Introduction

In Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd[1] the Queensland Court of Appeal has considered a claim by Thiess that the work performed by Warren Brothers Earthmoving Pty Ltd (“Warren”) was not subject to the provisions of the Queensland adjudication legislation because it was effectively mining work rather than construction work.  On this basis, Thiess said, the adjudicator’s decision in favour of Warren was made without power, or jurisdiction, and should be set aside.

Background

Thiess operates open cut coal mines in the Bowen Basin in Central Queensland.  Thiess entered into three contracts with Warren in relation to work required for the establishment of a new open cut mine.  The first contract was for the construction of dams and drains, clearing land and stripping and hauling topsoil.  The second and third contracts were for the dry hire of separate excavators.  Detailed discussion of the precise work to be undertaken under each contract can be found in the extract from the reasons of the court HERE [paras 16 to 25 of QCA reasons]

Warren carried out work under each of the contracts and then issued payment claims under the Building and Construction Industry Payments Act 2004 (Qld)[2] (“the Act”).  Thiess did not make the payments claimed on the due dates.  In its responding payment schedules, Thiess said that the contracts were not ‘construction contracts’ as defined in the Act because the work that had been performed was not ‘construction work’ as defined in the Act.  Rather, Thiess said, this was mining and was therefore exempt from the Act.  Warren referred the disputes to adjudication.  The adjudicator agreed with Warren and issued a determination that Thiess should pay the full amounts claimed.  Thiess applied to the Supreme Court seeking a declaration that the adjudication decisions were void.  The Court dismissed the application.  Thiess then appealed to the Court of Appeal.

Mining work under the Act

Section 10 of the Act[3] defines ‘construction work’ in part in the following terms:

10        Meaning of construction work

(1)       Construction work means any of the following work—

(b)      the construction … of any works forming, or to form, part of land, including walls, roadworks, powerlines, telecommunication apparatus, aircraft runways, docks and harbours, railways, inland waterways, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for land drainage or coastal protection;

(e)       any operation that forms an integral part of, or is preparatory to or is for completing work, of the kind referred to in paragraph (a), (b) or (c), including—

(i)       site clearance, earthmoving, excavation, tunnelling and boring; and

(v)       site restoration, landscaping and the provision of roadways and other access works;

(3)       Despite subsections (1) and (2), construction work does not include any of the following work—

(a)      the drilling for, or extraction of, oil or natural gas;

(b)      the extraction, whether by underground or surface working, of minerals, including tunnelling or boring, or constructing underground works, for that purpose.

(emphasis added)

The Thiess argument as to jurisdiction (power)

An adjudicator is only empowered by Parliament to deal with disputes in relation to construction work that is performed under a contract or other arrangement.   An adjudicator stands in contrast to a judge who is vested with wider powers of jurisdiction.  If an adjudicator makes a determination as to other matters, the determination is void for a lack of jurisdiction.

Thiess claimed that the work performed by Warren was the extraction by surface working of minerals and was therefore excluded from the definition of ‘construction work’ by s 10(3) of the Act.  Therefore, said Thiess, the adjudicator had made a decision about matters that were outside of his powers and his determination was void.  Warren said that the work it performed was included within the definition of construction work in s 10(1) and 10(2) and was not excluded by s 10(3) as they did not extract a mineral (coal).  In relation to the dry hire of the excavators, Warren said that the excavators had been hired for the same purposes as the work that they had performed and so similar arguments could be put forward to support the claims for hire payments.

The Court’s findings

The Court of Appeal was unanimous in rejecting Thiess’ argument that work such as the construction of the dams and drains was not construction work.  However, the Court was split as to whether clearing and grubbing land and stripping and hauling top-soil to a stockpile with the intention of spreading it later was ‘construction work’.  Two of the judges said that this work was not work ‘forming … part of land’, nor was it an ‘integral part of … completing’ other construction work as set out in s 10(1) of the Act.  The third judge disagreed, and said that all of the work performed under the three contracts was ‘construction work’.

Regrettably for Thiess, it had not previously raised the argument that the adjudicator only had power to make a determination about the dam and drain construction.  This argument was raised for the first time on the appeal.  A party is not permitted in adjudication to raise a ground that it did not set out in its payment schedule.  It would be most unlikely that an appeal court could allow in a new argument not raised in the payment schedule or before the first judge to hear the application for review.  For this reason alone, it appears unlikely that Thiess would have succeeded in having the adjudication set aside.

However, the Court said that even if the adjudicator had made an error by determining that Thiess should pay for work that was not ‘construction work’, the error did not invalidate his decision.   It was an error of judgement as to the quantum to be paid under the determination, not an error that went to the heart of the power of the adjudicator to make any determination.  In other words, this was an error in carrying out his function, not an error that deprived him of power.  The judges referred to Craig v South Australia,[4] a High Court case where the Court said that ‘the line between jurisdictional error and mere error in the exercise of jurisdiction may be particularly difficult to discern.’[5]  Thiess’ case was not helped by its payment schedule where it claimed that the contracts were not ‘construction contracts’ at all, rather than stating that the contracts were contracts under which some construction work had been performed, but mostly mineral extraction work.

Conclusion

Work of a temporary nature that will not form part of the land that is performed in mining operations may well be exempt from the provisions of the Act on the basis that it is not ‘construction work’ as defined.  Where a contract includes some ‘construction work’ and also includes other work, a payment schedule should carefully describe which work is said to be excluded from the definition under the Act and should admit liability for validly performed construction work.  If an adjudicator makes an incorrect decision as to the amount to be paid under a determination but, having acted properly and within power, has considered the relevant factors, it is difficult to set aside the determination.

 

[1] Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd [2012] QCA 276.

[2] The sections of the Queensland legislation applicable to the issue analysed in this Update are almost identical in the South Australian version of the Act.

[3] The equivalent provision in the SA Act is s (5)(2).

[4] Craig v South Australia (1995) 184 CLR 163.

[5] Ibid 178.

 

 

 

Details of the work undertaken

The undertakings under the subcontract

[16] The subcontract held by Warren in relation to Thiess’ operation of the Burton/Bullock Creek mine contemplated work including building dams and drains, stripping and hauling topsoil, and clearing and grubbing. The primary judge’s description of the subcontract is not the subject of dispute:

“[19] The work originally included in the subcontract was shown in sch 1 against the heading ‘General description of the Services to be performed’ as ‘Bullock Creek Dams and Drains/Plumtree South Clear Grub, Topsoil Stripping and Dams and Drains at Thiess Burton Coal Project’. The scope of that work was indicated in more detail in tabular and diagrammatic form in sch 2, where provisional quantities were set out. Areas to be cleared and grubbed were categorised as Heavily Timbered and Lightly Timbered. Topsoil stripping was to take place over 10 identified blocks. The volume of material to be excavated was small compared to the total amount of excavation which Thiess had to perform, even where it consisted of clearing and removing topsoil from above the coal seam … Eight thousand lineal meters of drain were to be constructed at Plumtree South, and three dirty water drains and three clean water diversion drains were to be constructed at Bullock Creek. … At least one dam was to be constructed at Plumtree South and two (a dirty water dam and a sediment dam) at Bullock Creek. … The case was conducted on the basis that the work under the subcontract was part of the work which Thiess undertook to perform for the owners. I find that it was a relatively small part of that work.

[20] A further indication of the nature of the work is found in the notes to the provisional quantities in the schedule. They stated:

‘Clear and Grub Notes:

  1. All material is to be stockpiled in a pile suitable for burning.
  2. Timber sizing varies from Saplings to well establish Timber.

Topsoil Stripping Notes:

  1. Topsoil will be required to be stripped from undisturbed ground (insitu) and previously rehabilitated areas (quantities provided below)
  2. Topsoil stripped from undisturbed ground is assumed to be stripped to 300mm.
  3. Payment for Topsoil stripping will be as measured in Loose Cubic Metres in stockpiles.
  4. Topsoil stockpiles will be required to be stockpiled to a maximum height of 3m.
  5. Topsoil stockpiles to be shaped to minimise erosion.

Dams & Drains Notes:

  1. Dam pricing to include compaction to required standard
  2. Drains will be of a suitable width for excavation by scrapers.’

[21] Schedule 2 also set out the rates for each task. For ‘Clear, Grub and Stockpile’, two rates were prescribed: one for lightly timbered areas and the other for heavily timbered areas. For ‘Strip Topsoil’, four rates were prescribed depending upon the length of haul to the stockpile. The haul distances were expressed in 500m increments up to 2 km. Rates for ‘Construction of Drains’ were divided into two classes. The first covered hauling material to stockpile; the second hauling to a compacted embankment. Three rates were prescribed in each class depending on haul lengths in increments of 500m up to 1.5 km. Rates for hauling to embankments were the higher, presumably to cover the cost of compaction. ‘Construction of Dams’ was divided into the same two classes and the same rates were provided as for the drains.

[22] The schedule also included rates for a task not originally included in the subcontract. This rate was called ‘Place Topsoil’. This evidently referred to moving topsoil from the stockpile to areas to be rehabilitated, and placing it in those areas. Four rates were prescribed, depending upon the length of haul to the rehabilitation area. Plainly Warren was required to do this work if given a variation order under the subcontract.

[23] Lastly the schedule provided hourly hire and standby rates for Warren’s equipment, if required. That equipment comprised scrapers, bulldozers, a grater, an excavator, a loader, a compactor and a water truck. It did not include dragline or any other equipment of the size appropriate for digging out or transporting coal.”

[17] In understanding the nature of the undertaking under the subcontract, his Honour derived assistance from the following affidavit evidence of Mr Mallam, who at the relevant time was the Project Manager for Thiess at the Burton Coal Project, extracted at [24]:

“8. … approximately 65% of the works performed under the Subcontract related to the stripping of top soil and scrub with [Warren’s] scrapers and dozers [which] stocked the topsoil for later rehabilitation of the mine.

  1. The stripping of top soil and scrub is the first part of the coal mining process. That process is followed by removal of overburden which covers the coal seam, which continues to be carried out by Thiess on Site. The stripping of the top soil and scrub, and the removal of the overburden which covers the coal, are a necessary and integral part of accessing the coal seam for the purpose of extracting coal.
  2. Further, the remainder of the works performed under the Subcontract related to the implementation of water protection measures such as drain channels and embankments on the edge of the coal mine pit, and the excavation of topsoil and earth for a brown water dam.

  1. The purpose of the drain channels and embankments is to prevent water ingress into the pit that would obstruct the mining operations. If water entered the pit, it would prevent the ongoing operations of the coal extraction process as the plant that was clearing the overburden and extracting the coal would not be able to enter the flooded areas in the pit.
  2. The purpose of the water management activities is also to protect the environment as required by the relevant environmental legislation. The water management activities minimised the clean water infiltrating the pit and become contaminated, which would then require the mine affected water to be pumped out from the pit, and to prevent the mine affected water runoff into clean water catchments.”

[18] Warren did not challenge Thiess’ summary of the primary judge’s findings that, with respect to the subcontract, the work to be performed (using scrapers, bulldozers, a grater, an excavator, a loader, a compactor and a water truck provided for at an hourly rate and standby rate from Warren) comprised work falling into the following categories:

(a) constructing dams and drains (the rates differing for lightly timbered and heavily timbered areas);

(b) stripping and hauling topsoil to stockpile (with different rates depending upon the length of haul to the stockpile) and a rate to “Place Topsoil” (moving topsoil from the stockpile to areas to be rehabilitated and placing it in those areas, also payable at different rates depending on the length of haul); and

(c) clearing and grubbing (with different rates for lightly timbered and heavily timbered areas), with material to be stockpiled in a pile suitable for burning.

The nature of the undertakings under the hire contracts

[19] Likewise, there was no dispute concerning the primary judge’s findings as to the nature of the undertakings under the dry hire contracts for the Lake Vermont Coal Project. They provided for the “dry hire” of excavators (without the supply of an operator) from Warren to Thiess. The contracts contained no provision relating to the purpose of the hiring. However, the primary judge held that the subject of the undertaking under the hire contracts was the hire of excavators for use in connection with the performance of any of Thiess’ obligations under the head contract for which they were suitable.

[20] His Honour noted at [58] that it was common ground between the parties that one use to which both excavators were to be put was “in connection with the carrying out of work being trimming and scaling batters and walls in the coalmine overburden and clearing away the material thus excavated, in order to access the coal seam”. Batters are the near-vertical faces of the stepped terraces constructed on the sides of the mine pit.

[21] His Honour then made the following observations at [59]-[61] as to the Caterpillar contract:

“Negotiations for the hire of the Caterpillar excavator took place between Darryl Warren on behalf of Warren and Timothy Fuller on behalf of Thiess at the site office for the Lake Vermont project in November 2009. Thiess required the excavator to replace one then under hire from another company. Unknown to Mr Warren, at the time of the negotiations that excavator was loading overburden into trucks which had been hired by Warren to Thiess under another hire contract. It was also stripping the last 300 mm of waste off the top of the coal to prevent coal losses which would occur were a larger excavator to be used.

Mr Fuller said to Mr Warren words to the effect, ‘I need to hire plant from [Warren] to replace the existing excavator currently operating on site and loading your trucks.’ Mr Warren replied, ‘I can provide plant to Thiess to replace that existing excavator.’ Representatives of Thiess told Mr Warren that the Caterpillar would be excavating topsoil, overburden and rock, assisting bulldozers to take excavated topsoil, overburden and rock to the paddock for removal, and building dams and drains. Being a 30 tonne machine, it was too small to dig up coal. Thiess had 500 tonne machines for that purpose.

Mr Fuller deposed that the Caterpillar was used to strip the last 300 mm of waste off the top of coal to prevent coal losses by over digging with the larger excavators. Mr Warren did not work in the pit and did not see this. Mr Fuller resigned from Thiess in around April 2010 and left the site. Mr Stansfield, a successor as site manager deposed that the excavator was primarily used to strip the last 300 mm of waste off the top of the coal. However he estimated that it was also used for water management outside the pit (building dams and drains) on an ad hoc basis for about 25% of the time it was on site.”

[22] His Honour made the following observations as to the Komatsu contract at [62]-[64]:

“Negotiations for the hire of the Komatsu excavator took place between the same corporate representatives at the site office in February 2010. At that time another excavator, owned by Thiess, was assisting the stripping bulldozers by pulling overburden from the high wall (ie the side of the pit). A Thiess employee showed Mr Warren that activity.

When Mr Warren returned to the office, Mr Fuller said words to the effect, ‘I need to hire plant from [Warren] to relieve the existing excavator so that it can carry out other tasks on site.’ Mr Warren replied with words to the effect, ‘I can provide plant to Thiess to relieve the existing excavator.’ He was told that the excavator would be pulling batters down and assisting the bulldozer to push excavated rock to the rock dump in the paddock for removal.

Mr Fuller deposed that the Komatsu was used to pull the overburden from the high wall. This was an activity which occurred in the pit and again, Mr Warren did not see it. Mr Stansfield deposed that the excavator was primarily used to trim and scale batters and walls in the pit and to clean the interface between the overburden and the coal seam. However he estimated that it was used for water management outside the pit (building dams and drains) on an ad hoc basis for about 25% of the time it was on site.”

[23] His Honour found at [78] that the excavators were for use in connection with:

(a) the construction of dams and drains;

(b) trimming and scaling batters and walls in the coalmine overburden and clearing away the material thus excavated;

(c) excavating topsoil, overburden and rock; assisting bulldozers to take excavated topsoil, overburden and rock to the paddock for removal;

(d) cleaning the interface between the overburden and the coal seam.

[24] In respect of the Caterpillar excavator, the primary judge proceeded on the basis that it was used primarily to strip the last 300 mm of waste off the top of the coal to prevent coal losses by over digging with the larger excavators, but was also used for water management outside the pit (building dams and drains) on an ad hoc basis for about 25 per cent of the time it was on site.

[25] In respect of the Komatsu excavator, he proceeded on the basis that it was used to pull the overburden from the high wall in the coal mining pit. Its primary use was to trim and scale batters and walls in the pit and to clean the interface between the overburden and the coal seam, but was also used on an ad hoc basis for water management outside the pit (building dams and drains) for about 25 per cent of the time it was on site.