The New South Wales Supreme Court has made it easier for individuals who unknowingly buy a defective property to seek damages by expanding the definition of an “owner-builder”. Attwood Marshall Lawyers Commercial Litigation Senior Associate Jade Carlson represented the winning side in this case and here she explains the implications of the court’s decision.
The New South Wales Supreme Court has expanded the circumstances in which a person can be considered an “owner-builder” and, therefore, be found liable for the costs of fixing defects after a property is sold.
In a recent dispute that went in favour of Attwood Marshall Lawyers’ client, the Supreme Court found that the literal meaning of the definition of an “owner-builder” in the Home Building Act 1989 (NSW) (“the Act”) leads to an “unjust result” that Parliament surely did not intend when they drafted the legislation.
Our opponent had argued that because he did not have an owner-builder permit when he carried out building work on the dwelling that our client subsequently purchased, he was not an owner-builder and did not breach any statutory warranties to our client under the Act.
Consumer protection is one of the main reasons for these warranties, providing protection to purchasers of residential property and successors in title from defective residential building work.
By focusing on Parliament’s intention of the statutory warranties – consumer protection – the New South Wales Supreme Court decided that individuals who do owner-builder work on a house are now subject to the Act, whether they have a permit or not. This is a matter which has not previously been decided in the New South Wales Supreme Court.
Here, we summarise the case and explore the conditions under which a court can “read in” words to a provision – which involves expanding on a definition by adding new words, clarifying confusion or unintended consequences of the original wording.
The case: McIntosh v Lennon [2024] NSWSC 169
Tweed Shire Council approved Mr Alan McIntosh’s application to demolish his Kingscliff property and build a new house in 2014. While obtaining development consent, Mr McIntosh applied for Home Warranty Insurance and told Fair Trading that a licensed builder would do the building work. However, between 2014 and 2016, Mr McIntosh carried out the construction independently, in the absence of the licensed builder and without an owner-builder permit.
Attwood Marshall Lawyers represented Stephen Lennon, who bought the property in 2020 from two women who had purchased the property from Mr McIntosh in 2016.
After forking out significant sums and obtaining an expert report from a qualified builder reporting on the defects, Mr Lennon sued Mr McIntosh for damages in the New South Wales Civil and Administrative Tribunal (NCAT). Mr Lennon claimed Mr McIntosh had breached the statutory warranties under the Act.
McIntosh resisted the claim, arguing, among other things, that the Act did not apply because he had never obtained an owner-builder permit and was, therefore, not an “owner-builder” as defined in the legislation.
However, the fact that he should have obtained the permit was enough for NCAT and the NCAT Appeal Panel to regard him as an owner-builder, making him liable for our client’s losses, in relation to the major defects. Mr Lennon was limited to recovering in respect of the major defects only, given the time frame for seeking compensation in relation to the minor defects had already lapsed by the time Mr Lennon purchased the property.
Mr McIntosh appealed again, to the New South Supreme Court, which had to decide whether Mr McIntosh was an “owner-builder” as set out in the Act.
Mr McIntosh argued that the Appeal Panel erred in law by changing the legal meaning of owner-builder, adding new words and denying procedural fairness.
The NSW Supreme Court, however, rejected the appeal and decided in favour of Mr Lennon.
In a decision handed down on 29 February 2024, the NSW Supreme Court found that if it had of favoured Mr McIntosh’s position and there was a loophole in the law that allowed him to avoid accountability as a builder-owner, it would be a “capricious and unjust result” that would allow “wrongdoers to take advantage of their own wrong.”
Justice Payne said that the definition’s current wording was “a product of clear oversight”, and Parliament would have drafted it differently had the unintended consequence come to light.
According to the judgment, it would be “overly onerous” for buyers if they were expected to check the insurance register to determine whether the builder had a permit before completing a sale.
The judgment also clarified the wording of the legislation, concluding that the term “owner-builder” applies not only to a “person who does owner-builder work under an owner-builder permit issued to the person for that work” but also to someone who “is required to hold an owner-builder permit to do that work.”
“It follows that the plaintiff is an owner-builder, because he was required to obtain an owner-builder permit before carrying out residential building work on the property. Therefore… the defendants could enforce the statutory warranties against him,” Justice Payne said.
How can a court add words to legislation?
Four conditions need to be met for a court to “read in” or add words to a provision. These include:
- The identification of the precise purpose of the provision;
- The satisfaction that the drafter and the Parliament inadvertently overlooked an eventuality that must be dealt with if the provision is to achieve its purpose;
- The identification of the words that the legislature would have included in the provision had the deficiency been detected before its enactment; and
- The modification must be consistent with the wording otherwise adopted by the draftsperson.
In McIntosh v Lennon, the Supreme Court found that these conditions were met. The judge also said that the alteration in language was not too far-reaching and was consistent with other features of the Home Building Act.
The original definition of owner-builder reads: “a person who does owner-builder work under an owner-builder permit issued to the person for that work.”
But Justice Payne said that correctly understood, “owner-builder means a person who does owner-builder work under an owner-builder permit issued to the person for that work or is required to hold an owner-builder permit to do that work.”
“These words were necessary to ensure the purpose of the Act was not frustrated,” he said.
The key take home from this decision is that homeowners can be liable to successors in title in respect of unlicensed building works, despite not having applied for an owner-builder permit. Homeowners who decide to cut corners and not engage a licensed builder or apply for an owner-builder permit, are now exposed to civil claims for defective works in respect of major defects for up to six years, and two years for all other defects.
Attwood Marshall Lawyers – helping you understand your rights as a property owner and resolve disputes effectively
We have dedicated commercial litigation lawyers who understand the complexities of property and commercial law and the wide range of issues that can arise when buying and selling real estate and businesses.
Being involved in a dispute can be a very distressing experience, both emotionally and financially. We are here to help you resolve your matter efficiently so that you can move on with your life.
For initial advice about your dispute, please call our Commercial Litigation Department Manager, Amanda Heather, on direct line 07 5506 8245, email aheather@attwoodmarshall.com.au or free call 1800 621 071.
