Is the Owner who undertakes residential building work under the Home Building Act without an Owner-Builder Permit liable for damages for breach for various statutory warranties provided for under the Home Building Act?

12/03/2024

Watson & Watson have extensive experience in the area of Building and Construction having been engaged by Owners, Developers, Builders, Sub-Contractors, Consultants and others engaged in the building industry in particular, in relation to the building of residential buildings including high-rise buildings over a period of many years.

In New South Wales the Home Building Act 1989 (“HB Act”) has been subject to many changes over the period since 1989 and provides for the regulation of residential building work and specialist work as defined in the HB Act. 

The Home Building Act provides definitions in relation to various words and phrases used in the Home Building Act. Relevant to who is liable for example, for damages for breach of statutory warranties permitted under the Home Building Act, the following definitions are included in the HB Act:

1.       “owner-builder” means a person who does owner-builder work under an owner-builder permit.

2.       “owner-builder permit” means an owner-builder permit issued by the Department of Fair Trading under the Home Building Act.

3.       “owner-builder work” means residential building work (with a reasonable market cost above the prescribed amount currently at $5,000.00) that relates to a single dwelling house, dual occupancy or secondary dwelling that may not be carried out on the land except with a Development Consent or a Complying Development within the Environmental Planning and Assessment Act 1979.

For many years questions have arisen as to whether in deciding the meaning of a statute or part of it, is the Court or other Tribunal bound to the “actual literal meaning” notwithstanding that such interpretation may produce what a Court would find is an unintended outcome.

Recently (29 February 2024) in the case McIntosh v Lennon decided by Justice Payne in the Supreme Court of New South Wales considered whether an Owner who undertook relevant residential work without an owner-builder permit was an owner-builder for the purpose of the Home Building Act; and thereby be subject to claims in the appropriate circumstances for breach of statutory warranty by either a person who is the immediate successor in title to the owner-builder (pursuant to Section 18C of the Home Building Act) or a person who is a successor in title to a person entitled to the benefit of a statutory warranty under the Act (Section 18D of the Home Building Act). 

Brief Facts

Mr McIntosh was a relevant Owner of a house at Kingscliff. In about 2014 Mr McIntosh obtained a Development Consent from the Local Council to demolish the existing house and build a new house on the land.  Mr McIntosh represented that a named person who held a licence under the Home Building Act would do the residential building work.  However that named person did not undertake the work and Mr McIntosh carried out the residential building work.  Mr McIntosh was obliged under the Home Building Act as such, to obtain an owner-builder permit before commencing that work.  Mr McIntosh did not obtain an owner-builder permit in relation to the work.  The house was thereafter sold and then re-sold.

The matter came before the New South Wales Civil and Administrative Tribunal (“NCAT”).  NCAT made an award in the sum of $95,199.15 against Mr McIntosh.  Mr McIntosh appealed to the NCAT Appeal Panel who determined that Mr McIntosh was an owner-builder under the Home Building Act and was liable to the Claimants, Mr and Mrs Lennon for breach of the statutory warranties.

Mr McIntosh sought leave to appeal to the Supreme Court of New South Wales which was granted on the basis that the proceedings concerned an issue of wider public importance regarding interpretation of the Home Building Act and the issue relating to who is an owner-builder.

The Supreme Court reviewed various cases in particular, the case of Taylor v The Owners Strata Plan 11564 which was decided by the High Court of Australia in 2014.

In those circumstances, the Supreme Court held that the definition of owner-builder will include the words underlined below.

“owner-builder means a person who does owner-builder work under the owner-builder permit issued to the person for that work or is required to hold an owner- builder permit to do that work.

The Court noted that the case was one where the literal construction in the definition section would produce a capricious and unjust result and for the reasons referred to above, the Court read in the extra words into the literal definition within the Home Building Act.

Justice Payne stated that it has long been recognized that “It is a strong thing to read into an Act of Parliament words that are not there, and in the absence of clear necessity, it is a wrong thing to do “Thompson v Goold & Co [1910]”…. and

By the end of the 20^th Century, a view was sometimes expressed that words were never read into a statute rather the statutes were to be construed purposively.”

Justice Payne after reviewing relevant cases, stated that there were 4 conditions contemplated by the authorities to be considered as to whether the Court would add in words into a provision of the legislature namely:

          “(1) the identification of the precise purpose of the provision.

          (2) satisfaction that the drafter and the parliamentary inadvertently overlooked an eventuality that must be dealt with if the provision is to achieve its purpose.

          (3) identification of the words that the legislature would have included in the provision had the deficiency been detected before its enactment; and

          (4) the modification must be consistent with the wording otherwise adopted by the draftsperson. 

In Mr McIntosh’s case:

1.       The first condition: His Honour was satisfied the purpose of the definition of owner-builder in the Act is to identify the class of person who will be subject to various obligations under the Act and in particular, the statutory warranties.

2.       The second condition: The Court concluded that the draftsperson inadvertently overlooked a situation where an owner–builder failed to obtain a permit.

3.       The third condition: His Honour decided that given his findings as to purpose and context that in the circumstances the Parliament if the issue had been drawn to its attention, would have included at the end of the definiation “or is required to hold an owner-builder permit to do the work”.

4.       The fourth condition: The Court found that the wording referred to in 3 is consistent with the wording otherwise adopted by the draftsperson.

In Mr McIntosh’s case there were submissions by each of the parties as to likely outcome which included submissions as to what was the purpose of the definition of owner-builder.  There were various suggestions made however the Court having considered the matter, determined the purpose as referred to above and on that basis added the words to the literal definition of owner-builder.

In those circumstances under the Home Building Act, a relevant Owner who undertakes the owner-builder work as referred to above, will be liable for damages for breach of the statutory warranties provided for at Section 18B.

This particular case is an important case as it is now clear based on this case, that the appropriate immediate successor in title or is a successor in title to a person entitled to the benefit of the statutory warranty are potentially entitled to claim under the provisions of the Home Building Act.  There are other issues relating to the entitlement to bring a claim under the statutory warranties which must be considered. 

In passing there are a number of other circumstances that arise in relation to the possibility of circumstances where the literal meaning under the statute may be extended.  These would no doubt be rare however we are aware of some circumstances where there is a possibility for a similar outcome to give meaning to a literal definition.

At Watson & Watson Lawyers our highly experienced Building & Construction Lawyers can assist you in all areas of construction from residential homes to duplexes and strata complexes including large strata schemes. Please contact Richard Watson, Accredited as a Specialist Commercial Litigation by the Law Society of New South Wales specialising in Building and Construction.  Please contact Richard Watson’s Personal Assistant Shereen Da Gloria to discuss your matter and to seek appropriate and timely advice.

This is only a preliminary view and is not to be taken as legal advice without first contacting Watson & Watson Solicitors on 9221 6011.