The whole guts of having the gutter wall cut, apart from other issues of compliance and manufacturers recommendations, is this...
Roof drainage compliance is determined by a formula that includes the gutter's cross sectional area. The cross sectional area is measured from a height that is either 10mm below the top of the lowest wall or 10mm below the overflow slots. Cutting the gutter like that immediately means that the cross sectional area must be measured from 10mm below the bottom of the cut. The roof thereby had massive non compliance that had to be fixed pronto.
A few things stand out-
If the "plumber" was in the habit of always doing this, did the Vic PIC inspect all of his previous roof plumbing work? Somehow I seriously doubt it.
Jase, you have said that that the guttering is slotted. I see large numbers of houses that have non compliant roof drainage and one prime reason is that slotted guttering, which has a smaller cross sectional area than the same size standard (unslotted) guttering, must drain a smaller roof surface area than standard guttering. The problem is that the roof area drained is very often not recalculated and redesigned for compliance when slotted guttering is optioned.
An eaves gutter must be designed to not overflow during a 1:20 ARI and slots overflowing is the same as a standard gutter overflowing. Jase, given this builder's attitude and the idiot plumber he employed, if you have overflowing slots during heavy rain, your roof drainage is most probably not compliant. If you have this problem, then you are covered by the 7 year warranty. Feel free to PM me and if I can have the roof plan, roof slope, gutter make and style, downpipe size and your area, I can check its compliance for you at N/C. Alternatively, have a read of the thread I have linked below and see how you can check it yourself.
viewtopic.php?f=35&t=60789
Thanks for your feedback and for the link you provided. I have found it most interesting!!