Construction Legal Update: Half Yearly Report 2026

Construction Case Law Developments

Interpretation of insurance contracts in a strict liability claim
Owners Corporation 1 Plan No. PS 650567Y v Shangri-La Construction Pty Ltd [2026] VSC 117

• In Owners Corporation 1 Plan No. PS 650567Y v Shangri-La Construction Pty Ltd [2026] VSC 117the Court clarified the limits of professional indemnity insurance in cladding disputes, confirming that strict statutory liability imposed on directors will not be covered.
• In determining the issues, the Court examined two design and construction PI policies (covering the periods August 2017 to August 2018 and August 2018 to 6 August 2019) including the Proposal Forms, the terms and the Certificates of Insurance.
• As to whether the claim had been made and notified, the issue for this Director was that the facts and circumstances were first known in 2017-2019 (during the period of Policy cover) as a result of VCAT proceedings. However, the government did not introduce the strict liability clause until December 2020, well after the Policies had expired. This meant there was no Claim capable of being made or notified within either period of insurance
• Another issue for the Court’s consideration was the interpretation of ‘in the conduct of Professional Business’ and whether his ‘design and advice’ was considered to arise from the professional business, however the court determined that the Director’s liability did not arise from his design and advice, but arose from installation of cladding and it was a strict liability provision and not civil liability incurred in conduct of the Professional Business.
• It is not clear why the Director did not run arguments under section 40(3) ICA, however it’s likely because, given the strict liability did not exist at the time of the initial notification, it therefore could not have been anticipated as a potential claim in future.
• This case provides useful commentary on the use of all proposal and insurance documents in interpretation of a policy and identifies a gap in insurance (and potential market) in relation to the introduction of strict liability legislation

Construction contracts and limitation periods
Wang v Creation Homes Qld Pty Ltd [2026] FCA 136

• Wang v Creation Homes Qld Pty Ltd[2026] FCA 136 is a statute of limitations case which required determination of when a cause of action first arose in a breach of contract and Australian Consumer Law claim.
• The parties entered into a construction contract on 2 February 2016 for the construction of a property. The applicant’s purchase of the property settled on 30 August 2017. Construction commenced in April 2018, following confirmation of finance for the project on 5 April 2018. Contract works were suspended in June 2018, owing to the applicant’s refusal to pay invoices and formal contract termination occurring in January 2020. Proceedings commenced in December 2024.
• The chronology of events provided different potential dates from which the limitation period could accrue, the Court was required to consider when the cause of action arose and determined the material date was 20 working days after the confirmation of financing, pursuant to the terms of the contract. The Applicant’s claim was out of time and statute barred.
• This case highlights the possibility for insureds to present limitation arguments where it can be identified that the specific cause of action complained of falls outside the limitation period.

Combustible cladding and contractual indemnities
The Star Entertainment Sydney Properties Pty Ltd v Buildcorp Group Pty Ltd t/as Buildcorp Interiors [2026] NSWSC 27

• In The Star Entertainment Sydney Properties Pty Ltd v Buildcorp Group Pty Ltd t/as Buildcorp Interiors [2026] NSWSC 27 aluminum composite panels (ACPs) were installed on the external façade of three casino buildings during 2014 and 2016.
• The parties were contractually obliged to ensure the works complied with the Building Code of Australia (BCA), which required non-combustible cladding to be utilised.
• Star’s claim against the builder failed in respect of two of the projects because, at the time of installation, the BCA permitted the use of attachments to external walls of buildings that were not ‘non-combustible’.
• In relation to the third project, the ACP was found to be non-compliant under the BCA. The installation of non-compliant ACPs and the resulting physical alteration and damages were found to constitute “Property Damage”.
• The Court’s findings here aligned with the views expressed in Insurance Australia t/as CGU Insurance v Capral Ltd [2025] FCAFC 46 where the Full Court dismissed CGU’s appeal, upholding the finding that the installation of non-compliant ACPs caused “Property Damage” (as defined by the insurance policy) and were not subject to exclusion under the product recall clause. Following this decision, insurers should keep a close eye on the Court’s willingness to interpret the meaning of ‘property damage’ and the definition of ‘property damage’ in a liability insuring clause more expansively.

DBPA duties, “construction work” and proportionate liability

• Following the decisions of Pafburn and Kapila, the questions of whether statutory duties are owed under the DBPA and under what circumstances remain a central feature in NSW construction disputes.
• Cadence (90) Investments Pty Ltd v Aspire Constructions Pty Ltd [2026] NSWSC 136 builds on Pafburnand provides further analysis on the application of the duty of care imposed under s 37 of the DBPA. The court determined the plaintiff failed to establish breach of the DBPA in circumstances there was no evidence adduced to connect any particular breach of duty to individual building defects or to establish that further supervision ought to have been provided. Further, the court found, in obiter dicta comments, that any alleged breaches did not cause the economic loss claimed. This is important as s 37 of the DBPA places the duty on building practitioners to “avoid economic loss caused by defects”. In drawing that conclusion, the court found the plaintiff’s claim for economic loss was unreasonable.

This case highlighted that claims that are poorly pleaded and lack of specific evidence to substantiate the alleged breach will be treated harshly by a court where the applicant attempts to impose a breach of the duty under section 37 of the DBPA.

The law is always evolving and at HBA Legal, our focus is keeping you up to date with the changes that actually matter to the businesses we partner with.

Recent themes show:

• NSW and Victoria lead the way in legislative changes likely affecting the construction industry.
• In Victoria, surveyors will be classed as registered building practitioners and subject to more stringent legislated requirements. The introduction of the new consolidated Commission coupled with the security of payment reforms, may well introduce more frequent but potentially lower costs claims into the industry.
• In NSW:
  – Professional indemnity insurance is now mandatory for all building practitioners. Decennial Liability Insurance has also been introduced into the NSW market. With the ten-year liability period, we expect there to be a newfound emphasis on ensuring that every aspect of construction is done with the utmost care and adherence to safety standards. Whilst currently for strata schemes, it is expected to be more widely introduced.
  – As the introduction into DLI gains traction, there is an opportunity present for professional indemnity insurers to strengthen the wording of their subrogation clauses to increase the likelihood of successful claims against at-fault parties in claims for defective workmanship.
  – DBPA‑driven claims and decisions like Cadence show that builders, developers and supervisory professionals can face uncapped statutory exposure where they are found to have carried out “construction work” and proportionate liability is unavailable. This reinforces the importance of scrutinizing how responsibilities are allocated across design, construction and certification, especially on larger commercial and mixed‑use developments and projects with multiple tiers of consultants.
• South Australia shows increased regulatory oversight, likely increasing inquiry costs in that jurisdiction and putting strain on noncompliant businesses with large penalties being issued for noncompliant businesses.
• Queensland and WA are a ‘watch this space’ as many proposed amendments have been stalled, but we will monitor and update you again soon.

Looking ahead to 2026 and beyond

We will be keeping an eye on market movements and legislation changes and will keep you updated. Currently there is a focus on increased regulatory oversight and insurance in the industry, if the trend continues, we may well see a decrease in claim costs and earlier resolution of claims.

Key contacts

Courtney Steele, Partner

Mario Raciti, Partner

Iona Sjahadi, Partner

Disclaimer: This article is intended for informational purposes only and should not be construed as legal advice. For any legal advice please contact us.