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Residential Focus: HBCF Eligibility Decisions – Too Challenging to Challenge?

For builders and contractors operating in New South Wales’ residential construction sector, maintaining eligibility for Home Building Compensation Fund (HBCF) insurance is non-negotiable. This insurance, mandated under section 92 of the Home Building Act 1989 (NSW), protects homeowners by covering incomplete or defective building work if the builder becomes insolvent, disappears, or dies.


However, recent legal developments reveal how challenging it has become for builders to successfully challenge decisions made by icare, the statutory body administering HBCF insurance. The case of Introbuild Constructions Pty Ltd v Insurance and Care NSW NSWSC 773 marked a significant turning point, setting a strong precedent that limits judicial review of HBCF eligibility decisions.


A completed two-story suburban house with beige siding, white trim, and a white double garage door, set on a manicured lawn with trees in the background

Background and Legal Context

In this case, the plaintiff—a building contractor—faced suspension of its HBCF eligibility following a “special eligibility review” triggered by the insolvency of a related company linked to one of its directors. icare identified “unacceptable risk scenarios” in line with clause 9.1 of the HBCF Eligibility Manual, particularly noting that a key director had only recently resigned from a previous company that went into administration. Under the eligibility criteria, the effective date of resignation is the date of lodgement with ASIC, not the actual resignation date, impacting eligibility calculations.


The plaintiff’s multiple attempts to reverse the suspension through internal reviews were unsuccessful, prompting judicial review proceedings.


Court’s Findings and Implications

The Supreme Court rejected the builder’s challenge, ruling that icare’s decision was lawful and well-reasoned. Two major legal grounds put forward by the plaintiff were dismissed:

  • Phoenix Activity Allegation: The plaintiff argued icare’s decision was wrongly influenced by claims of illegal phoenix activity (reincarnating a company to avoid debt). The Court confirmed there was no finding of phoenix activity; rather, icare’s decision was based on factual risk assessments under the eligibility rules.
  • Interpretation of Eligibility Guidelines: The builder contended that icare improperly limited its consideration to clause 9.1 without assessing other eligibility criteria. The Court ruled that icare did consider other relevant clauses and that non-compliance with certain guidelines does not invalidate the decision, citing section 8A(3) of the Self Insurance Corporation Act which protects the validity of actions even where guideline compliance is imperfect.

The Court underscored that eligibility decisions are granted broad discretion and limited avenues exist to overturn these determinations in court.


Practical Takeaways for Builders and Contractors

  1. Continuous Eligibility Monitoring: Builders must actively manage their eligibility status, especially during and after corporate changes such as director resignations or related company insolvencies. These can have direct implications on HBCF risk assessments.
  2. Accurate and Timely Reporting: Proper and prompt lodgement of director or key personnel changes with ASIC is crucial. Delays can lead to unfavourable eligibility determinations even when there is no underlying misconduct.
  3. Understanding the Risk Landscape: Builders should be aware that HBCF insurance eligibility assesses a broad set of “unacceptable risk scenarios.” This includes financial viability and prior business history linked to principals.
  4. Limited Legal Recourse: Given the court’s ruling, administrative and legislative frameworks strongly favour icare’s eligibility decisions. Builders should seek expert advice to comply with regulations rather than rely on legal challenges.

Impact on the Residential Construction Industry

For homeowners, the decision assures that HBCF insurance maintains a high standard of reliability by preventing high-risk or potentially unstable builders from operating without insurance. The rigorous enforcement of eligibility protects consumers from financial loss due to incomplete or defective building work.


For the residential building sector, this ruling heightens the pressure on contractors to implement sound corporate governance practices and financial management to maintain coverage eligibility. It also signals increased regulatory scrutiny amidst the NSW Government’s push to accelerate housing delivery while safeguarding quality.


A large house under construction with exposed wood framing, green sheathing panels, concrete block foundation, and a yellow telescopic handler lifting materials to the upper level, with workers on the roof.

How Auswide Insurance Brokers Can Help

Navigating HBCF eligibility complexities requires specialist knowledge. Auswide Insurance Brokers offers tailored advice to builders and contractors to help them:

  • Understand and prepare for eligibility assessments.
  • Maintain compliance with reporting obligations and eligibility criteria.
  • Access appropriate insurance products that safeguard their business and projects.
  • Manage risks effectively to avoid costly disruptions or suspensions.

In a tightening regulatory landscape, proactive risk management and expert brokerage support are essential. Auswide Insurance Brokers is committed to guiding NSW builders every step of the way to ensure ongoing eligibility and robust insurance protection.