Two recent decisions in relation to the same matter handed down by the superior Courts of Queensland have once again highlighted the difficulties faced by claimants and respondents in relation to the Building and Construction Industries Payments Act 2004 (Qld) (The Act).
For those who are unfamiliar, the Act aims to ensure that parties carrying out work in the building and construction industry in Queensland who are entitled to receive progress payments, are able to claim and recover those progress payments from parties they have supplied goods or services to under a construction contract.The legislation provides for expedient adjudication of payment claims to avoid the crippling financial implications of lack of security of payment, restricted cash flow and in the extreme instances, bankruptcy and insolvency of those parties in the industry.
The recent decisions in the Queensland Court of Appeal and the Supreme Court of Queensland involving miner Thiess Pty Ltd (Thiess) and a local earthmoving company Warren Brothers Earthmoving Pty Ltd (Warren) clearly outline the difficulties faced on both sides of the coin in relation to these matters.
The issue before the Court of Appeal was whether certain works undertaken by Warren amounted to Construction Work under the Act. The Act at Section 10 sets out in some detail the meaning of construction work. Subsection 3 of Section 10 of the Act excludes certain works from the meaning of construction work such as:
a) drilling for or extraction of oil and natural gas; and,
b) the extraction, whether by underground or surface working, of minerals, including tunnelling or boring or constructing underground works for that purpose.
Part of the difficulty in this instance was that the three subcontracts between Thiess and Warren were for various works relating to the preparation and expansion of the Burton and Lake Vermont Coal Mines. Warren issued payment claims in respect of each of the Contacts with Thiess. Thiess then took issue with the claims which were subsequently determined by an adjudicator in favour of Warren who found that the Act was applicable to such claims and the works that Warren’s claims related to. Thiess then applied to the Supreme Court for an order that the payment claims and adjudicators decision fell outside the ambit of the Act. Unfortunately for Thiess, this application was dismissed with the trial judge also finding in favour of Warren.
Thiess then applied to the Court of Appeal in respect of the decision in the Supreme Court. The Court of Appeal mostly upheld the decision of the Supreme Court. That is, the Court held that the Act did apply to the works performed by Warren in so far as they related to the construction of the various drains and dams at both sites. However the Court did not find that other works such as clearing and grubbing of land, stripping and stop piling top soil or trimming the batters and walls amounted to construction work as defined in the Act.
It is clear then that this decision goes some way in clarifying what does and what does not fall within the “Mining Exclusion” under the Act and consequently strengthens the likelihood of success for civil contractors and sub-contractors in respect of these types of claims.
The second facet of Thiess and Warren dispute involved the application to the Supreme Court by Thiess in relation to the adjudications decision by RICS Australasia Pty Ltd (RICS). As previously mentioned, Warren lodged a payment claim against Thiess of more than $500,000.00 being made up of three various items. Thiess in response delivered to Warren their payment schedule highlighting that the amount Warren had calculated as being payable for the first item of work was calculated incorrectly. In response Warren amended the original payment claim stating that they had incorrectly described some of the work that made up Item 1 and consequently reduced the payment claim in respect of Item 1 from $101,032.51 to $40,619.06.
Warren then applied to have the matter adjudicated and advised RICS that it had recalculated its payment claim amount. Thiess’s assertion was that Warren had really just reduced its claim in respect of the Item 1 work. In late February 2012, the adjudicator delivered his decision and determined that Warren was entitled to the progress payment in the sum of $480,035.14 and in doing so, failed to take in to account the recalculation/reduction by Warren of more than $60,000.00. Both Thiess and Warren admitted that the amount determined by the adjudicator was incorrect and when the Court brought this to the attention of the adjudicator he admitted to making a mistake in relation to the recalculation/reduction and simply forgot to take this into account when finalising the adjudication decision.
The Supreme Court held that it had little choice but to declare the whole adjudication decision to be void and set aside because of the jurisdictional error. The Court held that the adjudicator, in failing to remind himself of submission by Thiess, failed to comply with his requirements under the Act and as such the error was not an error capable of correction. The Court also held that there was no provision in the Act which provided for the severing of any unlawful part of an adjudication decision including any adjudication decision which is in part affect by a jurisdictional error.
Unfortunately for Warren, the implications of the decision mean that a failure on the adjudicator’s part to take into account a recalculation/reduction of a payment claim which meant that the entire payment claim, which would have ordinarily been payable by Thiess, was invalidated.
With the current market for coal and business in the Central Highlands tightening, the implications of these decisions have never been more important. Claimants must insure that their payment claim is accurate and those engaging contractors or subcontractors must ensure that their contractual documents accurately reflect the work to be performed by the parties that they are engaging.
If you would like any further information in relation to the Building and Construction Industries Payments Act and payment claims, please do not hesitate to contact one of our experienced members of staff.
