Background
Kirkalocka Gold SPV Pty Ltd is subject to a deed of company arrangement (DOCA) made in 2023. In 2019, Kirkalocka and SCL Aus Limited had entered into a Royalty Deed under which SCL was entitled to royalties on gold doré produced from a mining tenement held by Kirkalocka, and had rights requiring any transferee of the tenement to agree to be bound by the same terms. SCL lodged a caveat over the mining lease to protect those rights. A dispute arose as to whether the DOCA, which binds all creditors under s 444D(1) of the Corporations Act 2001 (Cth), applied to SCL’s rights under the Royalty Deed.
Kirkalocka commenced proceedings seeking a declaration that SCL’s rights had been converted to claims against the DOCA fund, and an order requiring removal of the caveat. The primary judge declared that the DOCA was binding on SCL in respect of all monetary claims for breach of the relevant Royalty Deed obligations, finding that even non-monetary rights — such as the transfer-consent provisions — were ancillary to the monetary royalty obligation and therefore captured by the statutory scheme. SCL was ordered to pay Kirkalocka’s costs below.
SCL appealed on two grounds: first, that future royalty claims were a mere expectancy not caught by the DOCA because Kirkalocka had an absolute discretion whether to mine; and second, that the primary judge’s “ancillary claims” reasoning was wrong and that the transfer-consent right was a freestanding non-monetary right not captured by the DOCA. The Full Court dismissed both grounds in its earlier judgment (SCL AUS Limited v Kirkalocka Gold SPV Pty Ltd [2026] FCAFC 60), but reformulated the declaration on the basis that the transfer-consent rights were part of the contingent royalty claim itself, not merely ancillary to it. To that limited extent the appeal was formally allowed and the declaration reworded.
The Court’s Holding
The Full Court (Colvin, Neskovcin and Vandongen JJ) held that Kirkalocka was entitled to its costs of the appeal and that the primary judge’s costs order below should not be disturbed. Although the appeal was technically allowed in the narrow sense that the declaration was reworded, SCL failed entirely in its substantive objective: it did not establish that its rights under the Royalty Deed were unaffected by the DOCA. Kirkalocka was therefore the substantially successful party at both first instance and on appeal.
The Court reaffirmed the general principle that costs follow the event in favour of the successful party, while acknowledging that principle is not an inflexible rule and that special circumstances may warrant departure from it. It found no such special circumstances here. SCL’s reformulation of the declaration did not make the case exceptional: Kirkalocka succeeded entirely on ground one, and its submissions on ground two formed the substantive foundation for the Court’s reasoning, even though the precise legal basis differed from that of the primary judge. The commercial outcome was identical to that below.
The Court rejected SCL’s cascading alternatives — full costs of appeal and below, 50% of each, 50% of appeal only, or no order as to costs of the appeal — finding that the mere variation in the terms of a declaration, where the responding party nonetheless succeeds on the substance, does not deprive that party of a costs order. Costs orders in favour of respondents in analogous circumstances where declarations were varied on appeal were noted as well-established appellate practice.
Key Takeaways
- A party who succeeds on the substance of an appeal — securing the same commercial outcome — is ordinarily entitled to costs even if the appellate court reformulates the declaration or varies the precise legal reasoning.
- Under s 444D(1) of the Corporations Act 2001 (Cth), a DOCA binds all aspects of an existing contingent claim, including contractual rights (such as transfer-consent provisions) that form part of and support that claim — not merely rights that are independently freestanding.
- The discretion as to costs under s 43 of the Federal Court of Australia Act 1976 (Cth) is exercised judicially; courts are slow to deprive a substantially successful party of costs simply because it did not succeed on every argument or sub-issue advanced.
- Lodging a caveat over a mining tenement to protect royalty rights under a Royalty Deed does not insulate those rights from the operation of a DOCA where the underlying claim is a contingent monetary one.
Why It Matters
This decision reinforces that appellants cannot use technical variations to the form of a declaration — achieved on appeal — as a platform to shift costs against a substantively successful respondent. Practitioners advising parties to insolvency-related disputes should note that the costs consequences of litigation will be assessed by reference to who won the underlying controversy, not by who secured a minor reformulation of relief.
More broadly, the case confirms the wide reach of DOCAs under s 444D(1): contractual rights that support or form part of a contingent monetary claim — including transfer-consent and consent-to-deal provisions in royalty deeds — will be captured by the statutory scheme. Counterparties holding such rights cannot expect them to survive a DOCA merely because those rights are characterised as non-monetary or protective in nature.