SCL AUS Limited v Kirkalocka Gold SPV Pty Ltd [2026] FCAFC 60

SCL AUS Limited v Kirkalocka Gold SPV Pty Ltd [2026] FCAFC 60 is a Full Federal Court appeal about whether future rights under a royalty contract were caught by a deed of company arrangement. SCL had a Royalty Deed over a Western Australian gold project. Kirkalocka later entered external administration and then a DOCA. The dispute was whether SCL’s future royalty rights, plus its caveat and transfer protections, were claims bound by the DOCA under s 444D of the Corporations Act.

The Court drew an important distinction between the two appeal grounds. On the first ground, SCL lost. The Court held that the obligation to pay future royalties was a contingent claim and therefore a claim within s 444D. On the second ground, SCL succeeded only in a limited way. The Court said the primary judge had not described the caveat and transfer rights correctly as merely ancillary, but that correction did not change the practical result. The Court replaced the declaration so that the DOCA bound SCL in respect of claims for breach, future or otherwise, of the royalty, caveat and transfer obligations that were extant at 2 November 2023.

The commercial arrangement was a royalty deal tied to a mining project. Kirkalocka owned the Kirkalocka Gold Project and agreed to pay SCL $35 per ounce of doré produced from ore mined from the project. The deed was not limited to a simple payment promise. It also included a caveat mechanism and transfer controls designed to protect SCL if the mining lease or related interests changed hands. The deed recorded an intention that the grantor’s rights and obligations, including the royalty obligation, were intended to run with ownership of the tenement.

Those protections mattered because the deed also gave Kirkalocka broad operational freedom. Clause 6.2 said Kirkalocka had complete discretion concerning the nature, timing and extent of exploration, development, mining and other operations. It could suspend operations whenever it considered that prudent or appropriate. It owed SCL no duty to explore, develop or mine the tenements at any particular rate or in any particular manner. SCL relied heavily on that point in arguing that future royalties were only a hope or expectancy, not a claim.

The project stopped producing around April 2022 and went into care and maintenance. SCL lodged a caveat against the mining lease in 2022, and that caveat remained in place. Then, on 2 November 2023, receivers and managers and administrators were appointed to Kirkalocka. That date became central because the DOCA later defined claims by reference to acts, omissions, agreements, circumstances or events occurring on or before the appointment date.

Before the DOCA was signed, the receivers wrote to SCL on 14 November 2023 saying they did not intend to cause Kirkalocka to perform the Royalty Deed and that it was repudiated and terminated. SCL responded on 8 December 2023 that it elected not to terminate the deed and required performance. The parties accepted that the receivers’ letter was repudiatory, but SCL did not accept the repudiation. That meant the deed was not terminated by election, which was important to the way the issues were argued.

Creditors resolved on 8 December 2023 that Kirkalocka enter into a DOCA, and the DOCA was executed on 22 December 2023. It was a common form arrangement intended to compromise unsecured claims and return control of the company to its directors. It also contained a condition precedent requiring the receivers to have repudiated the Royalty Deed and procured removal of SCL’s caveat. Kirkalocka’s accounts recorded that more than $1.87 million was owing to SCL for past royalties. SCL accepted it was bound by the DOCA at least for debts due and payable as at the appointment date. The real fight was over future royalties and the related caveat and transfer rights.

The first issue was whether the obligation to pay future royalties under the Royalty Deed was a contingent claim and therefore a claim within s 444D of the Corporations Act and the DOCA. SCL argued that because Kirkalocka had complete discretion whether to mine at all, and because no royalty became payable unless doré was later produced, the future royalty right was not a claim. On that argument, it was only a mere expectancy. Kirkalocka argued that the deed already imposed an existing obligation as at the appointment date, even though liability to pay money would arise only if a future event occurred.

The second issue concerned the caveat and transfer provisions. SCL argued that these rights survived the DOCA regardless of whether monetary obligations were released. At first instance, the primary judge had treated those rights as ancillary to a monetary obligation. On appeal, the Full Court had to decide whether that characterisation was correct and, if not, whether the final declaration should be reframed. This was not just a drafting point. It went to whether the caveat and transfer covenants were separate rights outside the compromise, or part of the claim structure under the Royalty Deed.

The DOCA wording was also important. It defined a claim very broadly to include any action, demand, suit, proceeding, debt, claim, loss, damage or other liability, whether present or future, certain or contingent, arising directly or indirectly from any act or omission by the company or by any agreement, circumstance or event occurring on or before the appointment date. It bound creditors and provided for release and extinguishment of claims. So the Court had to decide how that broad definition interacted with the Royalty Deed and with the concept of a contingent claim under insolvency law.

The Full Federal Court said ground one failed. The Court agreed with the primary judge that the obligation to pay the royalty was an obligation that existed as at the appointment date, even though any resulting liability to pay money depended on future mining and production. The catchwords and reasons make clear that the Court treated this as a contingent claim and therefore a claim within s 444D. In other words, the fact that Kirkalocka had complete discretion whether to conduct mining operations did not stop the royalty obligation from being a contingent claim.

The Court’s reasoning followed the established idea that a contingent claim requires an existing obligation from which a liability to pay money may arise on a future event. The extract records the primary judge’s reliance on Community Development Pty Ltd v Engwirda Construction Company and the need for an existing obligation. The Full Court’s disposition of ground one shows it accepted that analysis. So, for insolvency purposes, the future royalty right was not treated as a mere commercial hope with no legal foundation.

On ground two, the Court allowed the appeal, but only to correct the way the rights were characterised. The primary judge had found that the caveat and transfer obligations were ancillary to a monetary obligation and therefore extinguished and released by the DOCA. The Full Court held instead that the caveat and transfer covenants formed part of the claim. That was a meaningful legal correction, but the Court expressly said it did not alter the effect of the primary judge’s findings.

The practical effect appears in the orders and declaration. The Court allowed the appeal, set aside the second declaration made on 28 November 2025, vacated an earlier stay order, and replaced the declaration. The replacement declaration stated that the DOCA dated 22 December 2023, as amended, was binding on SCL for the purposes of s 444D(1) in respect of all claims by SCL against Kirkalocka for any breach, future or otherwise, of obligations in cl 3, cl 5 and cl 8 of the Royalty Deed, where those obligations were extant as at 2 November 2023.

That declaration is the key business point. It did not stop at accrued royalties. It extended to claims for breach of the royalty clause, the caveat clause and the transfer clause, provided those obligations were extant at the appointment date. So although SCL succeeded in showing that the caveat and transfer rights were not merely ancillary, it did not obtain a practical carve-out preserving those rights from the DOCA.

This case is not limited to mining. Many commercial contracts create future payment rights that depend on later events. Examples include earn-outs on business sales, royalties on product use, commissions on future sales, licence fees tied to output, and milestone payments in technology, construction or supply arrangements. The decision shows that a court may ask whether there was already an existing contractual obligation before the insolvency appointment date, not simply whether money was already due on that date.

That distinction can be counterintuitive. A business owner may think, correctly in ordinary commercial language, that no debt exists until the triggering event happens. But insolvency law may still treat the right as a contingent claim if the contract already imposed an obligation and the future event only determines whether liability to pay crystallises. That can bring the right within a DOCA and reduce the creditor’s ability to enforce the contract outside the insolvency process.

The case also warns against assuming that supporting contractual protections will stand apart from the payment right. Here, the Royalty Deed included a caveat mechanism and transfer covenants requiring a transferee to assume the grantor’s obligations. The Court’s final declaration still treated claims for breach of those obligations as within the DOCA where the obligations were extant at the appointment date. So a caveat clause or transfer covenant may be commercially useful, but it is not automatically immune from a DOCA simply because it is not framed as a direct payment obligation.

Another practical point is timing. The appointment date was 2 November 2023, and the Court’s declaration was tied to obligations extant on that date. Businesses dealing with a distressed counterparty should identify that date early and map their rights against it. They should also consider whether to lodge a proof of debt, how to respond to repudiatory conduct, and whether any claimed protection is truly proprietary or only contractual. In this case, SCL did not challenge the primary judge’s finding that its rights under the Royalty Deed did not confer a proprietary interest in the mining lease.

When negotiating contracts, businesses should think carefully about whether future payment rights are backed by genuine security or only by contractual promises. If the commercial value of the deal depends on future production or future transfers, the insolvency position should be considered at the drafting stage, not only after administrators or receivers are appointed.

The key dates in this dispute help explain the result. The Royalty Deed was entered in December 2018 and amended and restated in December 2019. The project went into care and maintenance around April 2022. SCL’s caveat was relodged on 1 August 2022 and remained in place. Receivers and administrators were appointed on 2 November 2023, which became the appointment date under the DOCA. The receivers’ repudiation letter was sent on 14 November 2023. Creditors resolved to enter the DOCA on 8 December 2023, and the DOCA was signed on 22 December 2023. The Full Federal Court delivered judgment and orders on 8 May 2026.

The Court also noted that after the hearing before the primary judge, but before the primary judgment was delivered, the DOCA was amended by orders of the Supreme Court of Western Australia. The parties told the Court those amendments were not relevant to the appeal, and there was no suggestion that the orders would not apply to the amended DOCA. The Full Court directed that any party seeking costs orders file short submissions after the appeal orders.

The reasons available for this page contain the essential facts, issues and orders, but the published text used here is truncated before the end of the reasons. The page therefore remains on review status rather than being treated as final settled commentary.