Kirkalocka Gold SPV Pty Ltd v SCL AUS Limited (No 2)

This was not the main judgment about the parties' substantive rights. It was the Federal Court's later decision about costs after the plaintiffs had already succeeded in the underlying proceeding.

The parties were Kirkalocka Gold SPV Pty Ltd and its former joint and several receivers and managers on one side, and SCL AUS Limited on the other. The reasons show that the broader dispute involved royalty rights under a Royalty Deed, caveats lodged over a Mining Lease, and steps connected with a deed of company arrangement. Another entity, Tor, also had royalty rights and featured in the settlement correspondence discussed by the court.

That commercial setting matters because the costs questions were not limited to the usual winner-versus-loser argument. The court also had to consider whether the former receivers could have their legal costs paid out of Kirkalocka's assets, and whether a rejected Calderbank offer justified indemnity costs against SCL.

For business readers, this is a useful example of how litigation can produce a second round of argument after the main result. Even where one side wins the case, the court may still need to decide whether costs should be ordinary or indemnity costs, whether officeholders can recover from a company asset pool, and whether defects in the originating documents should affect the final costs order.

Jackson J identified three separate issues.

First, the plaintiffs wanted an order that the receivers be indemnified for their costs of the proceeding out of Kirkalocka's assets. The judge had already raised concern about that in the main decision because the proceeding appeared to be part of implementing the DOCA. Ordinarily, privately appointed receivers enforce the security under which they are appointed, while implementation of a deed of company arrangement is handled by deed administrators.

Secondly, the plaintiffs argued that SCL should pay indemnity costs because it had rejected a Calderbank offer made before the proceeding was fully underway.

Thirdly, SCL argued that the plaintiffs should not receive any costs order against it at all, because the originating process did not ask for the usual costs order against SCL. Instead, the costs relief originally sought was that costs be paid out of Kirkalocka's assets.

So the court had to answer three different questions: was there a legal basis for the receivers to be paid from company assets, did the rejected settlement offer justify indemnity costs, and should the successful plaintiffs still get ordinary costs despite the way their originating process had been framed?

The court was not satisfied, on the material before it, that the receivers were entitled to be indemnified out of Kirkalocka's assets for their costs of the proceeding.

The plaintiffs pointed to clause 4.1(d) of the DOCA, which provided that it was for the receivers to repudiate each Royalty Agreement as a condition precedent to the DOCA. They also submitted that the order sought reflected the kind of order often made where a company in external administration seeks declaratory relief. They relied on authority about representative parties claiming costs from a fund. They further submitted that there was no suggestion the receivers had acted improperly in causing Kirkalocka to bring the proceeding.

The judge accepted those submissions as far as they went, but said they still did not answer the key question. Proper conduct does not itself create a right to remuneration or reimbursement from a particular fund. If someone wants to be paid from a fund or asset pool, the source of that entitlement must be identified.

The court explained that in a typical case a trustee may have a right of indemnity out of trust assets for costs and expenses properly incurred in performing trustee functions. Likewise, a deed of company arrangement will usually provide an indemnity for deed administrators, and this DOCA did. But the DOCA did not provide any indemnity for the receivers for costs and remuneration incurred in taking steps contemplated by the DOCA.

The court also considered the general position of receivers. If receivers become liable to third parties in the course of their duties as receivers, they may have an indemnity out of assets subject to the charge. But if that was the principle being relied on here, the missing explanation was why bringing this proceeding, apparently to give effect to the DOCA, was part of the receivers' duties as receivers. The judge said that was not obvious, because giving effect to a DOCA usually falls to deed administrators.

The receivers had put into evidence a deed of indemnity with the company that appointed them, but that did not solve the problem. The court noted that the receivers appeared to seek payment from Kirkalocka's assets because they did not want to call on that indemnity first, and the deed itself required them to exhaust other sources of payment. The judge also observed that perhaps the receivers relied on a term in the security under which they were appointed, but that security was not in evidence.

The court would not speculate. That was so even though the order was not opposed, because if the receivers were paid out of Kirkalocka's assets, the company and its shareholders and creditors would have fewer assets available. The result was that the court refused the order on the material then before it, but gave liberty to apply if further evidence and submissions were provided.

The plaintiffs also sought indemnity costs against SCL based on a Calderbank offer sent on 18 April 2024.

At that time, the plaintiffs' solicitors acted for all plaintiffs, and the solicitors who received the offer acted for both SCL and Tor, the two entities with royalty rights under the Royalty Deed. The offer referred to a draft originating process sent in open correspondence on the same day. The court said that draft sought relief essentially the same as what was ultimately sought in the plaintiffs' second further amended originating process, and essentially the same as the relief that was granted.

In substance, the offer proposed that SCL and Tor remove the caveats they had lodged over the Mining Lease, that the plaintiffs pay each of SCL and Tor $75,000, and that SCL and Tor agree not to lodge any later caveats against the Mining Lease. The offer was initially open for eight days, then extended to 3 May 2024. On that date, SCL and Tor rejected it. Their response also said Tor had agreed to sell its interest in the Royalty Deed to SCL and intended to finalise that transaction quickly. As the main decision recorded, that instead triggered a pre-emptive right for Kirkalocka to purchase the interest, which it did on 22 May 2024.

The plaintiffs argued that SCL's rejection had been unreasonable. They said the prospects of success had crystallised by the time administrators were appointed on 2 November 2023, that the plaintiffs' contentions had already been advanced in earlier correspondence, that the offer was clear, and that it involved a real compromise because it included payment of $75,000 to each of SCL and Tor. Since the final orders achieved the same practical outcome for the plaintiffs, except that SCL received no payment, the plaintiffs said SCL would have been better off accepting the offer.

The court rejected the indemnity costs claim. Importantly, the refusal rested on two separate points.

First, the court accepted that it was not unreasonable for SCL to reject the offer at the time. The legal position was not straightforward. The reasoning in the main decision itself showed that. The earlier correspondence relied on by the plaintiffs consisted largely of conclusory assertions from their solicitors. The judge said the plaintiffs' position was not fully articulated until written submissions were filed after the proceeding had commenced. As at 3 May 2024, it was therefore not unreasonable for SCL to resist the orders sought and seek to develop and defend its position before the court.

Secondly, the court did not accept that the offer was clear. It was made to two defendants and, although it proposed a payment to each, it did not make clear whether each could accept or reject the offer independently of the other. The court said that lack of clarity became even more significant once Tor decided to seek to sell its interest to SCL.

Because rejection was not shown to be unreasonable at the time, and because the offer itself lacked sufficient clarity, the court made no order for indemnity costs.

SCL's fallback argument was that there should be no costs order against it at all. The point was procedural but potentially important. As the court noted, the originating process did not seek an order for costs against SCL. The costs order originally sought was different: that costs be paid out of Kirkalocka's assets.

Even so, the court ordered that, subject to one qualification, SCL pay the plaintiffs' costs of the proceeding.

The judge gave several reasons. The plaintiffs had been wholly successful in the proceeding. The case had been conducted in an adversarial way, unlike some applications by external administrators or trustees for directions. The earlier Calderbank letter made it clear enough that the plaintiffs would seek costs against SCL. The originating process also contained the usual wording seeking such other orders as the court thought fit.

The court said the fundamental question was prejudice. It was open to the plaintiffs to change or confirm their position and seek costs after the substantive orders made it plain that they had succeeded. The real issue was whether doing so at that stage prejudiced SCL in resisting the order.

No such prejudice was identified or established. SCL had a full opportunity to make submissions about costs. Apart from contesting indemnity costs, SCL relied only on the lateness with which the plaintiffs confirmed their intention to seek any costs order against it. SCL did not suggest that the lateness had caused substantive prejudice, and it raised no argument against the usual party-party costs order following the event.

For that reason, the court was satisfied that SCL had a proper opportunity to resist the costs orders, even though the intention to seek one was only made plain after the main decision. The court therefore made the usual order that costs follow the event.

There was, however, one qualification. Because each side had some success on the costs issues themselves, the court made no order as to the costs of the parties' submissions about costs.

For most businesses, the direct lesson is not about mining royalties. It is about litigation discipline in disputes involving property rights, caveats, security interests, insolvency processes and settlement strategy.

First, if your business wants to rely on a Calderbank offer later, draft it with precision. This case shows that a commercially sensible offer can still fail as a basis for indemnity costs if it is ambiguous. Joint offers to multiple parties are especially risky unless they clearly explain whether each offeree can accept independently.

Secondly, timing matters. The court assessed reasonableness at the time the offer was rejected, not with hindsight after the plaintiffs had won. If the legal position is still developing, or your case has not yet been fully articulated, the other side may be justified in refusing to settle on your terms.

Thirdly, if a receiver, administrator, trustee or similar officeholder wants legal costs paid from a company or asset pool, identify the exact legal source of that right. The court will not infer it from proper conduct alone. It will want to know whether the right comes from the deed, the security, the appointment instrument, a recognised indemnity principle or some other legal source.

Fourthly, costs pleading still matters. The successful plaintiffs recovered ordinary costs here because SCL could not show prejudice and had a full opportunity to respond. But that outcome depended on the circumstances. A business should not assume a court will always overlook a mismatch between the relief pleaded and the costs order later sought.

Finally, this case is a reminder that costs can materially affect the commercial outcome of a dispute. Even where the substantive result is favourable, losing an indemnity costs argument or failing to establish a right to reimbursement from company assets can significantly reduce the practical value of the win.

Businesses often assume that costs are a mechanical follow-up to the main judgment. This case shows they are not. Different costs questions can turn on different principles. A party may win ordinary costs but fail on indemnity costs. An officeholder may act properly but still fail to show a right to be paid from company assets. And a settlement offer may be commercially sensible but still be too unclear to support a stronger costs order.

The practical thread running through the judgment is clarity. Clarity about who is entitled to claim on a fund. Clarity about what a settlement offer means and who can accept it. Clarity about whether the other side had a fair chance to understand the case against it. And clarity in pleadings about the costs order being sought.

The judgment was delivered by Jackson J in the Federal Court of Australia on 11 February 2026. It was determined on the papers.

The orders made were that, subject to one qualification, SCL must pay the plaintiffs' costs of the proceeding, to be assessed if not agreed; there be no order as to the costs of the parties' submissions about costs; and there be liberty to apply in relation to the order sought for the receivers to be indemnified out of Kirkalocka's assets.

Readers should keep in mind that this is a No 2 costs judgment. It should not be treated as a complete account of the underlying merits dispute, but it is a clear and useful authority on the costs issues it decides.