Piqued at losing a USD40 million claim in the Supreme Court by a narrow 3:2 margin, L&M Holdings then claimed Bathurst Resources subsidiary Buller Coal was instead liable to pay, only to lose a second time. Buller’s liability as guarantor had not crystallised, the High Court ruled. USD40 million was owing, but not due.
In hard fought litigation spread over six years and multiple court cases, L&M Holdings (now known as LMCHB Ltd) has been chasing what it claims are instalment payments due from Bathurst on a USD160 million sale in 2010 of West Coast coal mining rights.
Bitterly disappointed that a Supreme Court ruling saw it wave goodbye to the final USD40 million claimed, L&M Holdings reversed course and sued Buller Coal which had guaranteed Bathurst’s obligations on the USD160 million deal.
The 3:2 split in the Supreme Court turned on interpretation of a series of contracts between L&M and Bathurst negotiated over several years while Bathurst was obtaining resource consents to start coal extraction, negotiating rights of access with Department of Conservation and seeking finance for the project. The majority of judges in the Supreme Court ruled payment of the last USD40 million did not fall due so long as royalty payments were being made on coal extracted. This suited Bathurst; it had closed down its West Coast operations. With coal no longer being mined, no royalties were currently payable but equally payment of the final USD40 million was suspended. L&M was enraged. In its view, Bathurst had agreed upfront to payment of a full USD160 million but now with its short-payment of the agreed price had effectively passed back to L&M the commercial risk of mining on site becoming uneconomic.
In the High Court, Justice Isac said terms of Buller Coal’s guarantee held it liable for money owing by Bathurst. But any money ‘owing’ changed over time as a result of the extensive series of contracts negotiated between L&M and Bathurst. Since the Supreme Court had ruled a USD40 million balance of the purchase price owed by Bathurst was not due because of the current royalty agreement, there was no present obligation by Bathurst to pay the USD40 million demanded. Since Bathurst was not liable, Buller Coal was not liable as guarantor.
The court was told periodic royalty payments were earlier agreed by L&M to temporarily assist Bathurst with its then cash flow difficulties whilst seeking to raise finance for the project.
LMCHB Ltd v. Buller Coal Ltd – High Court (27.03.23)
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