In the recent decision in McIntosh v Lennon [2024] NSWSC 169, the Supreme Court was tasked with determining whether words should be implied into the definition of ‘owner-builder’ in the Home Building Act 1989 (NSW) (HBA) to extend the statutory warranties contained in part 2C of the Act to subsequent title holders for owner-builder work performed without the appropriate permit. 

The statutory warranties contained in section 18B of the HBA are intended to be read into all contracts for residential building work done under a contract made after the commencement of Part 2C, and provide minimum requirements as to the quality of the works. Section 18C provides cover under the warranties for the immediate successor in title to an owner-builder, and section 18D provides the same warranties for subsequent titleholders. 

The case discussed an oversight in the definition of ‘owner-builder’, which under the HBA was defined as “a person who does owner-builder work under an owner-builder permit issued to the person for that work” and whether successive titleholders to a person who performed owner-builder work without the relevant permit would gain the benefit of the statutory warranties.

Background

Mr Alan McIntosh held real property in Kingscliffe on a resulting trust for his daughter. In 2014 he obtained development consent to perform building work on the property and proceeded to perform building work on the property himself, not engaging the services of the licensed builder he nominated in the development application, nor applying for the relevant owner-builder permit. Mr. McIntosh sold the property in 2016, and those buyers then on-sold the property to Mr. and Mrs. Lennon in 2020. In 2021 the Lennons brought proceedings against Mr. McIntosh for breach of the statutory warranties.

The proceedings in New South Wales Civil and Administrative Tribunal and the subsequent appeal before the appeal panel found in favour of the Lennons and directed Mr. McIntosh to pay $95,199.15 in damages. The appeal panel determined that the legal meaning of ‘owner-builder’ should be used, despite how the phrase was defined in the legislation. 

Mr. McIntosh appealed to the Supreme Court arguing that the definition of owner-builder did not apply to him. He submitted that as he never held an owner-builder permit he was not liable to the subsequent titleholders under sections 18C and 18D of the Home Building Act.

Supreme Court’s Decision

The point on appeal was whether the appeal panel in NCAT had made an error of law by adopting the legal meaning of ‘owner-builder’ instead of giving the words their normal, ordinary usage. It was argued in the alternative that the phrase ‘or is required to do so’ that was read into the definition was an error of law, as the elements for the test of implication of words into statute had not been made out.

The Court gave leave to hear the appeal but dismissed it, ruling that there was a lacuna in the legislation which should be addressed by the phrase ‘or is required to do so’ being read into the owner-builder definition. The Court looked general statutory interpretation principles as approved by the High Court in Taylor v The Owners – Strata Plan No 11564 (2014) 253 CLR 531 to reach its conclusion. 

The test in Taylor requires a three-step test to be made out, which requires:

  1. It be possible to determine by considering the provisions what the mischief sought to be corrected by the legislation was;
  2. It was apparent that the draftsperson had inadvertently overlooked an apparent eventuality; and
  3. It be possible to state substantially what would have been inserted by the draftsperson.

By reference to the terms of the sections of the Act itself, as well as extrinsic materials to determine the statutory warranties were intended to apply to all building contracts the Court determined that the definition of ‘owner-builder’ in the HBA was intended to identify the class of person subject to the owner-builder obligations. It was found that the original draftsperson did not intend to exclude owner-builders who did not apply for a permit from the definition, and that as a whole, the draftsperson would have intended the meaning of the provision as changed by the implication of the phrase. 

By implying extra words into the definition, the Court ruled that “owner-builder means a person who does, or is required to do, owner-builder work under an owner-builder permit issued to the person for that work”. A failure to do this would have resulted in a capricious and unjust result for the Lennons. By applying this definition, it ruled that the sections 18C and 18D of the Act extended the statutory warranties to the subsequent titleholders, and that no error was made in allowing the Lennons to pursue Mr. McIntosh for breach of the statutory warranties.

Tags: ,