The Security of Payment Act: considering the cope of the mining exclusion

ALLIE A UMOFF, SENIOR ASSOCIATE, LIPMAN KARAS

The Building and Construction Industry Security of Payment Act 2009 (SA) (the SA Act) provides a regime by which persons who carry out construction work or supply related goods and services under a construction contract can obtain progress payments for that work, without compromising the ultimate rights of the parties in respect of the final contract price. The purpose of the SA Act is to assist persons in the building and construction industry to secure payment in a timely fashion for work performed or goods and services supplied, and to protect them from oppressive “pay when paid” or “pay if paid” clauses which had previously been found in many construction contracts. 1 In order to come within the operation of the SA Act, a party must perform “construction work” or supply “related goods and services” as those terms are defined in the SA Act.

Section 5 of the SA Act defines “construction work” very broadly, subject to an exclusion in subsection 2, which provides that construction work does not include (the mining exclusion): a. the drilling for, or extraction of, oil or natural gas; b. the extraction (whether by underground or surface working) of minerals, including tunnelling or boring, or constructing underground works, for that purpose; c. other work of a kind prescribed by the regulations for the purposes of this subsection.

The regulations currently in force, Building and Construction Industry Security of Payment Regulations 2011 (the Regulations), do not include any provisions in respect of the mining exclusion.

Section 6 of the SA Act also defines “related goods and services” very broadly, and the scope of this term is further broadened by section 5 of the Regulations. While the relevant sections of the SA Act have not yet been the subject of much litigation, its counterparts in Queensland 2 and New South Wales, 3

which are in relevantly nearly identical terms, have been the subject of comparatively more litigation. Given the similarities between the QLD Act and the NSW Act, as compared to the SA Act and to each other, 4 the cases decided under those provisions can be instructive in considering the scope of the mining exclusion in the SA Act.

CONSTRUCTION WORK

Courts considering the scope of “construction work” or “related goods and services” within the meaning of the Act have differed in their characterisation of the legislation as either “remedial” and deserving of a liberal interpretation, 5 or as requiring a “natural” construction of the relevant definitions without any presumption of liberality. 6 However, an analysis of these cases indicates that the approach has essentially been a common-sense approach that considers whether the scope of work described in the particular contract at issue in the case can fairly be said to be, or be related to, “construction work”, by reference to the terms of the contract and the statutory provisions. For example, in Edelbrand, the NSW Court of Appeal held that contractual provisions requiring one party to manage consultants and contractors and monitor and administer the development of a factory were properly characterised as building advisory services, which were included within the NSW Act as goods and services related to construction work, such that the NSW Act applied. 7 Whereas in Capricorn Quarries, the provision of rock crushing services to the owner and operator of a quarry, which then sold that crushed rock on to quarry customers (who may have eventually used the rock in work that could be deemed “construction work”), was held not to be construction work or the supply of materials for use in construction work, within the meaning of the QLD Act. 8

No construction use was identified at the time of the making of the contract between the two parties and the potential future construction use of the rock by customers of the quarry was too tenuous to satisfy the requirements of the statute. 9 Further, if a company’s scope of work includes some aspects which do come within the definition of construction work or related goods and services, and others which do not, those aspects of the work which come within the definition have been held to be sufficient to trigger the

application of the Act. In other words, it is not a necessary condition that all of a company’s scope of work be deemed construction work or related goods and services in order for it to avail itself of the benefit of the Act. 10

SCOPE OF THE MINING EXCLUSION

While the cases to consider the definitions of “construction work” and/ or “related goods and services” have generally indicated that the scopes of work which fall into either of those categories are quite broad (consistent with the broad language used in the statutory definitions), the cases to consider the mining exclusion so far have tended to interpret that particular provision narrowly.

As a starting point, the mere fact that work occurs on a mine site, or in connection with the construction or expansion of a mine, does not mean that it is captured by the mining exclusion. 11 Further, the temporary nature of a structure, which may only be intended to remain in place for the life of a mining project or a phase of that project, does not suffice to bring the work of building or dismantling that structure within the operation of the mining exclusion. 12 In J&D Rigging, the respondent mine operator argued that the work in question (dismantling and removal of a treatment and storage plant that had been erected on a mine site) could not be considered “construction work” for purposes of section 10(1)(a) of the QLD Act, which

referred to buildings or structures “forming, or to form, part of land” 13 because the structures had been built on behalf of the owner of a mining lease only, and not on behalf of the owner of the underlying land. 14

In rejecting this argument, Applegarth J stated: 15 Generally speaking, the extraction of minerals can only take place pursuant to a mining lease. The effect of s 10(3) of BCIPA is that certain kinds of work on areas covered by mining leases which otherwise would fall within the definition of “construction work” in s 10(1) and (2) are taken outside of that definition. The implication is that other kinds of construction work on such land such as the construction or dismantling of structures that form part of land may constitute “construction work”. The work may be undertaken as part of a mining venture and be authorised by a mining lease. If such work on land that is subject to a mining lease precluded the building, structure or construction works from “forming, or to form, part of land”, then s 10(3) would have little, if any, work to do. In Thiess, 16

at issue was the meaning of the word “extraction” within section 10(3) (b) of the QLD Act, which excluded from construction work “the extraction, whether by underground or surface working, of minerals, including tunnelling or boring, or constructing underground works, for that purpose”. 17

Thiess, the operator of a coal mine, had entered into contracts with Warren Brothers Earthmoving Pty Ltd (Warren) for Warren to clear and grub, strip topsoil, and construct dams and drains. Thiess also contracted with Warren for Warren to supply excavators for Thiess to use in connection with various work at the mine site.

The contracts included work in constructing dams and drains, and it was undisputed between the parties that constructing dams and drains comprised “construction work” within the meaning of section 10(1) of the QLD Act. 18

Thus, the issue was whether constructing dams and drains came within the mining exclusion, so as to take Warren’s scope of work out of the operation of the QLD Act.

Thiess submitted that the mining exclusion was directed to work constituting mining industry operations, 19

which included all activities that “were ‘a necessary and integral part of the coal mining process’ or which were ‘essential for the exposing of the coal seam for removal of coal’”. 20

On Thiess’ submission, constructing the dams and drains at issue in the contracts with Warren was such “necessary and integral” work, essential to the process of extracting the coal. 21 The Court rejected those submissions, noting that if the legislature had wanted to extend the scope of the meaning of the phrase “extraction … by … surface working” to include “activities which are integral to or necessary for the extraction of minerals”, it would have been simple to do so by clear words. 22

This was particularly clear when contrasted with the broad terminology used in section 10(1)(e) of the QLD Act, which expressly extends “construction work” to activities that are

“an integral part of, or … preparatory to or … for completing” the relevant work. 23 On that basis, the Court held that the construction of the dams and drains did not come within the mining exclusion and, accordingly, the protections of the QLD Act applied. 24

CONCLUSION

Thus, the Courts have been careful so far not to expand the scope of the mining exclusion, instead closely considering the particular work at issue to determine whether it comes within the literal meaning of that provision.

When considering a scope of work that appears at fi rst glance to be “mining work” in a colloquial sense, it will be important to return to the text of section 5(2) of the SA Act and evaluate the position in the context of the specifi c words used. B

Endnotes 1 South Australia, Parliamentary Debates, House of Assembly, 5 March 2009, 1855-6 (Tom Kenyon). 2 Building and Construction Industry Payments Act 2004

(Qld) (the Qld Act). The Qld Act has recently been repealed and replaced by the Building Industry Fairness (Security of Payment) Act 2017 (Qld), but the relevant provisions in the new legislation are largely the same. 3 Building and Construction Industry Security of Payment Act 1999 (NSW) (the NSW Act). 4 See, especially, Qld Act ss 10 (defi nition of

“construction work” and the mining exclusion) and 11 (defi nition of “related goods and services”); and NSW Act ss 5 (defi nition of “construction work” and the mining exclusion) and 6 (defi nition of “related goods and services”). 5 See, eg, Edelbrand Pty Ltd v HM Australia Holdings Pty Ltd [2012] NSWCA 31 at [30] (per Bathurst CJ; McColl JA and Tobias AJA agreeing) (Edelbrand); Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd [2012] QCA 276 at [62] (per Philippides J) (Thiess) (referring to the “benefi cial purpose” of the Qld Act). 6 Capricorn Quarries Pty Ltd v Inline Communication Construction Pty Ltd [2012] QSC 388 at [45] (Jackson J) (Capricorn Quarries). 7 Edelbrand [2012] NSWCA 31 at [34]-[36]. 8 Capricorn Quarries [2012] QSC 388 at [60], [66], [70], [72]-[73], [78]-[80]. 9 Ibid at [60], [69]. 10 Edelbrand [2012] NSWCA 31 at [32]-[37]; HM Hire Pty Ltd v National Plant and Equipment Pty Ltd

[2013] QCA 6 at [27] (per Fraser JA; Margaret McMurdo P and Gotterson JA agreeing) (HM Hire). 11 HM Hire [2013] QCA 6; Thiess [2012] QCA 276. 12 See, SA Act s 5(1)(a), which explicitly includes temporary structures within the defi nition of “construction work”; J&D Rigging Pty Ltd v Agripower Australia Ltd [2013] QCA 406 (Holmes JA and Applegarth and Boddice JJ) (J&D Rigging). 13 Section 10(1)(a) was virtually identical to section 5(1)(a) of the SA Act. 14 J&D Rigging [2013] QCA 406; Agripower Australia Ltd v J&D Rigging Pty Ltd [2013] QSC 164. 15 J&D Rigging [2013] QCA 406 at [47] (with Boddice J and Holmes JA agreeing). 16 [2012] QCA 276. 17 This is in virtually identical terms to section 5(2) (b) of the SA Act. 18 Thiess [2012] QCA 276 at [57]. 19 Ibid at [61]. 20 Ibid at [65]. 21 Ibid. 22 Ibid at [68] (per Philippides J). 23 The corresponding provision in the SA Act is s 5(1)(e), which extends “construction work” to activities that are “an integral part of, or … preparatory to or … for rendering complete” the relevant work. 24 Thiess [2012] QCA 276 at [68]-[69] (per Philippides J).

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