Australia: Does your contract involve construction work under the Construction Contracts Act 2004 (WA)? Guidance from the WA Supreme Court

The delivery last week of the decision of the Western Australian Supreme Court in Field Development Solutions Pty Ltd v SC Projects Australia Pty Ltd [2015] WASC 60 is interesting for at least three reasons. First, it confirms that a respondent may, in resisting an application for review of a dismissal of an adjudication application (under section 46 of the Construction Contracts Act 2004 (WA) (Act)), raise 'fresh' grounds of dismissal. Secondly, it provides guidance on what constitutes 'construction work' for the purposes of the Act. Thirdly, it touches (briefly) on the question of the scope of the exclusion from 'construction work' in section 4(3) of the Act.

BACKGROUND

Field Development Solutions Pty Ltd (FDS) entered into an agreement with Clough Sea Trucks Joint Venture (CSJV) for the supply, maintenance, servicing and operation of a number of specialised all-terrain vehicles (Service Agreement).

These vehicles were to be used to transport a quantity of quarried material from a location outside the project site to certain set locations on the project site. That material would be used to backfill trenches and gullies that had been previously excavated during the installation of a pipeline by which gas from the Gorgon LNG Plant would be supplied into the Dampier to Bunbury gas pipeline.

FDS applied under the Act for adjudication of a payment dispute. CSJV defended the application on the sole basis that the application had been made out of time and ought to be dismissed for that reason under section 31(2)(a)(ii) of the Act. The adjudicator accepted that argument.

FDS made an application to the Western Australian State Administrative Tribunal (Tribunal) for review of the adjudicator's decision. Before the Tribunal, CSJV raised an additional basis upon which FDS's application ought to be dismissed. CSJV contended, in addition, that the Service Agreement was not a 'construction contract' within the meaning of section 3 of the Act (as set out in section 31(2)(a)(i) of the Act).

There were three issues for the Tribunal (constituted by Member Carey) to consider:

1. Where an application is dismissed on one of the four grounds of dismissal under section 31(2)(a), is the review by the Tribunal to be confined to that ground only or is it possible to consider other available ('fresh') grounds?
2. If it is possible to consider other available grounds for dismissal, was the Service Agreement a 'construction contract' within the meaning of section 3 of the Act?
3. Was FDS's adjudication application prepared and served on time in accordance with section 26 of the Act?

THE TRIBUNAL'S DECISION

The availability of 'fresh' grounds of dismissal

The Tribunal held that, where an application is dismissed on one ground, the Tribunal's review of the adjudicator's decision to dismiss will not be confined to that ground. The Tribunal considered that the relevant 'decision' being reviewed by the Tribunal was the adjudicator's decision to dismiss the application under section 31(2)(a) of the Act and not the basis or ground that the adjudicator had relied upon in arriving at that decision.

Indeed the Tribunal considered that if it was to form the view that an additional ground of dismissal applied, it would be compelled to dismiss the application notwithstanding that the additional ground had not been raised before it.

Was the Service Agreement a 'construction contract'?

The Tribunal found that the "main objective" of the Service Agreement was the haulage of fill from a stockpile located outside of the project site to certain locations within that site. For the following reasons, the Tribunal held that this was not a construction contract.

1. First, in dismissing the submissions that FDS's obligations under the Service Agreement (to supply all-terrain vehicles for the purpose of hauling fill material) fell within the scope of paragraph (c) of the definition of 'construction work', the Tribunal held that the Service Agreement did not involve "the construction, in whole or in part, of civil works" for the purposes of section 4(2)(c) (read with section 4(1)(a)).
2. Secondly, the Tribunal was not persuaded that the extending provision in paragraph (e) of section 4(1) was triggered so as to encompass the Service Agreement. This was because, in the Tribunal's view, that extending provision was only triggered where the relevant works comprised the "constructing ... of ... civil works" within section 4(2)(c) of the Act and, in this case, the supply of all-terrain vehicles for the purpose of hauling fill material was not concerned with "constructing ... any civil works".
3. Finally, while the Tribunal was of the view that the five non-exhaustive examples of works listed in paragraph (f) of section 4(2)² pointed towards a broad definition of 'construction works', in the Tribunal's view 'construction works' would encompass:
4. • site works, but not the mere supply of equipment and material;
   • earthmoving within a particular site, but not the hauling of fill material from a location outside of the relevant site to that site; and
   • site restoration, but not the haulage of fill material to facilitate site restoration.

Was FDS's adjudication application prepared and served within time?

Having made several findings as to the procedure for payment set out in the Service Agreement, the Tribunal held that no 'payment dispute' for the purposes of the Act had yet arisen, with the consequence that FDS's application was made prematurely (not late).

Outcome before the Tribunal

Thus, the Tribunal ultimately dismissed FDS's review application on two, independent, bases.

1. First, the contract in question was not a 'construction contract' within the meaning of section 3 of the Act.
2. Secondly, FDS's application was not prepared and served in accordance with section 26 of the Act.

THE SUPREME COURT'S DECISION

FDS applied to the Western Australian Supreme Court for leave to appeal against the Tribunal's decision.

FDS relied on six grounds of appeal, which essentially raised two questions for the Court:

1. First, was the Tribunal able to consider, as part of its de novo review, the 'fresh' ground of dismissal raised by CSJV before it (namely, whether the Service Agreement was a 'construction contract'³)?
2. Secondly, had the Tribunal made an error of law in concluding that the Service Agreement was not a 'construction contract'?

Justice Mitchell concluded that FDS was successful on one of its six grounds of appeal. His Honour held that the Tribunal had erred in law in concluding that the Service Agreement was not a 'construction contract'. However, because the Tribunal had dismissed FDS's review application on two, independent, bases, Justice Mitchell found that the Tribunal's error did not affect the Tribunal's ultimate conclusion.

Did the Tribunal have the capacity to consider 'fresh' grounds of dismissal?

Justice Mitchell held that the Tribunal was able to consider the 'fresh' ground of dismissal raised by CSJV because the Tribunal had to, before it could exercise its review jurisdiction under section 46 of the Act, satisfy itself that none of the four conditions set out in section 31(2)(a) of the Act applied.

Having considered the relationship between section 46 of the Act and the relevant provisions of the SAT Act, Justice Mitchell observed that the scheme of the Act was to compel an adjudicator to dismiss an adjudication application and to preclude the adjudicator from determining that application on its merits if any of the four circumstances in subparagraphs (i) to (iv) of section 31(2)(a) existed. Section 31(2)(a) of the Act conferred a power, and duty, upon the adjudicator to dismiss an adjudication application without making a determination of its merits. The duty to exercise that power was triggered if any of the four circumstances in subparagraphs (i) to (iv) of section 31(2)(a) existed.

Justice Mitchell held that it was inconsistent with the scheme of the Act to construe section 46 as only allowing the Tribunal to consider whether one of the potentially available grounds for dismissing an adjudication application is established. His Honour took the view that section 46(1) of the Act provided a "right of review of an adjudicator's ... decision made under section 31(2)(a)" and not from a decision made under any one of the four circumstances set out in subparagraphs (i) to (iv) of section 31(2)(a).

Was the Service Agreement a construction contract?

Justice Mitchell held that the Tribunal had erred in law in concluding that the Service Agreement was not a 'construction contract' and that this error arose from the Tribunal's treatment of the term 'construction contract' under section 3 of the Act. His Honour found that the Service Agreement was a 'construction contract' on three different bases; namely, that it obliged FDS to:

• carry out 'construction work' within the meaning of paragraph (a) of the definition of 'construction contract';
• supply 'plant' within the meaning of paragraph (b) of the definition of 'construction contract' when read with section 5(1)(c) of the Act; and
• provide 'on-site services' within the meaning of paragraph (d) of the definition of 'construction contract'.

The Service Agreement obliged FDS to carry out 'construction work'

In contrast to the Tribunal's view, Justice Mitchell concluded that the Service Agreement was a 'construction contract' for the purposes of the Act because, in substance, it obliged FDS to carry out 'construction work' within the meaning of paragraph (a) of the definition of 'construction contract'. His Honour found that the construction of a gas pipeline (including the rehabilitation of the land on which the pipeline was constructed) fell within paragraph (c) of the definition of 'civil works'⁵. Importantly, his Honour (adopting the language of section 4(2)(f) of the Act) went on to find that moving earth to the location of the pipeline was "an integral part" of those 'civil works'. That is because, without that activity, the construction of the pipeline and site restoration could not be completed. The activity of hauling backfill material could be regarded:

• as 'site restoration' within the meaning of section 4(2)(f)(v); and also as
• 'earthmoving' within the meaning of section 4(2)(f)(i).

The Service Agreement obliged FDS to supply 'goods'

Justice Mitchell found that FDS's obligation to supply the all-terrain vehicles also brought the Service Agreement within paragraph (b) of the definition of 'construction contract'. FDS's supply of all-terrain vehicles constituted a supply of 'goods' that were related to construction work as contemplated by section 5(1)(c) of the Act, namely, the supply of 'plant' "for use in connection with the carrying out of the construction work at the site of the construction work".

The Service Agreement obliged FDS to provide 'on-site services'

Justice Mitchell's finding that the haulage of fill material was 'construction work' also allowed His Honour to further find that FDS's obligation to maintain and operate the all-terrain vehicles also brought the Service Agreement within paragraph (d) of the definition of 'construction contract'. FDS's obligation to maintain and operate the vehicles constituted 'on-site services' that were directly related to construction work as contemplated by section 5(3)(b)(i) of the Act.

Operation of section 4(3)(c) of the Act

Justice Mitchell briefly considered whether the 'mining exclusion' in section 4(3)(c) of the Act operated to exclude the Service Agreement from constituting a 'construction contract'. His Honour took the view that the construction of a pipeline for the transport of processed gas would not fall within the work that is excluded by section 4(3)(c) of the Act, namely, work for the constructing of 'any plant' which extracts or processes a "mineral bearing or other substance".

His Honour commented that, even if the transport of natural gas in the pipeline, in fact, involved regulation of the physical properties of the transported gas (for example, temperature, pressure and moisture content), such regulation would not involve 'processing' for the purposes of section 4(3)(c) of the Act. Rather, that regulation would be a necessary part of the transport of the gas.

Having regard to the decision of Re Anstee-Brook; Ex parte Karara Mining Ltd [2012] WASC 129, his Honour also took the view that CSJV had not established that the pipeline performed a function that was so related to "extracting or processing" of natural gas that the works the subject of the Service Agreement could be said to fall within the ambit of section 4(3) of the Act.

This aspect of Justice Mitchell's decision is interesting because the very same question (namely, whether the construction of a pipeline for the transport of processed gas would fall within the scope of works that were excluded by section 4(3)(c) of the Act) came before Justice Le Miere in the context of an application for two injunctions in connection with this same pipeline. That application sought to restrain an adjudication applicant (Kempe Engineering Services (Australia) Pty Ltd) from progressing an adjudication application and to restrain the adjudicator from making a determination⁶.

The adjudication respondent (Enerflex Process Pty Ltd) had sought the injunctions on the basis that it had an arguable case that its contract with Kempe was not a 'construction contract' because the work on this pipeline was excluded from being construction work by virtue of section 4(3)(c) of the Act. Justice Le Miere had found that there was a serious question to be tried albeit without any detailed analysis because the injunction application was to be dismissed on other grounds. Justice Mitchell's opinions in the present decision, suggest that Enerflex's contract with Kempe would not be excluded by section 4(3)(c) of the Act.

THE ORDERS MADE BY THE SUPREME COURT

Justice Mitchell ordered that the Tribunal's decision to dismiss FDS's adjudication application under section 31(2)(a) be affirmed. His Honour also considered it appropriate to make a declaration that the Tribunal had erred in law in finding that the Service Agreement was not a construction contract for the purposes of the Act. Central to this result was His Honour's concern that the Tribunal's decision that the Service Agreement was not a construction contract would operate as a barrier to the success of any further adjudication applications made by FDS in connection with the Service Agreement.

CONSEQUENCES OF THE DECISION

The Court's decision confirms that, upon the Tribunal's review of an adjudicator's decision to dismiss an adjudication application under section 31(2)(a) of the Act – being a hearing de novo – the Tribunal is not restricted to considering only those grounds of dismissal relied upon by the adjudicator. The Tribunal must satisfy itself that none of the four conditions set out in section 31(2)(a) of the Act apply.

Further, the Court's decision establishes that the class of activities that fall within the term 'construction work' under section 4(2) of the Act is a broad class. That the Tribunal and the Court came to different views suggests that whether an agreement is to be characterised as obliging a party to carry out 'construction work' for the purposes of the Act is not always an easy question and will continue to be a fertile ground for dispute.

The Court's dicta in relation to the question of the scope of the exclusion from 'construction work' for the purposes of section 4(3)(c) of the Act suggests that 'construction work' that relates to a section of pipeline that is used for the transportation of natural gas will not be caught by that exclusion.

Footnotes

¹Section 4(2)(c) of the Act provides that 'construction work' means work on a site in WA "constructing the whole or a part of any civil works, or a building or structure, that forms or will form, whether permanent or not and whether in WA or not, part of land or the sea bed whether above or below it". FDS had (strangely) submitted that the particular type of 'civil works' that applied was "a road" (within section 4(1)(a) of the Act) or any works associated with civil road works (within section 4(1)(e) of the Act).

²Such works being "associated" with the five categories of 'construction work' set out in paragraphs (a) – (e) of section 4(2).

³Section 31(2)(a)(i) of the Act.

⁴Primarily, sections 27 and 29 of the SAT Act.

⁵Paragraph (c) of section 4(1) provides that 'civil works' includes a pipeline for water, gas, oil, sewage or other material.

⁶ See Enerflex Process Pty Ltd v Kempe Engineering Services (Australia) Pty Ltd [2013] WASC 406.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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