Federal Court of Australia

Kandos Development Corporation Pty Ltd v Cement Australia Holdings Pty Ltd [2026] FCA 743

ORDERS

THE COURT ORDERS THAT:

1.    The interlocutory application dated 9 June 2026 be dismissed.

2.    Cement Australia pay Kandos’ costs of that interlocutory application.

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

REASONS FOR JUDGMENT

Delivered ex tempore, revised from transcript

JACKMAN J:

1    By interlocutory application dated 9 June 2026 the first respondent (Cement Australia) seeks an order pursuant to r 30.01 of the Federal Court Rules 2011 (Cth) that the following question be heard separately from and before the other issues in the proceeding:

Whether, on the proper construction of cl 3.1 of the Deed of Release dated 16 April 2024, the first respondent was obliged to indemnify the applicant under cl 24.4(b) of the Share Sale and Subscription Agreement dated 15 December 2014 in respect of the costs of defending the Claim after 16 April 2025 or in respect of the Judgment Sum (as those terms are defined in the statement of claim).

2    In the proceedings the applicant (Kandos) claims indemnity pursuant to cl 24.4(b) of the Share Sale and Subscription Agreement (SSSA) in relation to a third-party claim made by a claimant in proceedings commenced on 14 January 2025, which were resolved by a consent judgment entered against Kandos in the sum of $1.2 million. Clause 3.1 of the Deed of Release provides that with effect from 16 April 2025, the SSSA is “determined”, and Kandos releases Cement Australia from its obligations, including the indemnities contained in cl 24 of the SSSA.

3    Kandos also alleges in the statement of claim that if Cement Australia is not liable to indemnify Kandos as claimed, Cement Australia breached an implied covenant of good faith and fair dealing, by reason of which Kandos has suffered loss and damage. Kandos also makes claims against its former solicitors, who are the second respondents.

4    At a case management hearing last Friday, Cement Australia foreshadowed a second separate question concerning the allegations as to breach of an implied term of good faith, but that aspect has not been pursued. The parties agreed at that case management hearing that the final hearing on all issues would only take one or two days.

5    Cement Australia envisages that the proposed separate question could be decided in half a day to a day on the basis of a statement of agreed facts, and that the question turns simply on the proper construction of cl 3.1 of the Deed of Release. In fact, the draft statement of agreed facts is controversial in a number of respects, and although a redraft was sent by Cement Australia's solicitors yesterday evening there has not been sufficient time for the other parties to consider it. In any event, I am sceptical as to whether the proposed separate question involves no more than a question of construction.

6    Mr Mack, who appears for Kandos, has confirmed that it is likely to be contended by Kandos that the general words in the release are limited to what was specifically in the contemplation of the parties at the time the release was given, relying on what might be regarded as a literal reading of Grant v John Grant & Sons Pty Ltd [1954] HCA 23; (1954) 91 CLR 112 at 125–8 (Dixon CJ, Fullagar, Kitto and Taylor JJ). That principle, and the cognate principle in equity concerning the unconscionable exercise of legal rights conferred by releases, and the relevance of subjective intentions in construing releases, have been considered recently by the Full Federal Court in Redbubble Ltd v Hells Angels Motorcycle Corporation (Australia) Pty Ltd [2024] FCAFC 15; (2024) 303 FCR 100 at [38] (Perram and Downes JJ), and in a thorough and characteristically illuminating analysis by the New South Wales Court of Appeal in Reid v Commonwealth Bank of Australia [2022] NSWCA 134; (2022) 109 NSWLR 149 at [3] (Bell CJ), [15]–[52] (Leeming JA) and [119]–[128] (White JA). It is not necessary to pursue the proper scope of the principles further for present purposes. It is sufficient to indicate that Mr Mack has indicated that Kandos proposes to rely on those principles, and that the proposed separate question is thus likely to be more complicated than Cement Australia currently envisages.

7    The benefit of the proposed separate question is said to be as follows. If answered in favour of Cement Australia, the remaining claims can be conducted with knowledge of the indemnity obligation. That seems to me a minimal advantage at best, when the remaining claims can be approached from the alternative and binary bases that the obligation to indemnify either was or was not in existence. If the question is answered in favour of Kandos, Cement Australia submits that the balance of the claims will not be necessary to be decided. Although that would benefit Kandos, Kandos is opposed to the separate question.

8    In circumstances where the parties agree that the final hearing on all issues will take only one or two days, there is no real saving of time, cost and energy in conducting separate hearings of a day or so each on different aspects of the case. Further, there may well be overlap between the evidence on these different aspects, having regard to the principles on which Kandos proposes to rely, which extend beyond questions of purely objective construction. Finally, the spectre of an application for leave to appeal from the answer to the separate question is to be avoided if reasonably practicable.

9    In my view the proceedings should be conducted in the usual way as a trial on all issues, and I make the above orders accordingly.

Associate:

Dated:    11 June 2026