Federal Court of Australia

Kirkalocka Gold SPV Pty Ltd v SCL AUS Limited (No 2) [2026] FCA 79

ORDERS

THE COURT ORDERS THAT:

1.    Subject to paragraph 2 below, the defendant must pay the plaintiffs' costs of the proceeding, to be assessed if not agreed.

2.    There is no order as to the costs of the parties' submissions about the costs of the proceeding.

3.    There is liberty to apply in relation to paragraph 6 of the orders sought in the Second Further Amended Originating Process.

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

REASONS FOR JUDGMENT

JACKSON J:

1    These reasons concern the costs of the proceeding that was determined in Kirkalocka Gold SPV Pty Ltd (Subject to Deed of Company Arrangement) (Receivers and Managers Appointed) v SCL AUS Limited [2025] FCA 1490 (Main Decision). The parties have filed written submissions as to costs, after which three issues need to be determined. I will address each in turn. Defined terms will be as in the Main Decision.

Receivers' entitlement to remuneration and expenses out of the assets of Kirkalocka

2    The first issue was raised by me in the Main Decision at [222]. It concerned an order that the plaintiffs sought for the Receivers to be indemnified for their costs of the proceeding out of the assets of Kirkalocka. I queried why the Receivers took the running of this proceeding, which appeared to be a step in the implementation of the DOCA. Ordinarily, privately appointed receivers are enforcing the security under which they are appointed, and the implementation of a deed of company arrangement is for the deed administrators appointed under it. I sought an explanation from the plaintiffs of the Receivers' entitlement to be indemnified out of the assets of Kirkalocka.

3    The written submissions filed by the plaintiffs do not provide that explanation. They do point out that cl 4.1(d) of the DOCA provides that it is for the Receivers to repudiate each Royalty Agreement, as a condition precedent to the DOCA, and they submit that the relief sought in the proceeding was directed to that requirement. They also say that the order they seek reflects the usual orders that are made on an application for a company in external administration seeking declaratory relief. They rely on Australian Securities and Investments Commission, in the matter of GDK Financial Solutions Pty Ltd (in liq) v GDK Financial Solutions Pty Ltd (in liq) (No 4) [2008] FCA 858; (2008) 169 FCR 497 in that regard. They submit there is no suggestion that the Receivers have not acted properly in causing Kirkalocka to bring the proceedings. But even accepting all these submissions, as I do, the plaintiffs still do not identify the source of the Receivers' asserted entitlement to be paid out of the assets of Kirkalocka.

4    It does not follow from the mere fact that someone has acted properly that they have a right to remuneration out of a particular fund. Ordinarily, there needs to be a connection with the fund that is recognised by the law as giving rise to a right of indemnity in those circumstances. In a typical case, the fund will be one that is under the supervision or administration of the person claiming remuneration or reimbursement, such as the trustees of a trust or the deed administrators of a deed of company arrangement. But in every case, a source of an entitlement to claim on the fund must be identified. In the case of a trustee, it is generally accepted that they have rights of indemnity out of the trust assets for costs and expenses properly incurred in the performance of their functions as trustees: Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth [2019] HCA 20; (2019) 268 CLR 254 at [29], [83]. In the case of a deed of company arrangement, the deed itself will invariably provide for an indemnity for the deed administrators, as the DOCA here does. But it does not provide for any indemnity for the Receivers for costs and remuneration incurred in taking steps that are contemplated in the DOCA as being taken by them.

5    In GDK Financial Solutions at [8]-[10], consistently with the above, Finkelstein J set out the principles which permit a trustee or other 'representative party' to claim out of the fund for the costs of a proceeding as to the proper construction of the trust instrument or another issue arising in the administration of the fund. But this simply raises the same question, namely: why are steps that appear to have been contemplated or required by the DOCA, an instrument to which the Receivers were not a party and for the implementation of which they were not obviously responsible, steps that were necessary in the administration or realisation of any fund or asset for which the Receivers were responsible?

6    As to the general entitlement of receivers, in Re Jackgreen (International) Pty Ltd [2010] NSWSC 817 at [48], Barrett J quoted with approval the following passage from S Frisby and M Davis-White, Kerr and Hunter on Receivers and Administrators (19th ed, Sweet & Maxwell, 2010):

If the receiver becomes liable to third persons, in respect of acts done or contracts entered into by him in the course of his duties as receiver, he is entitled to indemnity out of the assets subject to the charge, unless he has forfeited such right by improper conduct; such indemnity extends to his costs as between solicitor and client. He is not however entitled to a lien in respect of possible future claims.

If that is the principle on which the Receivers here rely, what still needs to be explained is why the bringing of this proceeding, apparently to give effect to the DOCA, was in the course of the duties of the Receivers as receivers. The explanation is not obvious, because giving effect to a DOCA usually falls to the deed administrators.

7    The Receivers have put into evidence a deed of indemnity they have entered into with the company that appointed them. But that does not answer the above questions; presumably the Receivers seek an order for their remuneration to be paid out of the assets of Kirkalocka because they do not want to have to call on that indemnity. The deed of indemnity does indeed require them to exhaust other sources of payment first. Perhaps instead the Receivers rely on a term in the security under which they were appointed, but that security is not in evidence.

8    It should not be for the Court to speculate as to the source of the Receivers' entitlement. That is so even where, as here, the order is not opposed; if the Receivers are paid out of the assets of Kirkalocka, the company and its shareholders and creditors will have less assets at their disposal as a result.

9    The Receivers have not satisfied me that they are entitled to be indemnified out of Kirkalocka's assets for their costs of and incidental to this proceeding. But they will have liberty to apply if they wish to provide further evidence and submissions to establish that entitlement.

The effect of a Calderbank letter

10    There is an issue about whether the plaintiffs are entitled to recover costs from SCL at all, but it is convenient to deal with a different issue first, about the effect of a without prejudice letter containing a settlement proposal that was expressed to have been sent in accordance with the principles in Calderbank v Calderbank [1975] 3 WLR 586.

11    The letter was sent by Lavan Legal to Corrs Chambers Westgarth on 18 April 2024. It appears from open correspondence that is also in evidence that at this time, Lavan Legal acted for all the plaintiffs, and Corrs Chambers Westgarth acted for both of the entities that had royalty rights under the Royalty Deed, namely SCL and Tor.

12    The Calderbank letter referred to a draft originating process that had been sent in open correspondence on the same day. This sought relief that was essentially the same as that which was ultimately sought in the plaintiffs' second further amended originating process, and essentially the same as the relief that was granted.

13    In substance, the Calderbank letter offered to settle the proceeding on terms that each of SCL and Tor would remove the caveats that they had lodged over the Mining Lease, that the plaintiffs would pay each of SCL and Tor $75,000, and that SCL and Tor would agree not to lodge any subsequent caveats against the Mining Lease. The offer was stated to lapse on 26 April 2024, eight days after it was sent. After a request by Corrs, however, the offer was extended to expire on 3 May 2024. But on that day, Corrs emailed Lavan Legal saying that SCL and Tor rejected the offer, and that Tor had agreed to sell its interest in the Royalty Deed to SCL and intended that the transaction be finalised as soon as possible. This would, according to Corrs' email, 'render the proceeding against Tor moot'. That turned out to be so, albeit because, as recorded in the Main Decision at [16]-[17], it triggered a pre-emptive right for Kirkalocka to purchase the interest, which it did on 22 May 2024.

14    The plaintiffs submit that it was unreasonable for SCL to reject the offer in the Calderbank letter, so that SCL should be ordered to pay the plaintiffs' costs on an indemnity basis. They submit that: the prospects of success had 'crystallised' by the time of the appointment of the Administrators on 2 November 2023; the contentions advanced by the plaintiffs in the proceeding had been advanced by them in previous correspondence; the offer was clear; and it included a compromise by way of the proposed payment of $75,000 to each of SCL and Tor. The orders finally made in the proceeding achieve the same outcome for the plaintiffs as offered, save that SCL does not receive any payment of money. Implicitly, then, the plaintiffs submit that SCL would have been better off accepting the offer.

15    SCL denies that it was unreasonable of it not to accept the offer. It relies on one matter on which I place no weight, namely that the letter did not say that it would be relied on in relation to costs. For the reference to Calderbank v Calderbank made that clear enough. SCL also relies on the fact that the letter did not explain why the offer was reasonable and its rejection would be unreasonable, but in that regard it relies on a case that does not stand for any proposition of that kind (AAI Limited trading as Vero Insurance v Technology Swiss Pty Ltd (No 2) [2021] FCAFC 183 at [10]). SCL also submits that the plaintiffs' case was not articulated until 18 July 2024, when its written submissions were filed.

16    Those last two submissions seem to be to the effect that it was not unreasonable of SCL to reject the offer because the case against it, and so the strength and weaknesses of its position, were not clear at the time. I accept that is so. The reasoning in the Main Decision demonstrates that the legal position was not straightforward. The 'conferral' correspondence referred to consisted largely of conclusory assertions from solicitors acting for the plaintiffs. It does seem that the plaintiffs' position was not fully articulated until they filed their written submissions after the proceeding was commenced. As at 3 May 2024, at least, it was not unreasonable for SCL to resist the orders sought, and to seek to develop and defend its position before the Court.

17    I also do not accept the plaintiffs' submission that the offer was clear. For it was made to two defendants, and while it provided for a payment to each of them, it did not make it clear that each could accept or reject the offer independently of the other: see Harvard Nominees Pty Ltd v Tiller (No 5) [2022] FCA 1510 at [24]-[25]. The decision of Tor to seek to sell its interest to SCL made SCL's ability to accept the offer by itself even less clear.

18    For those reasons, I will make no order that SCL pay the costs of the plaintiffs on an indemnity basis.

Whether the plaintiffs should receive their costs of the proceeding

19    It is convenient now to turn to whether the plaintiffs should obtain any costs order against SCL at all. They were wholly successful in the proceeding, and now seek such an order. But SCL resists this and submits that there should be no order as to costs.

20    SCL relies on the fact that (as pointed out in the Main Decision at [223]), the originating process did not seek an order for costs against SCL. The costs order that was sought was to a different effect, namely that the costs would be paid out of Kirkalocka's assets.

21    However, the Calderbank letter described above made it clear enough that the plaintiffs would seek costs against SCL. And the proceeding was conducted in an adversarial way, (in contrast, say, to an application to the Court by external administrators or trustees for directions - see however Preston, in the matter of Sandalwood Properties Ltd (No 2) [2018] FCA 816 at [22] (Colvin J)). That would make it surprising if costs orders were not sought. The fleeting and ambiguous reference in the plaintiffs' written submissions to seeking relief 'with costs' adds nothing to this. But the originating process did contain the usual wording about the plaintiffs seeking such other orders as the Court may think fit.

22    Fundamentally, it was open to the plaintiffs to change (or confirm) their position and seek costs after the substantive orders in the proceeding made it plain that they had succeeded. The real question is whether doing so at that time might prejudice SCL in any resistance to the order it might wish to make.

23    No such prejudice has been identified or established. SCL has had a full opportunity to make any submission about costs, and apart from contesting the plaintiffs' claim to indemnity costs, SCL has relied solely on the lateness with which the plaintiffs have confirmed their intention to seek any costs order against it. SCL has not suggested that this lateness has prejudiced it, and has raised no argument about the substantive merit of making the usual party-party costs order following the event. I am satisfied that SCL has had a proper opportunity to resist the costs orders, even though the intention to seek one was only made plain after the Main Decision was handed down.

24    There will be an order to the effect that the costs of the proceeding will follow the event. But since the parties have each had some success on the costs issues, there will be no order as to the costs of agitating those issues.

Associate:

Dated:    11 February 2026