Bluewaters bids for Griffin Coal inquiry

The Federal Court of Australia has dismissed Bluewaters Power’s bid for an inquiry into the alleged misconduct of Griffin Coal’s receivers despite finding an element of mistrust between the parties.

In a judgment delivered today, Federal Court judge Michael Feutrill dismissed Bluewaters’ application because he was not satisfied an inquiry was warranted.

However, Justice Feutrill accepted Bluewaters’ claim that the receivers’ conduct had an element of mistrust.

Bluewaters Power operates a coal-powered station in Collie, supplying up to 20 per cent of electricity demand in the South-West Interconnected System and was Griffin Coal’s biggest customer.

Deloitte’s Matthew Donnelly, Sean Holmes, and Grant Sparkes were appointed as receivers and managers to Griffin Coal Mining Company in 2022.

According to the judgment, the receivers were of the view Griffin Coal’s obligations under long-term coal supply agreements were unprofitable and would adversely affect the business if continued.

But Bluewaters started legal action in the Federal Court, alleging the receivers’ conduct over disclaiming the coal-supply agreements was outside of their power.

Justice Feutrill said the receivers appeared to have played a role in a decision by Griffin’s liquidators seeking to end the agreements.

“In these circumstances, the receivers, and no doubt Griffin Coal’s financiers, would like to see Griffin Coal liberated from its obligation to perform the [coal supply agreements],” his judgment reads.

“To that end, the receivers encouraged the former liquidators to disclaim the [coal supply agreements] under s 568 of the Act in the belief and on the understanding that, if disclaimed, Griffin Coal’s obligations under the contracts would be terminated and so too would the receivers’ obligation to continue performing those obligations.”

Cor Cordis partners Tom Birch and Jeremy Nipps were appointed as liquidators of Griffin Coal Mining Company in September 2022.

However, they were replaced by WLP Restructuring’s Glenn Livingstone and Scott Pascoe at Griffin Coal’s parent company Lanco’s intervention.

“There are documents that suggest that the receivers played an instrumental role in bringing about the replacement of the former liquidators with the new liquidators,” Justice Feutrill observed.

“For example, prior to their appointment, the new liquidators were contacted by Mr Robert True of (law firm) Quinn Emanuel who represented that he acted for ‘Senior Lenders including ICICI [Bank]’.

“A series of texts exchanged between Mr True and Mr Livingstone were in evidence.

“In one text Mr True said that ‘Deloitte Perth (receivers) are in the client’s ear on this one and will want to make it their referral …’.”

Justice Feutrill also accepted Bluewaters’ submissions to the effect that “the receivers’ conduct has, no doubt, engendered an element of mistrust and sense in which they have not acted impartially”.

“However, the extent to which that would disqualify them from continuing in their role could also be the subject of declaratory or, possibly, other relief.

“Therefore, that factor, at this stage, is relatively neutral.

“As is the fact that the receivership is likely to continue for some time.”

In conclusion, Justice Feutrill found that Bluewaters Power had raised reasonably arguable claims that the receivers did not faithfully perform their functions.

However, he concluded the alleged misconduct was of a relatively minor nature.

“The alleged misconduct largely turns on points of contractual interpretation and, if sustained, appears to be driven by an honest but mistaken apprehension about the nature of the Receivers’ functions and powers,” he stated.

Justice Feutrill fell short of accepting Bluewaters’ bid for an inquiry.

“Having regard to all the discretionary factors to which reference has been made, I am not satisfied that an order for an inquiry is warranted at this time,” he said.

“However, if Bluewaters Power commences proceedings in which it seeks declaratory or other relief against the Receivers and those proceedings are successful, findings may be made in the course of those proceedings that may warrant disciplinary sanction or inquiry into the conduct of the receivers.

“If other proceedings are commenced, depending on the outcome and what findings are made in those proceedings, they may then renew this application.”