Residential Focus: Owner builder permit not required for benefit of statutory warranties

In McIntosh v Lennon [2024] NSWSC 169, the Supreme Court of NSW confirmed that individuals who do owner-builder work without obtaining a permit under the Home Building Act 1989 (NSW) (HB Act) remain subject to the statutory warranties in section 18B of the HB Act (warranties) regardless of their non-compliance with the legislation.

The decision was on appeal from the Appeal Panel of the NSW Civil and Administrative Tribunal and we summarise the facts following our article ‘No permit, not on title? Still liable as an owner-builder’.

Background

The Appeal Panel had found that a person undertaking residential building work without an owner-builder permit fell within the meaning of “owner-builder” in the HB Act, by reading in additional words to the definition.

The plaintiff appealed the Appeal Panel’s decision, asserting errors of law in:

• giving a legal meaning to owner-builder that differed from the ordinary meaning of the phrase
• construing that the words “or is required to do” should be inserted into the definition of owner-builder in circumstances where those words were absent
• making the above findings in circumstances where they were not argued before it
• denying procedural fairness.

The Court granted leave but dismissed the appeal.

Reading words into the definition

In the HB Act, owner-builder means a person who does work under an owner-builder permit issued to the person for that work.

The Court reviewed the authorities related to the reading in of words into legislation. In Taylor v The Owners – Strata Plan No 11564 [2014] HCA 9, the High Court accepted the views of Lord Diplock in Jones v Wrotham Park Settled Estates [1980] AC 74 as reformulated and restated in Inco Europe Ltd v First Choice Distribution (a firm) [2000] UKHL 15 where a court is required to read in words when construing legislation. The test adopted in Taylor required the following three conditions be satisfied:

• that it is possible to determine by reviewing the provision of an Act, read as a whole, what the “mischief was that it was the purpose of the Act to remedy”
• that it is apparent that the drafter and legislature had mistakenly overlooked or omitted to address a circumstance that may eventuate which would be addressed by the purpose of an Act
• that the wording to be “read in” to a provision of an Act can be discerned based upon the substance of the wording that may have been used by the legislature, had the words been drafted into the provision.

The Court concluded that the conditions adopted in Taylor had been satisfied and that a person who had not obtained an owner-builder permit should be included in the definition of owner-builder on the basis that:

• the legislature had intended that the warranties were implied into every contract for residential building work, regardless of whether or not a required permit had been obtained
• the drafter had overlooked the circumstances where a person required to obtain an owner-builder permit had not done so, and it would be illogical for the omission of this scenario from the HB Act to frustrate the respondent’s right to the warranties
• the Court was able to ascertain the substance of the words that the legislature may have drafted into the HB Act, had it turned its mind to those circumstances.

The Court further noted that the plaintiff should not receive a benefit from his unlawful acts.

The Court then reviewed extrinsic materials, including case law regarding previous definitions of owner-builder and concluded that there was a strong indication that owner-builder included individuals who were required to obtain a permit prior to undertaking any residential building work but had failed to obtain such permit.

The Court also considered the plaintiff’s argument that the definition of owner-builder work excluded the “reading in” of any additional wording because there were other remedies available to the defendant, such as rescission of a sale contract under section 95(5) of the HB Act.

The Court rejected this argument as the right of recission could only occur prior to a sale and in circumstances where a purchaser had discovered that a vendor had not disclosed that it was an owner-builder. This would not be consistent with the consumer protection scheme established by the HB Act. The Court similarly rejected an argument that a purchaser could make enquiries to determine if an owner-builder permit was required, finding that any consumer protection provided by a register is merely illusory.

The plaintiff also argued that the legislature had not intended that a person who had unlawfully failed to obtain an “owner-builder” permit would be subject to the warranties. The Court rejected this argument on the basis that there was no contextual indication that the legislature had meant to exclude the warranties.

The plaintiff further contended that extending the definition of owner-builder to include individuals who failed to obtain an owner-builder permit would adversely affect section 6.6 of the Environmental Planning and Assessment Act 1979 (NSW)(EPA Act). The Court concluded that the interaction between the HB Act and EPA Act allowed for an interpretation of owner-builder, where the owner-builder had not strictly sought the required permit, so that section 6.6 of the EPA Act was unaffected.

The Court concluded that reading in the words “or is required to hold an owner-builder permit to do work” into the definition of owner-builder was correct as the strict, literal construction of the definition would deprive the respondents of the benefit of the warranties and produce a “capricious and unjust result”.

Authors: Christine Jones & Lauren Boswell

In the media

Extreme conditions for renters described as 'needle in a haystack type stuff' as housing crisis deepens
Australia’s national vacancy rate has hit a record low of 0.7 per cent, according to data from Domain. The nation’s ongoing lack of housing supply cannot meet its growing housing demand. Chief of research and economics at Domain, Nicola Powell, speaks of the “much more extreme conditions” in “capital cities”. Australia’s housing crisis is expected to deepen, and renters will continue searching for housing in this “needle in a haystack” crisis (05 March 2024). Read more here.

NSW building commissioner issues stop work order on Illawarra apartment construction site
The New South Wales Building Commissioner David Chandler has ordered work halt on a major development in the Wollongong CBD. Speaking at an Urban Development Institute of Australia event in Wollongong on Thursday, Mr Chandler expressed his frustration with the project. Mr Chandler told the function that before his appointment to the role in 2019, the Building Commission had been "out to lunch" in the Illawarra. Mr Chandler said he had plans to expand the commission and establish permanent offices in the Hunter, Mid North Coast, and Northern Rivers (29 February 2024). Read more here.

Tweed Council tackles population boom, housing shortage and water insecurity triple threat
The Tweed Shire, located just south of the Queensland border, is already home to almost 100,000 people. By 2041 that number could grow by another 30,000. Residents have been told the Tweed Shire Council will not be able to meet community demand after about 2028. To meet water supply demands, the council is hoping to double the capacity of its main water supply by raising its walls by 8.5 metres. The council’s strategic planning coordinator Iain Lonsdale says there is a particular focus on increasing housing density in existing residential areas (22 February 2024). Read more here.

The government’s Help to Buy scheme will help but it won’t solve the housing crisis
The federal government’s Help to Buy scheme is before the parliament. If passed the government will provide an equity contribution of up to 40% of the purchase price of a new home, and up to 30% for an existing dwelling, with buyers needing a minimum deposit of 2%. Only 10,000 places will be offered each year. This scheme is set to level the playing field of home buying, however there are several disadvantages (5 March 2024). Read more here.

Urbanisation and tax have driven the housing crisis. It’s hard to see a way back but COVID provides an important lesson
Australia has an abundance of land but a shortage of accommodation. Small towns are declining and cities are growing. Packing Australia’s population into capital cities has helped push up land prices because the limited supply of well-located land in cities. Covid-19 has reversed this affect as people no longer need to live very close to work with flexible work arrangements being introduced. Now people are overwhelming regional areas which lack the sufficient planning to accommodate for this change (4 March 2024). Read more here.

Building approvals fall a further 1 per cent in January
The Australian Bureau of Statistics today released its monthly building approvals data for January 2024 for detached houses and multi-units covering all states and territories. HIA Chief Economist, Tim Reardon, states that “the low volume of building approvals throughout 2023 will see the volume of homes commencing construction continue to slow this year” (4 March 2024). Read more here.

In practice and courts

Register now for the next ABCB Forums
The Australian Building Codes Board (ABCB) invites you to attend our ABCB Forums in Melbourne. The forums are an opportunity to talk to our Board Chair, Glenys Beauchamp AO PSM, and CEO, Gary Rake, about any aspect of the NCC’s work (19 February 2024). Read more here.

Published – articles, papers, reports

Australian Bureau of Statistics – Building Approvals, Australia: January 2024
This report provides the number of dwelling units and value of buildings approved for the period. The total dwellings approved fell 1.0%, to 12,850 (4 March 2024). Read more here.

Australian Bureau of Statistics – Construction Work Done, Australia, Preliminary: December 2023
This report provides preliminary estimates of value of total construction work done, building work done and engineering construction work done. The trend estimates total construction work done rose 1.0% from the previous period. (28 February 2024). Read the report here.

Cases

MDR Design and Construction Pty Ltd v Ferguson [2024] NSWCATAP 25
APPEAL – HOME BUILDING – failure to make necessary findings of fact.
Civil and Administrative Tribunal Act 2013; Home Building Act 1989.

McIntosh v Lennon [2024] NSWSC 169
BUILDING AND CONSTRUCTION – Home Building Act 1989 (NSW) – enforcement of Part 2C statutory warranties against owner-builder – where owner undertook residential building work without an owner-builder permit – whether owner was “owner-builder”.
STATUTORY INTERPRETATION – definition of “owner-builder” in Home Building Act – where on literal reading definition extends only to those who had an owner-builder permit – whether definition should be extended to those required to obtain an owner-builder permit but did not – purposive construction – whether legal meaning of definition’s actual words differs from literal meaning – whether permissible to read definition as if it contained additional words – principles for reading additional words into statute.
Building Services Corporation Act 1989 (NSW); Building Services Corporation Legislation Amendment Act 1996 (NSW); Civil and Administrative Tribunal Act 2013 (NSW) ss 80, 83; Civil Procedure Act 2005 (NSW) s 98; Criminal Procedure Act 1986 (NSW) s 179; Environmental Planning and Assessment Act 1979 (NSW) Pt 1, sch 5, s 6.6; Competition and Consumer Act 2010 (Cth); Conveyancing Act 1919 (NSW) s 52A; Home Building Act 1989 (NSW) Pt 2C, Pt 3, Pt 4, Pt 6, Pt 6AA, ss 12, 18B, 18C, 18D, 29, 30, 31, 32, 32AA, 90, 92, 95, 96, 98, 99, 100, 102A, 103F, 127A; sch 1 cll 1, 2,; Home Building Amendment Act 2014 (NSW); Interpretation Act 1987 (NSW) s 33; Land Tax Management Act 1956 (NSW); Local Government Act 1993 (NSW) Pt 1, s 113; Local Government Act 2020 (Vic) s 224; Motor Accidents Compensation Act 1999 (NSW) s 138; Sentencing Act 1991 (Vic) s 37; sch 3 cl 5; Sentencing Amendment (Community Correction Reform) Act 2011 (Vic) s 21; Work Health Act 1986 (NT) s 3; Conveyancing (Sale of Land) Regulation 2022 (NSW); Uniform Civil Procedure Rules 2005 (NSW) rr 42.1, 50.12.

Lechowicz v Commissioner of Fair Trading [2024] NSWCATOD 20
ADMINISTRATIVE LAW – Home Building Act – administrative review of decision to refuse application for owner builder permit – special circumstances – occupancy.
Administrative Disputes Review Act 1997; Civil and Administrative Tribunal Act 2013; Home Building Act 1989; Standard Instrument (Local Environmental Plans) Orders 2006.

Dyjecinska v Step-Up Renovations (NSW) Pty Ltd [2024] NSWSC 159
APPEAL – statutory interpretation – signature requirement – building contracts – legislative amendments – legislative intention – secondary reading speech.
Civil and Administrative Tribunal Act 2013 (NSW) ss 57 and 83; Home Building Act 1989 (NSW) s 7, 7A, 7B, 10 and Schedule 2; Interpretation Act 1987 (NSW); Statute Law (Miscellaneous Provision) Act (No 2) 2001 (NSW).

Visscher v SafeWork NSW [2024] NSWIRComm 1012
EMPLOYMENT AND INDUSTRIAL LAW – work health and safety – notices and enforcement – owner-builder issued with Prohibition notice – whether inspector had power to issue Prohibition Notice – whether residential construction site was a “workplace” – whether construction of dwelling by an owner-builder constituted an “undertaking” within the meaning of the Work Health and Safety Act 2011 (NSW) – whether an owner-builder is a “person conducting a business or undertaking” and a “worker” within the meaning of the Work Health and Safety Act 2011 (NSW) – whether inspector held requisite reasonable belief as required by s 195 before issuing Prohibition Notice.
Fair Work Act 2009 (Cth), ss 789FC and 789FD; Home Building Act 1989 (NSW), Part 3, Div 3, ss 12 and 32; Industrial Relations Act 1996 (NSW), ss 175, 178A, 179, 187 and 188; Supreme Court Act 1970 (NSW), s 69; Work Health and Safety Act 2011 (NSW), ss 3, 5, 7, 8, 19, 195, 196, 197, 23, 223, 224, 226, 229; Uniform Civil Procedure Rules 2005 (NSW), rr 13.4, 28.2; Work Health and Safety Regulation 2017 (NSW), regs 7, 36, 78, 79, 225, 289, 292, 293 and 297.

BCA Constructions Pty Ltd v Arsovski [2024] NSWCATAP 31
COSTS – proceedings at first instance settled prior to hearing by consent orders with issue of costs reserved – r 38 Civil and Administrative Tribunal Rules 2014 – whether costs order should be made in favour of a party – applicable principles.
Civil and Administrative Tribunal Act 2013 (NSW); Civil and Administrative Tribunal Rules 2014 (NSW); Home Building Act 1989 (NSW).

Shakiri v Holland [2024] NSWCATAP 28
APPEALS – internal appeal – significant new evidence not reasonably available – no grounds for leave established – appeal against order enforcing unwritten contract for residential building work to a value exceeding $30,000 allowed – s 7 and s 10 Home Building Act 1989 (NSW) – order on appeal – order for return of monies paid pursuant to order set aside on appeal.
EVIDENCE – opinion evidence – consequences of non-compliance with NCAT Procedural Direction 3 – expert Evidence – affects weight not admissibility – expert report containing bare assertions – given no weight.
Civil and Administrative Tribunal Act 2013 (NSW); Design and Building Practitioners Act 2020 (NSW); Evidence Act 1995 (NSW); Home Building Act 1989 (NSW); Home Building Regulation 2014 (NSW); Workers Compensation Commission Rules 2003 (NSW) (Repealed).

Legislation

Acts
Hunter Water Act 1991 (NSW) – commenced 1 March 2024
Local Government Act 1993 (NSW) – commenced 1 March 2024
Law Enforcement (Powers and Responsibilities) Act 2002 (NSW) – commenced 1 March 2024
Crown Land Management Act 2016 (NSW) – commenced 23 February 2024

Non-Government
Residential Tenancies Amendment (Prohibiting No Grounds Evictions) Bill 2024 – introduced LA 8 February 2024

Regulation and other miscellaneous instruments
Local Government (General) Regulation 2021 (NSW) – commenced on 01 March 2024
Property and Stock Agents Regulation 2022 (NSW) – commenced on 29 February 2024

Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Christine Jones

Faith Zalm

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