The applicability of Security of Payments legislation to the mining sector – the story so far

Security of payment legislation, such as the Building and Construction Industry Payments Act 2004 (QLD) (Act), will not apply to a contract unless some of the work under the contract satisfies the Act’s definition of ‘construction work’ or ‘related goods and services’. 

We previously reported here on two Queensland Court of Appeal cases (HM Hire Pty Ltd v National Plant and Equipment Pty Ltd & anor [2013] QCA 6and Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd & anor [2012] QCA 276),  from which we learned that the ‘mining exclusions’ to the Act’s definition of ‘construction work’ (at s 10(3)) is to be interpreted narrowly, and will only exclude from the Act’s application contracts for works involving the direct physical extraction of materials.  Accordingly, it was found in those cases that contracts relating to the construction of access roads, dams and drains at the Burton Coal Mine were caught by the Act.  

It followed that contracts for works at mining sites, other than for works involving the direct extraction of minerals, were capable of being caught by the Act. 

However, in an apparent contradiction, the Queensland Supreme Court in the case of Agripower Australia Ltd v J & D Rigging Pty Ltd [2013] QSC 164found that a contract involving the dismantling of mining plant (such as baghouses, storage tanks and kilns) originally installed for the purposes of a mining lease will not attract the Act’s operation. 

This article will consider the reasoning adopted by the court in arriving at its decision in Agripower and the implications for participants in the mining sector.

The dispute    

The case relates to mining plant (including mixing tanks, storage bins, baghouses, a large kiln, electrical motor control centre and cabling, two kiln baghouses and corresponding screw conveyors) originally installed by the mining lease holder at the Skardon River Mine in Cape York, Queensland.  Agripower Australia Ltd (Agripower) purchased this plant, and engaged J and D Rigging Pty Ltd (J and D) to dismantle it and transport it from the mining site to its new destination (Contract).

J and D issued a payment claim under the Act for the dismantling works, and the claim proceeded to adjudication.  The adjudicator found in favour of J and D.  Agripower appealed the adjudicator’s decision, arguing that the Act did not apply to Contract as the Contract work was not ‘construction work’ as defined by section 10 of the Act.

The definition of ‘construction work’ under section 10 of the Act relevantly includes:

  1. the construction, … demolition or dismantling of buildings orstructures, whether permanent or not, forming, or to form, part of theland;
  2. the construction, … demolition or dismantling of any works forming, orto form, part of land, including walls, roadworks, powerlines…[emphasis added].

Agripower submitted that the contract works did not satisfy this definition because the works did not ‘form part of the land’. 

Decision

The Court agreed with Agripower, concluding that the mining plant did not ‘form part of the land’ as required. 

In arriving at this conclusion, the court found:

  1. From its definition under the Acts Interpretation Act 1954 (Qld)and its meaning under the common law, the word ‘land’ included estates and interests in land (which are essentially certain legal rights in respect of land).
  2. At common law, something may be attached to land so that it becomes part of the land (ie becomes a fixture), and whether that thing becomes a fixture depends essentially upon the objective intention with which it was put in place.  Relevant factors to this are the purpose of annexation and the degree annexation.
  3. There is nothing in the language of the Act to displace the meaning of ‘land’ under the Acts Interpretation Act 1954 (Qld), or to suggest that buildings or structures, works or fittings may form part of the land under that Act when they would not do so at common law.
  4. From section 10 of the Mineral Resources Act 1989 (Qld) and common law principals relating to mining tenements set down by the High Court, a ‘mining lease’ (which essentially grants the holder the right to remove minerals from specified land) is not ‘land’ and does not give rise to an estate or interest in the subject land.

Applying the above findings to the facts of the case, the Court held:

  1. The purpose for which the mining plant was initially put in place on the land was for the mining lease (which, from 4 above, is neither ‘land’ nor and ‘interest in land’), rather than to add some additional feature to the land the subject of the mining lease, and accordingly it could not be said that it ‘formed part of the land’ as required by the Act.
  2. This conclusion is supported by the fact that the Mineral Resources Act 1989 (Qld) actually mandated the removal of the mining plant prior to the expiration of the mining lease.  However, consistent with the terms of section 10 of the Act and the common law concept of forming part of the land, permanence is not a necessary or decisive criterion, but merely a relevant factor.
  3. To the extent that the plant being physically attached to the land might have been a relevant consideration, the plant was affixed to the land for the mere purpose of stabilisation for efficient operation. 

Since the mining plant could not be said to ‘form part of the land’, the dismantling of that plant was not ‘construction work’ within the meaning of the Act. Accordingly, the Act was held to not apply to the Contract. 

Implications

Applicability to other state jurisdictions

Though the Court’s reasoning involves Queensland specific legislation, it would seem that the reasoning will be at least relevant in all jurisdictions since it focused keenly on the common law concept of fixtures.  However, that reasoning may be overridden if the concepts of ‘land’ or ‘mining leases’ are given a materially different definition under the legislative regimes of the different states.  For example, the Western Australian Interpretation Act 1984 defines ‘land’ in a similarly broad fashion to the Queensland legislation; however, in addition to expressly including ‘estates’ and ‘interests’ in land, it also expressly includes ‘buildings and other structures’.  So a similar case in Western Australia might have turned on a question not asked by the Court in Agripower, namely, what physical requirements are necessary for something to be considered a ‘structure’ on a parcel of land.  

Further, there is a growing difference between states in their courts’ approaches to interpreting the Act.  For example, the Chief Justice of the NSW Supreme Court held in Edelbrand Pty Ltd v H M Australia Holdings Pty Ltd [2012] NSWCA 31that the Act should be given a more liberal interpretation in favour of claimants on the basis that it is remedial legislation, however Queensland courts have expressed a reluctance to follow suit (see Agripower at [37]-[42]).  Accordingly, NSW courts may adopt a broader interpretation to the definition of ‘construction work’ in a similar case.

Can Agripower be reconciled with HM Hire and Warren Brothers?

It is very difficult to reconcile these cases.  In HM Hire and Warren Brothers, the subject works (the construction of dams, drains and access roads) were also constructed for the purposes of mining leases, yet the Act was found to apply.  Unfortunately, in those cases, whether or not the works ‘formed part of the land’ was not a major point in dispute between parties.  While it is difficult to speculate, the key distinction between those cases and Agripower might be the fact that the mining plant in Agripower, by its physical nature (being something which could be dismantled, carried off, and reassembled at another site), had the capability of being regarded as personal property as opposed to realty (the same could not be said for dams, drains and access roads), and therefore lent itself to an analysis analogous to the common law doctrine of fixtures to determine whether it relevantly ‘formed part of the land’.

Conclusion

The decision in Agripower should come as good news for mining principals in Queensland (and potentially in other jurisdictions) as it limits their exposure to the Act’s onerous regime in relation to contracts for works involving mining plant.  However, due to the apparent and yet unresolved contradiction with previous Queensland Court of Appeal cases, and the uncertainty as to whether the same principles will apply Australia-wide, principals under mining related contracts must remain vigilant to ensure they respond to all claims which on their face purport to be made under the Act with a payment schedule that complies with the Act.