The Queensland Court of Appeal decision of HM Hire Pty Ltd v National Plant and Equipment Pty Ltd [2013] QCA 6 serves as a reminder that the Building and Construction Industry Payments Act 2004 (Qld) (the Queensland Act) may apply to contracts for the hire of equipment—even if some of the work for which the equipment was hired may not be ‘construction work’.

The decision has important implications for parties hiring equipment not just in Queensland, but also in other jurisdictions.

Background

HM Hire Pty Ltd (HM Hire) supplies earthmoving equipment and undertakes earthmoving work at mining sites. It contracted with Thiess Burton (Thiess) to undertake various work at a mine in Queensland. HM Hire needed some additional plant to perform its obligations under the contract and it accordingly hired four dump trucks and one loader from National Plant and Equipment Pty Ltd (NPE).

There was a dispute between HM Hire and NPE regarding the hire charges NPE claimed from HM Hire. NPE issued a payment claim under the Queensland Act for the amount it considered it was entitled to be paid.

NPE referred the payment claim to adjudication and was successful.

HM Hire applied to the Queensland Supreme Court for an order that the adjudicator’s decision was void. In essence, HM Hire contended the adjudicator had no jurisdiction to consider the dispute because the rental agreement could not be a ‘construction contract’ as HM Hire was not performing any ‘construction work’ (as defined in the Queensland Act). One part of the basis for this contention was that the work was for ‘…the extraction of minerals’, which is excluded from the scope of ‘construction work’.

The Supreme Court dismissed HM Hire’s application on the basis that the rental agreement was a ‘construction contract’.

HM Hire accordingly appealed the Supreme Court’s decision to the Court of Appeal.

Decision of the Court of Appeal

The Court had to assess whether, under the rental agreement, NPE undertook to supply plant for use in connection with the carrying out of ‘construction work’. To answer that question, the Court had to determine whether:

  • the primary judge erred in holding that some of HM Hire’s work under its subcontract with Thiess was ‘construction work’; and
  • the adjudicator’s determination was outside jurisdiction even if some of HM Hire’s work was ‘construction work’ because the rental agreement was not a ‘construction contract’.

The Court had the benefit of a recent decision of the Queensland Court of Appeal in Thiess v Warren Brothers Earthmoving Pty Ltd & Anor, 1 (Warren Brothers) which held that earthworks of the nature of those performed by HM Hire were outside the scope of the ‘extraction … of minerals’ exception under the Queensland Act.

Did HM Hire’s contract with Thiess at the mine include ‘construction work’?

The Court held that the contract between HM Hire and Thiess contained a ‘substantial component of construction work’—including roadwork and the construction of installations for land drainage.

Was the rental agreement a ‘construction contract’?

Given the Court held HM Hire was required to perform ‘construction work’ at the mine, it next had to determine whether a reasonable person in the position of the parties would conclude, having regard to the state of affairs existing when the rental agreement was agreed, that NPE undertook to supply the dump trucks and the loader for use in connection with the ‘construction work’. The Court assessed factors such as:

  • the nature of the plant hired;
  • evidence about the formation of the rental agreement, including the timing of it in relation to the contract between Thiess and HM Hire;
  • the contents of the rental agreement; and
  • the context and the market in which the parties were operating.

The dump trucks were suitable for constructing roads and drains and the Court considered that, being experienced in the industry, HM Hire and NPE ought to have contemplated they would be used in the performance of work which included ‘construction work’.

The rental agreement neither stated the purpose of the hire, nor did it refer to the contract between HM Hire and Thiess. It did, however, identify the site and the evidence of the parties supported an inference that both HM Hire and NPE understood the plant would be used in connection with that contract.

NPE gave evidence that its manager had visited the site on two occasions and that the equipment supplied could be used in both mining applications and in civil earthwork on a mine site. The Court referred to Warren Brothers where the Court held that proof the plant was in fact used in connection with the ‘construction work’ would not itself be enough, because determining whether equipment was supplied for use in connection with the ‘construction work’ required an assessment of the state of affairs before the equipment was used (i.e. when the contract was formed). The Court did, however, note that evidence of how the equipment was actually used may support an inference of an undertaking to supply the plant in connection with the ‘construction work’.

That said, the Court acknowledged that the hired equipment was to be used by HM Hire in carrying out work that was largely ‘construction work’, but that some of the work was not ‘construction work’. This did not prevent a finding that the ‘rental agreement’ was a ‘construction contract’.

After balancing the factors, the Court held a reasonable person would have concluded that NPE undertook to supply the dump trucks and the loader to HM Hire for use in connection with the ‘construction work’. The rental agreement was accordingly a ‘construction contract’ and the adjudication determination was valid.

What this decision means for you

If you hire equipment for a job that includes ‘construction work’, and the equipment is or could be used in relation to the ‘construction work’, the Queensland Act may apply. If the Queensland Act applies, the supplier will be able to serve a payment claim, rely on the ‘pay now, argue later’ benefits of the Queensland Act, and bring an adjudication application in the event that its payment claim is challenged. Principals should be aware that a contract might still be a ‘construction contract’ to which the Queensland Act applies even if some of the work being performed under the contract is not ‘construction work’.

In this case, the Court held that, even though the rental agreement contained no provision identifying the purpose of the hire and there was no evidence of pre-contract conversations about the purpose of the hire, it nevertheless could be ‘inferred’ that parties experienced in the industry would have ‘contemplated’ that the equipment was being supplied for use at the mine. In this way, the rental agreement was held to be a ‘construction contract’ because the plant or materials being hired were intended ‘for use in connection with the carrying out of construction work’.

However, to avoid the argument about intended purpose, parties (particularly the owner of equipment for hire to the industry) should consider setting out the intended purpose in the rental agreement to ensure it retains the benefit of the Queensland Act’s operation when submitting payment claims. Similarly, the mining industry ought to bear in mind that it will not be able to avoid the operation of the Act in respect of rental agreements where it can be inferred on the facts that the equipment would be used in connection with construction work.

Mining contractors should continue to be mindful of the Court of Appeal decision in Warren Brothers, which found that the ‘mining work’ exception at s 10(3) of the Queensland Act should not be given a broad meaning and that works not related specifically to ‘winning of coal at the seam’ will not fall within the exception.

The effect of this case reaches beyond Queensland’s borders. Given the definitions in the Queensland Act which allowed the Court to reach the decision in this case are materially the same as those at least in NSW’s, Victoria’s and South Australia’s equivalent legislation, it would be open for a court in those states to reach a similar conclusion.