No indemnity for receivers in Kirkalocka costs fight

The Federal Court has ordered that costs follow the event in the Kirkalocka Gold royalty litigation, but declined to award indemnity costs based on a Calderbank offer and refused, at least for now, to indemnify the former receivers’ costs out of company assets.

The costs judgment followed the Court’s substantive decision in late 2025 concerning the repudiation of royalty agreements affecting Kirkalocka Gold SPV Pty Ltd, which was subject to a deed of company arrangement and had previously been under receivership.

The plaintiffs included the company itself and its former joint and several receivers and managers. The defendant, SCL AUS Limited, was the holder of royalty rights over the Kirkalocka mining lease and the primary defendant in the proceeding, having lodged caveats to protect its interests and resisted the company’s attempt under the DOCA to repudiate the royalty arrangements.

Having succeeded on the merits, the plaintiffs sought three principal outcomes on costs:

1. an order that SCL AUS Limited pay their costs;

2. an order for indemnity costs based on a rejected Calderbank offer; and

3. an order that the receivers be indemnified for their costs out of Kirkalocka’s assets.

The Court first addressed whether the receivers were entitled to be indemnified out of the company’s assets for their costs of the proceeding. Although the receivers had acted properly and the relief sought was said to facilitate implementation of the DOCA, Justice Jackson held that propriety alone does not establish an entitlement to remuneration from a particular fund. Ordinarily, there needs to be a connection with the fund that is recognised by the law as giving rise to a right of indemnity in those circumstances.

The Court noted that trustees and deed administrators commonly enjoy rights of indemnity grounded in trust law or the terms of the deed. However, the DOCA in question did not provide an indemnity for the receivers in respect of steps taken to implement it, and the security instrument under which they were appointed was not in evidence.

Nor was it sufficient that the receivers had entered into a deed of indemnity with their appointor. If company assets were to be depleted to meet their costs, the Court required a clear juridical basis. In the absence of that foundation, the Court declined to order indemnification, though granting liberty to apply if further evidence could establish the entitlement.

The Court then turned to the without prejudice offer made by the plaintiffs under the principles in Calderbank v Calderbank, proposing settlement on terms broadly consistent with the ultimate relief, albeit including a payment to SCL. The plaintiffs argued that SCL’s rejection of the offer was unreasonable and that indemnity costs should follow. Justice Jackson disagreed.

The Court accepted that, at the time of rejection, the plaintiffs’ legal position was not fully articulated and the issues were not straightforward. The substantive reasoning in the main judgment demonstrated that the dispute involved complex legal questions. It was not unreasonable for SCL to seek to test and develop its position before the Court rather than capitulate. The offer itself was also directed to two defendants and did not clearly indicate whether acceptance could occur independently, further reducing its force as a basis for indemnity costs. Accordingly, the Court declined to depart from the ordinary party-party basis.

Finally, the Court considered SCL’s argument that the originating process had not initially sought costs against it, instead seeking payment from company assets. The Court held that this did not preclude a later application for costs once the plaintiffs had succeeded. The proceeding had been conducted on an adversarial footing, not as a neutral application for directions. SCL had a full opportunity to address the costs question and identified no prejudice arising from the timing of the plaintiffs’ position.

As a result, Justice Jackson ordered that SCL pay the plaintiffs’ costs of the proceeding, but declined to award indemnity costs or to indemnify the receivers out of company assets.

Read the decision here.

Samantha Nadilo of Fourth Floor Chambers (instructed by Lavan) represented the receivers, while Jeremy Giles SC of 7 Wentworth Selborne and Michael Rose of 9 Wentworth Chambers (instructed by Ashurst) represented SCL.