Kirkalocka Gold SPV Pty Ltd (Subject to Deed of Company Arrangement) (Receivers and Managers Appointed) v SCL AUS Limited

This dispute came out of a royalty arrangement over a Western Australian gold project. Kirkalocka held mining lease M59/234 and had agreed to pay royalties to SCL under a Royalty Deed. The payment formula was tied to production, with Kirkalocka to pay $35 per ounce of doré produced from ore mined from the project. The deed also dealt with caveats over the mining lease and with what had to happen if the tenement or related interests were transferred.

The commercial arrangement looked designed to give the royalty holder ongoing protection. The deed allowed a consent caveat to be lodged under section 122A(2) of the Mining Act 1978 (WA). It required Kirkalocka to ensure a caveat remained lodged during the term. It also included transfer machinery requiring a transferee or encumbrancee, in some circumstances, to execute a deed of covenant in favour of the royalty holder. On top of that, clause 8.5 said the parties intended Kirkalocka's rights and obligations under the deed, including the obligation to pay the royalty, to run with ownership of each royalty tenement and bind successors in title.

That structure became much more important once the project stopped producing and the company entered external administration. The project was placed into care and maintenance around April 2022. SCL lodged a caveat over the mining lease. Then, on 2 November 2023, receivers and managers were appointed to Kirkalocka and administrators were also appointed under Part 5.3A of the Corporations Act. A DOCA followed in December 2023.

The DOCA mattered because it was designed to compromise unsecured claims and return control of the company. It also contained a condition precedent requiring the receivers to repudiate the royalty agreements and procure removal of the caveats. Before the DOCA was executed, the receivers wrote to SCL and Tor saying they did not intend to cause Kirkalocka to perform the Royalty Deed and that it was repudiated and terminated. SCL and Tor responded that they elected not to terminate at that time and required performance.

The proceeding was then brought in the Federal Court by Kirkalocka and its receivers. The Court noted that the written submissions had not made the real dispute easy to identify, but oral submissions clarified the issues. In substance, the fight was about two things. First, whether the DOCA bound SCL in relation to rights and claims under the Royalty Deed. Second, whether SCL could keep its caveat over the mining lease or had to withdraw it.

The Court identified two broad issues. The first concerned the effect of the DOCA under section 444D of the Corporations Act. The question was whether the DOCA extinguished and barred certain rights and claims by SCL under the Royalty Deed, substituting instead an entitlement to a dividend under the DOCA. The reasons specifically identified three categories of rights in issue: SCL's right to receive future royalties under clause 3, SCL's right under clause 5 to see that caveats over relevant mining tenements were lodged and maintained, and rights under clause 8 requiring Kirkalocka to ensure transferees of relevant tenements were bound by the deed.

The second broad issue concerned the caveat. The Court framed this as a cluster of questions. Was a proprietary interest in the mining lease necessary to support the lodgement or ongoing existence of the caveat? Did SCL in fact hold such a proprietary interest? If not, was the Royalty Deed still sufficiently connected with the mining lease to support the caveat? Did the Court have power to order withdrawal or removal of the caveat? And if so, was this an appropriate case to exercise that power?

Those questions brought together insolvency law and mining law. On the insolvency side, the case involved section 444D of the Corporations Act, which deals with the binding effect of a DOCA, and the Court's powers under section 90-15 of the Insolvency Practice Schedule (Corporations). On the mining side, the case involved sections 122A and 122E of the Mining Act 1978 (WA), which deal with caveats over mining tenements and the Court's power in relation to their removal or withdrawal.

For a business owner, the legal issue can be put more plainly. If you have a contract that gives you future payments linked to someone else's asset, does that contract give you an interest in the asset itself, or only a right to sue the other party if they do not perform? And if the asset owner becomes insolvent, are you outside the insolvency compromise because you have a property right, or inside it because you are really just a creditor with contractual claims? That was the practical heart of this case.

The most important declaration made by the Court was that, on the proper construction of the Royalty Deed, SCL's rights were contractual and did not confer any proprietary interest in the mining lease. That is the key legal characterisation point in the case.

In plain language, a contractual right is a promise one party makes to another. If the promise is broken, the usual remedy is a claim against that party. A proprietary interest is different. It is an interest in the asset itself. That kind of interest can sometimes give the holder stronger rights against third parties, stronger resistance to insolvency compromises, or a firmer basis for maintaining a caveat or similar form of registration.

Here, SCL had several features in the deed that might, from a commercial perspective, look asset-linked. The royalty was calculated by reference to production from the project. Clause 5 dealt specifically with caveats over the mining tenement. Clause 8 required transferees or encumbrancees in some circumstances to execute deeds of covenant in favour of the royalty holder. Clause 8.5 expressly said the parties intended the grantor's rights and obligations under the deed to run with ownership of each royalty tenement and bind successors in title.

Even so, the Court declared that these rights were contractual only. That is a strong reminder that commercial drafting language and legal characterisation are not the same thing. A clause saying obligations are intended to run with an asset does not, by itself, make them proprietary. A requirement that a future transferee sign a covenant also does not, by itself, mean the current holder has an existing proprietary interest in the asset. It may simply be a contractual mechanism designed to preserve the bargain if a transfer occurs.

This distinction also explains, at a practical level, why the caveat could not be maintained. A caveat is not magic. It does not create rights by itself. It protects whatever underlying interest the caveator actually has. Once the Court concluded that SCL's rights under the Royalty Deed did not amount to a proprietary interest in the mining lease, SCL could not rely on the deed as giving it the kind of asset-based interest needed to keep the caveat in place. That is why the Court went on to order SCL to provide its consent to withdrawal of the caveat and to cooperate in effecting its withdrawal.

The Court also made a declaration about the effect of the DOCA. It declared that the DOCA dated 22 December 2023 was binding on SCL for the purposes of section 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 clauses 3, 5 and 8 of the Royalty Deed, where those obligations were extant as at 2 November 2023.

That declaration is commercially significant. It means the Court accepted that the DOCA bound SCL in relation to monetary claims tied to the royalty clause, the caveat clause and the transfer clause, so long as the relevant obligations were extant on the Appointment Date. The wording of the declaration is important. It refers to monetary claims for any breach, future or otherwise, of those obligations. So the issue was not limited to amounts already due for past production. It also extended to the treatment of monetary claims connected with obligations that were still on foot as at 2 November 2023.

The reasons available also show that the DOCA used broad definitions of 'Claim' and 'Creditor', and that the DOCA provided for creditors to accept their entitlements under the deed fund in full satisfaction and release of claims against Kirkalocka on or before the Appointment Date. The available text is truncated before the end of the release clause, so the full mechanics should be checked in the complete judgment. But the declaration itself is clear enough to show that the Court treated SCL as bound by the DOCA in relation to the specified monetary claims.

The Court made a further declaration that the receivers had repudiated the Royalty Deed for the purposes of clause 4.1(d) of the DOCA by their letter of 14 November 2023. Importantly, the Court added that this said nothing about whether SCL had accepted the repudiation so as to terminate the Royalty Deed. That distinction matters. Repudiation by one party and termination by acceptance are related but not identical concepts. The Court was careful not to decide more than it needed to on that point.

For businesses, the practical lesson is that insolvency documents and pre-existing commercial contracts need to be read together. A DOCA can have direct consequences for future-looking payment arrangements if the underlying rights are contractual rather than proprietary. If your business expects a royalty or similar stream to sit outside an insolvency compromise, the legal basis for that expectation needs to be very clear before trouble starts.

The plaintiffs were largely successful. The Court declared that SCL's rights under the Royalty Deed were contractual and did not confer any proprietary interest in the mining lease. It declared that the DOCA bound SCL under section 444D(1) in respect of all monetary claims for breaches, future or otherwise, of obligations in clauses 3, 5 and 8 that were extant on 2 November 2023. It also declared that the receivers had repudiated the Royalty Deed for the purposes of the relevant DOCA clause by their 14 November 2023 letter, while leaving open whether SCL had accepted that repudiation so as to terminate the deed.

The Court then ordered SCL, pursuant to section 90-15 of the Insolvency Practice Schedule (Corporations), to provide its consent under section 122E(2)(b) of the Mining Act to withdrawal of caveat number 649465 by 12 December 2025 and otherwise do all things and provide all cooperation reasonably necessary to effect the withdrawal of the caveat as soon as practicable after that date. Costs were left for further submissions.

Business owners should read this case as a warning against overestimating what a royalty deed, caveat clause or successor-binding clause actually achieves. If the commercial goal is to create a true interest in land, a tenement or another asset, the drafting and structure must support that result in law, not just in commercial language. If the goal is instead to preserve a contractual payment stream, the parties should be realistic about what happens if the asset owner becomes insolvent.

This is not just a mining case. Similar issues can arise in earn-outs on business sales, revenue shares in technology deals, agricultural offtake arrangements, project-based royalties, licence fee structures and other contracts where one party expects future payments tied to an asset or operation controlled by someone else. In each of those settings, businesses should ask:

If those questions are not answered clearly at the drafting stage, the business may discover too late that it has less protection than it assumed.

The central provisions identified in the available reasons were section 444D of the Corporations Act, section 90-15 of the Insolvency Practice Schedule (Corporations), and sections 122A and 122E of the Mining Act 1978 (WA). On the contract side, the key clauses were clause 3 dealing with royalty payments, clause 5 dealing with caveats, clause 8 dealing with transfers and encumbrances, and clause 8.5 stating the parties' intention that obligations run with ownership of the tenement.

The timeline also helps explain the result. The Appointment Date of 2 November 2023 was central because the Court's declaration about the DOCA referred to obligations in clauses 3, 5 and 8 that were extant as at that date. The receivers' letter of 14 November 2023 was central because the Court declared that it amounted to repudiation for the purposes of the relevant DOCA clause. The DOCA was signed on 22 December 2023. The final orders were made on 28 November 2025.

Because the reasons available are truncated, anyone using this case for a detailed legal argument should check the complete judgment for the full reasoning and any further discussion of non-monetary claims, specific performance, injunctive relief and the precise basis for the caveat orders.