The Queensland Court of Appeal1 this month became the first appeal court in Australia to comment on the controversial mining exclusion contained in the Queensland Security of Payment Act, the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA).2 The Court confirmed earlier authority3 that the mining exclusion will only be engaged for the actual extraction of minerals4 as opposed to all work carried out in the mining industry or, importantly, preparatory work required to extract minerals. This case has relevance for each Security of Payment Act in Australia.

In reaching its decision, the Court also provided guidance on what types of work carried out on an open cut mine fall outside the definition of construction work as defined under the BCIPA.

Brief Explanation of Security of Payment Acts

There is a Security of Payment Act in place in each jurisdiction in Australia. Generally speaking, those Acts establish a process to resolve, on an interim but binding basis, payment disputes between principals and contractors, or head contractors and subcontractors (as the case may be). 

The process provides for a decision to be made by an appointed adjudicator within, on average, 35 business days from the service of a claim. This process has been regularly adopted by both major head contractors and smaller subcontractors alike and is mostly perceived as a fast and cost effective way to resolve payment disputes and cash flow problems in the construction industry. There is no monetary cap on the value of claims.

Mining Exclusion

Each Security of Payment Act sought to exclude certain work carried out in the mining and oil and gas industries. It was first thought by many that any work carried out in the mining and oil and gas industries would be excluded from the operation of the Security of Payment Acts. Those exclusions provide (to adopt the wording from the BCIPA):

  • 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.5

Court of Appeal Decision on Mining Exclusion

The Court of Appeal decision dealt with the second exclusion noted above. In the case the head contractor Thiess Pty Ltd (Thiess) engaged Warren Brothers Pty Ltd (Warren Brothers) as a subcontractor to carry out works for the construction of an open cut coal mine including, among other things, the construction of dams and drains, stripping, hauling, excavating and storing topsoil, clearing and grubbing and the “dry hire” of equipment which would be used for the construction of batters. 

The adjudicator found for Warren Brothers and Thiess applied to the Supreme Court of Queensland for the adjudicator’s decision to be declared void on the basis that the works fell within the mining exclusion. The Supreme Court held that the mining exclusion was not triggered by the work claimed by Warren Brothers. On that basis the adjudicator’s decision was valid and enforceable by Warren Brothers. Thiess appealed again. The Court of Appeal upheld the earlier decision of the Supreme Court, namely, that the mining exclusion did not apply to the works claimed by Warren Brothers. 

Key comments from the Court of Appeal:

I do not find anything in the purpose of the provision itself, or of the Act generally, which requires the words in s 10(3)(b) to be given a broad meaning. Indeed, the contrary is the case. The beneficial purpose of the Act is directed at providing a speedy interim means of payment to those who undertake to carry out construction work or to supply related goods and services under a construction contract. It is difficult to see how that beneficial purpose is promoted by a wide interpretation of the exception in s 10(3).6

Had it been the legislative intention, to extend the ordinary meaning of the phrase … extraction … by … surface working” to activities which are integral to or necessary for the extraction of minerals, it would have been a simple matter to do so by clear words. That was not done. By contrast, the legislative intention to widen the scope of s 10(1)(e) was made explicit by the broad terminology used in that subsection, which expressly extends to activities that are “an integral part of, or … preparatory to or … for completing” the relevant work.7

Court of Appeal Guidance on Construction Work

The Court of Appeal provided guidance on what was not construction work within the meaning of the BCIPA.

The Court held that construction work in the context of open cut mining did not include (notwithstanding the mining exclusion – which in any event was held not to apply):

  • Clearing and grubbing land;
  • Stripping and hauling top-soil;
  • Trimming and scaling batters and walls;
  • Clearing excavated material;
  • Cleaning the interface between the overburden and the coal seam.

So what does this all mean? We do know (until, and if, the law is changed) that the mining exclusion will be construed narrowly and will only apply to the actual extraction process.8 But where is the line drawn? Is the construction of a conveyor removing the coal from the pit the actual extraction process? Or is it only limited to the physical winning of coal from the seam? There is no answer to those questions yet and, for the time being, it is all open to argument.