AUSGROUP'S wholly-owned subsidiary AGC Industries has initiated legal action against a client over unpaid debts.

The mainboard-listed company said the subsidiary took out a writ of summons against Karara Mining Ltd (KML) in the Supreme Court of Western Australia on June 25.

AGC is alleging that KML had failed to make progress payments amounting to about A$43.5 million (S$51.2 million).

It also claimed that KML, a joint venture between Australian-listed Gindalbie Metals and China's AnSteel, had failed to recognise additional corporate overhead and profit (COP) of A$11.2 million.

The COP payment is a performance incentive to achieve certain milestone dates for structural, mechanical and piping installation works carried out by AGC, at KML's Karara iron ore project in Western Australia.

AGC believes that the progress payments and the COP payment claim are valid.

"AGC has not taken this action lightly, however in the interests of our shareholders and other stakeholders, we believe this is a necessary step," said AusGroup managing director and chief executive Laurie Barlow in a statement.

"AGC is confident that it has fulfilled its obligations under the contract and firmly believes it is fully entitled to the progress payments and COP payment from KML for the services provided and which can be supported when the matter proceeds to a hearing and formal decision."