The NSW Supreme Court (the Court) recently determined an application for leave to appeal a decision of the Appeal Panel, which had found that residential building work undertaken under several building contracts across non-contiguous lots on behalf of the owner of the land, could be constructed as a single instance of a ‘residential development’ for the purpose of considering whether a person is a ‘developer’ within the meaning of section 3A of the Home Building Act 1989 (NSW) (HBA).
In issue
- CN1 Pty Ltd (CN1) sought leave to appeal a decision of the Appeal Panel, which had found the owner was a ‘developer’ for the purposes of two insurance policies which were triggered after a builder became insolvent.
- The Court considered the meaning of the phrase 'in relation to the work ... a developer' in the contracts of insurance.
- Ultimately, the appeal was upheld and the matter was remitted to the Appeal Panel.
The background
CN1 was the registered proprietor of 7 of 17 lots of a subdivision (Site) which was registered in January 2016.
On 17 February 2021, CN1 entered into two building contracts as an ‘owner’ with Willoughby Homes (builder) to construct two dwellings on each of lots 544 and 547 (a total of four dwellings in total). Lot 544 and Lot 547 were non-contiguous lots in the Site, and formed part of a larger 'stage 5 Blue Horizons development'.
Two policies of insurance, issued by SiCorp (policies) were taken out by the Builder, for the benefit of CN1, with respect to the building work to be carried out.
The Policies contained the same clause 3.4(a) which stated that 'the policy does not cover a claim by any person who is, in relation to the work … a developer' (exclusion clause). The term 'developer' was defined as having the same meaning as in the HBA.
On or around July 2022, the builder became insolvent, allegedly leaving work on Lot 544 which was incomplete and defective (CN1 had sold Lot 547 by that time).
CN1 sought indemnity under the policies which applied to Lot 544 (claim).
SiCorp rejected the claim on the basis that CN1 was a developer within the meaning of the HBA in relation to the work on Lot 544 and was therefore ineligible to claim under the terms of the policies (declinature). In response, CN1 filed a home building application in the Consumer and Commercial Division of NCAT.
The NCAT first instance determination
At first instance, NCAT determined that CN1 was not a developer within the meaning of section 3A of the HBA, for reasons including that Lot 544 and 547 were separate instances of residential development, and therefore, CN1 was entitled to indemnity from SiCorp (NCAT determination).
The NCAT Appeal Panel determination
SiCorp challenged the NCAT determination before the NSW Civil and Administrative Tribunal (Appeal Panel).
In NSW Self Insurance Corporation v CN1 Pty Ltd [2025] NSWCATAP 27, the Appeal Panel allowed SiCorp’s appeal and found in its favour (Appeal Panel determination).
The decision at trial
CN1 subsequently sought leave to appeal the Appeal Panel Determination on questions of law by way of section 83(1) and for judicial review of the Appeal Panel Determination under section 34(1)(C) of the CAT Act. The Court refused to undertake a judicial review reasoning that it did not add anything to the Court’s determination upon any question of law that arose upon the Appeal Panel determination.
In considering the application, the Court considered four questions of law:
- whether two non-contiguous parcels of land may be said to be a single instance of a residential development under section 3A of the HBA,
- the proper construction of the words 'in relation to the work … a developer' of the exclusion clause which pointed to section 3A of the HBA for their interpretation, which raised two issues – whether the Appeal Panel had considered if CN1 was a developer in the abstract instead of in relation to the work under the contract, and whether the Appeal Panel had applied clause 3.4(a) of the policy to an earlier point of time than required (that is, the contract date),
- who bears the onus to prove the exclusion clause, and
- whether the Appeal Panel engaged in irrational and illogical fact-finding such as to give rise to a jurisdictional error.
The Court found as follows
As to question 1, the Court found that multiple, separate parcels of land could constitute a development. While the land being non-contiguous was a relevant consideration to determine whether a person was a developer, it was not determinative. What is required to consider whether works are a residential development is a practical factorial analysis of the circumstances of the construction project as a whole.
As to question 2, the Court reasoned separately in relation to the sub-questions.
Firstly, the Court quickly disposed of CN1’s argument that the Appeal Panel had failed to apply a correct construction of cl 3.4(a) of the policy, and that the correct construction would have required the Appeal Panel to 'connect' work done on the plaintiff’s land to a residential development. That is, the Court found that the Appeal Panel was considering whether CN1 was a developer for the purposes of section 3A with respect to the residential building work undertaken on Lot 544.
In relation to the second sub-question, CN1 had contended that the Appeal Panel erred in not considering whether there was a residential development ‘that was extant at the time of contract and [failing to] connect work done on CN1’s land to that development (not a historical one).’ [at 65] This required the Court to consider the proper timing to characterise a person as a developer, which the Court concluded was, broadly speaking, when the residential building work was done and not when the contract of insurance was entered. Given that the residential building work commenced on or around 17 February 2021, this was the critical date, meaning the Appeal Panel had erred in focusing on the earlier time when the subdivision occurred.
In relation to question 3, the Court was asked to determine which party bore the onus of proving that the claim fell within the exclusion clause of the policies. However, it was unnecessary to resolve this issue because the Appeal Panel did not address the question of where the burden of proof and persuasion lay, and it therefore did not make any error on the point.
The Court did not consider that question 4 was required to be answered, as it determined that the fact-finding and logic was unexceptional given the misunderstanding and misdirection as to the issues dealt with at issues 1 and 2 above.
As the Court concluded that the Appeal Panel misdirected itself as to the proper application of the exclusion clause, and therefore section 3A of the HBA by applying its analysis as to whether CN1 was a developer at a point in time prior to the date of the contracts, it set aside the Appeal Panel determination, and remitted it back to the Appeal Panel to determine the issue 'in accordance with the law'.
Implications for you
The NSW Supreme Court has clarified that residential building work carried out across multiple non-contiguous lots can in certain circumstances constitute a single residential development for the purposes of section 3A of the HBA. The Court also confirmed that whether or not a person may be characterised a developer under section 3A of the HBA is to be assessed at the time building work is done, and not during preparatory steps such as the process of obtaining development consents.
This judgment highlights key risks for owners of land and builders involved in non-contiguous multi lot residential projects, and the factors a Court may consider when determining whether a person is a developer for the purposes of the HBA which include:
- broader definition of residential development: construction projects spread over separate lots or multiple construction contracts may not shield a landowner from potentially being classified as a developer,
- timing matters: whether a land owner is a 'developer' will be assessed by the Court at the time the building work is done - determined by a practical assessment of the intended purpose of the entire project or development and not during preparatory planning steps; however, those steps may form part of a broader consideration of all the facts and circumstances when determining whether or not a land owner is a developer at the time work is done, and
- insurance coverage risks: if you are classified a developer under the HBA, claims under SiCorp issued policies that point to section 3A of the HBA may be excluded from cover leading to uninsured loss and damage arising from builder insolvencies and long tail defect claims.
This has implications for all owners of land who are developing non-contiguous lots, particularly in respect of considering how such building projects should be structured, to ensure cover is available under SiCorp Home Building Compensation Fund polices of insurance.
CN1 Pty Ltd v NSW Self Insurance Corporation [2025] NSWSC 1464
