McConnell Dowell Constructors (Aust) Pty Ltd and Consolidated Contracting Company Australia Pty Ltd  v  QCLNG Pipeline Pty Ltd

On 1 August 2011, Philip Davenport from Adjudicate Today Pty Ltd, handed down a decision awarding the largest amount to a Claimant to date under the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA). The Claimant, McConnell Dowell Constructors, was awarded $86,832,133 (excluding GST). The Respondent, QCLNG Pipeline, was obliged to pay the $86,832,133 (excluding GST) to McConnell Dowell Constructors within five days of the decision.

Facts of the adjudication

The parties entered into a contract for the design, engineering, procurement and construction of an export pipeline and gas collection header pipeline (Contract Works).

In its payment claim McConnell Dowell Constructors claimed $87,249,587 (excluding GST).

QCLNG Pipeline’s payment schedule set out the amount of $13,742,415 (excluding GST).

QCLNG Pipeline’s position

QCLNG Pipeline raised various reasons why McConnell Dowell Constructors was not entitled to the amount set out in the payment claim.

Importantly, QCLNG Pipeline’s argued that the Contract Works were not “construction work” as defined under the BCIPA. Moreover, QCLNG Pipeline argued that pursuant section 10(3)(a) of the BCIPA, the Contract Works were for “work for the extraction of natural gas” and therefore not “construction work” for the purposes of the BCIPA.

QCLNG Pipeline supported its argument with reference to a Queensland Supreme Court decision considering the Queensland Building Services Authority Act 1991 (QBSA Act) wherein the Court held that the mining process included “transportation of the product from the well to the central storage facility” and was not “construction work” as defined under the QBSA Act. QCLNG’s position was that the terminology in the QBSA Act was analogous with the wording of the BCIPA.

Decision of the adjudicator

The adjudicator rejected QCLNG Pipeline’s arguments. The adjudicator found that the Queensland Supreme Court decision put forward by QCLNG Pipeline in relation to the QBSA Act was of no assistance to him as the QBSA Act was a different Act using different terminology with different meanings to that of the BCIPA.

The adjudicator was not satisfied that QCLNG Pipeline had shown that the Contract Works were “drilling for, or extraction of natural gas”. Consequently, the adjudicator found that the Contract Works were “construction work” within the meaning of the BCIPA and McConnell Dowell Constructors was therefore entitled to have its payment claim adjudicated under the BCIPA.

Our advice to you

Whether or not the construction of infrastructure in the energy and resources sector is “construction work” as defined under the BCIPA has not definitively been determined by the Queensland courts. On this basis, the energy and resources sector in Queensland has had little exposure to payment disputes adjudicated under the BCIPA.

Whilst the adjudicator’s decision in McConnell Dowell Constructors v QCLNG Pipeline is not binding upon other adjudicators, it may represent a change in the way adjudicators are prepared to consider energy and resources infrastructure-related payment claims. Certainly, this decision represents clear guidance as to the manner in which Mr Davenport and most likely Adjudicate Today, will treat similar cases.

On this basis, if you are a head contractor or principal to a contract that is for work in relation to constructing energy and resources-related infrastructure you must now be aware that you may be the subject of a BCIPA-related adjudication application from a head contractor or subcontractor.

Given the short time frames to respond and the very limited ability to review an adjudicator’s decision, we recommend that you and your project team are fully apprised of the strict time frames of the BCIPA.