A Queensland Supreme Court Judge decided last week that subcontractors and contractors undertaking work on mining leases in Queensland, where the lease is granted under the Mining Resources Act 1989 (Qld), cannot use the Payment Claim system under the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA) to enforce payment.

For subcontractors and contractors working in Queensland's mining industry, this is a most unwelcome decision.

Decision defeats purpose of BCIPA

When the various State Governments introduced Payment Claims legislation like BCIPA in Queensland, one of the main purposes of doing so was to free up the flow of cash in the building and construction industry and to rein in the practice of parties refusing to pay as a tactic to force others to accept less than they should receive.

The legislation has been very successful in achieving this. This decision however, will adversely affect that objective being achieved for contractor and subcontractor clients working on mine sites and probably gas fields.

A question of "land"

For clients to be entitled to deliver a Payment Claim and otherwise pursue their rights to be paid for building and construction work under BCIPA, that work must form part of "land".

Justice Wilson, in the Agri-power Australia Ltd – v – J and D Rigging Pty Ltd decision of last week, found that mining leases granted under the Mineral Resources Act in Queensland do not create "an interest in land" and that mining leases are not "land" for the purpose of BCIPA.

It follows that construction work on a mining lease for purposes of or associated with the mining lease, is not "construction work" under BCIPA, and hence clients can not deliver Payment Claims, use the adjudication process or stop work for non-payment using that Act as the lawful basis to do so.

It seems to the author however, that Her Honour's interpretation is strained and that land is land and does not cease to be land simply because the Crown grants a leasehold interest over it, whether that be for mining or other purposes. That said, the case is currently binding, at least in Queensland.

Likely to affect gas-fields too

Given Her Honour's reasoning, it is quite likely that this case will be held up as the basis upon which to find that BCIPA can not be used by clients to recover payment for doing construction work on land under a petroleum lease either.

So those contractors and subcontractors with work on gas fields are also likely to be hit.

Painting, cleaning and soil testing not affected

The decision seems unlikely to affect painting, or cleaning of buildings on mining or petroleum leases or testing of soils and road making materials.

Not just Queensland

The Act in New South Wales is almost identical to BCIPA so clients doing work in that state are likely to find this case will also apply there. It is also likely to have ramifications in the other jurisdictions too.

Appeal possible but legislation likely to be needed

The decision could still be appealed and if it is, we will let you know. However, we believe that legislation is the key as Justice Wilson's reasoning in the judgement has a certain logic to it which may make the decision difficult to appeal.

It is to be hoped that each of the industry associations representing subcontractors and contractors, pressures the Government in Queensland to amend BCIPA to overcome the problems this case has exposed. Such representations may also be warranted in the other states.

What to do for your clients

If you have clients in the building and construction industry who are working on a mining lease or petroleum lease please feel free to forward this Newsletter to them.

If you would prefer to incorporate it into your own newsletter please feel free to do so but please let us see the draft first.

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.