Carna Group Pty Ltd v The Griffin Coal Mining Company

THE ISSUES 8 The issues at trial were ultimately these: (1) Did Griffin materially breach the Contract by reason of an 'Insolvency Default', as defined in the Contract (the Insolvency Default Breach)? (2) Did Griffin fail to establish a 'Payment Account' in accordance with cl 10.9 of the Contract (the Payment Account Breach)? (3) If the answer to 2 above is 'yes', was that failure a substantial breach within the meaning of 'Event of Default' under the Contract? (4) If the answers to 2 and 3 above are 'yes', did Carna seek to rely on this 'Event of Default' in its letter to Griffin on 3 December 2014? (5) If an 'Insolvency Default' or any breach entitling Carna to terminate is found, what is the quantum of Carna's entitlement to compensation for breach of contract under Sch 15 of the Contract? (6) Pursuant to what provision, and at what rate, should interest be awarded on any sum awarded to Carna? (it is agreed that this issue be deferred pending the resolution of issues (1)-(5)).

THE CONTRACT 9 Although there were references in the arguments to both a Contract and a 'Substituted Contract', the distinction between the two fell away on the case as finally advanced. The only relevance, in the failed negotiation of the Contract, followed by the immediate re-negotiation of the 'Substituted Contract', is that these events give context to the issues now in dispute. For convenience however, the agreement ultimately reached between the parties is simply referred to as the 'Contract'. 10 On 28 January 2014, Griffin as principal and Carna as contractor entered into the Contract. It was a mining services contract. The commencement date was defined as being 1 March 2014 or four weeks from satisfaction of conditions precedent, whichever was later. The conditions precedent required the parties to agree on a series of schedules to deal with the particulars of the operation. Those schedules were not agreed until mid-March 2014, such that the Contract was terminated and replaced by a Substituted Contract. 11 In consideration for the provision of the Mining Services, Griffin agreed to pay Carna a Mining Fee. With the removal of the statutory claims upon which Griffin's cross-claim was predicated, there is no challenge to the adequacy of Carna's provision of the Mining Services, though Griffin does raise one argument in resisting the alleged Insolvency Default Breach which touches upon Carna's own financial position during the Contract. 12 Griffin's obligation to pay the Mining Fee to Carna is contained in cl 10.1 of the Contract which provides: 10 Payment 10.1 [Griffin's] payment obligation (a) Subject to the proper performance of the Mining Services, [Griffin] must pay [Carna] the: (i) Mining Fee calculated in accordance with Schedule 13; and (ii) any other amounts which may become due to [Carna] under this agreement. (b) Subject to the other provisions of the agreement which provide for payment to [Carna], [Carna] accepts the payment of the Mining Fee in accordance with this agreement as full payment for the provision of the Mining Services and the performance of its other obligations under this agreement. 13 The terms Mining Services and Mining Fee were defined by reference to both cl 1.1 (Definitions) and the schedules to the Contract. Pursuant to Sch 13, the Mining Fee comprised a Monthly Progress Claim component and an Annual Reconciliation Invoice component. Amongst other things, the costs of consumables (including fuel, power and explosives) were to be factored into Carna's Monthly Progress Claim invoices to Griffin. Schedule 13 relevantly provided that: (a) the actual cost of power consumed by Carna each month was an item for which Carna would charge Griffin in Monthly Progress Claim invoices; and (b) the actual cost of consumable items provided by Griffin to Carna each month (net of payments made by Carna to Griffin for those items) could be deducted from Carna's Monthly Progress Claim invoices to Griffin. 14 Monthly Progress Claim was also defined in cl 1.1(Definitions) of the Contract as being a claim for payment in the form approved by Griffin's Representative showing the value of the Mining Services and other amounts claimed by Carna for a given month as calculated by Carna from information available to Carna and in compliance with the Contract. Clause 10.2 then provided for a process by which Monthly Progress Claim invoices were to be received, verified and paid by Griffin: 10.2 Payment (a) [Carna] must submit to [Griffin's] Representative within 5 days after the end of each month a Monthly Progress Claim for the previous month including: (i) the quantities of Coal Dispatched and received by the Buyers during the month for which there are specific rates in the Schedule 14; (ii) the Mining Fee payable calculated in accordance with Schedule 13; (iii) all evidence reasonably acceptable to [Griffin's] Representative verifying or substantiating amounts used for the purposes of calculating the Monthly Progress Claim; (iv) details of [Carna's] calculations of the Monthly Progress Claim; and (v) any other monies due to [Carna] under any other provision of this agreement. (b) Following receipt of a Monthly Progress Claim, [Griffin's] Representative must, within 7 days, determine the amount payable in respect of the Monthly Progress Claim and issue a payment certificate to [Griffin] and [Carna] setting out that determination showing: (i) the amount payable to [Carna] for the month; less (ii) the total of any monies which are due from [Carna] to [Griffin] under a provision this agreement [sic] (Payment Certificate). The Payment Certificate must include or enclose details of [Griffin's] Representative's calculations of the stated amounts and, if [Griffin's] Representative does not accept [Carna's] calculations, a statement of reasons for the differences in calculation. If [Griffin] does not issue a Payment Certificate, then it is deemed to have accepted [Carna's] claim in full. (c) [Carna] must give [Griffin] a Valid Tax Invoice in respect of the items and amount shown in the Payment Certificate within 2 business days of receipt of that certificate. (d) If requested by [Griffin's] Representative before the date for the issue of a Payment Certificate, [Carna] must give [Griffin] a statutory declaration in the form set out in Schedule 3 before it receives a payment under a Payment Certificate. (e) Provided that [Carna] has provided [Griffin] with a Valid Tax Invoice, and clause 10.2(d) where applicable has been complied with, [Griffin] must pay the amount in the Payment Certificate to [Carna] (less any amounts which [Griffin] is entitled to set off under this agreement) or, if [Griffin] has not issued a Payment Certificate, the whole of the amount claimed, within 20 days of receipt of a Valid Tax Invoice. (f) If [Griffin] does not pay the amount assessed in the Payment Certificate or [Carna's] claim (whichever applies), by the due date for payment in subparagraph (e) above, [Carna] may suspend the work upon 7 days' written notice to [Griffin] provided that non-payment is subsisting at the end of the 7 days notice period. (g) Any disputed amounts or amended amounts set out in a Payment Certificate will be paid to [Carna] or [Griffin] (as the case may be) within 14 days of it being resolved that [Carna] or [Griffin] (as the case may be) is entitled to such disputed or amended amount (including any amounts subject to dispute over whether or not they were erroneously included in the Payment Certificate). (h) If the payment is due on a day that is not a business day then that payment is due and payable on the next business day. (Emphasis added.) 15 The balance of cl 10 then provided for the payment of various amounts in certain circumstances as follows: 10.3 Interest If any monies due to either party remain unpaid after the due date, then interest is payable on the amount due from, but excluding, the due date to and including the date upon which the monies are paid. The rate of interest is the average bid rate for bills (as defined in the Bills of Exchange Act 1909 (Cth)) having a tenor of 90 days which is displayed on the page of the Reuters Monitor System designated "BBSY" plus one percent. Interest must be compounded at 3 monthly intervals. 10.4 Set-off Notwithstanding any other provision of this agreement or any Payment Certificate issued by [Griffin's] Representative, [Griffin] may set-off or deduct from any amounts due to [Carna] under this agreement any monies due from [Carna] to [Griffin] on any account under this agreement. 10.5 Annual Reconciliation Payment (a) At the end of every 12 (twelve) calendar months from the Commencement Date, [Carna] shall raise an annual reconciliation invoice for the immediate preceding 12 (twelve) months to [Griffin] ("Annual Reconciliation Invoice") for reconciliation and payment of any outstanding dues under this agreement except that the Year 1 annual reconciliation would be carried out at the end of 13 months from the Commencement Date. The Annual Reconciliation Invoice should clearly specify the requisite details as mentioned in Schedule 14. For the avoidance of doubt, it is clarified the remaining provisions of Clause 10 shall apply mutatis mutandis to the monies payable by [Griffin] on the basis of Annual Reconciliation Invoice (b) [Griffin] and [Carna] agree on the following process for the annual [sic] Annual Reconciliation Invoice process (i) [Griffin] and [Carna] are to agree on an external third party to be engaged to perform any services (including joint survey (at first instance) or to check if there is any difference in joint survey findings) (with the cost jointly borne by [Griffin] and [Carna]) to assist or confirm the annual reconciliation amount. This is to be agreed at least 1 calendar month prior to each 12 month annual reconciliation period. (ii) [Griffin] and [Carna] envisage that the external third party would take 4 weeks to produce its report, and upon the release of the report to both [Griffin] and [Carna], [Carna] is to provide its annual reconciliation invoice 10.6 Payment adjustments The parties agree that confirmation or payment by [Griffin] of any amount relating to the Mining Fee does not prevent either party from requiring a further adjustment to the amount confirmed or paid to ensure that actual amounts finally paid to [Carna] are the amounts required to be paid under this agreement taking into account any relevant actual information not available at the time that the calculation or payment of amounts was made. 10.7 Taxes (a) Unless otherwise expressly provided in this agreement, [Carna] must pay all taxes including sales tax, payroll tax, fringe benefits tax, levies, duties and assessments due in connection with the provision of Mining Services and [Carna's] performance of its other obligations under this agreement. (b) If any supply made under this agreement is subject to GST the party to whom the supply is made (Recipient) must pay to the party making the supply (Supplier), subject to the Supplier first issuing a Valid Tax Invoice to the Recipient, an additional amount equal to the GST payable on that supply. The additional amount is payable at the same time and in the same manner as the consideration for the supply, unless a Valid Tax Invoice has not been issued in which case the additional amount is payable on receipt of a Valid Tax Invoice. This sub-clause does not apply to the extent that the consideration for a supply is expressed to be GST inclusive. (c) If any party is required to reimburse or indemnify the other party for a cost, expense or liability (Cost) incurred by the other party, the amount of that Cost for the purpose of this agreement is the amount of the Cost incurred less the amount of any credit or refund of GST to which the party incurring the Cost is entitled to claim in respect of the Cost. 10.8 Standby (a) In its pricing for the Mining Fee, [Carna] has made allowance for: (i) 3 public holidays; and (ii) 39 days (or part thereof) for inclement weather and noise (inclusive), where [Carna] is unable to utilise its labour and/or equipment or is required to 'stand down' labour and equipment (Standby). [Carna] will bear its own costs for Standby for that duration. For the purpose of this clause [Carna] will keep [Griffin] regularly informed about these occurrences and the number of hours on cummulative [sic] basis. (b) After the allowance for Standby as set out in paragraph (a) above is exhausted, Standby related to noise and/ or inclement weather for up to an additional 8 days to that set out in paragraph (a), [Carna] shall be paid 50% of the Standby Rates for the period of Standby; (c) In all other respect[s], [Carna] shall be paid for Standby as follows: (i) for Standby caused or contributed to by [Griffin] i.e. failure to obtain mine approvals, licences, mine planning, directions to [Carna] as required under this agreement, [Carna] will be paid 100% of the Standby Rates for each day (or part thereof) of Standby; and (ii) for Standby caused or influenced by external authorities (other than on a default by [Carna]), [Carna] will be paid 100% of the Standby Rates for each day (or part thereof) of Standby, provided that where it is reasonable and practicable to do so, [Carna] will divert labour and equipment to non-affected areas of the Site. For the avoidance of doubt, Standby Rates are paid on a pro-rata basis such that those rates are paid to the extent that [Carna] is required to "stand down" labour and equipment. Notwithstanding anything in this agreement Standby Rates are payable provided that there is no subsisting default by [Carna] and provided that [Carna] informs [Griffin] of any delays, disruption or the applicability of the Standby Rates or payments in a timely manner and in any event within 4 hours of the commencement of the delay, disruption or applicability of the Standby Rates or payments. 10.9 Payment Account [Griffin] and [Carna] agrees [sic] to utilise a Payment Account for the purposes of ensuring payments are made to [Carna] by the due date under this agreement. [Griffin] must ensure as on the due date for payment, that there are sufficient [sic] funds in Payment Account to meet the amount payable for the relevant Monthly Progress Claim. (Emphasis added.) 16 It can be seen that cl 10.2 provided a mechanism for the resolution of late payments required to be made by Griffin and included cl 10.2(f) which enabled Carna to suspend its provision of services to Griffin. Clause 10.8(c)(ii) also enabled Carna to recover standby rates during any such suspension. In fact, on the occasions when Carna suspended works for non-payment, it charged and was paid such standby rates. This is relevant to an argument for Griffin that the availability of these mechanisms tells against a construction of the definition of 'Insolvent' which would permit Carna to rely on delays in payments by Griffin to generate a right to terminate the Contract for an Insolvency Default Breach. Griffin argues that Carna's construction would effectively elevate any minor payment-related breach to enlivening a contractual power to terminate. Griffin says that contention would render these contractual provisions of limited utility. This argument is addressed below. 17 As cl 10.9 sets out, Carna and Griffin agreed to utilise a 'Payment Account' to ensure Carna was paid on time for its Monthly Progress Claim invoices, as settled under cl 10.2. The term 'Payment Account' was also defined in cl 1.1 to be: an arrangement between [Griffin] and [Carna] where moneys would be received by Griffin under the Coal Supply Agreements or other coal sale agreements and would be paid to [Carna] in accordance with [the Contract]. 'Coal Supply Agreements' was further defined to mean the agreements entered into by Griffin with third party buyers who would purchase the coal produced at the Mine. 18 Clause 17 of the Contract made provision for the suspension and termination of the Contract in certain circumstances. It is central to many of the contractual arguments raised. The relevant parts provide as follows: 17.3 Termination by Principal for convenience (a) Notwithstanding any other provision of this agreement, [Griffin] may, at its sole discretion, terminate this agreement for its convenience at any time, where in the sole opinion of [Griffin], to continue with the mining operation would cause it significant ongoing financial losses, by giving [Carna] 60 days' written notice in which case [Griffin] (without prejudice to any other rights or remedies it has) must pay to [Carna] the Early Termination Amount. … 17.4 Default and termination for default If a party commits an Event of Default, then the non-defaulting party may serve on the defaulting party, a notice of default which shall: (a) state that it is a notice under this clause; (b) specify the breach upon which it is based; and (c) specify the time within which the default must be rectified (which must be a reasonable time, but in any event, not less than 7 days). If the Event of Default: (a) is not remedied within the time allowed by the notice of default; or (b) is a default not capable of remedy and the party in default has not provided a reasonable: (i) explanation for the default; and (ii) basis for concluding that the default will not reoccur (together with any information necessary to support the basis for this conclusion), The non-defaulting party may terminate this agreement by 14 days written notice to the other party. 17.5 Termination on a Termination Event occurring If a Termination Event continues for a period of 28 days, then either party may may [sic] terminate this agreement by giving the other party 14 days written notice specifying the Termination Event relied upon. For the purposes of clause 3.2(c) only, once the Termination Event occurs, then [Griffin] may terminate this agreement immediately by giving [Carna] 14 days written notice specifying the Termination Event relied upon. In the event of a termination under this clause or under clauses 17.2(f), 17.4, 17.5, 17.11 or 21.3(e): (a) where it is not the default of [Carna], [Carna's] entitlements will be calculated in accordance with Schedule 15 as if the termination was for [Griffin's] convenience; and (b) where it is default of [Carna], [Carna] will be paid the refurbishment costs set out in Schedule 16 and any other claim accured [sic] under this agreement. [Carna] remains liable for anything it is liable for under this agreement including under clause 3. This provision survives termination of this agreement. … 17.7 Preservation of rights on termination Termination of this agreement for any reason does not affect the rights of a party that arise before the termination, or as a consequence of the event or occurrence giving rise to the termination, or as a consequence of the breach of any obligation under this agreement which continues to take effect after termination. … 17.11 Termination for insolvency Either party may terminate this agreement immediately upon written notice if the other party (or its ultimate parent entity or any institution who provides security on behalf of a party for the purposes of this agreement) commits an Insolvency Default. (Emphasis added.) 19 As to the Payment Account Breach, Carna relies principally on cl 17.4 which sets out the process by which the Contract is to be terminated if an ' ' occurs. The Contract defines an Event of Default as meaning, in respect of a party, any of the following: (a) if a party commits a substantial breach of its obligations under this agreement which is capable of being remedied; or (b) the party commits a substantial breach of its obligations under this agreement which is not capable of being remedied. (Emphasis added.) 20 As noted in the list of agreed issues above, a question of construction arises in relation to the work of the adjective 'substantial' in relation to whether the Payment Account Breach was an Event of Default. 21 As to the Insolvency Default Breach, the ability of a party to terminate the Contract with immediate effect under cl 17.11 was predicated on the other party committing an 'Insolvency Default'. Clause 1.1 of the Contract defined 'Insolvency Default' by direct reference to the separate definition in the same clause of the term 'Insolvent'. Critically, for the purposes of the Contract, 'Insolvent' means, in respect of a party, that it: (a) is (or states that it is) insolvent (as defined in the Corporations Act [2001 (Cth)]); (b) has a controller (as defined in the Corporations Act) appointed to any part of its property; (c) is in receivership, in receivership and management, in liquidation, in provisional liquidation, under administration or wound up or has had a receiver or a receiver and manager appointed to any part of its property; (d) is subject to any arrangement, assignment, moratorium or composition, protected from creditors under any statute or dissolved (other than to carry out a reconstruction or amalgamation while solvent on terms approved by the other party to this agreement); (e) is taken (under section 459(F)(1) of the Corporations Act to have failed to comply with a statutory demand; (f) is the subject of an event described in s 459(C)(2)(b) or s 585 of the Corporations Act (or it makes a statement from which the other party to this agreement reasonably deduces it is so subject); or (g) is otherwise unable to pay its debts when they fall due. (Emphasis added.) 22 Carna particularly relies upon subpara (g) of the definition of 'Insolvent'. It contends that Griffin was otherwise unable to pay its debts when they fell due. 23 Helpfully, the parties are (correctly) agreed that if the Contract was validly terminated under cl 17.4 or cl 17.11, Carna's entitlement, if any, is to be calculated in accordance with Sch 15 of the Contract 'as if the termination was for [Griffin's] convenience …': cl 17.5. Schedule 15 provides for the calculation of the Early Termination Amount. It provides as follows: Schedule 15 - Early Termination Amount 1. Calculation of Early Termination Amount The Early Termination Amount payable by [Griffin] for termination for convenience is the sum of: (a) the amount outstanding under any unpaid Monthly Progress Claim less any amount due by [Carna] to [Griffin] up to the date of termination; (b) the amount of any Monthly Progress Claim made by [Carna] for work performed up to the date of termination less any amount previously paid by [Griffin] in respect of such Monthly Progress Claim; (c) the balance of the refurbishment costs due in respect of the residual period as per Schedule 16; (d) [Carna's] demobilisation costs (by excluding employee costs unless agreed between the parties); (e) any other amount due for payment to [Carna] net of any sum to be recovered from [Carna], as per the provisions of this agreement; (f) an amount of $4,500,000.00 to compensate [Carna] for premature termination provided that [Carna] must use all reasonable endeavours to minimize the costs, expenses and liabilities which may be incurred by [Griffin] under this Schedule as a result of early termination for convenience by [Griffin]. In the case of a termination for [Carna's] default, notwithstanding any rights [Griffin] may otherwise have to claim damages from [Carna], [Griffin] must still pay to (subject to any set off rights of [Griffin]) [Carna] all unrecovered refurbishment costs as set out in Schedule 16. The refurbishment cost is to be paid in equal installments and over a period that is 50% of the residual Initial Term of this agreement.

Contractual construction 24 As will be seen, Carna contends that Griffin was 'Insolvent' within the meaning of subpara (g) of the contractual definition by 3 December 2014, being the date on which Carna purported to terminate the Contract with immediate effect under cl 17.11. The proper construction and meaning of subpara (g) is strongly contested. 25 The principles applicable to the construction of a commercial contract have been summarised by the High Court in Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 per French CJ, Hayne, Crennan and Kiefel JJ (at [35]), where their Honours said: Both Verve and the Sellers recognised that this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties … intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience". (Emphasis added, citations omitted.) 26 Similar statements of principle appear in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 per French CJ, Nettle and Gordon JJ (at [46]-[51]) where their Honours said: 46 The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose. 47 In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract. 48 Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning. 49 However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals. 50 Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations. 51 Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption "that the parties … intended to produce a commercial result". Put another way, a commercial contract should be construed so as to avoid it "making commercial nonsense or working commercial inconvenience". (Emphasis added, citations omitted.) 27 More recently, in Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 544, Kiefel, Bell and Gordon JJ reiterated this objective approach (at [16]-[17]): 16 It is well established that the terms of a commercial contract are to be understood objectively, by what a reasonable businessperson would have understood them to mean, rather than by reference to the subjectively stated intentions of the parties to the contract. In a practical sense, this requires that the reasonable businessperson be placed in the position of the parties. It is from that perspective that the court considers the circumstances surrounding the contract and the commercial purpose and objects to be achieved by it. 17 Clause 4 is to be construed by reference to the commercial purpose sought to be achieved by the terms of the lease. It follows, as was pointed out in the joint judgment in Electricity Generation Corporation v Woodside Energy Ltd, that the court is entitled to approach the task of construction of the clause on the basis that the parties intended to produce a commercial result, one which makes commercial sense. It goes without saying that this requires that the construction placed upon cl 4 be consistent with the commercial object of the agreement. (Citations omitted.) 28 Finally, the Full Court in Findex Group Limited v McKay [2020] FCAFC 182 per Markovic, Banks-Smith and Anderson JJ last year applied these principles as follows (at [78]-[87]): 78 A commercial contract is to be construed so as to avoid it making commercial nonsense or working commercial inconvenience: Woodside Energy, [35]; Zhu v Treasurer (NSW) [2004] HCA 56; 218 CLR 530, [83]; Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310, 313-314. 79 Commercial contracts must be interpreted fairly and broadly, without being too astute or subtle in finding defects: Pan Foods Company Importers and Distributors Pty Ltd v Australia and New Zealand Banking [2000] HCA 20; 170 ALR 579, [14]; Australasian Performing Right Association, 109-110. 80 A construction that avoids unreasonable results is to be preferred to one that does not, even though it may not be the most obvious, or the most grammatically accurate: Australasian Performing Right Association, 109-110. 81 Determining the meaning of a contractual term normally requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165, [40] (Toll); Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, 350; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451 (Pacific Carriers), [22]; Woodside Energy, [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; 256 CLR 104 (Mount Bruce Mining), [47] and [49]-[50]; Ecosse Property, [17]. 82 Words may generally be supplied, omitted or corrected, in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency: Fitzgerald v Masters (1956) 95 CLR 420, 426-427. … 85 If a clause is valid in all ordinary circumstances which have been contemplated by the parties, it is equally valid notwithstanding that it might cover circumstances which are so 'extravagant', 'fantastic', 'unlikely or improbable' that they must have been entirely outside the contemplation of the parties: Home Counties Dairies Ltd v Skilton [1970] 1 WLR 526, 536 endorsed in Rentokil, 304 (Doyle CJ), 320-321 (Matheson J) and 339 (Debelle J). See also Marion White Ltd v Frances [1972] 1 WLR 1423; Littlewoods Organisation Ltd v Harris [1978] 1 All ER 1026; Clarke v Newland [1991] 1 All ER 397. ... 87 A construction which will preserve the validity of the contract is to be preferred to one which will make it void: Pearson v HRX Holdings Pty Ltd [2012] FCAFC 111; 205 FCR 187, [45]. 29 A provision in a contract is to be construed objectively by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose. Ordinarily, the process of construction is possible by reference to the contract alone. If an expression in a contract is unambiguous or susceptible of only one meaning, extrinsic evidence of surrounding circumstances external to the contract is not admissible to contradict its plain meaning. 30 Against the backdrop of these accepted principles lies the primary ground of dispute in this case concerning the alleged Insolvency Default Breach. The parties disagree first, as to the correct construction of the definition of 'Insolvent' set out in cl 1.1 of the Contract and second, whether the evidence establishes that Griffin was in fact 'Insolvent' at the relevant times, indeed Griffin contends that it could not be considered 'Insolvent' on any proper construction because its cash flow problems were temporary rather than endemic. 31 The Contract comprehensively defines the term 'Insolvent' by setting out seven specific circumstances which, if one or more applies to either party, will mean that party is 'Insolvent'. The only relevant circumstances for the purposes of this dispute are those set out at (a) and (g) of the definition: Insolvent means, in respect of a party, that it: (a) is (or states that it is) insolvent (as defined in the Corporations Act [2001 (Cth)]); … (g) is otherwise unable to pay its debts when they fall due. 32 Insolvent is defined in the Corporations Act 2001 (Cth) by s 95A which provides: 95A Solvency and insolvency (1) A person is solvent if, and only if, the person is able to pay all the person's debts, as and when they become due and payable. (2) A person who is not solvent is insolvent. Note: A company is taken to be insolvent if the company proposes a restructuring plan to creditors (see subsection 455A(2)). 33 As noted, Carna relies solely on subpara (g) and, as will be developed below, contends that Griffin was 'Insolvent' within the meaning of subpara (g) by 3 December 2014. Carna argues that each subparagraph is a separate head of liability that will attract the definition and thus constitute the state of being 'Insolvent' under the Contract. Each part of the definition must be given work to do and accordingly, there is no reason to read subpara (g) down by reason of its similarity to subpara (a) by reference to s 95A(1) of the Corporations Act. To the contrary, Carna contends that the presence of the word 'otherwise' indicates a means of demonstrating a state of 'Insolvency' in a different way to that contemplated by the other subparagraphs. The upshot of this argument for Carna is that, while similar legal tests may be utilised in assessing whether a party is 'Insolvent' under both subpara (a) and subpara (g), it is not necessary under subpara (g) to establish insolvency under s 95A of the Corporations Act. All that is required, Carna says, is a factual finding that Griffin was 'unable to pay its debts when they fell due' at the relevant point in time. 34 Griffin proffers an alternative construction to explain the inclusion of both subpara (a) and (g) in the contractual definition of 'Insolvent'. It notes that governments repeal legislation from time to time and if the Corporations Act were to be relevantly repealed or amended, cl 1.2(e) of the Contract could well operate to alter the content of subpara (a) of the definition. Clause 1.2(e) is in the following terms: 1.2 Interpretation In this agreement (unless the context otherwise requires): … (e) a reference to any legislation or legislative provision includes any statutory modification or re-enactment of, or legislative provision substituted for, and any subordinated legislation issued or made under, that legislation or legislative provision; … 35 There is therefore no warrant, Griffin says, to read subpara (g) more broadly than subpara (a) of the definition. Griffin argues that subpara (a) is intended to pick up the definition of insolvent under the Corporations Act, whatever that may be throughout the life of the Contract, while subpara (g) seeks to immortalise that definition by effectively setting it (or the converse) out. Properly construed, Griffin argues, the clause is intended to pick up the well-understood concept of insolvency considered by cases under the Corporations Act adopting the natural and ordinary meaning of the words used. 36 Griffin says it follows that as a matter of construction, Carna did not have a right to invoke cl 17.11 in circumstances where Griffin has never been found to be insolvent under the Corporations Act and indeed continues to trade today. This fact is strenuously emphasised by Griffin throughout each of its arguments. 37 Carna's construction is to be preferred. The text of the definition discloses no basis upon which subpara (g) is to be confined and read down by reference to subpara (a). Rather, each subparagraph should be construed as providing independent and different ways of demonstrating that a party to the Contract could be said to be 'Insolvent' within the meaning of the Contract. Such a construction is far more plausible than Griffin's contention that subpara (g) was only included as a contingency in the event that the Corporations Act was repealed or amended to alter the s 95A insolvency definition. Carna's construction is strengthened by the word 'otherwise' in subpara (g). It suggests that subpara (g) was intended to be different from subpara (a). Accordingly, subpara (g) operates to enable a party to terminate under cl 17.11 if the other party is 'otherwise unable to pay its debts when they fall due'. That expression in itself which will require explanation. 38 A debate then arises between the parties as to the correct test to be applied to determine whether a party is 'Insolvent' under the Contract by operation of subpara (g). Griffin notes Carna's arguments all proceed by reference to authorities which have applied the test for insolvency under s 95A of the Corporations Act and that this is so because of the clear similarity between subpara (g) and the statutory concept. For instance, Carna relies on Crema (Vic) Pty Ltd v Land Mark Property Developments (Vic) Ltd [2006] VSC 338; (2006) 58 ACSR 631 in which Dodds-Streeton J (at 652) enshrined the cash flow test of insolvency under s 95A. 39 There is no doubt that the analysis required under subpara (g) is similar to that which would be required under subpara (a) such that the same authorities may be relevant to both considerations. Subpara (g) is triggered on proof of debts that are not able to be paid when they fall due. That is a question of fact. It is accepted by Carna, however, that subpara (g), as is the case under s 95A, is not satisfied by viewing a single day in isolation. Carna points to the orthodox summary in The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) [2008] WASC 239; (2008) 39 WAR 1; (2008) 225 FLR 1 per Owen J (at [1065]-[1067], [1070] and [1072]-[1074]), which dealt with events over a 12-16 month period, revealing the importance of having regard to the months before and after the relevant moment in time. Debts that would arise in the immediate future, payment out of terms (whether the subject of demand or not) and similar factors which, as a matter of commercial reality and common sense should be considered at the date of insolvency, are relevant. 40 In Bell, Owen J said (and I respectfully agree) (at [1066] and [1070]-[1074]): 1066 The "cash flow" or "commercial insolvency" test is an assessment of solvency based on a company's ability to meet its debts (current liabilities), as and when they fall due. This test assesses the financial health of a company by reference to its capacity to finance its current operations. In other words, it looks at whether the company's business is viable and can continue to operate by meeting the present demands upon it. As the authors of Ford, Austin and Ramsay, Ford's Principles of Corporations Law (12th ed, 2005) point out, the essential features of the cash flow test include an assessment of the company's existing debts and debts that will arise in the near future, the date each debt is due for payment, the company's present and expected cash resources and the date each inflow item will be received (at [25.050]). … 1070 To add to the confusion, it is possible that a company might be cash flow insolvent but show a positive balance sheet where assets exceed liabilities. A company may be, at the same time, insolvent and wealthy. It may have wealth locked up in investments that are not easy to realise. Regardless of its wealth in this sense), unless it has assets available to meet its current liabilities, it is commercially insolvent and therefore liable to be wound up: Re Tweeds Garages Ltd [1962] Ch 406 at 460 (Plowman J, referring to an extract from the Buckley's Companies Acts, 13th ed, 1957). … 1072 There is no unanimity of approach across common law jurisdictions. In Australia, however, the cash flow test is generally viewed as the more appropriate mechanism for assessing solvency, both for individuals and companies. For example, in Bank of Australasia v Hall (1907) 4 CLR 1514 at 1521, Isaacs J said: "The debtor's position depends on whether he can pay his debts, not on whether a balance sheet will show a surplus of assets over liabilities". The cash flow test is more in keeping with the definitions of solvency in the Bankruptcy Act and the Corporations Law. 1073 That having been said, it would be wrong to dismiss the balance sheet test as irrelevant. It can be useful, for example, in providing contextual evidence for the proper application of the cash flow test. In Coburn N, Coburn's Insolvent Trading (2nd ed, 2003), p 66, the author says that: The courts have moved to a far wider consideration of solvency, rather than just applying a cash flow test, which is viewed as a basic starting point in the consideration of solvency. This is because the statutory emphasis is on "solvency" rather than "liquidity". The consideration will be as a question of fact: in the light of commercial reality, all things considered, could the company pay its debts as and when they became due? Such an approach includes the balance sheet test, and other commercial realities such as access to money from third parties, raising capital or credit and financial support are all relevant considerations in determining a company's ability to pay debts. 1074 The proposition that a balance sheet assessment continues to have some relevance is supported by other authorities: see, eg Australian Securities and Investments Commission v Edwards (2005) 220 ALR 148 at [96] (Barrett J); ACE Contractors & Staff Pty Ltd v Westgarth Development Pty Ltd [1999] FCA 728 at [44] (Weinberg J). (Emphasis added.) 41 Thus, in order to consider whether Griffin's financial position fell within the contractual definition of 'Insolvent' under subpara (g), it is necessary to consider in detail, the events in the months leading up to Carna's purported termination of the Contract on 3 December 2014.

ADMISSIBILITY OF RECORDS GOING TO LIABILITY 42 Carna bases its contractual claims entirely on the documentary evidence. It has not served any expert evidence from an insolvency practitioner expressing the opinion that Griffin was 'Insolvent' by at least 3 December 2014. There is no doubt that it was open to Carna to put on such evidence. It had intended to rely on an expert in relation to its statutory claims. Instead, it relies for the Insolvency Default Breach on documentary evidence and answers given by Mr Roy and Mr Riordan in examinations by Carna's liquidators. By and large, the parties have agreed that thousands of pages of documentary evidence could be admitted without objection. Griffin raises objections to a relatively small number of documents, and the parties agreed that these could be resolved in these reasons for judgment. 43 For the purpose of establishing the Insolvency Default Breach, the only disputed document upon which Carna relies is the Dunn & Bradstreet Report. There is also a question of the weight to be given to admissions purportedly made by Mr Riordan and Mr Roy during liquidators' examinations conducted between 2016 and 2019. These issues are dealt with below. The other disputed documents comprise business records of Carna which are said to demonstrate various amounts that were owing by Griffin to Carna following termination of the Contract. The admissibility or proper weight to be given to those business records is considered later in these reasons together with the substantive question as to the calculation of Carna's entitlement under Sch 15 of the Contract.

Dun & Bradstreet report 44 In its letter to Griffin of 3 December 2014 purporting to terminate the Contract on, amongst other things, insolvency grounds, Carna relied on a report produced by Dun & Bradstreet examining Griffin's credit worthiness. Dun & Bradstreet provide for a fee, views on, inter alia, states of solvency of companies. The report was compiled on 2 December 2014 and provides conclusions and scores calculated by Dun & Bradstreet pertaining to various measures of financial standing. 45 Griffin initially objected to this report on the grounds of relevance and alternatively by way of seeking a limitation as to the use of its contents under s 136 of the Evidence Act 1995 (Cth). This limitation would admit the matters recorded in the document but not the truth of these matters. In oral submissions, senior counsel for Griffin accepted that the objection was not so much as to admissibility but rather as to weight. Nothing more was said about the underlying facts on which the report was based. The report lists the commencement of 17 court actions which are sourced from publicly accessible documents. It also lists 15 collection notices issued on Griffin. The latter information appears to be derived from entities who participate in a Dunn and Bradstreet program by providing their invoice registers. 46 I give very little weight to the recommendations and conclusions in the report. I give no weight to the 'collections' referred to in the report. Nonetheless, the existence of court actions (to the extent they fall within the relevant time period) and the existence of substantial financial pressure ultimately was not seriously disputed in the proceeding. To this extent, the list is consistent with the history otherwise recorded in these reasons. However as senior counsel for Griffin said, 'there is a far better forensic landscape to trawl through to determine' the issue before the Court. I agree with that submission. No express objection was taken to the court actions listed in the report which are said to be sourced from public documents. That is true of some courts. But as the better records are expressly canvassed in these reasons, I also give them little to no weight or treat them as material pursuant to s 136 of the Evidence Act.

Admissions by Griffin's officers in liquidators' examinations 47 As has been noted, following the settlement of Carna's statutory claims and the removal of Mr Riordan and Mr Roy as respondents, Carna's contractual case proceeded entirely on documentary evidence. Neither Mr Riordan nor Mr Roy were called to give evidence. Carna relies however, on a number of admissions made by these two Griffin officers in the course of various liquidators' examinations conducted between 2016 and 2019. Carna sought to adduce evidence of those examinations by tendering the transcripts. In particular, Carna relies on what it says are clear admissions from both Mr Roy and Mr Riordan that Griffin was unable to pay its debts when they fell due in 2014. 48 Griffin does not object to the tender of the transcripts, but says that a careful reading of the exchanges recorded therein is required for the Court to form a view that the admissions as Carna frames them were actually made. Griffin points out that in some cases, Carna's construction as to the purported admission is put too high, or ignores qualifications that both individuals made in response to what appears to be fairly rigorous questioning. For instance, it is clear from the transcripts that both Mr Riordan and Mr Roy sought to qualify their answers to the proposition that Griffin was unable to pay its debts when they fell due by repeatedly saying that this was only true 'in some cases' or in 'certain instances' or absent parent company support. Griffin says the Court should give appropriate weight to these exchanges, rather than accept, as Carna appears to assert, that they demonstrate that Griffin was 'Insolvent' essentially by its own admission at the relevant times. 49 Griffin is undoubtedly correct on this point. I do not consider very much is gained from the examination transcripts on the specific question of whether Griffin was able to pay its debts when they fell due at the relevant times. Again, that is the ultimate question for the Court and, in a case which was run by both parties exclusively on a vast corpus of documents, it could hardly be thought that certain admissions, made some years ago under examinations in a different context, could add anything of substance as to the ultimate factual conclusion the Court is required to reach that is not already apparent from the documents. Mr Riordan and Mr Roy are not expert witnesses, or witnesses at all. (No doubt the examinations were useful for other purposes.) 50 A number of the admissions that Carna puts forward were clearly made by Mr Riordan or Mr Roy but are also readily apparent from the documents and not seriously contested by Griffin; for instance, that it was reliant on parent company support or that it paid some creditors late. Griffin does not shy away from the financial problems it was facing. 51 Perhaps the only admission on which any weight has been placed in these reasons is that of Mr Riordan in relation to Griffin's difficulties in borrowing from banks. This state of affairs is not expressly revealed on the documentary record, however it is a reasonable inference to be drawn by virtue of Griffin's reliance on other, more expensive forms of finance discussed below.

THE FINANCIAL ATMOSPHERE DURING THE CONTRACT 52 Against the backdrop of the claim and certain evidentiary rulings, it is necessary now to examine the financial circumstances during and around the performance of the Contract with an eye particularly to the alleged Insolvency Default Breach.

Griffin's position in 2013 and early 2014 53 A convenient summary of Griffin's creditors in 2014 was prepared in a schedule produced by Carna derived from the documentary records. That schedule is annexed to these reasons as Annexure A. It includes 12 creditors for which the only evidence is the collection notices listed in the Dunn & Bradstreet report, described in Annexure A as 'TB 672'. I have limited the uses that the report can be put to and have disregarded these references. 54 As the following reasons reveal, Griffin was in a precarious financial situation for much of 2013 and 2014, frequently paying creditors months after letters of demand were issued, and in a few instances, after proceedings were commenced. Counsel for Griffin could not shy away from those matters at trial, but maintained that Griffin eventually managed to pay off its debts and that now, more than six years later, it continues to trade. Thus, by reference to the authorities discussed in the next section, Griffin attempted to characterise this period as a time of temporary, yet surmountable liquidity problems. While there is some disagreement as to the exact timings, circumstances and amount of some payments, the main dispute concerns the correct characterisation to be given to Griffin's financial position at the relevant times and whether, as Carna claims, such characterisation reaches the threshold of an Insolvency Default Breach under the Contract. 55 Some contextual background is of assistance before looking at the evidence in detail. 56 Although the parties commenced communicating about the Contract in November 2013, and Carna did not commence on the Mine site until March 2014, a good deal of Carna's evidence was directed to Griffin's financial situation leading up to the Contract in 2013. Carna contends, relying on Bell, that the period of months before and after the alleged 'Insolvency' are relevant to the Court's assessment. 57 Since February 2011, Griffin was part of the Lanco Group of companies. The Lanco Group's acquisition of Griffin was funded by an $800 million facility provided by the Singapore branches of the Industrial Credit and Investment Corporation of India (ICICI Bank). The Lanco Group, at material times, comprised: (a) Griffin's parent, Lanco Resources Australia Pty Ltd; (b) Lanco Australia's parent, Lanco Resources International Pte Ltd, which was incorporated in Singapore (Lanco Singapore); and (c) Lanco Singapore's parent, Lanco Infratech Ltd, which was incorporated in India (Lanco India). 58 It was ultimately accepted at trial that Griffin was dependent on funding from Lanco Australia (and the Lanco Group more broadly) to meets its debts. The nature and relative timeliness of this 'parent support' is critical to both parties' arguments on the Insolvency Default Breach. 59 In addition to their positions in Griffin, Mr Roy was a director of Lanco Australia from 18 January 2014 and Mr Riordan was the company secretary from 26 August 2011. In April 2017, receivers and managers were appointed to Lanco Singapore. 60 Mr L Madhusudhan Rao, was the executive chairman of Lanco India, which underwent a restructure in December 2013 as the Lanco Group did not earn its estimated profits for the preceding three years. On 11 December 2013, the Industrial Development Bank of India (IDBI) approved that restructure, which proposed to utilise cash flow for business operations by obtaining a moratorium on debt servicing as well as additional funding. Support to Lanco Australia, Griffin and Carpenter Mine Management Pty Ltd (CMM) was factored into the restructure proposal. On 12 December 2013, Lanco India accepted the letter of approval from IDBI and passed necessary resolutions to implement the restructure. Mr Riordan reported at that stage that Griffin received about $25 million in funding from banks through the restructure. As pointed out by Carna at trial however, this funding was not received as a lump sum, and certain instalments were received later than Griffin had anticipated. 61 On July 2016 a further restructure was attempted, but it failed and on 27 August 2018, Lanco India went into liquidation. Nonetheless, Griffin itself has continued to trade. 62 Mr Riordan also holds the position of company secretary of CMM and financial controller of CMM. Mr Roy, at the relevant times was a director of CMM. At all times relevant to this proceeding, the ultimate holding company of Griffin and CMM was Lanco India. In about 2004, Griffin and CMM entered into a mining services contract under which CMM was responsible for certain costs incurred by Griffin. Griffin recharged these costs on a monthly basis to CMM. 63 Throughout the history of dealings between the parties, the documents reveal that the Lanco Group was struggling financially. It acquired Griffin in 2011 and Griffin had been a loss-making company at least for the period leading up to and including the Contract. Griffin frequently requested funding from Lanco India. If approved, that money was provided by Lanco India via Lanco Singapore, which transferred it to Lanco Australia and to CMM, which then ultimately transferred it to Griffin. Nothing particularly significant turns on this rather complex trail of funding. 64 There were times when Lanco India provided letters of support to its subsidiaries. For example, on 13 May 2013, Lanco India wrote to Lanco Australia that it undertook to arrange sufficient financial assistance for Lanco Australia as and when it was needed to enable Lanco Australia to continue its current operations and pay post-acquisition debts for at least one year from the time that the directors signed the 31 March 2013 financial statements. Griffin was not specifically mentioned. However, by letters of 16 August 2013, 19 May 2014 and 5 August 2014, Lanco India undertook to arrange sufficient financial assistance for Lanco Australia, Griffin and CMM as and when it was needed to enable them to continue current operations for at least one year from the time the directors signed the relevant financial statements, being for the years ending 31 March 2013 and 31 March 2014. 65 The correspondence in evidence suggests that Mr Riordan did not question Lanco India's assurances that it would provide funding to Griffin, nor did he conduct investigations into Lanco India's affairs, other than by speaking to Mr Roy. He relied upon Lanco India's prior instances of funding support and Lanco India's accounts. Mr Riordan was informed by Mr Roy that the ICICI Bank would continue to support Griffin through Lanco India. Mr Riordan was aware of media reports in late 2013 about the significant debt of Lanco India and that it was highly leveraged and was working with a group of banks to restructure its debt. In the liquidators' examinations, Mr Roy accepted that Lanco India was in a very difficult financial position in 2013 and 2014 and that is why it had to be restructured. 66 As will be seen below, Griffin clearly had no control over the degree, nature or timing of the support that Lanco India would provide. 67 The evidence shows that the support from Lanco India was not easily obtained and if it was received, it was often too late for Griffin to meet payments on time or as and when they fell due. The documents indicate that there was quite a deal of frustration between Mr Roy and Mr Riordan on behalf of Griffin about the inadequacy of funding from Lanco India. 68 The relevant background also includes dealings with a financier, Greensill Capital Australia Pty Ltd and Greensill Capital (UK) Limited (together, Greensill). Those companies were controlled by Mr Alexander (Lex) Greensill. The companies provided invoice factoring facilities, which enabled the principal, in this case Griffin, to sell invoices that were issued by its suppliers to the factor, in this case Greensill, at a discount. This required the suppliers of the principal to agree to have their invoices paid through the facility. Greensill would pay a supplier on the invoice, subject to a charge for its fees. The principal would then be liable to repay the full sum of the invoice over an extended period of time, up to between six months and a year, and subject to interest accruals. One of the advantages of a factoring facility is to assist businesses to pay their suppliers on time during times of low cash flow. 69 Such a facility was provided by Greensill Australia on 16 April 2012 to Griffin and to Lanco Singapore, Lanco Australia and CMM. Griffin was the primary debtor under this facility and would submit invoices from its suppliers for payment by Greensill. As noted, Griffin was obliged to eventually repay Greensill with interest. On 26 October 2012, that facility was transferred to, and replaced by, a new facility between Greensill UK and Lanco Australia, Griffin and CMM under which Griffin became the new 'parent' responsible for paying Greensill UK (the Griffin-Greensill Facility). That facility was used by CMM and Griffin to assist them in paying suppliers. When it did not have sufficient cash, Griffin was able to pay suppliers by using that Facility. In May 2014, Carna became a supplier under the Griffin-Greensill Facility to enable its invoices under the Contract to be paid. 70 There was a deal of evidence that the anticipated support from Lanco India was late and, on occasions, very late in arriving (if at all) to the point where the correspondence reveals that those operating Griffin locally may fairly be described as having been in a state of alarm. Griffin's own financial reports clearly showed in 2013 that its ability to continue as a going concern and to pay its debts as and when they fell due was 'primarily dependent' upon the continued support of Lanco India and the Griffin-Greensill Facility which was said to be 'to the value of $75 million' and necessary in order to 'further free cash flow for normal business activities'. In fact, the Griffin-Greensill Facility was never available to that amount, let alone by 31 March 2013. 71 The position as now known and as established on the evidence, is that numerous demands were made of Griffin by its creditors during 2013 ranging from small debts to significant amounts resulting in winding up proceedings being filed. Those demands included the following: Date Creditor Amount 22 March 2013 Australian Taxation Office (ATO) $13.9 million 4 July 2013 ATO - winding up application $8.613 million (reduced from $13.9 million) 30 July 2013 Mercury Messengers Pty Ltd $124.95 1 August 2013 Hewlett-Packard Financial Services Australia Pty Ltd $15,375.09 7 August 2013 Fremantle Ports $536,747.50 15 August 2013 Piacentini & Son (Piacentini) Amount unknown 27 August 2013 Fremantle Ports $253,845.02 1 October 2013 Davies & Davies $9,097.97 9 October 2013 Bureau of Metrology $47,009.60 15 October 2013 Wesfarmers Kleenheat Gas Pty Ltd $52,971.40 1 November 2013 Kreab Gavin Anderson (Australia) Ltd $51,209.40

72 As can be seen from the above table, the ATO filed a winding up application in July 2013, causing Griffin to pay its outstanding debt due to the ATO. Shortly after that, the winding up application was dismissed and Griffin was ordered to pay the costs of the Deputy Commissioner of Taxation. 73 Another supplier listed in the above table that will feature further in the narrative was Piacentini. It was a supplier to Griffin of dry hire and equipment repair/services for the Mine. It was another significant and frequent creditor that had agreed to receive payment of invoices through the Griffin-Greensill Facility. It raised concerns in August 2013 directly with Mr Greensill that its officers had 'not been able to speak to [Mr] Riordan for some time and we have not been receiving regular updates and/or payment from Griffin…'. They further expressed a 'growing concern as promises are not being kept.' The evidence shows that Mr Greensill brought this communication to the attention of Mr Riordan who advised that Griffin expected to be able to 'address these matters shortly.' 74 It is common ground that Griffin was reliant upon its parent for funding in 2013, and equally common ground that this factor alone would not be determinative of whether or not Griffin was able to pay its debts when they fell due within the meaning of those words in the Contract. 75 Griffin's income statement to the end of December 2013 showed its losses before interest and tax were approximately $38.6 million. 76 Griffin was able to control its financial affairs in a sporadic way through 2013 into early 2014. But by early 2014, Griffin had no contractor operating at the Mine and was concerned that it would not be able to continue to make payments to suppliers. That, in turn, would affect Griffin's ability to mine and to earn revenue. The internal documents demonstrate, and I find, that in late 2013 Griffin needed to execute a mining contract, in this case the Contract, as soon as possible. 77 It was in this context that Carna and Griffin commenced communicating about the prospect of a contract in November 2013. A series of proposals and meetings ensued. On 19 December 2013, Griffin expressed interest in engaging Carna to provide mining services and, following Carna's presentation of a five-year mine plan on 22 December, Griffin expressed its intention to award a mining services contract to Carna on 24 December 2013. Numerous drafts were exchanged from 3 January 2014. 78 Griffin's need to secure a contract with Carna for the provision of mining services is most starkly illustrated by an internal email of 14 January 2014 sent by Mr Kumar to Messrs Riordan, Roy and Peddu stating relevantly that: Production numbers are going down rapidly … You are aware the main reason being the lack of working capital and failure to maintain the gear … As mentioned earlier several times, if this situation continues, we are at grave risk of failing to meet the supplies to domestic customers. If we can't utilise January, February and March months effectively, even if [Carna] takes over operations, we can't expect better volumes from them during winter. We need: A. Immediate operational funding to maintain operations at a level which will give us minimum comfort to meet the domestic supplies. B. Whatif [sic] contract agreement doesn't happen? What is our Plan "B"??? PLEASE ACT IMMEDIATELY ON "A" & GIVE A SERIOUS THOUGHT ON "B" (Emphasis added.) 79 A month later, on 14 February 2014, Mr Kumar sent a follow up email noting that: [a]s found, the production volumes continued to slide and we failed to supply to blue waters the required quantities due to the same continuing issue of lack of operational funding Still my request regarding item "A" remains unaddressed … (Emphasis added.) Mr Roy responded to Mr Kumar's email later on 14 February 2014 stating that '[in] the given situation, Plan B is a definite closure, very frankly'. 80 Griffin's financial difficulties became public around this time. In January 2014, the media reported that the Office of State Revenue had lodged a charge under s 77A and s 78 of the Taxation Administration Act 2003 (WA) to secure Lanco Australia's stamp duty liability to the Commissioner of State Revenue. The next day, Mr Greensill emailed Mr Riordan raising concerns that he had only learned about this development from media reports. He sought an explanation from Mr Riordan which was provided later that day. Mr Grey also raised concerns the day after the media reports regarding Griffin's financial position and ways in which it could be ensured that payments to Carna would not be compromised. Noting Carna's potential exposure under the Contract (in draft form at this stage) would be $35 million in outlays, Mr Grey sought some form of security of payment from Griffin given that certain other options such as an escrow arrangement had fallen out of the Contract negotiations. 81 In any event, and despite what appears to have been some concerns on the part of Carna, the Contract was executed on 28 January 2014. Initially, in these proceedings there was much disputation as to whether this was the final form of the Contract or merely an initial contract, but as discussed, that issue has fallen away. 82 Under the Contract, Carna was to provide Griffin with Mining Services at its coal mines called Ewington 1 and Ewington 2 (together, the Mine), in exchange for payment. Those coal mines are multi-seam, multi-pit open cut coal mines located close to Collie. Griffin's processing plant comprised buildings and infrastructure for processing the coal from those mines, including conveyors which went to the Bluewaters Power Station, which was a Griffin customer as well as a supplier of power to the Mine. The total delivery capacity of the processing plant was 5 million tonnes per annum of coal. 83 The initial term of the Contract was for four years and one month from 1 March 2014 or four weeks from satisfaction of certain conditions precedent, whichever was the later date. The conditions precedent required agreement of various schedules to the Contract. These schedules were to deal with the particulars of the operation, such as the site, the detail of the mining operations, and the equipment. Griffin was to pay Carna to assist it to mobilise onto the Mine, and thereafter for the amount of coal mined by Carna, with various adjustments for consumables. 84 On 24 February 2014, Carna purported to terminate the Contract due to the non-satisfaction of conditions precedent, but at the same time, indicated it was willing to enter into a new contract on similar terms if issues as to equipment, the outstanding schedules to the Contract, and financing issues could be agreed. This ultimately occurred, and again nothing turns on this, except to observe that Carna did not commence on the Mine until mid-March 2014. 85 There were to be ongoing payments pursuant to cl 10 of the Contract known as Monthly Progress Claims. As noted, cl 10 established a process by which Carna was to submit invoices for Griffin's approval and payment. 86 At least on the face of the Contract, there was an expectation by cl 2.1(b) that each party warranted that it had the financial standing and capacity to fulfil its obligations under the Contract. This was despite the fact that at the time of execution of the Contract, Carna says Griffin's financial position was not sound, in that: (a) only two days before execution, on 26 January 2014, Mr Riordan had informed Mr Roy about a delayed transfer of USD$7 million from the Lanco Group which resulted, on 29 January 2014, in Griffin missing its deadlines for payment of superannuation, payroll, stamp duty, fuel and Greensill obligations; (b) on 23 January 2014, Piacentini's lawyers had made a demand for payment of over $8 million, arising from Piacentini's loan of equipment to Griffin on the Mine; (c) Griffin's income statement showed that to the end of January 2014, its loss so far for the year ended 31 March 2014, before interest and tax, was approximately $39.724 million; (d) the Griffin-Greensill Facility was still capped at $25 million. Griffin had reported to the ICICI Bank earlier in the month that Greensill wanted the export of coal from Bunbury Port to commence before increasing the Griffin-Greensill Facility to $75 million; and (e) approximately $23.7 million of the then $25 million Griffin-Greensill Facility had already been utilised by Griffin. Most of that was to pay invoices from CMM and Piacentini. It seems unlikely that the entirety of this state of affairs was known to Carna when it entered the Contract, but there is clear evidence of Carna expressing concern to Griffin about its financial condition. That concern increased throughout 2014. The warranty at cl 2.1(b) demonstrates the parties' basic concern that each should be able to perform its contractual role in relation to matters such as payment due to the other under the Contract. 87 Griffin's position did not improve in February and March 2014 in the lead up to Carna's commencement on the Mine. At least three letters of demand were issued to Griffin in February 2014. The first for a small sum on 7 February 2014 from Namtech (Aust) Pty Ltd was followed on 11 February by a demand from the Office of State Revenue for $1,148,810.01 in payroll tax liabilities which sought payment within seven days, failing which a garnishee notice would be issued. This was around the time that Mr Kumar was advising Messrs Roy and Riordan that production volumes 'continued to slide' and Mr Roy frankly replying that 'Plan B is a definite closure'. On 26 February, Piacentini issued the first of three further statutory demands, which were to issue over of the ensuing months. This first demand was for $4,992,584.17 and followed an email to Mr Riordan advising him that 'Griffin has not been able to respond with any feedback or commitment regarding the proposed deed and/or timing of payments'. 88 In relation to Griffin's ongoing liabilities to the ATO for which a payment plan had previously been agreed, the ATO advised Mr Riordan on 5 March 2014 that: (a) on 10 March 2014, it would garnish one of Griffin's bank accounts to the value of $2 million; and (b) on 31 March 2014, it would garnish that same account for the balance of the debt (then estimated at approximately $9.235 million). 89 Later on the same day, Mr Riordan forwarded the ATO's email to Mr Roy noting the need to meet the deadline of 10 March 2014. Mr Roy, in turn, forwarded those emails to officers at Lanco India and to the ICICI Bank. On 7 March 2014, Mr Riordan emailed Mr Roy foreshadowing that Griffin would have an $8 million shortfall the following week because its expenses would exceed its anticipated revenue. That was so even with an expected $10 million cash injection from ICICI Bank, which was anticipated on 14 March 2014. Mr Riordan told Mr Roy that Griffin needed: without fail the USD[$]10.5 [million] in our account on Wednesday [12 March 2014] with the equivalent of AUD[$]3 [million] in our account on Friday [14 March 2014]. This will allow us to recommence export and clear the Piacentini demand notice. (Emphasis and underline in original). He noted that they would have still 'substantial issues though with the week commencing 24th March'. 90 As foreshadowed, the ATO froze all of Griffin's bank accounts on the morning of 11 March 2014 due to the non-payment of $2 million which was due. Later that day, Greensill forwarded $2 million to Griffin, which Mr Riordan caused to be paid to the ATO by 12 March 2014. As an email from Mr Roy to his superiors in the Lanco Group reveals, this payment from Greensill was outside the terms of the Griffin-Greensill Facility and was instead short term credit repayable, according to the email, on the same day that the funds were purportedly transferred to the ATO, 12 March 2014. 91 Carna had already commenced expressing concerns about Griffin's financial capacity and at a meeting on the following day, 13 March 2014, Mr Riordan showed Mr Grey a letter of 10 March 2014 regarding the Griffin-Greensill Facility to support the statement that Griffin had access to a supply chain finance facility from Greensill UK. Greensill UK had forwarded two letters of 10 March 2014 to Mr Riordan. The final version, as he described it, relevantly stated the facility limit had a total as at that date of $30 million. It said that utilisation levels would be monitored on a monthly basis against the facility limit determined by Greensill, which would not exceed $75 million. 92 The letter concluded with Greensill stating that the increased facility of $75 million would be available for use as soon as there was confirmation that the revised terms were acceptable. This letter from Greensill UK is somewhat misleading with hindsight because the Griffin-Greensill Facility was never in fact increased to AUD$75 million. It is apparent that Greensill UK intended to put in place insurance and conduct further due diligence including a visit to the Mine before increasing the limit. As is revealed below, Mr Roy expressed justifiably held concerns over the coming weeks about the effect that continuing pressure from Griffin's creditors would have on Greensill UK's appetite for increasing the limit. 93 On 21 March 2014, Piacentini's legal representatives issued a second statutory demand to Griffin for approximately $2.1 million. Mr Riordan forwarded that demand to Mr Roy who sent it to Lanco India on 1 April 2014. It is useful to set out the body of this email in full: Sir, Would like to mention that the payment as per this Statutory Notice is due by 10th April and failure to pay would be an Event of Insolvency as per local laws. We don't have any means to cater to this payment at present. Given that Greensill has not enhanced our limit (he is coming for Site visit on 8th [of April]), we have failed in making promised payment of $ 2 ml to [Carna] towards additional equipment mobilization. Would like to request for some quick support. Best regards, Roy (Emphasis added.) 94 Despite the understandable request for quick support, it would appear that Lanco India did not respond to Mr Roy's request. 95 On 4 April 2014, Piacentini issued its third statutory demand to Griffin, this time for approximately $1.6 million. On the same day, Mr Roy emailed the ICICI Bank directly, explaining that Griffin was also facing trouble with another creditor, Komatsu, and that they were considering terminating financial leases for three trucks if $3.5 million outstanding in relation to a second statutory demand from July 2013 was not paid by 15 April 2014. It was also emphasised that Piacentini's second demand for $2.1 million was due by 10 April 2014. 96 Also in that email to the ICICI Bank, Mr Roy expressed his concern that if Piacentini and Komatsu were not paid, Carna, who was 'currently mobilizing better than [his] expectation despite being denied credit by suppliers (due to exposure to Griffin), may slow down'. Mr Roy continued that '[t]his would affect export and in turn chances of getting higher limit from Greensill'. He requested $5 million in short term funding concluding that '[t]his is really crucial to operations for whatever we are trying to do right now' (emphasis added). Again, Mr Roy appears to receive no response, because on 7 April 2014 he followed up with a further email to the same contact in the ICICI Bank as follows: Good morning Suresh, I probably missed your call on Friday as signal was poor at Collie. Will like to speak to you whenever convenient. Just a heads up, Lex (Greensill) is coming to site tomorrow spending the day with us. He has in-principle agreed to extend the credit gradually to $ 75 [million] over next 12-18 months subject to satisfactory due diligence tomorrow. The real danger I am running is [Piacentini] default on 10th. They have not agreed for any extension despite our constant discussion last week. On the contrary, they served us with another notice of $1.64 ml out of his remaining $2.9 ml. In case [Piacentini] go legal on 11th, which it appears to be, Greensill extension will get jeopardized. I am extremely sorry to come to you about these but writing to you one-o-one given that no respite coming from corporate. I need to take care of both [Piacentini] $2.1 and Komatsu $3.5 to keep operations related improvements whatever we have started and exports on. Best regards, Roy (Emphasis added.) 97 Mr Greensill did visit the Mine on 8 April 2014. On the same day, Mr Riordan emailed him stating Griffin's request for a rollover of the $25 million facility limit, and use of the Griffin-Greensill Facility to pay for Carna's first invoice of $2.2 million and Carna's next three expected invoices, which were estimated to total $34 million. Mr Greensill indicated that the Griffin-Greensill Facility could be used for the first of these, the $2.2 million invoice, and that the other $34 million should be 'fine', but it was conditional on additional insurance cover being in place. 98 In keeping with the continuation of Griffin's financial troubles into April 2014, in the Indian financial year ended 31 March 2014, Griffin's net losses were in excess of $58 million. Its net cash flow from operating activities was negative $61.7 million and it had a working capital deficiency of $522.9 million. 99 On 17 April 2014, Griffin and Piacentini entered into a deed of settlement and release under which Griffin paid Piacentini a little under $6 million to settle its statutory demands. That day, Mr Riordan emailed Mr Roy forecasting there would be a shortfall in cash of $12.5 million over the next three weeks. The anticipated payments to suppliers, including employee entitlements, stamp duty and additional Piacentini invoices far exceeded Griffin's anticipated revenue from coal sales. His concerns about the 'extremely precarious' cash flow were passed on to Lanco India and later to ICICI Bank, requesting 'immediate help to tide over this crisis'. 100 There is little doubt that the financial circumstances as seen by those controlling Griffin at this time did constitute a crisis, in their own words. 101 It was in this climate that Carna commenced its operations at the Mine on or around 23 March 2014.

Performance of the Contract 102 A complicating feature of the history of events set out above was Carna's concerns about its own financial position and its potential exposure in the early months of the Contract. This issue explains in part why the Contract was in fact re-negotiated in late February and early March with the Substituted Contract executed on 12 or 14 March 2014. On 25 February 2014, Mr Grey sent an email to Mr Roy explaining that Carna had terminated the Contract due to a concern that the schedules would not be finalised in time, but remained committed to the project and re-negotiating the schedules. He explained that: … our financiers would not support us unless we had clarity and finalisation of the schedules including clarity and agreement around the equipment. The equipment as stated is our greatest concern and subsequent exposure … As stated we remain prepared to engage with Griffin on the original terms however we require some assistance in respect to the first number of months … (Emphasis added.) 103 On an estimate of 3 million tonnes of coal per annum produced by the Mine, Carna's accountant projected that its cash position would be 'pretty tight' and that a $5 million advance would be required. The projection estimated that Carna would have a positive bank balance through to June 2015 except for the months of April 2014, and December 2014 to April 2015. It requested from Griffin, as part of the re-negotiation of the Contract, cash support from Griffin in the early months of operation. 104 To this end, Mr Roy sent two emails to Mr Grey of 6 March and 12 March 2014 promising cash support would be provided to Carna by Griffin in the early months of the Contract. The email of 6 March 2014 relevantly stated: Financial support - As mentioned earlier, [Griffin] will provide all possible cash flow support in initial three months of Contract. a. We will have an open book system and any surplus cash from coal sales will be made available to Carna as early payment support in these three months. (Emphasis in original.) And in the email of 12 March 2014, Mr Roy re-affirmed the promise of cash support: Just to reiterate my earlier commitment, we will provide cash flow support in initial three-six months based on open book system i.e. make any cash surplus from revenue available to you as operational advance. The understanding reached was that cash support advanced to Carna in the early stages of the Contract would be factored into the Annual Reconciliation Invoice under Sch 13. It was also agreed at this time that Carna could invoice Griffin fortnightly to assist with cash flow. On 19 March 2014, Mr Roy emailed Mr Grey saying that 'we are there to support commercially'. 105 Griffin's purported promise of cash support in the emails above formed a central pillar of Carna's statutory claims which have now settled. Griffin also no longer suggests in its defence of the contractual case that Carna's financial health was a relevant factor, nor is the adequacy of its performance under the Contract disputed. Griffin does rely however on these requests for support from Carna in explaining some of the funding arrangements that were entered into during the Contract, and the provision by Griffin of this cash support in resisting Carna's claim for damages. It is contended by Griffin that it was in fact 'ahead' in its payments owing to Carna under the Contract by virtue of this initial additional cash support. This will be addressed more fulsomely below. 106 Carna, for its part, says that prior to entering into the Contract, Carna was profitable, but again no expert evidence was advanced to support this suggestion. Equally, there is no evidence to support any significant financial concerns. Such accounting information as there is in relation to Carna suggests that it was not in any serious financial difficulty prior to entry into the Contract. Although Mr Grey was raising some concerns internally, this would not be unexpected from a company's financial officer acting diligently in the lead up to the commencement of a significant and complex mining project. Carna's financial health was not a relevant factor in the contractual case. 107 Following finalisation of the schedules to the Contract, Carna commenced operations at the Mine on or around 23 March 2014. The next day, Carna executed a supplier agreement with Greensill UK under the Griffin-Greensill Facility to allow its invoices to Griffin to be paid out of that Facility. On 26 March, the Mine Plan was agreed. It would be amended with decreased projections in August 2014. 108 Griffin needed to utilise its Facility with Greensill to pay Carna's first four invoices. Less than a month into Carna's operations, Mr Grey emailed Messrs Roy and Riordan on 15 April 2014 expressing concerns about the timing of payments: Gents whilst we appreciate you are both extremely busy and actively pursuing additional funding, it is extremely difficult operating without a clear understanding of the payments, as discussed a couple of weeks ago given the unfortunate history with the project we are finding it very difficult to provide the confidence to our suppliers that we will be paid and subsequently they will be paid and given this many of the key suppliers require payments up front (fuel being the main one). … … as can be seen our investment is becoming significant, this is not an issue providing we get paid as agreed / advised. Its [sic] extremely difficult to manage when payments don't occur as expected. As stated we appreciate your position with your cashflows however the Carna cashflow is just as important an in order to manage this we must work closely … (Emphasis added.) 109 There were further delays in payment to Carna by Griffin in May 2014. Recalling that under cl 10.2(e), Griffin was required to pay validly raised invoices within 20 days of issue, by 8 May 2014, Griffin had delayed in paying Carna invoices totalling almost $5.7 million, as follows: Date of Griffin receipt of invoice Invoice number Total amount invoiced (incl. GST) Subject matter of invoice Deadline for payment Amount unpaid at 8 May 2014 17 April 2014 3612 $3,084,382.27 Claim #1 7 May 2014 $168,546.65 (23-31 March 2014) 17 April 2014 3615 $919,489.37 Claim #2 7 May 2014 $46,765.48 (23-31 March 2014) 17 April 2014 3616 $4,048,806.14 Claim #3 7 May 2014 $4,048,806.14 (1-14 April 2014) 17 April 2014 3619 $1,478,795.07 Claim #4 7 May 2014 $1,478,795.07 (1-14 April 2014) Total overdue $5,742,913.34

110 As the above table shows, while Griffin managed to pay most of Carna's first two invoices on time, the full amount of both the third and fourth invoices went unpaid for the entirety of the 20 day period for timely payment. It is not the case that Griffin did not pay Carna at all; rather, as here, it paid some invoices and not others, only sometimes in full and rarely on time. This feature is a common thread throughout the events of the remaining months of the Contract discussed below. 111 In the context of these underpayments in the first six weeks of Carna's operation of the Mine, Carna also sought alternative funding arrangements to address a lack of cash flow. On 7 May 2014, Carna itself entered into a $10 million factoring facility with Greensill UK (Carna-Greensill Facility), not as a supplier, but as principal. This Facility allowed Carna to upload invoices from its own suppliers directly, for payment by Greensill, and Carna was to repay those amounts to Greensill at a later date with interest. Griffin intended (through Mr Riordan) to use the Carna-Greensill Facility to pay Carna's invoices under the Contract. He accepted that under the Carna-Greensill Facility Carna would ultimately be liable to Greensill, but the 'initial intention' was that Griffin would eventually pay for the Carna-Greensill Facility. 112 Under that Facility, $9.474 million was paid by Greensill to CMM as one of Carna's suppliers, while Carna incurred a $10 million liability to Greensill. This appeared to be appreciated at the time because on 15 May 2014, Mr Grey emailed Mr Riordan and Mr Roy stating that Carna had agreed to utilise a direct facility with Greensill to assist in fortnightly payments however when going out to monthly Carna was 'being impacted two-fold with cash flow and the high cost of debtor financing', and Carna would obviously not have to utilise debtor financing if monthly payments were being made. The effect was that Carna was internally funding its own invoicing and paying a significant fee for it, which, as Mr Grey unsurprisingly said, 'require[d] further discussion'. 113 The process by which Carna and Griffin had intended the Carna-Greensill Facility to facilitate payments by Griffin to Carna is illustrated by two sets of fund transfers over the periods of 16-19 May 2014 and 13-16 June 2014. 114 On 16 May 2014, Carna uploaded an invoice issued by CMM to Carna of $5 million for payment on the Carna-Greensill Facility. On 19 May 2014, approximately $4.709 million was paid by Greensill to CMM, transferred by CMM to Lanco Australia, who then transferred it onto Griffin. Griffin retained $1.32 million and passed on $3.389 million to Carna 'as an advance'. 115 In the period 13-16 June 2014, a similar payment occurred. On 10 June 2014, CMM issued 10 invoices, each worth $1 million, to Carna. On 11 June 2014, Carna uploaded five of those invoices, totalling $5 million, to the Carna-Greensill Facility and two days later, $4.765 million was paid by Greensill to CMM, transferred by CMM to Lanco Australia, who in turn transferred it to Griffin. On 16 June 2014, of the $4.765 million, $4.75 million was transferred by Griffin to Carna. 116 Over the course of May 2014, Griffin also received about $7.99 million (incl GST) from the sale of coal. Of that, $3.799 million was provided to Carna. 117 Griffin acknowledged on 19 May 2014 that it was having difficulty making fortnightly payments, but that it would pay fortnightly once the increase to the Griffin-Greensill Facility to $75 million had been finalised. (It never was.) The failure to make fortnightly payments was attributed to lower than expected sales coupled with other payment commitments. 118 Later in the month, on 26 May 2014, Mr Riordan told Mr Greensill that the Lanco Group would not be in a position to support Griffin that week. He asked Greensill to increase the Griffin-Greensill Facility, acknowledging it would be 'highly damaging' if Carna did not continue operations. Mr Greensill said he found this troubling and sought further information and a meeting with Mr Rao. He expressed a preference for Griffin to set up another Greensill facility with Bluewaters (both a buyer of coal and a supplier of power to the Mine), to provide an extra source of funding. 119 The same day, Mr Roy sent a request to Lanco India explaining that Griffin had been using its revenue for the past two months 'to take care of past outstandings as required for operations to continue' (emphasis added). The increase to the Griffin-Greensill Facility to $75 million had been delayed while Greensill was obtaining insurance coverage. Mr Roy requested at least $10 million in funding support to continue with operations, promising that the rest could definitely be funded through the Griffin-Greensill Facility. In keeping with past experience, no response appears to have been received. 120 On 3 June 2014, Carna wrote to Griffin stating that Griffin had approximately $14.5 million outstanding to Carna at that stage with approximately $8 million post-35 days from invoice, and that Carna was not in a position to carry that debt and to continue to operate the Mine. By this time, Carna had reached the $5 million limit of its facility with Greensill and expressed concerns that not only were fortnightly payments being missed, but monthly payments as required under the Contract were not being met. It requested Griffin to immediately rectify the situation. It also threatened to suspend operations. 121 Email exchanges ensued the following day between Mr Roy and Mr Carna. On 4 June 2014, Mr Roy said that he understood Carna's position and did not dispute Carna's right to suspend. He continued that: … our funding arrangement has not materialised which is our problem. I don't run away from that commitment. The best possible of us in this circumstance is to keep paying you whatever revenue is generated and 10 Million from Lex [Greensill] as quickly as he completes the arrangement. Don't have any other avenue from any other source, parent [Corporate Debt Restructure] has also not moved to disbursal. (Emphasis added.) Later that same day, Mr Roy followed up Mr Carna's response to the above email as follows: Structurally, Greensill can't extend further facility to us till he gets credit insurance for this disbursal which is taking much longer than anticipated. We have fulfilled all our conditions which were required for insurance… … It's obvious that this is self financing for you but in the situation where neither parent [sic] nor our bank is in a position to release any money to us, this is the only avenue of funding for us. I had clearly given go ahead for our contract in view of funding commitment by Greensill which has hit this unexpected barrier at their end. (Emphasis added.) 122 In a response on the same day (4 June 2014), Mr Carna referred to discussions had with Mr Riordan about increasing the limit on the Carna-Greensill Facility and told Mr Roy that such a course of continued self-funding would be 'commercial suicide for Carna given there is no guarantee of payment'. 123 As at 5 June 2014, the invoices owing to Carna post-35 days from their due date totalled $8.12 million as follows: Date of Griffin receipt of invoice Invoice number Total amount invoiced (incl. GST) Subject matter of invoice Deadline for payment Amount unpaid at 5 June 2014 17 April 2014 3612 $3,084,382.27 Claim #1 7 May 2014 $168,546.65 (23-31 March 2014) 17 April 2014 3615 $919,489.37 Claim #2 7 May 2014 $46,765.48 (23-31 March 2014) 17 April 2014 3616 $4,048,806.14 Claim #3 7 May 2014 $1,144,970.52 (1-14 April 2014) 17 April 2014 3619 $1,478,795.07 Claim #4 7 May 2014 $1,478,795.07 (1-14 April 2014) 1 May 2014 3621 $4,857,273.41 Claim #5 21 May 2014 $4,857,273.41 (15-30 April 2014) 1 May 2014 3622 $427,610.70 Claim #6 (15-30 April 2014) 21 May 2014 $427,610.70 Total overdue $8,123,961.83

124 As a comparison between this table and the previous table (at [109] above) reveals, Griffin managed to pay down about $3 million of invoice 3616, but a significant amount of that invoice remained outstanding almost a month after the due date. Similarly, the smaller outstanding amounts from invoices 3612 and 3615 remained unpaid, despite the bulk of those invoices being paid on time. Most concerning, and demonstrative of the pattern that emerged over the life of the Contract, is that the two most recent claims, including invoice 3621 for almost $5 million, remained outstanding in full a number of weeks after the due date. 125 Following discussions between Mr Riordan and Mr Grey later on 5 June 2014, Carna ultimately agreed to increase the Carna-Greensill Facility to $10 million provided that it made apparent the liability to Greensill. I infer and find that, in circumstances where Mr Carna had only a day earlier described increasing the Carna-Greensill Facility limit as 'commercial suicide', Carna's acquiescence to this course was due to the fact that, as Griffin made clear, no other viable funding option was available to Carna to rectify the cash flow problems caused by Griffin's late and repeated underpayment of invoices. 126 The next day on 6 June 2014, Griffin transferred $1.5 million to Carna. 127 Later in the month, and following a meeting on 23 June 2014, Carna reiterated to Griffin that it was being pushed into a serious position regarding employee entitlements, supplier payments and other critical payment obligations. These were being compromised which meant that the margins did not provide a sufficient buffer to support operations when payments outstanding exceeded the original timeframes. Reference was made to the Carna-Greensill Facility now amounting to self-funding of $10 million. 128 In the discussions that had occurred in early June between Mr Carna and Mr Roy, Mr Roy had assured Mr Carna that 'we have trusted each other from day one and if this spirit continues, we will be out of this situation and self-sufficient in month of July itself'. In fact, the situation did not improve. 129 On 8 July 2014, Mr Grey wrote to Mr Peddu (of Griffin) informing him of Carna's intention to suspend operations at the Mine for non-payment. The letter referred to various communications between the parties on the topic of late payments, including advice from Mr Roy that $2 million could be provided shortly, followed by advice from Mr Riordan that payment of $2 million would not be available. Mr Grey calculated Griffin's currently overdue liabilities to Carna in the sum of $12,029,095.18 as follows: Total Payments Due $25,989,062.83

Total Due over 30 days $17,171,095.18 Less Advance $3,742,000.00 Less Dyno / power / Sargent vehicles $1,400,000.00 Net Overdue $12,029,095.18

Carna sought payment of at least $10 million by 12 July 2014 in order to avoid a suspension of operations, with the balance to be paid by 17 July. These funds were said to be required for 'crucial employee statutory payments'. 130 By a follow up letter of 17 July 2014, Carna issued Griffin with a notice suspending operations at the Mine unless outstanding payments were received by 3.00 pm that day. The letter referred to an attachment specifying payments outstanding but no such attachment appears in the version in evidence. Carna's bank statements for the period 8-17 July 2014 reveal payments received from Griffin as follows: 9 July 2014 $300,000 11 July 2014 $250,000 15 July 2014 $1,175,000 15 July 2014 $790,000 TOTAL $2,515,000

A further payment of $2.2 million was paid by Griffin on 18 July 2014. The letter also referred to the termination by Komatsu of leases in relation to seven trucks that would no longer be available to Carna in its operations. 131 Some days later, on 21 July 2014, there was still a debate between Carna and Griffin as to who would ultimately be liable to repay the Carna-Greensill Facility. Griffin did, however, commit on that day to further provision of cash support from coal sales to Carna. The following day, Carna reiterated its concern that Griffin had not addressed how and when it would pay its outstanding invoices. 132 On 24 July 2014, Carna's payments from its account were dishonoured. Over the weekend, 26-27 July 2014, Carna and Griffin agreed to a payment plan, upon which commitment Carna recommenced operations at the Mine on 27 July 2014. Griffin agreed to make payment of $4.6 million by 8 August 2014 to satisfy outstanding amounts for May invoices, a further $8.6 million by 8 August 2014 to satisfy June invoices and with July invoices to be paid by 25 August 2014 in approximately the sum of $6.5 million. 133 Griffin failed to comply with this plan, but instead made payments in the period 27 July to 25 August 2014, according to Carna's banks statements, as follows: 29 July 2014 $3,000,000 5 August 2014 $1,000,000 8 August 2014 $2,000,000 14 August 2014 $2,000,000 18 August 2014 $300,000 22 August 2014 $1,500,000 TOTAL $9,800,000

134 The net effect of Griffin's underpayments was captured by Carna as at 14 July 2014. At that time, Griffin still owed Carna $11.2 million in unpaid invoices older than 20 days from April-June 2014 as follows: Date of Griffin receipt of invoice Invoice number Total amount invoiced (incl. GST) Subject matter of invoice Deadline for payment Amount unpaid at 14 July 2014 17 April 2014 3612 $3,084,382.27 Claim #1 7 May 2014 $19,583.66 (23-31 March 2014) 1 May 2014 3621 $4,857,273.41 Claim #5 21 May 2014 $1,992,652.41 (15-30 April 2014) 1 May 2014 3622 $427,610.70 Claim #6 (15-30 April 2014) 21 May 2014 $427,610.70 19 May 2014 3635 (adjusted by invoice 3647) $4,860,248.80 Claim #7 (1-15 May 2014) 9 June 2014 $4,860,248.80 5 June 2014 3643 (adjusted by invoice 3647) $3,940,099.30 Claim #8 (16-31 May 2014) 25 June 2014 $3,915,179.45 Total overdue $11,215,275.02

135 Similarly, by 9 August 2014, the amount owing to Carna on invoices older than 20 days was $7.8 million as follows: Date of Griffin receipt of invoice Invoice number Total amount invoiced (incl. GST) Subject matter of invoice Deadline for payment Amount unpaid at 9 August 2014 17 April 2014 3612 $3,084,382.27 Claim #1 7 May 2014 $19,583.66 (23-31 March 2014) 8 July 2014 3648 $8,694,753.14 Claim #27A (1-30 June 2014) 28 July 2014 $7,809,007.46 Total overdue $7,828,591.12

136 Again, as a comparison between these tables for each month demonstrates, Griffin did eventually pay some of Carna's invoices, but not before further invoices fell due for payment. This left Griffin consistently in arrears by between $5 million and $11 million. 137 In a letter to Griffin dated 1 September 2014, Carna raised further concerns about Griffin's failure to make payments on time in August 2014 despite repeated promises that this would occur: … [Mr Roy] advised the payment will not occur as promised and for Carna to accept another delay with Thursday 4th August being nominated, this clearly demonstrates another example of how commitments made by [Griffin] cannot be relayed upon [sic]. Carna has stretched itself far beyond its contractual obligations, demonstrated extreme patience and has continued to operate despite continually misled … Carna has no faith in [Griffin] meeting the latest notification. … Operations will cease on or prior to 1 pm Monday 1st September and will not restart until the above is satisfied in full. 138 It appears that this threatened suspension did not eventuate. A further letter of 14 September 2014 from Carna to Griffin indicates that Griffin committed to meeting unpaid obligations from June 2014 on or before 4 September 2014 and on the basis of that communication, Carna postponed the suspension. Although this letter was included in the trial bundle, neither party sought to rely upon it. It is thus unclear whether Griffin did in fact meet this renewed commitment, though the balance of that letter proceeds to complain of Griffin's repeated failures to meet any commitment. I place no weight on this communication except to the extent that it explains why Carna did not in fact suspend operations at the Mine, as threatened in its letter of 1 September 2014. 139 Also on 1 September 2014, the balance of approximately $3.6 million from an August invoice reached the 20 day contractual deadline. Griffin managed to discharge this liability shortly after with payments on 2 and 4 September 2014. However, by 19 September 2014, Mr Henshaw (for Carna) emailed Carna's current invoice register with Griffin to Mr Grey and Mr Carna which showed Griffin still owing $6.478 million on overdue invoices. On 30 September 2014, a further outstanding amount of approximately $6.8 million became overdue. This was repaid by a series of payments over the period to 23 October 2014 with a payment of $5,176,570.42 coming from Greensill on 7 October 2014. Two smaller invoices totalling approximately $275,000 fell due on 9 October 2013 and were not paid until 14 November 2014. 140 Although Griffin avoided a suspension of Carna's operations at the Mine in the first week of September 2014, it faced other problems. On 3 September 2014, the ATO issued another garnishee notice over Griffin's bank accounts. This had been foreshadowed in an amended notice sent to Griffin by the ATO on 27 August 2014 in which it sought payment of an outstanding sum of $10,767,427.69. Mr Riordan advised Mr Roy of this development in an email on 3 September 2014, stating as follows: Hi Roy Please note that the ATO has frozen all Griffin Coal bank accounts. They have run out of patience as original commitment was to clear everything by 20 March. We are now nearly six months down the track and no progress has ben [sic] made. We continue to extend payment dates and nothing eventuates. They don't believe us anymore and want to protect their position. I don't need to tell you the implications of this. … (Emphasis added.) 141 On 31 October 2014, Mr Grey sent a letter to Mr Peddu in response to an instruction from Griffin that Carna cease all mining operations at Ewington 2 due to issues concerning authorisation. Carna raised further complaints about Griffin's failures to meet payment obligations and also noted that Griffin's exports had been suspended due to its payment defaults at the port. Carna advised that it would no longer extend the time for Griffin to meet its payment obligations beyond the contractual terms. 142 On 7 November 2014, Griffin failed to make a transfer to Carna on time purportedly due to a 'banking error', resulting in Carna being unable to pay employee wages or for fuel deliveries for the weekend. 143 As a result, Carna shut down operations. 144 On 11 November 2014, Carna wrote to Griffin complaining of its persistent failures in that year to pay Carna on time, its failures to comply with the arrangements under cl 10 for disputing Carna's invoices, and its failure to have obtained proper authorisation to mine on Ewington 2. It set out terms under which it was willing to recommence mining operations. 145 Carna then sent a notice of default on 25 November 2014 under cl 17.4 of the Contract. The events of default relied upon included Griffin's failure to make payment in accordance with cl 10 and Griffin's failures to obtain authorisation to mine on Ewington 2. 146 On 29 November 2014, Griffin responded denying the matters Carna had raised and denying that Carna had an entitlement to terminate. 147 At about 7.00 am on 3 December 2014, Carna issued Griffin with a Notice of Termination purporting to rely on cl 17.11 of the Contract which provided that in the event of an 'Insolvency Default', either party may terminate immediately upon written notice to the other party. Carna contended that Griffin was 'Insolvent' under the Contract because it was unable to pay its debts when they fell due. In the alternative, Carna provided a notice of termination under cl 17.4 of the Contract, which enabled termination after 14 days of written notice being provided to the other party. In support of its contention that Griffin had committed the Insolvency Default Breach, Carna relied upon the Dun & Bradstreet report dated 2 December 2014 referred to above. 148 Later that day, Griffin denied it had committed the Insolvency Default Breach and considered that Carna's Notice of Termination and Carna having left the Mine, as a repudiation by Carna of its contractual obligations. Griffin purported to accept Carna's repudiation and terminated the Contract with immediate effect. 149 Disputes followed in relation to invoices for November and December 2014. Carna's position was that Griffin owed Carna the amounts identified under Sch 15 of the Contract, which will be discussed below.

WAS THERE AN INSOLVENCY DEFAULT BREACH? 150 Griffin accepts, as it must, that it was under serious financial strain throughout 2013 and 2014. However, the crux of its argument is that, by virtue of the fact that Griffin continues to trade today, some seven years later, there is no basis upon which its troubles at that time could be characterised as anything other than a temporary liquidity problem. It says the fact that it was able to pay off all its debts tells strongly against any finding of 'Insolvency', which would require, according to the authorities it cites, endemic and insurmountable liquidity problems. With the benefit of hindsight, Griffin says the Court could not conclude that it was 'Insolvent' as at 3 December 2014 when Carna purported to terminate. 151 Carna, for its part, says that it was financially stable prior to the Contract but was placed into liquidation in June 2015. It was not specifically contended that Griffin's alleged failure to pay caused this, but it is inevitable that the events of 2014 played a role in Carna's demise. 152 I find that for the duration of the Contract, Griffin was entirely dependent on funding from its parent company (and the broader corporate group) and the Griffin-Greensill Facility to pay its creditors. In addition to being unable to compel support from its parent, Griffin had no control at all over when or if funds would flow to it from the Lanco Group (further, the anticipated additional funds from the Griffin-Greensill Facility never eventuated). The evidence demonstrates that even urgent requests from senior officers in Griffin, which often gave details of the crucially parlous circumstances the company was facing, went unanswered. The same is true of Mr Roy's requests direct to the ICICI Bank. 153 With respect to the Griffin-Greensill Facility, Carna submitted that the fact that the Facility was always almost completely utilised by Griffin added weight to its case for the Insolvency Default Breach. This submission should not be accepted. As Griffin pointed out, the terms of the Facility were such that Griffin was strongly encouraged to keep the utilisation rate above 95% by the prospect otherwise of higher fees and interest charges. Nevertheless, I find that Griffin required the Greensill Facility to supplement, to a very significant extent, the haphazard parent company support. The invoice factoring provided by the Griffin-Greensill Facility was required to address Griffin's sustained inability throughout 2013 and 2014 to generate sufficient cash flow from the operation of the Mine to pay its creditors. The consequence however of drawing on the Facility to continually address immediate cash flow needs was simply to defer Griffin's liabilities under creditor invoices by 6-12 months, with the full sum being eventually repayable to Greensill together with a substantial interest rate. 154 I infer that Griffin's recourse to a factoring facility with Greensill was at least in part also due to the 'difficulties' that Griffin and the other Lanco Group companies in Australia faced in trying to secure finance from Australian banks. Mr Riordan admitted to these 'difficulties' during a liquidators' examination; it is a representation relied on by Carna, and one that I am satisfied is conveyed and should be given weight as an admission as to Griffin's financial situation from its chief financial officer. 155 I also find that Griffin's failure to have its Greensill Facility increased to $75 million exacerbated its cash flow issues and pushed it, at certain points in 2014, close to breaking point. This was partly so due to Mr Roy's and Mr Riordan's perceptions at the time that the increase to the Facility was being held up by unexpected delays relating to the attainment of additional insurance coverage and other due diligence matters outside Griffin's control. The evidence does not disclose the precise reason or time at which the prospect of an increase to $75 million was finally given up, or if it ever was. I make no finding in this regard, other than to find it did not become available prior to the date of the Notice of Termination. It is clear that Griffin had a real expectation throughout 2013 and at least the first half of 2014 that it would be receiving an extra $45 million in invoice factoring finance through the Griffin-Greensill Facility. It had planned accordingly. This was made plain in Mr Roy's final email to Mr Carna of 4 June 2014 which has been extracted above (at [121]) where Mr Roy stated he 'had clearly given go ahead for our contract in view of funding commitment by Greensill which has hit this unexpected barrier at their end'. 156 The practical effect of these financial constraints was that Griffin was late in paying at least some portion of almost every invoice that Carna submitted in consideration for performance of the Mining Services for the entire duration of the Contract. While the quantum of the outstanding amounts, and the extent of their lateness varied, sums in the hundreds of thousands, and sometimes millions were consistently paid to Carna between a month and two months late. This translated into Griffin always owing between $5 million and $11 million in late payments to Carna in at least May, June, July, August and September 2014. Of course, on top of these late unpaid invoices, Carna continued to issue monthly invoices for its ongoing operation of the Mine which would then contractually fall due 20 days later. Griffin was simply unable to catch up. 157 This is not to say that Griffin failed to pay Carna altogether. Carna's bank statements and the various schedules of invoices and payments collated by the parties bear out the fact that Griffin did make consistent payments to Carna over the life of the Contract. However these payments were invariably partial instalments in part satisfaction of invoices that had already fallen due. 158 The question then is whether this course of conduct, and this state of affairs in 2014 meets the definition of 'Insolvent' under subpara (g) of the definition of that word in the Contract. That subparagraph, contained in cl 1.1, provides that a party will be 'Insolvent' under the Contract if it is 'otherwise unable to pay its debts when they fall due'. A party that is 'Insolvent' commits an 'Insolvency Default' such that the other party is entitled to terminate the Contract under cl 17.11 with immediate effect. That is relevantly what Carna purported to do when it sent the Notice of Termination to Griffin on 3 December 2014. 159 As has already been set out above, subpara (g) is a separate and independent limb of the definition of 'Insolvent'. It is distinct from that provided by subpara (a). Having regard to the commercial context, I consider that a reasonable business person would have understood the inclusion of subpara (g) in similar terms to the Corporations Act definition of insolvent, yet clearly divorced from it, to simply mean that a party will become liable to termination for breach if it is 'unable to pay its debts when they fall due'. Although the content of the factual enquiries to be undertaken for both (a) and (g) would be similar, the implication that a party is 'Insolvent' under subpara (g) would rise no higher than a finding that a party had breached a term of the private bargain that had been struck, which entitled the other party to terminate. 160 A finding to this effect is not a finding that the party is insolvent under the Corporations Act. Clearly the inclusion of subpara (g) discloses the intention to enable either party to terminate the Contract without the need for recourse to the legislated insolvency regime. I accept the relevance of authorities discussing s 95A of the Corporations Act, but the words of the Contract must be given their own plain meaning in context. 161 I turn to consider whether Griffin was 'otherwise unable to pay its debts when they fell due' as at 3 December 2014. The question is to be answered having regard to an holistic assessment of the company's position within the commercial reality that it found itself. That analysis proceeds primarily by an application of the cash flow test which directs attention to the 'liquidity and viability of the business', as opposed to a singular assessment of a company's assets and liabilities from its balance sheet: Crema (at [141]). However, the position of a company's balance sheet will also be relevant. 162 In Smith v Boné [2015] FCA 319; (2015) 104 ACSR 528, Gleeson J provided a succinct summary of the principles to be applied (at [24]-[35]) and, particularly at [25]-[26], identifies some of the key factors presently in dispute: 25 Whether or not a company is insolvent at a particular point in time is a question of fact to be ascertained from a consideration of the company's position taken as a whole, including the nature of its assets and business, having regard to "commercial realities" and common sense: Bluestone Property Services Pty Ltd (in liq) v First Equilibrium Pty Ltd [2013] FCA 876 at [42]; Southern Cross. The Court's task is to decide whether the company is suffering from an "endemic shortage of working capital": Hymix Concrete Pty Ltd v Garritty (1977) 13 ALR 321 at 328. 26 Thus, a temporary lack of liquidity does not constitute insolvency: Sandell v Porter [1966] HCA 28; (1966) 115 CLR 666 at 670 (Barwick CJ). "In assessing whether a company's position as a whole reveals surmountable temporary illiquidity or insurmountable endemic illiquidity resulting in insolvency, it is proper to have regard to the commercial reality that, in normal circumstances, creditors will not always insist on payment strictly in accordance with their terms of trade but that does not result in the company thereby having a cash or credit resource which can be taken into account in determining solvency": Southern Cross at [54]. 163 Griffin relies particularly on the judgment of Barwick CJ (with whom McTiernan and Windeyer JJ agreed) in Sandell v Porter (1966) 115 CLR 666 for the proposition that a 'temporary lack of liquidity' will not be sufficient to ground a finding of insolvency in contrast with an 'endemic shortage of working capital'. That contrast is also drawn from Hymix Concrete Pty Ltd v Garritty (1977) 13 ALR 321 per Jacobs J (at 328 and with whom Barwick CJ and Gibbs J agreed at 323). In that case, his Honour said: A temporary lack of liquidity must be distinguished from an endemic shortage of working capital whereby liquidity can only be restored by a successful outcome of business ventures in which the existing working capital has been deployed. 164 Senior counsel for Griffin also emphasised 'insurmountable' as the descriptor used by Palmer J in Southern Cross Interiors Pty Ltd v Deputy Commissioner of Taxation [2001] NSWSC 621; (2001) 53 NSWLR 213 (at [54]) as appears in the passage from Smith v Boné above. 165 Griffin also relies for this point on the first instance decision in Clifton v Kerry J Investment Pty Ltd (t/as Clenergy) [2017] FCA 1379 per White J (at [61]) where his Honour said: The focus of the Court's determination must be on the company's ability to pay its debts as and when they fall due; not whether the company actually does so. Naturally, however, the latter may inform the former. The task of the Court is to decide whether the company is suffering from an endemic shortage of working capital as opposed to a temporary lack of liquidity: Sandell v Porter (1966) 115 CLR 666 at 670. 166 Thus, Griffin stresses the proposition that the focus must be on the ability to pay debts, not whether a company actually does so. It says the fact that it continues to trade is demonstrative in this regard. It is not clear that the Full Court in Clifton v Kerry J Investment Pty Ltd (t/as Clenergy) [2020] FCAFC 5 (which allowed a cross-appeal on the s 95A point) approved of the formulation at [61] at first instance, but I accept that formulation is clearly correct from other cases discussed. 167 Another oft-cited formulation was stated by Griffiths CJ in Bank of Australasia v Hall [1907] HCA 78; (1907) 4 CLR 1514 where his Honour said (at 1528): The words "as they become due" require, as already pointed out, that some consideration shall be given to the immediate future; and, if it appears that the debtor will not be able to pay a debt which will certainly become due in say, a month … by reason of an obligation already existing, and which may before that day exhaust all his available resources, how can it be said that he is able to pay his debts "as they become due", out of his own moneys? 168 Griffin also stresses (correctly) that a company need not be able to pay its debts as and when they fall due from its own cash reserves and regard may be had to other means by which it may obtain funds within a relevantly short time, including by borrowing, sale of assets and capital raising, as noted in Clifton (at [60]). In this regard, the observations of Morrison JA in Chan v First Strategic Development Corporation Ltd (in liq) [2015] QCA 28 (at [42]-[44], and with whom Gotterson and Boddice JJA agreed at [1] and [124] respectively) are important: 42 The learned primary judge also referred to the statement of Giles JA in Lewis v Doran that "the key concept is ability to pay the company's debts as and when they become due". The learned primary judge went on: "That emphasis on "ability" is important here. The prospects of obtaining necessary funds from a party, which is not obliged to provide them, must be such as to give the company something more than a chance of paying its debts: the prospects must be sufficient to make the company able to do so. That does not mean that the provision of the funds must be free of any uncertainty or contingency. But there must be a sufficient likelihood for the company, and those directing it, to be able to rely upon the availability of those funds when incurring the relevant debts." 43 I agree respectfully with those observations. They reflect the need, in cases where the financial support is from a source which cannot be compelled by legal arrangement, for there to be a degree of assuredness that the financial support will be forthcoming and at such a level that one could say the company was able to pay its debts as and when they fall due, rather than being possibly able to do so. Just as a conclusion that the relevant financial support does not have to be absolutely certain in order to be sufficient to meet the test in Lewis v Doran, Scholz and International Cat, equally the financial support does not have to be absolutely uncertain in order to be insufficient to qualify. Between the two extremes the factual circumstances of each case will provide a variety of points at which one might conclude that the financial support was of such a degree of commitment that it was likely to continue, and with the result that the company was able to pay its debts, and therefore that it has sufficient financial support to draw the conclusion of solvency. 44 However, in my view there is no benefit in attempting to achieve some precise formula as to likelihood, by reference to which the financial support qualifies or does not. To say that the likelihood of it being provided is "probable" or "improbable" adds no more to what has been said in the authorities to which I have referred. Given that the resolution of this issue will almost always depend upon an assessment of facts, in my view it is better to proceed on the basis that, where the financial support is being provided by a director or related entity, and in circumstances where there is no formalised agreement or understanding, what is required is cogent evidence which enables the court to conclude that there is such a degree of commitment on the part of the provider of the financial support to continue it, such that it can be said that at any point of time it was likely to be continued, with the result that, at any of those times, the company was able to pay its debts as and when they fell due. (Emphasis in original, citations omitted.) 169 Griffin submits that the relevant support was always available from Griffin's parent. Again, there does not need to be an ability for the company to legally compel the provision of support, but rather, there needs to be a degree of assuredness that the financial support will be forthcoming, which falls to be determined having regard to the facts or circumstances of the case. Griffin says it did have the necessary degree of assuredness that parent company support would be provided, as was repeatedly set out in letters of support of 13 May 2013, 16 August 2013, 19 May 2014, 5 August 2014 and 27 May 2015. 170 Griffin also emphasises that regard is to be had to the commercial realities including the reality that in normal circumstances creditors will not always insist on strict compliance with their credit terms and instead will allow debtors some leeway: Southern Cross (at [54]). 171 The parties also urge competing views as to the relevant time periods that are to be considered. As noted, Griffin argues that a strong objective factor telling against such a conclusion is that some six and a quarter years later, Griffin is still in existence and it is not suggested that Griffin's fortunes materially improved in the period between December 2014 and now. In this regard Griffin relies upon the observations of Palmer J in Lewis v Doran [2004] NSWSC 608; (2004) 184 FLR 454 (at [107]-[108] and [112]) where his Honour said: 107 The question of a company's solvency may arise retrospectively or prospectively. The question arises retrospectively where, for example, a liquidator is seeking to recover an unfair preference or to set aside an insolvent transaction so that the issue is solvency as at a date prior to the winding up. The question may arise prospectively where a company is sought to be wound up in insolvency and the company's ability to pay its debts must be determined not only by reference to debts payable as at the date of trial but also by reference to its ability to pay debts which will fall for payment some time in the near future. 108 Where the question is retrospective insolvency, the Court has the inestimable benefit of the wisdom of hindsight. One can see the whole picture, both before, as at and after the alleged date of insolvency. The Court will be able to see whether as at the alleged date of insolvency the company was, or was not, actually paying all of its debts as they fell due and whether it did, or did not, actually pay all those debts which, although not due as at the alleged date of insolvency, nevertheless became due at a time which, as a matter of commercial reality and common sense, had to be considered as at the date of insolvency. By reference to what actually happened, rather than to conflicting experts' opinions as to the implications of balance sheets, the Court's task in assessing insolvency as at the alleged date should not be very difficult. … 112 So, where retrospective insolvency is in issue, the court can take into account that as at and after the alleged date of insolvency the company actually paid all its debts as they fell due because a third party made funds available to it without security. The court can look at the arrangements which were actually made rather than artificially excluding them from consideration because the arrangements did not fall within the definition of payments from the debtor's "own monies". To look at what actually happened avoids the possibility that the court is forced to conclude that, as a matter of law, a company could not pay all its relevant debts when, as a matter of fact, the company clearly did pay those debts. 172 These observations were recently cited with approval by the Full Court of this Court in Clifton FCAFC 5 per Besanko, Markovic and Banks-Smith JJ (at [214]-[216] and [224]). 173 While Carna does not appear to take issue with those statements at the level of principle, it contests that Griffin's continued existence is dispositive. It says the Court's task is to undertake the factual enquiry raised by subpara (g) by looking back in time so as to take a view of the position during the currency of the Contract, not merely at the precise moment of the Notice of Termination, but also in the several months leading up to it so as to assess in a commercially realistic way whether Griffin was able to pay its debts when they fell due. I accept this contention. 174 Support for this position is found in the reasons of Owen J in Bell, parts of which have been quoted above (at [40]), where his Honour considered events over a 12-16 month period in reaching a view as to insolvency. Carna also points to his Honour's ultimate conclusion (at [1949]) that the Bell Group of Companies' financial position as at 26 January 1990 was one of 'insurmountable endemic illiquidity' yet the companies continued their existence for at least a further 16 months. Subsequent survival in unknown circumstances and for unknown reasons does not always prove the requisite liquidity at the relevant point in time. 175 In Powell v Fryer (2001) 37 ACSR 589, Olsson J (with whom Duggan and Williams JJ agreed at [119] and [120] respectively) said (at [75(v)]): It is not appropriate to base an assessment on the prospect that the company might be able to trade profitably in the future, thereby restoring its financial position. The question is whether it, at the relevant time, is able to pay its debts as they become due - not whether it might be able to do so in the future, if given time to trade profitably: Sheahan v Hertz Australia Pty Ltd (1995) 16 ACSR 765 at 769. (Emphasis added.) 176 Carna relies on a finding of insolvency made by Siopis J in Travers v Commissioner of Taxation [2006] FCA 1073 where his Honour's analysis (at [37]) is said to bear similarity to the present case: 37 Secondly, the overall financial position shows that at the time that the impugned payments were made the company was not suffering from a temporary liquidity problem but from an endemic and chronic shortage of working capital. This inference is drawn from the following factors: the company's failure to meet the instalment payment arrangement it reached with the defendant in September 2002; the fact that the defendant was required in February 2003 to issue a statutory demand for the sum of $404 382.39; the company's failure in March 2003 to meet that statutory demand; the failure of the company to pay its trade creditors in the period leading up to July 2003 such that by the beginning of July 2003 the company had aged payables for its trade creditors in excess of 60 days, of $314 853.97; the fact that at the beginning of July 2003 the company had only $4584.42 in its bank account and no overdraft facilities, and was only able to discharge the debt of its most pressing long term creditor by a combination of the proceeds from the sale of assets and an advance from a related party; the fact that after the impugned payments were made the company was unable to meet its continuing taxation obligations to the defendant with the result that a second winding up application was made by the defendant; and from the fact that the balance sheet of the company as at 30 June 2003 showed that the current liabilities of the company exceeded its current assets by $966 835. 177 While Travers no doubt bears some similarities to the present case in terms of Griffin's continuous failures to pay various creditors on time, a distinguishing feature is that the company in Travers went into liquidation shortly after the period the subject of Siopis J's analysis. 178 Although I accept the fact that Griffin continues to trade today has some relevance, I do not think it rises to the level that Griffin contends in resolving the factual enquiry. In my view, in considering the commercial realities of the matter, it is necessary to have regard to the months preceding the alleged date of the Insolvency Default Breach. Equally, while Carna's reliance on Bell (at [1949]) goes some way to responding to Griffin's primary resistance, caution should be exercised when drawing such a parallel given the sheer scale and complexity of that group of companies. 179 The fundamental issue between the parties is whether this inability to meet the payments on time was temporary or with sufficient consistency and duration to warrant falling within subpara (g) of the definition of 'Insolvent' in the Contract. The position is that throughout most of 2014 until late November 2014, Griffin was well behind on payments to Carna, despite letters promising support from Lanco India and despite the Griffin-Greensill Facility. The length of the delays and the size of those unpaid amounts to Carna alone was certainly significant and has been set out above. These factors are of paramount significance in this instance. 180 Carna relies upon the Australian Securities and Investments Commission's (ASIC) Information Sheet 42, which in turn, mirrors the indicia set out in Australian Securities and Investments Commission v Plymin [2003] VSC 123; (2003) 175 FLR 124 per Mandie J (at [386]) as providing strong indications that Griffin was insolvent by any test, but certainly 'Insolvent' for the purposes of subpara (g) of the definition in the Contract at and around, and certainly in the months before, the Contract was terminated on 3 December 2014. I turn to consider each of those factors relied upon by Carna below.

Ongoing losses 181 As to ongoing losses, the financial statements make clear that in the year ending 31 March 2014, Griffin recorded a net loss after tax in excess of $58.8 million and further, in the year ending 31 March 2015, Griffin recorded a net loss after tax of just over $25 million. Carna also produced on the final day of trial a copy of Griffin's financial report for the year ended 31 March 2018, primarily in response to Griffin's emphasis on the fact that it continues to trade. The report reveals Griffin recorded a net loss after tax of $37.354 million to 31 March 2018. Reference is also made in the 2018 report to a net loss after tax of $38.517 million in 2017. Griffin does not dispute this.

Poor cash flow 182 As to poor cash flow, in the year ending 31 March 2014, the evidence shows that Griffin's cash outlay for its operating activities exceeded $61.7 million. Accounting for cash flow from 'investing activities', particularly net movement in related party loans, Griffin's cash in-flow was just over $1.1 million. In the year ending 31 March 2015, Griffin's cash out-flow for its operating activities exceeded $36 million, accounting similarly for 'investing activities', particularly net movement in related party loans, the cash in-flow was about $646,000. Carna also relies on the admissions by Mr Roy and Mr Riordan in the earlier liquidators' examinations, that Griffin was unable to pay its debts when they fell due in 2014. As discussed previously, I do not consider that the admissions can be taken as conveying either individual's definite view that such was the case. The examination transcripts reveal both Mr Roy and Mr Riordan expressing their belief that debts could be paid with parent support which they believed to be guaranteed. 183 Griffin says that although the two sets of accounts show losses, all the accounts were signed on behalf of the directors and are audited. The accounts confirm the opinion of the directors and auditors that there were reasonable grounds to believe that the company would be able to pay its debts as and when they became due and payable. Accordingly, it is said the accounts do not show any endemic problem. If the cash flow problem was endemic, the directors would not have formed the opinion that Griffin was a going concern and nor would the auditors have signed off on the accounts, Griffin argues. 184 I pause to observe that there would rarely be an insolvent trading case or conclusion if this factor alone were conclusive. 185 As to the admissions by Mr Roy and Mr Riordan, none of these passages support Carna's case, Griffins says. The highest they reach is the somewhat uncontroversial proposition that Griffin required parent company support to pay its debts and that parent company support was provided, albeit with some delay at times. Griffin accepts it had no ability to control or dictate when the parent company support would be provided or what amounts it would comprise. No subsidiary is able to control the acts of its parent, but Griffin points to Chan (at [43]) for the proposition that such legal compulsion is not required and that the letters of support clearly provided the necessary assurance. Delays from time to time do not establish insolvency, Griffin says. They are simply a matter of commercial reality evidencing no more than temporary problems. 186 I accept that temporary problems are neither uncommon nor conclusive indicia of whether a company can pay its debts when they fall due. But in this instance, Griffin's liquidity problems were far from temporary and its continued reliance on the Lanco Group despite frequent disappointments was optimistic at best.

Incomplete financial records 187 Carna points to the fact that the audited report for the year ending 31 March 2014 was not filed until 7 November 2017 and the audited report for the year ending 31 March 2015 was not filed until 29 August 2016. 188 As to the delay in filing financial statements, Griffin says this point smacks of desperation. I consider that objectively viewed, these delays in the absence of some explanation are relevant. No evidence was called to explain the delays. On their own, they would certainly not, in my view, be indicators of insolvency, but taken with the other factors presently being examined, I do regard the unexplained delays as being relevant.

Lack of cash flow forecasts or other budgets 189 Carna points to the fact that Griffin frequently did not plan for repayment of debts as shown by its urgent requests for parent company funding. It also points to the fact that the parent company support was not provided in a timely manner and that both Mr Riordan and Mr Roy admitted that Griffin had no control over if and when Lanco India might provide funds. Carna stresses the events of mid-February 2014, when Mr Roy, Mr Riordan and Mr Kumar exchanged emails about two options; 'plan A' was to obtain immediate funding to enable Griffin to pay its debts and 'plan B' was a 'definite closure' of the Mine (Griffin's only business). 190 Griffin, however, says that events in early 2014 are not relevant to the date of the alleged 'Insolvency Default' some 10 months later, which Carna relies on for its case. The matters which Carna relies on are said to rise no higher than that dealt with concerning the general topic of parent company support. The support was provided and the debts 'ultimately paid'. Griffin is still in existence (at trial) some six and a quarter years later and has not been subject to any external administration. Griffin says that the reliance by Carna on the emails in mid-February 2014 between Mr Roy and Mr Kumar about 'plan A' and 'plan B' show only that as at 14 February 2014, funding was tight within Griffin and that parent company support was being requested and had not been provided as at that date. It was, however, provided by March 2014, Griffin says and at that point debts were paid. Griffin seeks to characterise these events as simply a temporary position which could not equate to insolvency on the established tests. 191 As indicated by my findings above and the repeated and unfulfilled requests for parent company support through until at least June 2014 as set out in the previous section, I do not accept Griffin's description of the circumstances.

Increasing debt (liabilities greater than assets) 192 Carna relies on the fact that Mr Roy admitted that since the Lanco Group acquired Griffin in 2011, Griffin had been a loss-making company. That is an uncontroversial proposition. Griffin's ability to continue as a going concern, as expressed in its 2014 and 2015 financial statements, was primarily dependent on the Lanco Group's support to pay its debts as and when they fell due. The difficulty was that the Lanco Group itself was heavily indebted and underwent restructures in December 2013 and July 2016 which ultimately failed. The 2018 financial statement reveals that receivers were appointed to Lanco Singapore in April 2017; Lanco India, the ultimate parent company, went into liquidation in August 2018.. 193 As to this topic, Griffin accepts that the matters relied upon are uncontroversial facts, but again, it argues, they do not either in themselves or in combination with other matters pointed to by Carna lead to the conclusion that Griffin was 'Insolvent' by at least 3 December 2014. Griffin says the more relevant objective facts are that the parent company support was repeatedly provided during 2013 and 2014 to enable Griffin to pay its debts, Lanco India successfully restructured its debts in December 2013 and not withstanding that Lanco India went into liquidation in 2018, Griffin continues to trade.

Creditors paid outside usual terms 194 Carna says, and clearly correctly, that this was the case throughout the relevant period of the Contract. This fact is uncontested and has been discussed at length in the previous section.

Existence of demands, summonses or judgments 195 The evidence of such notices served and actions taken against Griffin is substantial. Throughout 2013 and 2014, Griffin received numerous letters of demand and statutory demands from the ATO, as well as a winding up application. Many of the demands also came from critical suppliers, such as Piacentini, Kleenheat Gas. There were many in late 2014, including the following in close proximity to 3 December 2014: (a) 14 November 2014, ATO statutory demand for $10.88 million; (b) 2 December 2014, Department of Health for $4,447 for invoices which were due and payable from 10 April 2011 to 30 March 2013; and (c) 5 December 2014, Wren Oil for $16,948 for invoices which were due and payable from 2013 to early 2014. 196 In addition, the Dunn & Bradstreet report lists 17 court actions filed against Griffin in Western Australia between 2012 and 2014. The report does not give any details beyond the date that each action commenced, the plaintiff's name and the amount claimed. That being said, the report explains that this information was sourced from the 'D + B Automated Court Data Feed' and the various court actions are listed under the heading 'public records'. In line with my reasoning above (at [44]-[46]), I do consider that very limited weight should be given to this factual information which was said to be collated from publicly available records. Griffin's objections to the report, although briefly expressed in writing on a global basis, were focussed almost entirely on the conclusions and opinions as to the financial health and credit risk expressed by the author. Of the 17 court actions, the following four were commenced within the period I consider relevant to whether Griffin was 'Insolvent' (the amounts are quite minor compared with other financial problems): Date of Claim Plaintiff Defendant Amount Claimed Description 26 September 2013 Stanhope Holdings (WA) Pty Ltd ATF Hynes No2 Family Trust Griffin Coal Mining Company Pty Limited $6,679.48 'WA Claim' 12 February 2014 Cardinal Contractors Pty Ltd (ACN008688097) Griffin Coal Mining Company Pty Limited $12,160.50 'WA Claim' 26 August 2014 Koomarlin Pty Ltd Griffin Coal Mining Company Pty Limited $13,928.68 'WA Claim' 4 November 2014 ADG Global Supply Pty Ltd Griffin Coal Mining Company Pty Limited $52,780.33 'WA Claim'

197 On this topic, Griffin reiterates that as an overarching response, two matters should be borne in mind; first, temporary liquidity problems do not demonstrate insolvency. The problem must be endemic. Secondly, it says that 'ultimately all creditors were paid', which tells strongly against any endemic problem. It is not apparent what the evidence is of all creditors ultimately being paid or when such full payment took place. This is not a conclusion I can safely draw on any of the evidence adduced. But in any event it does not address the problem of failing to pay numerous (if not most) creditors when debts fell due or even within a reasonable period thereafter. 198 Griffin submits further that the delays in the payment to Carna, as set out in the facts outlined above, gives a misleading picture. The proper analysis is said to be that as at the end of November 2014, Griffin was in fact ahead in terms of payments that it had made to Carna, that is, it had paid Carna more than it had been invoiced by Carna. Griffin relies upon two schedules showing Carna's invoices rendered under the Contract and payments made by Griffin. Those schedules are annexed to these reasons as Annexure B. In any event, Griffin says that the amounts invoiced by Carna to Griffin included amounts in excess of that to which Carna was contractually entitled but were included and paid by Griffin. Griffin says the logic behind this was that the payments above the contractual entitlement were to provide support to a cash-strapped Carna and things would be resolved via the Annual Reconciliation Invoice procedure in Sch 13 to the Contract. 199 It is difficult to identify any specific evidence which supports these assertions beyond the level of the in-principle agreement, which Carna accepts, that it sought cash support from Griffin in the initial months of the Contract. Griffin's analysis at Annexure B will be discussed further below, but it suffices to say here that Griffin does not point to any invoices paid that were specifically for cash support as opposed to being charged to Griffin for work performed. While Griffin did pay Carna amounts it received from coal sales, this does not answer Carna's evidence of consistently late and underpaid invoices. It is clear that Carna was repeatedly pressing for payment. Carna's evidence on this point is to be preferred. Carna's demands were entirely warranted. 200 As to creditors other than Carna, Griffin notes Carna relies on three periods, 2013, 2014 and late 2014. For 2013, a number of creditors are identified by Carna and have been set out in the table above (at [71]) describing demands made of Griffin in 2013, but of these, Griffin say that all of the creditors referred to were paid, albeit after some delays. The two major creditors were the ATO and Piacentini. In relation to the ATO, the ATO was paid in full after winding up proceedings were filed by the ATO. Whilst not ideal, it is clear that there were 'short term funding' issues being experienced in 2013 and it was an unfortunate reality, Griffins says, that the ATO is often one of the last to be paid. However, it was paid. While this may be true of 2013, it completely ignores the ongoing troubles Griffin experienced with the ATO throughout 2014, including garnishee notices being issued over Griffin's bank accounts in March and September, and a further demand for $10.88 million issued on 14 November 2014. 201 In relation to Piacentini, a deed of settlement was entered into between Griffin and Piacentini in April 2014, with payments then made by Griffin of the instalments referred to in the deed so as to pay off the debt. Bank statements evidence these payments. It is said the debt was paid and the delay short and temporary. I cannot accept Griffin's characterisation in relation to this creditor. The evidence reveals that from at least the second half of 2013, Piacentini was pressing for payment, including by contacting Mr Greensill directly as Griffin's financier because communications with Mr Riordan had produced no result. Piacentini then served at least four statutory demands on Griffin in 2014 before the deed of settlement was agreed. These issues were neither short nor temporary. 202 Griffin contends that the position in 2014 was relevantly the same. In the late 2014 period, there were three creditors identified with the only substantive creditor being the ATO, but the debt to the ATO was paid in early 2015. While this is clearly the case, Mr Riordan's email to Mr Roy in early September, when the ATO garnisheed Griffin's accounts for the second time, indicates that the ATO's debt had been outstanding from since March 2014. It is of serious concern that a creditor such as the ATO was not paid in full for a debt of some $10 million for at least a year.

Suppliers insisting on cash on delivery 203 Carna notes that this recommendation was made in the Dun & Bradstreet report, a hearsay view to which I attach no weight. 204 There are however references in the various email exchanges to Carna being forced into cash on delivery terms with respect to fuel for the operation of the Mine. Mr Grey made reference to this state of affairs to Carna's external accountants on 27 March 2014 and, in an email to Mr Riordan and Mr Roy on 15 April 2014, Mr Grey noted that: … given the unfortunate history with the project we are finding it very difficult to provide the confidence to our suppliers that we will be paid and subsequently they will be paid and given this many of the key suppliers require payments upfront (fuel being the main one). (Emphasis added.) I give some weight to this in assessing Griffin's position but the evidence does not reveal whether this was an isolated instance or persisted throughout the Contract. 205 Carna also relies on the fact that Mr Roy admitted that he did not find it surprising that Dun & Bradstreet recommended cash on delivery terms in its 2 December 2014 report. However, there was no definitive evidence that creditors consistently required a cash on delivery basis. I place no weight on this 'admission'.

Special arrangements with select creditors 206 Carna points first to the fact that it was immediately added as a supplier for payment through the Griffin-Greensill Facility. Beyond the implications for Griffin's position from its reliance on the Griffin-Greensill Facility generally outlined above, there is nothing added to the analysis by considering Carna's inclusion specifically. The reality is, although the invoice factoring offered by Greensill was a less typical means of finance compared with bank borrowings, Griffin was incentivised to ensure its Facility was highly utilised. Of far more concern was the creation of the Carna-Greensill Facility in early May 2014. Carna also says the evidence discloses numerous instances where Carna and Griffin made special arrangements for payment to keep the Mine operating. 207 Griffin says none of these circumstances assists Carna in establishing that Griffin was 'Insolvent'. Rather, Griffin contends all of the matters relied upon arise out of Carna's own chronic lack of funding to enable it to properly carry out its obligations under the Contract and Griffin's efforts to assist Carna in dealing with that chronic lack of funding. As to the email from Mr Roy dated 19 March 2014 indicating that Griffin was there to support Carna commercially, Griffin says the preceding correspondence makes it clear that Carna appreciated that it had a significant cash flow problem, particularly in the early months of the Contract, and was looking for assistance from Griffin, amongst others, to assist with that cash flow problem. 208 Even if relevant, which is doubtful, any suggestion that Carna experienced a 'chronic lack of funding' cannot be sustained on the evidence. While Mr Grey had expressed concerns internally about Carna's financial projections in early 2014 and had acted on that concern by seeking cash support, those projections from early March 2014 only identified shortfalls in April 2014 and the first quarter of 2015. These concerns raised within Carna do not correspond to any failure on its part to perform under the Contract or, for instance, to meet contemporaneous demands from its own creditors. They pale into insignificance when compared with Griffin's parlous circumstances. Rather, it demonstrates that Carna's officers knew that the position would be tight, particularly in the early months, and that it would be reliant on timely payments by Griffin under the Contract. It made that position clear to Griffin. The terms of the Contract were directed to prompt payment. I infer that Griffin's failure to honour the payment terms was the primary reason why Carna became a willing participant in payments under the Griffin-Greensill Facility as soon as it started operations at the Mine. 209 Griffin repeats this submission with respect to Carna's entry into the Carna-Greensill Facility, namely, that it was an arrangement which allowed Carna to be paid in a timely manner in circumstances where it was experiencing cash flow problems. There are problems with this submission. As recognised by Mr Grey on 15 May 2014, this Facility amounted to Carna self-funding its invoices and paying significant financing fees in the process. The subsequent exchanges reveal significant disagreements as to who would ultimately be responsible for what was clearly Carna's liability to Greensill, with the ultimate result being Greensill UK lodging a proof of debt for $10 million in Carna's liquidation. I find, contrary to Griffin's submissions, that the Carna-Greensill Facility was an extraordinary arrangement, necessitated by Griffin's failure to make contractual payments due to Carna on time. So much is put beyond doubt by Mr Roy's statement in early June in discussions about increasing Carna's Facility limit: It's obvious this is self-financing for you but in the situation where neither parent [sic] nor our bank is in a position to release any money to us, this is the only avenue of funding for us. I had clearly given go ahead for our contract in view of funding commitment by Greensill which has hit this unexpected barrier at their end. (Emphasis added.) I consider this factor carries significant weight in the analysis. It was a last resort payment arrangement agreed to by Carna in circumstances where funding from Griffin's usual avenues had failed to materialise.

Payments to creditors of rounded sums 210 Carna observes that payments made to it by Griffin for its invoices were made in rounded sums not reconcilable to specific invoices, resulting in frequent part payment of invoices. Griffin says this goes no distance in demonstrating 'Insolvency'. I consider Carna's point while correctly made, is relatively neutral.

Overdraft limits reached or defaults on loans/interest 211 Carna says that overdrafts and defaults on loans may not be apparent because Mr Riordan admitted that Griffin had difficulties borrowing from banks. The Griffin-Greensill Facility was frequently close to being fully utilised. Griffin does not dispute this, but emphasises the point already made that Greensill required a particular utilisation rate and there were penalties if this was not achieved. The required utilisation rate was at least 95%. Reliance on this material is a red-herring, Griffin says, because it is not in dispute that Griffin was, during the relevant period, reliant on parent company support and Greensill for the payment of its debts. This directs attention back to the contentions made by Carna in relation to that support. In light of the facts of this case, this point does not reveal much in the analysis. I accept that Griffin had difficulties in borrowing from conventional lenders.

Problems obtaining finance 212 Carna relies on the admission by Mr Riordan that Griffin had difficulty borrowing from the banks and, secondly, that Greensill did not extend Griffin's facility to $75 million as requested. I have already addressed this point above and it suffices to repeat only that I infer Griffin's recourse to an invoice factoring facility stemmed from the 'difficulties', as described by Mr Riordan, in borrowing from Australian banks. As to the failure to have the Griffin-Greensill Facility increased by $75 million, the evidence does not permit a finding that this was due solely to Greensill's doubts or concerns about Griffin's viability. Mr Roy made clear his belief that the problems arose at Greensill's end, but there is also evidence of concerns that unpaid creditors could impede progress towards the limit being increased. The practical point for the purpose of the analysis was that Griffin's officers had planned their activities on the basis that an additional $45 million would be available in invoice factoring by the middle of 2014. That finance never eventuated. I find this to be a significant setback that had a material effect on Griffin's ability to pay its creditors on time in 2014.

Increased monitoring/involvement by financier 213 Carna simply points to the fact that from time to time Greensill made enquiries of Griffin's finances. Griffin says there is nothing remarkable in a company's financier making enquiries of the company in relation to its financial position. That is to be ordinarily expected. It was no secret that cash flow was tight within Griffin. I do not place weight on this point.

Inability to raise finance from shareholders 214 Carna says that Griffin suffered from a lack of reliable and timely payments from the Lanco Group, leading to the admissions which have been identified by Mr Riordan and Mr Roy. Griffin says that this factor adds nothing to the analysis. 215 I agree. The point is correct, but in the present case is indistinguishable from the points already raised on parent company support.

Overdue taxes and superannuation liabilities 216 As to the existence of overdue taxes and superannuation liabilities, Carna correctly points to the fact that Griffin was frequently late with payments to the ATO and to the Commissioner of State Revenue, resulting in, amongst other things, the ATO freezing Griffin's bank accounts in March and September 2014 and issuing a statutory demand for $10.88 million from Griffin on 14 November 2014. Griffin accepts that it was late in complying with its taxation obligations, but says that ultimately they were all met. This point has been addressed above. As noted, I consider it be very significant that large taxation obligations were vigorously pursued for as long as a year by the ATO before being paid, with serious actions being taken by the ATO to extract payment in 2014. The fact emphasised by Griffin that the ATO was ultimately paid in early 2015 can only be taken so far. A fundamental element of the definition of 'Insolvent' under subpara (g) of the Contract is that debts are able to be paid when due. Given the serious repercussions for Griffin in having its bank accounts frozen by the ATO twice in 2014, I find that Griffin did not pay its tax obligations on time because it was unable to do so.

Increased complaints or queries raised with suppliers 217 There is ample evidence of this factor. Carna itself frequently wrote to complain about delayed payments resulting on at least one occasion in the suspension of operations. Griffin says that these complaints were only in the early stages of the Contract, principally until June 2014. There were some delays in the early stages, Griffin admits, but what is equally clear, and more relevant to the issue of 'Insolvency' as at 3 December 2014, is that Griffin was in fact up to date, and if anything ahead, it says, on its payments to Carna as at the end of November 2014. All that is demonstrated is a short-term liquidity problem in the early months of the Contract. 218 This issue has already been well ventilated. I do not accept Griffin's submission that Carna's complaints were confined to the first half of 2014. Rather, I find that the threats of suspensions and revised payment plans agreed to in July, August and September indicate that Griffin's failure to pay Carna on time persisted throughout the term of the Contract. Griffin's submission that the problems were confined to the period up to June 2014 simply ignores the fact that Carna suspended operations at the Mine for ten days in July 2014 for non-payment.

Expectations that a future windfall will save the company 219 Carna points to evidence that the Contract was critical to Griffin in that Griffin had no contractor at the Mine from approximately June 2013 and was receiving no revenue at all. It was also evidenced by the fact that as at mid-February 2014, Mr Roy and Mr Kumar exchanged emails about the two options being 'plan A' to obtain immediate funding to enable Griffin to pay its debts and 'plan B' being a 'definite closure' of the Mine. 220 Griffin argues that the email was simply indicative of a particular point in time at which the expected parent company support had not been provided, although it was provided shortly after. Again, in the circumstances of this case, this factor adds very little to the analysis. While the emails discussing a 'Plan A' and 'Plan B' are relevant to Griffin's position in early 2014, Carna's submission as to their significance is overstated, just as Griffin understates their significance. The evidence demonstrates that both Carna and Griffin considered the Contract represented an important opportunity for both of their businesses. Both parties were committed to operating the Mine profitably throughout most of 2014 and both were determined, for a time, to stick with the project despite setbacks, including Griffin's failure to make payments on time.

Conclusion on the Insolvency Default Breach 221 It has not been Carna's contention, nor would I accept it, that simply being late with one or two payments could satisfy the requirements of subpara (g) of the definition of 'Insolvent' under the Contract. Clearly more is required. 222 In my assessment, the analysis cannot possibly be conclusively resolved merely by reference to Griffin's continued existence over six years later. No one gave any evidence as to how or why Griffin was able to turn around its financial circumstances at least to the point of being able to survive, but in any event, the most recently filed financial statements and reports that are in evidence show that for the year ended 31 March 2018, its net cash position in operating activities was negative $48,975,000 and for 2017, negative $70,706,000. The auditors drew attention at note 2 in the financial report indicating that the company incurred a net loss of $37,354,000 during the year ended 31 March 2018 and its liabilities exceeded its current assets by $485,221,000. Without expert evidence as to the current position, I am not able to say more than what appears in the accounts in relation to Griffin's current position, but its 'continued existence' six years later does not throw light on the question I must address as to whether subpara (g) of the definition of 'Insolvent' under the Contract was met at the material time. 223 The question for me is not whether or not Griffin was insolvent for the purposes of the Corporations Act, but whether it was unable to pay its debts when they fell due as at the currency of the Contract and within the meaning of that subparagraph in this Contract. That test is applicable because it is the protection to which each party to the Contract is entitled so that obligations to it, if they cannot be met, entitle termination of the Contract. The focus in this instance must be on the state of affairs at the time the parties were in the contractual relationship, not on what has happened over six years later. For this reason, I have also given less weight to Griffin's position in 2013, on which Carna placed emphasis, compared with its position during the Contract in 2014. Though I accept that Griffin's position both before and after the Contract is relevant to the question of whether its problems were temporary or endemic. 224 Griffin's heavy reliance on the fact of its existence today fails to address a fundamental aspect of the factual enquiry. Not only must debts be paid, they must be paid when they fall due. Over the life of the Contract, Carna made it clear to Griffin that timely payment was crucial to its operation of the Mine. The Contract terms reflect that fundamental fact to these contracting parties. As has been set out, less than a month into Carna's operation of the Mine, it told Griffin that 'Its [sic] extremely difficult to manage when payments don't occur as expected'. Carna was entitled to expect that payments would be made on time and I find that an important aspect of the right to terminate for an Insolvency Default under subpara (g) was the protection it afforded against consistent and debilitating late payment of debts. 225 There is no doubt that throughout the period of the Contract, including at the time of the Notice of Termination, Griffin was under a chronic disability with respect to its capacity to pay its debts. 226 Griffin says that Carna's construction of, and reliance on, subpara (g) of the definition boils down to an attempt to construe a right to terminate from the mere fact that some of Griffin's payments to Carna under the Contract were made late. It is contended that cl 10.2 provides a perfectly adequate mechanism for the resolution of late payments, all of which suggest that the construction advanced by Carna is not the proper construction of the Contract. Griffin also argues that the Contract provided, through cl 17.4, an opportunity for a party in default to remedy the breach relied on by the non-defaulting party. To characterise a chronic underpayment or late payment issue as coming within the definition of an 'Insolvency Default', and the immediate right to terminate under cl 17.11, would give cl 17.4 and the corresponding definition of an 'Event of Default' (being a 'substantial breach of its obligations under [the Contract] which is capable of being remedied') no work to do, Griffin says. Griffin says this construction is supported by the fact that Griffin's obligations under the Contract were almost exclusively concerned with the making of payments to Carna. 227 Griffin's submission that late payments could never give rise to a right to terminate for an Insolvency Default because cl 10.2 provided a mechanism for dealing with late payments must be rejected. Carna did in fact avail itself of its right to suspend operations and receive standby rates on at least one occasion, and threatened to suspend on other occasions. Each suspension or threat thereof was resolved by an agreement to a payment plan which Griffin failed to honour. It would be wholly untenable, and against all the commercial realities of the case, to insist that Carna could only have responded to Griffin's consistent failure to pay on time by further suspending operations at the Mine. It is difficult to see how such a course could have led to any result other than termination, as did occur. The fact that cl 17.4 was available to Carna as a mechanism by which it could require the remedy of an 'Event of Default', which could include non-payment, does not exclude the possibility of a course of persistent and sustained underpayment and late payment falling within the contractual definition of 'Insolvent' and entitling a party to terminate under cl 17.11. 228 In the 2014 calendar year, both Mr Roy and Mr Riordan estimated Griffin received about $50 million in parent funding. But as has been made plain, not only did Griffin have absolutely no control over when or if parent funding would arrive, the reality was that such funding consistently failed to arrive on time. The letters of support from Lanco do nothing to overcome this fact. This repeated in-principle commitment does not reflect what actually occurred. I find both that Griffin was primarily reliant on its parent to pay its debts when they fell due and that in practice, Griffin did not have the necessary degree of assuredness that financial support would be forthcoming: Chan (at [43]). On numerous occasions Mr Roy contacted the parent, and when that failed, the parent's financing bank, requesting urgent assistance and giving details of numerous debts that required immediate payment. The evidence suggests those requests went unanswered, at least within the time required. 229 The contemporaneous records from officers of the company, including primarily from Mr Roy and Mr Riordan shows the perspective as they saw it in terms of commercial realities and the dire circumstances in which they regarded Griffin as experiencing throughout the period of the Contract. 230 It is also relevant that under the heading of 'Going concern' in the financial reports for Griffin for the year ending 31 March 2014, the directors considered that Griffin was heavily reliant upon continued parent support to continue as a going concern. That report included the following statement: Acknowleding [sic] the uncertainties in the above paragrpah [sic], the Directors are confident of the parent entity's continued financial support on an ongoing basis to the Company. To this effect, subsequent to balance date, [Lanco India] provided the Directors of the company with a letter of financial support indicating that it will provide sufficient financial assistance to the company as and when it is needed to enable the company to continue its current operations for period of at least one year from the date the directors of the company sign the 31 March 2014 financial statements. 231 Similarly, but somewhat less significantly, in the financial reports for the previous year (ending 31 March 2013), reference was also made to the increase to $75 million of the Griffin-Greensill Facility in relation to Griffin continuing as a going concern. No reference to the Facility is found in the 2014 report. 232 The evidence demonstrates that in 2014, the parent company support was not provided in a way that permitted Griffin to pay its debts when they fell due. Further, the Griffin-Greensill Facility was never increased. This was an eventuality that Griffin's officers had specifically relied upon in their financial planning. The contemporaneous statements of Mr Roy and Mr Riordan in 2014 demonstrate that they were made acutely aware that both of their major funding avenues were not available to them at the times they, often desperately, needed them. It was on this basis that Griffin encouraged, and Carna agreed, to self-fund its operation of the Mine at an additional cost to Carna through the Carna-Greensill Facility. At that time (less than a month into operations) Carna was still committed to the project, though its concerns were repeatedly expressed. 233 Importantly, these findings are not a comment on the actions or bona fides of Griffin's directors or officers who may apparently have believed that both parent support and the extension of the Greensill Facility would eventuate when needed. Much more importantly, those persons were not (in the end) parties to this litigation. 234 Nor does a finding in relation to subpara (g) in this proceeding have any other insolvency consequence for Griffin at law other than that, for the purposes of subpara (g) under this Contract as between these parties, a breach occurred. The parties to the Contract were clearly turning their minds to an inability to pay debts when due during the currency of the Contract as that would directly affect their respective abilities to perform the Contract. It is of no comfort to Carna, which was forced into liquidation shortly after its dealings with Griffin, that years later Griffin is trading and supposedly solvent. It is a feature of commerce that companies from time to time have liquidity difficulties. Occasional liquidity difficulties do not equate to insolvency. However, when assessed by reference to the term of the Contract, Griffin's failure to meet its payment obligations were apparent from the Contract's inception, and persisted for the next nine months until the Notice of Termination was issued. Consideration of Griffin's financial position during the Contract is fundamental to construing the protection afforded to both parties by subpara (g) of the definition of 'Insolvent' under the Contract. When viewed in this light, Griffin's problems were not temporary or occasional, rather, they plagued both parties' ability to perform over the course of the Contract's relatively short life. 235 It is to be noted that neither party has called Mr Roy or Mr Riordan. Certainly they may have been be in a position to say what factors have enabled Griffin to continue as a going concern as at the time of trial, but there is no reason to think that Carna would have access to that information, and certainly would not have functional access to Mr Roy and Mr Riordan, who were its adversaries in the litigation up until the commencement of the trial. Similarly, no such evidence could be anticipated from Mr Grey. 236 Griffin's assertion of sufficient payment to Carna is not established by reliance on its analysis set out in Annexure B. The point that is contended by this analysis is brief. Griffin has sought to compare total amounts invoiced by Carna with total payments received by Carna from Griffin and Greensill into Carna's bank account. Griffin's schedules indicate that Carna invoiced Griffin for a total of $81,912,671.05 over the Contract (each of these amounts includes GST). Griffin then made payments to Carna totalling $49,081,623.35 up to 9 December 2014. Payments totalling $30,882,792.82 were also paid to Carna by Greensill. Thus, Griffin says Carna was paid $79,964,416.17 over the life of the Contract such that Griffin was only behind in payment by $1,948,254.88. 237 This analysis fails to address a number of key points. It overlooks the fact that the payment of $79 million takes in the $10 million of self-funding that Carna itself arranged through the Carna-Greensill Facility. Further, it provides no basis whatsoever for any satisfaction that these amounts were paid when due. Although the analysis lists the dates on which payments were made to Carna, it fails to connect these payments to the due dates for any specific invoices. Further, the amounts of the various payments are not directly referrable to amounts invoiced and are often rounded sums; Griffin paid Carna as and when it could, but this is insufficient to show that debts were paid on time. It also deals only with payments to Carna, not to other creditors. In the absence of expert evidence, and this analysis having (without notice) only been produced on the second and final day of trial, Carna's evidence is to be preferred with respect to Griffin's consistent inability to keep up with payments. 238 The Insolvency Default Breach is established. The mere fact that some companies do trade out of trouble does not mean that this is either the norm or acceptable. Insolvent trading is a fundamental cause of concern for creditors dealing with such companies. Creditors should not be required to incur the financial risk of significant losses caused by companies continuing to trade in the hope of somehow turning the position around. As is patently clear from the documentary record, in late 2013 and 2014, Griffin could not pay all its debts as and when they fell due without parent company support. Crucially, the parent support consistently failed to materialise at the times it was needed and in the amounts required to pay Griffin's debts. Griffin did not have the necessary degree of assuredness that parent company support could be used to pay its debts. So much is apparent from its reliance on Greensill but as has been stated, that avenue also failed to provide the extent of support anticipated. Although Griffin's position was already extremely precarious, once both these avenues of funding became at the very least, unreliable, Griffin was unable to pay its debts when they fell due. 239 The finding of Griffin's Insolvency Default Breach is not a finding that Griffin was or is insolvent under the Corporations Act. That is not in issue. It establishes that a breach of the contractual term in the words the parties to this Contract chose to use, and on the trading terms of this Contract, has been established.

WAS THERE A PAYMENT ACCOUNT BREACH? 240 By the Payment Account Breach, Carna contends Griffin breached cl 10.9 of the Contract. Clause 10.9 is in these terms: 10.9 Payment Account [Griffin] and [Carna] agrees [sic] to utilise a Payment Account for the purposes of ensuring payments are made to [Carna] by the due date under this agreement. [Griffin] must ensure as on the due date for payment, that there are sufficent [sic] funds in Payment Account [sic] to meet the amount payable for the relevant Monthly Progress Claim. 241 In its letter to Griffin of 25 November 2014, Carna purported to rely on the failure to establish a Payment Account under cl 10.9 as an 'Event of Default', as to which seven days' notice was given pursuant to cl 17.4, allowing for Griffin to seek to remedy the breach. Griffin now concedes it never established a Payment Account. However, the dispute between the parties is whether that failure falls within the contractual definition of 'an Event of Default' such as would have allowed cl 17.4 to be invoked as it was. The definition of Event of Default has been set out above (at [19]). In essence, it requires a party to commit a 'substantial breach of its obligations' under the Contract. The contractual definition encompasses substantial breaches that are both capable and incapable of being remedied. 242 Griffin's case simply is that the use of 'substantial breach' should be taken to be an invocation of that phrase as understood at general law. Griffin says its failure to set up the Payment Account under cl 10.9 was not a substantial breach. Carna contends that an Event of Default is established solely by demonstration of the fact that a Payment Account was never opened. Its argument is that a substantial breach does not need to depend upon the second requirement in cl 10.9 that any Payment Account have sufficient funds to meet each Monthly Progress Claim. There simply was no Payment Account.

Relevant construction principles 243 It is to be observed at the outset that the failure to establish a bank account at all, so as to satisfy the requirement of a Payment Account under cl 10.9 gives rise to binary outcomes only; either the account was established or it was not. Griffin concedes no such account was established. Thus, while Griffin accepts a breach has occurred, the question is whether that breach is 'substantial' so as to permit reliance upon cl 17.4 to give notice of termination unless the breach is remedied within seven days. 244 It is uncontroversial that breaches of contract exist on a spectrum. In this regard, the summary of Jordan CJ in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632 is germane (at 641): … In considering the legal consequences flowing from a breach of contract, it is necessary to remember that (i) the breach may extend to all or to some only of the promises of the defaulting party, (ii) the promises broken may be important or unimportant, (iii) the breach of any particular promise may be substantial or trivial, (iv) the breach may occur or be discovered (a) when the innocent party has not yet performed any or some of the promises on his part, or after he has performed them all, and (b) when the innocent party has received no performance from the defaulting party, or has received performance in whole or in part; and to remember also that the resultant rights of the innocent party and the nature of the remedies available to him may depend upon some or all of these matters. … 245 Referring to Jordan CJ's observations, the High Court in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115 per Gleeson CJ, Gummow, Heydon and Crennan JJ stated (at [48]) that: It is the common intention of the parties, expressed in the language of their contract, understood in the context of the relationship established by that contract and (in a case such as the present) the commercial purpose it served, that determines whether a term is essential, so that any breach will justify termination. 246 Griffin relies on the subsequent statement in Koompahtoo (at [54]) to the effect that: … Breaches of this kind are sometimes described as "going to the root of the contract", a conclusory description that takes account of the nature of the contract and the relationship it creates, the nature of the term, the kind and degree of the breach, and the consequences of the breach for the other party. Since the corollary of a conclusion that there is no right of termination is likely to be that the party not in default is left to rely upon a right to damages, the adequacy of damages as a remedy may be a material factor in deciding whether the breach goes to the root of the contract. (Emphasis added, citations omitted.) Griffin contends that the concept of a substantial breach focuses on whether the innocent party has been deprived of substantially the whole benefit of the contract. It is an expression used in relation to cases where there are breaches of intermediate terms, i.e. terms which are neither conditions nor warranties. 247 Griffin also asserts that Carna's position is not assisted by resort to the warranty as to financial capacity set out in cl 2.1(b) of the Contract. The clear structure of the payment provisions in Sch 13 of the Contract is that Carna was to be paid based on coal dispatched, against a background of Carna being well aware of Griffin's financial problems. 248 Carna relies on a decision of John Dixon J sitting at first instance in Stojanovski v Australian Dream Homes Pty Ltd [2015] VSC 404 where his Honour considered the meaning of the term 'substantial breach' contained in a construction contract. In that decision, his Honour said (at [45]-[47], [52], [55] and [56]): 45 The word 'substantial' is protean, which no doubt explains the propensity for the drafters of standard form terms and conditions for building contracts to identify what breaches are to be regarded as substantial. It is not uncommon for building contracts to contain an inclusive definition of 'substantial breach'. However, the term 'substantial breach' is not defined in this contract. Neither party addressed the court as to the proper meaning of 'substantial breach'. 46 Its meaning in a variety of contexts has been considered by courts. 47 In Wong v Silkfield Pty Ltd, the High Court said that the term 'substantial' may have various shades of meaning. Having regard to the context, it may mean 'large or weighty' or 'real or of substance as distinct from ephemeral or nominal'. In that case, the meaning dictated by the statutory context was that 'substantial' did not indicate that which is 'large' or 'of special significance' or would 'have a major impact on the ... litigation' but, rather, was directed to issues which were 'real or of substance'. The court's reasoning permitted context to determine where on the continuum the intended meaning was to be found. … 52 Although I agree that a substantial breach is one that is more than ephemeral or de minimis in its character, the concept and purpose of evaluating, and limiting, the kind of breach that enlivens the owner's right to serve a default notice is given context by reference to the terms of the contract as a whole. It is unhelpful to paraphrase the qualifying condition introduced by the word 'substantial' by using the phrase 'only really important breaches' because that is not the language. … 55 What is difficult is to assess where the parties, on the continuum from 'real or of substance as distinct from ephemeral or nominal' to 'considerable, solid, big, or really important,' intended the word 'substantial' to operate in order to evaluate the seriousness of the breach for the purpose of enlivening the owner's rights. … 56 The proper approach in determining whether the builder was in substantial breach of the contract requires that the court should first identify the term or terms breached, and the breach must then be evaluated by considering its nature and the consequences of the breach. … (Citations omitted.)

The Payment Account Breach - consideration 249 It is apparent when regard is had to the totality of cl 10, and the payment obligations contained therein, that cl 10.9 is a facilitative provision. It was intended to ensure that Griffin otherwise met obligations imposed on it with respect to payment under the Contract. In this regard, Griffin argues that no reasonable businessperson would have understood that non-establishment of an account from which Carna would be paid was a 'substantial breach' of Griffin's obligations. It is tolerably clear that the substantive obligations which Griffin had under the Contract related to the making of payments, regardless of their existence in a dedicated account. While failing to pay Carna might be capable of being labelled a 'substantial breach', Griffin says so long as the payments were made it could not seriously be the case that the account used to make them was material to Carna's enjoyment of the benefits it obtained under the Contract. To suggest to the contrary is said to enable a matter of form to override the true substance of the bargain. 250 Griffin points out further that although a failure to 'establish a Payment Account' in breach of cl 10.9 could not be characterised as an 'Event of Default' does not mean that no consequences would flow from it. Such a failure would be a breach of the Contract, but the question is what loss could be said to flow from it. Griffin says its construction does not deprive any such breach of legal consequence, it is merely that a party could not, on a proper construction of the Contract, seek to rely upon such a breach as a basis to terminate the agreement through the mechanism of cl 17.4 and thus open a path to calculating damages under cl 17.5 and Sch 15. 251 Carna contends to the contrary that the establishment of a Payment Account would have enabled better transparency, it would have enabled payment and would have provided Carna with an extra layer of protection in that regard. This submission stems from evidence relied upon by both parties at trial of the negotiations of the Contract in which the Payment Account appears to have been a compromise reached by the parties following Griffin's refusal to commit to an escrow arrangement. It is doubtful that such evidence can be used to give meaning to cl 10.9 and the phrase 'substantial breach' (Mount Bruce Mining (at [50])), but in any event, I do not consider those pre-contractual statements to be of any assistance to the construction task at hand. They do not tell one way or the other whether a breach of cl 10.9 was intended to be an 'Event of Default'. 252 Carna also urges a reading of the descriptor 'substantial' as giving meaning only to the nature or extent of the breach itself, as opposed to the nature of the obligation that has not been met in the context of the Contract. Griffin disputes this reading as set out above.

Conclusion on the Payment Account Breach 253 Primarily for the reasons given by Griffin, its failure to establish a Payment Account under cl 10.9 was not a substantial breach of the Contract and was therefore not an 'Event of Default'. I have difficulty in accepting Carna's submission that the intended focus of the descriptor ('substantial') is intended to only attach to the extent of the breach, i.e., that it was complete not just partial, rather than the nature or significance of the obligation as well. While on one view the text might suggest that 'substantial' pertains to breach alone rather than 'breach of its obligations', such a reading makes little sense for all the contextual and purposive reasons Griffin gives. It would mean that there was an act of default warranting termination (after notice and subsequent failure to remedy) no matter how trivial the obligation, as long as the breach was complete and not partial. 'Substantial' would be a strange descriptor to give to a breach alone, but one well known to the law and commerce when it is intended to embrace the nature of the obligation as well as the breach. 254 The commercial purpose of cl 10 of the Contract was to set out a payment regime for the performance of the Mining Services. Clause 10.9 was intended to facilitate that payment, however the focus of the clause is clearly on ensuring that Griffin made available sufficient funds to pay Carna. Notably, throughout the volumes of documentary evidence which Carna relied upon in relation to the Insolvency Default Breach, there is not a single mention of Griffin's failure to establish the Payment Account until Carna began contemplating termination in late 2014. Nor was evidence adduced of any contemporaneous complaints or concerns raised by Carna about the failure to establish the account prior to the Notice of Default of 25 November 2014. Carna's main concern was that it be paid in full and on time. While Griffin's failures to so do have been discussed at length above, no logical or relevant connection has been drawn between the failure to pay and the failure to establish a Payment Account. Clause 10.9 is directed to both matters. 255 The substantial obligation breached was Griffin's failure to pay Carna on time. The mechanism of payment through a particular account was a machinery mechanism. The substantial obligation was to pay.

THE VALIDITY OF THE NOTICE OF TERMINATION 256 Griffin raised a further issue in relation to the Payment Account Breach that the Notice of Termination was invalid to the extent it sought to rely on this breach. I have already concluded that the Payment Account Breach has not been established so my views on the Notice of Termination on that ground are unnecessary. There is no challenge raised to the Notice of Termination in relation to the Insolvency Default Breach, only to the fact of that breach occurring at all and on which I have ruled against Griffin.

Overview 257 Having established the Insolvency Default Breach, Carna's claim for damages falls for consideration. Griffin strongly contests the amounts Carna contends it is entitled to. 258 As noted, Carna had intended proceeding with its statutory claims, which included a claim for compensation for misleading or deceptive conduct. That claim, had it been made out, was to be calculated on an altogether different basis from the contractual claim. In the initial written materials, by way of submissions prepared prior to the proposed commencement date of the trial, there was very little focus on the computation of damages under the contractual claim. That the parties reached settlement of the statutory claims is highly commendable, but the consequence was that the evidentiary support for the contractual claim was by no means as clear in respect of all of the claimed items as Carna would suggest. Of course, Carna is in liquidation and the liquidators' access to officers of Carna at the time may be taken to be somewhat limited, although Carna did intend to call Mr Grey prior to settling the statutory claims. The result however was that in the absence of any oral evidence whatsoever, Carna was obliged to rely solely upon business records to prove the claim. No expert evidence, independent or otherwise, was led to support the documentary records going to quantum. Even the guidance from the submissions as to the source of the foundational evidence to support claims that were made as the Contract reached its point of breakdown was very limited. Carna tended to rely mainly on the actual claims themselves which was not sufficient to prove some elements of the claim. As will be seen below, in my view, at times the business records fell well short of establishing the amounts Carna sought to make good. Nonetheless, some of them have been accepted. 259 Equally, it must be said that the focus of Griffin's pre-trial submissions was on the statutory claims and the claim for compensation arising in that claim. It was not until the last possible moment, on the second and final day of the hearing, that Griffin produced a document which set out why it contended that it owed Carna nothing, even if the breaches were established. That document proffered an alternative to Carna's claimed amounts based on some rather involved mathematical calculations which were only made known to Carna on the last day of trial. It also falls quite short in achieving the objective Griffin sought to achieve. 260 In the end, a fundamental defect in a number of Carna's claims, as well as some of Griffin's claimed set-offs, is that no proper basis for an entitlement under the specific regime for the calculation of damages provided for in Sch 15 of the Contract was demonstrated. Although both parties agreed, at the level of general principle, that Sch 15 provided an exhaustive code for the calculation of damages, they (particularly Carna) failed to adhere to this proposition when formulating and delving into the detail of the amounts claimed. Schedule 15 of the Contract is the start and the end of the analysis in ascertaining the damages, if any, Griffin is liable to pay on account of the Insolvency Default Breach. A close and careful consideration of the Schedule is thus essential to the determination of the quantum of damages.

Construing Schedule 15 of the Contract 261 Both parties accept that if the Insolvency Default Breach is established (as it has been), then the damages which flow are to be calculated in accordance with Sch 15 of the Contract. This is so because of the operation of cl 17.11 (which entitled Carna to terminate with immediate effect upon an Insolvency Default) and cl 17.5. Clause 17.5 is relevantly in these terms: … In the event of a termination under this clause or under clauses 17.2(f), 17.4, 17.5, 17.11 or 21.3(e): (a) where it is not the default of [Carna], [Carna's] entitlements will be calculated in accordance with Schedule 15 as if the termination was for [Griffin's] convenience;… The reference to termination for Griffin's convenience is a reference to cl 17.3 which permitted Griffin to withdraw from the Contract without reason on 60 days' written notice: see Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; (2003) 77 ALJR 768. That clause does not play any active role in the present dispute though it warrants mentioning to provide context to the effect of cl 17.5(a), which deems Carna's contractual entitlement for damages for breach as being the same as if Griffin were to terminate for its convenience. 262 Schedule 15 provides for calculation of the Early Termination Amount. Although it has been set out above, it is convenient to reproduce it here in full: Schedule 15 - Early Termination Amount 1. Calculation of Early Termination Amount The Early Termination Amount payable by [Griffin] for termination for convenience is the sum of: (a) the amount outstanding under any unpaid Monthly Progress Claim less any amount due by [Carna] to [Griffin] up to the date of termination; (b) the amount of any Monthly Progress Claim made by [Carna] for work performed up to the date of termination less any amount previously paid by [Griffin] in respect of such Monthly Progress Claim; (c) the balance of the refurbishment costs due in respect of the residual period as per Schedule 16; (d) [Carna's] demobilisation costs (by excluding employee costs unless agreed between the parties); (e) any other amount due for payment to [Carna] net of any sum to be recovered from [Carna], as per the provisions of this agreement; (f) an amount of $4,500,000.00 to compensate [Carna] for premature termination provided that [Carna] must use all reasonable endeavours to minimize the costs, expenses and liabilities which may be incurred by [Griffin] under this Schedule as a result of early termination for convenience by [Griffin]. In the case of a termination for [Carna's] default, notwithstanding any rights [Griffin] may otherwise have to claim damages from [Carna], [Griffin] must still pay to (subject to any set off rights of [Griffin]) [Carna] all unrecovered refurbishment costs as set out in Schedule 16. The refurbishment cost is to be paid in equal installments and over a period that is 50% of the residual Initial Term of this agreement. 263 Shortly before trial, and at the Court's request, Carna filed a set of written submissions directed to the question of Carna's entitlement to contractual damages and the operation of Sch 15. Although Griffin did not contest the propositions enunciated in those submissions, in light of the way that both parties put their submissions on quantum and the various amounts claimed, it is necessary to develop a number of those propositions concerning the operation of Sch 15. 264 In short, Sch 15 provides a code as to Carna's entitlement to contractual damages following termination. In deeming Carna's entitlement for a breach of the Contract to be 'as if the termination was for [Griffin's] convenience', and in enumerating an exhaustive list of categories under which amounts are payable, it is clear that the parties intended to eschew any recourse to general loss of bargain damages in the instances where Sch 15 applies. Carna's entitlement to damages are thus strictly limited to those set out in Sch 15 and are unaffected by any other entitlement that might be said to add or discount from the amounts permitted by Sch 15. 265 Carna relies on the decision in Basetec Services Pty Ltd v Leighton Contractors Pty Ltd (No 6) [2016] FCA 1534, where Besanko J considered a similar question as to the operation of a purported contractual 'code' (though his Honour did not use that phrase) for the calculation of damages where the principal (Leighton) had terminated for convenience. Leighton contended that in calculating the amounts it owed to the contractor (Basetec) under cl 43.1 (the specific 'code'), Leighton retained the power to make valuations or determinations under cl 33 and cl 35 even after the termination, and so could diminish Basetec's claim under cl 45 of the contract. Besanko J disagreed, stating (at [349]): The point is not an easy one, but I have reached the conclusion that Leighton's argument should be rejected. It seems to me that the principal purpose of clause 43 is to make it clear in a case where Leighton has terminated for convenience, that it is not liable for loss of bargain damages and to identify the amounts which may be recovered by the Contractor. Clause 43.1(d) is fixing a point in time by reference to a counterfactual. As I would read it, the subclause's purpose is to identify an amount as if a claim had been made on the relevant date. I do not read the clause as going further than that, and there is no need to import all of the procedure in clause 35 (i.e., a determination by Leighton) and the procedure in clause 33 (i.e., a valuation by Leighton). (Emphasis added.) 266 Reliance is similarly placed on Velvet Glove Holdings Pty Ltd v Mount Isa Mines Ltd [2011] QCA 312. In that case, the contractor (Velvet Glove) owned a caravan park and agreed to provide accommodation and related services to the principal (Mount Isa Mines). The contract term was for one year with the total 'Contract Price' of $5,203,440 to be paid over the course of the term for the provision of the services. The principal terminated for convenience after only four months, by which time only about $1.7 million of the 'Contract Price' had been paid. Clause 18.5 of the contract 'provided the mechanism … by which the amount payable to [the contractor] was to be calculated in the event that the contract was terminated pursuant to that clause'. The contractor brought a claim for the unpaid balance of the 'Contract Price' which was rejected at both first instance and on appeal. On the appeal, Philippides J (with whom Fraser and White JJA respectively agreed at [1] and [2]) said relevantly (at [69], [72], [77] and [79]): [69] Velvet Glove contended that nothing in cl 18.5 altered the obligation which already accrued to pay the lump sum, where a lump sum Contract Price was agreed to and that the balance of that amount became payable on termination without cause. The crux of MIM's case was that Velvet Glove failed to show how the full lump sum ever became payable under the mechanism for payment provided in cl 18.5. … [72] MIM's submissions correctly highlighted the flaw in Velvet Glove's case and that is the failure to show how Velvet Glove's contention that Velvet Glove had an accrued entitlement to the full amount of the lump sum, albeit payable by instalments during the currency of the contract, was to be accommodated by the specific and detailed mechanism for payment provided in cl 18.5. ... [77] But there is nothing in cl 18.5 which, by its terms, specifies that the balance of the Contract Price becomes payable or is due upon termination under that clause. … [79] There is a further difficulty with the submissions advanced by Velvet Glove in that it is assumed that, if it became entitled to the balance of the Contract Price, that amount is payable in addition to the claim for Reimbursable Expenses. However, cl 18.5(d) does not, on any construction, allow for Velvet Glove to receive the equivalent of the Contract Price in addition to payments for Reimbursable Expenses incurred. The effect of cl 18.5(d) is to limit the amount payable on termination to a maximum of no more than the Contract Price. The subclause sets the Contract Price as the maximum liability of MIM (including for Services performed, Reimbursable Expenses incurred and amounts due under the contract) not as the minimum amount guaranteed under the contract. (Emphasis added.) 267 As a consequence, rather than needing to quantify any conventional 'expectation loss' suffered by Carna with regard to issues of causation and remoteness, the question to be asked is whether the amounts claimed by Carna fall within its entitlements under Sch 15 of the Contract. Carna likens Sch 15 to a liquidated damages clause that operates to fix an amount that is to be payable by way of damages in the event of a breach of the Contract. Subject to the penalties doctrine which is irrelevant here, proof of causation is unnecessary and the inquiry into the exact nature of the loss incurred is avoided. As stated in J-Corp Pty Ltd v Mladenis [2009] WASCA 157 (at [35]): … that amount is recoverable without proof of the actual loss caused by the breach. It is immaterial that the amount of the actual loss turns out to be less than the amount specified. Equally, if the actual loss turns out to be greater than the amount of the liquidated damages, the claimant cannot ignore the liquidated damages clause and sue for unliquidated damages … That is, ordinarily a valid liquidated damages clause fixes the amount that is recoverable in the event of a breach, regardless of whether the claimant's actual loss is greater or less than the amount specified. 268 It was not contended by either party as a matter of construction that Sch 15 operates in any way other than as a comprehensive code that governs Carna's entitlement to damages. As Griffin quite rightly points out, for each amount it claims, Carna must identify precisely which part of Sch 15 authorises that amount to be paid as damages.

Admissibility of certain 'business records' going to quantum 269 Before turning to a consideration of the quantum of Carna's Sch 15 entitlement, it is necessary to consider a number of evidentiary objections to documents relied upon by Carna to substantiate various amounts that it claims. Griffin objects to these documents on the grounds of hearsay, speculation or conclusion, or alternatively seeks for their use to be limited under s 136 of the Evidence Act. Those documents are: (a) The annexures to Mr Grey's first letter of 12 February 2015 with the subject line: 'Schedule 15 - Early Termination Amount' (First 12 February letter); (b) Carna's spreadsheets on coal volumes and mobilisation amounts (coal and mobilisation spreadsheets); (c) Carna's 'Monthly Volumes' spreadsheet circulated by Mr Grey from his work email to what may be assumed to be his home email on 11 January 2015 (Monthly Volumes spreadsheet); (d) 'Dewatering' spreadsheet attached to emails between Mr Brad Gillies (of Carna) to Mr Grey on 3 February 2015 with the subject line: 'FW: Dewatering Claim' (Dewatering spreadsheet); and (e) Carna's spreadsheet entitled 'Copy of GCM Claim V12.xlsx' circulated between Mr Henshaw and Mr Grey on 5 February 2015 under cover of an email with the subject line: 'RE: Costs' (GCM Claim spreadsheet). 270 In response, Carna claims these documents are business records pursuant to s 69 of the Evidence Act and therefore should be admitted as exceptions to the hearsay rule. Alternatively, it submits that they are admissible under s 1305 of the Corporations Act as the books of a company that are prima facie evidence of the matters stated or recorded within them. 271 Section 69 of the Evidence Act provides as follows: 69 Exception: business records (1) This section applies to a document that: (a) either: (i) is or forms part of the records belonging to or kept by a person, body or organisation in the course of, or for the purposes of, a business; or (ii) at any time was or formed part of such a record; and (b) contains a previous representation made or recorded in the document in the course of, or for the purposes of, the business. (2) The hearsay rule does not apply to the document (so far as it contains the representation) if the representation was made: (a) by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact; or (b) on the basis of information directly or indirectly supplied by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact. (3) Subsection (2) does not apply if the representation: (a) was prepared or obtained for the purpose of conducting, or for or in contemplation of or in connection with, an Australian or overseas proceeding; or (b) was made in connection with an investigation relating or leading to a criminal proceeding. (4) If: (a) the occurrence of an event of a particular kind is in question; and (b) in the course of a business, a system has been followed of making and keeping a record of the occurrence of all events of that kind; the hearsay rule does not apply to evidence that tends to prove that there is no record kept, in accordance with that system, of the occurrence of the event. (5) For the purposes of this section, a person is taken to have had personal knowledge of a fact if the person's knowledge of the fact was or might reasonably be supposed to have been based on what the person saw, heard or otherwise perceived (other than a previous representation made by a person about the fact). Note 1: Sections 48, 49, 50, 146, 147 and subsection 150(1) are relevant to the mode of proof, and authentication, of business records. Note 2: Section 182 gives this section a wider application in relation to Commonwealth records. 272 Section 1305 of the Corporations Act provides as follows: 1305 Admissibility of books in evidence (1) A book kept by a body corporate under a requirement of this Act is admissible in evidence in any proceeding and is prima facie evidence of any matter stated or recorded in the book. (2) A document purporting to be a book kept by a body corporate is, unless the contrary is proved, taken to be a book kept as mentioned in subsection (1). 273 As to the exception under s 69 of the Evidence Act, Carna says each of the documents forms part of Carna's records; they were kept by, and circulated amongst, Carna's officers. Carna says the reasonable inference is they were prepared by Carna's officers. Further, from those documents it can be inferred that Carna sought to agglomerate the expenses and supporting documents to identify Carna's claim under Sch 15 of the Contract. Preparing a claim is contended to be in the course of Carna's business, or for the purpose of Carna's business. 274 The documents are said to contain previous representations as to expenses incurred by Carna that were prepared in early 2015, well before these proceedings were commenced in 2018. They are representations that were made by Carna's officers, in particular Mr Grey, who had or might reasonably be supposed to have personal knowledge of the asserted facts, or on the basis of information directly or indirectly supplied by a person who had or could reasonable have had personal knowledge of the asserted fact. 275 Carna says it is therefore not necessary for the identity of the person who made the representation to be known. It is enough to be able to infer that each document was prepared by Carna's officers. 276 As to admissibility under s 1305 of the Corporations Act, it is clear that the documents could fall within the broad definition of 'books' that were kept by Carna. Carna says the documents are financial records in that they summarise, or add together amounts in invoices, and are working papers and other documents needed to explain the methods by which financial statements are made up. 277 The effect of the statutory proof mechanisms appears to be overstated. The starting point is the Evidence Act. It may be accepted that each document could be admissible as a business record under s 69 of the Evidence Act and would thereby be evidence of the truth of the matters that the document represented: see Australian Securities and Investments Commission v Hellicar [2012] HCA 17; (2012) 247 CLR 345 (at [69]). Crucially however, the business record exception to the hearsay rule is qualified by s 69(3), which provides that the exception does not apply if the evidence (or representation it contains) was created in connection with or in contemplation of legal proceedings. This is addressed in relation to each contested document. 278 Section 1305 of the Corporations Act concerns the admissibility of books in evidence. Under s 1305(1), a book kept by a body corporate under a requirement of the Corporations Act is admissible in evidence in any proceeding and is 'prima facie evidence of any matter stated or recorded in the book'. Section 1305(2) provides that 'a document purporting to be a book kept by a body corporate is, unless the contrary is proved, taken to be a book kept as mentioned in subsection (1)'. 'Books' is defined in s 9 of the Corporations Act to include, relevantly: (a) a register; (b) any other record of information; (c) financial reports or financial records, however, compiled, recorded or stored; and (d) a document. 279 Section 1306(1) provides that a book that is required by the Corporations Act to be kept or prepared, may be kept or prepared: (a) by making entries in a bound or loose-leaf book; (b) by recording or storing the matters concerned by means of a mechanical, electronic or other device; or (c) in any other manner approved by ASIC. 280 Taken at their highest and assuming the relevant documents were supported by s 1305(2) of the Corporations Act, all that the documents show for the most part is that Carna made claims for such amounts or, in some instances, recorded some unproven underlying data on which certain claims were later based. 281 To consider an analogy with company board minutes which also have an evidentiary enabling provision, assuming that the minutes of a meeting fell within the scope of s 1305 of the Corporations Act, the minutes constitute 'prima facie evidence' of any matter stated in them. The minutes are not actual evidence of matters or documents referred to in them. Section 1305 was addressed in some detail by Austin J in Australian Securities and Investments Commission v Rich [2009] NSWSC 1229; (2009) 236 FLR 1 (at [395]-[398]) where his Honour said: 395 The defendants referred to the definition of the words "prima facie" in the Macquarie Dictionary (2nd revised ed), as meaning "at first appearance; at first view, before investigation". They compared that with the definition of "prima facie evidence" as "evidence sufficient to establish a fact, or to raise a presumption of fact, unless rebutted". They submitted that the former meaning is the one intended in s 1305, and that the words "prima facie" are not used in the sense that, absent some satisfactory contrary evidence on the part of the defendants, the matters said to be recorded in the books have been conclusively proved. 396 In my view the true meaning of the words "prima facie" lies between the alternatives identified in the defendants' submission. The statement in s 1305(1) that the company's books are prima facie evidence of a matter stated or recorded in them does more than merely to convey that they are the starting point to proof or a "first view". All other things being equal, the fact that a matter is stated in a book kept by a company is sufficient to prove that matter in civil proceedings. That does not reverse the onus of proof in the proceedings in any general way, but it means that the tendering of the book is evidence of the matter recorded in it, and that matter will be thereby proven unless other evidence convinces the tribunal of fact to the contrary, on the balance of probabilities. 397 Section 1305(1) does not make the company's books conclusive evidence of the matters they contain, in the sense of requiring the tribunal of fact to make a finding in terms of the content of the books in the absence of proof to the contrary by the opposing party. The books are prima facie evidence of the matters stated in them, but the weight of that evidence is to be measured in accordance with the common sense of the tribunal of fact (Malek HM, Auburn J, Bagshaw R, Phipson on Evidence (16th ed, Sweet and Maxwell, 2005), at [7-17]). 398 In my view it would be open to the tribunal of fact to find that the prima facie evidence constituted by the company's books is outweighed by other evidence (including evidence adduced by the proponent of the books, even if the opponent does not give evidence about them); or by some quality or characteristic of the books themselves, even if there is no other evidence. In particular, if a book has the appearance of a draft or (being electronic) has a file title indicating that it is a draft, that alone may be sufficient (all other things being equal) for the tribunal of fact to reject the book as evidence of the matter stated in it, notwithstanding that the book is prima facie evidence of that matter; a fortiori if, in addition to having the appearance of a draft, the book contains inconsistencies or ambiguities or the matter otherwise demands explanation. (Emphasis added.) 282 Austin J also referred to the explanatory memorandum to the Companies Bill 1981 (Cth), which introduced the provision, and said (at [400]): Therefore s 1305(1) allows a company's books to be introduced into evidence as they are, without any "authenticating" evidence by any witness, and allows the books to be relied upon to prove transactions recorded in them. But it does not elevate the matters contained in the books to a plane of probative value that requires the court to disregard the context in which the matters relied on appear in the tendered document. If, for example, there is some doubt as to whether a particular transaction is "recorded" in a book because of some uncertainty about the status of the document or ambiguity about what it contains, s 1305(1) does not overcome the problem. (Emphasis added.) 283 As the Full Court noted very recently in Advanced Holdings Pty Limited as Trustee for The Demian Trust v Commissioner of Taxation [2021] FCAFC 135 per Logan, McKerracher and Perram JJ (at [169]): A court may be entitled to accept at face value for all purposes, including the underlying transactions, those documents admitted under the statutory provisions. But it is not obliged to do so. In circumstances where there are factors which may mitigate against the prima facie acceptance of such records as, for example, where there are other findings of fact firmly adverse to the quality of corporate management by a sole director (as there were in this case), a court is not obliged to accept at face value and for all purposes, the existence and efficacy of challenged underlying transactions referred to in a company minute. This may present a sobering bookkeeping reminder to directors of small companies, but the evidentiary rules established under these statutory provisions were not intended to circumvent the need to establish the efficacy of all the underlying transactions recorded in a company's minutes in all cases. In this case, those underlying transactions were squarely in issue and their efficacy open to being doubted. 284 Each document is considered in turn below but in short, no witnesses have been called to explain or prove their authorship or provenance in circumstances where they were all created after termination of the Contract in January and February 2015, in anticipation of potential litigation in the event that Griffin disputed the amounts claimed under Sch 15.

Carna's letters to Griffin dated 12 February 2015 285 In quantifying its entitlement to damages for Griffin's alleged breaches of the Contract, Carna relies heavily on two letters sent by Mr Grey to Mr Riordan on 12 February 2014. The First 12 February letter set out Carna's calculation of its entitlement under Sch 15 of the Contract and annexed various business records (invoices and spreadsheets) purporting to make good its calculations. The Second 12 February letter set out Carna's claims for additional losses borne by Carna from Griffin's breaches and consequent claims for additional amounts. While there is no objection to the contents of the letters as setting out the amounts Carna claims, I give no weight to the annexures to the First 12 February letter as business records (the Second 12 February letter did not contain any annexures). 286 I do not generally accept Carna's assertion that preparation of documents to support its claims for payment of various amounts as claimed in the two letters of 12 February 2015 could be said to be naturally in the course of Carna's business or for the purposes of Carna's business. The calculation of the amounts in those letters was plainly and in express terms, articulated with a view to litigation in mind. This is made clear by the statement in both letters that upon failure to make payment within seven days, Carna would initiate proceedings for recovery without further notice. This is particularly so where the basis of Carna's termination of the Contract was wholly disputed by Griffin, who treated Carna's departure from the Mine as a repudiation. Griffin clearly did not share Carna's view that Carna was entitled to any amount under Sch 15 such that Carna's officers must have been keenly aware of the likely prospect of legal proceedings when preparing documents purporting to quantify Carna's claim under Sch 15. Whether there was a delay in commencing the proceedings due to Carna's own liquidation and other events is another question all together, but such delay does not change the character of the documents. 287 The documents were clearly prepared in anticipation of litigation which was threatened unless the claimed sums were paid in seven days as the letters state. Even if they did not squarely fall within the s 69(3) Evidence Act exception, I would give little weight to the annexures on the basis that no one has been called to explain (and be cross-examined) anything about the computation, authorship, accuracy and other provenance of these records which purport to establish the amounts claimed in the letter.

Coal and mobilisation spreadsheets 288 It is not entirely clear when these spreadsheets were prepared. If they were prepared at the time of the activities they describe as part of the ordinary course of business carried on by Carna, I would give them weight in the absence of evidence to the contrary. If they form essentially part of the claim, I would give them little weight as source documents for the same reason as the annexures to the First 12 February letter. This point is somewhat academic because, as will be seen in the next section concerning quantum, I do not consider that the amounts said to be substantiated by these spreadsheets can be properly claimed by Carna under Sch 15.

Monthly Volumes spreadsheet 289 I treat this document in the same way as the previous document. The main issue with the amounts claimed is whether they can be properly claimed under Sch 15.

Dewatering spreadsheet 290 I give this document little weight. It was probably produced after Carna terminated the Contract and there is no other evidentiary support for the claim.

GCM Claim spreadsheet 291 No explanation has been given as to why Mr Henshaw or Mr Grey or other Carna employees could not have been called to explain this or other material. I would give very little weight to this spreadsheet. It was more likely than not produced after termination of the Contract given it was circulated internally on 5 February 2015. It was most likely produced in anticipation of litigation against Griffin.

Quantum 292 The quantum of Carna's entitlement under Sch 15 falls for consideration against the backdrop of these rulings. Carna makes claims for various amounts under items (1)(b), (1)(d), (1)(e) and (1)(f) of Sch 15 and considers that a credit is owing to Griffin under (1)(c). Carna's valuation of its entitlement stands at $19,123,465.16 (incl. GST). There is a dispute regarding GST which will be addressed later. The breakdown of Carna's valuation under each item of Sch 15 is as follows (with GST calculations included for the convenience of later reasoning only): Claimed entitlement under Sch 15(1)(b): 'the amount outstanding under any unpaid Monthly Progress Claim less any amount due by [Carna] to [Griffin] up to the date of termination;' DESCRIPTION AMOUNT (excl. GST) GST AMOUNT (Incl. GST) November 2014 Monthly Progress Claim $3,554,851.21 $355,485.12 $3,910,336.33 December 2014 Monthly Progress Claim $730,356.23 $73,035.62 $803,391.85 Claimed entitlement under Sch 15(1)(c): 'the balance of the refurbishment costs due in respect of the residual period as per Sch 16;' DESCRIPTION AMOUNT (excl. GST) GST AMOUNT (incl. GST) Refund of capital payments made by Griffin to Carna for 'Hitachi diggers' (Invoices 3606 and 3637) ($3,000,000.00) ($300,000.00) ($3,300,000.00) Claimed entitlement under Sch 15(1)(d): '[Carna's] demobilisation costs (by excluding employee costs unless agreed between the parties);' DESCRIPTION AMOUNT (excl. GST) GST AMOUNT (incl. GST) Demobilisation costs $889,344.33 $88,934.43 $978,278.76 Claimed entitlement under Sch 15(1)(e): 'any other amount due for payment to [Carna] net of any sum to be recovered from [Carna], as per the provisions of [the Contract];' DESCRIPTION AMOUNT (excl. GST) GST AMOUNT (incl. GST) Unpaid invoice 3704 for power $47,528.57 $4,752.86 $52,281.43 Unpaid balance of invoice 3705 for power $18,693.61 $2,077.07 $20,770.68 Unpaid balance of invoice 3723 for power $72,295.59 $7,229.56 $79,525.15 Unpaid invoice 3734 for power $157,122.52 $15,712.25 $172,834.77 Unpaid invoice 3765 for power $46,742.16 $4,674.22 $51,416.38 Leave entitlements for 'Select Personnel' $4,230,525.97 $423,052.60 $4,653,578.57 Workers compensation payments $15,543.09 $1,554.31 $17,097.40 Rates adjustment $4,158,458.33 $415,845.83 $4,574,304.16 Dewatering $456,797.29 $45,679.73 $502,477.02 Additional mobilisation costs due to Griffin's inability to provide working equipment $829,877.45 $82,987.75 $912,865.20 Provision of Ewington 1 workshop offices, crib room and ablution facilities $140,724.20 $14,072.42 $154,796.62 Construction costs for in-pit facilities (laying of pad) $419,101.86 $41,910.19 $461,012.05 Removal of additional overburden outside of Griffin's Mine Plan $126,934.76 $12,693.48 $139,628.24 Rehandle from Bill Stockpile $154,656.19 $15,465.62 $170,121.81 Reimbursement of Griffin overpayment for CHP Railings and Guarding ($29,942.00) ($2,994.20) ($32,936.20) Invoice 3746 fuel price adjustment to Griffin ($134,831.87) ($13,483.19) ($148,315.06) Entitlement under Sch 15(1)(f): 'an amount of $4,500,000 to compensate [Carna] for premature termination;' DESCRIPTION AMOUNT (excl. GST) GST AMOUNT (incl. GST) (1)(f) entitlement $4,500,000.00 $450,000.00 $4,950.000.00 TOTAL CLAIMED UNDER Sch 15 $17,384,779.49 $1,738,685.67 $19,123,465.16

293 Griffin rejects Carna's claims to every amount above except for the $4,500,000 mandated by item (1)(f) of Sch 15. Griffin goes further however, noting that the chapeau of Sch 15 clearly contemplates that the Early Termination Amount is to be the sum of all the amounts under items (1)(a) through to (1)(f). A number of those subparagraphs in their internal calculation then provide for relevant amounts due to Griffin to be deducted. Griffin says that it is possible for certain of those subparagraphs to result in a liability owing by Carna to Griffin (as Carna accepts with its calculation under item (1)(c)). On this basis, and accounting for numerous adjustments in its own calculations, Griffin contends that the valuation of Carna's entitlement under Sch 15 is no more than $813,090.74 (incl. GST). 294 Carna stresses that the Court is not required to display exactitude in calculating amounts and that in assessing the quantum of each item, a broad-brush estimate is acceptable and, indeed, appropriate in the context of a company in liquidation. Griffin says, with some justification, such a contention is no doubt made as Carna is acutely aware of the inadequacy of some of the material it has put forward in support of many of its claims. I accept this submission. There is no authority to suggest that a liquidator is subject to some lesser standard of proof, let alone a fully funded liquidator of the kind in the present case. Griffin relies on the extensive and helpful analysis by Einstein J in Optus Vision Pty Limited v Australian Rugby Football League Ltd [2003] NSWSC 288 in support of this contention. In relation to the reliance by Griffin on Optus Vision NSWSC 288, it is clear from [126] of that decision that the contractual clause concerned was very different to the contractual provisions presently under consideration. In any event, the relevant decision was reversed on appeal in Optus Vision Pty Ltd v Australian Rugby Football League Ltd [2004] NSWCA 61 per Santow JA (with whom Meagher JA and Stein AJA agreed) (see [102]-[105]). That said, I do proceed on the premise that Carna is obliged to prove the items it claims under Sch 15. Simple reliance on the First 12 February letter is inadequate. 295 It will be necessary to deal individually with each of Carna's claims and Griffin's set-offs under each of the items under Sch 15. As the following reasons reveal, the debate as to the sufficiency of evidence adduced by Carna is somewhat overborne in many instances by the threshold question of whether the amounts claimed or set-offs raised can properly arise under the Sch 15 regime for the calculation of damages.

Unpaid Monthly Progress Claims - Sch 15(1)(a) 296 Carna makes no claim to an entitlement under this item. It says item (1)(a) concerns Monthly Progress Claims that had travelled through the cl 10.2 process and had been invoiced to Griffin prior to termination. Carna's claim for unpaid amounts for November and December 2014 were issued to Griffin after termination, hence Carna addresses them under item (1)(b) of Sch 15. No alternate construction of these subparagraphs was put and it is immaterial for present purposes. Griffin says Carna cannot pick and choose, and it advances a submission that an overall consideration of Monthly Progress Claim payments over the life of the Contract must form part of the analysis. Given Griffin seeks to set-off against Carna's claim under subpara (1)(b), it is convenient to deal with both issues together in the next section.

Monthly Progress Claims up to the date of termination - Sch 15(1)(b) 297 Carna claims $3,554,851.21 (excl. GST) for the November 2014 Monthly Progress Claim contained in invoice 3722. It also claims $730,356.23 on account of the December 2014 Monthly Progress Claim contained in invoice 3742. 298 As to the November 2014 claim, Carna sent a claim for a slightly higher amount to Griffin on 4 December 2014, the day after termination. As part of the verification process for Monthly Progress Claims set out in cl 10.2, Mr Riordan sent a letter of 11 December 2014 to Carna which was to be treated as the issue of a payment certificate under cl 10.2(b). Mr Riordan acknowledges in the letter that the amount now claimed by Carna was due to it from Griffin for work done in November 2014. Invoice 3722 was then issued to Griffin on 12 December 2014 for $3,554.851.21 (excl. GST). I am satisfied based on the contemporaneous business records that the November 2014 Monthly Progress Claim can be claimed in the amount sought. Griffin does not contest the specific claim, but seeks an overall set-off discussed below. 299 A similar set of records is available to establish the December 2014 Claim, albeit for a lower amount. An invoice dated 14 January 2015 was sent to Griffin for a sum of $730,356.23 (amount now claimed). In a responsive letter a week later, taken to be a payment certificate under cl 10.2(b), Mr Riordan accepts that the amount payable for December 2014 is $694,704.74. Mr Riordan proceeds however in the letter to claim that as part of a 'final reconciliation' accounting for 'activities up to the date of contract terminating', that Griffin is owed $7,593,693.81. There is a significant issue with respect to amounts claimed by both parties as to whether some form of annual or final reconciliation process is contemplated by Sch 15. That will be dealt with shortly. Considering the specific claim for payment to Carna for work done in December 2014, I am satisfied Griffin accepted in the letter of 21 January 2015 that the amount payable to Carna is $694,704.74. Carna did not give any reason why it was owed more than that admitted by Mr Riordan and Griffin did not engage directly with the amounts owing under this specific invoice. 300 In response, Griffin argues that any amounts claimed by Carna under either items (1)(a) or (1)(b) are subject to reduction by amounts owing by Carna to Griffin. Indeed, item (1)(a) provides that the amount claimed is to be reduced by 'any amount due by [Carna] to [Griffin] up to the date of termination'. Similarly, the amount claimed under subpara (1)(b) is 'to be reduced by any amount previously paid by [Griffin] in respect of such Monthly Progress Claim'. The formulation under subpara (1)(a) is clearly the broader of the two and Griffin primarily relies on the former to contend that when the totality of Carna's progress claim invoices (including those for power and workers compensation addressed below) are compared with Griffin's overall payments to Carna by reference to Carna's bank statements, Griffin has only underpaid Carna by $1,948,254.88. 301 This analysis is set out in the series of schedules prepared by Griffin reproduced at Annexure B which were adverted to above in relation to the Insolvency Default Breach. In short: (a) Carna issued invoices to Griffin over the course of the Contract totalling $81,912,671.05 (incl. GST); (b) Carna's bank statements reveal Griffin made direct payments to Carna totalling $49,081,623.35; (c) in addition, Carna's bank statements also disclose payments received from Greensill UK totalling $30,882,792.82; (d) thus, the total funds received by Carna is the sum of (b) and (c) and equals $79,964,416.17; and (e) the amount outstanding to Carna is the difference between the amounts at (a) and (d), which equals $1,948,254.88. 302 There are a number of problems with this analysis. As mentioned, the first of which is that it fails to account for the $10 million of self-funding that Carna procured through the Carna-Greensill Facility to pay its own suppliers during the Contract. While the exchanges at the time seemed to indicate (despite some debate) that Griffin would be liable for Carna's Greensill debt, ultimately Greensill UK sought to prove in Carna's liquidation for the full value of the Facility. 303 More fundamentally in relation to the Sch 15 calculation however, Griffin has failed to demonstrate through this analysis how 'any amount was due by [Carna] to [Griffin] up to the date of termination'. There were no invoices issued to Carna at the time and any deductions claimed were clearly dealt with through the process in cl 10.2 which included the issuing of payment certificates, as Mr Riordan did in relation to the November and December 2014 Progress Claims. It is therefore not possible to identify any amounts due to Griffin up to the date of termination that could be discounted against the November and December 2014 Monthly Progress Claims or otherwise.

Schedule 15 and the Schedule 13 Annual Reconciliation Invoice 304 I come to an alternative argument advanced by Griffin that the assessment of damages under Sch 15 is in effect subject to the Annual Reconciliation Invoice process set out in Sch 13. Griffin appears to run this argument as much in response to certain of the amounts claimed by Carna under item (1)(e) of Sch 15 as it does in support of its own position. By this, I mean that the following analysis is also relevant to a number of the amounts claimed by Carna below which effectively stand or fall on the same question. 305 As has already been adverted to in these reasons (at [13]), pursuant to Sch 13 of the Contract, the Mining Fee comprised Monthly Progress Claims and an Annual Reconciliation Invoice. Under part A of Sch 13, Monthly Progress Claims were to be calculated as follows: [Carna's] Invoice for the Month (Monthly Progress Claim) will include the following; 1) Coal and Waste (Material) Removal Charges plus 2) Coal Dispatch Charges plus 3) Cost of electricity consumed minus 4) Cost of [Griffin's] Supply items net of payment made available by [Carna] for such supplies plus/minus 5) Adjustments in respect of Fuel for past billing as per SOR plus/minus 6) Any other adjustments for past Monthly Commercial Invoice 306 Part B of Sch 13 then set out how the Annual Reconciliation Invoice would be calculated: [Carna] would carry out an annual reconciliation exercise at the end of each Year of the Term and present an Annual Reconciliation Invoice (Annual Reconciliation Invoice) which will include the following; 1) Annual Coal and Waste (Material) Removal Charges plus 2) Annual Coal Dispatch Charges minus 3) Cumulative Mining Fee Payments received and / or due for the Year of annual reconciliation plus 4) Dewatering Capital Cost Variation plus / minus 5) Any other adjustments on account of other provisions of the Agreement (Emphasis added.) 307 For various reasons to do with ascertaining the precise quantities of coal extracted and processed by Carna, certain measurements were used as a proxy for the calculation of the Monthly Progress Claims which would then be reconciled in the annual process once exact quantities of coal could be ascertained. It is also clear that the parties intended that any additional cash support provided to Carna in the early months of the Contract from coal sales would be adjusted in the Annual Reconciliation Invoice. 308 Carna validly terminated the Contract with immediate effect on 3 December 2014 and accordingly, no annual reconciliation exercise had yet occurred. The question then is whether such a process of 'final reconciliation' is contemplated by the terms of Sch 15. Griffin contends that cl 10.6 of the Contract reflects an accrued right held by Griffin which is not touched by termination and enables a 'pseudo annual reconciliation exercise' to be undertaken. Griffin proceeded in its submissions to undertake such an exercise in accordance with Pt B of Sch 13. The result of this detailed analysis is that Carna is said to owe an adjustment to Griffin of around $3.9 million (three separate figures are offered by Griffin based on differences in certain amounts not presently relevant) in the annual reconciliation process or a pseudo process conducted as at termination. 309 It is simply not possible to reconcile this submission with the agreed position of both parties that Sch 15 provides a 'code' for the calculation of the Early Termination Amount (the damages) owing to Carna upon termination. 310 Carna's general position in relation to the use of Sch 15, contrary to that of Griffin, is that when Sch 15 is read as a whole in the context of the Contract, it does not allow for some sort of generalised accounting with respect to both sides' entitlements. Rather, it is specific to the party who is entitled to the benefit of the claims under Sch 15. This, Carna says, is particularly supported by the passage in Sch 15 at its completion, which reads: In the case of a termination for [Carna's] default, notwithstanding any rights [Griffin] may otherwise have to claim damages from [Carna], [Griffin] must still pay to (subject to any set off rights of [Griffin]) [Carna] all unrecovered refurbishment costs as set out in Schedule 16. The refurbishment cost is to be paid in equal installments and over a period that is 50% of the residual Initial Term of this agreement. 311 Importantly, Carna says, when Sch 15 wishes to engage the mechanism of a set-off, which it does for refurbishment only, it says so, but when it does not do that, there is clear entitlement, without set-off, to the sums claimed in Sch 15. This is consistent with the notion of a regime in respect of which there is termination for convenience. 312 Further and fatally, if Griffin wished to raise these matters by way of set-off against Carna, it should have pleaded a set-off and cross-claim. While there would have been a construction argument in response to it, there is no doubt that any such claim should have been properly pleaded and particularised pursuant to r 16.08 and r 16.10 of the Federal Court Rules 2011 (Cth). This is a commercial contract involving large amounts of money, large commitments of personnel and equipment in respect of which a termination clause which reflects a claim in damages such as that embodied in Sch 15 must be deemed to be the parties' intention, even though such a clause might not mirror what could otherwise be expected to be legitimately claimed by way of expectation loss under a conventional contractual damages assessment. If Griffin wishes to have the benefit of a substantial carve out from the admitted claims, then it should have pleaded it, particularised it and given evidence in relation to it: see, for example, McLennan v Insurance Australia Ltd t/as NRMA Insurance [2014] NSWCA 300; (2014) 286 FLR 453. Alternatively, it could have attempted to negotiate such a treatment in the Contract itself in Sch 15 for claims other than refurbishment. 313 In any event, and putting the pleading point to one side, Clause 10.5(a) of the Contract sets out a detailed mechanism for the determination of the Annual Reconciliation Invoice, much in the same way that cl 10.2 does for Monthly Progress Claims. At cl 10.5(a), Carna is directed to raise an Annual Reconciliation Invoice at the end of every 12 month period, with the first to be raised 13 months after commencement, some four months later than the termination date in December 2014. Clause 10.5(b) then agrees a process whereby an external third party assists in settling the Annual Reconciliation Invoice. Clause 10.6, on which Griffin relies, then provides as follows: 10.6 Payment adjustments The parties agree that confirmation or payment by [Griffin] of any amount relating to the Mining Fee does not prevent either party from requiring a further adjustment to the amount confirmed or paid to ensure that actual amounts finally paid to [Carna] are the amounts required to be paid under this agreement taking into account any relevant actual information not available at the time that the calculation or payment of amounts was made. 314 Schedule 15 makes no reference to any of cl 10, Sch 13 or indeed any other specific provision of the Contract except for Sch 16. At subpara (1)(e), under which Carna makes the bulk of its claims, Sch 15 provides as follows: any other amount due for payment to [Carna] net of any sum to be recovered from [Carna] as per the provisions of this agreement; (Emphasis added.) 315 I do not consider that the parties' intention in including subpara (1)(e) in Sch 15 was to import the Annual Reconciliation Invoice process contained in Pt B of Sch 13 into the calculation of an Early Termination Amount which would be paid to Carna in the event Griffin terminated for convenience. Clause 17.3 entitled Griffin to terminate for convenience on 60 days' written notice. Theoretically, Griffin could have terminated for convenience within the first three months of the Contract or indeed two months after an annual reconciliation process had occurred. In neither situation would it make commercial sense for the process contained in Pt B of Sch 13 to be shoehorned into the Sch 15 calculation of the Early Termination Amount. The fact that Carna terminated on breach by Griffin after around nine months is of no moment. Clause 17.5 deems Carna's entitlements as being the same as if Griffin had terminated for convenience. The primary purpose of Sch 15 is informative of the construction intended by the parties. 316 Schedule 15 makes explicit reference to amounts owing under Monthly Progress Claims yet makes no mention of the Annual Reconciliation Invoice. The parties would have used much clearer language than that in subpara (1)(e) if their intention was to make the calculation in Sch 15 subject to some other general reconciliation process. As the parties contended at the level of general principle, Sch 15 is the reconciliation process agreed to by the parties which was intended to apply to the present circumstances by operation of cl 17.5. It provides an exhaustive regime for the calculation of the Early Termination Amount to which Carna is entitled, whether that amount is greater or less than any loss actually incurred. 317 Finally, it is doubtful whether cl 10.6 would survive termination in the way Griffin contends; in other places the Contract explicitly indicates that a clause survives termination: cll 4.3(d), 17.5 and 17.9 (noting though the ambiguity in cl 4.3(d) addressed below). In addition, cl 10.6 is clearly directed to allowing further adjustments based on new information following conclusion of the processes in cl 10.2 and cl 10.5. There is no warrant to read it as an expansive insertion of a pseudo reconciliation, (conveniently in the same terms as the annual reconciliation under Sch 13) into Sch 15. 318 Neither party is entitled to any adjustment or payment that would have otherwise been addressed under Sch 13 by the raising of an Annual Reconciliation Invoice. Each amount claimed must be directly provided for by one of the items in Sch 15. 319 Accordingly, Carna's claims under item (1)(b) stand at $4,249,555.95 (excl. GST). As will be seen below however, some amounts claimed by Carna under item (1)(e) must be disallowed on the basis of the reasoning in this section.

Refurbishment costs due under Schedule 16 - Sch 15(1)(c) 320 Carna does not claim any amounts under this item and instead considers that an adjustment in favour of Griffin for $3 million (excl. GST) should be made. Griffin accepts this adjustment should be made but also notes that Mr Grey in the First 12 February letter also indicated that a further $922,343.74 (excl. GST) was due to Griffin. Carna appears to have omitted this amount in its Sch 15 valuation without reason. 321 Subparagraph (1)(c) of Sch 15 provides as follows: The balance of the refurbishment costs due in respect of the residual period as per Schedule 16; The source of Griffin's purported entitlement to both amounts is drawn solely from the First 12 February letter and the annexures to it, which I have given no weight as business records. The relevant part of the First 12 February letter provides as follows in relation to the latter amount: 3 The balance of the refurbishment costs due in respect of the residual period as per Schedule 16 3.1 Refurbishment/Maintenance costs Carna incurred costs in in [sic] relation to the replacement of major components of [Griffin's] Plant and Equipment as listed within the backlog provided by [Griffin]. These costs incurred by Carna total $2,946,248.21. To date [Griffin] has paid Carna $3,868,591.95. Therefore, an adjustment of $922,343.74 is due and payable by Carna to [Griffin]. A copy of a spreadsheet containing details of costs incurred by Carna is annexed at Annexure 3. (Emphasis and colour in the original). 322 Schedule 16 of the Contract sets out a budgeting regime whereby certain of Griffin's mobile plant and equipment on the Mine site would be removed from Carna's refurbishment programme 'due to potential over capitalising and time restraints'. The Schedule is detailed and was not explained by any oral evidence, expert or otherwise. Likewise, the amounts purportedly owing to Griffin were not the subject of any detailed submissions or explanation, either orally or in writing. In the absence of such elucidation, the extract from the first 12 February letter above does indicate that both amounts do factor into the Sch 15 calculation under subpara (1)(c) by virtue of their connection to Sch 16 of the Contract. While Carna accepts that the $3 million should be adjusted to Griffin, its only response to Griffin's claim for the additional $922,343.74 is that Griffin 'can't pick and choose the parts of that letter that they like and reject the parts that they don't like'. Carna did not seek to establish that the additional amount did not fall within the ambit of item (1)(c) of Sch 15, nor did it provide any reason to doubt the force of Mr Grey's admission that this amount was due back to Griffin, together with the $3 million amount which Carna accepts. 323 In absence of any actual evidence as to the operation of Sch 16 or the arrangement as to refurbishment between the parties which that Schedule informed, Carna has provided no basis upon which the two amounts admitted to be owing to Griffin under item (1)(c) of Sch 15 could be distinguished. Both amounts which, total $3,922,343.74 (excl. GST), should be credited to Griffin in the Sch 15 calculus under subpara (1)(c).

Demobilisation costs - Sch 15(1)(d) 324 Item (1)(d) of Sch 15 entitled Carna to its 'demobilisation costs', excluding employee costs unless otherwise agreed. Carna claims demobilisation costs in the sum of $889,344.33 (excl. GST). Griffin accepts Carna is entitled to demobilisation costs but disputes that Carna has sufficiently proved it is entitled to the quantum claimed. That complaint is well-founded. Carna relies solely on the First 12 February letter and an annexure to it which contains a spreadsheet listing (apparently) numerous pieces of equipment and vehicles with various demobilisation costs listed against each one. 325 For the reasons given above (at [285]-[287]), I give no weight to the annexures to the First 12 February letter; they were clearly prepared in anticipation of the litigation which the letter threatened and the exception in s 69(3) of the Evidence Act applies. In addition, no one has been called to explain anything about the computation, authorship, accuracy or provenance of the annexure to substantiate the amounts claimed beyond the mere opinion of one of Carna's officers. It is not clear why Mr Grey could not have shed light on what demobilisation expenses were actually incurred. 326 There is also no evidence of other business records, contemporaneous or otherwise, which would enable verification that any of the amounts listed were actually incurred by Carna. The Court is left with an evidentiary lacuna with respect to the veracity of these amounts. By way of one example only, the spreadsheet annexure relied upon for this claim lists the demobilisation cost for a 'Hitachi EX3600' as $175,379.80 and the demobilisation cost for a 'Hitachi EX1200' as $5,000. No evidence has been called to explain such a significant variation in demobilisation costs in respect of these excavators. As stated, this is but one example of the evidentiary difficulties with the document. 327 Carna must have incurred some demobilisation costs when leaving the Mine, but I consider, absent proper proof, that only a far more modest amount could be awarded for it. I would consider that $40,000 is the maximum I could allow for demobilisation on the basis that it is very difficult to sensibly contemplate demobilisation costing less than that.

Other amounts claimed under the Contract - Sch 15(1)(e) 328 Carna has claimed a substantial amount under this miscellaneous heading in respect of amounts it contends were due to it under the Contract. Although item (1)(e) is substantially broader than the other items in the Sch 15 calculus, I do not consider it permits or contemplates a general reconciliation akin to the Sch 13 Pt B process. The item provides as follows: any amount due for payment to [Carna] net any sum to be recovered from [Carna], as per the provisions of this agreement. (Emphasis added.) Although there is a tension between the two bolded phrases above as to the question whether amounts have to be due at the time of termination, as opposed to simply being owing, or a liability contemplated to be reconciled at a later date, for the reasons given above, Sch 15 does not permit a 'pseudo annual reconciliation process' to be conducted. Rather, subpara (1)(e) only entitles Carna to amounts which could be said to be properly due to it at the date of termination and directly referable to a provision of the Contract. 329 Once again, there was a complete absence of explanation by oral or any other evidence. Carna generally relies for its claims under this item on documents created after termination that are tendered purportedly in reliance solely on statutory proof mechanisms. Each amount claimed under this item is considered below.

Unpaid invoices for power 330 As listed in the table setting out Carna's Sch 15 valuation (at [292] above), Carna claims five separate amounts for power costs that are referrable to five invoices issued to Griffin. Those power costs are said to be for the full months of September 2014 to December 2014 as well as further costs up to 13 January 2015. They total $342,382.45 (excl. GST). These amounts were claimed by Carna in the Second 12 February letter which purports to identify Carna's loss and damage 'in addition to the Early Termination Amount' calculated under Sch 15. Although it is now accepted that Carna is not entitled to damages for any losses beyond the provisions of Sch 15, it remains to be determined whether the amounts now claimed fall under Sch 15 notwithstanding their inclusion in the Second 12 February letter. 331 Griffin does not dispute that Carna is entitled to claim power costs under Sch 15. Having regard to Pt A of Sch 13, which provides for various items to be included in the Monthly Progress Claims and includes 'cost of electricity consumed', it is not immediately apparent why power was invoiced separately. Indeed, Griffin included these invoices into its set-off calculations under subpara (1)(a) or subpara (1)(b) with regards to a pseudo reconciliation, which I have rejected. 332 Carna says that Sch 13 contemplated that Carna would carry the cost of power each month, until later charging Griffin for power consumed each month as part of Carna's invoices to Griffin. The consumption and use of power in performing the Contract was to be cash neutral to Carna, as the costs of power consumed would be charged back to Griffin by payment of Monthly Progress Claims. Carna says that contrary to Sch 13, Griffin supplied Carna with power until at least June 2014, but by September 2014, Carna was paying the bulk of its power costs upfront and invoicing Griffin at each month's end. This goes some way to explaining the separate invoicing. It says that Sch 13 contemplated that Griffin would carry the cost of these consumables each month, until later charging Carna for the cost of the consumables as a deduction on the payment of Griffin's invoices to Carna. 333 Thus, whether power costs are factored in under items (1)(a), (1)(b) or (1)(e) of Sch 15, I am satisfied Carna is entitled to claim these amounts. 334 The invoices supporting the amounts are in the trial bundle and are taken to have been sent at or about the dates they bear and constitute claims which were raised by Carna. Griffin does not appear to raise, or to have raised, any doubt as to the genuineness of the power invoices and, indeed, all of the invoices appear to be genuine business records or corporation records which make them prima facie admissible. I consider the power claims are established. Some but not all of the supporting invoices and supporting breakdown schedules were raised in the course of ordinary business dealings before there was a suggestion of any claim in February 2015. They may be contrasted therefore with the nature of the demobilisation claims mounted in much more generalised terms around the time of quantifying Carna's claim. Griffin has raised no express objection to Carna's entitlement to claim for power costs and the quantum concerned. Accordingly, Carna's claim in relation to unpaid invoices for power is allowed in the amount of $381,029.05 (excl. GST).

Workers compensation 335 Carna claims $15,543.09 (excl. GST) in unpaid invoices relating to workers compensation payments. The genesis of this claim arises from provisions of the Contract not yet touched upon, but which require only brief description. 336 Pursuant to cl 4.3, Carna agreed to a transfer to it of 'Select Personnel' from Griffin. The Select Personnel were defined in cl 1.1 as: (i) All maintenance and production employees of Griffin as on the day prior to the Commencement Date'; and (ii) All staff employees as agreed between Griffin and [Carna] as on the day prior to the Commencement Date. 337 Carna was required to issue new employment contracts to the Select Personnel and cll 4.3(c), 4.3(d) and 4.3(e) governed how Carna and Griffin would account for employees' pre-existing accrued entitlements, as well as those that would accrue during the Contract. Clause 4.3 is addressed in further detail below in relation to the leave entitlements claim. 338 The amount now claimed by Carna relates to two invoices for workers compensation payments to Select Personnel that were transferred to Carna with existing injuries. In the First 12 February letter, Carna claimed workers compensation amounts referrable to five separate invoices for August 2014 to December 2014. It says that Griffin has paid three of those invoices and only the amounts for November and December 2014 are outstanding. As with the power invoices and Monthly Progress Claims, Carna has produced contemporaneous invoices that are prima facie admissible as business records. Griffin does not dispute these claims specifically, but sought to factor them into its set-off argument. 339 Griffin also appeared to accept that these amounts could be claimed under item (1)(e) of Sch 15. I consider that the fact that invoices were raised and issued for amounts incurred during the Contract confirms that the amounts are 'due for payment' to Carna. 340 In circumstances where the parties' practice was to raise monthly invoices for workers compensation liabilities payable by Griffin to Carna, and only the invoice for December 2014 for $4,908,34 (excl. GST) was issued after termination, I am satisfied those amounts fall within the purview of item (1)(e) of Sch 15. Accordingly, Carna's workers compensation claim is allowed for $15,543.09 (excl. GST).

Leave entitlements 341 Carna claims a further amount under item (1)(e) of Sch 15 in relation to annual leave and sick leave entitlements that Carna says it paid to the Select Personnel during the Contract but which entitlements had accrued to those employees prior to the commencement of the Contract (when the Select Personnel had been employed by Griffin). Carna claims an amount of $3,202,258.03 in relation to annual leave and $1,028.267.94 for sick leave entitlements paid out, for a total claim of $4,230,525.97 (excl. GST). 342 The parties' submissions before and at trial were focused almost exclusively on calculation of the quantum of this claim. However, as with all other amounts, there is a crucial threshold question whether the amount claimed can be said to properly fall within the ambit of one of the items of Sch 15, in this case, item 1(e). It is useful to set that sub-paragraph out again here: The Early Termination Amount payable by [Griffin] for termination for convenience is the sum of: … (e) any other amount due for payment to [Carna] net of any sum to be recovered from [Carna], as per the provisions of this agreement; … (Emphasis added.) 343 Carna says that the basis for the claimed amount is contained in cl 4.3 of the Contract. It is convenient first to set out the relevant parts of cl 4.3 complete with spelling and other errors in the original (which is, even without those errors, not easy to comprehend and apply): 4.3 [Griffin's] Personnel (a) The Select Personnel shall be transferred to [Carna] as provided in this Clause 4.3. (b) [Carna] will assume on the Commencement Date the transfer and employment of all Select Personnel (including any Select Personnel who is the subject of a workers compensation claim or is the subject of a salary continuance claim at or prior to Commencement Date) on terms no less favourable than those which the Select Personnel had when employed by [Griffin], with full recognition of service continuity. [Carna] will continue to apply the terms and conditions of the Griffin Coal (Production) Collective Agreement 2012 and Griffin Coal (Maintenance) Collective Agreement 2012 to the Select Personnel as applicable (c) [Griffin] shall transfer the Select Personnel to [Carna], with effect on the Commencement Date with new employment contracts issued by [Carna] to the Select Personnel who are not employed under an EBA on the basis set out in clause 4.3(b). i. [Griffin] shall have the obligation to pay all employee entitlements except redundancy payments accured [sic] up to the Commencement Date, when drawn upon by the Select Personnel, which may have accrued prior to the Commencement Date (unless provided for in clause 4.3(e)) but subject to clause 4.3(d)); and ii. [Carna] shall be responsible for all Select Personnel entitlements accured [sic] during the Term and remains unpaid at the end of the Term including leave, pay and allowances and the same must be adjusted in the final Annual Reconcilliation [sic] Invoice at the end of the Term. iii. Any entitlements drawn upon by the Select Personnel on and after the Commencement Date must be verified by [Griffin] and [Carna] prior to payment by [Carna] to the Select Personnel; with those entitlements first paid by [Carna] and after the payment, [Griffin] must, subject to clause 4.3(d), reimburse [Carna] an amount reflecting [Griffin's] obligation to reimburse [Carna] for employee entitlements which accrued prior to the Commencement Date, with [Griffin's] employee entitlements to be drawn upon until exhausted prior to drawing on entitlements acrrued [sic] on or after the Commencement Date. Payment of the entitlements by [Griffin] will be calculated at the Select Personnel's rate of pay immediately prior to the Commencement Date, unless agreed otherwise by [Griffin]. (d) [Griffin] indemnifies [Carna] against any claims made against [Carna] by or on behalf of any of the Select Personnel in respect of: (i) employee entitlements excluding redundancy payments, which accrued prior to the Commencement Date; (ii) any dispute or claim which relates to, or arises out of or in connection with, events or circumstances occurring prior to the Commencement Date; (iii) liability to pay taxes or other statutory entitlements accruing to the Commencement Date. [Carna] indemnifies [Griffin] against any such claim arises [sic] pertaining to the duration of Term as above referred in clause 4.3(d)(i) to 4.3(d)(iii) in respect of Select Personnel. Liabilities of [Griffin] due to [Carna] under clauses 4.3(c)(i), 4.3(c)(iii) and 4.3(d) will be subject to the annual reconciliation process as per Schedule 14 [sic] and will only be paid through the Annual Reconciliation Invoice, except where the liabilities arise from an employee seeking a payout of leave entitlements. This clause will survive on termination of agreement annual reconciliation process. … (Emphasis added.) 344 Carna says that cl 4.3 of the Contract provided that Griffin would transfer the Select Personnel to Carna in March 2014. Griffin was then obliged to pay all employee entitlements, except redundancy payments, up to the commencement date of the Contract. These leave entitlements were then paid by Carna over the Contract as and when drawn down by employees, with Griffin liable to reimburse Carna pursuant to the machinery in cl 4.3(c)(iii) of the Contract. The commencement date was set as either 1 March 2014 or four weeks after the conditions precedent were met, whichever was the later. The conditions precedent were met on or around 12-14 March 2014, such that the commencement date was therefore mid-April 2014, although Carna is only claiming up until 23 March 2014 and, therefore it says, less than its true entitlement. 345 However, both parties' submissions did not explain what effect, if any, the final two un-numbered paragraphs that appear at the end of cl 4.3(d) have on Carna's entitlement to claim this amount under item (1)(e) of Sch 15. Written submissions were sought from the parties after judgment was reserved. 346 Carna maintains that its entitlement is unaffected by the references in the penultimate paragraph of cl 4.3(d) to the liabilities 'under clauses 4.3(c)(i), 4.3(c)(iii) and 4.3(d)' being 'subject to the annual reconciliation process' and that those liabilities 'will only be paid through the Annual Reconciliation Invoice…'. Carna says this is because the annual reconciliation process itself did not survive termination and that process was only intended to be used to calculate various liabilities while the Contract was on foot. It notes further that Sch 13, which deals with the annual reconciliation process, is not specifically directed to employee entitlements. Moreover, it is said that the last paragraph (the final line) in cl 4.3(d) is convoluted and unclear such that the Court could not conclude from its drafting that the process of annual reconciliation in Sch 13 was intended to survive termination for the payment of leave entitlements under cl 4.3(d). 347 Instead, Carna says that on a fair reading of cl 4.3 as a whole, and cl 4.3(d) in particular, it emerges that what was to survive termination was Carna's entitlement to be indemnified by Griffin under cl 4.3(d) in respect of 'employment entitlements excluding redundancy payments, which accrued prior to the Commencement Date' (cl 4.3(d)). The indemnity is said to be the relevant right that survives termination, not the process for calculating the value of the right. 348 Carna reiterates that Sch 15 is the code which governs termination in this case and sets out the specific entitlements to damages following termination. As noted, there is clear agreement between the parties on this proposition. Carna contends however, that once the Contract is terminated, item (1)(e) of Sch 15 does not require the annual reconciliation process to be undertaken to determine Carna's entitlement to payment. At the time of termination, the value of the leave entitlements claim takes form from the 'amount due for payment' under item (1)(e) which looks to the entitlements arising under the Contract as they had accrued at the time of termination, including Carna's entitlement to be indemnified by Griffin for leave entitlements under cl 4.3(d). Similarly, the qualifying phrase 'as per the provisions of this agreement' that appears at the end of item (1)(e) is said to reference cl 4.3(d), particularly Griffin's indemnification of Carna for employee entitlements, but not the annual reconciliation process. 349 After careful consideration of Carna's submissions, I have come to the view that these entitlements are not recoverable under Sch 15. That is essentially because of the actual text of the penultimate paragraph of cl 4.3(d) of the Contract, noting of course that the reference in that paragraph to 'Schedule 14' is an error and, as the parties agree, it should be understood as a reference to Sch 13. It is clear from the supplementary submissions received that both parties also accept that the process which is undertaken pursuant to Sch 15 does not involve an annual reconciliation process as contemplated by Sch 13. 350 It may be readily observed that the first part of cl 4.3(d) is directed to an indemnification only 'against any claims made against the Contractor by or on behalf of any of the Select Personnel in respect of' the matters in (i) to (iii). As Griffin correctly points out, this identifies an additional and different obligation on Griffin from the obligation which is owed by Griffin pursuant to cl 4.3(c)(i), which is subject to the machinery set out in 4.3(c)(iii). Clause 4.3(c)(iii) is connected to quantifying the liability under cl 4.3(c)(i). That is the relevant obligation from which the leave entitlements claim derives. It is not, as Carna's submissions appear now to suggest, derived from the separate indemnity contained in the chapeau of cl 4.3(d) which is directed to the entirely different situation where a dispute arises during the Contract with respect to employee entitlements that accrued prior to the Contract and a claim is made against Carna 'by or on behalf of the Select Personnel'. 351 It is in this context that the words of the final two un-numbered paragraphs in cl 4.3(d) on which submissions were sought require examination. 352 The first, and critical paragraph is in the following terms: Liabilities of [Griffin] due to [Carna] under clauses 4.3(c)(i), 4.3(c)(iii) and 4.3(d) will be subject to the annual reconciliation process as per Schedule [sic-13] and will only be paid through the Annual Reconciliation Invoice, except where the liabilities arise from an employee seeking a payout of leave entitlements. (Emphasis added.) 353 Griffin submits, and I accept, that the plain meaning of this paragraph is that it requires any liability that Griffin may owe to Carna under cl 4.3(c)(i) to 'only' be recovered through an Annual Reconciliation Invoice. 354 Given that the circumstances of termination resulted in there being no annual reconciliation process of the kind in Sch 13, but instead an altogether separate calculation under Sch 15, it follows that there is no Annual Reconciliation Invoice which might have enabled recovery of the liability owed to Carna under clause 4.3(c)(i) (and the allied machinery for quantifying it in cl 4.3(c)(iii)). 355 It is to be noted that the obligations under each subclause of clause 4.3(c) are expressly qualified as being 'subject to clause 4.3(d)', which in turn contemplates recovery 'only' pursuant to an Annual Reconciliation Invoice such that absent any annual reconciliation process, Carna cannot recover these sums it claims under Schedule 15. To permit such recovery would ignore several aspects of the contractual wording, including the words making the obligation in cl 4.3(c)(i) expressly subject to cl 4.3(d) and the words in cl 4.3(d) that the liability under cl 4.3(c)(i) 'will only be paid through the Annual Reconciliation Invoice' (emphasis added). 356 This construction is reinforced by the qualification in item (1)(e) of Sch 15 that any amounts claimed under that item as being 'due for payment to [Carna]' must be due 'as per the provisions of this agreement'. Carna's submissions that the proper application of these words to the penultimate paragraph of cl 4.3(d) has the effect of preserving the liability, but not the annual reconciliation process, cannot be sustained. The whole of the provision must be read together, which gives rise to the result that liabilities under cll 4.3(c)(i), 4.3(c)(iii) and 4.3(d) would only be paid through the annual reconciliation process. This crucial qualification also calls into question whether Griffin's liability under cl 4.3(c)(i) was in fact 'due for payment' at the time of termination. Indeed, Griffin submits that Carna cannot contend that it has an accrued right to recoup pursuant to cl 4.3(c)(i), as that right is not yet one which has been 'unconditionally acquired' (McDonald v Dennys Lascelles Ltd [1933] HCA 25; (1933) 48 CLR 457 per Dixon J at 476-477) because it can 'only' be availed of via the machinery of the Annual Reconciliation Invoice which has no place where termination has occurred. There is force in this submission, though it is not strictly necessary to decide the interpretation of the provision on this basis. Although Carna's argument that its leave entitlement claim should be taken to have accrued at the time of termination could potentially have merit were it seeking general contractual damages, as it has repeatedly accepted, both parties are bound by the code in Sch 15 which does not provide any basis for an entitlement to the claimed amount on such terms. 357 While this result may appear to deny Carna a significant portion of its claim, it is to be noted that Sch 15 does provide for a lump sum payment of $4.5 million without proof of any further loss. This reinforces the fact that Sch 15 was to operate to the exclusion of general loss of bargain damages and other methods of calculating quantum. 358 There is then the final paragraph of cl 4.3(d) which is as follows: 'This clause will survive on termination of agreement annual reconciliation process'. 359 Both parties agree that this paragraph is ambiguous, and Griffin says it should be read as though the last three words did not appear - plainly they should not apply on termination and should be omitted to avoid producing an absurdity. Griffin points out that very similar wording (with the omission of the final three words) appears elsewhere in the Contract in cll 17.5 and 17.9, so to construe the paragraph in this way would not create any novel expression in the Contract. 360 To read the clause in this way gives it work to do, Griffin says. It preserves, after termination, an obligation on Griffin to reimburse Carna where an employee seeks a payout of his or her leave entitlements; this scenario being expressly excluded from the annual reconciliation process by the words of the preceding paragraph. 361 Aside from being semantically difficult to understand, the paragraph is ambiguous and neither party has sought to deploy it directly in support of their position, but have instead sought either to disclaim it altogether or proffer a possible reasonable explanation for its inclusion in the Contract in a way that has no impact on the issues of this case. In my view, it is the preceding paragraph which is fatal to Carna's entitlement to this claim under Sch 15 and I do not consider, for all the reasons given at [304]-[317] above, that the final paragraph of cl 4.3(d) creates a pseudo annual reconciliation process that is to be undertaken upon any termination of the Contract at any time. 362 For these reasons, Carna's claim for the sum of $4,230,525.97 (excluding GST) with respect to leave entitlements under item (1)(e) of Sch 15 to the Contract cannot be accepted.

Rates adjustment claim 363 The next sum claimed is a considerable amount for rates adjustment pursuant to Sch 15, item 1(e). The sum claimed by Carna is $4,158,458.33 (excl. GST). In short, Carna seeks to adjust the underlying rate that was used to calculate the Monthly Progress Claims it issued over the Contract. This is sought to be done by reference to Sch 14 of the Contract which, in Pt A, sets out a schedule of rates, in Australian dollars per cubic metre, that are to be used to calculate the component of Carna's Mining Fee that relates to volumes of waste and coal removed. The schedule contemplates that different rates are to be charged depending on the total volume of coal and waste removed in a year. For instance, the Bank Cubic Metre (BCM) Rate to be charged if the cumulative waste and coal removed in the year fell between 33 million and 38 million cubic metres, was $3.724. If the annual volume fell into the lower band of between 28.5 million and 33 million cubic metres, the BCM Rate would be $3.998. It should be noted that the schedule provides for a higher BCM rate to be charged as the annual volume bands decrease. This is crucial to Carna's rates adjustment claim. 364 The Mine Plan agreed by the parties at the commencement of the Contract set a target for the first year of 37,998,774 BCM. This volume falls into the 33-38 million BCM band which sets a rate of $3.724. Carna's Monthly Progress Claims over the course of the Contract utilised this rate as part of the calculations in Pt A of Sch 13 to calculate the monthly amounts of the Mining Fee. However, Carna says that at the date of termination it had only achieved an annualised volume of around 30 million BCM, which falls into the lower band of between 29.5 million to 33 million, and to which the higher rate of $3.998 applies. Carna thus seeks an adjustment such that the amounts it claimed throughout the Contract are recalculated using this higher rate. After some rather detailed calculations, this results in the figure of $4,158,458.33 (excl. GST) that is now claimed. 365 It is unnecessary to set out the analysis, because I do not consider that Carna is entitled to this amount under Sch 15. I have also ruled above that no weight should be given to the underlying spreadsheets that Carna relies on for this claim. As foreshadowed in relation to Griffin's attempted adjustments to the Monthly Progress Claims, Carna's rate adjustment claim is an attempt to import some form of pseudo reconciliation process into the Sch 15 calculus under item (1)(e). For all the reasons given above (at [304]-[317]), such an additional reconciliation to that already set out in Sch 15 is not permitted by the words of item (1)(e). Carna raised no invoices to reflect these claimed adjustments and there is no basis upon which they could be 'due for payment'. 366 It is also not at all clear that the adjustments to the BCM Rate that Carna now contends for would even be allowable under an annual reconciliation process, were one to occur under Pt B of Sch 13. The section of Pt B of Sch 13 dealing with calculation of the 'Annual Coal and Waste (Material) Removal Charges - AMC' includes the following statement: BCM Raten is the BCM Rate in AUD / Cubic Meter as per SOR (Schedule 14) corresponding to the Mining Plan agreed at the start of the Year or any amendment thereof during the Year. (Emphasis added.) 367 Griffin points out that it would be a perverse result if the Contract were to be construed so as to permit a mining contractor to claim a higher rate of payment because it failed to achieve the volumes agreed by the parties at commencement. It is unnecessary to decide this contention as Carna has failed to demonstrate that the amounts claimed as 'rates adjustment' were due for payment under a provision of the Contract. I do not consider that any of this amount should be allowed.

Dewatering claim 368 Carna's next claim, which is also pursuant to item 1(e), is for dewatering in the amount of $456,797.29 (excl. GST). Carna argues that it incurred dewatering costs of $1,278,073, but it had only been paid $821,275.71. This is also set out in the Second 12 February letter, but simply as a basic statement. As with the rates adjustment claim, Carna does not point to any provision of the Contract which gives it a right to seek to recover the additional dewatering costs. In any event, the evidence put forward to support the claim falls well short of proving it. Carna relies on the Dewatering spreadsheet prepared by its employees after the Contract was at an end, which is little more than an assertion as to the claim by Carna. Carna also relies on some invoices, but they do not assist in determining whether or not it has a contractual entitlement to the claimed sum. True it is that Carna was paid for some dewatering and it accepts that it was paid $821,275.71 pursuant to invoices rendered to Griffin, which were paid. The specific amounts claimed would also not fall within the annual reconciliation process because any entitlements under Sch 13 are constrained to capital cost. For all these reasons, Carna has failed both to demonstrate it is entitled to dewatering costs under Sch 15 and to prove that any amount is actually owing. The dewatering claim is not made out.

Various mobilisation costs 369 Carna's next claim under item (1)(e) is for various amounts that appear to relate to mobilisation costs incurred in the early stages of the Contract. Four separate amounts are claimed as set out in the table (at [292]) above. They are each considered in turn. 370 Carna first claims $829,877.45 (excl. GST) under this item on the basis of incurring additional mobilisation costs due to Griffin's inability to provide working equipment. This claim is set out in the Second 12 February letter from Carna to Griffin, simply saying: Carna incurred mobilisation costs of $2,073,155.45 as Carna had to expend additional funds due to [Griffin's] inability to provide working equipment. [Griffin] has paid Carna $1,243,278.00 for mobilisation. Therefore, Carna is entitled to an adjustment of $829,877.45 payable by [Griffin] to Carna. 371 There are three other items of mobilisation claimed. The Second 12 February letter claims for those amounts as well, but again, with no further information. The Second 12 February 2015 letter relevantly states: 4 Additional mobilisation expenses incurred after the Commencement Date Carna undertook a number of additional mobilisation projects including improvements to [Griffin's] facilities. Carna also incurred costs undertaking activities for the preparation of the pits for future coal recovery. These additional expenses include: a) provision of Ewington Pit 1 workshop offices, cribroom and ablution facilities including replacement of failed septic system $140,724.20; b) construction costs for in pit facilities (laying of pad) $419,101.86; and c) removal of additional overburden outside of [Griffin's] mine plan $126,934.76, TOTAL: $686,760.20. [Griffin] has not paid Carna for undertaking these additional mobilisation projects. Therefore, Carna is entitled to an adjustment of $686,760.20 payable by [Griffin] to Carna. (Emphasis added.) 372 Once again, the fact that the claim is contained in the Second 12 February letter does nothing to substantiate the claim. In both of the 12 February letters, Carna is certain that if Griffin failed to make payment within seven days, it would initiate court proceedings. In each instance these documents fall within the exception to the business rule under s 69(3) of the Evidence Act. Undoubtedly, court proceedings were genuinely contemplated at that stage. 373 Carna has not articulated any basis under the Contract for it to seek to recoup costs of this nature, let alone demonstrated how that entitlement is recoverable under Sch 15. Carna had already agreed a sum for mobilisation costs with Griffin and was paid for these costs, as an invoice issued to Griffin on 30 January 2014 demonstrates. The deficiency in evidence to support these claims is manifest. That is true of each of the claims for mobilisation. No witness has been produced to verify the amounts said to have been incurred and why they were incurred and how they were incurred. It is bare assertion. None of these amounts can be accepted.

Rehandling costs 374 Carna's final claim under item (1)(e) of Sch 15 is an amount of $154,656.19 (excl. GST) for what is described as 'Rehandle from Bill Stockpile'. Once again, Carna relies on the Second 12 February letter and, once again, it is manifestly insufficient to prove the amount is properly due to Carna, or that Carna is entitled to claim that amount under (1)(e) of the Sch 15. 375 There is also an excel spreadsheet with a tab entitled 'Bills dump (export)' which is said to identify Carna's costs for this amount. What the evidence does show is that there are various amounts charged by Carna and paid for rehandling throughout the term of the Contract, but there is no clear evidence that Carna actually did this work or was entitled to payment of this sum. Carna's general practice was to invoice Griffin for work done. It did not invoice Griffin for this amount which appears for the first time in the pre-litigation claim. This claim fails.

Further adjustments to Griffin 376 Carna's calculations of the Sch 15 'Early Termination Amount' also allow for two smaller credits to be made to Griffin under item (1)(e). Those amounts are $29,942 (excl. GST) for 'reimbursement of overpayment for CHP Railings and Guarding' and $134,831.87 (excl. GST) for 'Invoice 3746 fuel price adjustment to Griffin'. The basis for these credits to Griffin is the First 12 February letter in which reference is made to adjustments in Griffin's favour for these specific items although the amounts differ slightly from those ultimately included in Carna's calculations. These amounts were not the subject of any argument or submissions, and as with the amounts said to be owing to Griffin under item (1)(c), there is no reason to disclaim what was said in the First 12 February letter on these topics. Their force as admissions has not been doubted. 377 Adding the two sums together, I find that a sum of $164,773.87 (excl. GST) should be subtracted from Carna's overall entitlement under Sch 15, subject to the resolution of the question of GST below.

Termination payment - Sch 15(1)(f) 378 The next amount Carna claims is item (1)(f) of Sch 15, the 'early termination payment' of $4,950,000, being $4,500,000 plus GST. It says that evidence is unnecessary to prove this claim as it is the lump sum payable under Sch 15. Griffin does not appear to dispute this. Obviously, the parties contemplated when they entered into the Contract that there would be a substantial lump sum payment on termination in lieu of general losses that fall outside the ambit of Sch 15. 379 The amount of $4,500,000 is properly claimable, subject to the question of GST.

Final assessment of Sch 15 Early Termination Amount 380 In accordance with each of my rulings in relation to the amounts claimed by Carna and the set-offs raised by Griffin, I consider, subject to the question of GST, that Carna's entitlement under Sch 15 is as follows: Item under Sch 15 Description Amount excl. GST (1)(a) 0 (1)(b) Invoice 3722 for November 2014 Monthly Progress Claim. $3,554,851.21 (1)(b) Invoice 3742 for December 2014 Monthly Progress Claim. $694,704.74 (1)(c) Refund of capital payments made by Griffin to Carna for 'Hitachi diggers' under Sch 16 (Invoices 3606 and 3637). ($3,000,000.00) (1)(c) Further Sch 16 refurbishment amounts admitted as owing to Griffin in the First 12 February letter. ($922,343.74) (1)(d) Carna's demobilisation costs. $40,000.00 (1)(e) Invoice 3704 for power. $47,528.57 (1)(e) Invoice 3705 for power. $18,693.61 (1)(e) Invoice 3723 for power. $72,295.59 (1)(e) Invoice 3734 for power. $157,122.52 (1)(e) Invoice 3765 for power. $46,742.16 (1)(e) Invoices 3706 and 3735 for workers compensation. $15,543.09 (1)(e) Reimbursement of Griffin overpayment for CHP Railings and Guarding. ($29,942.00) (1)(e) Invoice 3746 fuel price adjustment to Griffin. ($134,831.87) (1)(f) Early termination payment. $4,500,000.00 TOTAL $5,060,363.88

381 Subject to the applicability of GST, and a final argument raised by Griffin concerning the settlement of the statutory claims, I consider the Early Termination Amount to which Carna is entitled under Sch 15 is $5,060,363.88.

Settlement sum 382 Separately from the calculation under Sch 15, Griffin contends that any amount of damages awarded to Carna on its contractual case must account for the settlement Carna reached with Griffin and the individual respondents in relation to its statutory claims. Griffin says that is because if both cases had run to judgment, there would have been an inherent tension: the misleading or deceptive conduct case was effectively premised on the avoidance of the Contract, that is, Carna was running a no-transaction case, whereas the breach of contract case obviously relies on the Contract's existence. In those circumstances, Griffin says Carna would not have been able to recover the full amount of its claims in relation to both cases. The Court would not have permitted recovery by Carna for debts that were said to only have been incurred due to the alleged misleading or deceptive conduct said to have induced Carna's entry into the Contract, while at the same time allowing it to theoretically recover monies for breach of the Contract it was otherwise disavowing. 383 Griffin says that in those circumstances, the position is not altered by Carna's settlement of the claims by way of a deed executed on or around 8 March 2021 with Mr Roy and Mr Riordan. Carna's rights in respect of that claim effectively merged in the deed. Nevertheless it is plain that Carna received monies from the settlement which it is contended must be brought to account in order to pay proper regard to the issues identified above. Griffin says Carna cannot avoid the consequences of having brought competing claims through a strategy which settled one claim for $2,000,000 such that that sum should be factored into the damages which are now claimed under Sch 15. Griffin contends that, insofar as the Court is otherwise minded to award any damages to Carna, it should reduce any award by the sum of $2,000,000. 384 Carna, however, asserts in response that the making of a commercial settlement is irrelevant to the Court's consideration of Sch 15 damages that are payable. Orders were made by the Court dismissing that part of the case in an agreed form. 385 Although it is the case that a settlement deed was executed shortly before trial which resulted in a payment to Carna, my view is that the document is irrelevant. The case referred to in the settlement deed has been dismissed. The fact that the statutory claims were the subject of a commercial settlement is irrelevant to the Court's calculation of Carna's damages, if any, under Sch 15 for breach of contract. Schedule 15 is a code for the computation of damages. It does not contemplate deduction of a claim of this nature. That part of the matter, namely, the misleading or deceptive conduct claim against Messrs Roy and Riordan has settled. As observed in Bailey v Marinoff [1971] HCA 49; (1971) 125 CLR 529 (at 530): … Once an order disposing of a proceeding has been perfected by being drawn up as the record of a court, that proceeding apart from any specific and relevant statutory provision is at an end in that court and is in its substance, in my opinion, beyond recall by that court. It would, in my opinion, not promote the due administration of the law or the promotion of justice for a court to have a power to reinstate a proceeding of which it has finally disposed. … 386 There can be many reasons for reaching a commercial settlement. None of those reasons is disclosed on the settlement deed. The order made by the Court simply dismissed the proceeding, with no order as to costs. It was only at the commencement of the trial that the Court was made aware of the settlement sum, by reason of the last minute inclusion of the settlement deed itself in the trial bundle. 387 It is also by no means clear that the statutory case and the contractual case would have been inconsistent. The submission is irrelevant because of the way in which the matter has progressed, but in my view, no election would have been required in this case because the causes of action were not inconsistent. The issue arose in Westpac Banking Corporation v Wittenberg [2016] FCAFC 33; (2016) 242 FCR 505 per Buchanan, McKerracher and White JJ where the specific facts meant that a misleading conduct claim and a contract claim ran against each other. In that case, each claim rested on alternative and contradictory facts being found. The employees' contract claim against their employer for breach of contract for non-payment of bonuses rested on a contention that the contract would specify that they would be paid bonuses if profit exceeded 8-10%, which they said was not observed. Their misleading or deceptive conduct claim was an entirely alternative claim resting on the contention that the true position of the employer board was that bonuses would not be paid unless profit exceeded 10.1%, contrary to the contract. With such factual inconsistency, an election is required. That is not the position here. Carna's contractual cause of action has not been shown to be inconsistent with Carna's statutory conduct cause of action against different persons. 388 I would not make any adjustment by reason of the settlement sum. The settlement deed does not stipulate that the sum to be paid was in respect of damages for misleading and deceptive conduct. There could be a number of reasons for paying an amount to achieve a dismissal of the claims based on alleged misleading and deceptive conduct.

Goods and services tax (GST) 389 There remains the question of whether, and to what extent, GST should be factored into the calculation of Carna's entitlements under Sch 15. Carna contends that the whole amount attracts GST while Griffin takes exception primarily to the addition of GST to the early termination payment of $4,500,000 under item (1)(f) of Sch 15. 390 Griffin says that to include GST in relation to the early termination payment would go beyond the compensatory principle and be inconsistent with authority. It relies on Gagner Pty Ltd v Canturi Corporation Pty Ltd [2009] NSWCA 413; (2009) 77 ATR 157, where Campbell JA said the following (at [157]-[158]): 157 An essential prerequisite for there being an obligation to pay GST concerning (relevantly for present purposes) a supply of goods or services is that there is a "taxable supply". Under section 9-5 GST Act, an essential prerequisite of there being a "taxable supply" is that "you make the supply for consideration". The Australian Taxation Office has issued a public ruling, GSTR 2001/4, concerning the GST consequences of court orders and out-of-court settlements. It states, at para [60], that "a court, in giving judgment, does not make a supply for GST purposes". Nor is there any relevant "taxable supply" involved in the events that led to litigation such as the present. At [71]-[73] the ruling considers situations, including "claims for damages arising out of property damage" and concludes: "This damage, loss or injury, being the substance of the dispute, cannot in itself be characterised as a supply made by the aggrieved party. This is because the damage, loss or injury, in itself does not constitute a supply under section 9-10 of the GST Act." 158 Nor would a judgment in the present case later, of itself, generate a liability for GST. The ruling says, at [61]: "The payment, in money, of a judgment debt will not itself be a supply for GST purposes. It is excluded from being a supply under subsection 9-10(4)." (Emphasis added.) 391 Carna puts the position on a global basis, although within its individual claims it did individually claim GST. As to the global position, it contends that GST should be awarded on any judgment sum generally. 392 A New Tax System (Goods and Services Tax) Act 1999 (Cth) identifies when GST attaches to goods or services. It is payable on taxable supplies or taxable importations (not presently relevant). Taxable supplies are supplies connected to Australia made by a registered entity for consideration in the course or furtherance of a business. For GST to apply the following must be shown: (a) supply of a good or service by a supplier (frequently referred to as a 'taxable supplier'); (b) that supply was made for consideration; (c) that supply was in the course or furtherance of an enterprise; (d) that supply was connected with Australia; (e) that supply was made by an entity which was registered or required to be registered; and (f) that supply does not fall within any exception. 393 In this instance Carna was supplying mining services to Griffin and Griffin was obliged to pay Carna for its services. Carna says that was consideration for the supply, and that supply was clearly in the course or furtherance of an enterprise. Enterprise is a broad concept and covers an activity or series of activities in the form of a business. In any event, Carna was clearly covered. The supply occurred in Western Australia and was physically connected with Australia. It was made by an entity which is registered or required to be registered for GST. That is clear from the evidence: Carna rendered invoices to Griffin to which GST was attached and was paid. The supply does not fall within an exception. Griffin does not appear to be contending that the supplies were GST free supplies or import tax supplies, such that an exception would apply. 394 Carna says that these principles apply to each item of Carna's Sch 15 claims. As GST attaches to each, an additional amount is payable for GST under the GST 'gross-up' provisions of cl 10.7 of the Contract. Clause 10.7 provides as follows: 10.7 Taxes (a) Unless otherwise expressly provided in this agreement, [Carna] must pay all taxes including sales tax, payroll tax, fringe benefits tax, levies, duties and assessments due in connection with the provision of Mining Services and [Carna's] performance of its other obligations under this agreement. (b) If any supply made under this agreement is subject to GST the party to whom the supply is made (Recipient) must pay to the party making the supply (Supplier), subject to the Supplier first issuing a Valid Tax Invoice to the Recipient, an additional amount equal to the GST payable on that supply. The additional amount is payable at the same time and in the same manner as the consideration for the supply, unless a Valid Tax Invoice has not been issued in which case the additional amount is payable on receipt of a Valid Tax Invoice. This sub-clause does not apply to the extent that the consideration for a supply is expressed to be GST inclusive. (c) If any party is required to reimburse or indemnify the other party for a cost, expense or liability (Cost) incurred by the other party, the amount of that Cost for the purpose of this agreement is the amount of the Cost incurred less the amount of any credit or refund of GST to which the party incurring the Cost is entitled to claim in respect of the Cost. (Emphasis in the original). 395 Carna also relies on public tax ruling GSTR 2001/4 Goods and Services Tax: GST consequences of course orders and out-of-court settlements. That ruling confirms that there must be a 'sufficient nexus' between the supply and the payment for it in order to be a supply for consideration. It also confirms that the mere act of paying a judgment debt will not of itself be a supply for GST purposes (at [61]-[67]), but the fact that a payment is made in compliance with a court order does not negate the possibility that it was consideration for a supply (at [97]-[99]). 396 It is also relatively clear that a payment of damages for a loss will not constitute a taxable supply. In this regard, GSTR 2001/4 states as follows (at [71]-[73] and [110]-[111]): Where the subject of a claim is not a supply 71. Disputes often arise over incidents that do not relate to a supply. Examples of such cases are claims for damages arising out of property damage, negligence causing loss of profits, wrongful use of trade name, breach of copyright, termination or breach of contract or personal injury. 72. When such a dispute arises, the aggrieved party will often assert its right to an appropriate remedy. Depending on the facts of each dispute a number of remedies may be pursued by the aggrieved party in order to ensure adequate compensation. Some of these remedies may be mutually exclusive but it is still open to the aggrieved party to plead them as separate heads of claim until such time as the matter is resolved by a court or through negotiation. 73. The most common form of remedy is a claim for damages arising out of the termination or breach of a contract or for some wrong or injury suffered. This damage, loss or injury, being the substance of the dispute, cannot in itself be characterised as a supply made by the aggrieved party. This is because the damage, loss, or injury, in itself does not constitute a supply under section 9-10 of the GST Act. … Damages 110. With a dispute over a damages claim, the subject of the dispute does not constitute a supply made by the aggrieved party. If a payment made under a court order is wholly in respect of such a claim, the payment will not be consideration for a supply. 111. If a payment is made under an out-of-court settlement to resolve a damages claim and there is no earlier or current supply, the payment will be treated as payment of the damages claim and will not be consideration for a supply at all, regardless of whether there is an identifiable discontinuance supply under the settlement. (Emphasis added, citations omitted.) 397 The facts of the present case are distinguishable from those in Gagner (see also Dual Homes Victoria Pty Ltd v Moores Legal Pty Ltd [2016] VSC 86; (2016) 306 FLR 277) to the extent that the payments to be ordered under Sch 15 have not been established on the basis of some proven loss, but rather on Carna's entitlement to certain outstanding amounts under provisions of the Contract, with the exception of the specified amount under $4,500,000. I therefore consider that these amounts (including the adjustments in favour of Griffin) would attract GST provided there is a sufficient nexus between the payment and a supply. On this point, GSTR 2001/4 provides (at [81], [89]-[96] and [96]): The need for nexus 81. It will not be sufficient for there to be a supply and a payment. GST is not payable on supplies unless they are made for consideration, and the other tests in section 9-5 are satisfied. There must be a sufficient nexus between the supply and the payment. In C of IR v. New Zealand Refining Co. Ltd (1997) 18 NZTC 13187, at 13193 Blanchard J commented: 'It can be seen that … a linkage between supply and consideration is requisite to the imposition of the tax … There is a practical necessity for a sufficient connection between the payment and the supply. The mechanics of the legislation will otherwise make it impossible to collect the GST.' … The nexus test in Australia 89. A supply is not subject to GST in Australia unless it is made for consideration. Consideration 'for a supply or acquisition' is defined in section 195-1 as any consideration, within the meaning given by sections 9-15 and 9-17, which is 'in connection with the supply or acquisition'. 90. The Commissioner considers that, in the context of the GST Act, the expression 'you make the supply for consideration' in paragraph 9-5(a) means the same as 'there is consideration for the supply that you make'. 91. The references in the GST Act to 'supply for consideration' and more commonly to 'consideration for a supply' underscore the close coupling between the supply and the consideration that is necessary before a payment will be consideration for a supply that will make the supply subject to GST. 92. In a similar fashion to the GST legislation in New Zealand, the nature of the nexus required between supply and consideration is specified in the definition of consideration. A payment will be consideration for a supply if the payment is 'in connection with', 'in response to' or 'for the inducement' of a supply. 93. In determining whether a payment satisfies the requirements of subsection 9-15(1), the test is whether there is a sufficient nexus between the supply and the payment made. 94. This test may establish a nexus between consideration and supply in a broader range of cases than the 'direct link' test which applies in the European Community and in Canada. While caution needs to be exercised in applying decisions on connective terms in other contexts, the term 'in connection with' has been held to be broader in scope than 'for'. 95. The meaning given to the term 'in connection with' in Berry's Case is similar to that which was described by the Court of Appeal in New Zealand Refining, but needs to be applied with regard to the structure of the definition of supply in the GST Act. In Berry's Case, Kitto J held that 'in connection with' was a broader test than 'for'. At page 659 he commented that consideration will be in connection with property where: 'the receipt of the payment has a substantial relation, in a practical business sense, to that property'. 96. In determining whether a sufficient nexus exists between supply and consideration, regard needs to be had to the true character of the transaction. An arrangement between parties will be characterised not merely by the description which parties give to the arrangement, but by looking at all of the transactions entered into and the circumstances in which the transactions are made. (Emphasis added, citations omitted.) 398 I am satisfied, based primarily on the fact that most of the amounts claimed under Sch 15 were for outstanding amounts owing to Carna (or to Griffin) by virtue of its provision of the Mining Services, that there is a sufficient nexus between these payments as consideration for a supply. However, I do not consider this to apply to the termination payment under item (1)(f). 399 The text of item (1)(f) indicates that the payment is intended to 'compensate [Carna] for premature termination' which I consider to be in the nature of a contractually agreed fixed amount to meet any damage or loss that arises from the termination. As GSTR 2001/4 makes clear, GST is not to be applied to amounts constituting general damages for losses suffered where there is no underlying supply. I do not agree with Carna's characterisation of the payment as a 'cancellation fee' to which a separate tax ruling (GSTR 2009/3 - Goods and services tax: cancellation fees) provides guidance. To the extent that Carna relies on [18] of that ruling and seeks to characterise the payment as a 'cancellation supply' which, for example, relates to administrative services to give effect to a cancellation, this should be rejected. The character of the payment is clearly compensatory as a previously agreed liquidated amount to account for potential losses suffered by early termination. 400 I consider therefore that the termination payment of $4,500,000 does not attract GST. GST will be applied to all other amounts as follows: (a) Carna's total Early Termination Amount under Sch 15: $5,060,363.88 (b) Amounts to which GST does not apply: $4,500,000 (c) Residual amount to which GST does apply: $560,363.88 (d) GST payable on residual amount in (c) above: $56,036.39 Thus, the total amount payable to Carna under Sch 15 of the Contract is the sum of the amounts at (b), (c) and (d) above which totals $5,116,400.27.

CONCLUSION 401 For these reasons, I consider Carna has established its entitlement under Sch 15 of the Contract to payment of $5,116,400.27 by reason of Griffin's Insolvency Default Breach. The parties have agreed that the question of interest should await this judgment. I will direct that Carna file submissions in relation to interest and costs within 14 days, Griffin to reply within 14 days with the matter to be listed for hearing only if necessary and otherwise to be resolved on the papers. 402 To repeat yet again, the question in this case is not whether Griffin was insolvent for the purposes of the Corporations Act. That was not a matter in issue. What was squarely in issue was whether Griffin was unable to pay its debts when they fell due as at the currency of the Contract and within the meaning of that subparagraph in this Contract. That test is applicable because it is the protection to which each party to the Contract is entitled so that if these contractual obligations cannot be met, termination of the Contract is permitted. The focus in this instance must be on the state of affairs at and around the time the parties were in the contractual relationship, not on what has happened over six years later. I certify that the preceding four hundred and two (402) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McKerracher.

Associate: Dated: 8 October 2021 ANNEXURE A ANNEXURE B