Griffin Coal told to pay Carna $5m for contract breach

The federal court has ordered Griffin Coal to hand over more than $5 million in damages to its former contractor Carna Group, following a bitter six-year contractual dispute over works at its Collie mine.

Family-owned business Carna Group was placed in administration in March 2015, a collapse it attributed to a dispute with Griffin Coal Mine owner Lanco Infratech over the non-payment of a contract it held at the mine.

Carna severed ties with Griffin and walked off the mine in December 2014 over the dispute, prompting its administrators to launch a civil court action to recoup the money owed and additional damages.

Since then, Carna has been pursuing legal action against Griffin Coal Mining Company, its director Raj Kumar Roy and financial controller James Riordan over allegations of misleading and deceptive conduct in the negotiation of the employment contract and breaches of that contract.

The misconduct claim was settled in March this year, but what remained was the company’s claim against Griffin for two alleged breaches of the contract; which concerned whether Griffin had committed an insolvency default breach and whether it had failed to establish a payment account for invoices to Carna, as required under the contract.

It also addressed whether the company was unable to pay the debts as they fell due.

In a judgement handed down in the Federal Court this morning after a two-day trial, justice Neil McKerracher ordered Griffin to pay Carna Group $5,116,400.27 in damages.

In handing down the judgement, Justice McKerracher said the insolvency default breach and the payment account breach had been established, but that the latter was not a “substantial breach’.

He said the sums involved in the contract were “substantial”, as were the financial problems of Griffin at the time.

Griffin has been experiencing financial difficulties for several years, with its latest annual report showing it lost $40 million in the year to March 2018.

During the two-day trial, the court was told that Carna issued Griffin $30.8 million in invoices between January and December of 2014.

Details from the trial revealed that Griffin had been required to pay invoices within 20 days of issue, but that just five months into the contract, it had delayed paying Carna invoices totalling $5.7 million.

By the following month, the amount outstanding had more than doubled, with Carna writing to Griffin claiming it was owed $14.5 million.

The majority of those funds were more than 35 days late, and Carna warned it was no longer in a position to carry the debt and would have to suspend work at the mine.

Though Griffin made a series of payments of several million dollars at a time, it consistently remained in arrears by between $5 million and $11 million at a time.

By September, there were more than $12 million in invoices outstanding, and by November, Carna shut down operations; claiming it was unable to pay employees or pay for fuel deliveries.

At the time of the court action, Carna’s valuation of its entitlement stood at more than $19 million, but Griffin rejected all but one of those claims - a $4.5 million termination payment.

The court rejected Griffin’s assertion that its recent settlement with Carna should be factored into any award for damages.

In a statement released this afternoon, Carna Group liquidators FTI Consulting welcomed the decision.

"Before entering this contract, Carna Group had a substantial successful operational history that was impacted significantly by a single contract," the company said.

"Initiating these proceedings on behalf of Carna Group followed a carefully considered strategy to maximise recoveries for creditors."