Federal Court of Australia

SCL AUS Limited v Kirkalocka Gold SPV Pty Ltd [2026] FCAFC 60

ORDERS

THE COURT ORDERS THAT:

1.    The appeal is allowed.

2.    The second declaration made by made by the Court in WAD 110 of 2024 on 28 November 2025 is set aside and, in lieu thereof, the Court makes the declaration set out below.

3.    Order 1 of the orders made on 24 December 2025, staying order 4 of the orders made by the Court in WAD 110 of 2024 on 28 November 2025, is vacated.

4.    Within 14 days, any party seeking an order as to costs shall file and serve an outline of submissions as to costs, limited to five pages and specifying the order sought, together with any necessary affidavit.

5.    Within 21 days, the parties shall file and serve any submissions in response, limited to three pages.

THE COURT DECLARES THAT:

6.    The deed of company arrangement dated 22 December 2023 in relation to the first respondent, as amended, is binding on the appellant for the purposes of s 444D(1) of the Corporations Act 2001 (Cth) in respect of all claims by the appellant against the first respondent for any breach, future or otherwise, of obligations in the following clauses of the Royalty Deed, which obligations were extant as at 2 November 2023: cl 3 (Royalty), cl 5 (Caveat) and cl 8 (Transfers).

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

1    This appeal, and the proceeding from which the appeal was brought, concern the interaction between a Royalty Deed between the respondent, Kirkalocka Gold SPV Pty Ltd (formerly subject to a deed of company arrangement) (formerly receivers and managers appointed) and the appellant, SCL Aus Limited, and a deed of company arrangement (DOCA) entered into by Kirkalocka.

2    The primary judge found that the contingent obligation of Kirkalocka to pay a royalty under the Royalty Deed is a “claim” within the meaning of s 444D of the Corporations Act 2001 (Cth) and that the obligations imposed on Kirkalocka by the Royalty Deed, not to seek to remove a caveat or transfer the royalty tenements without complying with certain conditions, are “ancillary” to a monetary obligation and therefore extinguished and released by the DOCA: Kirkalocka Gold SPV Pty Ltd (Subject to Deed of Company Arrangement) (Receivers and Managers Appointed) v SCL AUS Limited [2025] FCA 1490 (PJ).

3    SCL advanced two grounds of appeal: first, that the primary judge erred in finding that the obligation of Kirkalocka to pay a royalty to SCL under the Royalty Deed, if doré is won by Kirkalocka from identified tenements, is a contingent claim and a “claim” within the meaning of that term in s 444D of the Corporations Act, which is compromised by the DOCA. Secondly, that the primary judge erred in finding that the obligations imposed by the Royalty Deed, not to seek to remove the caveat and the conditions on transfer of the royalty tenements to a third-party transferee, to the extent that they are “ancillary” to a monetary obligation are extinguished and released by the DOCA.

4    SCL submitted that the primary judge should have found that the rights that SCL has against Kirkalocka, including the right to receive future royalties under the Royalty Deed, are not “claims” within the meaning of s 444D. Further, that the obligations imposed on Kirkalocka under the Royalty Deed with respect to the caveat and transfer of the mining lease survived the DOCA, and that was so irrespective of whether monetary obligations are released by the DOCA.

5    For the reasons that follow, Ground one of the appeal is without merit and is dismissed. Ground two is allowed for reasons which do not alter the effect of the primary judge’s findings.

background

Factual Background

6    The following factual matters were not in dispute in the appeal or the proceeding before the primary judge, although one matter occurred after the primary judge heard the matter, as mentioned below.

7    Kirkalocka is the owner of a gold mine known as the Kirkalocka Gold Project, which is situated within the area of the Mining Lease M59/234, about 70 km south of Mount Magnet in Western Australia.

8    On 21 December 2018, Kirkalocka and SCL entered into the Royalty Deed, which was amended and restated on 31 December 2019. The Royalty Deed was also executed by another entity, which has ceased to be a party to the Royalty Deed and whose involvement is not relevant to the appeal.

9    The Royalty Deed required Kirkalocka to pay a royalty to SCL on doré (semi-refined gold) produced from any gold bearing material (ore) mined from the Kirkalocka Gold Project.

10    The Kirkalocka Gold Project was in production until around April 2022, when it was placed into care and maintenance.

11    On 17 May 2022, SCL lodged a Caveat against the Mining Lease, which was rejected and later relodged on 1 August 2022 and given registration number 649465. The Caveat has remained in place since that time. (Orders of the primary judge requiring SCL to provide its consent to the withdrawal of the Caveat were stayed, by orders made on 24 December 2025, until 20 May 2026.)

12    On 2 November 2023, Global Loan Agency Services Australia Nominees Pty Limited appointed the second respondents, Christopher Hill, Vaughan Strawbridge and Hayden White, as receivers and managers (Receivers) of Kirkalocka. On the same date, Adam Nitikins, Samuel Freeman and Clare Baily of Ernst & Young were appointed as administrators of Kirkalocka under Pt 5.3A of the Corporations Act (Administrators).

13    On 8 December 2023, the creditors of Kirkalocka resolved to enter into the DOCA, which was signed on 22 December 2023. The Administrators became the Deed Administrators under the DOCA and the date of the Administrators’ appointment (2 November 2023) is the “Appointment Date” in the DOCA.

14    The DOCA provides for the establishment of a fund to meet the claims of unsecured creditors (Deed Fund, as defined in the DOCA). It is a condition precedent to the distribution of the Deed Fund that the Receivers have repudiated the Royalty Deed and procured the removal of SCL's Caveat.

15    On 14 November 2023, before the execution of the DOCA, the Receivers wrote to SCL stating “that the Receivers do not intend to cause [Kirkalocka] to perform its obligations under the [Royalty Deed], which is hereby repudiated and terminated”. The letter was accompanied by a notice purportedly under s 419A(3) of the Corporations Act stating that the Receivers did not propose to exercise rights in relation to “specified property”, which term was described as the Royalty Deed and all other “agreements, contracts, deeds or other arrangements associated with” the Royalty Deed.

16    On 8 December 2023, the solicitors for SCL responded stating that SCL elected not to terminate the Royalty Deed at that time, and that it required performance.

17    It was common ground at the trial that the Receivers’ letter was repudiatory, in the sense that it manifested an intention on the part of Kirkalocka no longer to be bound by the Royalty Deed, and that SCL did not accept the repudiation, that is, there was no election on their part having the consequence that the Royalty Deed was terminated: PJ [81].

18    Kirkalocka's accounts recorded that $1,878,326.03 was owing to SCL, presumably in respect of royalties for past production payable under the Royalty Deed. SCL did not lodge a proof of debt under the DOCA. However, SCL acknowledged that it was bound by the DOCA as a creditor of Kirkalocka at least in respect of debts due and payable as at the Appointment Date: PJ [89].

19    After the hearing before the primary judge, but before the primary judgment was delivered, the DOCA was amended by orders made by Justice Strk in the Western Australian Supreme Court. The Court was told that the amendments to the DOCA were not relevant to the determination of the appeal, and there was no suggestion that the orders of the primary judge and any orders made by this Court would not apply to the amended DOCA.

The Royalty Deed

20    Under the Royalty Deed, the “Grantor” is Kirkalocka, the “Royalty Holder” is SCL and the “Royalty Tenement” is the Mining Lease.

21    The Royalty Deed provides for Kirkalocka to pay a royalty to SCL at a rate of $35 per ounce of doré (semi-refined gold) produced from any gold bearing material (ore) mined from the Kirkalocka Gold Project: cl 3.1. The royalty is payable on a quarterly basis, based on production in each quarter. There are provisions governing Kirkalocka’s obligations regarding the calculation of the royalty and provision of royalty statements and audits, which it is unnecessary to mention.

22    Under cl 2.2 of the Royalty Deed, the deed, and Kirkalocka's liability to pay the royalty, commenced on the date the deed was signed and continue for the benefit of SCL until the earlier of the date on which the royalty is payable (on a quarterly cycle) for the quarter in which a defined product limit is reached that is, the first 350,000 ounces of doré produced or the surrender, forfeiture or expiry of the Mining Lease. It was common ground that neither of those events had occurred.

23    Clause 5 of the Royalty Deed is entitled “Caveat” and provides for a “consent caveat” to be lodged in favour of SCL, as the Royalty Holder. Clause 5 provides:

5.1    Lodgement

(a)    The Grantor and the Royalty Holder agree, for the duration of the term of this deed, that either of them may lodge a consent caveat (in favour of the Royalty Holder as caveator) against each Royalty Tenement (from time to time) under section 122A(2) of the Act forbidding the registration of a dealing or surrender affecting the Royalty Tenement or the Grantor's interest in the Royalty Tenement.

(b)    The Grantor must ensure, at all times during the term, that a consent caveat is lodged against each Royalty Tenement (from time to time) as contemplated by clause 5.1(a).

(c)    The Grantor and the Royalty Holder must each use their best efforts, execute all documents and do all acts and things necessary or desirable to lodge (or procure the lodgement of) a consent caveat against each Royalty Tenement (from time to time) as contemplated by clause 5.1(a).

(d)    The Grantor consents to the lodgement of each consent caveat as contemplated by clause 5.1(a) and the Grantor must not (and must not take any steps to):

(i)    prevent the lodgement of any such caveat;

(ii)    remove or cancel any such caveat; or

(iii)    make any application, commence any proceedings (including by way of summons) or otherwise apply for any order for, or which might cause or lead to, the removal or cancellation of any such caveat, unless it has obtained the Royalty Holder's prior written consent.

5.2    Assistance

The Royalty Holder will give to the Grantor all assistance that the Grantor may reasonably require in carrying out its obligations under this clause and will pay all costs associated with the registration of each caveat as contemplated by clause 5.1.

24    Clause 6 is entitled “Tenements and conduct of Operations” and was central to SCL’s arguments on the appeal. Clause 6.1 deals with Kirkalocka’s obligation to keep the Mining Lease in good standing and to keep the Royalty Tenements valid and in full force and effect.

25    Clause 6.2 gives Kirkalocka complete discretion concerning the nature, timing and extent of the operation of the Royalty Tenements and with respect to operations. It provides:

The Grantor:

(a)    has complete discretion concerning the nature, timing and extent of all exploration, development, mining and other operations conducted on or for the benefit of the Royalty Tenements and may suspend operations on and production from the Royalty Tenements at any time it considers prudent or appropriate to do so;

(b)    owes the Royalty Holder no duty to explore, develop or mine the Royalty Tenements or to do so at any rate or any manner other than that which the Grantor may determine in its sole and unfettered discretion; and

(c)    is not liable for mineral values lost in processing under sound practices and procedures and no Royalty will be due on such lost mineral values.

26    Clause 6.3 obliges Kirkalocka to cause the operations to be conducted in a proper and efficient manner. Clause 6.4 concerns the expiry, surrender or non-renewal of the Royalty Tenement. Clause 6.4(b) provides for SCL to have an option of sorts over the Mining Lease. The effect of cl 6.4 is that where Kirkalocka is not going to apply for renewal or wishes to surrender the Mining Lease, Kirkalocka is required to give SCL four weeks’ notice of the expiry or surrender. Under cl 6.4(b), if SCL wishes to apply for some or all of the relevant ground specified in the Mining Lease, Kirkalocka must cooperate in good faith. In the case of a proposed surrender of the entire Mining Lease, SCL may elect to take a transfer of it for consideration of $1.

27    The final clause central to the appeal is cl 8, concerning transfers of the parties’ rights and obligations under the Royalty Deed. In effect, cl 8 imposes an obligation on the parties not to transfer their interest without observing the stipulated conditions in relation to the proposed transferee. Transfers by SCL, as the Royalty Holder, are dealt with in cll 8.1(a), 8.2 and 8.3 and can be put to one side.

28    The relevant provisions dealing with transfers by Kirkalocka are cl 8.1(b), 8.4 and 8.5, which bear setting out in full.

29    Clause 8.1(b) provides:

Subject to clause 8.4 (“Transfer by the Grantor”), the Grantor must not Transfer or Encumber:

(i)    any of its rights or obligations under this deed;

(ii)    any Royalty Tenement; or

(iii)    any Royalty Tenement Interest,

or attempt or purport to do so, in whole or in part, without the Royalty Holder's prior written consent or as permitted under the Finance Documents.

30    “Transfer” and “Encumber” are defined broadly in cl 1.1 of the Royalty Deed, but it is not necessary to set out the definitions. “Royalty Tenement Interest” means “a party's right, title and interest in any Royalty Tenement”: cl 1.1. There was no suggestion that the meaning of or requirements under the “Finance Documents” are material.

31    Clause 8.4 provides:

Transfer by the Grantor

(a)    Subject to any other provision of a Finance Document, the Grantor may Transfer (the whole or part of) any Royalty Tenement or any Royalty Tenement Interest if:

(i)    the proposed Transferee is financially and technically competent to carry out the operations on the Royalty Area;

(ii)    the proposed Transferee would be reasonably expected to be able to meet the obligations of the Grantor under this deed; and

(iii)    in the case of a Transfer of:

(A)    all of the Royalty Tenements and all of the Grantor's Royalty Tenement Interests to a third party, the proposed Transferee (at the cost of the Grantor or the proposed Transferee) first executes a deed of covenant (and such deed becomes effective) in favour of the Royalty Holder in the form as set out in Schedule 1 or otherwise the form and substance of which is reasonably acceptable to the Royalty Holder under which the proposed Transferee agrees to assume, observe and perform all of the obligations of the Grantor under this deed; and

(B)    any one or more (but not all) of the Grantor's Royalty Tenements or any one or more (but not all) of the Grantor's Royalty Tenement Interests, the proposed Transferee (at the cost of the proposed Transferee) first executes a deed of covenant (and such deed becomes effective) in favour of the Royalty Holder and in the form set out in Schedule 2 or otherwise the form and substance of which is reasonably acceptable to the Royalty Holder, under which the proposed Transferee agrees to assume, observe and perform all of the obligations of the Grantor under this deed (to the extent of the relevant Royalty Tenement or Royalty Tenement Interest Transferred) on an individual basis (“Deed of Covenant”) on and from the date of such Transfer. On and from the date the Deed of Covenant becomes effective, the Grantor is automatically released from any obligation to pay the Royalty in respect of any Royalty Tenement or Royalty Tenement Interest that is Transferred.

(b)    Subject to any other provision of a Finance Document, the Grantor may Encumber (the whole or part of) any Royalty Tenement or any Royalty Tenement Interest provided that the Grantor ensures that the proposed Encumbrancee (at the cost of the Grantor or the proposed Encumbrancee) first executes a deed of covenant (and such deed becomes effective) in favour of the Royalty Holder, the form and substance of which is reasonably acceptable to the Royalty Holder (which approval must not be unreasonably withheld or delayed) under which the proposed Encumbrancee agrees that it will be bound by, and must comply with, all of the Grantor's obligations under this deed (including under this clause 8) in exercising its rights under the Encumbrance.

32    Clause 8.5 of the Royalty Deed is entitled “Intention of the parties” and provides:

Intention of the parties

The parties agree that the Grantor's rights and obligations under this deed (including the obligation to pay the Royalty) are intended to run with ownership of each Royalty Tenement and that the Grantor's obligations under this clause 8 are intended to ensure that the Grantor's obligations under this deed will be binding upon any successor in title to the Grantor as if named as a party to this deed.

33    The Royalty Deed did not have a Schedule 2, being the proposed form of a deed of covenant to be signed by a transferee of some but not all of the Royalty Tenements: cl 8.4(a)(iii)(B).

34    Schedule 1 of the Royalty Deed is the proposed form of the Deed of Covenant to be signed under cl 8.4(a)(iii)(A) by a transferee of all of the Royalty Tenements. Recital B of the Deed of Covenant recites that “[p]ursuant to the Royalty Deed, the Royalty Holder is entitled to a Royalty” and the second of two recitals labelled “Recital D” recites that “[t]he Transferee agrees to assume the obligations of the Grantor in respect of the Royalty arising under the Royalty Deed to the extent of the Transferred Interest”.

35    Clause 2 of the Deed of Covenant deals with the assumption, by the Transferee, of Kirkalocka’s obligations under the Royalty Deed, and provides:

Assumption

The Transferee:

[(a)]     confirms that it has been supplied with a copy of Royalty Deed; and

[(b)]     with effect on and from the Effective Date, covenants with the Royalty Holder to observe and perform the terms of the Royalty Deed to the extent of the Transferred Interest and to pay the Royalty to the Royalty Holder pursuant to the terms of the Royalty Deed as if the Transferee were a party thereto.

36    Clause 3 of the Deed of Covenant provides for the consent of Kirkalocka and SCL to the transfer and states:

Consent of Grantor and Royalty Holder

Each of the Grantor and the Royalty Holder:

[(a)]    consents to the Transfer of the Transferred Interest from the Grantor to the Transferee with effect on and from the Effective Date;

[(b)]     consents to the Transferee assuming the obligations of the Grantor in accordance with the Royalty Deed to the extent of the Transferred Interest and consents to the Transferee becoming a party (as "Grantor") to the Royalty Deed to the extent of that Transferred Interest; and

[(c)]    agrees that the Transferee will be entitled to exercise all of the rights, privileges and benefits of the Grantor in respect of the Transferred Interest.

37    Finally, cl 5 of the Deed of Covenant acknowledges that, except as provided by the Deed of Covenant, the provisions of the Royalty Deed “remain in full force and effect”.

The DOCA

38    As already mentioned, the DOCA was amended after the hearing before the primary judge, but before the primary judgment was delivered. The submissions by the parties on the appeal proceeded on the basis that the amendments did not affect the resolution of the matters in issue. The provisions of the DOCA referred to below are the provisions that were in effect at the time of the hearing before the primary judge and relevant to the appeal.

39    The DOCA, which took effect on execution on 22 December 2023, is a common form deed of company arrangement under which it is intended that unsecured claims are compromised, and control of the company is returned to its directors.

40    The parties to the DOCA are Kirkalocka, the Deed Administrators and Blondie Trading Pty Ltd (administrators appointed) (receivers and managers appointed). Blondie Trading is Kirkalocka's ultimate parent company and the “Proponent” of the DOCA.

41    The DOCA is subject to a number of conditions precedent, which relevantly include the Receivers having repudiated each “Royalty Agreement” (including the Royalty Deed) and procured the removal of each caveat from the mining tenements (including the Caveat from the Mining Lease): cl 4.1.

42    The Deed Fund is established under cl 6.1, by a cash contribution from the Proponent, which is to be used to discharge the Administrators’ and Deed Administrators’ liabilities and “Claims” admitted by the Deed Administrators.

43    The DOCA purports to bind “Creditors” and effect a release and discharge of their “Claims”.

44    “Creditor” is defined to mean “a person who, or an entity that, has a Claim against [Kirkalocka]”.

45    “Claim” is defined to mean:

any action, demand, suit, proceeding, debt, claim, loss, damage or other liability (whether present or future, certain or contingent, ascertained or sounding only in damages) whatsoever and however incurred, arising directly or indirectly from any act or omission by the Deed Company or by any agreement, circumstance or event, occurring on or before the Appointment Date, but does not include an Excluded Claim.

46    The definition of “Excluded Claim” is not relevant to the appeal. As already mentioned, the “Appointment Date” is 2 November 2023, being the date on which the Deed Administrators were appointed as the Administrators.

47    Clause 14 of the DOCA contains the terms which are relevant to binding “Creditors” to the DOCA and effecting a release and discharge of “Claims”. It relevantly provides:

14.    Moratorium and Release

14.1    Binding Effect

Without limiting sections 444D and 444G of the Corporations Act, this Deed binds:

(a)    each Creditor; and

(b)    each Member and Officer of the Deed Company.

…

14.3    Release and Discharge of Claims

(a)    Creditors must accept their entitlements under the Deed Fund (if any) in full satisfaction and complete release and discharge of all Claims which they have, or claim to have, against the Deed Company on or before the Appointment Date.

(b)    Each Creditor must, if required by the Deed Company or the Deed Administrators, execute any document that the Deed Company or a Deed Administrator may require from time to time to give effect to the releases in Clause 14.3(c).

(c)    Immediately upon and with effect from the Final Distribution Date, the Claims of all Creditors (other than any Excluded Claims) will be fully released and extinguished.

…

14.5    Bar to Creditors' Claims

Subject to section 444D of the Corporations Act, this Deed may be pleaded by the Deed Company or the Deed Administrators against any Creditor as an absolute bar and defence to any Claim to the extent that the Deed Company's liability has been released and discharged in relation to that Claim pursuant to Clause 14.3.

the primary judge’s reasons

48    By the second further amended originating process dated 20 August 2024, in the proceeding before the primary judge, Kirkalocka and the Receivers sought declarations that:

(a)    on the proper construction of the Royalty Deed, SCL's rights under it “are contractual and do not extend to a proprietary interest” in the Mining Lease;

(b)    the DOCA is binding on SCL for the purposes of s 444D(1) of the Corporations Act “in respect of all monetary claims” by SCL against Kirkalocka “for any breach, future or otherwise”, of obligations in cl 3, cl 5 and cl 8 of the Royalty Deed, “which obligations were extant as at 2 November 2023”; and

(c)    the Receivers repudiated the Royalty Deed, for the purposes of cl 4.1(d) of the DOCA, by the Receivers’ letter dated 14 November 2023.

49    Kirkalocka and the Receivers also sought an order requiring SCL to withdraw and remove the Caveat.

50    SCL did not challenge the primary judge’s finding that SCL’s rights under the Royalty Deed did not confer a proprietary interest in the Mining Lease.

51    Leave to file the second further amended originating process appears to have been granted at the hearing before the primary judge. Relevantly, Kirkalocka amended the second declaration (referred to in paragraph 48(b) above) in light of arguments that had been raised by SCL, to the effect that the DOCA released only monetary claims, but the contractual right itself was not extinguished and was able to be enforced. Before his Honour, Kirkalocka submitted that SCL’s claims under cll 3, 5 and 8 of the Royalty Deed were all contingent claims which were capable of valuation in monetary terms. In the alternative, Kirkalocka submitted that the obligations under cll 5 and 8 were claims that were “ancillary” to the monetary claim under cl 3, such that all of the claims were captured by the DOCA. The expressions used in the parties’ submissions becomes relevant to how the primary judge addressed the issues.

52    The primary judge found that SCL is a “Creditor” as defined in the DOCA, and so bound by it, because it is owed royalties that became payable before the Appointment Date and are unpaid: PJ [89]. SCL did not contest that finding.

53    The primary judge also found that the definition of “Claim” in the DOCA is wide enough to encapsulate any monetary claim under the Royalty Deed because, relevantly, it includes any claim “arising directly or indirectly from … any agreement, circumstance or event, occurring on or before the Appointment Date”: PJ [90].

54    The primary judge, at PJ [93], agreed with Vaughan J’s analysis in Smith v Sandalwood Properties Ltd (2019) 344 FLR 278; [2019] WASC 109, at [179], that on the proper construction of s 444D, the right to sue for damages for a possible future breach of a contractual covenant may be a contingent claim for the purposes of s 444D, despite obiter dictum of the Full Court in Lam Soon Australia Pty Ltd v Molit (No 55) Pty Ltd [1996] FCA 899; (1996) 70 FCR 34 at 44 (von Doussa, O'Loughlin & Lehane JJ) to the contrary.

55    Turning to the obligation to pay the royalty under the Royalty Deed and SCL’s submission that the claim to payment of royalties was a “mere expectancy” and not a “claim” for the purpose of s 444D, the primary judge found, at PJ [99], that the obligation to pay the royalty on any doré produced from ore mined from the Mining Lease is an obligation that existed as at the Appointment Date, and a contingent claim within the meaning of s 553 and so within s 444D and thus admissible to proof: PJ [107]. In reaching that finding, his Honour considered the following passage from Kitto J’s decision in Community Development Pty Ltd v Engwirda Construction Company [1969] HCA 47; (1969) 120 CLR 455, at 459, as authoritative as to the meaning of “contingent claim” (emphasis added):

In In re William Hockley Ltd. [(1962) 1 WLR 555, at p 558], Pennycuick J. suggested as a definition of "a contingent creditor" what is perhaps rather a definition of "a contingent or prospective creditor", saying that in his opinion it denoted "a person towards whom, under an existing obligation, the company may or will become subject to a present liability upon the happening of some future event or at some future date". The importance of these words for present purposes lies in their insistence that there must be an existing obligation and that out of that obligation a liability on the part of the company to pay a sum of money will arise in a future event, whether it be an event that must happen or only an event that may happen.

56    In relation to Kirkalocka’s obligation to pay the royalty, the primary judge found, at PJ [114], that:

…Kirkalocka was subject to an obligation to pay the royalty that existed as at the Appointment Date, although any resulting liability to pay a sum of money was contingent on Kirkalocka mining and producing doré in a given quarter. While that mining and production was in the control of Kirkalocka, and at its discretion, it remained, as at the Appointment Date, a future event that may or may not have happened. To describe the right to future royalties, as SCL does, as 'inchoate' or an 'expectancy' does not deprive it of its essential character as contingent…

57    The primary judge concluded, at PJ [118], by saying that the DOCA is binding on SCL for the purposes of s 444D in respect of all monetary claims by SCL against Kirkalocka for any breach, future or otherwise, of obligations in cll 3, 5 and 8 of the Royalty Deed, including claims for damages for breach and any claim in debt arising out of non-payment of future royalties alleged to be due.

58    Turning to the “non-monetary” claims which SCL identified under cll 5.1(a), 5.1(b), 5.1(d) and 8.4 of the Royalty Deed, the primary judge commenced the analysis by addressing SCL’s submission that even if monetary claims are released by the DOCA, specific performance would be available to compel performance of the non-monetary obligations under those clauses of the Royalty Deed and, as a result, such claims are not extinguished by the releases and bar in enforcement in cl 14 of the DOCA, see PJ [119]–[147].

59    The primary judge noted, at PJ [122], that SCL relied on a passage in Sandalwood, at [154], where Vaughan J said (emphasis added):

As is evident in the concession of the Quintis group defendants, by senior counsel, that there is a continuing obligation under the IMAs to provide management services … it is the monetary claim for breach of the primary contractual obligation that is released rather than the contractual obligation. It might be that coercive relief remains available in a particular case.

60    The primary judge further noted, at PJ [123], that the abovementioned (italicised) proposition was footnoted by reference to Thiess Infraco (Swanston) Pty Ltd v Smith (2004) 209 ALR 694; [2004] FCA 1155 and The Airtourer Co-operative Ltd v Millicer Aircraft Industries Pty Ltd (subject to a Deed of Company Arrangement) [2004] FCA 393, although Vaughan J made it clear that he did not need to decide the point.

61    The primary judge, at PJ [124], referred to a particular passage in Thiess, which SCL also relied upon in the appeal, where Finkelstein J summarised the House of Lords’ decision in Hardy v Fothergill (1888) 13 AC 351, as follows (emphasis added):

According to the Law Lords the only cases which fell outside the proof provisions were:

(1)     those where the court considered that it was impossible to estimate in any way the amount of the claimant's damage; and

(2)     possibly, contracts which had an object different from the payment of money and any others for which the proper remedy was an injunction or specific performance.

The first exception was provided for in the statute itself but, as Lord [MagNaghten] said (at 367) such a case “is one … very unlikely to occur”.

62    The primary judge observed, at PJ [126], that certain references in Thiess could create the impression that if the proper remedy for a claim of breach of a contract is an injunction or specific performance, then the claim will not be extinguished by force of s 444D of the Corporations Act. However, after considering Beaumont J’s “more nuanced” explanation in Airtourer, his Honour stated, at PJ [129], that “identifying that specific relief is available for breach of a given obligation is not the end of the inquiry. It is also necessary to consider whether the claim for breach is connected to a debt that is released by the operation of the deed of company arrangement” (emphasis added).

63    The primary judge concluded, at PJ [147], that “whether enforceable by specific performance or not, an obligation will still be released by force of s 444D of the Corporations Act (or s 553) to the extent that it is ancillary to a monetary obligation that is released, in the sense that it secures, protects or otherwise supports that obligation”. Relevantly for the purpose of the appeal, SCL submitted that his Honour reached that conclusion (erroneously) principally based on the following three authorities.

64    First, by reference to the decision of Jessel MR in Collyer v Isaacs (1881) 19 Ch D 342, taking from that decision that where a debt is discharged by an act of bankruptcy, it would be a strange result if a covenant to secure that debt, being an “ancillary covenant”, is not also discharged: PJ [133]–[134], [140] and [150].

65    Second, the primary judge regarded Zambena Pty Ltd v Capitol Laundry Pty Ltd (1995) 14 ACLC 241 as consistent with the proposition that, where specific relief is available to enforce a promise, the obligation founding that relief will nevertheless be capable of being discharged by force of s 444D “if it is ancillary to an obligation to pay money which is discharged”: PJ at [141][142], and that “it is the nature of the obligation as one that does not sound in money which leads to the conclusion that the obligation has not been discharged … by deed of company arrangement”: PJ at [143].

66    Third, the primary judge stated, at PJ [144], that the abovementioned principles were also consistent with PK Riddell Investments Pty Ltd v Onwards Up and Gone Pty Ltd (2024) 73 VR 219; [2024] VSC 159 (Waller J).

67    The primary judge, at PJ [149]–[150], considered that the obligations under cll 5.1(a), (b) and (d) and 8.4 are “ancillary to or supportive of the monetary obligation to pay the royalty” and protected the obligation to procure the deed of covenant from a competent transferee.

68    For those reasons, the primary judge concluded, at PJ [158], that the rights on which SCL relies to require Kirkalocka to lodge a caveat and procure a deed of covenant from a transferee of the royalty tenements are ancillary and protective of the right to receive the royalties and are released by the DOCA.

69    Before reaching that conclusion, the primary judge also dealt with a further submission by SCL that the object of cl 8.4 is to ensure the payment of the royalty not just by Kirkalocka, but by any future holder of the royalty tenement, and, as such, SCL’s rights under cl 8.4 are not extinguished by the DOCA. In rejecting that argument, his Honour stated, at PJ [153], that the language in s 444D that a deed of company arrangements binds all creditors “so far as concerns claims” that arise before the relevant day was “broad language, the natural meaning of which encompasses rights of SCL that are ancillary to that claim, and intended to protect and support it, so as to ‘concern’ that claim”.

RELEVANT PRINCIPLES

70    Section 444A(4) of the Corporations Act identifies matters that a deed of company arrangement must specify, which includes the extent to which the company is to be released from its debts (s 444A(4)(d)), and the day (not later than the day when the administration began) on or before which claims must have arisen if they are to be admissible under the deed (s 444A(4)(i)).

71    Section 444D of the Corporations Act deals with the extent to which a deed of company arrangements binds creditors, and relevantly provides:

(1)    A deed of company arrangement binds all creditors of the company, so far as concerns claims arising on or before the day specified in the deed under paragraph 444A(4)(i).

(2)    Subsection (1) does not prevent a secured creditor from realising or otherwise dealing with the security interest, except so far as:

(a)    the deed so provides in relation to a secured creditor who voted in favour of the resolution of creditors because of which the company executed the deed; or

(b)    the Court orders under subsection 444F(2).

(3)    Subsection (1) does not affect a right that an owner or lessor of property has in relation to that property, except so far as:

(a)    the deed so provides in relation to an owner or lessor of property who voted in favour of the resolution of creditors because of which the company executed the deed; or

(b)    the Court orders under subsection 444F(4).

72    While the terms “creditor” and “claim” are used repeatedly in Pt 5.3A of the Corporations Act, they are not defined in Pt 5.3A or the definitional provisions contained in Pt 1.2 of the Corporations Act. They have, however, been the subject of numerous judicial decisions, some of which are mentioned below.

73    Section 444H deals with the extent of release of a company's debts and provides:

A deed of company arrangement releases the company from a debt only in so far as:

(a)     the deed provides for the release; and

(b)     the creditor concerned is bound by the deed.

74    Section 553(1), contained in Pt 5.6 (Winding up generally) of the Corporations Act, is also relevant, for reasons that will be explained. It deals with debts or claims that are provable in a winding up, and provides:

… in every winding up, all debts payable by, and all claims against, the company (present or future, certain or contingent, ascertained or sounding only in damages), being debts or claims the circumstances giving rise to which occurred before the relevant date, are admissible to proof against the company.

75    The following principles are well established and were not in dispute.

76    First, insofar as s 444D of the Corporations Act provides that a deed of company arrangement binds all creditors of the company, so far as concerns “claims” arising on or before the day specified in the deed, the “claim” must exist at the relevant date: Brash Holdings Ltd v Katile Pty Ltd [1996] 1 VR 24 at 34 (Brooking, J D Phillips and Hansen JJ). In this case, the relevant date is the Appointment Date (see above, at paragraphs 45–47).

77    Second, the expression “claims arising on or before the day specified in the deed” must be read in the same way as the expression “debts or claims the circumstances giving rise to which occurred before the relevant date” in s 553(1): Brash at 34. In other words, the claims for the purpose of Pt 5.3A should be the same debts or claims had the company gone into liquidation: Brash at 34, 36; Sandalwood at [76] (Vaughan J). Thus, the “creditors” for the purposes of Pt 5.3A are those who would have been the creditors of the company had the company gone into liquidation at the relevant date, for the purposes of s 553(1), being the day specified in the deed of company arrangement: Lehman Brothers Holdings Inc v City of Swan (2010) 240 CLR 509; [2010] HCA 11 at [38] (French CJ, Gummow, Hayne and Kiefel JJ); Sandalwood at [76].

78    Third, for the purposes of s 444D, “claims arising on or before the day specified in the deed” includes future or contingent debts or claims: Brash at 28, 34 and 36; Lehman Bros at [38], [51], Sandalwood at [83], [162].

79    Fourth, s 444D, like s 553, is concerned with a claim founded on an existing legal right to participate in the division of the assets of the company: BE Australia WD Pty Ltd v Sutton (2011) 82 NSWLR 336; [2011] NSWCA 414 at [105] (Campbell JA); Riddell at [37], [78] and [105] (Waller J).

80    Fifth, the claims that may be compromised by a deed of company arrangement are claims in the nature of monetary claims, or at least something that may be valued and taken into account in a winding up: BE Australia at [105]; Riddell at [78].

ground one

81    SCL submitted that the primary judge erred, at PJ [91]–[118], in finding that the future obligation to pay royalties, if doré is won, under cl 3 of the Royalty Deed is a claim capable of being compromised by the DOCA. As already mentioned, SCL did not contest the finding that it is a “Creditor” in respect of outstanding royalties that were due and payable as at the Appointment Date. That liability is a debt and there is a “claim”, the existence of which does not depend upon the provisions of the Royalty Deed.

82    SCL’s primary submission was that any claim for future royalties under cl 3 of the Royalty Deed is not a claim that existed as at the relevant date, being the Appointment Date, because the obligation to pay the royalty under cl 3 is subject to cl 6 of the Royalty Deed, which gives Kirkalocka an absolute discretion as to whether or not to conduct mining operations. That is to say, the obligation to pay only arises if Kirkalocka exercises its discretion in a particular way. SCL submitted that the obligation under cl 3 to pay the royalty, when there was no corresponding obligation to produce doré, and indeed an absolute discretion not to do so, meant there was not a present obligation that existed at the relevant date.

83    SCL accepted that the passage in the judgment of Kitto J in Community Development set out in paragraph 55 above is authoritative as to the meaning of “contingent claim”: see, eg, Sons of Gwalia Ltd (subject to deed of company arrangement) v Margaretic (2007) 231 CLR 160; [2007] HCA 1 at [174] (Hayne J); BE Australia at [90], [200] and [201] (Campbell JA, McColl and Young JJA agreeing at [1] and [223]). Blackbird First Mortgage Corporation Pty Ltd v Jacobs [2025] FCAFC 136 at [26] (Feutrill and Longbottom JJ); Sandalwood at [157]–[160]. The following part of that passage bears repeating:

… there must be an existing obligation and … out of that obligation a liability on the part of the company to pay a sum of money will arise in a future event, whether it be an event that must happen or only an event that may happen.

84    SCL sought to distinguish Community Development and subsequent authorities that have applied it on the basis that those cases concerned contingencies arising from events external to the company, such as another debtor’s default (as in the case of a guarantee given by a company), completion of work by the contractual counterparty triggering a right to payment (as in Community Development), or an assessment that an amount is due (as in Taylor v Commissioner of Taxation (1987) 16 FCR 612), whereas in the present case the future event that may happen is caused by the company itself, ie, it is an internal event.

85    SCL relied on the distinction drawn by Windeyer J in Norman v Federal Commissioner of Taxation [1963] HCA 21; (1963) 109 CLR 9 at 26, albeit in a different context, between a chose in action, being an existing legal right, and a “mere expectancy” or “possibility”. In that case, the High Court held that assignments of: (i) interest to accrue on a loan repayable by the borrower at will; and (ii) dividends which might be declared on certain shares, were assignments of mere expectancies, which could not occur without consideration. As was later pointed out by Kitto J in Shepherd v Federal Commissioner of Taxation [1965] HCA 70; (1965) 113 CLR 385 at 396, the decision concerning the interest payable was explicable on the basis that the loan agreement recorded the terms that should apply to the relationship of borrower and lender so long as such a relationship should exist, but left the borrower free to decide whether such a relationship should exist in a future year; the lender had no right to insist on there being a loan in existence at the relevant time. SCL submitted that the interaction of cll 3 and 6 of the Royalty Deed exhibits similar features.

86    SCL also relied on Heesh v Baker (2008) 67 ACSR 192; [2008] NSWSC 711, where Barrett J held, at [63]–[64], that a particular company’s shareholders were not creditors of the company where, owing to the statutory context, the purported obligation to pay dividends and/or redeem shares only arose if the company made a profit or declared a dividend out of profit, which had not occurred. SCL submitted that the present situation was analogous to Heesh because the relevant contingent event in this case is also within the company’s control. SCL submitted that, notwithstanding Kirkalocka’s commercial incentive to mine, the effect of cl 6.2 is to eviscerate the ostensible obligation in cl 3 and, as a result, the first step of Kitto J’s test in Community Development is not satisfied and there is no presently existing obligation.

87    Finally, SCL submitted that the correct position was stated, in obiter, by this Court in Lam Soon at 44, namely, a right to sue for damages for a future breach of covenant is “not even a contingent claim: it is a mere expectancy”.

Disposition

88    As the primary judge stated, at PJ [93], on the proper construction of s 444D of the Corporations Act, the right to sue for damages for a possible future breach of a contractual covenant may be a contingent “claim” and the contractual party thus a “creditor” of the company within that provision: BE Australia at [105] (Campbell JA); Sandalwood at [161] and [179] (Vaughan J).

89    The question whether a contingent claim, founded on a pre-existing contractual obligation, arises requires a consideration of the nature of the contractual obligation and whether, at the relevant date, the posited substantive liability had its genesis in the making of the contract or carries with it the seed of the eventual claim: Blackbird at [27] (Feutrill and Longbottom JJ).

90    Kirkalocka’s obligation to pay the royalty under cl 3 of the Royalty Deed is an obligation that existed as at the Appointment Date, albeit that any resulting liability to pay a sum of money is contingent on Kirkalocka mining and producing doré in a particular quarter. It does not assist SCL to focus, as it did, on Kirkalocka’s discretion whether or not to mine and produce doré. Kirkalocka has no discretion as to whether or not to pay the royalty once doré is produced in the relevant quarter. Although there is no obligation on Kirkalocka to mine, and it has an absolute discretion as to whether to mine and produce doré, it has a presently existing, unconditional obligation to pay the royalty once doré is produced. Properly framed in this way, both limbs of Kitto J’s test in Community Development are satisfied.

91    The purported analogy with Heesh was misplaced. There, the contract imposed no obligation to make payment to shareholders because, if no profits were forthcoming, payment would be deferred until the shares were to be redeemed, and, if, at the time of redemption, the necessary profits or proceeds were unavailable, the obligation to redeem did not arise. As a result, there was neither a debt for an amount payable nor a breach of contract. The outcome in that case turned on the particular deferral mechanism under the contract, not on whether there was an event that was within the company’s control.

92    Thus, the primary judge was correct to find that the obligation to pay the royalty was a contingent claim and a “claim” within the meaning of s 444D of the Corporations Act, which is extinguished and released by the DOCA. As his Honour also observed, at PJ [115], even if the right to sue for damages for breach could not be valued at anything other than zero or a nominal amount, or even if it is very difficult to value, it still gives rise to a contingent claim: BE Australia at [200][201].

93    To the extent that obiter dictum in Lam Soon might suggest that a right to sue for damages for a future breach of contract is not even a contingent claim, and is a mere expectancy, that statement is contrary to numerous subsequent authorities, some of which have been mentioned, and should no longer be regarded as good law, if it ever was: see Thiess at [16] (Finkelstein J); BE Australia at [201] (Campbell JA); Sandalwood at [160], [161] and [179] (Vaughan J).

94    Ground one therefore fails.

GROUND TWO

95    SCL submitted that the primary judge erred, at PJ [148] – [158], in finding that Kirkalocka’s obligations under cll 5 and 8 of the Royalty Deed are extinguished and released by the DOCA.

96    SCL submitted that, even if a claim under cl 3 of the Royalty Deed is released by the DOCA, Kirkalocka’s obligations under cll 5 and 8 of the Royalty Deed survived the DOCA. SCL submitted that the primary judge rejected that argument in two steps. First, his honour derived a principle that an obligation will be released by force of s 444D if it is “ancillary” to a monetary obligation that is released by the DOCA, in the sense that it “secures, protects or otherwise supports that obligation”: PJ [147]. Secondly, his Honour held that cll 5 and 8 are of that character: PJ [149][150]. SCL submitted that both of those steps were erroneous.

97    As to the first step, SCL submitted that the test posited by the primary judge was rejected in Lehman Bros and is not supported by the authorities that his Honour evidently relied on to derive the test, namely Collyer v Isaacs, Zambena and Riddell. SCL submitted that the proper test, to determine whether a claim may be subject to a proof of debt in a winding up or administration, is the approach identified by Finkelstein J in Thiess, referred to in paragraph 60 above, which requires consideration of whether the obligation, covenant or promise has “an object different from the payment of money” or for which “the proper remedy [is] an injunction or specific performance”. SCL further submitted that his Honour should have found that the obligations under the Royalty Deed with respect to the caveat and restrictions on transfer are non-monetary obligations, properly enforceable by injunction or specific performance, which are not extinguished or released by the DOCA.

98    As to the second step, SCL submitted that the primary judge was incorrect to characterise cll 5 and 8 as “ancillary” to the obligation imposed on Kirkalocka to pay any royalty. SCL submitted that cll 5 and 8 are concerned with obligations owed by a third-party transferee, and not Kirkalocka, and do not secure the payment of the royalty by Kirkalocka itself under the Royalty Deed.

Disposition

99    Lehman Bros concerned the proper construction of s 444D(1) of the Corporations Act and the words “so far as concerns claims”. It did not consider the meaning of “claims” or the characterisation of contractual obligations as “claims”. The question in Lehman Bros was whether related entities of the company in administration were bound by the deed of company arrangement. In finding that the related entities were not bound by the deed, the plurality (French CJ, Gummow, Hayne and Kiefel JJ) stated, at [50], that s 444D identifies who is to be bound by a deed of company arrangement (all creditors of the company) but at once proceeds (by the “so far as concerns” clause) to limit the extent to which those creditors are to be bound (“so far as concerns” identified claims). Furthermore, Heydon J stated, at [71], that the words “so far as concerns claims” have a narrow meaning.

100    The parties did not dispute that someone has a “claim” within the meaning of s 444D, and s 553, if they have a basis, founded on an existing legal right, to participate in the division of the assets of the company: BE Australia at [105] (Campbell JA); Riddell at [78] and [105] (Waller J). Furthermore, the claims that may be compromised by a deed of company arrangement are claims in the nature of monetary claims, or at least something that may be valued and taken into account in a winding up: BE Australia at [105]; Riddell at [78].

101    The starting point in the analysis requires a consideration of the nature of the contractual obligations under the Royalty Deed: Blackbird at [27] (Feutrill and Longbottom JJ). The contingent claim to payment of the royalty subsists in the form of the covenant to pay under cl 3 of the Royalty Deed. Kirkalocka further covenants, under cl 5 of the Royalty Deed, to lodge a consent caveat and not to remove or cancel the consent caveat, without the prior written consent of SCL. Similarly, by cl 8.1 of the Royalty Deed, Kirkalocka covenants not to transfer or encumber its rights or obligations under the deed or the Mining Lease without the prior written consent of SCL. If Kirkalocka proposes to transfer the Mining Lease, it is required to comply with the conditions on transfer under cl 8.4 of the Royalty Deed, which relevantly include that the proposed transferee first execute a deed of covenant in favour of SCL, or one in a form reasonably acceptable to SCL, under which the proposed transferee “agrees to assume, observe and perform all of the obligations of [Kirkalocka]” under the Royalty Deed.

102    The character of the caveat and transfer covenants, as provisions that are intended to protect the performance of the royalty covenant, is relevant to the characterisation of the contractual obligations as forming part of the “Claim”. Together, cll 3, 5 and 8 confer the nature of the royalty under the Royalty Deed and form part of the “Claim”. Those provisions express the attributes of the “Claim” that SCL can assert against Kirkalocka as at the date specified in the DOCA. The “Claim” is not simply the right to payment of the royalty amount. Rather, the “Claim” is to a particular kind of royalty that has the associated protections expressed by cll 5 and 8. The “Claim” that had arisen in favour of SCL as at the date specified in the DOCA was not just a right or claim to payment of money if and when the contingency arises. The “Claim” extended to and included a present and ongoing right to insist upon performance of the other provisions in the Royalty Deed that formed part of the particular form of royalty granted to SCL. It is the whole of that “Claim” that SCL has against Kirkalocka. The monetary value of that “Claim” will include the value of the feature that the royalty has protections, including protections designed to ensure that it would be binding against a transferee of the Mining Lease. Clauses 5 and 8, when viewed in context, cannot sensibly be divorced from the “Claim”. They are not provisions that have a separate and distinct character.

103    Contrary to SCL’s submission, the obligations under cll 5 and 8 are not solely concerned with obligations owed by a third-party transferee and ensuring that the transferee assumes the obligation to pay the royalty under cl 3 of the Royalty Deed. Rather, cll 8.4 (“Transfer by the Grantor”) and 8.5 (“Intention of the parties”) and the recitals to the deed of covenant contemplate that the right to the royalty exists at the time of the Transfer and the transferee agrees to assume Kirkalocka’s obligations under the Royalty Deed.

104    This approach, which is consistent with the approach of Vaughan J in Sandalwood, at [149], [154], [163]–[165], [179]–[185] and [202]–[212], means that it is unnecessary to consider, as the primary judge did, whether the obligations under cll 5 and 8 are “ancillary” to or a form of security for a monetary claim. On this analysis, it is wrong to approach those obligations on the basis that they are not part of the “Claim” and instead are somehow simply ancillary to a “Claim” that is confined to the obligation to pay the royalty. In a different case, the extent to which some form of non-monetary right or entitlement against a company might be a “Claim” on the basis that it is ancillary to a “Claim” that can be measured in monetary terms might arise. However, in the present case, for reasons that have been given, the “Claim” does not have that character. As a result, it is unnecessary to say anything further regarding the excerpts from authorities relied upon by SCL, namely, Collyer v Isaacs, Zambena and Riddell.

105    For those reasons, respectfully, the primary judge was in error in granting declaratory relief on the basis that certain of the rights conferred by the Royalty Deed were ancillary to and supportive of what his Honour described as “the central right to receive payments of money”: PJ [158]. Rather, the correct approach is to view those rights as forming part of the “Claim”. On that basis, ground two is upheld. The consequence is that the terms of the declaratory relief granted by his Honour should be expressed in different terms so as to remove the notion of monetary claims in respect of which the relevant rights were found by his Honour to be “ancillary” and “supportive”. However, his Honour was correct to conclude that the relevant rights formed part of the claims that are extinguished by the DOCA.

conclusion

106    For the reasons set out above, the appeal is allowed in relation to Ground two. In light of those reasons, the second declaration made by the primary judge should be set aside and substituted with the following declaration:

The deed of company arrangement dated 22 December 2023 in relation to the first respondent, as amended, is binding on the appellant for the purposes of s 444D(1) of the Corporations Act 2001 (Cth) in respect of all claims by the appellant against the first respondent for any breach, future or otherwise, of obligations in the following clauses of the Royalty Deed, which obligations were extant as at 2 November 2023: cl 3 (Royalty), cl 5 (Caveat) and cl 8 (Transfers).

Associate:

Dated:    8 May 2026