
If the vehicle is of a prescribed class (which by the Road Traffic (Miscellaneous) Regulations 1999, regulation 32 includes: prime movers; commercial motor vehicles; and trailers) the Police or inspector can examine the vehicle whether or not there is reason to suspect deficiencies.
What is a defective vehicle?
A vehicle is considered defective if it:
does not comply with the vehicle’s standards;
has not been maintained in a condition that it can be driven or towed safely, if it would endanger the person driving/towing the vehicle, anyone else in or on the vehicle, or a vehicle attached to it or other road users.
does not have an emission control system fitted, or has an emission control system that has not been maintained.
and blah blah further down the act.
that the vehicle is not to stand or be driven on a road or be sold or otherwise disposed of, until:
•produced at specified place for examination;
•a clearance certificate is issued by a member of the Police, an inspector or vehicle registration authority certifying that the repairs are done; and
•the Police, inspector or vehicle authority caused the label to be defaced or removed from the vehicle; and
As arbitrary as the difference between defect and illegal are, it is illegal to drive a defective vehicle on public roads.
And yourself being in NSW should know that your rules and regulations are not only much stricter than the rest of Australia, but also enforced with much more vigor.