The outer limits of insurance cover for directors of construction companies

On 6 February 2026, her Honour Justice Rees of the Supreme Court of New South Wales handed down judgment in a long-running dispute between The Star Casino in Pyrmont and its builder, Buildcorp Interiors: The Star Entertainment Sydney Properties Pty Ltd v Buildcorp Group Pty Ltd [2026] NSWSC 27 (Star Entertainment).

Although The Star Casino sued for around $4 million in cladding remediation costs across three refurbishment projects, it walked away with only $285,662 against the builder, and only $214,247 against the insurers.

Factual background

Between 2014 and 2016, The Star Entertainment Sydney Properties Pty Ltd and The Star Pty Ltd (together Star Casino) engaged Buildcorp Group Pty Ltd trading as Buildcorp Interiors (the Builder) to carry out three successive refurbishment projects at its Pyrmont casino complex.[1] In the course of those works, aluminium composite panels (ACP) manufactured by Mitsubishi Plastics Inc and marketed as Alpolic®/fr (Alpolic FR) were installed on the external façade of two of Star Casino’s buildings.[2]

The projects spanned a period marked by growing public and regulatory concern about combustible cladding. The Lacrosse tower fire in Docklands, Melbourne, occurred in November 2014 and the catastrophic Grenfell Tower fire in London followed in June 2017.[3] In the wake of the Grenfell Tower fire in 2017, the New South Wales Government directed Star Casino to remove the ACPs, and Star Casino did so.[4]

The contractual arrangements differed materially across the three projects:

• the first was procured under a ‘Construct Only’ head contract, which provided expressly that the Builder ‘will not have any Design Responsibility’ (Project 1)[5]
• the second was procured as a design and construct contract (Project 2),[6] and
• the third was procured as a minor works (design and construct) contract, which included a warranty that the works would be fit for their intended purpose and compliant with the Building Code of Australia (BCA) (Project 1).[7]

The Builder subcontracted the supply and installation of the façade panels on each project to Ausrise Aluminium Pty Ltd (Ausrise).[8] Each Ausrise subcontract included a substantially identical fit-for-purpose warranty.[9] Star Casino separately engaged Malone Buchan Laird & Bawden Pty Ltd trading as The Buchan Group (the Architect) as architect for Project 1 and Project 2.[10]

Ausrise was subsequently deregistered,[11] leading to its public liability insurer (Certain Underwriters at Lloyd’s) being joined to the proceedings.[12]

The Architect’s design for Project 1 and Project 2 originally specified a non-combustible ‘solid core’ or ‘honeycomb core’ aluminium panel.[13] That product had, however, been withdrawn from the Australian market.[14] As a result of the unavailability of the specified product, the identification of the ‘closest match’ drove a decision to substitute Alpolic FR.[15] The Architect initially resisted the change but ultimately signed off an Alpolic FR sample for use on Project 1 and Project 2, approved shop drawings depicting the installation of 4mm ACPs for Project 1, and revised the Project 2 drawings to refer to Alpolic FR.[16] On Project 3, Alpolic FR was supplied and installed by Ausrise in accordance with a Façade Performance Brief prepared by a façade engineer.[17]

At the time of installation, Alpolic FR was the subject of a CodeMark Certificate of Conformity.[18] Star Casino contended that this Certificate was insufficient to establish BCA compliance in its own right.[19]

Key issues before the Court

The claims and cross-claims were numerous, but the key issues for determination by the Court were:

• was Alpolic FR compliant with the BCA on each of the three projects, and if not, by reference to the Deemed-to-Satisfy (DTS) provisions, was each project subject to the ‘attachment exception’ in Clause 2.4 of Specification C1.1; or was an Alternative Solution in place or formulated[20]
• was the Builder liable to Star Casino under each of the three head contracts, having regard to the different allocation of design responsibility on each project[21]
• did the Architect owe the Builder a duty of care to avoid pure economic loss, and did the Architect make misleading representations in contravention of the Australian Consumer Law (ACL)[22]
• was Ausrise in breach of its fit-for-purpose warranty to the Builder, and did Ausrise owe the Builder a separate duty of care in tort[23]
• did the affixing of non-compliant Alpolic FR constitute ‘Property Damage’ within the meaning of the Ausrise liability policy, and if so, to what extent were Underwriters obliged to indemnify the Builder,[24] and
• was the contractual liability exclusion in the policy engaged by Ausrise’s agreement to contract out of the proportionate liability regime under Part 4 of the Civil Liability Act 2002 (NSW) (Civil Liability Act).[25]

The Court’s decision

In respect of Project 1, Her Honour found that Alpolic FR was not compliant with the BCA.[26] It did not satisfy the DTS provisions, and no Alternative Solution report had been prepared.[27] The Court held that a CodeMark Certificate is not, on its own, sufficient to establish BCA compliance unless it is incorporated into a report prepared by a suitably qualified fire engineer.[28] Nevertheless, Star Casino’s claim against the Builder failed.[29] Achieving BCA compliance fell within the definition of ‘Design Responsibility’, which had been expressly excluded from the Builder’s obligations under the Construct Only contract.[30] In obiter, Her Honour observed that the Builder’s cross-claim against the Architect in negligence would also have failed (because no duty of care was owed), but that the Architect would have had an exposure under s 18 of the ACL in respect of the representations made by its sign-off on the Alpolic FR sample and its approval of the shop drawings.[31]

The claim in respect of Project 2 failed on a different basis. Her Honour accepted that the ACPs installed on Project 2 fell within the ‘attachment exception’ in Clause 2.4 of Specification C1.1 of the BCA.[32] The panels were treated as an attachment to the external façade rather than as part of the external wall itself, and on that analysis, the installation complied with the BCA as it then stood.[33]

In respect of Project 3, Her Honour found that Alpolic FR did not satisfy the DTS provisions and that no Alternative Solution had been formulated.[34] The builder, however, had warranted under its head contract that the works would be BCA compliant and fit for their intended purpose.[35] The builder was therefore in breach of its contract and liable to Star Casino. Damages were assessed at $285,662,[36] representing only approximately 7% of the loss originally claimed.[37]

Justice Rees further found that Ausrise, as façade installer, had breached its fit-for-purpose warranty to the Builder and was fully liable to the Builder for the same loss.[38]

The Court’s reasoning

The underwriters of Ausrise’s public liability policy were held liable to indemnify the Builder, but only in respect of the portion of the damages that fell within the policy definition of ‘Property Damage’.[39] The parties agreed that this portion represented 75% of the remediation cost, giving a judgment against the underwriters of $214,247.[40] The contractual liability exclusion in clause 3.6 of the policy was held not to be engaged.[41]

Her Honour rejected the submission that a CodeMark Certificate of Conformity, standing alone, was capable of establishing BCA compliance.[42] Instead, the Certificate operated as technical data that might be incorporated into a fire engineer’s report.[43] Because there was no such report for Projects 1 or 3, Alpolic FR was not DTS compliant and no Alternative Solution existed in respect of those projects.[44] Project 2 compliance survived only because the panels were able to be characterised as attachments.[45]

The outcome on Project 1 turned almost entirely on the allocation of design risk. Under the Construct Only contract, the Builder expressly bore no Design Responsibility, and BCA compliance fell squarely within that excluded category.[46] Consequently, though non-compliant cladding had been installed on a building the Builder had built, the Builder was not contractually liable for the cost of remediation.[47] Project 3, by contrast, turned on the presence of a fitness-for-purpose warranty, which encompassed BCA compliance and gave Star Casino a direct contractual route to recovery.[48]

Further, Her Honour’s analysis of the Architect’s duty of care was consistent with the established reluctance of Australian courts to impose a duty of care on a professional consultant to another commercial contracting party in respect of pure economic loss, particularly where that party is able to, and did, protect itself through the terms of its own contract.[49] The builder had included clause 3.4 in its Construct Only contract with Star Casino, excising responsibility for the Architect’s design.[50] The builder was an experienced commercial operator, was well informed about the Architect’s design (having itself participated in pre-construction and value-engineering services), and faced no social, political or economic constraints on its ability to allocate risk contractually.[51] The necessary element of vulnerability was therefore absent and no duty of care to avoid pure economic loss was  found to exist in the circumstances.[52]

The insuring clause in the policy indemnified Ausrise for amounts for which it became legally liable as compensation in respect of ‘Property Damage’, which was defined as ‘physical loss, destruction of or damage to tangible property’.[53] Her Honour held that the affixation of Alpolic FR to Star Casino constituted a physical alteration of the tangible property that impaired its value or usefulness in two related ways: the building acquired a combustible external façade, and, by reason of the nature of the defect, the incorporated product required removal, which itself damaged the building.[54] This reasoning continues the recent judicial trend towards an expansive reading of ‘property damage’ in liability policies in combustible cladding claims.[55]

We note the scope of the indemnity was narrower than the scope of the Builder’s loss.[56] The insurers’ liability was limited to the cost of repairing the damage to the building caused by the affixation of Alpolic FR, but did not extend to the cost of supplying and installing replacement cladding; the parties agreed this gave a recoverable proportion of 75% of the remediation cost.[57]

The underwriters sought to rely on the contractual liability exclusion in clause 3.6 of the policy, which excluded liability assumed under any contract requiring Ausrise to ‘assume liability for … Property Damage regardless of fault’.[58] Her Honour rejected Underwriters’ argument that, by agreeing to clause 24.10.1 of the Ausrise subcontract, Ausrise had contracted out of the proportionate liability regime in the Civil Liability Act and had thereby assumed liability regardless of fault.[59] Applying the orthodox principles that insuring clauses and exclusion clauses are to be read harmoniously, and that exclusions will be construed narrowly where necessary to preserve the indemnity, Her Honour held that clause 24.10.1 of the subcontract engaged only where Ausrise had failed to take reasonable care.[60] It did not impose liability ‘regardless of fault’ hence the exclusion was not enlivened.[61]

We also note her Honour’s remarks in obiter on the ACL claim. The Architect’s sign-off of the Alpolic FR sample and approval of the shop drawings were capable of constituting representations that Alpolic FR was suitable for installation on the external walls and was of a standard compliant with the BCA.[62] The Court found that those representations would have been misleading in contravention of s 18 of the ACL because Alpolic FR did not comply with the DTS provisions and no Alternative Solution existed.[63] Design consultants should take careful note.

Key implications

• Principals cannot assume that their head contractor will bear the cost of remediating non-compliant cladding simply because the contractor installed it. Where BCA compliance is not expressly warranted, and where design responsibility is carved out, principals may be left without a contractual remedy. Principals should review their standard-form building contracts to ensure that fit-for-purpose and BCA-compliance warranties are clearly expressed, and that design carve-outs are not drafted so broadly that they exclude compliance-related obligations the principal intended the contractor to bear.
• This decision reinforces that, where a building professional properly confines its role through contract, it can rely on that allocation as a defence even where a non-compliant product has been installed. Conversely, builders and subcontractors who give fit-for-purpose or compliance warranties should appreciate the significant exposure those warranties create: namely, the warranty gives the principal a direct contractual remedy without the need to prove fault.
• However, her Honour’s obiter remarks concerning the Architect’s exposure under the ACL should be read as a warning. A design consultant who signs off a product sample, approves shop drawings, or otherwise puts its imprimatur on a material substitution may find itself representing that the product is compliant with the BCA. Where that is in fact wrong, liability under s 18 may follow even in the absence of contract with the party who ultimately relies on the representation. Design consultants will need to carefully review the language used in connection with product approvals and should clearly document the limits of any sign-off.

[1] The Star Entertainment Sydney Properties Pty Ltd v Buildcorp Group Pty Ltd [2026] NSWSC 27 [1] (Star Entertainment).

[2] Ibid at [6].

[3] Ibid at [1].

[4] Ibid at [2], [419]–[420].

[5] Ibid at [189]–[193].

[6] Ibid at [301], [332].

[7] Ibid at [17], [345], [350]–[351].

[8] Ibid at [2], [6], [13], [151], [300], [345].

[9] Ibid at [353], [362], [385].

[10] Ibid at [2], [12].

[11] Ibid at [2], [391].

[12] Ibid.

[13] Ibid at [5], [76]–[80].

[14] Ibid at [5].

[15] Ibid at [6].

[16] Ibid at [6], [148]–[149], [276]–[280], [307]–[311].

[17] Ibid at [341]–[343].

[18] Ibid at [65], [187], [297].

[19] Ibid at [66], [187], [344].

[20] Ibid at [38]–[66], [186]–[187], [319]–[330], [342]–[348].

[21] Ibid at 189]–[224], [331]–[336], [350]–[352].

[22] Ibid at 225]–[241], [242]–[290].

[23] Ibid at [353]–[388].

[24] Ibid at [392]–[410].

[25] Ibid at [411]–[418].

[26] Ibid at [66], [186]–[187].

[27] Ibid.

[28] Ibid.

[29] Ibid at [8], [224].

[30] Ibid at [193]–[196], [212]–[213], [224].

[31] Ibid at [242]–[260].

[32] Ibid at [8], [319]–[331].

[33] Ibid at [319], [328]–[330].

[34] Ibid at [343]–[344], [348].

[35] Ibid at [350]–[351].

[36] Ibid at [9].

[37] Ibid at [440], [443]–[450].

[38] Ibid at [385]–[390].

[39] Ibid at [409]–[410].

[40] Ibid.

[41] Ibid at [411]–[418].

[42] Ibid at [66].

[43] Ibid at [63]–[66].

[44] Ibid at [66], [186]–[187], [343]–[348].

[45] Ibid at [319]–[331].

[46] Ibid at [192]–[196], [212]–[213].

[47] Ibid at [224].

[48] Ibid at [350]–[352].

[49] Ibid at [236]–[240].

[50] Ibid at [192], [240].

[51] Ibid at [241].

[52] Ibid at [240]–[241].

[53] Ibid at [393]–[394].

[54] Ibid at [400]–[405], [409]–[410].

[55] Ibid at [398]–[405].

[56] Ibid at [441].

[57] Ibid.

[58] Ibid at [411]–[412].

[59] Ibid at [412], [418].

[60] Ibid at [414]–[418] citing Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance [2018] NSWCA 100 at [54] (Barrett JA).

[61] Ibid at [418].

[62] Ibid at [242], [260], [265], [284]–[286].

[63] Ibid at [286]–[289].