FRANCO-NEVADA AUSTRALIA PTY LTD -v- SOUTHERN IRON PTY LTD [2026] WASC 43 (S)

[2026] WASC 43 (S) Page 1 JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA IN CIVIL CITATION : FRANCO-NEVADA AUSTRALIA PTY LTD -v- SOUTHERN IRON PTY LTD [2026] WASC 43 (S) CORAM : HILL J HEARD : 8 APRIL 2026 DELIVERED : 9 JUNE 2026 FILE NO/S : CIV 2359 of 2022 BETWEEN : FRANCO-NEVADA AUSTRALIA PTY LTD Plaintiff AND SOUTHERN IRON PTY LTD First Defendant MARK MENTHA Second Defendant MARTIN MADDEN Third Defendant CASSANDRA MATHEWS Fourth Defendant BRYAN WEBSTER Fifth Defendant -- 1 of 14 -- [2026] WASC 43 (S) Page 2 Catchwords: Practice and procedure - Costs - Application for indemnity costs in reliance on clause in royalty deed - Proper construction of royalty deed - Turns on own facts Practice and procedure - Application for special costs orders - Turns on own facts Legislation: Legal Profession (Supreme and District Courts) (Contentious Business) Determination 2022 Legal Profession Uniform Law Application Act 2022 (WA) s 141 Supreme Court Act 1935 (WA) s 37 Result: Application for indemnity costs refused First defendant to pay 75% of the plaintiff's costs of the proceedings to be assessed if not agreed Special costs orders made Category: B Representation: Counsel: Plaintiff : R Young SC First Defendant : S Penglis SC Second Defendant : No appearance Third Defendant : No appearance Fourth Defendant : No appearance Fifth Defendant : No appearance -- 2 of 14 -- [2026] WASC 43 (S) Page 3 Solicitors: Plaintiff : Blackwall Legal LLP First Defendant : Clayton Utz Second Defendant : Arnold Bloch Leibler Third Defendant : Arnold Bloch Leibler Fourth Defendant : Arnold Bloch Leibler Fifth Defendant : Arnold Bloch Leibler Case(s) referred to in decision(s): Amaca Pty Ltd v Hannell [2007] WASCA 158 (S) Chen v Kevin McNamara & Sons Pty Ltd [2012] VSCA 229 CPB Contractors Pty Ltd v JKC Australia LNG Pty Ltd (No 2) [2017] WASCA 123 Crawley Investments Pty Ltd v Elman [2014] WASC 233 (S) Franco-Nevada Australia Pty Ltd v Southern Iron Pty Ltd [2026] WASC 43 Frigger v Lean [2012] WASCA 66 Inpex Operations Australia Pty Ltd v AIG Australia Ltd [No 3] [2023] WASC 332 (S) KSG Investments Pty Ltd v Open Markets Group Ltd (No 2) [2021] VSC 359 Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 3) [2010] NSWSC 1139 May v Thomas [2014] WASCA 176 (S) Sino Iron Pty Ltd v Mineralogy Pty Ltd [2022] WASC 151 Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 (S) State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174 The Pilbara Infrastructure Pty Ltd v Brockman Iron Pty Ltd [No 2] [2014] WASC 345 (S) Wainwright v Barrick Gold of Australia Ltd [2014] WASCA 15 (S) -- 3 of 14 -- [2026] WASC 43 (S) HILL J Page 4 HILL J: 1 On 24 February 2026, I delivered my reasons for decision following the trial in this matter.1 On that date, orders were made to program the question of costs through to a hearing on 8 April 2026. The primary reason a further hearing was required was because, based on cl 4.3 of the Royalty Deed, Franco-Nevada sought indemnity costs of the proceedings, which had not been the subject of argument at trial. 2 It was not in dispute that Franco-Nevada was the successful party at trial and that it was entitled to an order that Southern Iron pay at least a portion of its costs of the proceedings. 3 Franco-Nevada's primary position was that, by reason of cl 4.3 of the Royalty Deed, it was entitled to an order that Southern Iron pay its costs on an indemnity basis, except insofar as these costs had been unreasonably incurred. In recognition that it did not succeed on all issues at trial, Franco-Nevada proposed that Southern Iron pay 80% of its costs. In the alternative, Franco-Nevada sought an order that Southern Iron pay its costs of the action, including reserved costs, and sought a special costs order in relation to three items (its statement of claim, the preparation of the case, and trial), as well as orders to remove the maximum hourly and daily rates for both of its senior counsel and two solicitors, and to permit the charging of two senior counsel and two practitioners attending trial. 4 Southern Iron denied Franco-Nevada was entitled to indemnity costs or that Franco-Nevada had established any entitlement to a special costs order. In its submission, the appropriate costs order was that Southern Iron pay two-thirds of Franco-Nevada's costs of the action, including reserved costs. 5 For the reasons that follow, I do not consider that, on the proper construction of cl 4.3 of the Royalty Deed, Franco-Nevada has a contractual entitlement to an order for indemnity costs. In my view, the appropriate costs orders are that: (a) the first defendant pay 75% of the plaintiff's costs to be assessed if not agreed; and (b) special costs orders be made to lift the limits in Table B of the Legal Profession (Supreme and District Courts) (Contentious 1 Franco-Nevada Australia Pty Ltd v Southern Iron Pty Ltd [2026] WASC 43 (Primary Reasons). In these reasons, I have adopted the definitions used in the Primary Reasons. -- 4 of 14 -- [2026] WASC 43 (S) HILL J Page 5 Business) Determination 2022 (WA) (Costs Determination) for the statement of claim, preparation of case and trial, to increase the limit of the daily and hourly rates in Table A of the Costs Determination for Mr Maiden KC by 40%, and (to the extent required) to remove the limit of the hourly and daily rates in Table A of the Costs Determination for Ms Young SC. What is the appropriate costs order? 6 Section 37 of the Supreme Court Act 1935 (WA) gives the court a wide discretion in relation to costs. This discretion is not unfettered and must be exercised judicially.2 7 The general rule is that costs should follow the event; that is, the successful party should recover their costs from the opposing party on a party-party basis.3 Where an agreement contains an obligation for one party to pay the costs of the other, the agreement will generally be construed as an agreement to pay costs on a party-party basis unless it is plain from the language used by the parties that costs are to be paid on a different basis. Where this is the case, as was stated by the Victorian Court of Appeal in Chen v Kevin McNamara & Sons Pty Ltd:4 the court will take such a provision into account but it is not bound to give effect to any extra-curial contract as to costs. An agreement to pay costs on a 'special' basis is only a factor informing the exercise of the court's discretion, but not requiring the exercise of that discretion in a particular way. Generally however, where the parties have unmistakeably agreed to the making of a special costs order, such a term will be given effect to unless there is some other discretionary consideration that militates against the making of such an order. 8 Where a court does not accept all the arguments of a successful party at trial, this does not, of itself, mean that it is appropriate to deal with costs orders on an issue-by-issue basis.5 The court's discretion to do this should only be exercised in the clearest of cases.6 In exercising its discretion to reduce the costs of a successful party, the court approaches the issue as a matter of overall impression, without requiring any higher degree of mathematical precision.7 The court is not 2 Frigger v Lean [2012] WASCA 66 [53]. 3 Rules of the Supreme Court 1971 (WA) O 66 r 1(1). 4 Chen v Kevin McNamara & Sons Pty Ltd [2012] VSCA 229 [8]; see also Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 3) [2010] NSWSC 1139 [39]. 5 State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174 [8]. 6 KSG Investments Pty Ltd v Open Markets Group Ltd (No 2) [2021] VSC 359 [8]. 7 Amaca Pty Ltd v Hannell [2007] WASCA 158 (S) [6]; May v Thomas [2014] WASCA 176 (S) [5]. -- 5 of 14 -- [2026] WASC 43 (S) HILL J Page 6 required to tabulate the 'wins and losses', nor undertake an exercise of assessing the time spent or length of submissions, or reasons devoted to each of the issues.8 The central and overriding principle is that of doing substantial justice to the parties. 9 In this case, the sole basis for Franco-Nevada's application for indemnity costs was cl 4.3 of the Royalty Deed. As set out at [208] of the Primary Reasons, this clause provides that: 4.3 Failure to Pay Royalty If [Southern Iron] does not pay any Royalty due to the Joint Venturers by the date on which it is payable then, without prejudice to any other rights of the Joint Venturers, [Southern Iron] agrees to pay to the Joint Venturers immediately on demand: (a) interest at the Prescribed Rate on the unpaid Royalty calculated daily from the due date for payment until the payment has been made in full; and (b) all costs and expenses (including legal costs and disbursements on a full indemnity basis) incurred by the Joint Venturers attributable to [Southern Iron]'s failure to pay that Royalty by the date for payment. 10 Franco-Nevada submitted the language of this clause was clear; namely, the parties contractually agreed that Franco-Nevada was entitled to be indemnified for any legal costs which were attributable to Southern Iron's failure to pay any royalty by the date for payment. Senior counsel for Franco-Nevada submitted this clause is enlivened when three matters are proved: first, a failure to pay the royalty due by the date on which it was payable; second, a demand has been made for payment of the costs and expenses; and third, that the costs and expenses incurred by Franco-Nevada were attributable to or caused by Southern Iron's failure to pay the royalty by the due date.9 Franco-Nevada submitted that, in this case, each of these elements had been proved. This is because, in its submission, these proceedings were instituted because of Southern Iron's 'failure to acknowledge the plaintiff's entitlement to [the] Royalty (and thereby failure to pay it)';10 a demand had been made by Franco-Nevada; and Franco-Nevada had incurred costs in prosecuting these proceedings. 8 Inpex Operations Australia Pty Ltd v AIG Australia Ltd [No 3] [2023] WASC 332 (S) [21]. 9 ts 361 - 362. 10 Plaintiff's submissions on costs filed 10 March 2026 [3]. -- 6 of 14 -- [2026] WASC 43 (S) HILL J Page 7 11 Franco-Nevada proposed that Southern Iron's obligation to pay its costs on an indemnity basis be limited to 80% of its costs. In its submission, this reflected it being unsuccessful at trial on its contention that the Royalty Deed had been varied, its estoppel claim, and its application for orders under s 447A of the Act. Franco-Nevada contended a discount of 20% reflected my observation at [1] in the Primary Reasons that the proper construction of the DOCAs (and related instruments) was the primary issue framing the conduct of the trial and the submissions filed by the parties. 12 Southern Iron denied that, on its proper construction, cl 4.3 provided any basis for the award of indemnity costs. It emphasised that there were no claims in these proceedings that Southern Iron had either failed to pay a 'Royalty due to the Joint Venturers' or had breached the Royalty Deed; or for any specific amount to be paid by Southern Iron. Instead, Franco-Nevada sought declaratory relief as to whether the DOCAs had extinguished its right to be paid royalties under the Royalty Deed. 13 Senior counsel for Southern Iron submitted that on its proper construction, cl 4.3 required there to be an ascertainable amount that was due for payment.11 This construction was said to be supported by the requirement in the same clause to pay interest which could only occur if an unpaid royalty amount had been calculated. Reference was also made to the decision of the Court of Appeal in CPB Contractors Pty Ltd v JKC Australia LNG Pty Ltd (No 2) as to the meaning of 'due' that:12 In ordinary parlance, the meaning of the word 'due' includes 'immediately payable' or 'owing, irrespective of whether the time for payment has arrived'. The word 'due' in a legal context is sometimes used in the sense of 'payable', but prima facie means any sum that a person is legally liable to pay, irrespective of whether the time for payment has arrived, ie, irrespective of whether it is then 'payable'. 14 Before turning to the proper construction of cl 4.3 of the Royalty Deed, it is useful to consider the context and purpose of this clause. Pursuant to cl 3.1 of the Royalty Deed, Southern Iron agreed to pay Royalties to the Joint Venturers in perpetuity. The basis on which the Royalties were to be calculated was set out in cl 3.2. Clause 4 then set out when the Royalties would be paid and what would occur in the event there was a failure to pay the royalties. Clause 4.1 provided that 11 ts 376 - 377. 12 CPB Contractors Pty Ltd v JKC Australia LNG Pty Ltd (No 2) [2017] WASCA 123 [122]. -- 7 of 14 -- [2026] WASC 43 (S) HILL J Page 8 Royalties were required to be paid within 30 days after the end of a 'Royalty Period' (defined as 30 June, 30 September, 31 December and 31 March) and set out the proportions each of the Joint Venturers would receive. Under cl 4.2, Southern Iron was required to provide the Joint Venturers with a Royalty Statement (setting out the information and data necessary for the calculation of the Royalties) at the same time it paid any Royalty to the Joint Venturers and in any event within 30 days after the end of the Royalty Period. 15 It is in that context that cl 4.3 sets out what was to occur in the event Southern Iron failed to pay a Royalty to the Joint Venturers. Where this occurred, in addition to the requirement to pay the unpaid Royalty, Southern Iron was also obliged to pay 'immediately on demand' interest of 2% above the overdraft rate charged by the Commonwealth Bank of Australia on loans of over $100,000 calculated daily, and all costs and expenses (including legal costs and disbursements on a full indemnity basis) attributable to the failure to pay the Royalty. 16 The text, context and purpose of cl 4.3 support a conclusion that, by this clause, the parties agreed that where a Royalty that was due for payment to the Joint Venturers had not been paid, Southern Iron was required to pay interest and to indemnify the Joint Venturers for the costs incurred as a result of the failure to pay the Royalty. In my view, cl 4.3 contemplates a relatively simple claim for, what is in essence, non-payment of a debt. These proceedings are not that claim. 17 As is clear from the Primary Reasons, the primary issue raised in these proceedings concerned the proper construction of the Transaction Support DOCA, the Distribution DOCA and the novation deeds, and whether these agreements (or any of them) extinguished Franco-Nevada's entitlements under the Royalty Deed. No relief was sought for the provision of any Royalty Statements, for the payment of any Royalty, or for interest calculated in accordance with cl 4.3(a) of the Royalty Deed. Instead, Franco-Nevada sought various declarations or in the alternative, an order under s 447A of the Act. Given this, I do not consider that Franco-Nevada's contractual entitlement to indemnity costs extends to its claims in these proceedings. 18 In addition, for the reasons at [229] to [235] of the Primary Reasons, I consider the indemnity in cl 4.3 is an indemnity for the costs of the 'Joint Venturers' and not Franco-Nevada by itself. -- 8 of 14 -- [2026] WASC 43 (S) HILL J Page 9 19 Where proceedings go beyond a simple debt claim, as is the case here, the Royalty Deed is silent as to how those costs should be allocated. Given these conclusions, it is my view that any costs order should be on the usual basis, namely party-party costs, unless special costs orders are made. 20 While the minute of proposed orders filed by Franco-Nevada did not propose any reduction in or apportionment of costs to reflect that it did not succeed on all claims in the proceedings, its submissions proposed an apportionment of 80%. In contrast, Southern Iron contended the appropriate apportionment was two-thirds. 21 In this case, I accept the issues on which Franco-Nevada did not succeed added to the costs of the proceedings in a discernible way. 22 While the oral evidence called in these proceedings was limited, this evidence was only relevant to the question as to whether there had been an agreement to vary the Royalty Deed. In addition, a relatively significant proportion of the documents tendered at trial were only relevant to this issue or the estoppel claim. These issues required the court and the parties to focus on the detail of the history of the negotiations of possible amendments to the Royalty Deed which would not have otherwise been required. 23 That said, much of the complexity and the time taken in these proceedings concerned the proper construction of the DOCAs and related instruments. This issue occupied most of the time at trial as well as the written submissions filed by the parties. Taking a broad-brush approach, I consider that Franco-Nevada's costs should be reduced by 25% to reflect the fact that they were not successful on all of the issues that were raised at trial. Should special costs orders be made? 24 Pursuant to s 141(3) of the Legal Profession Uniform Law Application Act 2022 (WA), the court has the power to make special costs orders. 25 On an application for special costs, the court considers two questions: (a) Is the maximum amount allowable under the applicable costs determination inadequate, in the sense there is a fairly arguable -- 9 of 14 -- [2026] WASC 43 (S) HILL J Page 10 case that, on taxation, costs may properly be allowed in an amount greater than the maximum amount? (b) Does the inadequacy of the costs allowable under the costs determination arise because of the unusual difficulty, complexity, and/or importance of the matter? 26 Both of these questions are addressed as a matter of impression, rather than matters of detailed evaluation, precision, or science.13 27 The effect of s 141(1) of the Legal Profession Uniform Law Application Act 2022 (WA) is to confine the costs recoverable by a successful party to the limits imposed by the relevant costs determination then in force. As was noted by the Court of Appeal in Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2], this provision is 'protective of the party charged and, more generally, serves the due administration of justice by limiting the allowable scope for legal costs'.14 28 In considering the first question, it is not sufficient for a party to show it has incurred costs greater than the limit in the relevant costs determination. However, the fact that a party has incurred significantly greater costs in each step of the litigation, when viewed in the context of the unusual difficulty, complexity or importance of the matter, may enable the court to conclude there is a fairly arguable case that each of the items identified is inadequate.15 29 In considering whether to exercise its discretion to make special costs orders, the court can take into account whether the complexity relied upon to justify the proposed orders arose in respect of issues on which the party failed at trial.16 30 Finally, the discretion to be exercised by the court on an application for special costs must be exercised judicially as the interests of justice in each case require. As was noted by Quinlan CJ in Sino Iron Pty Ltd v Mineralogy Pty Ltd, the interests of justice include 'the need to keep the costs of litigation generally within reasonable bounds'.17 13 Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 (S) [12]. 14 Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [11]. 15 Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [14]. 16 Wainwright v Barrick Gold of Australia Ltd [2014] WASCA 15 (S) [20]. 17 Sino Iron Pty Ltd v Mineralogy Pty Ltd [2022] WASC 151 [20]. -- 10 of 14 -- [2026] WASC 43 (S) HILL J Page 11 31 In support of its application for special costs, Franco-Nevada initially sought to rely on two affidavits of Jeffrey David Malone, a partner of Franco-Nevada's solicitors, the first filed on 10 March 2026 and the second on 8 April 2026, shortly prior to the commencement of the hearing. Senior counsel for Southern Iron objected to certain paragraphs of the first affidavit and to the entirety of the second affidavit. Ultimately at the hearing, senior counsel for Franco-Nevada only read Mr Malone's first affidavit save for the portions which were the subject of objections (being [37], [38], and the second sentence of [39]). 32 The application for special costs orders was opposed by Southern Iron, who relied on an affidavit of Scott Philip Crabb, a partner of Southern Iron's solicitors, filed on 24 March 2026. 33 The costs of these proceedings, which were commenced in December 2022, are governed by the Costs Determination. Franco-Nevada sought special costs orders in relation to three items: (a) its statement of claim; (b) preparation of case; and (c) trial. 34 Table B of the Costs Determination provides that, in the absence of special costs orders being made, the maximum amount allowed for the statement of claim is $6,072 (which assumes 12 hours of a senior practitioner's time) (item 1(c)); for preparation of the case is $65,780 (which assumes 130 hours of a senior practitioner's time) (item 19); and for trial, where senior counsel and junior counsel is briefed, a total of $87,450 plus the hourly costs of an instructing solicitor's attendance (item 22). 35 Franco-Nevada did not file a draft bill of costs in support of its application for special costs. The only admissible evidence on the application was the hourly rates charged by those involved in the matter. Notwithstanding this, as the case manager and trial judge of these proceedings, it is my view that there is a fairly arguable case that on taxation, costs may properly be allowed in an amount greater than the maximum allowable under the Costs Determination in respect of each of these items. -- 11 of 14 -- [2026] WASC 43 (S) HILL J Page 12 36 While the statement of claim is not a lengthy document, I accept that its preparation and drafting required consideration in some detail of the terms of the Transaction Support DOCA, the Distribution DOCA, the reports issued by the Administrators to creditors, the deeds of novation, and the Royalty Deed. The DOCAs, in particular, are complex commercial agreements. In my view, it is fairly arguable that on taxation, the taxing officer may accept that it was reasonable for a senior practitioner (and counsel) to spend more than 12 hours drafting this document and allow an amount greater than the maximum provided in item 1(c) of Table B of the Costs Determination. 37 For similar reasons, I consider that, while only one witness was called at trial, the taxing officer may consider it was reasonable for more significant time periods to have been spent preparing the case for trial and at trial, exceeding the maximums allowed in items 19 and 22 of Table B of the Costs Determination. 38 I also consider that these proceedings can be fairly described as unusually difficult and complex; particularly legally. In this case, it is this difficulty and complexity which makes it fairly arguable that costs may be allowed in an amount greater than the maximum of these items in the Costs Determination. 39 Franco-Nevada also sought an order that their costs be taxed without regard without regard to the limits of the hourly and daily rates imposed by Table A of the Costs Determination for counsel and two of the legal practitioners engaged on the matter. 40 The evidence of Mr Malone, which I accept, is that Mr Maiden KC's rates are significantly higher than the maximum allowed in Table A of the Costs Determination, while the rates of the solicitors working on this matter were about 20% higher than the maximum allowed in Table A of the Costs Determination. In relation to Ms Young SC, who was appointed senior counsel in October 2022, her hourly rate of $660 applied for the entirety of the matter. This rate was higher than the maximum rate in Table A of the Costs Determination for junior counsel but less than the maximum rate for senior counsel. 41 The court does not lift the limit on hourly rates simply because a party has engaged lawyers who charge at a higher rate from the rates provided in Table A.18 That said, as was accepted by Southern Iron, it is 18 Crawley Investments Pty Ltd v Elman [2014] WASC 233 (S); The Pilbara Infrastructure Pty Ltd v Brockman Iron Pty Ltd [No 2] [2014] WASC 345 (S). -- 12 of 14 -- [2026] WASC 43 (S) HILL J Page 13 not uncommon on complex commercial matters, particularly in insolvency and restructuring matters, for solicitors and counsel to charge rates significantly above those provided in Table A of the Costs Determination.19 42 Taking account of the complexity of the matter, I will allow an uplift of 40% of the rate in Table A of the Costs Determination for Mr Maiden KC and remove the limit in Table A of the Costs Determination for Ms Young SC. I do not consider any uplift should be allowed for Franco-Nevada's solicitors. 43 Given that I consider the hourly and daily rates for Ms Young SC should be removed, I do not consider it is necessary to make the order sought in relation to the costs of two senior counsel. In case I am wrong in this regard, it is my view, given that Mr Maiden KC is based in Victoria and Ms Young SC was already briefed, that it was appropriate for Franco-Nevada to continue to retain Ms Young SC as counsel after her appointment as senior counsel in October 2022. 44 Franco-Nevada also sought an order to permit the charging of the attendance of two senior practitioners at trial. There is no evidence before the court to explain why this was necessary. In my view, this is a matter for the taxing officer in assessing and fixing the costs. Conclusion 45 For these reasons, I consider that the appropriate orders as to costs are as follows: 1. The first defendant pay 75% of the plaintiff's costs, including reserved costs, to be assessed if not agreed. 2. Pursuant to s 141(3) of the Legal Profession Uniform Law Application Act 2022 (WA), the costs payable pursuant to Order 1 be taxed: (a) without regard to the limits imposed in items 1(c), 19 and 22 (a) and (b) of Table B of the Costs Determination; (b) by increasing the maximum allowable hourly and daily rates for Mr Maiden KC fixed by Table A of the Costs Determination by 40%; and 19 Affidavit of Scott Philip Crabbe filed 24 March 2026. -- 13 of 14 -- [2026] WASC 43 (S) HILL J Page 14 (c) by removing the maximum allowable hourly and daily rates for Ms Young SC fixed by Table A of the Costs Determination. I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia. KS Associate to the Hon Justice Hill 9 JUNE 2026 -- 14 of 14 --