UPDATE – BUILDING & CONSTRUCTION INDUSTRY PAYMENTS ACT
Agripower Australia Ltd v J & D Rigging Pty Ltd & Ors
On 25 June 2013, Justice Margaret Wilson of the Supreme Court at Brisbane handed down a decision that could have wide ranging effects to the application of the Building & Construction Industry Payments Act 2004 (“BCIPA”) on works carried out on land that is subject to a mining lease.
The Skardon River Mine is located in Cape York, Queensland. The registered owners of the land hold the land on trust for Aboriginal reserve purposes. The land is subject to a mining lese however the registered owners of the land never held the mining lease.
The holder of the mining lease was ACC Ecominerals Pty Ltd (“ACC”). It had installed certain mining plant (“the mining plant”) on the land, subject to the mining lease.
Agripower Australia Pty Ltd (“Agripower”) purchased the mining plant from ACC in August 2011 and October 2012.
In June 2012, Agripower entered into a contract with J & D Rigging Pty Ltd (“J & D Rigging”) to dismantle and remove the mining plant.
In November 2012, J & D Rigging issued a Payment Claim under the BCIPA for $4.4 million worth of work. Agripower responded with a Payment Schedule, contending that it was not obliged to pay the amount claimed because the work was not “construction work” within the meaning of section 10 of the BCIPA.
The dispute proceeded to Adjudication and J & D Rigging obtained a successful result.
Agripower commenced proceedings in the Supreme Court, seeking a declaration that the Adjudication Decision was void on the basis that the Adjudicator did not have jurisdiction to decide the matter on the basis that the Payment Claim was invalid, because the work carried out was not “construction work” as prescribed by section 10 of the BCIPA.
In essence, Agripower submitted that the work set out in the Payment Claim was not “construction work” within the meaning of section 10 of the BCIPA. It based this reasoning on the distinction that the works were carried out under a mining lease and not under a lease that gives rise to an “interest” in the land.
Section 10 of the BCIPA defines the meaning of “Construction Work”. It includes the “Construction, Alteration, Repair, Restoration, Maintenance, Extension, Demolish or Dismantling of buildings or structures, whether permanent or not, forming or to form part of the land.”
Agripower submitted that under the Mineral Resources Act 1989 (Qld), a grant of a mining lease did not create an “estate” or an “interest” in land. Furthermore, it was a condition of every grant of mining lease that, prior to termination of the mining lease, the holder of the mining lease remove any building, structure, equipment or plant from the leased area.
In applying the objective test under the general law, the mining plant was never intended to form part of the land and so it never did so.
THE COURT’S CONSIDERATIONS
The Court considered the definition of “land” and whilst it concluded that the definition was wide enough to include everything above and below its surface, it was important for the Court to define what may be “attached” to the land in some way so that it becomes “part of the land”, that is a fixture.
The Court held that in some cases, a “chattel” will become a “fixture” however that depends specifically upon the objective intention with which it was put in place. Under general law, on the sale of land, fixtures pass to purchasers as part of the realty.
However, the Court held that a “Mining Lease” should not be confused with a “lease of land” which is subject of the mining lease. Mining leases entitle the lease holder to remove minerals and to carry out associated mining activities on the land the subject of the leases.
Importantly, the Court held that a Mining Lease did not give rise to any “estate” or “interest” in the land. This is because the leaseholder was required to remove the mining plant from the land prior to the expiry of the leases.
Accordingly, mining plant brought onto the land for the purposes of a mining lease insofar as it physically attached to the land was regarded by the Court to merely stabilise the plant, to allow for its efficient operation, rather than to add some additional feature to the land on which it rested, and the Court held that while “mining plant” may be part of a mining lease, did not “form part of the land”, and did not form part of “land” within the meaning of Section 10 of BCIPA.
THE FUTURE EFFECT OF THIS DECISION
The effect of this decision could have wide ranging effects on Contracts and Contractors regarding work which would normally be classified as being “construction work” that takes place on land which is subject to a mining lease.
This decision has held that such work will not fall under the definition of “construction work” as defined by section 10 of BCIPA.
This means, that a Payment Claim for such work would be looked upon as being void and any Notice to Suspend Works for failure to pay under BCIPA could be an invalid suspension of works which could lead to Claimant being sued for breach of contract (for abandoning the site) or be liable for liquidated damages for failing to complete the works on time.
It is important that Contractors obtain proper advice before entering into any Contract that could be the subject of a mining lease, issuing a Payment Claim or Notice under BCIPA in cases where the work is carried out (or possibly carried out) on property that may be subject to a mining lease.
Bruce Johnstone and Mark Taylor are both experienced Legal Practitioners in dealing with Building and Construction disputes and especially matters arising out of the BCIPA. If you are contemplating initiating or responding to an Adjudication Application, contact us to obtain “straight to the point, down to earth” legal advice.