Key takeaways

Payne J considered the underlying purpose of the Act and ultimately found that the plain purpose was to include anyone who has carried out residential building work, even if they have not obtained the necessary owner-builder permit.

This means that, by extending the definition of “owner-builder” under the Act, subsequent purchasers of property can still bring a claim for a breach of statutory warranties against previous homeowners who carry out residential building work without obtaining the necessary owner-builder permit.

Background to the case

Mr McIntosh owned a property in Kingscliff, NSW. In 2014, Mr McIntosh obtained a development consent to demolish the existing house and build a new house on the property. This was “residential building work” within the meaning of the Act.

In the development application for the property, Mr McIntosh represented that a licensed builder would complete the demolition and building works. However, neither the nominated builder nor any other licensed builder undertook the demolition or construction work.  The work was actually undertaken by Mr McIntosh himself.

Section 12(a) of the Act made it an offence for Mr McIntosh to do residential building work except as the holder of an owner-builder permit authorising him to do that work.

Following completion of the new dwelling in 2016, Mr McIntosh sold the property, which was sold again in 2020 to Mr and Mrs Lennon. In 2021, the Lennons commenced proceedings against Mr McIntosh in the NSW Civil and Administrative Tribunal (NCAT) for defective work in breach of the statutory warranties under the Act.

At first instance, Senior Member Ellis SC:

1. Found that Mr McIntosh was an “owner-builder” within the meaning of the Act
2. Found that the new dwelling constructed on the property by Mr McIntosh breached the statutory warranties in Part 2C of the Act
3. Ordered Mr McIntosh to pay the Lennons damages in the amount of $95,199, along with costs.

Mr McIntosh appealed the decision to the NCAT Appeal Panel, which was dismissed. Mr McIntosh then appealed the decision to the Supreme Court of NSW. Mr McIntosh argued that the statutory warranties under the Act had no application because on a literal reading of the definition of owner-builder, it did not apply to anyone who had not obtained an owner-builder permit.

Supreme Court Decision

Payne J granted leave to appeal on the basis that the interpretation of the term “owner-builder” is an issue of public importance affecting those performing residential developmental work.

Ultimately, Payne J dismissed the appeal finding that:

1. It would be clearly contrary to the purpose of the Act for the statutory warranties not to be available to subsequent purchasers from owners who have done their own residential building work but have failed to obtain a permit to do so.
2. A person doing their own residential work cannot rely on their own breach to obtain the necessary permit to avoid liability.

His Honour considered the underlying purpose of the Act and, in applying the well-established, general principles of statutory interpretation, extended the definition of “owner-builder” under the Act to provide the necessary safeguards it was intended to provide for the benefit of subsequent purchasers.

Further information / assistance regarding the issues raised in this article is available from the authors, Patrick Kaluski, Partner, Joshua Murgatroyd, Associate, James Davis, Lawyer, or your usual contact at Moray & Agnew.