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No BCIPA Protection on Mining Sites

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A recent case has confirmed that BCIPA contract payment arrangements do not apply to work done for a party on land they are occupying subject to a mining lease.  In the Queensland Supreme Court’s decision in Agripower Australia Ltd v J & D Rigging Pty Ltd & Ors, the Court found that a contractor who did work in dismantling mining plant was not able to use the BCIPA arrangements to seek payment from the company that was occupying the land under a mining lease, because the contract fell outside the definition of ‘construction work’.

Details of the case

In Agripower, the parties entered into a contract for the dismantling and removal of certain mining plant by the First Respondent, J & D Rigging Pty Ltd.  The mining plant was owned by the Applicant, Agripower Australia Ltd and affixed to the Skardon River Mine site in Cape York.  The site was subject to a mining lease held by the Applicant under the Mineral Resources Act 1989 (Qld).
On 30 November 2012, the First Respondent served a payment claim under BCIPA on the Applicant seeking some $3.1 million.  In response, the Applicant delivered a payment schedule on 14 December 2012 in which it claimed that it was not obliged to pay any amount demanded in the payment claim, as the work under the contract was not ‘construction work’ within the BCIPA meaning of that term.  The First Respondent then served an adjudication application on 21 December 2012 and in reply, the Applicant again raised that the work required by the contract fell outside the definition of ‘construction work’ in BCIPA.  An adjudicator then decided in favour of the First Respondent, which caused the Applicant to seek a declaration that the adjudication was void from the Court.  
Accordingly, the main issue for the Court’s determination was whether the contract was a ‘construction contract’ as defined in BCIPA.  To be a BCIPA ‘construction contract’ and for the First Respondent’s payment claim to be valid, the contract between the parties had to be for ‘construction work’.  Whether the work performed by the First Respondent for the Applicant was ‘construction work’ turned on whether the mining plant to be dismantled and removed consisted of buildings, structures or works that formed part of the land.  The BCIPA meaning of ‘construction work’ meant it did not matter whether the mining plant was permanent.
The Applicant successfully argued that as ‘forming part of the land’ is not defined in BCIPA and no Court had previously interpreted that phrase under BCIPA, the Court should adopt the established test for determining whether plant is a chattel (not forming part of the land) or fixture (forming part of the land).  The result of that test depends largely upon the objective intention with which the plant is put in place on the land.  The degree to which the plant is annexed to the land and the reason why it is so annexed are relevant to determining the objective intention.  
The Court explained that it was never the Applicant’s objective intention that its mining plant become fixtures on, or form part of, the land as

  • the Applicant’s mining lease gave it no ownership of the land; and
  • the law under which the Applicant’s mining lease was granted stipulates as a condition to every mining lease, that prior to termination of such leases, the leaseholder is to remove any plant from the lease area. 
The Court effectively said that the Applicant’s position was different from that of a homeowner whose fixtures upon sale generally go with the home to the buyer.  In this case, not only did the Applicant’s mining plant remain the property of the Applicant at the end of the mining lease, but the Applicant was in fact required to take the plant with it at that time. 
Ultimately, the Court, relying on the case of TEC Desert Pty Ltd v Commissioner of State Revenue (Western Australia) in which the High Court of Australia ruled that items brought onto land pursuant to a mining tenement, do not become fixtures when the tenement holder is obliged by law to remove them upon the expiry of the tenement, found in the Applicant’s favour.  Interestingly, the Court justified its decision by suggesting that in so far as the Applicant’s mining plant was physically attached to the land, this was only to stabilise it and allow its efficient operation, rather than to add an additional feature to the land on which it rested.

The key lesson

The lesson to be learned is that work to construct, alter, repair, restore, maintain, extend, demolish, dismantle or install fittings into buildings, structures or works on land subject to a mining lease will not fall under BCIPA and, therefore, afford any entity performing such work the cash flow protections that BCIPA provides.
As a result, if you are undertaking work of this type you should take extra care with securing payments, including seeking up front legal advice to put you in the best possible position to recover what you are owed.
If you are in any doubt as to whether a payment claim can be made pursuant to BCIPA for the work you, your business or subcontractor is to perform or has performed, please do not hesitate to contact one of the Clifford Gouldson Building & Construction Team.

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