McGufficke v Commissioner for Fair Trading

NCAT Occupational|2022-02-28

Background

On 21 October 2021, Mr David McGufficke (the Applicant), a licenced builder, lodged with the Commissioner for Fair Trading (the Respondent) an application for an owner-builder permit ("OBP") for construction of a dual occupancy and one into two lot subdivision at a property in Wangi Wangi. On 2 March 2017, the Lake Macquarie City Council granted to the Applicant a Development Consent for that construction. The market value of the OBP under the Home Building Act 1989 ("HBA") was stated to be $200,000.
On 25 October 2021, the Respondent issued a Notice of Determination stating that an OBP must not be issued unless the Applicant meets the 'special circumstances' requirement to demonstrate a compelling reason that justifies the issue of the OBP. The Respondent refused to issue the Applicant an OBP in accordance with s32(1A) of the HBA.
On 1 November 2021, the Applicant requested the Respondent to internally review its decision. The result of the internal review, which was made on 23 November 2021, affirmed the Respondent's initial decision again to refuse the issue of an OBP.
On 17 December 2021, the Applicant filed an application in this Tribunal, seeking administrative review of the Respondent's internal review decision made on 23 November 2021 ("the Reviewable Decision").
The Applicant cites the grounds for his application as being 'unfair reasons for refusal.' In the Applicant's written submissions, he makes allegations of illegal conduct of the Respondent. Those grounds were withdrawn during the hearing. Therefore, the only grounds he seeks the Tribunal to consider is whether there are 'special circumstances' as required by the HBA, which, enables an OBP to be issued to him.

Relevant Legislation

Section 32 of the HBA sets out the authorities conferred on the holder of a permit by the issue of an owner-builder permit. The default position is that owner-builder permits may not be issued in relation to a dual occupancy. An owner-builder permit for the purposes of a dual occupancy may only be issued in "special circumstances". Section 32 HBA Authority conferred by owner-builder permits (1) An owner-builder permit authorises its holder to do such residential building work as is described in the permit on the land specified in the permit. (1A) An owner-builder permit must not be issued to authorise its holder to do residential building work that relates to a dual occupancy unless the Secretary is satisfied that special circumstances exist that justify the owner-builder permit authorising its holder to do that work. The Secretary may issue guidelines as to the circumstances that will be considered to be special circumstances for the purposes of this subsection. (2) The authority conferred by an owner-builder permit: (a) is subject to the conditions applicable to the permit for the time being, and (b) may, on the application of the holder of the permit, be varied by an order of the Secretary set out in a notice served on the holder of the permit. Section 29 HBA Definitions (1) In this Act: "dual occupancy" and "secondary dwelling" have the same meanings as in the principal local environmental planning instrument prescribed by the Standard Instrument (Local Environmental Plans) Order 2006. "owner-builder work" means residential building work: (a) the reasonable market cost of the labour and materials involved in which exceeds the prescribed amount, and (b) that relates to a single dwelling-house, dual occupancy or secondary dwelling: (i) that may not be carried out on the land concerned except with development consent under Part 4 of the Environmental Planning and Assessment Act 1979 , or (ii) that is complying development within the meaning of that Act. (2) If land is owned by a company that is wholly owned by individuals, the land is to be taken (for the purposes of this Division) to be owned by those individuals. (3) In this Division, a reference to an owner of land includes a reference to a person who has a prescribed interest in the land.
The Standard Instrument (Local Environmental Plans) Order 2006 defines dual occupancy and dwelling as follows: "dual occupancy means 2 dwellings (whether attached or detached) on one lot of land; and "dwelling means a room or suite of rooms occupied or used or so constructed or adapted as to be capable of being occupied or used as a separate domicile."
The holder of an OBP must not engage unlicensed contractors to do any residential building work - (see s 32AA of the HBA).
In accordance with s 92 of the HBA, a person must not do residential building work over $20,000 under a contract unless-- (a) a contract of insurance that complies with this Act is in force in relation to that work in the name under which the person contracted to do the work, and (b) a certificate of insurance evidencing the contract of insurance, in a form approved by the Authority, has been provided to the other party (or one of the other parties) to the contract.
It follows, that if the Applicant does not enter a building contract with himself as an owner-builder, he does not require homeowners warranty insurance under s 92 of the HBA. I note however, it is a requirement of the Applicant's development consent and a requirement of the certifier, that he is to hold such insurance. The requirement under the development consent is contradictory where the HBA does not require insurance to be held, for example, as an owner-builder, however, this is ultimately not an issue for my determination in these proceedings.
It is not in dispute that the Reviewable Decision is a 'reviewable decision' pursuant to s 63 of the Administrative Decisions Review Act 1997 (NSW) which provides: (1) In determining an application for an administrative review under this Act of an administratively reviewable decision, the Tribunal is to decide what the correct and preferable decision is having regard to the material then before it, including the following: (a) any relevant factual material, (b) any applicable written or unwritten law. (2) For this purpose, the Tribunal may exercise all of the functions that are conferred or imposed by any relevant legislation on the administrator who made the decision. (3) In determining an application for the administrative review of an administratively reviewable decision, the Tribunal may decide: (a) to affirm the administratively reviewable decision, or (b) to vary the administratively reviewable decision, or (c) to set aside the administratively reviewable decision and make a decision in substitution for the administratively reviewable decision it set aside, or (d) to set aside the administratively reviewable decision and remit the matter for reconsideration by the administrator in accordance with any directions or recommendations of the Tribunal.

The Evidence

The Applicant relies upon the following evidence:
Application filed 17 December 2021 (A1);
Bundle of documents including submissions filed 9 February 2022 (A2);
Covering email and letter from AcroCert Certifier filed 25 February 2022 (A3).
The Respondent relies upon its bundle of s58 of the ADA documents filed 28 December 2021 (R1) and written submissions.

The Applicant's Position

The Applicant is a married man who at the time of the hearing was 57 years of age. His wife is 50 years of age. They have two daughters. The Applicant is a licenced builder who engages in subcontract construction work. The Applicant gave evidence that he is not insured for construction work where homeowner's warranty insurance is required. He has no desire to engage in this type of work in his professional capacity. As such, the Applicant as an owner-builder is not required to maintain homeowner's warranty insurance. He contends that the refusal of the Respondent to issue an OBP impacts him financially because of his professional qualification. He also asserts that his builder's licence places him at a financial disadvantage to other owner-builders because it would require the Applicant to obtain home warranty insurance if an OBP is not issued. I reject this argument because any owner-builder is subject to the same requirement to show 'special circumstances' exist.
It is not in dispute that the Applicant has finished two previous projects as an owner-builder which predate the subject development between 20 to 30 years ago.
The Applicant purchased the subject premises which had an existing fibro cottage situated upon it. Since purchasing the property in about 2013, the Applicant has leased the home to tenants through a real estate agent for financial gain.
The Applicant applied for a development consent and was granted approval for a dual occupancy with the ability to subdivide the property. The Applicant said he intends to build a second dwelling on the property and use the existing fibro cottage for the family when they visit. The Applicant said it has been part of his retirement plan to live in a newly constructed dwelling on the Wangi Wangi property and it is this desire which has led to him wanting to build that dwelling as approved in the development consent.
The Applicant denied, both in evidence and in his written material, that the purpose of the purchase of the property and the development consent was for commercial reasons. He also denied that because he is a licensed builder and has undertaken two previous owner-builder projects that this evidences a commercial desire to redevelop the Wangi Wangi property for resale or other commercial gains.
I asked the Applicant during his evidence in chief to set out the facts and circumstances he relies upon which might constitute special circumstances in accordance with s32(1A) of the HBA. He said that the redevelopment of the property is purely for his retirement as his current home will not be suitable. I asked him what his retirement plan was, he responded: "To have a property that is easier to maintain, have family come over and visit with their own accommodation." I asked the Applicant to give evidence about his retirement financial plan and how he intends to finance the development, he responded: "No, I don't think so."
Mr Coss, Solicitor, appeared for the Respondent. Mr Coss cross-examined the Applicant.
The cross-examination explored the Applicant's retirement plan. He said that he has two children aged 21 and 25. The Applicant's daughter remains living at the family home in a suburb on the Central Coast of New South Wales. The Applicant agreed that he had not put on any evidence about any medical condition or infirmity which would require him to need assistance on an ongoing basis, either by his daughter or commercially. When asked by Mr Coss whether his daughter would be staying in the existing cottage to help with his retirement, he responded "I don't know that, I don't have a crystal ball. Can I not plan for my further retirement."
The Applicant said that there was no financial benefit in retaining the existing fibro home at the Wangi Wangi property. If his intention was to maximise a commercial gain he would have been "better knocking the two dwellings down or building a big house, that was not my plan."
When asked questions about the requirement to hold homeowners warranty insurance under s92 of the HBA, the Applicant said it was a requirement of the certifier that he hold such insurance as set out in the email of the certifier in Exhibit R3.
The Applicant said he and his wife would not reside in the fibro cottage during the time they may build the new home, which he said could take between 6 to 12 months.
Mr Coss took the Applicant to his written application form for an OBP and noted at: '4.2 If you do not intend to sell, who will be the occupants of both dwellings? The applicant in the new dwelling, existing dwelling is an original weekender cottage.'
Mr Coss put to the Applicant that he had not indicated in the application form any information about his retirement plan which he now asserts as being a special circumstance. The Applicant agreed he had not stated that in the application form and provided no further explanation in that regard.
I accept the Applicant as an honest and reliable witness.

The Respondent's Position

The Respondent submits that the Applicant 'simply wants to construct another house beside the existing 3-bedroom home on the premises at Wangi Wangi. Mr Coss said the property was bought in 2013 and the Applicant has commercially exploited the existing 3-bedroom property whilst living elsewhere. In 2017, he was granted a development consent for the construction of a second dwelling on the property, which does not of itself amount to a special circumstance.
The Respondent also contends that the Applicant's proposal to move from his existing premises into a newly constructed house at Wangi Wangi, does not of itself constitute special circumstances. The Respondent contends that the Applicant has not provided any objective evidence about his plan to retire in this property nor the property being his dream retirement home for himself, his wife and two children.
The Respondent further contends that the Applicant has not evidenced any medical condition or infirmities that would require family members to reside in the existing three-bedroom cottage.
In all the circumstances the Respondent submits that the correct and preferable decision is that the internal decision of the Respondent is affirmed.

Tribunal's Consideration

The Applicant purchased the Wangi Wangi property, in April 2013. Since that time, he has rented the fibro cottage situated on that property receiving an income. There is no evidence before me that the property was subject to any encumbrance.
It is not in dispute that the Applicant obtained a development consent for the construction of a second dwelling at Wangi Wangi property and a subdivision into two lots.
On 21 October 2021, the Applicant lodged an application for an OBP with the Respondent to develop the Wangi Wangi property. That application was refused on the grounds that there were no special circumstances demonstrated which would enable the Respondent to exercise a discretion to grant the OBP.
The Applicant requested the Respondent to internally review that decision. The Respondent on 23 November 2021, affirmed its previous 25 October 2021 decision to refuse the grant of an OBP.
The main contention of the Applicant is that the purchase and redevelopment of the Wangi Wangi property was to form part of his and his wife's retirement plan. I do not doubt that this may have been a reason for the purchase of the property. However, the Applicant has put on no objective evidence, apart from an assertion that it was he and his wife's plan to further their desire in that regard. The Applicant did not provide any financial detail around his retirement plan. He was asked questions in cross-examination about when he intends to retire, which he gave no decisive answer. The Applicant said he has no specific medical condition or other infirmities which could lead to an early retirement, except a knee injury that has led to sporadic time off work.
I accept that the Applicant may have a distant plan for retirement but, unlike the factors which were considered in the decision of Hammoudi v Commissioner for Fair Trading [2016] NSWCATOD 57, which was a case cited by the Applicant, there are no identifiable or relevant factors which support the Applicant's contention of special circumstances existing. The decision in Hammoudi can be distinguished. Mr Hammoudi had a medical condition which required, amongst other things, a family member to assist him with his health and reside on the same property. The Tribunal further could financial hardship if the staged construction plan with an OBP was not granted. The Applicant has not provided any objective evidence similar to the factors considered in Hammoudi's case to support of his application for an OBP.

Special Circumstances

There are no guidelines issued as to the definition of special circumstances in the HBA context. However, a number of factors can be considered in interpreting the meaning of special circumstances:

An understanding of the term "special circumstances" generally;
the purposes of the Home Building Act 1989;
the purposes of an owner-builder permit in the context of the HBA;
the legislative purpose behind the amendment to the HBA in section 32(1A) against the issue of owner-builder permits for dual occupancies;
the scope of special circumstances as set out in the Minister's Second Reading Speech in May 2014; and
the Applicant's claim for special circumstances in the context of the permit sought.

Meaning of special circumstances

A review of case law reveals that the concept of 'special circumstances" is commonly found in the areas of criminal law, professional disciplinary matters in relation to costs, applications for security of costs and in the social security arena concerning beneficial exercise of a discretion.
In Topp and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2010] AATA 99, the AAT considered the meaning of the term "special circumstances" in relation to its use in section 1184K of the Social Security Act. Section 1184 allowed for the Secretary of the Department of Social Security to exercise a beneficial discretion "if it is appropriate to do so in the special circumstances of the case." Relying on a Full Federal Court decision in Beadle v Director General of Social Security [1984] AATA 176, the AAT considered that if something unfair, unintended or unjust had occurred which was out of the ordinary, (my emphasis) this might constitute special circumstances justifying the exercise of the discretion - see Topp's case - see paragraphs 21 and 38-40.
The AAT's analysis in Topp's case also indicates that the determination of the existence of "special circumstances" vested a broad discretion in the decision maker.

Purposes of the HBA

The overall purpose of the HBA is to protect consumers in the contracting for and the construction of residential buildings. Davie describes an owner-builder in the context of the HBA as "someone who intends to build a dwelling on his or her own land and live in it." (See Davie, T: The Annotated Home Building Act 1989 NSW; 2000 at p17)
Prior to the s32(1A) amendment, generally speaking, it appears an owner-builder permit was not granted unless the dwelling built was to be occupied by the Applicant.
The Second Reading Speech introducing the amendment against dual occupancy states that: "The owner-builder provisions are being reformed to help ensure that the permit system is not being used inappropriately for commercial reasons as a means of circumventing the licensing requirements." AND "There are concerns that some commercially orientated, unlicensed people may be using the permit system in order to undertake dual occupancy work on land with a view to subdividing the land and on selling it at a profit. The owner-builder permit system is not intended for such commercial development work."
I understand this to mean that the amendment is aimed at avoiding the use of owner-builder permits to create a dual occupancy for commercial purposes such as immediate on selling or subdivision for financial advantage. It could also include renting part or whole of the developed property for financial gain.
In this context the Second Reading Speech then refers to special circumstances as follows: "special circumstances exist, such as where a family could demonstrate legitimate non-commercial reasons for the work or where refusing the permit could cause family hardship. "
I am satisfied that the reason advanced by the Respondent demonstrates that the Applicant has failed in this application to establish 'special circumstances' which would enable the Respondent to exercise a discretion to grant an OBP. The non-commercial reason in support of the Applicant's claim relates to his proposed retirement. Unlike the matters the Tribunal considered in Hammoudi, the Applicant has failed to show through objective evidence that his real intent was to purchase and redevelop the property for retirement. I am not suggesting that the Applicant is in any way fabricating his evidence, but he must by way of objective evidence be able to satisfy me that special circumstances exist. He has failed to provide any financial information about the project, whether he would sell or rent his current home and how he intends to finance the new construction and if the OBP is not issued whether he would suffer financial hardship. No evidence was adduced from the Applicant's wife about their retirement plan. The Applicant did not provide a timeline as to when he would retire. In the absence of this type of evidence, a finding of special circumstances is far too remote.
I also find that one of the other purposes for which the Applicant sought to obtain an OBP was to avoid the payment of between $4,000 to $5,000 for homeowner's warranty insurance. This is not a special circumstance in my mind.
As pointed out by the Applicant, it is of no comfort to him, or indeed the public, that there are no published guidelines as to what amounts to 'special circumstances' for the purposes of s32(1A). However, it is incumbent upon the Applicant to demonstrate that there are special circumstances to be successful in his application. He has failed to do so.
I am, therefore, not satisfied that the Applicant has demonstrated special circumstances exist. In the result, the decision of the Respondent made on 23 November 2021 is affirmed.

Orders 1. The decision of the Respondent made on 23 November 2021, is affirmed.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 December 2022

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Judgment (12 paragraphs)

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