Australia: Court decision confirms BCIPA can apply to equipment supply contracts for mining works

Construction Alert: 6 Mar 2013

A recent Court of Appeal decision has confirmed that Queensland's security of payment laws can apply to contracts for mining-related construction works in the State - despite exclusions in the legislation for certain works on mining sites.

The decision in HM Hire v National Plant & Equipment follows a recent trend in Queensland court cases related to this legislation, finding that the mining exclusion under the Building and Construction Industry Payments Act 2004 may not necessarily apply to works performed on mining sites.

Partner Adam Carlton-Smith and senior associate Michelle Hall explain the findings in this case.

Key takeaways

  • 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. However, BCIPA contains a mining exclusion to the effect that the legislation does not apply to certain works carried out on mining sites.
  • The decision in HM Hire Pty Ltd v National Plant & Equipment Pty Ltd [2013] QCA 6 confirms that contracts to supply equipment for use on a mining site may still be covered by BCIPA.
  • Companies that enter into construction contracts need to determine whether the construction work and related goods and services are covered by BCIPA. It is not clear cut in many instances, and even though a 'mining site' might be involved, this does not necessarily mean that the legislation will not apply.

HM Hire v National Plant & Equipment

HM Hire entered into a subcontract with Thiess Burton to carry out works at the Burton Coal Mine in central Queensland. HM Hire then hired four dump trucks and one loader from National Plant & Equipment (NPE) to carry out the earthmoving work under the subcontract with Thiess.

After a dispute arose regarding the hire charges due under the two equipment rental agreements signed, NPE applied for adjudication under BCIPA. Following the adjudication decision, which was made in favour of NPE, HM Hire applied to the Court for a declaration that the adjudication decision was void, on the basis that the rental agreement was not a 'construction contract' as defined in the legislation. The primary judge held that the adjudicator had jurisdiction to make a decision on the dispute, and dismissed HM Hire's application. HM Hire then appealed to the Court of Appeal.

Mining works excluded 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).

The Court of Appeal's findings

In the appeal, HM Hire contended that the mining exclusion under BCIPA applied. It submitted that the work performed was not 'construction work', as the work formed part of the coal mining operation and was therefore covered by the mining exclusion under BCIPA, as it related to the "extraction... of minerals".

The Court of Appeal disagreed and confirmed the decision of Thiess v Warren Brothers Earthmoving Pty Ltd & Anor [2012], in which it found that earthworks that formed part of the overall coal mining operation, but did not actually involve the extraction of minerals, were not covered by the mining exclusion.

The case of Thiess v Warren Brothers also found that if work is undertaken that is not excluded by section 10 (3) of BCIPA, there is no need to consider the nature of the other work undertaken to determine whether a construction contract existed. In other words, it did not matter that some of the work performed was not 'construction work', as long as some of the work performed did in fact satisfy the definition of 'construction work' under BCIPA.

In the case of HM Hire v National Plant & Equipment, the Court of Appeal also determined that:

  • the construction of an access road and drains, as well as the excavation of a channel through the earth to construct a drain, was 'construction work'; and
  • the rental agreement was a contract where the equipment supplied was for use 'in connection with' carrying out construction work as required by BCIPA. Even though the construction work was not expressly provided for in the rental agreement, it was still a 'construction contract' to which BCIPA applied. This is because the pre-contractual evidence suggested that the parties were aware that the hired equipment would be used to carry out work of a kind considered to be 'construction work' under BCIPA.

The Court confirmed that the construction contract between HM Hire and NPE was a contract to which BCIPA applied. As a result, NPE was able to use BCIPA to recover progress payments.

© HopgoodGanim Lawyers

Award-winning law firm HopgoodGanim offers commercially-focused advice, coupled with reliable and responsive service, to clients throughout Australia and across international borders.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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