An Indian-owned Australian coal miner, believed to be worth more than $ 1 billion in red, overturns after a federal court judge ordered the company to pay an aggrieved creditor more than $ 5 million in costs.
- The federal court has ordered Griffin Coal to pay Carna Group $ 5.1 million in damages
- Carna administered the Griffin mine in 2014, but sued on charges of repeated non-payment
- Griffin is owned by Indian interests and has reportedly lost more than $ 1 billion in 10 years
Griffin Coal Mining, which operates a mine at Collie, about 300 km south of Perth, has been left behind after losing a case brought by its former mining manager, Carna Civil and Engineering.
Carna operated the mine for about nine months until December 2014, when it terminated the contract due to claims that Griffin had repeatedly failed to pay its debt on time.
It subsequently went into liquidation and sued Griffin for damages.
In a ruling handed down in Perth on Friday, Judge Neil McKerracher confirmed Carna’s claim, saying Griffin’s non-payment had been “consistent and disabling” for the contractor.
“There’s no doubt that the entire contract period … Griffin was under a chronic disability in terms of its ability to pay its debts,” Justice McKerracher found.
“As is clear from the documentary record, at the end of 2013 and 2014, Griffin could not pay all of his debts as they fell due without parent company support.
“The crucial thing was that parental support was consistently not created at the time it was needed and in the amounts needed to pay Griffin’s debts.”
Griffin in ‘terrible’ financial health
According to the ruling, financial accounts show that Griffin burned nearly $ 70 million in cash in fiscal year 2017 and nearly $ 50 million in the nine months to the end of March 2018.
Justice McKerracher ruled that Griffin should pay Carna $ 5.1 million in damages plus costs, even though he overruled a decision on how much interest the miner should pay.
Steve Thomas, a state-liberal MP, said the decision was a devastating setback for Griffin, who had been hit by a series of crises since it was taken over by Indian interests in 2011.
Most recently, Griffin relied on a so-called Act of God clause to reduce deliveries to its customers and blame a relatively wet winter.
Dr. Thomas put Griffin’s total losses over the last decade at more than $ 1 billion, saying that even though $ 5.1 million may not sound like much “it’s another nail in Griffin’s coffin”.
He said Griffin’s problems created uncertainty over the town of Collie, the heart of WA’s coal industry, and produced nearly half of the power to the state’s main grid.
“It all points to a company that is simply unable to manage its financial affairs,” Thomas said.
“Ultimately, Collie is so important to the Southwest.”
Decision of ‘justification’ for trial
Griffin’s customers include Bluewaters, the 400mw power plant whose value was written down to zero last year by its Japanese owners amid the crumbling economy of coal-fired power generation.
Unlike the eastern states, WA does not export its coal, which is used domestically for electricity generation and industrial purposes.
FTI Consulting, acting as liquidator for Carna, said it welcomed the federal court’s decision confirming its decision to press its legal case against Griffin.
“(The decision) upholds our claim, which was centered on guarantees and representations from the Griffin Coal about its financial health, before Carna signed a mining service contract with Griffin in early 2014,” an FTI spokesman said.
“Prior to the conclusion of this contract, Carna Group had a significant successful operational history, which was significantly affected by a single contract.
“It had been operating successfully since its inception in 1992, delivering more than 250 projects on behalf of clients.
“The initiation of these proceedings on behalf of Carna Group followed a carefully considered strategy to maximize recovery for creditors.”
Griffin has been contacted for comment.