Section 46 (Review, limited right of) of the Construction Contracts Act 2004 (WA) and the jurisdiction of the State Administrative Tribunal of Western Australia
5.8. Section 31(2)(a)(i) Adjudicator’s function dealing with when a contract is not a construction contract construction contract
The matter
The first issue arises before the SAT when an adjudicator decides to dismiss an application for adjudication because the contract before the adjudicator is not a Construction Contract.
The aggrieved party believes that the contract between the parties is a Construction Contract, pursuant to the Act. The aggrieved party, pursuant to s 46(1) of the Act, ‘may apply to the
808 Perrinepod Pty Ltd and Georgiou Building Pty Ltd [2011] WASCA 217, 7 [7].
809 Ibid.
810 Ibid 7 [10].
811 Ibid.
812 Ibid 38 [112].
813 Ibid.
814 [2012] WASC 304.
815 Cape Range Electrical Contractors Pty Ltd v Austral Construction Pty Ltd [2012] WASC 304.
181 State Administrative Tribunal for a review of the decision’.816
Upon review, The SAT may set aside the decision,817 or reverse the decision and order the adjudicator to make a new determination within 14 days of the SAT decision.818
What does the Act say?
Section 31(2)(a)(i) of the Act,819 states:
31. Adjudicator’s functions
(2) An appointed adjudicator must, within the prescribed time or any extension of it made under section 32(3)(a) —
(a) dismiss the application without making a determination of its merits if —
(i) the contract concerned is not a construction contract.
The Construction Contracts Act 2004 (WA) and the Mining Exclusion Clauses
When Professor Evans drafted the ‘Report on the Operation and Effectiveness of the Construction Contracts Act 2004 (WA)’, he wrote of the exclusions of certain mining activities and what does not constitute construction work pursuant to s 4(3):820
This has been a somewhat complex and controversial issue (with respect to the origins of and rationale for the exclusion) and it has been necessary to consider the issue in some detail.821
In Western Australia, mining, oil and gas and the construction of processing plants play a significant role in the Western Australian economy. When the Construction Contracts Act 2004 (WA) was drafted, there was much pressure put on the government of the day to exclude these areas within the Act.
Coggins would state:
Doubtless there are reasons which the relevant Parliaments found compelling as to the
816 Construction Contracts Act 2004 (WA), s 46(1).
817 State Administrative Tribunal Act 2004 section 29(3)(c)(i).
818 Ibid 29(3)(c)(ii).
819 Construction Contracts Act 2004 (WA), s 31(2)(a)(iv).
820 Construction Contracts Act 2004 (WA), s 4(3).
821 Philip Evans, ‘Report on the Operation and Effectiveness of the Construction Contracts Act 2004 (WA)’, (Parliament of Western Australia, 2015), 48.
182 extent to which legislative intervention is needed, especially within the WA process plant, mining and oil and gas industries.822
Professor Evans noted:
Not all construction work is included in the Act. Work in discovering or extracting oil or natural gas is excluded as well as the mining for minerals and the constructing of plant for the purpose of extracting oil or minerals.823
Ultimately; the interpretation of construction work would not include these areas.
What does the Act say?
The Act states, pursuant to s 4(3) of the Act,824 that:
4. Construction work
(3) Despite subsection (2) construction work does not include any of the following work on a site in WA —
(a) drilling for the purposes of discovering or extracting oil or natural gas, whether on land or not;
(b) constructing a shaft, pit or quarry, or drilling, for the purposes of discovering or extracting any mineral bearing or other substance;
(c) constructing any plant for the purposes of extracting or processing oil, natural gas or any derivative of natural gas, or any mineral bearing or other substance;
(d) constructing, installing, altering, repairing, restoring, maintaining, extending, dismantling, demolishing, or removing, wholly artistic works, including sculptures, installations, and murals;
(e) work prescribed by the regulations not to be construction work for the
822 Jeremy Coggins, Robert Fenwick Elliott, and Matthew Bell,’Towards Harmonisation of Construction Industry Payment Legislation: A Consideration of the Success Afforded by the East and West Coast Models in Australia – plus Addendum’ (2010) Australasian Journal of Construction Economics and Building, 10 (3) 14-35, 20.
823 Philip Evans, ‘The Resolution of Construction Contract Payment Disputes in the Western Australian Construction Industry through Security of Payment Legislation’ (Paper presented at the 18th International Annual Conference - Building and Construction Contracts Between Traditional Legal Rules and Developed Legal Systems, Dubai United Arab Emirates 18-21 April 2010) (Printed in Proceedings), 440.
824 Construction Contracts Act 2004 (WA), s 4(3).
183 purposes of this Act.
The exclusions of s 4(3) are, as recognised by Cruse and Boyle ‘colloquially referred to as the
"mining exclusion".’825 They noted that ‘given the number of contracts in Western Australia which relate directly or indirectly to mining projects, it is helpful to consider the extent of the
"mining exclusion".’826
In this research I shall only deal with s 4(3)(a-c).
s 4(3)(a) – Oil & Gas and s 4(3)(b) – Mining Exclusion Clauses Steensma and Evans found that within WA:
The number of adjudication applications arising from the mining industry is nevertheless significant. In 2010 – 11, mining related activities which did not fall within the exemptions in the Act, constituted only 12 (or 1.92 percent) of the 625 adjudication applications since 2005. Since 2010-2011 mining related activities numbered 40 (or 3.96%). However, the 40 applications, account for the highest total dollar values of adjudications payment claims and determinations.827
They further found that:
Since the commencement of the Act mining-related activities accounted for $173.9m (or 30.61per cent) of the total of the then $568.2m value of adjudications, has been attributed to claims in the mining industry generally. Mining related activities now account for
$268.7m (or 24 per cent) of adjudication claims. This is a percentage change of an increase of 55 per cent.828
Mining/Gas Infrastructure accounts for only 97/1822 payment claims (or 5.3%) in terms of the number of payment claims since 2005. However, Mining/Gas Infrastructure recorded an astonishing amount of $964,439,944.67 (or 33%) of the total amount claimed since 2005. In the past four years regional parts of Western Australia made up 41% of payment claim disputes.
The Pilbara accounted for 246 (or 75%) of payment claim disputes in the regional area. The
825 Carine Cruse, and Stephen Boyle The Construction Contracts Act 2004 (WA) may not apply to your contract after all, [2000].
<http://www.claytonutz.com/publications/edition/16_february_2012/20120216/the_construction_contracts_act_
2004_wa_may_not_apply_to_your_contract_after_all.page>.
826 Ibid.
827 Auke Steensma and Philip Evans, ‘The Construction Contracts Act 2004 (WA); Trends and Issues 2005 to 2013’ IAMA New Horizons 2014 Conference Canberra 2-4 May 2014, 3.
828 Ibid.
184 work is clearly around the oil and gas/mining industries.
It is clear that security of payment legislation plays a significant role in the oil and gas/mining industries in several states within Australia. All include specific ‘mining exclusion’ clauses that have led to the intervention of the Courts and Tribunals in Western Australia, Northern Territory and Queensland Courts and Tribunals and are how the ‘mining exclusion’ clauses have affected those states.
The Mining Exclusions and the Courts
Research conducted for this study fundamentally found that relating to s 4(3)(a-b) of the Act, and the equivalent in the Construction Contracts (Security of Payments) Act 2004 (NT), s 6(2)(a-b), and the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA), at s 10(3)(a-b), has found that reviews of adjudicators’ determinations pertaining to oil & gas, and mining in WA and NT there has been insufficient judicial guidance available pertaining to s 4(3)(a) & s 4(3)(b).
In Queensland, however, as Heading would write:
Before 2011, most thought that the intention of the carve-out was to remove from the operation of the Security of Payment Acts construction work carried out in the mining industry.829
It would be in Queensland where the first case would come before the courts. That case was Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd and Anor. 830 The case related to an application before the Supreme Court of Queensland by Thiess to determine whether an adjudicator had jurisdiction to make a determination for the security of payment under the BCIPA for earthmoving works at two open cut coal mines in central Queensland.
Heading commented:
The adjudicator’s decision was made in favour of a subcontractor for works involved in the construction of a mine, including the construction of dams and drains, stripping, hauling, excavating and storing topsoil, and clearing and grubbing. Because those works were not actually for the extraction of minerals (in this case coal), the Court held that
829 Tom Heading, Australia: Do the Security of Payment Acts Apply to Mining Activities?, Norton Rose Fulbright Australia 14 October 2012.
<http://www.mondaq.com/australia/x/201158/Building+Construction/Do+the+Security+of+Payment+Acts+App ly+to+Mining+Activities>.
830 Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd and Anor [2011] QSC 345.
185 Security of Payment Act applied.831
The Counsel for the applicant argued that ‘whether and to what extent, if any, the Building and Construction Industry Payments Act 2004 applies to the subcontracts’.832
They would argue that:
Thiess submitted that the focus of the definition of construction contract was on the undertaking, not the work actually carried out, but it did not suggest that the contract or arrangement alone could determine the issue presently under consideration.833
His Honour Justice Fryberg stated:
I have already held that the construction of dams and drains and excavating topsoil and removing and storing it are the carrying out of construction work within the meaning of the Act. That is sufficient to dispose of this case, for it means that the excavators were planned for use in connection with the carrying out of construction work. Consequently, both subcontracts were construction contracts.834
His Honour held:
All of the subcontracts were construction contracts. The Act applied to them. The adjudicator had jurisdiction to determine the matters before him. Consequently, the application must be dismissed with costs.835
Heading would later conclude:
[t]he exemption given by s 10(3)(b) is not expressed to apply to work done for the purpose of opening or as preparatory to operating a mine. The words used are much more limited than that. They focus purely on the process of extraction.836
831 Tom Heading, Australia: Do the Security of Payment Acts Apply to Mining Activities?, Norton Rose Fulbright Australia 14 October 2012.
<http://www.mondaq.com/australia/x/201158/Building+Construction/Do+the+Security+of+Payment+Acts+App ly+to+Mining+Activities>.
832 Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd and Anor [2011] QSC 345, 2 [2].
833 Ibid 20 [76].
834 Ibid 21 [79].
835 Ibid 21 [81].
836 Tom Heading, Australia: Do the Security of Payment Acts Apply to Mining Activities?, Norton Rose Fulbright Australia 14 October 2012.
<http://www.mondaq.com/australia/x/201158/Building+Construction/Do+the+Security+of+Payment+Acts+App ly+to+Mining+Activities>.
186 Crawford837 observed of Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd and Anor as:
[t]he most significant development of 2012 was consideration of the mining exclusion.
The Queensland Court of Appeal has interpreted the exclusion of work relating to drilling for, and extraction of, certain minerals (section 10(3)) narrowly.838
Queensland again would turn towards a narrower interpretation. In HM Hire Pty Ltd v National Plant and Equipment Pty Ltd & Anor839, The Honourable Coram of McMurdo P, Fraser JA, and Gotterson JA held that a contract ‘to provide certain earthmoving services to Thiess for the Burton Coal Mine. For this purpose, HM hired four dump trucks and a wheel loader from National Plant and Equipment Pty Ltd’840 ‘was a “construction contract”.
The primary judge was right to hold that the adjudication was not outside the jurisdiction conferred by the Act’.841 Further, they held that ‘at “preparatory” works for a mining project, like clearing land, are not covered by the mining exemption’.842
The case of HM Hire Pty Ltd v National Plant and Equipment Pty Ltd & Anor had brought much speculation that parties to a contract might now have inadvertently entered into what would be held as a ‘construction contract’. Niemann and Gelic noted that ‘for mining principals and head-contractors, they will need to be aware of the requirements of the Act and its implications’,843 but for ‘contractors and sub-contractors, the decision should be good news.
The decision further supports the view that courts are willing to allow contractors and subcontractors to have their recourse to the Act’.844
The decision would validate the earlier case of Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd and Anor.
In June 2013, again in Queensland, in Agripower Australia Ltd v J&D Rigging Pty Ltd,845 Her
837 Richard Crawford; Minter Ellison - Partner – Construction Engineering & Infrastructure.
838 Richard Crawford (Ed), Minter Ellison - Security of Payment Roundup 2012, Minter Ellison (2013), 7.
<http://www.minterellison.com/files/uploads/Documents/Publications/Reports%20Guides/RG2013_SecurityOf Payment%5bSYD130091%5d.pdf>.
839 HM Hire Pty Ltd v National Plant and Equipment Pty Ltd & Anor [2013] QCA 6.
840 Ren Niemann and Goran Gelic, Focus: Security of Payment – The 'Mining Exclusion' Considered Again!,
<http://www.allens.com.au/pubs/const/foconst22feb13.htm>.
841 HM Hire Pty Ltd v National Plant and Equipment Pty Ltd & Anor [2013] QCA 6, 11 [30].
842 Allens Linklaters, ‘Mining and Security of Payment Legislation - Is your work 'construction work'?’, (2012) Allens Breaking Ground. <http://allensbreakingground.blogspot.com.au/2012/09/mining-and-security-of-payment.html>.
843 Ren Niemann and Goran Gelic, Focus: Security of Payment – The 'Mining Exclusion' Considered Again!,
<http://www.allens.com.au/pubs/const/foconst22feb13.htm>.
844 Ibid.
845 Agripower Australia Ltd v J&D Rigging Pty Ltd [2013] QSC 164.
187 Honour Justice Wilson held that ‘a contract for the dismantling of mining plant that had been brought onto site for the purposes of a mining lease was not a contract for "construction work"
within the meaning of the BCIPA’.846
Her Honour held the decision of the adjudicator void, citing ‘mining leases are not "land" for the purposes of the BCIPA and while the mining plant may have formed part of the mining leases, it did not "form part of the land" within the meaning of section 10 of the BCIPA’.847 Her Honour held that ‘common law rules relating to personal property and fixtures were relevant to deciding whether the mining plant formed part of the land’.848
The case would go to the Queensland Court of Appeal in J & D Rigging Pty Ltd v Agripower Australia Ltd & Ors. The Honourable Coram of Holmes JA, Applegarth J, Boddice J, would unanimously overturn the decision of her Honour Justice Wilson. The Honourable Coram held that:
‘issues of legal ownership of land or other legal interests are not relevant to the application of the BCIPA if the structure or work forms part of the land’ and further ‘the common law principles of fixtures are not relevant, and a practical assessment of the physical relationship of the item and the land and the degree of annexation is the correct test’.849
There is no doubt that there is a vast difference between the rationale of the WA Courts and those of Queensland. In WA there is a broad view taken on the mining exclusions. The broad view has given those making decisions far greater flexibility. In Queensland, the narrow interpretations add greater complexity to decisions and makes for less flexible in its interpretation. This is one of the inherent issues against the states adopting a more
‘harmonised’ approach to the security of payment. This subject will always be the common divide between what is often referred to as the ‘West Coast’ and ‘East Coast’ models.
846 Paul Bradley and Stephen Boyle, ‘Does the Construction Contracts Act 2004 (WA) apply to construction work on mining tenements?’, (01 August 2013), (Clayton Utz Insights),
<http://www.claytonutz.com.au/publications/edition/01_august_2013/20130801/does_the_construction_contract s_act_2004_wa_apply_to_construction_work_on_mining_tenements.page>.
847 Jeremy Chenoweth and Donovan Ferguson “Construction work on mining leases - Case Alert - J & D Rigging Pty Ltd v Agripower Australia Ltd [2013] QCA 406’, (2014) Construction Update - Ashurst Australia, 1.
848 Ibid.
849 Jeremy Chenoweth and Donovan Ferguson “Construction work on mining leases - Case Alert - J & D Rigging Pty Ltd v Agripower Australia Ltd [2013] QCA 406’, (2014) Construction Update - Ashurst Australia, 2.