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Australia – Construction Work On Mining Leases.

13 January, 2014

 

Legal News & Analysis – Asia Pacific – Australia – Construction & Real Estate

 

J & D Rigging Pty Ltd v Agripower Australia Ltd [2013] QCA 406


WHAT YOU NEED TO KNOW

 

  • A recent decision of the Queensland Court of Appeal has overturned an earlier decision of the Supreme Court which found that the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA) does not apply to work done on a mining lease.
  • The Court of Appeal decision re-affirms that construction work done on land subject to a mining lease will fall within the ambit of the BCIPA, unless the activity is of a type expressly excluded from the BCIPA.
  • In deciding whether the BCIPA applies it is not relevant to consider the legal status of a person’s interest in the land upon which the construction work is undertaken. It is also not relevant to consider the intention of the parties regarding the permanency of the structure to be constructed.
  • The test of whether a structure is “forming or to form, part of the land” is to be determined by a practical and ordinary assessment of the structure’s physical relationship with the land. That physical relationship is not altered by the nature of any legal instrument (for example, mining leases) under which the construction work is authorised.
  • The court’s reasoning would apply equally to construction work on petroleum leases.

 

The Supreme Court of Queensland decision in Agripower Australia Ltd v J & D Rigging Pty Ltd [2013] QSC 164 found that construction work on land subject to a mining lease was not captured by the provisions of the BCIPA.


On 20 December 2013, the Queensland Court of Appeal delivered its judgment in J & D Rigging Pty Ltd v Agripower Australia Ltd & Ors [2013] QCA 406 unanimously overturning the decision of the trial judge.


The Facts


Agripower Australia Ltd (Agripower) was the owner of mining infrastructure at the Skardon River Mine in Cape York, Queensland. J & D Rigging Pty Ltd (J&D Rigging) was the operator. Agripower and J&D Rigging entered into a contract for the dismantling and removal of the mining plant (Contract).


J&D Rigging delivered a payment claim under the BCIPA contending that it had performed $4.4 million worth of work under the Contract and had only been paid $1.3 million by Agripower.


In its payment schedule, Agripower contended that it was not obliged to pay any of the amount claimed because the work was not “construction work” within the meaning of section 10 of the BCIPA.


The adjudicator rejected Agripower’s jurisdictional argument (and other arguments), and ordered that Agripower pay J&D Rigging just over $2.5 million. Agripower commenced proceedings seeking a declaration that the adjudication decision was void for jurisdictional error.


The Issue


The principal question in the appeal was whether dismantling the mining plant was “construction work”. “Construction work” is relevantly defined in section 10(1) of the BCIPA as:


(a) the construction,… demolition or dismantling of buildings or structures, whether permanent or not, forming or to form, part of the land…; and

(b) the construction,… demolition or dismantling of any works forming or to form, part of the land… [emphasis added].


Whether dismantling the mining plant was “construction work” turned on the meaning of the phrase “forming part of the land“. Specifically, the Court was asked to decide whether the mining plant consisted of structures or works “forming part of the land” within the meaning of section 10(1)(a) and (b) of the BCIPA.


The Arguments


The phrase “forming part of the land” is not defined in the BCIPA.


J&D Rigging argued that the natural construction of the phrase “forming part of the land” should be preferred; whether the mining plant formed part of the land in the physical sense.
Agripower argued that the phrase should be interpreted in light of the common law principles from real property law which govern when chattels will form part of the land as fixtures; the objective intention of the person who put it in place in light of the purpose and degree of annexation.


The Decision At First Instance


At first instance, Justice Wilson held the adjudication decision was void on the basis of jurisdictional error for the following reasons:

 

  • Mining leases are not “land” for the purposes of the BCIPA: The trial judge noted that mining leases entitle the leaseholder to remove minerals, but do not give rise to an estate or interest in land. On this basis, Her Honour found that mining leases are not “land” within the meaning of the Acts Interpretation Act 1954 (Qld) or common law principles. The trial judge held mining leases are not “land” for the purposes of the BCIPA.

 

  • 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: The trial judge held the common law rules relating to personal property and fixtures were relevant to deciding whether the mining plant formed part of the land. The mining plant was brought on to the land for the purpose of mining leases only and, as such, was to be removed before the expiry of the mining leases. To the extent the plant was affixed to the land, this was to stabilise the plant and allow for efficient operation, rather than to add some additional feature to the land. The common law requirements for the mining plant to become part of the land (that is, a fixture) had not been satisfied.

The Decision On Appeal


The Court of Appeal unanimously disagreed. On the two points, the Court found:

 

  • The mining plant did “form part of the land”:  Within the meaning of section 10 of the BCIPA. The Court of Appeal considered that the common law rules in relation to fixtures are not relevant when deciding whether an item forms part of the land. There is no need to look at the intention of the person who placed the mining plant on the land to decide whether it formed part of the land. The correct test is a practical assessment of the physical relationship of the item and the land and the degree of annexation. Applying this practical test, the Court of Appeal found that the mining plant did form part of the land.

 

  • the fact that the plant was constructed on land subject to a mining lease did not preclude a conclusion that the construction work in this case was the dismantling of building or structures forming part of the land. While a mining lease may not legally be classified as “land”, the actual land on which the building or structure is affixed does not change its character by reason of the existence of a mining lease. The word “land” has an extended meaning as contained in the Acts Interpretation Act 1954 (Qld) as well as its ordinary meaning.

What Does This Mean?


The Court of Appeal has confirmed that:


(a) 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. The BCIPA applies to construction work done on land which is subject to a mining lease if the structure or work forms part of the land.

 

In our view, the position would be the same under a petroleum tenure.


(b) issues of intention are not relevant to the question of whether buildings or structures form part of the land for the purposes of the BCIPA. 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.

 

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For further information, please contact:

 

Jeremy Chenoweth, Partner, Ashurst
jeremy.chenoweth@ashurst.com


Donovan Ferguson, Ashurst
donovan.ferguson@ashurst.com

 

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