Crackin' Snack Pty Ltd v Gameking Australia Pty Ltd

Introduction

1. BELL CJ: This appeal involves proceedings arising from and related to a contract in a modified form of the 2004 edition of a "Contract for the sale of business" (the Contract). The "Type of business" was identified in the Contract as "Vending machine".
2. The Contract was executed on 1 December 2021, for a consideration of $350,000. The Contract was between: 1. Crackin' Snack Pty Ltd (Crackin' Snack) and Simon Hall (together the Appellants) as the purchaser and guarantor respectively; and 2. Gameking Australia Pty Ltd (Gameking) as the vendor.
3. Gameking was the first defendant in the proceedings at first instance and the First Respondent in this Court. Mr Darren Brown and Ms Linda Brown were the shareholders of Gameking (together, the Respondents) and were the second and third defendants in the proceedings below, and are the Second and Third Respondents in this Court.
4. Annexure A of the Contract listed some 112 vending machines, each identified by an "Asset ID". Annexure B to the Contract detailed the sites at which various vending machines were located.
5. The primary judge noted that it was "common ground" that Crackin' Snack took possession of the Assets on 7 December 2021: Red 119P.
6. A software system called "Seed Pro" monitored sales for the vending machines and processed credit card payments made to purchase an item from the vending machines: Red 175H. Gameking had a licence to use Seed Pro. The primary judge held that (Red 119Q-S): "The defendants allowed the plaintiffs to use the defendants' software database and licence after completion. That was no part of the contract or any purchase. The plaintiffs did not consider their use of the defendants' software suitable or sufficient. But that is not a contractual issue as such; nor does it arise from or constitute any misleading or deceptive conduct."
7. Clause 34 of the Contract provided that Crackin' Snack pay to Gameking any remaining "Cash Balance and Stock" which was leftover in the vending machines at the time of completion. The primary judge held that, at the time "when hostilities broke out", Crackin' Snack had not paid $32,383.61 in cash and stock which it was obliged to pay to Gameking: Red 164G.
8. Mr Hall provided affidavit evidence that, on 14 December 2021, he and Mr Brown agreed orally that Gameking would receive any credit card payments made in relation to purchases from the vending machines following completion to indirectly repay the debt owed relating to the "Cash Balance and Stock": Red 185Q-186F. Somewhat perversely, the Appellants (one of whom was Mr Hall) challenged a finding made to this effect - see further at [154] below.
9. By email sent on 19 December 2021 at 9.34pm, Mr Hall informed Mr Brown of a shortfall in the number of machines as compared to the 112 listed in Annexure A of the Contract. The primary judge noted that (Red 120X-121C): "It is common ground that some of the asset IDs were not transferred to the purchaser. The amended statement of claim pleaded that 10 machines were missing. The defendants conceded the pleading point about asset IDs, and said frankly that there were errors in the appendix A list; but say variously that 103 or 106 machines were transferred."
10. By email sent on 19 December 2021 at 11.57pm, Mr Brown replied, offering to replace the missing vending machines: "In regards to machines if it's an issue I will give you the effected [sic] machines or equivalent if required." The primary judge noted that this offer was not taken up, nor was a repeated offer in January 2022: Red 123C, 124J.
11. By letter sent on 8 January 2022, Mr Hall informed Mr Brown of the Appellants' right to claim damages, but Crackin' Snack continued in possession and use of the vending machines that were transferred: Red 143S-U, 144W.
12. By emails on 8 January and 9 January 2022, the Respondents again offered to provide extra vending machines and find additional sites for the vending machines.
13. Whilst the Appellants rejected various offers, Gameking had provided three vending machines by 3 February 2022 pursuant to a separate oral agreement of 6 December 2021, and offered to provide further machines: Red 154 U-V.
14. On 25 February 2022, Crackin' Snack purported to rescind the Contract, by issuing a Rescission Notice asserting that the Contract was void ab initio "as a result of Gameking's misrepresentations and misleading and deceptive conduct".
15. As of 24 November 2022, Gameking had retained $46,648.14 in credit card payments, exceeding the amount which the primary judge considered was owed by Crackin' Snack, being $22,383.61 (that is, $32,383.61 owed in cash and stock (see [7] above), minus what her Honour estimated to be Crackin' Snack's $10,000 loss caused by not having received 3 vending machines or, to put it slightly differently, only receiving 109 vending machines from Gameking: Red 164H-I, 217K.

Commencement of proceedings and primary judgment

1. Proceedings were commenced on 29 March 2022 by statement of claim, with claims being made alleging misleading or deceptive conduct of various kinds as well as unconscionable conduct, and for breach of contract and in negligence. An amended statement of claim was filed on 28 August 2023.
2. The Appellants contended that Gameking was liable for misleading or deceptive and unconscionable conduct, breach of contract, and/or negligence due to: 1. its failure to provide 112 vending machines as specified in Annexure A of the Contract; 2. its failure to provide the Appellants with a Seed Pro software licence; 3. its retention of credit card payments earned from use of the Appellants' vending machines; and 4. the poor condition of the vending machines.
3. The Appellants further claimed that Mr and Ms Brown had themselves engaged, or were persons involved, in misleading or deceptive conduct. The primary judge rejected the Appellants' claims against Mr and Mrs Brown: Red 109.
4. In the event, the primary judge held that there was a failure to deliver part of the "contractual assets", namely 6 vending machines were not provided, being those matching Asset IDs 1616458; 1642066; 1641589; 1632000; 1671867; and 1622639. The primary judge also held that 3 sites listed on Annexure B were not provided, being the sites at Yagoona Tavern; Binksie Services at Granville; and the Royal Hotel at Granville. Red 126H-J, and that the Respondents had engaged in misleading and deceptive conduct in this respect: Red 189W-X, 200O-T. There was no challenge by way of cross-appeal to this finding.
5. In an important passage which is key to understanding the primary judge's reasoning, her Honour held that (Red 126K-R): "This not being a purely contractual analysis, the overall dealings are relevant[.] There were 3 extra machines provided separately (for which the agreed $15,000 payment was not made), which brought with them 2 sites. The "missing" machine at Oakdale, was not missing and brought with it an extra site. The missing number of sites was met by the extra sites and Oakdale. The parties had made separate arrangement about the 3 additional machines, with "a couple of new sites" outside of the contract. That was agreed upon separately on about 6 December 2021 at a price of $15,000. The machines (with individual asset IDs) were provided; but no payment was made. Mr Brown deposed that Mr Hall said "just add them to the bill", which I infer was the bill that was expected to be raised in respect of cash and stock, payable separately under the contract. Putting aside the agreed payment (of $15,000), which was not made for the extra machines, the first plaintiff received a net shortfall of 3 machines missing as against the contractual expectation and representation. (Alternatively the 6 (5-20 year old) missing machines were offset by a sum of $15,000, being the price of 3 new machines (being money payable but withheld by the plaintiffs.) The defendants made repeated offers to supply the missing machines or replacements. That offer was not accepted and led to more dispute between the parties in the following months." (Citations omitted.)

Failure to provide six vending machines

1. The primary judge held that the failure to provide six of the 112 vending machines listed in Annexure A constituted a breach of contract, negligence and, to the extent that there was a contractual representation that 112 machines would be supplied, that representation amounted to misleading or deceptive conduct: Red 136M-P, 149Q-R, 189W-X.
2. In substance, there was a shortfall of only three vending machines in circumstances where three machines were supplied by the Respondents shortly after completion of the Contract but the $15,000 which Mr Hall had agreed to pay for those additional machines was never paid.

Seed Pro software licence: not liable

1. The Appellants argued at first instance that Gameking breached the Contract and engaged in misleading or deceptive conduct due to Gameking's failure to provide Crackin' Snack with a licence to the Seed Pro software system.
2. Clause 1.1 of the Contract provided that the "business" included the "software of the business". Furthermore, Special Clause 51.1(d) required that Gameking "provide… all computer software, programs and systems".
3. The primary judge held that Gameking was under no obligation (contractual or otherwise) to provide Crackin' Snack with a licence to Seed Pro because Gameking did not own the software: Red 176F. Rather, Crackin' Snack was obliged to secure the licence itself: Red 176H. Consequently, the primary judge held that there was no liability for misleading or deceptive conduct, or breach of contract, in relation to Seed Pro: Red 137L-O.

Retaining credit card payments: not liable

1. Despite taking possession of the vending machines, Crackin' Snack could not access the proceeds from credit card payments to the machines, because Mr Hall/Crackin' Snack did not create an account with Seed Pro: Red 184K.
2. The primary judge was satisfied that, on 14 December 2021, Mr Hall and Mr Brown agreed that the credit card payments for snacks from the vending machines could be directed to Gameking's Seed Pro account to offset the amounts which were still owed to Gameking: Red 185Q-186F, 187C. Her Honour accepted Mr Hall's evidence that he and Mr Brown had the following conversation concerning an offset agreement (Red 185T-Y): "Darren [Mr Brown]: ... and I've put the amounts for the other three machines on there as well. So, let's say that it's looking like 54 thousand overall, but I'll send through the workings. Me [Mr Hall]: I'll have a look when you send it through. What about the credit card payments? Because they should come to me. Darren: And there is that stock you picked up on Friday. Me: So let's say this. We'll offset anything that's owed between our two companies. It just makes it easier, rather than I pay you and you then pay me. There's no point in doing that. So anything that's owed to Crackin' Snack you just use it to offset what I'll need to pay Gameking. How's that sound? Darren: Yes, ok, that sounds fair. I should be able to send through those workings tonight and I'll offset anything, so you just have a final amount to pay. Me: Great. I'll wait for your email and have a look ...."
3. The primary judge found that the agreement was consistent with Mr Hall and Mr Brown's contemporaneous communications. For example, on 24 December 2021, Mr Hall sent Mr Brown an email confirming the offset agreement, explaining that "the card reader money will still be paid into the Gameking accounts": Red 186J-K. Despite this agreement, it was contended by the Appellants that the Respondents had engaged in misleading or deceptive conduct by keeping the proceeds from the credit card payments directed to Gameking's Seed Pro account. The primary judge rejected the Appellants' claim for misleading or deceptive conduct on the basis that the parties had agreed to this arrangement: Red 187L-M, 190.
4. The remaining issue, dealt with below, was that the Respondents retained funds derived from credit card payments beyond that which was owed to Gameking. To the extent that there was unjustified retention of funds, this was the subject of the restitutionary component of the damages ultimately awarded: see [25] above.

"Good working order" of the vending machines: not liable

1. The Appellants also pleaded that the vending machines provided by Gameking were "not each in good and proper working order": Red 190T-U. Special condition 10.1.1.16 [sic.] of the Contract provided that: "As of the date of this agreement, all machines are in good working condition, sold with fair wear and tear, and as is and where is with all defects and faults if any and have been well serviced from reputable suppliers in NSW."
2. Save for one vending machine, which was missing a coil (and was subsequently fixed by Mr Brown: Red 191X), the primary judge held that there was "no evidence that any of [the] faults had manifested relevantly as at completion": Red 191V-W. Rather, her Honour held that there was "no reliable evidence that any of the equipment or vending machines was not in good and proper working order at completion": Red 192C.
3. Consequently, the primary judge rejected the Appellants' claim that Gameking had breached the Contract by failing to provide vending machines in "good working order": Red 192-197.

Primary judgment on termination

1. The Appellants contended that the Contract could be terminated due to the Respondents' failure to provide all 112 vending machines.
2. The primary judge held that the Appellants could not terminate the Contract because Crackin' Snack: (i) had elected to affirm the Contract; and (ii) failed to provide any notice of rescission before completion.
3. In relation to affirmation, the primary judge held that the Appellants could not terminate or rescind the Contract because they had elected to affirm the Contract when in possession of knowledge concerning the breach, namely the shortfall of machines: Red 144R-S, 146S-U, 147T U, 147H. The primary judge held that the Appellants' election to affirm the contract was also evidenced by the continued operation of the vending machine business: Red 144W.
4. Furthermore, the Appellants had sent a letter on 7 January 2022, asserting that completion of the Contract "had occurred"; and another letter, sent on 8 January 2022, asserted that the "only way to compensate Crackin' Snack for the breach is through damages".
5. Clause 23.1 of the Contract provided (with emphasis added) that: "23 Rescission of contract 23.1 If this contract expressly gives a party a right to rescind, the party can exercise the right: 23.1.1 only by serving a notice before completion; and …"
6. Special condition 2.6 of the Contract provided that: "If the Vendor breaches this contract or otherwise commits an act or omission of fraud, willful [sic] misconduct or negligence, or does not Complete by the Completion Date, the Purchaser may immediately terminate this agreement by notice in writing, without any further obligation to the Vendor or incurring any costs, expenses, damages or losses and the deposit will be refunded to the Purchaser plus the Vendor will pay on demand, the Purchaser's costs incurred in relation to this contract, including legal costs."
7. Taking cl 23.1 and special condition 2.6 of the Contract together, the primary judge held that the contractual right to termination could only be exercised before completion had occurred: Red 149W. The primary judge held that the Contract was completed on 7 December 2021, before the Appellants had provided the purported notice of rescission to the Respondents, on 25 February 2022: Red 147H. Therefore, despite the Appellants' notice of rescission, there was no express contractual right to rescind/terminate the Contract at that time: Red 150J. Rather, the primary judge held that the Appellants' purported termination constituted a repudiation of the Contract: Red 150Q.

"No transaction" case

1. As noted above, the Appellants contended that they would not have entered into the transaction had Crackin' Snack known that it would only receive 106 vending machines (or 103 machines, as it also contended) (the "no transaction" case).
2. The primary judge did not accept or find that Crackin' Snack or Mr Hall would not have entered into the transaction had they or Crackin' Snack through Mr Hall known all the facts: Red 163.
3. Earlier, at Red 154, her Honour had held: "When the plaintiffs fixed upon a price in October 2021 and made an offer there were 108 machines under discussion and no representation that there were 112 machine[s] in 2021. The defendants' material (and that of the broker) listed about 108 machines (although the accountant's working sheet disclosed that there had been 112 machines more than a year earlier (as at 30 June 2020). I accept that Mr Hall believes that he now recalls mention of 110 machines. But I accept the broker's evidence in cross-examination that he referred to 108 machines consistently … The plaintiffs' case rests on the repeated assertion that had Mr Hall known of the shortfall in the number of the vending machines he would not have entered into the transaction on behalf of the first plaintiff. There is no objective evidence supporting that statement, which is made repeatedly, by reference to the assertion of the 10 missing machines and each other allegation. The objective and contemporaneous evidence is inconsistent with that assertion; which I do not accept. The contemporaneous evidence is to the contrary; and I so find." (Citations omitted.)
4. The primary judge also rejected the Appellants' "no transaction" claim because they refused to accept further replacement vending machines from the Respondents, despite continuing to operate the vending machine business for weeks after completion: Red 153T-X. The logic of this argument was that, had the number of 112 vending machines been critical to the Appellants, and they would not have entered into the Contract otherwise, rejection of "top-up" machines was quite inconsistent with the Appellants' no transaction argument.

Quantifying the value of the missing vending machines

1. The primary judge held that quantifying the value of the missing vending machines was "speculative" because: (i) the missing vending machines were not identified; (ii) the age or condition of the missing vending machines was unknown; (iii) no expert opinion was provided; and (iv) no valuation evidence was provided, including evidence about the market for vending machines: Red 153M-N, 157R. As such, the primary judge found that there was no "satisfactory" way to value the missing machines: Red 163W.
2. The primary judge, after considering various different ways of calculating the value of three vending machines (see Red 159C-163U), arrived at the figure of $10,000: Red 164H. Despite deciding upon this figure, her Honour acknowledged that $10,000 was a "rather excessive quantification", and that "the better view is that it is closer to half of that": Red 164E-H.
3. Nonetheless, the primary judge held that the Appellants suffered loss in the sum of $10,000 due to the Respondents failing to provide the three vending machines: Red 164F.

Failure to pay for cash and stock

1. Clause 34 of the Contract provided that the Appellants must pay to the Respondents any remaining "Cash Balance and Stock" which was leftover in the vending machines at the time of completion.
2. As already noted, the primary judge held that, "when hostilities broke out", the Appellants had failed to pay the Respondents $32,383.61 for cash and stock in the vending machines at the time of completion: Red 164G.
3. Therefore, the primary judge held that, in substance, the Appellants had not suffered any "net loss": Red 164C-D. Rather, the Appellants owed the Respondents "at least $22,383.61", which accounted for the $32,383.61 owed by them to the Respondents for cash and stock, minus their "loss" of $10,000 due to three missing vending machines: Red 164H-I.

Credit card receipts

1. As noted above at [8] and [34], the Appellants and Respondents agreed that the Respondents could take the Appellants' revenue received from credit card payments to "offset" the debt owed by the Appellants to the Respondents: Red 186E-F.
2. The Appellants, after accounting for the three missing vending machines, owed $22,383.61: Red 164H-I. However, the Respondents had drawn $46,648.14 from vending machine credit card payments as of 24 November 2022: Red 217K. The reason for the overdrawn amount (i.e., an amount in excess of that which the Respondents were entitled by agreement to set off against amounts owed to them by the Appellants) was that, after the Appellants had issued the notice of rescission on 25 February 2022, they did not seek to recover further funds generated by sales from the vending machines, leaving the amounts in Gameking's Seed Pro account. Her Honour said (Red 216 O-R): "…He [Mr Hall] eschewed entitlement to those payments when he abandoned the contract. There lies the complexity at the core of the relationship between these parties. The first defendant continued to receive the credit card payments generated by the machines. The first defendant could do nothing else except block receipt of the monies. In principle that would have laid waste to that money, until there was a signed consent to transfer. The evidence does not disclose that the plaintiffs signed a consent to transfer as receiver. But so long as the first plaintiff owned the machines, as it did, the money generated through their sales belonged to the first plaintiff."
3. As earlier noted, it was pleaded that Gameking's receipt of credit card payments beyond what was owed to it should be "disgorged" by way of unjust enrichment: Red 217N-O. After quoting Carpenter v Morris [2023] NSWCA 154 at [62]-[63], [68]-[70], her Honour concluded that "[t]his is such a case" justifying restitution of unjust enrichment: Red 217R-218O.
4. Her Honour determined that the Respondents should disgorge $26,300.39 in favour of the Appellants, reasoning (Red 218O-V): "It is not easy to identify when the monies held pursuant to the 14 December 2021 agreement exceeded the monies owed. I find that equilibrium was reached around about 3 February 2022 when credit card receipts were at $19,613.55 as at the week ending 1 February 2022 and credit was allowed for $20,347.75, including commission of $734.36. I reach that by applying the earlier analysis that the first plaintiff owed $32,383.61 for cash (float) and stock (which may be an underestimation), received 3 extra machines (in which respect I disregard the $15,000), and allowing the rather excessive quantification of $10,000 to the value of the 3 missing machines, the first plaintiff owed the first defendant a net balance of at least $22,383.61. (The better view may be that equilibrium was reached on 25 February 2022 having regard to the plaintiffs' quantification of the sum then held and the plaintiffs' use of the defendants' software which relieved the first plaintiff of the liability to pay $1,652.50 per month for its own software.) I have taken the simple view that monies received after the 3 February 2022 invoice should be disgorged. That is a sum of $46,648.14 less $20,347.75, i.e., $26,300.39." (Citations omitted.)

Costs judgment

1. On 20 October 2023, the primary judge ordered that there be "no order in respect of costs with the intention that costs lie as they fall", but gave each party 14 days to apply for variation of the costs order in accordance with r 36.16(3A) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR).
2. On 3 November 2023, the Respondents filed a motion, consistent with her Honour's orders, seeking a variation as follows: "(a) There is no order as to costs as between the first plaintiff and the first defendant up to and including 27 November 2022, with the intention that the costs lie as they fall. (b) The second plaintiff is to pay the first defendant's costs of the proceedings up to and including 27 November 2022 on an indemnity basis, or alternatively, on the ordinary basis. (c) The plaintiffs are jointly and severally liable to pay the defendants' costs of and incidental to this proceeding on an indemnity basis from 28 November 2022."
3. The Respondents' application was brought on five bases, which can be summarised as: 1. Mr Hall was entirely unsuccessful in his personal claim; 2. The Appellants were entirely unsuccessful in their claim against Mr and Ms Brown; 3. The Appellants unreasonably failed to accept a Calderbank v Calderbank [1975] 3 All ER 333 (Calderbank) offer, and the Respondents have since done better at trial than the terms of their offer; 4. The Appellants unreasonably failed to accept a without prejudice offer to settle proceedings, and the Respondents have since done better at trial than the terms of their offer; and 5. The Respondents succeeded at trial on majority of issues.
4. On 26 February 2024, before the costs variation motion had been heard, the Appellants made an application for the primary judge to recuse herself from determining the issues of costs, on grounds of bias. The primary judge directed that the costs application be heard by another judge, saying: "Mr Hall did not get precisely what he wanted in the first instance. Although I do not think that that can constitute at law either bias or apprehended bias, I can understand why… a self represented party could feel concerned not having got what he wanted in the first place to go back before the same judge to agitate another matter. Now, I don't think that's a matter of either bias or apprehended bias. But I can understand the point of concern. And to be quite frank, I see no reason why it can't be determined by another judge. Now, I don't see that it can cause anyone any prejudice. I think there's a case for saying that where a litigant, particularly a litigant in person, has already had a disappointing outing, unless someone is part heard it could and should go before another judge. And I am content for that to occur."

Grounds of Appeal

1. By Notice of Appeal filed on 18 January 2024, the Appellants raised 14 grounds of appeal from the orders made by the primary judge. The Notice of Appeal was extremely discursive in that it combined a number of grounds with argument which were in turn supplemented in the Appellants' lengthy written submissions. Subject to that qualification, the grounds of appeal can be broadly summarised as follows (Red 225-236): 1. The primary judge "pre-determined the case, acted with bias, and treated the [parties] differentially"; 2. The primary judge erred in applying the principles relating to loss caused by misleading or deceptive conduct; 3. The transaction was erroneously characterised as an "asset sale only"; 4. The primary judge erred in finding that the Appellants would not have entered the transaction but for the Respondents' misleading conduct; 5. The primary judge erred in not finding that the Contract was for 112 unique machines, all on sites; 6. The primary judge erred in finding that the "special condition" in the Contract overrode the "standard condition" in the Contract in relation to the "good working order" of the vending machines; 7. The primary judge erred in finding that the Appellants bore responsibility for effecting the systems and software transfer, including Seed Pro; 8. The primary judge erred in finding that the parties agreed to an offset arrangement involving the Respondents receiving the Appellants' credit card takings from the vending machines; 9. The primary judge erred in finding that the Respondents disclosed that iVendGroup Pty Ltd (IVG) had the exclusive right to occupy 13 sites and in not finding that cl 10.1.14 of the Contract was misleading; 10. The primary judge erred in finding that the Contract was completed as and from 7 December 2021; 11. The primary judge erred in permitting the Respondents to argue that the Appellants had affirmed the Contract, as it was not pleaded; 12. The primary judge erred in finding that the Contract had completed; 13. The primary judge erred in determining the loss suffered; and 14. This Court should find that the Second and Third Respondents engaged in "contravening conduct" and are liable to compensate the Appellants.

Ground 1: Apprehended or actual bias

1. The Appellants contended that the primary judge predetermined the case, acted with bias and treated the Appellants differentially as compared to the Respondents. It may be noted, as the Respondents submitted, that the Appellants made no allegation or complaint of bias until after judgment was delivered by the primary judge, albeit prior to argument on costs. In this context, as was observed by the majority in Michael Wilson & Partners Ltd v Nicholls (2011) 244 CLR 427; [2011] HCA 48 at [76]: "If a party to civil proceedings, or the legal representative of that party, knows of the circumstances that give rise to the disqualification but acquiesces in the proceedings by not taking objection, it will likely be held that the party has waived the objection."
2. The arguments advanced in support of this ground of appeal bear some similarity to some of the arguments advanced in favour of a finding of actual or apprehended bias in Feldman v Nationwide News Pty Ltd (2020) 103 NSWLR 307; [2020] NSWCA 260. There I said at [43] (Payne JA concurring): "Further, the fact that the primary judge ultimately rejected the appellant's case for a variety of reasons does not and cannot demonstrate actual or apprehended bias. In Mohareb v Kelso (No 2) [2018] NSWCA 246 at [15], this Court said that: 'Disagreement with the reasoning, or the outcome, provides no basis for an assertion of actual bias'."
3. In Mohareb v Booth [2020] NSWCA 49 at [37], Basten JA, White JA and Simpson AJA had said: "An allegation of actual bias must be clearly proved. Such a finding is not made lightly. Adverse findings, even adverse findings that are contrary to the evidence or unreasonable or hopelessly flawed, will not be sufficient. The circumstances in which actual bias is established will be rare and exceptional."
4. The Appellants contended that the decision by the primary judge not to determine the issues as to costs was itself suggestive that her Honour acknowledged that she was biased, and or suggested that "her Honour simply couldn't be bothered hearing the [Appellants] and found a way to recuse herself". The former submission did not follow at all, for reasons given below; the latter submission bordered on the scandalous. By the time the costs argument came to be heard, the Appellants had already flagged their contention that the primary judge was biased against them. Another judge was available to hear the argument, and her Honour's decision not to hear the costs application was plainly not because of any acceptance on her part that she had been biased: see [69] above. Rather, it was a pragmatic way of dealing with a matter that had already been extremely costly to the parties against the contingent possibility that even further costs would be incurred given the bias contentions which, by that stage, had been raised by the now Appellants in respect of the primary judge.

Grounds 2 and 4: Loss caused by misleading or deceptive conduct

1. Grounds 2 and 4 of the appeal overlap in the way they have been advanced by the Appellants and it is thus convenient to deal with them together.
2. In their written submissions, the Appellants contended that the primary judge erred in assessing their loss for misleading or deceptive conduct in two respects. First, the Appellants argued that, when assessing loss under ss 236 and 237 of the Australian Consumer Law (ACL), one cannot consider the benefit which the victim has received to offset the loss suffered as a result of misleading or deceptive conduct. This was evidently a reference to the fact that Crackin' Snack was provided with 3 additional vending machines for which it agreed to pay $15,000 but in fact never paid for them, and the primary judge treated this benefit as diminishing what would otherwise have been part of the Appellants' loss.
3. The Respondents countered that the primary judge did not err in applying principles concerning loss under s 237 of the ACL, and that the primary judge was correct to consider the overall dealings between the parties in determining the Appellants' loss. This submission accords with the observation of Gleeson CJ in Henville v Walker (2001) 206 CLR 459; [2001] HCA 52 at [18] (Henville) that the "task is to select a measure of damages which conforms to the remedial purpose of the statute and to the justice and equity of the case".
4. In oral address, Mr Hall put ground 2 in the following manner: "Going to ground 2, and this is misleading and deceptive conduct principles and the loss test. Now, the appellants say that ss 18, 236, 237 and 243 of the ACL, they have a particular logic, and firstly there must be a determination of the conduct which is breaching the s 18 prohibition, and then determination of the loss caused by that conduct enlivening damages as of right under s 236, or further remedies under ss 237 or 243 that do justice. Now, in this particular case, her Honour actually did the opposite, and she appears to look at loss first before considering the conduct and the representations in this particular matter."
5. This submission was not sustained on an examination of her Honour's reasons. The Appellants were critical of the fact that her Honour dealt at a relatively early stage of her judgment with the question of how many vending machines were in fact in existence or supplied to Crackin' Snack on completion. This was a far from straightforward topic, and it was entirely orthodox for her Honour to deal with a factual question early in her reasons before proceeding to detailed legal analysis. Ascertaining the shortfall was relevant not only to questions of contractual breach but also whether any breach was so fundamental as to warrant termination or a statutory remedy of rescission. It was also relevant to her Honour's conclusion as to whether or not what she held to be a representation in the Contract was in fact misleading or deceptive.

Ground 3: Asset sale and loss

1. The Appellants challenged the primary judge's characterisation of the Contract as "more of an asset sale than a business sale" (Red 111N-O) although precisely what flowed from this challenge was not entirely clear. The Appellants contended that the sale was a "business sale", as evidenced by the title of the Contract being "Business Sale Agreement", and referred to various terms of the Contract. Such a construction was, according to the Appellants, consistent with the intention of the Contract, which was to enable the Appellants to take over the business of the Respondents. This submission is inconsistent, however, with cl 33.1 of the Contract, which provided that "[s]ubject to Completion, the Vendor will sell and transfer the Assets to the Purchaser at Completion". Assets were defined under cl 32.1 as "Vending Machines", "Cash Balance" and "Stock". The only reference to good will was contained in additional clause 10.14, under a sub-heading "Vendor's promises" which was in the following terms: "There are no third party assets in any of the business assets or good will".
2. The characterisation of the Contract as a business sale was, according to the Appellants, relevant to determining the loss caused by not receiving the missing vending machines. The Appellants claimed that her Honour's characterisation of the Contract as an asset sale enabled her to treat the vending machines as a detachable component of the sale, which could be remedied by simply providing a replacement machine. This approach, according to the Appellants, ignored the goodwill attached to the business, comprised by the vending machines. One reason this submission goes nowhere is that there was no evidence led as to the goodwill of the business and there was no separate value attributed to goodwill. So much was confirmed in the following exchange between Mr Hall and the primary judge: "HER HONOUR: That's fine, Mr Hall, but can you tell me what the value is that the goodwill has under this contract so that I can identify this because if you're taking that view, that's fine, but we - normally in a contract, you'd have goodwill quantified at X, so what is goodwill quantified at under the contract? HALL: I appreciate it, your Honour-- HER HONOUR: Can you just give me a figure-- HALL: --and you are correct, there's no quantification."
3. The Respondents contended that the Appellants' focus upon goodwill is misconceived, and that no goodwill was sold under the Contract. They pointed out that the usual indicia of goodwill were not sold, including the logo, livery, customer lists or methodology and that the single reference to goodwill in cl 10.1.14 of the Contract appeared to be a redundant provision that had no practical effect in light of the definition of Assets. There was no other contractual reference to goodwill.

Ground 5: The 112 machines-on-sites representations

1. The Appellants contended that the primary judge erroneously determined that there was "no contractual representation that there were 112 machines; nor that there is a one-to-one correlation of asset IDs and machines": Red 131D. This argument goes nowhere as her Honour in fact found a representation was in substance made to the same effect. As her Honour said: "There are 112 asset IDs listed in Appendix A. Although the contract made no express representation about "112 machines" per se, it plainly represented that the machines listed by asset IDs (which are 112 in number) would be located at the sites listed in annexure B."
2. Secondly, the Appellants argued that the Respondents' misrepresentation as to the 112 machines caused the Appellants to lose their opportunity to rescind the agreement under cl 2.6 of the Contract. This argument, so far as I understood it, essentially involved a repetition of the "no transaction" argument which was properly rejected for reasons already set out. Furthermore, this argument is inconsistent with what the primary judge correctly held to be the Appellants' affirmation of the Contract.

Ground 6: Machines in good working order

1. The Appellants contended that the primary judge erred in finding that the vending machines transferred by the Respondents were in "good" or "proper" working order, as contemplated by cll 10.1.4 and 10.1.1.16 of the standard and additional terms of the Contract respectively.
2. Clause 10.1.4 of the standard Contract provided that "the equipment is in proper working order". Clause 10.1.16 of the additional terms to the Contract provided: "As of the date of this agreement, all machines are in good working condition, sold with fair wear and tear, and as is and where is with all defects and faults if any and have been well serviced from reputable suppliers in NSW." (Emphasis added.)
3. The Appellants characterised cl 10.1.4 as a "future representation" on the basis that cl 10.2 purportedly constituted a promise at both the Contract and completion date. Clause 10.2 of the Contract provided: "These promises are made as at the contract date and are also made as at completion."
4. I reject the characterisation of any representations arising from the identified contractual provisions as being representations as to future matters. Rather, both clauses were, in terms, representations as to state of the machines as at the Contract date and as at the date of completion.
5. Clause 10.1.4 provided that the equipment "is" in proper working order, and provided no warranty as to its future condition. Furthermore, cl 10.1.1.16 is prefaced with the words "[a]s of the date of this agreement".
6. It should also be noted that the Appellants at no time, pleaded or argued that cll 10.1.4 or 10.1.1.16 were representations as to future matters - and the case was conducted on that basis.
7. This ground also fails at a basic factual level. The primary judge made the following findings, the lack of challenge to which is fatal to this ground of appeal (Red 191T-Y): "It is common ground that these are mechanical machines of varying age, being between 5 and 20yrs old; and located at various sites that are not under the vendor's control. The contractual special condition expressly referred to the machines being "as is and where is with all defects and faults if any." The plaintiffs' allegation was particularised by reference to 6 machines and listed a series of machine faults in the amended statement of claim. There is no evidence that any of these faults had manifested relevantly at completion on 7 December 2021, save that the Bass Hill police station machine was then known to be missing a coil. That was a minor fault (or defect) consistent with fair wear and tear, with the machine itself in good working condition. (Replacing the coil with a new one was a minor matter, and Mr Brown supplied a replacement coil and a whole tray.)" (Emphasis added.)

Ground 7: Software systems

1. This ground of appeal relates to paragraph 34 of the Statement of Claim which was as follows: "The [Respondents]… by written terms of the Business Sale Agreement, represented that the first defendant would transfer to the first plaintiff any and all software and systems used by the business, and/or the first defendant would sign all forms and make all necessary applications to enable the first plaintiff to have the benefit of any and all such software and systems…"
2. Clause 20.3.1 of the Contract provided: "On completion the vendor must…sign all necessary forms and make all necessary applications to… make all other services to the business and the premises available to the purchaser (subject to the consent of all the suppliers of the services)…"
3. Clause 51.1(d) of the Contract provided: "Upon Completion the Vendor will… in addition to the requirements of the Vendor in clause 20, provide to the Purchaser all computer software, programs and systems (including the login details) for such, all policies, procedures, manuals, handbooks and templates used in the operation and running of the Business…"
4. By paragraph 35 of the Statement of Claim, the Appellants complained that Gameking had not transferred any of the "Seed Assets" used by the business. It was then simply pleaded that, as a result of this, the Respondents had engaged in misleading or deceptive conduct, or conduct that was likely to mislead or deceive.
5. In respect of the Seed Pro software systems, the Appellants challenged the primary judge's finding that (Red 176I-J): "At completion, and until the Plaintiffs advised the new account details and consent to receive a transfer, it was impossible to transfer anything."
6. Clause 20.1.1 of the Contract provided that, on completion, the Respondents must give the Appellants "possession of the business". Clauses 1.1 and 1.2 together defined the "business" as including the "licences" and "software of the business". As the primary judge noted, Gameking merely had a licence to use Seed Pro and did not own the software. Furthermore, the primary judge held that there was no obligation for the Respondents to provide access to the Seed Pro software which it did not own. Rather, the Appellants were required to acquire their own licence to use Seed Pro.
7. It is convenient at this point to set out the primary judge's findings in this regard (Red 176H-178Q): "Cantaloupe's role was known to all parties at all relevant times; as was the fact that the first plaintiff needed to establish its own software account and licence. The plaintiffs did not do this until about mid-January 2022. At completion, and until the plaintiffs advised the new account details and consent to receive a transfer, it was impossible to transfer anything.… The third defendant gave the software providers (Cantaloupe) the purchaser's details on 2 December 2021. There were there steps involved in a transfer: • First the purchaser had to establish an account with Cantaloupe, which started with the purchaser completing a request form; • Then, as Cantaloupe told the defendants on 2 December 2021, both sender and receiver needed to sign a consent to transfer: ... after this request form is returned and the agreement is finalised with the new operator, we would need to have you and the new operators sign the device transfer agreement. Mr Hall deposed that he was present in the van with Mr Brown on 6 December 2021 when the defendants told Cantaloupe that the sale was to progress and arrangements should be made for the transfer of the machines to the new purchaser. In cross-examination Mr Hall largely agreed with that … Mr Hall said frankly that the account had not been set up in December 2021. Part of the delay in the first plaintiff's establishment of a new account arose from Mr Hall's oversight, which he confessed frankly in exhibit B: 151 Around 5:30pm on 7 December 2021 Nick from Cantaloupe sent me an email, attaching a copy of the Cantaloupe Agreement and Cashless Processing Form that I needed to complete. Exhibited at SJH-1, p 195 is a copy of the email. At the time I did not see the email as it went into my SPAM folder. At completion (and for some time afterwards) the defendants had done and did all that was within their power to allow for the transfer of software and data. The first defendant had no contractual obligation to allow the purchaser any access to the defendants' software account or licence, which they continued to use in respect of machines that were not part of this sale.…. But it was mutually known fact that the vendor did not own the relevant Cantaloupe software; and the plaintiffs had to establish their own account for their own business, to which the defendants were to transfer the relevant data. The defendants had no duty to surrender their own account (which was used for their continuing business that was not sold) or hand it to the plaintiffs. … Mr Brown set up a dummy log-in on the vendor's account for the first plaintiff on about 9 December 2021. Thereafter the defendants allowed the plaintiffs to use the defendants' licence and account. Mr Hall operated under the defendants' licence and used the defendants' account/licence."

Ground 8: Credit card takings

1. The Appellants contended that the Respondents should not have been permitted by the primary judge to rely upon the purported 14 December 2021 offset agreement to explain why the Respondents received the credit card payments directed to the Appellants' vending machines, as the offset arrangement was not pleaded by the Respondents, and therefore "ambushed" the Appellant.
2. The Respondents argued that reliance upon the offset agreement could not have ambushed the Appellants because Mr Hall's own affidavit, dated 23 October 2022, made express reference to the offset agreement. Mr Hall's affidavit relevantly recounted a conversation between himself and Mr Brown, stating: "Me: So let's say this. We'll offset anything that's owed between our two companies. It just makes it easier, rather than I pay you and you then pay me. There's no point in doing that. So anything that's owed to Crackin' Snack you just use it to offset what I'll need to pay Gameking. How's that sound? Darren: Yes, ok, that sounds fair. I should be able to send through those workings tonight and I'll offset anything, so you just have a final amount to pay."
3. While pleadings play an important role in identifying the issues in any given case, those issues frequently expand by reference to the way in which the parties have themselves conducted the case: see for example, Dare v Pulham (1982) 148 CLR 658 at 664; [1982] HCA 70. This was plainly such a case, and the Appellants cannot be heard to complain about a matter which they introduced into the case. The primary judge acted on Mr Hall's own evidence.
4. Furthermore, the Appellants' case relied upon the offset agreement as evidence to calculate the loss suffered due to the Respondents' misleading conduct. Therefore, the Respondents' reference to the offset agreement could not have taken the Appellants by surprise or caused procedural unfairness, because the Appellants relied upon the very same agreement in evidence.
5. The Appellants contended that the objective evidence did not support the existence of an offset agreement between the parties. This argument was undercut by the Appellants' own admission through their affidavit evidence (see [151] above) that an offset agreement had been struck. Additionally, by letter dated 7 January 2022, Mr Hall informed Mr Brown of the offset agreement, stating that "I further reiterate that we agreed to offset any amounts owed between the two companies". Earlier in the same letter, Mr Hall had said: "In addition, when we met… on 14 December 2021, we agreed to offset any amounts owed between Crackin' Snack and Gameking."

Ground 9: Involvement of IVG

1. The essence of ground 9 was that the primary judge erred in finding that the Respondents disclosed that IVG had the exclusive right to occupy 13 sites and in not finding that cl 10.1.14 of the Contract was misleading. That clause warranted that "[t]here are no third party interests in any of the business assets or good will".
2. The Appellants' submission was that: "cl.10.1.14 was specifically inserted as Mr Hall wanted assurance that no other party had a role in the business, consistent with Mr Hall not wanting a franchise-like business. … The guarantee of a non-franchise/no 3rd party interests business led the Plaintiffs into the Agreement. It was not clear on the contract that IVG had exclusive rights to 11 sites and that taking over those sites required an ICA where IVG maintains site relationships and can direct the Plaintiffs to upgrade machines. Mr Ramsay agreed he said the IVG fees were a hangover from the vendor finance arrangement. Mr Brown himself said the Agreement references to IVG were redundant. The Plaintiffs would never have entered the Agreement had the true facts been disclosed, or the cl.10.1.14 guarantee not been given. And whilst not the sole cause of the 'loss', being entry into the Agreement, that conduct that made a non-trivial or material contribution."
3. The Assets the subject of the Contract were defined as the Vending Machines, Cash Balance and Stock. IVG had no interest in the business assets. Nor is it clear how it was said to have any interest in the goodwill of the business. It does not appear to have been in issue that Gameking did not own any of the sites on which any of the Vending Machines were located. As best it could be understood, the Appellants' argument in this respect was a variation of the no transaction argument but one difficulty with it was that, to the extent that any representation could be spelt out of cl 10.1.14 of the Contract, the fact that IVG may have had the right to occupy 13 sites did not render the representation misleading or deceptive.
4. The primary judge made a number of findings to the effect that IVG's role was disclosed both prior to entry into the Contract and in the Contract itself. Thus, the primary judge explained that IVG: "was referenced in special conditions 33 and 52, and the price of the arrangements was disclosed in the attached profit and loss statement." (Red 204G-J)

Grounds 10 and 12: Completion and unconscionability

1. Grounds 10 and 12 overlap and can be considered together. The Appellants' written submissions did not fully reflect all of the points made in the discursive sub-grounds of appeal (ground 10, for example, contains six separate sub-grounds). In these circumstances, these reasons focus on the points advanced in the Appellants' written submissions. Broadly speaking, however, the Appellants contended that her Honour erred in finding: (i) that the Contract had completed (grounds 10 and 12); and (ii) that the Respondents had not acted unconscionably by withholding the Appellants' credit card payments (ground 10).
2. The primary judge determined that completion of the Contract occurred on 7 December 2021 (Red 130G) by analysing whether the key contractual obligations required at completion had been performed by that date.
3. Clause 33.1 of the Contract provided that: "Subject to Completion, the Vendor will sell and transfer the Assets to the Purchaser at Completion."
4. Clause 20.5.1 of the Contract provided that: "On completion the purchaser must… pay to the vendor, by cash, settlement cheque, or by making an electronic funds transfer, the price (less any deposit paid) and any other amount payable by the purchaser under this contract…"
5. The primary judge held that (Red 129E-N): "The vendor sold and transferred the "Assets" as defined in the special conditions i.e., the Vending Machines; the Cash Balance; and the Stock) to the first plaintiff/Purchaser with some deficiencies (6 missing machines)' at the same time as the extra 3 machines were conveyed. The purchaser paid the purchase price for the vending machines in full on 7 December 2021…. The first plaintiff purchaser took possession of the machines, stock and float, and started operating the business on 7 December 2021."
6. Such events led to her Honour's conclusion that "I find that there was completion at the payment of the purchase price on 7 December 2021": Red 130G. This reasoning turned upon an analysis of the terms of the Contract, the purchaser's payment to the vendor and the act of taking possession of the machines.
7. The thrust of the Appellants' attack on this finding was that the Respondents had, in various exchanges of correspondence in late 2021, early 2022, denied that there had been contractual completion whilst, ironically in the context of these grounds of appeal, at the same time, it was the Appellants who were maintaining that there had been contractual completion, consistent with the primary judge's now challenged finding.

Ground 11: Unpleaded arguments concerning affirmation of the contract

1. The Appellants contended that the primary judge erred in permitting the Respondents to argue that the Contract was completed and affirmed by the Appellants as the Respondents had not pleaded affirmation. The Appellants also made reference to UCPR r 14.14(2)(a) which requires defendants to plead defences that could take the opposing party by surprise.
2. The Respondents drew attention to the fact that, at the time of the parties' dispute, the Appellants had asserted that completion of the Contract had occurred in letters dated 7 and 8 January 2022 such that they could hardly have been taken by surprise that this was an issue in circumstances where they sought to argue on appeal that the Contract had not been completed on 7 December 2021.
3. Affirmation of the contract was implicit in the Appellants' assertion as to their entitlement to contractual damages and or a reduction in the purchase price. The Respondents submitted, and I accept, that whether or not the Appellants had affirmed the Contract was squarely in play at the trial and in any event, is really a legal conclusion which resulted from a consideration of the parties' conduct including evidence adduced by the Appellants themselves.
4. The Appellants alternatively argued that they did not unequivocally elect to affirm the contract. To this, the Respondents relied upon the letter authored by Mr Hall on 8 January 2022, which threatened to sue for damages, with no reservation of rights to terminate the Contract. Furthermore, the very existence of the offset agreement, referred to in the same letter of 8 January 2022, supports the Appellants' affirmation of the Contract.
5. Ground 11 should be rejected.

Ground 13: Calculating loss

1. The Appellants raised eight challenges to the primary judge's calculation of the Appellants' loss. First, the Appellants contended that they did not owe a debt to Gameking in respect of "Stock and Trade". The Respondents argued that such submissions could not be sustained in light of the Appellants' acceptance of its debt of $54,550.71 according to its own calculations as at 19 December 2021. That submission is accepted.
2. Secondly, the Appellants challenged the way the primary judge calculated the cash and stock. Clause 34.2 of the Contract provided that cash and stock must be calculated according to the balance existing during the four-hour period from 8.01pm on 6 December 2021 to 12.01am on 7 December 2021. The Appellants contended that, contrary to cl 34.2, Mr Brown impermissibly calculated stock and float according to a seven-day period, from 7 to 14 December 2021. The Respondents submitted that the timeframe for calculating cash and stock was not challenged contemporaneously or at the trial, and therefore could not be raised as part of this appeal. That submission is accepted.
3. Thirdly, the Appellants claimed that any debt in respect of stock and trade had not materialised due to failing to comply with formality requirements concerning the issuing of invoices under cl 34.3 of the Contract. Clause 34.3 of the Contract provided: "The Purchaser acknowledges that it will be invoiced directly by the Vendor on the day of Completion (Cash and Stock Invoice Date) for the Cash Balance and Stock Amount residing in each Vending Machine acquired by it under this Agreement." The Appellants contended that no invoice was issued, and therefore no debt was due.
4. The Respondents argued that they did provide an invoice, therefore satisfying cl 34.3, and in turn enlivening the Appellants' obligation to repay the debt owed in respect of stock and trade. Specifically, the Respondents claimed that they issued a spreadsheet to the Appellants which detailed the sums owing by the Appellants over stock and trade. As the primary judge held, the Appellants did not dispute the debt indicated in the spreadsheet, with Mr Hall and Mr Brown having the following text message exchange on 16 December 2021: "Mr Brown: Hi Simon fyi That money for stock and cash etc has not hit out account yet Mr Hall: Hey Darren. Sorry missed your call - on the road doing the Sim changes! I was going to transfer tonight as had already hit transfer limit. Will likely have to do it in 2 lots as limit is back down to $40k." This exchange illustrates the absence of merit of this ground of appeal, and the Appellants' attempt to elevate form over substance.

Ground 14: Providing relief to all Appellants, against all Respondents

1. The Appellants argued that the primary judge's orders should have been made against all of the Respondents in favour of Mr Hall and Crackin' Snack. The Respondents contended that there is no utility in this ground of appeal, as it is not in dispute that the judgment sum has already been paid to Crackin' Snack in full. That submission should plainly be accepted. Ground 14 should accordingly be rejected.
2. As none of the grounds of appeal against the judgment has been made out, the appeal against the judgment ought be dismissed with costs.

Challenges to the costs judgment

1. By order 4 of her orders of 20 October 2023, the primary judge made an order that there be no order as to costs "with the intention that costs lie as they fall". She also, however, made an order that each party had 14 days to apply for variation of her (no) costs order in accordance with UCPR 36.16(3A). In making this order, the primary judge recognised that the parties had not separately been heard on costs and thus indicated that her order that there be no order as to costs was provisional and subject to any arguments that the parties may wish to make.
2. By Notice of Motion filed on 3 November 2023, the Respondents sought the following orders: "1. Order 4 of the orders made by Her Honour Judge Gibb on 20 October 2023 are varied as follows: (a) There is no order as to costs as between the first plaintiff and the first defendant up to and including 27 November 2022, with the intention that the costs lie as they fall. (b) The second plaintiff is to pay the first defendant's costs of the proceedings up to and including 27 November 2022 on an indemnity basis, or alternatively, on the ordinary basis. (c) The plaintiffs are jointly and severally liable to pay the defendants' costs of and incidental to this proceeding on an indemnity basis from 28 November 2022. 2. The plaintiffs pay the costs of this Notice of Motion on an indemnity basis. 3. Any such other orders as the Court deems fit."
3. The costs judgment was delivered by Andronos DCJ on 8 May 2024: Red 225-236. The circumstances by which this matter came before his Honour have been explained earlier in these reasons at [69] above.
4. On 13 May 2024, following a case management hearing, Registrar Jones, on the Appellants' application, directed the filing of a Summons seeking leave to appeal from the costs judgment.
5. On 16 May 2024, six days before the hearing of the substantive appeal, the Appellants filed a summons seeking leave to appeal against the whole of the decision of Andronos DCJ in relation to costs. The Appellants filed a White Folder on 17 May 2024 which contained a draft notice of appeal and an outline of the Appellants' submissions concerning the application for leave to appeal.
6. Although, due to the short period of time prior to the hearing of the substantive appeal, the Respondents had filed no written response to the Appellants' outline of submissions for leave to appeal at the hearing of the substantive appeal, Mr Young for the Respondents advanced oral submissions as to costs.

Ground 1: Determining bias before costs

1. The Appellants argued that Andronos DCJ erred in determining costs before the Appellants' complaint concerning the primary judge's purported bias was resolved, submitting that a "single judge who is to hear the matter should also first decide any raised issue of bias", referring to the dicta of Edelman J in QYFM v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2023] HCA 15; (2023) 97 ALJR 419 at [130] (QYFM).
2. The Appellants argued that Andronos DCJ erred in holding that: "There is no step in the determination of the costs motion which requires the prior determination of the allegation of bias against Gibb DCJ, and no impediment on that basis to my hearing and determining the costs motion."
3. The Appellants further contended that costs could not be determined before the bias issues were resolved, as a "bias issue…concerns the jurisdiction of the court": QYFM at [121]. Therefore, the Appellants claimed that Andronos DCJ's jurisdiction to determine costs remained uncertain. Consequently, the Appellants argued that the "uncertain" nature of Andronos DCJ's jurisdiction rendered the costs judgment irregular, and therefore capable of being set aside pursuant to r 36.15 of the UCPR; citing Zakaria v Dr Noyce [2012] NSWSC 981 at [24]-[25]. Rule 36.15(1) of the UCPR relevantly provides: "A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith."
4. There was no relevant irregularity. Invocation of r 36.15 of the UCPR adds nothing given that a challenge to the costs judgment has been brought by way of application for leave to appeal.
5. Andronos DCJ accepted the general principle that a court, when faced with an allegation of bias, should address that question first. However, as his Honour explained, the principle did not apply in the circumstances of the present case: "[18] I do not accept the plaintiffs' submissions that this principle operates in the present circumstances. The authorities to which the plaintiffs referred dealt with the determination of the question of bias raised prior to a determination by the tribunal against whom the allegation is raised. As was the case in QYFM, an allegation of bias brought against a trial judge, or an appellate judge, prior to determination by that judge of the issues before the Court must be dealt with at an early stage. A hearing before an unbiased court is an essential component of the exercise of judicial power. [19] That is not the case here. The allegation of bias was first raised by the plaintiffs in their Notice of Appeal in January 2024, and was first raised before Gibb DCJ on 13 February 2024. By that time, Gibb DCJ had already delivered judgment and the question of whether the plaintiffs can succeed in establishing actual bias by the trial judge will be determined by the Court of Appeal. Gibb DCJ dealt with the allegation of bias first raised before her on 13 February 2024, not by determining it herself, but by adopting the expedient course of referring the matter back to the list judge so another judge could determine the costs application. Thus, any question that she may have been biased did not arise prior to any determination by her of any matter in issue in these proceedings, including the costs motion."

Ground 2: No misapprehension identified

1. The Appellants contended that the power to vary a costs order under r 36.16(3A) of the UCPR, being the power identified by the primary judge in her orders of 20 November 2023 (see [66] above) was not enlivened, as the Respondents did not identify an irregularity or misapprehension affecting the primary judge's initial costs orders.
2. Rule 36.16(3A) of the UCPR provides, under the heading "Further power to set aside or vary judgment or order": "If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered."
3. The Appellants contended that a party relying upon r 36.16(3A) to vary a costs order must prove that the impugned order was attended by irregularity or misapprehension of law. In support of this contention, the Appellants relied upon State of New South Wales v Hollingsworth (No 2) [2023] NSWCA 283 (Hollingsworth (No 2)) at [17], [19]-[20]; Ranclose Investments Pty Ltd v Leda Management Services Pty Ltd (No 2) [2024] NSWCA 13 (Ranclose) at [5]; and Mohareb v State of New South Wales (No 2) [2024] NSWCA 69 at [22].
4. A similar argument was made before Andronos DCJ. On 28 March 2024, Andronos DCJ invited both parties to provide further submissions as to the effect of Hollingsworth (No 2) and other authorities on the Court's power to vary a costs order under r 36.16(3A). The Appellants noted that the Court in Ranclose at [5] summarised the principles established in Hollingsworth (No 2) as follows: "(1) The power conferred by UCPR, r 36.16 is to be exercised "sparingly and with caution" having regard to the importance of the finality of litigation… (2) In order to enliven the exercise of the jurisdiction, what must emerge "is that the Court has apparently proceeded according to some misapprehension of the facts or the relevant law and that this misapprehension cannot be attributed solely to the neglect or default of the party seeking the rehearing"… (3) The reference to misapprehension in this context "is concerned with matters of oversight and inadvertence, and not with deliberate decisions which are said to be incorrect"… (4) Ordinarily, questions of costs should be raised and addressed at the appeal hearing rather than by parties making separate and subsequent applications…" (Emphasis added; citations omitted.)

Ground 3: Holding the Respondents to the variation sought

1. The Appellants argued that, contrary to r 36.16(3A), Andronos DCJ erroneously considered costs-related arguments which were raised more than 14 days after the primary judge's initial costs judgment on 20 October 2023.
2. Specifically, the Appellants argued that his Honour should not have had regard to the Respondents' written submissions dated 26 February 2024 (outside the 14 day period), which he claimed proposed further orders sought beyond those sought in the notice of motion filed on 3 November 2023 (which was within the 14 day period).
3. This excessively technical argument must be rejected. The 14 day period referred to in the rules concerns the time frame for filing an application, not the filing of evidence or written submissions in support of the application. In any event, in the present case, the notice of motion was accompanied by an affidavit of Mr Cakic's of 3 November 2023.
4. A notice of motion filed pursuant to r 36.16(3A) of the UCPR is not a pleading. The 14 day period prescribed by the rule plays an important role in signalling the need for the expeditious challenge to an order. Moreover, the jurisprudence that has built up around the operation of the rule as reflected in the cases referred to in [224] above ensures that the important principle of finality is not undermined. Subject to that observation, however, the scope of the arguments able to be deployed when such an application is made is a matter for the judge hearing the application whose obligation is to do justice as between the parties, consistent with the overriding purpose of the rules, as set out in s 56 of the CPA. In any event, the notice of motion sought in paragraph 3 the making of "any such other orders as the Court thinks fit". In other words, the orders ultimately made were within what was sought in the Notice of Motion.

Grounds 4 and 5: Indemnity costs

1. The Appellants contended, by grounds 4 and 5, that his Honour erred in awarding indemnity costs against the Appellants from 21 September 2023. Ground 4 claimed that his Honour erred in finding that the Respondents' oral offer made on 20 September 2023 could generate costs consequences. This was because, according to the Appellants, when Mr Cakic made the offer of compromise to Mr Hall, Mr Cakic said that the offer was "all without prejudice", yet made no mention of the qualifying words "save as to costs".
2. Two difficulties confront this argument. First, as Andronos DCJ held below, whether Mr Cakic said the qualifying words "save as to costs" is not determinative of whether a genuine offer of settlement was made by the Respondents. Indeed, as his Honour noted, Mr Hall was likely aware that the settlement discussions were without prejudice, and that if settlement were not reached, the discussions might be relied upon. Secondly, at 5.43pm on the same day as the offer, Mr Cakic sent an email to Mr Hall, summarising the terms of the oral offer under the heading "without prejudice save as to costs". As Andronos DCJ held: "…it is plain that the characterisation in the email of the communication being without prejudice save as to costs extends to the earlier conversation as well."
3. Ground 5 contended that his Honour's finding that the Second Appellant was jointly and severally liable for indemnity costs from 21 September 2023 was punitive - undermining the compensatory nature of cost awards.
4. Andronos DCJ's order in relation to the Second Appellant was plainly within the scope of his discretion, and no House v The King (1936) 55 CLR 499; [1936] HCA 40 (House) error vitiates the exercise of the discretion. The settlement offer which led to the indemnity costs order was a settlement offer in respect of the whole of the proceedings, including the claims brought by the Second Appellant.

Ground 6: Costs of the motion

1. The Appellants contended that the parties should bear their own costs in respect of the motion to vary the primary judge's costs orders because, according to the Appellants, the Respondents were almost entirely unsuccessful on the motion.
2. As noted above at [78], Andronos DCJ ordered that the Appellants pay the Respondents' costs on an indemnity basis from 21 September 2023. In doing so, his Honour rejected the Respondents' arguments that: (i) the Respondents' offer to settle on 28 November 2022 was an effective Calderbank offer; and (ii) that the Respondents were substantially successful at trial. Nonetheless, the Respondents were successful in proving that the Appellants unreasonably rejected their offer of compromise on 20 September 2023, resulting in his Honour awarding indemnity costs from 21 September 2023.
3. His Honour's order in effect that the costs of the hearing of the motion followed the event was open to him, entirely orthodox and plainly correct.
4. To the extent that the Appellants required leave to appeal from the judgment of Andronos DCJ, I would refuse leave. To the extent that leave was not required, I would reject the challenges made to his Honour's discretionary judgment in respect of the costs of the trial.

The Respondents' further challenge to the costs judgment

1. The Respondents separately contended by their own application for leave to appeal that Andronos DCJ erred in [84] of his costs judgment of 8 May 2024 when holding that he could not determine the relative success of the parties at trial. His Honour held that: "One of the difficulties arises from having a judicial officer, other than the trial judge, determining the appropriate order for costs on the basis of costs following the event in complex proceedings, in which neither party was wholly successful. It is impossible to form an impressionistic view of the relative success of the parties on the issues as they were presented without reviewing the entirety of the evidence, transcript and submissions of a fiercely contested 10-day hearing and hearing submissions from the parties as to the appropriate breakdown of time spent on each issue. It would be contrary to the principles of the just, quick and cheap determination of the real issues in dispute and the principles of proportionality to undertake such a task on a costs application without submissions directed to these issues. This is particularly so, where the costs application may be determined with reference to an anterior offer to settle the proceedings which was unreasonably rejected." (Emphasis added.)
2. The Respondents accepted that a challenge to his Honour's reasoning in this regard would be assessed by reference to House. The Respondents claimed that, having regard to either the quantum or issues raised in the pleadings, the Respondents enjoyed "undoubtedly substantial success" at trial. Contrary to his Honour's position, the Respondents claimed that, through considering the pleadings and primary judgment, he could have formed an impressionistic view of the real and practical relative successes of the parties.
3. In turn, the Respondents contended that his Honour should have taken account of the Respondents' considerable success at trial when exercising his discretion to award costs under s 98 of the CPA.
4. It is apparent from the extract of his Honour's judgment at [243] above that Andronos DCJ was not provided with "submissions directed to these issues", viz. the success of either party or the respective issues and the time devoted to the resolution of each of the issues. In these circumstances, there was no vitiating error affecting the exercise of his Honour's discretion. As Mr Hall submitted, the complaint made by the Respondents was in part at least an "issue of their own making" in that they did not provide the judge with the assistance required to make a fractional costs order.

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