Qld: Court of Appeal considers the meaning of ‘construction work’ under the BCIP Act

On 20 December 2013, the Queensland Court of Appeal delivered its judgement, finding for the appellant, in J & D Rigging Pty Ltd v Agripower Australia Ltd & Ors [2013] QCA 406.

The dispute arose out of a contract between the parties to dismantle a number of large treatment and storage tanks (Plant) on land subject to a mining lease near Cape York. The appellant, who was engaged to dismantle the Plant, claimed $3.1 million for the work it had performed. When the respondent did not pay the claimed amount, the matter was adjudicated pursuant to the Building and Construction Industry Payments Act 2004 (Qld) (BCIP Act). The adjudicator awarded the appellant an amount just over $2.5 million.

The respondent brought proceedings in the Supreme Court seeking to have the adjudicator’s decision declared void on the basis that the dismantling of the plant was not ‘construction work’ as defined in the BCIP Act and, therefore, that the adjudicator did not have jurisdiction to determine the dispute.

The Supreme Court held that the dismantling of the Plant was not ‘construction work’ under a ‘construction contract’ and consequently the adjudicator’s decision was void. In coming to that finding the Supreme Court noted:

•  the meaning of ‘construction work’ in section 10 of the BCIP Act includes ‘dismantling of buildings or structures, whether permanent or not, forming, or to form, part of the land’,
• ‘land’ in section 10 of the BCIP Act (which defines ‘construction work’) does not include mining leases,
• the Plant may have formed part of the mining lease, and
•  the Plant did not ‘form part of the land’ within the meaning of section 10 of the BCIP Act and therefore the BCIP Act did not apply.

The Court of Appeal unanimously overturned the Supreme Court’s decision which, in effect, resulted in the reinstatement of the adjudicator’s decision. Their Honours held that:

• the phrase ‘forming, or to form, part of the land’ in section 10 of the BCIP Act should be interpreted in accordance with its ordinary meaning which does not import the requirements of the law of real property (in respect of the ownership of things affixed to the land),
• while a mining lease may not be legally characterised as ‘land’, the actual land on which the building, structure or plant is affixed does not change its character by reason of the existence of a mining lease,
• section 10 simply requires consideration of the physical characteristics of the thing that has been (de)constructed or is to be (de)constructed and the thing’s relationship to the land which will determine whether it forms part of that land for the purposes of the BCIP Act, and
• the Plant formed part of the land and the contract between the parties was to carry out ‘construction work’ within the meaning of the BCIP Act.

The decision clarifies that work undertaken on mining tenements or petroleum and gas tenements (by analogy) will not be excluded from the operation of the BCIP Act on the basis that the tenement holder has no estate or interest in the land. Principals engaged in construction contracts will be subject to the BCIP Act adjudication regime (regardless of their interest in the land) if the building, structure or plant the subject of the contract forms part of the physical land upon which it is (or will be) situated.

For further information, please contact Jay Leary, Partner, Roger Allingham, Graduate, or your usual Herbert Smith Freehills contact.