Appellants v Respondent

2 SNL and Su have filed a notice of appeal seeking, pursuant to s 109 of the Magistrates' Court Act 1989 (Vic) ('MCA'), to appeal the judgment and orders made by Magistrate Tan on 14 May 2024 in proceeding M10996652. The relevant orders made by the Magistrate are:

1. Order that Complaint be dismissed against Muffin Break Pty Ltd.

2. SEC New Line Pty Ltd to pay Muffin Break Pty Ltd $5,623.43 and interest of $1,368.11.

3. Dongbiao Su to pay Muffin Break Pty Ltd $5,623.43 and interest of $1,368.11.

4. The plaintiff pay the defendant's costs in an amount as agreed between the parties, failing such agreement, the parties have leave to return the matter before [the Magistrate] for determination.

5. The defendants by counterclaim pay the costs of the plaintiff by counterclaim in an amount as agreed between the parties, failing such agreement, the parties have leave to return the matter before [the Magistrate] for determination.

3 On 16 September 2024, Muffin Break filed a summons seeking orders pursuant to s 62 of the Civil Procedure Act 2010 (Vic) ('CPA') and/or r 58.10(9) of the Supreme Court (General Civil procedure) Rules 2015 ('Rules'), summarily dismissing SNL and Su's appeal. In the alternative, in the event the appeal is not summarily dismissed, Muffin Break seeks an order that SNL pay security for costs in the sum of $50,000. While Muffin Break's application was brought under the above provisions, as will be discussed below, its application was in large part founded upon alleged deficiencies in SNL and Su's pleaded grounds of appeal.

4 For the reasons given below I have decided to strike out each of the current grounds of appeal and to give SNL and Su an opportunity to reformulate their grounds. As I have decided not to summarily dismiss the appeal, I have also decided that SNL should provide security for Muffin Break's costs of the appeal in the sum of $30,000.

(a) the affidavit of Christopher Clement Brodrick affirmed 11 September 2024;

(b) the affidavit of Georgeana Luong affirmed 10 September 2024;

(c) the affidavit of Ajai Lyndon Thapliyal, solicitor for the appellants, sworn 19 June 2024;

(d) the affidavit of Ajai Lyndon Thapliyal, solicitor for the appellants, sworn 14 August 2024; and

(e) written submissions filed 9 October 2024.

6 SNL and Su opposed the application. They relied upon:

7 The appellants' Notice of Appeal identifies five questions of law:

in finding that the respondent had not engaged in misleading and conduct in contravention of s 18 of the ACL_._

2. whether the Magistrate erred in law, or alternatively failed to set out sufficient reasons, in finding that the respondent had not breached the implied duty to cooperate.

3. whether the Magistrate erred in law in finding that the first appellant had failed to prove it had suffered loss and damage.

4. whether the Magistrate, having made the errors set out at paragraphs 1 to 3 above, erred in law in finding that the respondent had made good its counterclaim.

5. whether the Magistrate erred in law, and/or failed to set out sufficient reasons, in finding that the respondent had established that the first appellant had an obligation to reinstate and that the respondent had not acted in the absence of good faith in negotiating a payment of a fixed fee to the landlord in lieu of the obligation to reinstate.

8 Under cover of those questions of law, the appellants' notice of appeal set out five separate grounds of appeal. I will refer to these further below.

9 Section 109 of the MCA allows a party to a civil proceeding in the Magistrates' Court to appeal, on a question of law, to the Supreme Court from a final order made in the Magistrates' Court proceeding.

(9) The Court may dismiss the appeal if satisfied that -

(a) the notice of appeal does not identify sufficiently or at all a question of law on which the appeal may be brought;

(b) the appellant does not have an arguable case on appeal or to refuse leave would impose no substantial injustice; or

(c) the appeal is frivolous, vexatious or otherwise an abuse of the process of the Court.

11 At the hearing the respondent clarified that its application under r 58.10(9) was limited to r 58.10(9)(a) and (b). In other words, the respondent did not submit that the appellants' notice of appeal should be dismissed on the basis that it is frivolous, vexatious or otherwise an abuse of the process of the Court.

12 Section 62 of the CPA permits a defendant in a civil proceeding to apply to the Court for summary judgment on the ground that a plaintiff's claim has no real prospect of success. Section 63 empowers the Court, subject to s 64 of the CPA, to give summary judgment in any civil proceeding if satisfied that a claim has no real prospect of success.

13 Section 64 of the CPA provides that the Court may order that a proceeding proceed to trial if the Court is satisfied that, despite there being no real prospect of success, the civil proceeding should not be disposed of summarily because, either, it is not in the interests of justice to do so; or the dispute is of such a nature that only a full hearing on the merits is appropriate.

14 The principles relevant to an appeal under s 109 of the Magistrates' Court Act were not in real dispute between the parties. An appeal under this section is an appeal strictly so called and is limited to a question of law.[1] The question of law must be identified before an appellant is entitled to relief.[2] The Court is not entitled to interfere with the decision of a Magistrate unless it is satisfied that the Magistrate acted on a wrong principle of law, misapprehended the facts or made a wholly erroneous assessment of the relevant issues.[3] There is a strong presumption in favour of the correctness of the decision appealed from, and the general rule is that the decision should be affirmed unless the Court is satisfied that it is clearly wrong.[4] Vague references to the Magistrate having either misunderstood unspecified evidence, or having failed to correctly apply that evidence to unidentified relevant legal principles are not permissible.[5] As noted by the Court of Appeal in State of Victoria v Bacon & Ors:[6]

...to allege error in the drawing of some particular conclusion... will often simply cloak what it is sought to put in issue. That the judge erred in making some particular finding, if of fact, may mean, inter alia, that there was no evidence at all to support that finding, or that the primary facts were not proved from which an inference was drawn, or that though there was evidence of those primary facts that evidence ought to have been rejected, or that the inference, though open, ought not to have been drawn. Where the finding under attack is in truth of mixed fact and law, the allegation of error in arriving at the stated conclusion may conceal a contention that the judge misunderstood the law or, though properly understanding the principles, misapplied them; and where as here a statute is involved, the possibilities are often multiplied.

15 A Magistrate will have erred in law in making a factual finding if that finding was unavailable to the Magistrate. As stated by the Court of Appeal in Ericsson (Australia) Pty Ltd v Popovski:[7]

But the appeal given by s 109 of the Magistrates' Court Act is only on a question of law, and it is not enough to show error of law simply to persuade a judge that the magistrate went wrong on a question of fact. The plaintiff accepts this, and acknowledges that it was necessary for her to satisfy the judge, as she did, not only that the finding of the magistrate was wrong in the sense that the judge himself would have come to a different conclusion on the primary facts found by the magistrate, but also that the magistrate was constrained to make the finding which commended itself to the judge. It is a strong thing to reach such a conclusion in a case where the burden of proof lies on the appellant, who is therefore submitting not that an affirmative finding had no evidence to support it, but that the evidence was such as to necessitate an affirmative finding which was not made. It will be impossible to sustain this burden in cases where the refusal to make the finding sought may be grounded in a refusal, open to the tribunal, to accept part of parts of the evidence.

16 The principles relevant to an application for summary judgment were set out by the majority of the Court of Appeal in Lysaght Building Solutions Pty Ltd (t/as Highline Commercial Construction) v Blanalko Pty Ltd.[8]

(a) the test under s 63 of the CPA should be construed as one of whether the respondent to the application for summary judgment has a 'real' as opposed to a 'fanciful' chance of success;

(b) the test is to be applied by reference to its own language and without paraphrase or comparison with the 'hopeless' or 'bound to fail' test essayed in General Steel;[9]

(c) it should be understood, however, that the test is to some degree a more liberal test than the 'hopeless' or 'bound to fail' test essayed in General Steel and, therefore, permits of the possibility that there may be cases, yet to be identified, in which it appears that, although the respondent's case is not hopeless or bound to fail, it does not have a real prospect of success; and

(d) at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by an amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.

18 The same approach has been extended to applications under r 58.10(9) of the Rules.[10]

19 The appellants' proposed first ground of appeal is as follows:

Ground 1 - Error of law in in (sic) finding that the Respondent had not engaged in misleading and conduct (sic) in contravention of Section 18 of the Australian Consumer Law

(a) The learned Magistrate erred in law in finding that the Respondent had not engaged in misleading and deceptive conduct or conduct that was likely to mislead and deceive in contravention of section 18 of the Australian Consumer Law 2010 when the respondent:

(i) is and was a franchisor and had leased the premises at Shop F001 Bayside Shopping Centre ("the leased premises") which it licenced to the appellant as part of a Franchise Agreement;

(ii) approached the Second Appellant in December 2019 to ascertain whether the First Appellant was interested in taking an early renewal of the Franchise Agreement, to which the Second Appellant responded in the affirmative;

(iii) received from the landlord:

1. An email dated 10 January 2020 stating that "...we are not able to offer any longer term at (sic) to anyone on level 2 as we are currently working through a future strategy on whether it will continue as a food court or if we will repurpose the space..." ("the 10 January email"); and

2. a notice dated 2 March 2020 under section 64 of the Retail Leases Act 2003 informing the respondent that the landlord did not propose to offer the respondent a renewal of the lease for the leased premises ending on 9 September 2020 ("the non-renewal notice"); and

(iv) failed to provide the First Appellant with:

1. a copy of 10 January email or inform the First Appellant that it had received such an email; or
2. a copy of the non-renewal notice or inform the First Appellant that it had received such a notice; and instead

(v) wrote to the First Appellant by letter dated 6 March 2020 offering to enter into a new franchise agreement to be operated from the leased premises, for a term commencing after the lease had ended and in respect of which it had received the non-renewal notice;

(vi) Did not disclose to the First Appellant until 7 July 2020 that the landlord was not prepared to renew the lease for the leased premises.

(b) The learned Magistrate erred in, or alternatively failed to set out sufficient reasons for, concluding that the Respondent had not made a misrepresentation caused by silence on the basis submitted by the First Appellant that the Respondent was under a duty to disclose the existence of the non-renewal notice or that there was a reasonable expectation, objectively assessed, that it would do so.

(c) The learned Magistrate erred in law by taking into account the following irrelevant considerations when determining that the Respondent had not engaged in misleading and deceptive conduct by silence:

(i) That the 2 March 2020 notice from the landlord was not certain as to non-renewal or final as to non-renewal of the lease;

(ii) That the landlord eventually offered a new lease in September 2020; and

(iii) That the Respondent's conduct in not disclosing the 2 March 2020 notice from the landlord was not capable of misleading the First Appellant because, prior to 6 March 2020, the First Appellant was aware that absent a renewal of the lease the lease term ended 9 September 2020;

in circumstances where these matters are not logically relevant to whether the Respondent:

(iv) engaged in misleading conduct by failing to disclose the 10 January 2020 email and/or the non-disclosure the letter (sic) (or the contents of these documents) to the First Appellant; and/or

(v) was under a duty to disclose the existence of the non-renewal notice or that there was a reasonable expectation that it would do so.

20 Counsel for the appellants conceded that this ground, and the remaining grounds, was not expressed as clearly and succinctly as it might have been. Nevertheless, counsel submitted that the relevant error of law was identified with the requisite degree of clarity.

21 I am unable to accept this submission. Paragraph (a) of this ground merely asserts that the Magistrate erred in not finding a breach of s 18 of the ACL in the circumstances of the case presented to the Magistrate. It unclear whether the factual findings of the Magistrate are in issue or whether the issue is the Magistrate's apprehension of the statutory provision. To the extent the error alleged may be the Magistrate's application of the facts to the requirements of the legislation, this paragraph does not clearly articulate that is the case or specifically how the Magistrate erred.

22 Similarly, paragraph (b) appears to assert the Magistrate erred in not accepting the appellants' case that the respondent had made a misrepresentation by silence. It is not clear whether the appellants allege the Magistrate erred in his understanding of the law of misrepresentation by silence or again, whether the appellants allege the finding of the Magistrate that the respondent had not made a representation by silence was unavailable on the evidence. It is also not sufficient for the appellants to include in a formulaic way without elaboration that the Magistrate erred by failing to set out sufficient reasons for his finding.

23 In my view, while paragraph (c) is arguably clearer than the preceding paragraphs under this ground, it is also deficient. The deficiency is most evident from the current wording of sub-paragraph (c)(iv) which uses the phrase, 'the non-disclosure the letter'. It is unclear whether this is intended to be a reference to the non-disclosure notice (as defined earlier in this ground) or some other document.

24 It follows that I am satisfied that, as currently drafted ground 1 has no real prospect of success.

Ground 2 - Error of law in in (sic) finding that the Respondent had not breached the implied duty to cooperate

(a) The learned Magistrate erred in law, or alternatively failed to set out sufficient reasons, in concluding that the Respondent had not breached the implied duty to cooperate by failing to inform the First Appellant of:

(i) The 10 January email; and

(ii) The non-renewal notice,

with the result that the First Appellant was denied the right to sell the franchise agreement, a right expressly given to it by the Franchise Agreement.

26 This ground, as expressed, set out a conclusory statement (the Magistrate erred) and the consequences of that conclusion (the First Appellant was unable to sell his franchise business). It does not clearly articulate the specific error made by the Magistrate in finding that the respondent had not breached any implied duty to cooperate.

27 It follows that I am satisfied that as currently expressed, ground 2 has no real prospect of success.

Ground 3 - Error of law in finding that the First Appellant had failed to prove it had suffered loss and damage

(a) The learned Magistrate erred in finding that the First Appellant had failed to prove it had suffered loss and damage when:

(i) loss of opportunity is an accepted head of damages under section 236 of the ACL;

(ii) the First Appellant adduced uncontradicted evidence as to the opportunity that was lost;

(iii) there was no evidence before the learned Magistrates' (sic) capable of contradicting the First Appellant's claim;

(iv) the findings of fact made by the Magistrate were neither supported by evidence nor were they put to any of the First Appellant's witnesses during cross-examination.

29 Counsel for SNL and Su referred me to the decision of Beach JA in Lu v Ballantyne.[11] In that case Beach JA, sitting in the trial division of the Supreme Court of Victoria, considered an appeal from a decision of the Magistrates' Court. The central issue in the appeal was whether it was open to the Magistrate to find the respondent had discharged his onus of showing that the appellant had 'acted unreasonably...because he...hired a vehicle from Right2Drive without having any appreciation or consideration of his ability or inability to hire a vehicle at a competitive rate.'[12] Beach JA noted that while the underlying facts as found by the Magistrate were not capable of being challenged, his ultimate conclusion on the reasonableness of the appellant's actions in hiring the relevant vehicle could be overturned on appeal if that conclusion was not open.[13] The evidence before the Magistrate was that before hiring the vehicle the appellant had taken advice from his insurer that Right2Drive was a suitable organisation to obtain a replacement car in the circumstances.[14] The Magistrate's reasons noted that while the appellants actions were understandable, they were not reasonable.[15] Beach JA found that on the underlying facts found by the Magistrate, the only conclusion open to the Magistrate was that the appellants actions were 'entirely understandable' and thus the respondent had not proved that the appellant's conduct was unreasonable.[16] In reaching this conclusion, Beach JA stated:

It is also significant to note that at no stage during his cross-examination of the appellant did the respondent's counsel who appeared at the hearing of the arbitration ever suggest to the appellant that the appellant's conduct was in any way unreasonable.

30 Counsel for SNL and Su submitted the circumstances in Lu v Ballantyne were analogous to the appeal in this proceeding. Counsel clarified that this ground sought to argue that the Magistrate had drawn inferences that were not open on the evidence.

31 In the case before the Magistrate in this appeal, the Magistrate concluded that even if he had found that Muffin Break had not acted in good faith or had engaged in misleading and deceptive conduct, he was not of the view that any damage or loss flowed from such conduct. The Magistrate stated his reasons by reference to the evidence given by Su and Mr Danny Chang, who said he would have bought the franchise for $50,000, knowing there was only six months left to run on the lease and without examining the books and records of the business. The Magistrate carefully went through this evidence, finding it implausible (noting he had reservations accepting some fundamental parts of Su's evidence) and noted that there was no evidence that Muffin Break would have accepted Mr Chang as a franchisee, given he was operating another franchise (not Muffin Break) at the time. The Magistrate concluded that he did not accept that there was any opportunity lost by SNL to sell its franchise business or its chattels.

32 I am satisfied that ground 3 as currently drafted has no real prospects of success. I have reached this view because, given counsel's concession that this ground was directed to allege the Magistrate had drawn impermissible inferences from the evidence, the ground does not identify the inferences said to be erroneously drawn by the Magistrate, such that it is not possible to identify with precision which part of the Magistrate's reasoning is objected to and why.

Ground 4 - Having made the errors set out at paragraphs 1 to 3 (above), further error of law in finding that the respondent had made good its counterclaim

(a) Having erred in making the findings at paragraphs (a), (b), (c) and (d) the learned Magistrate erred in finding that the respondent had made good its counterclaim when he ought to have found that:

(i) Had the First Appellant sold the franchise business in 2020 there would have been no obligation to make good under the lease and no bond to forfeit; and in any event

(iii)(sic)there was no obligation either under the lease or the licence to conduct a 'defit' of the premises.

34 At the hearing, counsel for SNL and Su was unable to clearly explain whether, and if so how, the term, 'Having made the errors set out at paragraphs 1 to 3 (above)' somehow conditioned the 'further error' the subject of this ground. Counsel did clarify that the reference to 'paragraphs (a), (b), (c) and (d)' should have been a reference to grounds 1 to 3. Even leaving aside this obvious lack of clarity, the ground as expressed does not clearly articulate the alleged error(s). Subparagraph (i) appears to involve a mixture of both factual and legal findings and subparagraph (iii) may refer to an error in the Magistrate's construction of the lease, licence or the word 'defit'.

35 It follows that I am satisfied that, as currently expressed, ground 4 has no real prospect of success.

Ground 5 - Error of law in finding that the Respondent had established that the First Appellant has an obligation to reinstate and that the Respondent had not acted in the absence of good faith in negotiating a payment of a fixed fee to the landlord in lieu of the obligation to reinstate.

(a) The learned Magistrate erred in law in, or alternatively failed to set out sufficient reasons for, concluding that:

(i) he was satisfied that there would be monies having to be expended to de-fit and reinstate the leased premises; and

(ii) the fixed fee of $14,300 was not negotiated in the absence of good faith,

in circumstances where it was not open on the evidence for his Honour to make these findings because his Honour did not make any findings of fact as to:

(I) whether the applicable obligation was an obligation to de-fit or an obligation to reinstate; and

(II) whether the applicable obligation arose under clause 5.18.1 of the Licence Agreement or clause 12.12(a)(iii) of the Lease; and

(III) If the applicable obligation was under clause 5.18.1 of the Licence Agreement, the condition of the premises at the commencement date of the initial lease, which informed the scope of the applicable obligation; and

(IV) If the applicable obligation was under clause 12.12(a)(iii) of the Lease, the condition of the premises at the commencement date of the Lease and any alterations made to the premises, which informed the scope of the applicable obligation,

And in circumstances where:

(i) There was no evidence as to the state of the leased premises as of the commencement date of the initial lease (for the purposes of making an assessment of the relevant duty under clause 5.15.1 of the Licence Agreement); and

(ii) There was no evidence as to the condition of the premises at the commencement date of the Lease and of alterations made to the premises after the commencement date, save for the evidence of the Defendant's witness, Chris Borsboom, that the alterations would only have been "cosmetic" (for the purposes of making an assessment of the relevant duty under clause 12.12(a)(iii) of the Lease).

37 This ground as expressed is convoluted and unclear. The chapeau to the ground appears to raise two distinct issues, the Magistrate's finding of an obligation to reinstate and also the Magistrate's finding that in negotiating a fixed fee payment in lieu of reinstatement works, the respondent had not acted in the absence of good faith. The use of the double negative, 'had not acted in the absence of good faith' does not aid the clarity of this ground. Subparagraph (a) then appears to say that the Magistrate erred in finding no bad faith in the respondent negotiating a payment in lieu of reinstatement works because this was not a finding open on the evidence. The Magistrates' finding of the obligation to reinstate may be a finding based upon a construction of the licence or lease. The finding that Muffin Break did not act in bad faith in negotiations would appear to involve different legal or factual considerations. The issue arising from mixing these two issues within one ground is that it difficult to comprehend exactly how SNL and Su put their case. The use of the words 'and in circumstances where' before alleging a lack of evidence of particular matters further obscures the case SNL and Su wish to raise. Without greater clarity Muffin Break would be prejudiced if required to file a responsive pleading.

38 I am satisfied that as currently pleaded this ground has no real prospect of success.

Should the appellants be given an opportunity to replead?

39 Counsel for Muffin Break submitted that if the Court struck out the grounds of appeal it should not afford the appellants an opportunity to reformulate their proposed grounds. Counsel submitted that Muffin Break had put SNL and Su on notice of defects in the notice of appeal in Muffin Break's solicitor's letter to the appellants' solicitor dated 12 July 2024, and that SNL and Su had not sought to address any of the concerns raised in that letter.

40 If SNL and Su are not afforded an opportunity to reformulate their grounds of appeal, their appeal rights would end. This appears to me to be a particularly harsh outcome given the application before the Court is in large part predicated on defects with the wording of SNL and Su's grounds of appeal. In my view the interests of justice require that the Court afford SNL and Su an opportunity to reformulate their grounds of appeal.

41 During the course of the hearing, counsel for Muffin Break took the Court through the transcript of the Magistrate's decision, setting out where the Magistrate identified the relevant legal tests, the evidence and the reasons for the Magistrate's finding in relation to the evidence. Counsel submitted that SNL and Su's notice of appeal effectively (and impermissibly) sought a rehearing of the dispute before the Magistrate. Ultimately, I have found that the grounds of appeal should be struck out, largely because the way they are expressed obscures the identification of the specific errors that the Magistrate is alleged to have made. Put another way, because of the fundamental defects in the wording of the grounds of appeal, it has not been necessary to address Muffin Break's submissions on the adequacy of the Magistrate's reasons. Nothing in this Court affording SNL and Su an opportunity to reformulate their grounds of appeal should be taken to infer a rejection of Muffin Break's submissions as to the sufficiency of the Magistrate's reasons, which on their face and absent regard to properly formulated grounds of appeal, appear orthodox.

The respondent's security for costs application

42 Given that I have decided not to summarily dismiss the appeal but rather to give SNL and Su an opportunity to reformulate their grounds of appeal, it is necessary for me to consider Muffin Break's application for security.

43 Muffin Break's summons sought an order that SNL pay security for costs in an amount of $50,000.

44 This aspect of Muffin Break's application was supported by the evidence of Mr Brodrick, who affirmed an affidavit on 11 September 2022, filed in this proceeding. Mr Brodrick is a partner at the firm of Holding Redlich, solicitors for Muffin Break. He has more than twenty five years' experience in civil litigation, particularly in commercial litigation and dispute resolution. Mr Brodrick deposed that:

(a) SNL was incorporated on 25 July 2019, some two months before it entered into the franchise agreement with Muffin Break, and Su is its sole director and shareholder;

(b) The franchise agreement and the corresponding licence agreement were entered into by SNL in its capacity as trustee for the SEC Family Trust;

(c) Unsigned financial accounts for SNL filed in the Magistrates' Court proceeding suggest any funds received by SNL from the conduct of the franchise business were held on trust for the unspecified beneficiaries of the SEC Family Trust;

(d) A property and Personal Property Securities Register (PPSR) search of SNL reveals that SNL owns no real property in Australia and has no assets registered on the PPSR;

(e) Muffin Break has significant concerns that SNL would not be able to meet an adverse costs order, if made in this proceeding;

(f) On 12 July 2024, Holding Redlich invited SNL to provide details of SNL's financial position, including any assets held in the jurisdiction;

(g) On 15 August 2024, SNL's solicitors wrote to Holding Redlich confirming that SNL was incorporated for the purpose of purchasing the franchise and is 'otherwise without assets';

(h) SNL is the subject of an adverse costs order from the Magistrates' Court proceeding in favour of Muffin Break, which, at the time of the hearing in this Court, remained unpaid;

(i) Muffin Break has had its costs of the Magistrates' Court proceeding assessed in the amount of $112,316.13;

(j) The primary findings sought to be challenged in this appeal relate to SNL's failed claim in the Magistrates' Court.

45 Mr Brodrick prepared an estimate of Muffin Break's costs in this proceeding. That estimate was broken down by the hours expected to be spent by various specified levels of professional staff and counsel in completing specified tasks. Mr Brodrick's estimate was presented in the following table:

Reviewing Notice of Appeal and affidavit materials, taking instructions and conferences, considering issues corresponding with appellant's solicitor

Review affidavits and consider need for further evidence, prepare responsive evidence

46 Muffin Break's application for security was brought pursuant to s 1335 of the Corporations Act 2001 (Cth) (Corporations Act) and r 62.02(1)(b) and (f) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (Rules).

47 Section 1335(1) of the Corporations Act provides:

Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given.

(b) the plaintiff is a corporation....and there is reason to believe that the plaintiff has insufficient assets in Victoria to pay the costs of the defendant if ordered to do so;

...

(f) under any Act the Court may require security for costs -

the Court may, on the application of a defendant, order that the plaintiff give security for the costs of the defendant of the proceeding and that the proceeding as against that defendant be stayed until the security is given.

49 The principles relevant to an application for security for costs are well settled and were not in real dispute. Other than in relation to one matter, I have previously set out the principles[17] it is unnecessary to refer to those principles again here.

50 The one matter that does require further discussion arises because in this proceeding both SNL and Su are appellants but Muffin Break seeks security from SNL only. SNL's counsel submitted where a natural person is one of two or more plaintiffs, security will not ordinarily be ordered against a corporate plaintiff unless there are separate claims brought by the corporate and individual plaintiffs. I accept that support for this proposition can be found in the authorities.[18] However, security may be ordered where there are differences between the claims made by the corporation and the individual such that it is possible that if both fail, the Court will not order the individual to pay all the costs of the defendant.[19] The Court is required to consider the degree of overlap between the claims.[20]

51 In this proceeding while Su is the second appellant, SNL and Su's counsel conceded that as Su was only joined as a defendant to Muffin Break's counterclaim in the Magistrates' Court proceeding, his interest in the appeal was limited to current grounds 4 and 5. I am satisfied that if SNL and Su were unsuccessful on the appeal, were it to be brought upon properly formulated grounds reflecting the scope of the current notice of appeal, there is a real possibility that Su would not be ordered to pay Muffin Break's costs of grounds 1-3 of the appeal.

52 As SNL's lawyers conceded SNL has no assets, there was no genuine dispute that the Court's jurisdiction to order security is enlivened. The real issue on the security for costs application is the appropriate quantum.

53 Having regard to Mr Brodrick's estimate, in the event that SNL and Su file a redrafted notice of appeal, it would be based on the existing transcript of the Magistrates' Court hearing and ruling. I would therefore be inclined to disallow any amount for reviewing affidavits and considering the need to file or prepare further evidence. The other tasks identified by Mr Brodrick appear to me to be logically reasonably necessary in the event SNL and Su file a reformulated notice of appeal.

54 Of the remaining tasks, it appears to me that the hours allowed for multiple practitioners to prepare submissions is excessive given counsel will also be involved in that task and I would discount the estimate of professional costs for that task by 20%.

55 Taking a broad brush approach, I would further discount the cost of each of the remaining tasks by 40% to account for Su's interest in two of the five grounds of appeal.

56 Finally I would apply a further discount to the estimate for the remaining tasks to take account of the unlikelihood that all Muffin Break's professional costs will be recovered on taxation.

57 In the result I will order that SNL provide security for Muffin Break's costs of the appeal in the sum of $30,000.

58 For the reasons provided above I have decided that the appellants' grounds of appeal should be struck out, and that the appellant should be provided with an opportunity to reformulate new grounds of appeal.

59 I will also order that SNL provide security for Muffin Break's costs of the appeal in the sum of $30,000.

60 Subject to any submissions the parties may wish to make I propose to make the following orders:

(i) Within 14 days of the date of this order, the first appellant is to provide security for the respondent's costs, in the sum of $30,000, by payment into Court to the Senior Master, for steps in this proceeding up to and including the hearing of the appeal.

(ii) Failing the payment of the security required by Order 1 above, the appeal by the first appellant shall be stayed.

(iii) The appellants' grounds of appeal contained in the Notice of Appeal filed 12 June 2024 are struck out.

(iv) The first and second appellants have leave to file and serve an amended Notice of Appeal within 30 days, with the first appellant's leave subject to compliance with Order 1 above.

61 I ask the parties to confer on these draft orders and indicate to the Court whether they wish to be heard on the terms of the orders to be made to give effect to these reasons. I also request that the parties confer on the costs of Muffin Break's summons filed 16 September 2024. If the parties are unable to reach agreement about these matters within seven days of the date of these reasons, the proceeding will be relisted for oral submissions.

[1] Romas v Green [2015] VSC 95, [24]-[26].

[5] Watapaldeniya v Transport Accident Commission [2022] VSCA 50, [3].

[6] [1998] 4 VR 269, 285.

[7] [2000] VSCA 52; [2000] 1 VR 260, [265].

[8] [2013] VSCA 158; (2013) 42 VR 27, 40.

[9] General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 ('General Steel').

[10] Warren v Efficient Pure Plumbing Pty Ltd [2022] VSC 594, [32].

[11] [2022] VSC 454.

[17] Jabiru Satellite Limited (in liq)(rec and mgs apptd) & Anor v Societe Generale & Ors (Top up security) [2024] VSC 411, [20]-[21].

[18] See for example, the authorities referred to by Derham AsJ in Opes Prime Group Ltd & Anor v Niako Investments Pty Ltd & Anor [2014] VSC 414, [33(a)] ('Opines').