Key takeaways
- While various activities in the nature of civil works may not appear to involve the construction of ‘buildings’, a series of decisions by the Supreme Court of Queensland indicate that such works may be ‘building work’, and subject to the requirement to hold an appropriate licence.
- This is an important risk to balance of plant (BOP) contractors, or other parties performing similar works on renewables projects who may assume that such work does not need to be performed by a licensed contractor or subcontractor.
- While there are significant consequences for undertaking ‘building work’ without a licence, such risks can be well-managed with foresight and appropriate contracting structures.
Background
In Queensland, there are unique risks (not present in other jurisdictions) which arise because some civil works may (counterintuitively) constitute ‘building work’, as that term is defined under the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act). It is an offence under the QBCC Act for a person to carry out building work without the appropriate licence. In addition to potential penalties and even imprisonment, a failure to hold the appropriate licence will affect a person’s entitlement to payment for the work performed, including that they will not be entitled to any profit or to recover the costs of their own labour.
This is particularly relevant to the civil work component carried out by a BOP contractor, who may not expect the QBCC Act’s licensing regime to apply to all or substantial parts of its civil scope. That (in turn) is relevant because a BOP contractor performing building work, without the appropriate licence, commits an offence under the QBCC Act.
This article explains these risks, how they arise, and what can be done to address them. While the focus of this article is on wind farm projects in particular, similar issues apply equally to other renewables projects—such as solar farm projects—particularly in relation to the construction of unsealed private access tracks.
BOP scope of work
A common division of the scope of work for a wind farm project is a BOP contract undertaken by one party, with a separate party undertaking the turbine erection works. Under this division, the BOP contractor will be undertaking the civil and electrical packages of works. The electrical works are not subject to the QBCC licensing regime: a separate licence is required under the Electrical Safety Act 2002 (Qld). However, even with only the ‘civil’ scope of a BOP contract, there are QBCC Act licensing risks which arise.
Under a BOP contract, the civil scope of work will typically include components such as the wind turbine generator (WTG) foundations, access tracks, crane hardstands, and the blade laydown areas.
Constructing the WTG foundations involves a poured concrete base, but considering this to be the only aspect of the BOP civil works potentially subject to the QBCC Act’s licensing regime may be an error, as other parts of the BOP civil scope—such as the access tracks, hardstands, and laydown areas—may also be subject to the regime. This risk arises from a series of (perhaps surprising) Court decisions in Queensland on what constitutes ‘building work’.
What is a ‘building’ under the QBCC Act?
The QBCC Act defines ‘building’ broadly, providing that it ‘includes any fixed structure’. The definition provides examples, namely, a fence other than a temporary fence, a water tank connected to the stormwater system for a building, and an in-ground swimming pool or an above-ground pool fixed to the ground. These kinds of structures would not, as a matter of ordinary English usage, be described as ‘buildings’, which highlights the expansive reach of the QBCC Act’s licensing scheme. ‘Building work’ is in turn defined to include the erection or construction of a ‘building’.
The broad definition makes it difficult to draw a clear line as to what will be a ‘fixed structure’ and therefore a ‘building’, and it will depend on a number of factors, making it a case-by-case exercise to identify what will fall within this definition. That said, guidance can be drawn from case law applying these definitions, and there have been a series of cases in Queensland which are particularly important to contractors performing civil works.
Why may unsealed access tracks constitute ‘building work’?
As the heading indicates, a key risk arises from the construction of access tracks, and assuming such work to be ‘civil work’ not caught by the QBCC Act’s licensing regime.
In the context of a wind farm’s construction, part of the BOP civil works will often include earthmoving, excavation, and compaction. While there is an exemption in the QBCC Act for ‘work consisting of earthmoving and excavating’—which will therefore not be ‘building work’—it is important to know where the scope of this exemption ends.
To this point, the Supreme Court of Queensland has held the following to constitute ‘building work’:
- the construction of an undesignated (private) road for a rural residential subdivision involving layering and compaction work, as well as the incorporation of culverts;[1] and
- the construction of hardstand pavements for a rail receival area involving the supply, placement, and compaction of unbound materials (a base and subbase layer).[2]
Both are perhaps surprising results, as the placement of unbound materials on an unsealed access track may seem to be closer to ‘earthmoving’ than the construction of buildings.
Conversely, the construction of a laydown area, involving the rolling, compaction, and trimming of a flat area (for the storage of plant, equipment, and other items), has been held not to constitute ‘building work’ within the meaning of the QBCC Act.[3]
A distinction which can be distilled from these decisions is that, if the construction involves pavement layering work—such as the placement and compaction of unbound materials for access tracks—it is more likely to constitute ‘building work’ within the meaning of the QBCC Act, whereas a mere compacted foundation (for a hardstand, for example), may not constitute ‘building work’. As such, applied to wind farm construction, the construction of unsealed private access tracks (depending on the construction techniques involved) may constitute the performance of ‘building work’.
Each instance will require a case-by-case evaluation, and it is difficult to set down precise rules in the abstract.
The scope split under a BOP contract makes this an important issue to manage. If, for example, a BOP contactor engages an appropriately licensed subcontractor to undertake the construction of the WTG foundations (and similarly for the electrical work), but itself carries out the construction of the access tracks, that may constitute ‘building work’ under the QBCC Act, and subject it to the QBCC Act’s licensing regime. This will be a significant issue if the BOP contractor was expecting to be able to perform such work without holding a QBCC license, on the basis that it is ‘civil work’.
While work on ‘roads’ is exempt from being ‘building work’ under the QBCC Act, that applies to land for the purpose of a road for public use, in contrast to the private access tracks constructed on wind farms (or other renewable projects).
How may this risk be addressed?
Summarised generally, the two main alternatives to manage the application of the QBCC Act’s licensing regime are to:
- obtain a QBCC ‘building work’ licence of the appropriate class – noting that there are certain financial criteria that need to be satisfied to obtain a QBCC licence (see below); or
- engage an appropriately licensed subcontractor to carry out the relevant building work.
These alternatives should be considered well in advance of the issues arising, and should form part of a broader structural and commercial decision. That is because a company which holds a QBCC licence is required to satisfy minimum financial requirements imposed upon licensees, a key part of which are requirements to, at all times, meet a prescribed minimum amount of net tangible assets (determined based on a licensee’s maximum revenue) and, at all times, to maintain a prescribed ‘current ratio’, being a ratio of the licensee’s current assets to liabilities. This can have significant commercial implications. To give two examples, a licensee with a maximum revenue of $5 million is required to hold (at all times) net tangible assets to a value of at least $228,000, or if a licensee’s maximum revenue is $15 million, to a value of at least $600,000.
If an appropriately licensed subcontractor is, instead, to be engaged, the risk should be managed by carefully considering the scope of work to be performed, to ensure that all items of ‘building work’ are carried out by that licensee.
[1] Cheshire Contractors Pty Ltd v Everett [2018] 3 Qd R 94.
[2] Civil Mining & Construction Pty Ltd v Wiggins Island Coal Export Terminal Pty Ltd [2017] QSC 85, [894]-[903].
[3] Monadelphous Engineering Pty Ltd v Wiggins Island Coal Export Terminal Pty Ltd [2015] QSC 160, [44].
