No permit, not on title? Still liable as an owner-builder
In a recent decision, the Appeal Panel has expanded the circumstances in which a person may be considered an "owner" and an "owner-builder" and therefore owe statutory warranties under the Home Building Act 1989 (NSW) (HBA).
Background
In 1995, the appellant bought a property in his daughter's name. Although the appellant's daughter was the registered owner of the property, she neither contributed to the purchase price nor resided at the property.
In 2013, the appellant decided to build a new house on the property himself, relying on his previous experience of building houses as an owner-builder. The appellant lodged the relevant development application documents and received approval. The work commenced in 2014 and was completed in 2016.
At no point did the appellant obtain an owner-builder permit because he assumed he was applying as the owner/builder as he had paid the application fees himself and made the application in his name. However, the appellant obtained home warranty insurance in the name of a builder without that builder's knowledge or consent.
The property was sold in 2016 and listed for sale again in 2020. The purchasers (the respondents) were advised in a pre-purchase report that the property contained defects. A meeting was then held between the respondents and the appellant, where the appellant represented that the property had no major defects. In June 2020, the respondents purchased the property in reliance on those representations.
The defects in the property worsened. The respondents carried out rectification work at their expense. The appellant refused to assist the respondents and advised them that he had nothing to do with the building work.
In February 2021, the respondents commenced proceedings against the appellant to recover the cost of the rectification works. The Tribunal, at first instance, found that the statutory warranties in section 18B of the HBA were breached by the appellant, who was either an owner-builder or an unlicensed builder who contracted with the registered owner (his daughter) to carry out the work.
Issues on appeal
The primary grounds of appeal before the Appeal Panel were whether the appellant:
- could be described as the owner of a property, even though his daughter was the sole registered proprietor of the property
- was an owner-builder for the purposes of the HBA, even though the appellant had not obtained an owner-builder permit.
Relevant HBA definitions
The applicable definition of 'owner' was:
"owner of land means the only person who, or each person who jointly or severally, at law or in equity—
(a) is entitled to the land for an estate of freehold in possession, or
(b) is entitled to receive, or receives, or if the land were let to a tenant would be entitled to receive, the rents and profits of the land, whether as beneficial owner, trustee, mortgagee in possession or otherwise."
The applicable definition of 'owner-builder' was:
"owner-builder means a person who does owner-builder work under an owner-builder permit issued to the person for that work."
Section 18B of the HBA establishes the statutory warranties implied in every contract for residential building work. Section 18C of the HBA provides that a successor in title to an owner-builder is entitled to the benefit of the statutory warranties in section 18B. Section 18D extends the statutory warranty to successors in title of a person entitled to a benefit of a statutory warranty.
Consideration
Owner, where not registered proprietor
The appellant challenged the finding of the Tribunal below that the appellant was an owner of the property, relying on the fact that the registered proprietor of the property was his daughter. In reply, the respondents contended that the daughter held the property on a resulting trust for the appellant and that the presumption of advancement (the presumption that because of a certain relationship, such as parent-child, an advancement of monies is a gift) had been rebutted.
The Appeal Panel relied on the High Court's recent discussion of resulting trusts in Bosanac v Commissioner of Taxation [2022] HCA 34 and the Court of Appeal's decision in the even more recent Koprivnjak v Koprivnjak [2023] NSWCA 2, and found that the existence of a resulting trust is "determined by intention... of the person contributing the funds for the purchase of a property".
In applying this principle, the Tribunal found there was a resulting trust and that the appellant was the owner of the property. This was because, despite the appellant's daughter being the proprietor on title, the appellant had paid the purchase price for the property and continuously described himself as the owner or stated that he bought the property in various documents.
This evinced an intention that his daughter was doing nothing other than lending her name to her father. The fact that his daughter never received any proceeds of sale from the property nor contributed to the expenses of the property, supported the fact that the presumption of advancement had been rebutted.
The appellant sought to rely on the fact that the construction work was paid for by a family trust in which the appellant had an undisclosed role. However, the Appeal Panel found this fact was not determinative because there was no indication that the trust had provided the purchase price for the property, merely the funds for construction work.
The appellant had equitable ownership of the property because he could obtain an order for actual possession if needed, which satisfied the definition of owner within the HBA. As a result, the appellant was determined to be an owner of the property.
Owner builder, where no permit
The appellant contended that he was not an owner-builder, so the purchasers of the property were not successors in title entitled to rely on section 18B statutory warranties. The appellant argued that the plain words of the definition of owner-builder conveyed that they must have been issued with a permit. Since no owner-builder permit was issued to the appellant, he could not be an owner-builder. In support of this reasoning, the appellant relied on Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 (Project Blue Sky) in arguing that meaning must be given to every word of a provision and that no word or clause should be treated as superfluous.
For the Appeal Panel, the appellant's interpretation, though a possibility, would lead to a plainly unjust result. While accepting the principle in Project Blue Sky, the Appeal Panel drew a distinction between the grammatical meaning of words (which leaned in favour of the appellant's interpretation) and the legal meaning of words. The legal meaning of the definition of owner-builder would include owner-builders who do owner-builder work without, in breach of the HBA, having applied for and been issued with an owner-builder permit for that work. The legal meaning of the words is to be preferred on the basis that this would be consistent with the purpose of the HBA, which includes consumer protection in circumstances where owner-builders undertake work without obtaining permits.
Although, as the appellant noted, it is already a separate and distinct offence for owners to complete work without an owner-builder permit, the Appeal Panel still preferred an interpretation that is consistent with the policy purpose of providing the same protection to subsequent purchasers of properties on which owner-builder work was done without a permit, as exists for those who purchase a property on which owner-builder work was done with a permit.
Accordingly, the Appeal Panel held that an individual can be an owner-builder without a permit if that individual does owner-builder work. Alternatively, the Appeal Panel found that the definition should be read as "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" (emphasis added). In either case, the appellant was found to be an owner-builder for the purposes of the HBA, such that successors in title could rely on the statutory warranties against the appellant.
Outcome
The appeal was dismissed. In looking beyond the face of the certificate of title and a plain words interpretation of the HBA, a potential circumvention of the Act's consumer protections provisions was neatly avoided.
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