Construction contract or not a construction contract? That is the question…

December, 2012

In the recent decision in Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd & Anor [2012] QCA 276 the Queensland Court of Appeal considered the application of the Building and Construction Industry Payments Act 2004 (Qld) (BCIP Act) to the mining industry.

Executive Summary

The Queensland Court of Appeal has confirmed the decision of His Honour Justice Fryberg in the Supreme Court of Queensland – the ‘mining exclusion’ set out in the BCIP Act should be interpreted narrowly.

The Court also:

Critically for industry participants, their Honours came to differing views regarding whether various specific types of works would comprise ‘construction works’ under the BCIP Act.

Facts

Thiess Pty Ltd (Thiess), being the operator of the Lake Vermont Coal Project and the Burton Coal Project, entered into three separate contracts with Warren Brothers Earthmoving Pty Ltd (Warren Bros), comprising:

Warren Bros subsequently made claims for progress payments in respect to each of the above contracts under the BCIP Act.  The claims proceeded to an adjudicator who made decisions favouring Warren Bros in each case.

Thiess brought an application in the Supreme Court of Queensland seeking declarations that the adjudication decisions were void, as well as an injunction restraining Warren Bros from seeking adjudication certificates in respect of them, on the grounds that the adjudicator did not have jurisdiction to determine the adjudication applications because the contracts were not ’construction contracts within the meaning of the BCIP Act.

Fryberg J dismissed Thiess’s application finding that the contracts were ’construction contracts’ within the meaning of the BCIP Act and that the adjudicator consequently had jurisdiction to determine the adjudication applications.

Appeal

Thiess appealed the Court’s decision to the Court of Appeal raising the following two issues:

(a)       whether the Subcontract and Hire Contracts were in fact ’construction contracts’, failing which the adjudicator lacked jurisdiction to determine the adjudication applications; and

(b)       whether the adjudication decisions concerning the Hire Contracts were void as being beyond jurisdiction, because they included amounts for the supply of excavators which were not used in connection with the carrying out of construction work, so not for ’related goods and services.

Decision

In its decision, the Court of Appeal confirmed that a contract or arrangement is a ‘construction contract’ if it contains an undertaking of the type specified in the definition of ‘construction contract’ under the BCIP Act, notwithstanding that it contains other undertakings or imposes other obligations not within this definition.  Essentially, a party must undertake to carry out some ’construction work’ as part of its scope of works within the meaning of that term prescribed under the BCIP Act.

Importantly, the words in section 10(3) of the BCIP Act, which states that ’construction work’ does not include:

(i)        the drilling for, or extraction of, oil or natural gas; and

(ii)       the extraction, whether by underground or surface working, of minerals, including tunnelling or boring, or constructing underground works, for that purpose,

should be interpreted narrowly – if the work undertaken is not the actual process of drilling or extraction of oil, gas, or minerals, the ‘mining exclusion’ that is predicated on clause 10(3) of the BCIP Act will not operate.

However, their Honours came to different conclusions in relation to works common in connection with open pit mining and whether these works comprise ‘construction works’, such as:

These differing views may well prove to be fertile ground for future disputes.

Conclusion

In some respects the Court of Appeal’s decision clarifies the narrow nature of the ‘mining exclusion’ in the BCIP Act, which will be of particular relevance to all parties undertaking work in connection with mining.

However, superior contracting parties in particular should take note of the differing views of the members of the Court regarding what types of works would be considered ‘construction works’ and therefore would be regulated by the BCIP Act. As this area is somewhat uncertain, professional advice should be sought before seeking to decline claims on the basis of whether the works fall under the BCIP Act.

Contact Mills Oakley

For more information, please contact:

rechelle-brost-mills-oakley

Rechelle Brost | Partner
T: +61 7 3228 0421
E: rbrost@millsoakley.com.au

 

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Greg Richards | Partner
T: +61 7 3228 0443
E: grichards@millsoakley.com.au

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