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The Supreme Court of NSW has recently published a decision of significance for construction, design and insurance professionals in The Star Entertainment Sydney Properties Pty Ltd v Buildcorp Group Pty Ltd [2026] NSWSC 27, particularly as to the operation of misleading conduct provisions in the Australian Consumer Law.
Background
Three refurbishment projects at Star Casino in Pyrmont (the Star) involved the use of aluminium composite panel cladding (ACP). The Star sought approximately $4 million in remediation costs from its builder, Buildcorp, who in turn sued the project architect, and the façade subcontractor's insurers.
Decision
The Star's claim against the builder failed in relation to 2 of the 3 projects. Significantly, the Court determined that:
- both the attachment and removal of non-compliant ACPs from a building can (depending on the circumstances) constitute property damage for the purpose of triggering cover under a property damage policy of insurance;
- ACPs can be classed as an 'attachment' the purpose of establishing compliance with the Building Code of Australia (BCA);
- claim for misleading conduct in connection with the supply of services under Section 29 of the Australian Consumer Law (ACL) is not available to third parties to a 'buyer/seller' relationship.
Project 1
- Contractual construction - contracts must be read as a whole
The Star engaged the builder under a construct only contract. The contract provided that the builder would perform design management services, but expressly excluded design responsibility in connection with the works. The Contract also included warranties that the works would comply with the relevant provisions of the BCA.
The Star submitted that despite the contractual carve-out of design responsibility, the warranties as to BCA compliance must still stand to warrant compliance of the specified cladding and cladding design with the BCA.
When assessing the proper construction of the contract as a whole, the Court found that the warranty as to BCA compliance must be read down in light of the design responsibility carve-out. As a result, the warranty as to BCA compliance could not apply to import design responsibility and could not therefore extend to warrant compliance of the design or specification of the ACPs.
- Negligence - a matter of vulnerability
In assessing the potential liability of the architect to the builder in the alternative, assuming it was incorrect in its assessment of the builder's liability to the Star, the Court highlighting the difficulties parties will face when attempting to impose a duty of care at common law in a commercial construction context.
Justice Rees re-affirmed "vulnerability"' as the key component to establishing whether a duty of care existed between the parties, following the decisions of the High Court of Australia in the cases of Woolcock Street Investments Pty Ltd v CDG Pty Ltd and Mallonland Pty Ltd v AdvantaSeeds Pty Ltd.
Having regard to the project and the experienced, commercial and professional parties to the project who negotiated their contractual agreements at arms length, the Court found that the builder lacked the necessary "vulnerability" and that no duty of care was owed by the architect. Importance was placed by the Court on the ability of the builder to protect itself contractually, and that it did in fact protect itself contractually (including by way of the design liability carve-out).
Project 2
- ACP as an attachment under the BCA
At the time of installation of the ACP in Project 2, the BCA permitted the use of attachments to external walls of buildings that were not 'non-combustible'.
The Court held that the ACP could be an 'attachment' if certain criteria were satisfied, and be affixed to a non-combustible wall, in compliance with the BCA. Compliance in this regard under the BCA could be achieved if key criteria were satisfied relating to group number, proximity to exits, no undue risk of fire spread up the building façade, and no impairment of required FRL.
The Court ultimately determined that the ACP fell within the 'attachment' exception to the BCA, and no breach of the BCA was established.
Project 3
In respect of Project 3, the Star engaged the builder under a separate Minor Works Contract that included an obligation that the completed works would comply with the BCA. The design of ACPs in Project 3 did not meet the requirements for the 'attachment' exemption and was therefore non-compliant. The Court found the builder liable to the Star, as that building was ultimately not compliant with the BCA.
- ACP as Property Damage
Having found that the cladding installer was liable to the builder by reason of an indemnity in its contract, the Court turned to assessment of whether the insurers of the cladding installer would be liable under the cladding installer's policy of insurance.
The key issue for determination being whether the installation and/or removal of non-compliant cladding is sufficient to constitute 'property damage' within the meaning of the Policy.
Her Honour ultimately determined that there had been property damage both by affixing and removing the cladding. In coming to this determination, her Honour applied the definition of property damage Ranicar v Frigmobile, that is, there is "damage to" property if there "is a physical alteration or change, not necessarily permanent or irreparable, which impairs the value or usefulness of the thing said to have been damaged".
The Court found that the attachment of cladding to the building impaired is usefulness and value because it was less valuable by reason of its non-compliant external façade and was less useful as the building's fire resistance had been impaired. Her Honour otherwise considered there would be property damage by reason of the removal of the cladding from the building.
- ACL Clarifications
Section 29 of the ACL - Misleading conduct with regard to services
The Court provided some much needed clarification regarding the ambit of the section 29 of the ACL which provides that is an offence to engage in certain misleading conduct in connection with the supply of goods or services.
Her Honour determined that the builder could not rely on a claim against the architect under section 29 of the ACL in circumstances where it did not engage the architect. Instead, section 29 was aimed at targeting participants in a bilateral process of transacting or dealing between suppliers and consumers (i.e. parties to a sale/supply contract).
- Misleading future conduct
The Court made some useful comments regarding the application of the ACL to compliance representations for the ACPs, finding that they were not representation as to future matters within the meaning of section 4(1) of the ACL (which would afford the architect a defence on the basis that the representations were made on reasonable grounds). The Court instead found that they were statements of fact as to present compliance.
Implications
The Court's detailed, project-by-project approach to assessment demonstrates how outcomes in cladding litigation are heavily on the parties contractual relationships, and the precise application of BCA provisions to the cladding specified, its design and attachment on the building.
The Court's clarification of section 29 of the ACL is significant. Section 29 is often relied upon by non-parties to supply contracts when prosecuting construction litigation to avoid a proportionate liability defence otherwise available under section 18 of the ACL. Her Honour's clarification appropriately reduces the ambit of section 29 and may reduce the need for cross-claims to pass through liability in such proceedings.
The classification of affixation of non-compliant ACPs as property damage further develops the judicial thinking on this issue as set out in a number of recent decisions which indicated that the removal of cladding could constitute property damage. Property damage insurers should consider the coverage implications associated with the Court's determination, including regarding the affixation or incorporation of other non-compliant products as part of a larger product.
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