Receivers gunning for Griffin Coal liquidators

While it might appear that today’s edition comprises a “Focus on the West” and a spotlight on Deloitte partner Sean Holmes, we can assure iNO readers that it’s a coincidence.

Unlike our other yarn involving Holmes’s efforts to wind up a Ponzi scheme based on algorithmic trading of foreign exchange, this old economy tale deals with that bedrock of Australian enterprise, coal mining.

“At that meeting, which was conducted/led by the Receivers the Receivers advised that they (presumably on behalf of all of those in attendance) had lost confidence in the Liquidators and that, given our conduct to date, would be taking steps to remove us.” Excerpt from the August 11, 2023 Liquidators’ Report to Creditors of Griffin Coal.

Holmes features courtesy of his role as one of three Deloitte partners who were appointed as receivers of Griffin Coal Mining Company Pty Ltd (GCMC) and related entity Carpenter Mine Management Pty Ltd (CMM) (Griffin Group) on September 13, 2022.

On the same day Cor Cordis partners Tom Birch and Jeremy Nipps were appointed liquidators of the two companies, having been referred the appointment by Deloitte.

The liquidators’ initial DIRRI doesn’t identify who at Deloitte was their first contact but Birch and Holmes worked together previously at Ferrier Hodgson.

While that relationship might have had some influence on the referral, relations have since soured to the point where on August 31 creditors will assemble to vote on a resolution calling for the removal of Birch and Nipps and the installation of Pitcher Partners’ Bryan Hughes and Chris Pattinson, who as their DIRRI shows are not exactly strangers to Griffin and its woes.

According to the liquidators’ supplementary report to creditors dated August 11, the meeting’s been called at the behest of Lanco Resources Australia Pty Ltd (Lanco), a subsidiary of crippled Indian conglomerate Lanco Infratech.

That however might not be straightforward given Indian bank ICIC has been pulling the strings since it funded Lanco’s purchase of Griffin Coal’s mines in 2010.

It’s been widely documented that Griffin’s problems relate to uncommercial Coal Supply Agreements (CSA) it’s entered into with the Kansai Electric and Sumitomo Corporation-owned Bluewater Group, which is West Australia’s largest coal-fired electricity generator.

While the world’s coal miners have been gleefully reaping hundreds of dollars per tonne for their stored solar energy, the Bluewater CSAs reportedly require Griffin to deliver at no more than $50 per tonne and upon their appointment, Birch and Nipps were asked first by the receivers and then by Lanco to examine the legitimacy of the Bluewater CSAs.

Asked, but not funded, as the liquidators make clear in their report, which refers to fruitless discussions with Holmes and co-receivers Matthew Donnelly and Grant Sparkes about funding that never arrived.

Things changed just before Christmas when Lanco wrote to the liquidators expressing its concerns about the Bluewater CSAs and offering funding.

Their message was clear. If the liquidators could find a way to disclaim the Bluewater CSAs then do so.

Early in the new year Birch and Nipps issued a replacement DIRRI to advise they’d received $550,000 from Lanco “to meet certain legal costs and other out of pocket expenses”.

Between receipt of the funds in early January and May, the liquidators wrote to Bluewater, the West Australian Government, the receivers and the secured creditors “for the purpose of conferral
on the question of whether the Bluewaters CSAs were ‘unprofitable’ within the meaning of
section 568 of the Act and the issue of the potential disclaimer of the Bluewaters CSAs (the
Disclaimers).”

Then on May 22 Lanco wrote to the liquidators advising that it disagreed with their proposed strategy for disclaiming the Bluewater CSAs and wanted what was left of the $550,000 returned.

“The Liquidators disagreed with (and continue to disagree with) Lanco’s entitlement to
request the return of the funding,” Birch and Nipps told creditors.

The simmering dispute erupted on June 28 when Birch and Nipps were summonsed to Brookfield Place, Deloitte’s headquarters in Perth.

“At that meeting, which was conducted / led by the Receivers, we discussed the abovementioned matters. At the conclusion of the meeting, the Receivers advised that they (presumably on behalf of all of those in attendance) had lost confidence in the Liquidators and that, given our conduct to date, would be taking steps to remove us,” Birch and Nipps said in the August 11 report.

“While we are convening the meetings, we consider that the request from Lanco is unreasonable, unwarranted and may substantially prejudice the interests of one or more creditors or a third party.

“The Liquidators reserve their rights in this regard.”

Bring on August 31 when creditors will be asked to first vote on a series of resolutions in respect of Birch and Nipps’ remuneration before they get to vote on whether or not Hughes and Pattinson should replace them.

Given Lanco’s demands for repayment of the unutilised portion of the indemnity, the incumbents can expect resistance.