Federal Court of Australia

SCL Aus Limited v Kirkalocka Gold SPV Pty Ltd, In the matter of Kirkalocka Gold SPV Pty Ltd (Costs) [2026] FCAFC 84

ORDERS

THE COURT ORDERS THAT:

1.    The appellant pay the respondents costs of and incidental to the appeal.

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

REASONS FOR JUDGMENT

THE COURT:

1    The affairs of Kirkalocka Gold SPV Pty Ltd are being conducted on the basis that it is subject to a deed of company arrangement made in 2023 (since amended) (DOCA). The DOCA contains standard terms by which a fund is established to meet all the claims of unsecured creditors.

2    In 2019, Kirkalocka and SCL AUS Limited entered into a Royalty Deed. Relevantly for present purposes, the Royalty Deed provided for the payment of a royalty to SCL in respect of gold doré produced from a mining tenement held by Kirkalocka. It also contained terms which required SCL's consent to a transfer of the mining tenement. Those terms required any transferee of the mining tenement to enter into a deed with SCL by which the transferee agreed to be bound by the same terms as the Royalty Deed. SCL lodged a caveat over the mining lease to protect its rights under the Royalty Deed. Issues arose as between SCL and Kirkalocka as to whether the DOCA applied to the right to receive the royalty and the right to require a transferee of the mining tenement to agree to the same terms as the Royalty Deed and also as to whether SCL could and should be ordered to remove the caveat.

3    Section 444D(1) of the Corporations Act provides that a deed of company arrangement binds all creditors of the company arising on or before the date that the DOCA takes effect. It is well established that the reference to 'creditors' is to those unsecured creditors who have claims against the company of the kind described in s 553(1), which defines the nature of the claims against a company that are admissible to proof against a company in a winding up. Section 553(1) refers to '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'.

4    Kirkalocka commenced proceedings in this Court seeking (a) declaratory relief to the effect that the rights and claims of SCL under the Royalty Deed had been converted to claims against the fund created by the DOCA; and (b) an order requiring the removal of SCL's caveat.

5    Broadly speaking, there were two relevant aspects to SCL's claim that its relevant rights and claims under the Royalty Deed were not affected by the DOCA. First, it claimed that the provision in the Royalty Deed for the payment of a royalty to SCL was a mere expectancy (and not a claim to which the DOCA applied) because, under the terms of the Royalty Deed, there was no obligation upon Kirkalocka to conduct mining operations and no objection that could be raised by SCL if it did not. Second, it claimed that the right to require a transferee of the mining tenement to agree to be bound by the same terms was not a claim of a kind to which the DOCA applied. It described that right as a 'non-monetary' claim that could be separately enforced even if the right to the royalty came within the terms of the DOCA. On that basis SCL contended that, to the extent of the rights and interests conferred by the Royalty Deed, it was not a creditor and therefore the declaratory relief should not be granted.

6    Following a hearing, it was declared that the DOCA was binding upon SCL 'in respect of all monetary claims by the defendant against the first plaintiff for any breach, future or otherwise, of obligations in [the clauses of the Royalty Deed that were in issue]'. The use of the term 'monetary claims' reflected the basis upon which SCL opposed the declaratory relief sought by Kirkalocka. SCL contended that the rights conferred by the Royalty Deed were not claims to which the DOCA applied because they were 'non-monetary'. That contention was rejected. As to the first aspect of SCL's case, the mere expectancy contentions were not accepted. As to the second aspect, the basis for rejecting SCL's contentions was expressed in the following way (Kirkalocka Gold SPV Pty Ltd (Subject to Deed of Company Arrangement) (Receivers and Managers Appointed) v SCL AUS Limited [2025] FCA 1490 at [147]:

…for present purposes it can be concluded 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.

7    It was further concluded at [158] that:

…all of the rights on which SCL relies as being protected by the Caveat will be extinguished by the DOCA because they are ancillary to and supportive of the central right to receive payments of money.

8    It was also ordered that SCL's caveat be removed. SCL was ordered to pay Kirkalocka's costs of the application.

9    SCL brought an appeal. It advanced two grounds. First, it alleged error by the primary judge on the basis that any claim for future royalties under the Royalty Deed did not exist as at the relevant date, because Kirkalocka had an absolute discretion as to whether or not to conduct mining operations. On that basis it was said the primary judge should not have made a declaration to the effect that claims to future royalties under the Royalty Deed were claims to which the DOCA applied.

10    Second, it alleged error by the primary judge on the basis that the reasoning to the effect that a claim that was ancillary to a monetary claim was a claim of a kind to which a deed of company arrangement applied was in error and that, in any event, the right to require a transferee of the mining tenement to enter into an agreement to be bound by the same terms as the Royalty Deed was not an ancillary claim of that kind.

11    We determined that both appeal grounds must be rejected: SCL AUS Limited v Kirkalocka Gold SPV Pty Ltd [2026] FCAFC 60. As to the first ground we upheld the reasoning of the primary judge: see [88]-[93]. As to the second ground, we concluded that the rights of SCL concerning the circumstances in which the mining tenement could be transferred form part of the claim to payment of the royalty. We concluded that, for the purposes of the s 444D(1), deeds of company arrangement operate in respect of all aspects of an existing claim and, in the present case, that includes the provisions relating to transfer of the tenement.

12    Consequently, whereas the primary judge had found that the rights conferred by the Royalty Deed concerning the transfer of the mining tenement were ancillary to a claim and, on that basis, came within the statutory scheme for deed of company arrangement, we found that those rights were part of the contingent claim to payment of a royalty on gold production from the mining tenement that existed at the time the DOCA came into effect: see [99]-[105].

13    However, in reaching that conclusion, the foundation for the reasoning by the primary judge, namely that the rights in relation to the transfer of the mining tenement only existed to support the entitlement to payment of the royalty and not to create a separate free-standing right or interest as against any transferee was accepted: see our reasoning at [102]. Further, the commercial consequence of our reasoning was the same as that of the decision by the primary judge.

14    Therefore, even though the appeal succeeded in demonstrating that the terms of the declaration should be differently expressed, SCL failed in in its attempt to demonstrate that its relevant rights and interests had not been converted to claims under the DOCA. In those circumstances, the appropriate course was for an order to be made expressing the declaration in terms that reflected the view that we had reached as to the basis for our conclusion: SunshineLoans Pty Ltd v Australian Securities and Investments Commission [2025] FCAFC 34 at [5]-[6]. In that limited respect and to that limited extent, the appeal was allowed.

15    The parties have not reached agreement as to the cost orders that should be made consequent upon the decision on appeal. Kirkalocka seeks an order for payment of the costs of the appeal on the basis that it was substantially successful even though the appeal was allowed. SCL proposes cascading alternatives, namely it gets the costs of the appeal and below, alternatively 50% of each of those costs, alternatively 50% just of the appeal, alternatively no order as to costs of the appeal.

16    For the following reasons, Kirkalocka's position should be accepted.

17    The award of costs is discretionary: s 43 of the Federal Court of Australia Act 1976 (Cth). The discretion is to be exercised judicially and guided by principles: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at [34]- [35].

18    In general, the discretion as to costs is exercised in favour of the successful party: Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52 at [25]; and Northern Territory v Sangare [2019] HCA 25; (2019) 265 CLR 164 at [25]. However, the principle is not to be elevated to a rule: Norbis v Norbis (1986) 161 CLR 513. Special circumstances may warrant departure from the 'general rule': see Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53 at [6].

19    In substance, Kirkalocka has been wholly successful as to the outcome of the proceedings. Generally speaking, the fact that the Court does not accept all of the arguments advanced by a successful appellant does not mean that it should be deprived of an order for costs: PKT Technologies Pty Ltd (formerly known as Fairlight.au Pty Ltd) v Peter Vogel Instruments Pty Ltd (No 2) [2020] FCAFC 46 at [14]-[16]. The courts have been slow to order a successful party to pay costs because it failed on some issues: Les Laboratoires Servier v Apotex Pty Ltd [2016] FCAFC 27; (2016) 247 FCR 61 at [300]-[303]. In our view, the fact that aspects of the basis upon which Kirkalocka sought to support the reasoning of the primary judge were not upheld does not make this case exceptional. It was entirely successful as to ground one. As to ground two, the submissions made by Kirkalocka exposed the nature of the rights and interests conferred by the Royalty Deed. Those matters formed the substantive basis for the Court's decision as to ground two. The overall decision was adverse to SCL.

20    There are many instances where an appeal court varies the terms of a declaration but, as a matter of substance, requires the appellant to pay the costs of the appeal on the basis that, notwithstanding the variation, it is the responding parties who have been successful: see, for example, Burge v Swarbick [2005] FCAFC 257 at [73]-[74] and Chou v Metstech Pty Ltd (Costs) [2024] FCAFC 39 at [8].

21    There should be an order that SCL pays Kirkalocka's costs of the appeal and the order of the primary judge as to the costs of the proceedings below should not be disturbed.

Associate:

Dated:    11 June 2026