Cadia Holdings Pty Ltd v Downer EDI Mining Pty Ltd  NSWSC 1588 is the first case to consider the interpretation of the so-called "Mining Exception" in section 5(2)(b) of the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act).
In that case, the plaintiff, Cadia Holdings, operated the largest underground mine in Australia and had entered into a contract with Downer EDI for the provision of "lateral development works" at the mine, which included tunnelling and boring works and the construction of underground works. Downer referred a disputed payment claim for adjudication under the SOP Act and the adjudicator determined that an amount of $1,017,741.72 was payable by Cadia Holdings to Downer.
Cadia Holdings challenged that determination on the basis that its contract with Downer was not a "construction contract" for the purposes of the SOP Act. In particular, Cadia asserted that the work performed by Downer under the contract was not “construction work” within the meaning of section 5 of the SOP Act due to the “Mining Exception” in section 5(2)(b).
Section 5(2)(b) provides that "construction work" does not include "the extraction (whether by underground or surface working) of minerals, including tunnelling or boring, or constructing underground works, for that purpose".
The Court held that works will fall within the scope of the Mining Exception, and be excluded from the definition of "construction work", if they comprise:
- extraction (whether by underground or surface working) of minerals;
- tunnelling or boring (whether by underground or surface working) of minerals; or
- constructing underground works for the purposes of extraction (whether by underground or surface working) of minerals.
As Cadia Holdings did not contend that the work under the contract amounted to the “extraction” of minerals, the relevant question was whether or not the works were tunnelling, boring or the constructing of underground works for the purpose of extraction of minerals.
Ultimately, the Court found that the works performed by Downer were not “for the purpose of” extraction of minerals because they did not lead to a situation where mineral extraction could take place immediately. As those works were in preparation for and in anticipation of the later extraction of minerals from the mine, they did not fall within the scope of the Mining Exception. In reaching this conclusion, the Court endorsed the views expressed by the Queensland Court of Appeal and Queensland Supreme Court in decisions concerning equivalent provisions of the Queensland SOP Act that the Mining Exception should be construed narrowly and beneficially to the subcontractor in order to give effect to the objects of the SOP Act.
The Court also found that even if the relevant works had fallen within the scope of the Mining Exception, the contract would be classified as a "construction contract" because the other works carried out by Downer under it clearly fell within the definition of "construction work".