Mining services contractors seeking payment for work performed on a site that is occupied under a mining lease (or other similar arrangement) should carefully check to see whether the work for which payment is claimed can be characterised as “construction work”.

It is fair to say that the Supreme Court of Queensland’s recent decision in Agripower Australia Ltd v J & D Rigging Pty Ltd [2013] QSC 164 was unexpected. It dispelled a widely-held assumption about what is “construction work” under the Queensland security of payment legislation. But does it mean that the Act does not apply to work on mining leases? What is the likely fall out? And might it have national significance?

What did the case decide?

The Building and Construction Industry Payments Act 2004 (Qld) (Payments Act) only applies to “construction contracts”, which are contracts for the carrying out of “construction work” or the supply of related goods and services.

Agripower Australia operated the Skardon River Mine in Cape York, Queensland, with a right to extract clay. Agripower did not own the freehold. Rather, it held a mining lease. It entered into a contract with J & D Rigging for the dismantling and removal of certain mining plant. J & D Rigging made a payment claim under the Payments Act for about $3.1 million. An adjudicator determined it was entitled to a progress payment of about $2.5 million.

Before both the adjudicator and the Supreme Court, the mine operator argued that the contract was not a “construction contract” because the work that J & D Rigging was required to do was not “construction work”. J & D Rigging said the works fell within the Payments Act’s definition of “construction work” in section 10(1), which relevantly defines “construction work” to mean:

  1. the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of buildings or structures, whether permanent or not, forming, or to form, part of land;
  2. the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of any works forming, or to form, part of land …

The mine operator said that the work was not “construction work” because even though the work was the “dismantling of buildings or structures”, those structures were not “forming, or to form, part of land”. This was because, the mine operator said, the mine operator did not have any interest in land (other than a bare right to extract the minerals from it) and was obliged to remove the plant in any event at the end of the lease. The plant therefore was not a fixture and did not form part of the land. This argument was accepted by the court.

Does it mean the Payments Act does not apply to any work on Queensland mining leases?

In short, no.

It is significant that the mine operator’s right was only to extract minerals from the land. Perhaps if the mine owner also owned the freehold the outcome would have been different. It is also apparent under the Queensland Mineral Resources Act that the Minister may consent to such buildings, structures and mining plant and equipment remaining on the land.

Further, not all of the limbs of the definition of “construction work” are limited by the expression “forming, or to form, part of land”. For example, external and internal cleaning of buildings, and the painting or decorating of internal or external surfaces of buildings, structures, or works is also “construction work” for the purposes of the Payments Act.

But if the decision stands there will no longer be an entitlement to payment under the Payments Act for most work that was previously assumed to be construction work on mining leases.

What about other construction work on other types of landholding?

The court’s reasoning may apply equally to other types of land occupation and use rather than just mining leases under the Queensland mining legislation. One of the critical factors in the court’s reasoning was that any buildings or structures erected on the land were required to be removed before the lease ended.

This obligation was given in effect in the Queensland mining legislation as a condition of the mining lease. Other types of land occupation (eg licences) may contain similar conditions, whether statutory or possibly even privately imposed under contract.

One possible example is the construction of temporary sporting or cultural facilities in parkland. The terms of use for parkland frequently require removal and repair of any facilities at the event’s conclusion. It is possible that, based on Agripower, such work may not be “construction work” under the Payments Act.

Might the decision be overruled?

It is possible that the decision will be appealed to the Court of Appeal. J & D Rigging has until 23 July 2013 to file a notice of appeal. An appeal would, in the ordinary course, be heard some months later, with judgment often being reserved.

However, if the Queensland Government considers that the decision should not be allowed to stand regardless of whether an appeal is filed or the result of any appeal, there are two avenues open to it to overrule the decision.

First, “construction work” includes “any other work of a kind prescribed under a regulation”. No such regulation has, to date, been made. But the Government could make a regulation that includes certain work on land the subject of mining leases in the definition of construction work. Secondly, the Parliament could pass amending legislation (including retrospective legislation).

Is this likely to apply in other States?

The security of payment legislation in New South Wales, Victoria, the Australian Capital Territory, Tasmania, South Australia, the Northern Territory, and Western Australia define “construction work”, at least in part, by reference to works that form, or will form, part of land. Though the various States’ and Territories’ security of payment legislation is similar, it is not identical. While, in some cases, courts have held that the legal principles promoting consistent interpretation of federal or uniform national legislation apply to the security of payment legislation, it is now more widely accepted that they do not.

To the extent that work is done on a mining lease outside of Queensland, it is questionable whether the same arguments may be made. Take for example NSW’s Mining Act: unlike the Queensland legislation that was central to the decision in Agripower, the NSW legislation does not mandate as a condition of a mining lease that the holder removes its buildings, structures and mining plant and equipment.

It is therefore open for courts in other States and Territories, if the same matter arises before them, to either distinguish Agripower on its facts, or be persuaded by the cogent arguments to the contrary that were unsuccessful in Agripower.