Resources and Energy Alert: Court determines impact of security of payment legislation on mining-related construction works - 13 Jan 2012

A recent Supreme Court of Queensland decision demonstrates the importance for resources companies of understanding the role that security of payment legislation plays when carrying out mining-related construction works.

In Queensland, the Building and Construction Industry Payments Act 2004 (BCIPA) ensures that those who undertake construction work or supply related goods and services under a construction contract are able to receive progress payments for their work. The process for resolving payment disputes includes appointing an adjudicator, who only has jurisdiction if the contract in question is considered a construction contract within the meaning of BCIPA. There are some restrictions on the type of contracts covered by the legislation, including restrictions on certain works carried out on mining sites.

Here, partner Adam Carlton-Smith and senior associate Michelle Hall discuss the findings in Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd & Anor and outline how these findings apply to mining-related construction works in Queensland.

Key takeaways

  • Businesses that enter into construction contracts need to determine whether the construction work and related goods and services are covered by BCIPA. In many cases, it is not clear cut.
  • When work is being performed on or in connection with a mine, companies need to determine whether the work is exempt from BCIPA. While the legislation excludes certain mining-related construction, works performed on a mining site may still be covered.

Thiess v Warren Brothers Earthmoving

The Supreme Court of Queensland delivered the decision of Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd & Anor in December 2011. The case related to subcontracts entered into with an earthmoving contractor for works in connection with two open cut coal mines in central Queensland.

Thiess sought to have adjudication decisions in favour of the subcontractor, Warren Brothers Earthmoving, declared void on the basis that the contracts were not construction contracts within the meaning of BCIPA. Ultimately, the Court found that the subcontracts were construction contracts, and that the adjudicator had jurisdiction to determine the matters before him.

Mining works covered by BCIPA

BCIPA excludes certain mining-related works from the application of the legislation. Relevantly, it provides that construction work does not include "the extraction, whether by underground or surface working, of minerals, including tunnelling or boring, or constructing underground works, for that purpose" (emphasis added).

Thiess argued that the works performed by Warren Brothers were for the extraction of minerals, and as such were not construction works to which BCIPA applied. However, the Court found that the works were covered by BCIPA.

The Court's key findings

In arriving at its decision, the Court considered the nature of the work that Warren Brothers performed, and whether that work was "construction work" as defined by BCIPA.

It first determined that coal is a mineral. It also determined that the earthmoving works performed by Warren Brothers were a necessary part of opening the coal mines. However, the exemption provided by BCIPA to extracting minerals does not apply for work undertaken to open a coal mine, or in preparation for opening a coal mine. Therefore, the works could not be described as the "extraction" of coal, and as such, none of the work performed was exempt from BCIPA's application.

The Court also found the following:

  • The meaning of "to form part of land" as set out in BCIPA is a phrase of wide meaning, and dams and drains were works when constructed that formed part of the land on which they are built.
  • Stripping and hauling topsoil to stockpile is preparatory work and as such was covered by the meaning of construction work under BCIPA.
  • Clearing and grubbing was construction work within the meaning of BCIPA.

Hiring excavators

Another key issue in the case was whether subcontracts for the hire of excavators were covered by BCIPA.

The type of construction work that is undertaken will determine whether the plant or materials are to be used in connection with the carrying out of construction work, so as to fall within the definition of related goods and services to which BCIPA applies. Hiring excavators for earthmoving or excavation does not necessarily mean the contract is covered by BCIPA, as the work must be "integral" to the type of construction work expressly covered by BCIPA.

In this case, the Court held that the excavators were planned for use in connection with the carrying out of construction work, and held that the construction of dams and drains, and excavating topsoil and removing and storing it, are covered by BCIPA.

For more information on this case or the application of the Building and Construction Industry Payments Act 2004 to mining-related construction works, please contact HopgoodGanim's Construction, Infrastructure and Major Projects team.