Take home points
1. The Building and Construction Industry Payments Act 2004 (Qld) creates a regime where parties are able to seek security of payment for “construction work” under construction contracts in Queensland.
2. BCIPA does not apply to “construction work” which is the extraction of minerals, or drilling for oil or natural gas.
3. Notwithstanding the “mining exclusion” in BCIPA, the Courts will carefully construe the actual work being completed to determine whether or not certain construction work is excluded. Preparatory work done in respect of preparing a mining site is considered “construction work” as contemplated under the Act, as is demolition of fixtures on a mining lease.
4. Contractors who serve or receive a payment claim under the Building and Construction Industry Payments Act 2004 (Qld) should ensure that they comply with the requirements under the Act (particularly in relation to time lines for responding to claims or commencing proceedings) while carefully reviewing the contract and surrounding circumstances to determine whether or not Act does apply.
Legislation exists in each state and territory in Australia to enable contractors, subcontractors, consultants or suppliers in the building and construction industry to secure payments due to them for works carried out.1 The laws are aimed at avoiding costly project delays, avoiding contracting parties from reducing or holding up payments, while maintaining cash-flow allowing projects to be completed.
In Queensland, the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA) creates claimants with an additional procedure for the payment of building work claims and swift adjudication in payment disputes. However, the legislation is subject to certain exclusions in which the payment claim and adjudication processes under BCIPA do not apply.
The “mining exclusion” under BCIPA
When the bill for BCIPA was introduced to the Queensland Legislative Assembly on 12 May 2004, the then Minister for Public Works, Housing and Racing, the Hon. Mr Ralph Schwarten noted during the second reading of the Bill that “the application of the Bill covered all forms of construction contracts other than contracts involving “resident owners” under the Domestic Building Contracts Act 2000. The Bill will, however, cover owner-builders who engage contractors and tradespeople in a building contractor role.”
When enacted, BCIPA also contained a number of other exclusions in addition to “resident-owner” construction contracts. Under section 10(3)(b) of BCIPA, the definition of “construction work” excludes work which is “the extraction, whether by underground or surface working, of minerals, including tunnelling or boring, or constructing underground works, for that purpose”. It also does not apply to the “drilling for, or extraction of, oil or natural gas”.
In essence, the “mining exclusion” definition in Queensland excludes any building and construction work done in respect of extracting minerals (such as coal or iron ore). The exclusion under BCIPA does not extend to construction works done for the purpose of other resources which are not minerals, such as oil or natural gas. Depending on the scope of the project and works undertaken, contractors may be able to utilise the procedures under BCIPA to improve their prospects of payment and positive cash-flow.
Interestingly, in Western Australia (another resource intensive state), an exclusion exists in the Construction Contracts Act 2004 (WA) in relation to “constructing any plant for the purpose of extracting or processing oil, natural gas or any derivative of natural gas, or mineral bearing or other substance”.
Judicial decisions relating to the “mining exclusion”
Notwithstanding the express provisions under BCIPA excluding underground or surface works relating to minerals”, the decisions of the Queensland courts show that there is still scope in determining whether or not certain projects conducted on mining projects are excluded from BCIPA.
Preparatory work done in relation mining work is “construction work”
In Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd2, the Court was asked to consider whether or not an adjudication decision made in Warren Brothers’ favour was void because the adjudicator lacked jurisdiction as the contracts which Warren Brothers’ sought payment for were not “construction contracts”. The work in question which Warren Brothers’ sought a payment adjudication for was work done in preparing a mining site, including clearing and grubbing, stripping topsoil and constructing dams and drainage.
At trial, the trial judge found that the work to be carried out under the contract was “construction work” and did not fall within the exclusion under section 10(3)(b) of BCIPA. The trial judge’s decision was upheld on appeal to the Court of Queensland3, where the Court agreed that notwithstanding the wide definitions of “construction work” and “works that form part of the land” the “mining exclusion” was “not expressed to apply to work done for the purpose of opening or preparing to operate a mine. They are much more limited than that…they focus purely on the process of extraction.”
The Court held that “had it been the legislative intention, to extend the ordinary meaning of the phrase “extraction … by … surface working” to activities which are integral to or necessary for the extraction of minerals, it would have been a simple matter to do so by clear words. That was not done.” The legislative intention to widen the scope of s 10(1)(e) of BCIPA was made explicit by the broad terminology used in that subsection, which expressly extends BCIPA to cover activities that are “an integral part of, or … preparatory to or … for completing the relevant work”.
Similarly, the approach towards the characterisation of preparatory work was taken in the decision of HM Hire Pty Ltd v National Plant and Equipment Pty Ltd.4 His Honour Justice Douglas held that it is: “…necessary to construe [the exclusion in] s 10(3) in the context set by s 10(1) which describes a relatively broad set of circumstances amounting to construction work. It would detract unnecessarily from the apparent purpose of the legislation and the normal understanding of s 10(1) and its hierarchy in the section to extend the meaning of extraction of minerals to cover work associated with such extraction where the legislature … could readily have made such a purpose clear by the use of familiar language of wider meaning than this phrase. There is no reason why s 10(3) should be read so as to displace or render nugatory the meaning of s 10(1)”.
When HM Hire was reviewed upon appeal in the Court of Appeal, the Court held that one of the complained works (the construction of drains) which involved more than “cutting, filling and hauling” and also formed an integral part of the installations for land drainage was considered to be part of the construction contract and not excluded under BCIPA.5
The conclusion to be drawn is that certain preparatory work may (despite being done in relation to mining projects involving minerals, oil or gas) be considered “construction work” and therefore covered under the BCIPA adjudication regime.
Construction works conducted on mining leases
In Agripower Australia Ltd v J & D Rigging Pty Ltd & Ors6 the trial judge found that an adjudication decision under BCIPA for payments to a subcontractor company was “void for want of jurisdiction because the dismantling of the plant was not “construction work” under a “construction contract””. Her Honour considered the arguments advanced by Agripower Australia, the Applicant, and decided that “land” (as used in section 10 of BCIPA) does not include mining leases and fixtures and chattels which formed part of the mining lease, did not form part of the “land” within the meaning of BCIPA.
In allowing the appeal against the trial judges’ decision, the Court of Appeal held that “the rules about “ownership of fixtures, despite their adoption in other statutory contexts, should be adopted in interpreting s 10 of BCIPA”. The Court reasoned that by using the wording “buildings or structures, whether permanent or not, forming, or to form, part of land” permit a temporary building or structure to be the subject of construction work, which may extend to a fixture. The common law regarding fixtures were not applicable in the context of BCIPA.
Furthermore, in determining the issue regarding the applicability of BCIPA of mining leases, the Court held that “while a mining lease may not be legally categorised as “land”, the actual land on which the building or structure is affixed does not change its character by reason of the existence of a mining lease. The physical characteristics of the thing that is to be constructed or that has been constructed and the thing‘s relationship to the land determine whether it forms part of land”.
Summary
The above decisions show that notwithstanding the “mining exclusion” under BCIPA, there is scope for arguing that payment of certain mining related construction works are covered by the security of payment legislation. When parties on a mining site are faced with a payment claim under BCIPA, it is recommended that they carefully review the terms of the contract and surrounding situation whilst responding to the claim as required under the BCIPA timeframes. If it is found that the “mining exclusion” does not apply, then there are significant risks in failing to comply with the requirements and time lines under BCIPA.
Finally, we note however, another piece of security of payment legislation in Queensland, the Subcontractors Charges Act 1974 (Qld), does not contain any express exclusions in relation to construction work done on mines (both underground and aboveground). It therefore avoids any potential difficult questions relating to whether or not a party may seek security of payment for construction work done on mining projects under that Act.
While subcontractors who elect to secure payments under the Subcontractors Charges Act 1974 do not have to worry about the “mining exclusion”, there are a host of other matters that should be taken into consideration (including strict time lines to enforce charges, and the inability to subsequently rely on procedures for payment claims under BCIPA).
1 Building and Construction Industry Security of Payment Act 1999 (NSW); Building & Construction Industry Security of Payment Act 2002 (Vic); Building and Construction Industry Payments Act 2004 (Qld); Building and Construction Industry (Security of Payment) Act 2009 (ACT); Building and Construction Industry Security of Payment Act 2009 (SA); Building and Construction Industry Security of Payment Act 2009 (Tas); Construction Contracts (Security of Payments) Act (NT); Construction Contracts Act 2004 (WA)
2 [2011] QSC 345
3 See Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd & Anor [2012] QCA 276
4 [2012] QSC 4
5 [2013] QCA 6
6 [2013] QSC 164