Too clever by half: an unlicenced owner-builder liable for statutory warranties
By Sam Blackman
Published: 5 March 2024
Updated:
An unlicenced owner-builder fails to escape liability for statuary warranties. The owner-builder’s argument that it was not liable due to its own illegal conduct fails in the NSW Supreme Court.
Basic Facts
In 1995, Mr McIntosh became the owner of a property. In 2014, he obtained development consent to demolish the existing house and build a new house. Under that consent, a licenced builder should have done the work . Instead, Mr McIntosh arranged for the works to be done without a builder and without obtaining an owner-builder licence as required under the Home Building Act 1989 (HBA).
Mr McIntosh needed an owner-builder licence to undertake the works without a builder as it fell within the definition of “residential building work” under the HBA.
The property was sold in 2016 and again in 2020. The Lennons successfully sued Mr McIntosh in NCAT for breach of the statutory warranties found in s18B HBA and extended to subsequent purchasers under s18D HBA.
Legal Issues
Mr McIntosh (Plaintiff) appealed to the NCAT Appeal Panel and then to the Supreme Court of NSW.
In that appeal, the key issue was whether, a matter of statutory construction, the statutory warranties applied where the Plaintiff did not hold an owner-builder licence at the time he undertook the works. The Plaintiff argued that he was liable for statutory warranties as he was not an “owner-builder” within the meaning of the HBA.
The construction issue related to the definition of “owner-builder” in clause 1 of schedule 1 of the HBA:
Definition "owner-builder" (HBA)
owner-builder means a person who does owner-builder work under an owner-builder permit issued to the person for that work.
The Appeal Panel found that the proper interpretation of the Act was that the legal meaning, as distinct from the grammatical meaning of the definition of “owner-builder”, includes owner-builders who do residential building work without being issued an owner-builder permit for that work.
Payne JA (reasoning)
Payne JA found that while the appeal panel had erred in its approach to statutory construction, he nevertheless concluded that the defendants were entitled to statutory warranties as a matter of statutory construction rejecting the plaintiff’s arguments.
In coming to this conclusion, his Honour applied a purposive approach to statutory construction and inserted words into the statutory definition for “owner-builder”.
His honour applied Taylor v The Owners – Strata Plan No 11564 [2014] HCA 9; 253 CLR 531 (Taylor), and subsequent authorities, for the conditions where it is permissible for a court to read in additional works into a statue.
Test to read in words
The conditions are (see [155]):
- the identification of the precise purpose of the provision;
- satisfaction that the drafter and the parliament inadvertently overlooked an eventuality that must be dealt with if the provision is to achieve its purpose;
- 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.
At [108] Payne JA concluded that parliament’s clear intention was that the Statutory Warranties were to be implied into every contract for residential building work and were intended to apply to subsequent purchasers.
Ultimately, Payne would read in words into noting that at [148] “If the present case is not one where the principles on “reading in” are necessary, it is difficult to imagine where those principles would ever be necessary. To read in words so is an acceptable act of statutory construction.”
New definition "owner-builder"
At [156] concluded that each of the conditions for reading in works were made out and ultimately concluded that clause 1 of schedule 1 should be read as (additional words underlined):
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.
Significance (editorial)
This case is significant because it provides clarity as to the application of the statutory warranties to an unlicenced owner-builder and how clause 1 of schedule 1 HBA is to be read.
It is also an example of where a Court has applied Taylor and read in words into a statute. The approach taken by Payne JA is clearly reasoned and would be useful in other matters.
Perhaps the key proposition from this case is that the lack of a licence does not prevent a subsequent owner from enforcing statutory warranties against an owner-builder.
Key Paragraphs
Statutory interpretation – general [71-84]
Statutory interpretation – reading in words [85-101]
reasoning [151-158]
For more articles by Sam Blackman relating to Building and Construction
Disclaimer
The contents of this article is of a general nature only and is not a substitute for legal advice from a qualified legal practitioner. Check the date of publication and any update as the contents may have been superseded by changes in law.