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9 Jan 12
Queensland Supreme Court clarifies the application of BCIPA to mining projects

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In the recent decision of Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd [2011] QSC 345 (Thiess v Warren), Justice Fryberg provided important clarification with respect to the application of the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA) to mining projects.

McCullough Robertson Construction Group Partners, Bill Morrissey and Matt Bradbury outline why the decision is likely to be welcomed by contractors and subcontractors who carry out construction work and supply related goods and services in respect of mining projects throughout Queensland, because it clarifies that BCIPA’s reach is broader than what may previously have been understood.

A brief overview of BCIPA

In order for BCIPA to apply, there must be ‘a contract, agreement or other arrangement under which one party undertakes to carry out construction work for, or to supply related goods and services to, another party’.

The terms ‘construction work’ and ‘related goods and services’ are given broad definitions by BCIPA, which means that they encompass a great variety of works, goods and services. Relevantly however, section 10(3) of BCIPA excludes from the definition of ‘construction work’:

  • the drilling for, or extraction of, oil or natural gas, and
  • the extraction, whether by underground or surface working, of minerals, including tunnelling or boring, or constructing underground works, for that purpose.

Accordingly, BCIPA will not apply to contracts for work, goods or services that fall within the above exclusion.

The facts of the case

Thiess v Warren concerned the Burton and Lake Vermont coal mines, which are located in the Bowen Basin in Central Queensland. Thiess Pty Ltd (Thiess) was appointed as the operator of the mines by their respective owners and engaged a number of subcontractors.

The case centred upon three subcontracts entered into between Thiess and Warren Brothers Earthmoving Pty Ltd (Warren):

  • the first subcontract related to the Burton mine, pursuant to which Warren was responsible for the clearing and grubbing of wooded areas, stripping and haulage of topsoil above the coal seam as well as the construction of dams and drains to prevent the site from flooding during mining operations (Burton Subcontract), and
  • the second and third subcontracts related to the Lake Vermont mine, pursuant to each of which Warren was responsible for the supply of an excavator for general use by Thiess (Vermont Subcontracts).

Warren had served a number of payment claims on Thiess which it had endorsed under BCIPA, and had obtained three favourable adjudication decisions. Thiess sought to have the adjudication decisions set aside on the basis that the subject matter of the subcontracts did not fall within BCIPA’s definitions of ‘construction work’ or ‘related goods and services’, or alternatively, that it was excluded by section 10(3) because it related to the extraction of minerals.

Warren argued that the subcontracts were for ‘construction work’ and ‘related goods and services’ as defined by BCIPA, and therefore that BCIPA applied to the subcontracts.

The decision - Burton Subcontract

Was the work ‘construction work’?

  • Dams and drains - Thiess argued that, in order to constitute ‘construction work’, the work must actually add something to the land. Accordingly, digging a channel or a hole in the land would not satisfy this requirement. Justice Fryberg rejected this argument, and indicated that the construction of dams and drains would generally constitute construction work.
  • Stripping and haulage of topsoil - Justice Fryberg noted that BCIPA’s definition of ‘construction work’ encompasses site restoration. His Honour found that the stripping and haulage of topsoil to a stockpile is preparatory to site restoration and rehabilitation, and thus constitutes construction work. In the process of making this finding, his Honour rejected Thiess’ contention that such works would need to be permanent in nature in order to constitute construction work.
  • Clearing and grubbing of wooded areas - Justice Fryberg held that site clearance constitutes ‘construction work’ for the purposes of BCIPA. His Honour found that it was unnecessary to differentiate between clearing that was undertaken for environmental protection purposes and that which was carried out for the purpose of gaining access to the coal deposits, for to do so would have been unduly complicated. 

Accordingly, Justice Fryberg concluded that the works the subject of the Burton Subcontract constituted ‘construction work’ for the purposes of BCIPA.

Did the work fall within the ‘extraction of minerals’ exclusion?

His Honour then had to consider whether the work was sufficiently connected with the extraction of minerals as to be excluded by section 10(3) of BCIPA.

Thiess argued that Warren’s works were a necessary and integral part of the coal mining process, because coal extraction could not take place without the removal of various layers of topsoil, subsoil and overburden down to the coal seam, as well as the implementation of water management measures.

Justice Fryberg found that the exclusion in section 10(3) of BCIPA focused ‘purely on the process of extraction’, and that because Warren’s works were remote from the actual ‘winning’ or extraction of the coal, they did not fall within the exclusion. His Honour focused on the difference in place, time, machinery used and purpose of Warren’s work in determining that it did not amount to the extraction of minerals under section 10(3) of BCIPA.

The decision - Vermont Subcontracts

Was the supply of excavators a ‘related good or service’?

The excavators supplied by Warren pursuant to the Vermont Subcontracts were intended to be used by Thiess for a variety of purposes, including the construction of dams and drains, the stripping of topsoil, the trimming and scaling of batters and walls in the coal mine overburden and the clearing away of the excavated material to facilitate access to the coal seam. 

Warren argued that a contract would be for the supply of ‘related goods and services’, and thus attract the operation of BCIPA, if the plant supplied pursuant to it were used to carry out any construction work. It argued that Thiess had used the excavators to carry out construction work, and therefore that the excavators constituted construction related goods and services.

Justice Fryberg held that plant supplied under a contract would not amount to ‘related goods and services’ merely because it was used to carry out ‘construction work’. His Honour instead found that the plant must have been supplied for the purpose of carrying out construction work, as defined by BCIPA.

His Honour found that the excavators were supplied by Warren for general use by Thiess, and therefore could have been used in mineral extraction operations. Interestingly, Justice Fryberg went as far as finding that clearing overburden by trimming and scaling batters and walls, clearing the excavated material, assisting bulldozers to remove the excavated material and cleaning the interface between the overburden and the coal seam do not constitute construction work for the purposes of BCIPA.

Nevertheless, his Honour found that the excavators were also supplied for the purpose of constructing dams and drains as well as the excavation and haulage of topsoil (which his Honour had already held to constitute ‘construction work’ under BCIPA in respect of the Burton Subcontract). Accordingly, the Vermont Subcontracts were not excluded from the operation of BCIPA.

Implications

This decision provides important clarification as to the scope and limitations of the exclusion set out in section 10(3) of BCIPA. As a result of this case, BCIPA’s reach is perhaps broader than it was previously understood to be.

On the basis of this important decision, contracts whose subject matter is related to mining operations, but sufficiently remote from the actual physical extraction of minerals, are unlikely to be excluded from the operation of BCIPA.

Although this decision is likely to be welcomed by contractors and subcontractors who are undertaking work or supplying goods and services in respect of mining projects, they should also be cautious that their contracts may be excluded from BCIPA’s application if their scope of works is too closely related to the extraction of minerals.

Head contractors and owners may also find themselves being served with a greater number of payment claims and adjudication applications pursuant to BCIPA as a result of the decision, and should familiarise themselves with their rights and obligations under the legislation.

 

Focus covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. Focus is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.

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