An Australian coal miner believed to be more than $1 billion in the red has been ordered to pay a creditor. 

Griffin Coal Mining, which runs a mine about 300km south of Perth, has lost a legal case that was brought by its former mine manager, Carna Civil and Engineering.

Carna ran the mine for less than a year up to December 2014, when it terminated its contract, claiming Griffin had failed to pay its debts on time.

Carna then went into liquidation and sued Griffin for damages.

Justice Neil McKerracher has now upheld Carna's claim that Griffin's failure to pay had been “consistent and debilitating” for the contractor.

“There is no doubt that throughout the period of the contract … Griffin was under a chronic disability with respect to its capacity to pay its debts,” Justice McKerracher found.

“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 time it was needed and in the amounts required to pay Griffin's debts.”

Financial documents considered by the court show Griffin burned through almost $70 million in cash in the 2017 financial year, and almost $50 million in the nine months to the end of March 2018.

Griffin was found to be liable to pay Carna $5.1 million in damages plus costs.

Griffin's overall losses in the past decade have been shown to be over $1 billion.

Steve Thomas, a state Liberal MP, said $5.1 million might not sound like much, but “it's another nail in Griffin's coffin”.

“It all indicates a company that simply is unable to manage its financial affairs,” Dr Thomas said.

Carna’s liquidator FTI Consulting has welcomed the Federal Court decision.

“[The decision] upholds our claim which centred on warranties and representations made by Griffin Coal about its financial health prior to Carna signing a mining services contract with Griffin in early 2014,” a spokesperson for FTI said.

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

“It had successfully operated since being founded in 1992, delivering more than 250 projects on behalf of customers.

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