Cwalina v Rose [2025] VSCA 53; Mikkelsen v Li [2022] VSCA 126; Szwarcbord v Charbord Investments Pty Ltd [2024] VSCA 92, applied.

1. In September 2019, the applicants, SEC New Line Pty Ltd ('SEC') and Dongbiao Su, and the respondent, Muffin Break Pty Ltd ('Muffin Break'), entered into a franchise agreement ('the franchise agreement') of retail premises at the Bayside Shopping Centre in Frankston.
2. Mr Su is the sole director and shareholder of SEC.
3. The franchise agreement terminated in September 2020. The applicants disagreed with Muffin Break on several issues surrounding its termination, including the amount of any payment the applicants would make for the reinstatement of the premises.
4. The dispute between the parties was heard in the Magistrates' Court. In May 2024, the Magistrate dismissed the applicants' claims against Muffin Break and allowed Muffin Break's counterclaim in part, awarding it nearly $7,000 (made up of $5,623.43 and interest of $1,368.11) against both applicants in respect of the cost of reinstatement. Costs in favour of Muffin Break were fixed at $51,741.78 on the claim and $10,000 on the counterclaim.
5. That was not the end of the fight. The applicants then appealed to the Trial Division of this Court under s 109 of the Magistrates' Court Act 1989. Muffin Break then sought to have the appeal summarily dismissed. The Associate Justice (Irving AsJ) ordered that the grounds of appeal as formulated at that time be struck out; however, he gave leave to the applicants to file and serve an amended notice of appeal, which was done.[1]
6. In March 2025, the appeal came on before a single judge of the Trial Division of this Court (K Judd J). The judge noted that the questions of law and grounds of appeal were as follows:

Amended Ground 1 - The learned Magistrate erred in law in finding that the Respondent, who had entered into a lease of premises at Shop F001 Bayside Shopping Centre which it licensed to the First Appellant under the terms of a franchise agreement, was not under duty to disclose to the First Appellant:

(a) the contents of an email dated 10 January 2020 from the landlord to the Respondent stating that the landlord was not able to extend the term of the lease; and

(b) a Non‑Renewal Notice from the landlord to the Respondent dated 2 March 2020;

and that its conduct was not misleading and deceptive in contravention of section 18 of the Australian Consumer Law 2010 as that provision has been applied in such cases as Demagogue Pty Ltd v Ramensky [1992] FCA 557 ("Demagogue") in circumstances where:

(i) section 64 of the Retail Leases Act 2003 requires a landlord to notify a tenant at least 6 months before the end of a lease that it will either offer a new lease or that it will not be renewing the lease; and

(ii) by letter dated 6 March 2020 the Respondent had written to the Appellant offering to enter into a new franchise agreement for a term commencing after the lease was due to expire.

The Appellants say that the Magistrate erred in construing and applying the facts to the requirements of Section 18 of the Australian Consumer Law, in accordance with the principles enunciated by the Federal Court in Demagogue.

Amended Ground 3 - The learned Magistrate erred in concluding that the First Appellant was not entitled to an award of damages (as even if the Respondent's conduct had been misleading and deceptive) and thereby misapplied the law relating to lost opportunities as enunciated in Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 and Lanhai v & 7‑Eleven Stores [2022] VSC 132 in that he failed to take into account, or make allowances for, circumstances where a wrongdoer has prevented the victim from pursuing an opportunity because the wrongdoer 'has thrust the victim into a difficult task of proving a past hypothetical' and instead rejected the First Appellant's uncontradicted evidence (that it would have taken immediate steps to sell the business had it been properly apprised of the matters referred to in ground 1 above) without considering what it might have done had it been properly apprised of the matters referred to in ground 1 above.

Amended Ground 5 - The learned Magistrate erred in finding that the Respondent had made out its counterclaim when:

(a) there was no evidence to support his finding that the First Appellant was required to undertake a 'de‑fit' of the premises (as opposed to a 'reinstatement' of the premises and noting the premises were not nor could be reinstated as they were demolished after the end of the lease); and

(b) further and alternatively, there was no evidence that the amount forfeited from the deposit by the Respondent and paid to the landlord, namely, $14,300, was either actually incurred or represented a reasonable sum for reinstating the premises; and

(c) further and alternatively in acceding to the landlord's demand for compensation for a de‑fit the Respondent failed to consult or have regard to the legitimate interests of the Appellant (noting the matters raised at subparagraphs 5(a) and (b) above. His Honour ought to have found that in doing so the Respondent had breached the duty of good faith it owed the Appellant under the Franchise Code and the Franchise Agreement.[2]

1. On 10 April 2025, the judge dismissed the appeal.[3]
2. The applicants now seek leave to appeal that decision. They only challenge the judge's findings relating to the counterclaim and the issue of the cost of reinstatement (amended ground 5). The basis for the application is that the judge was wrong in concluding that no question of law was demonstrated on the s 109 appeal and therefore the section was not engaged.
3. In the Trial Division, Muffin Break sought security for its costs. Irving AsJ made an order that the applicants provide security of costs in the sum of $30,000.[4] They did so. Muffin Break now makes a similar application in respect of the application for leave to appeal in this Court and the costs of the appeal.
4. There is no issue between the parties that Muffin Break is entitled to an order for security of costs on this application. The only question is in what sum such an order should be made.
5. This application was originally to be heard orally in court by a bench of two judges. It became apparent to us that, consistent with the provisions of the Civil Procedure Act 2010 (particularly relating to proportionality of costs), it could be dealt with on the papers. Both parties had filed comprehensive affidavits articulating their respective positions. The parties agreed to that course; however, the applicants sought time to file a further affidavit and a further submission. In our view, this was unnecessary and inconsistent with achieving a speedy and cost‑effective disposition of the application. We refused the applicants' request.

1. The principles applicable to the making of an order of security for costs on an application for leave to appeal are well established and were recently summarised by this Court in Cwalina v Rose:[5]

Various factors can inform the exercise of the Court's discretion whether to order security for costs, including the following:

(1) the prospects of success of the appeal;

(2) the magnitude of risk that a costs order would not be satisfied;

(3) whether the giving of security would be oppressive in that it would stifle a reasonably arguable claim;

(4) whether the conduct of the respondent that is the subject of the appeal has contributed to the risk that the applicant would not be able to satisfy a costs order;

(5) whether the appeal is defensive in nature;

(6) whether the respondent has cross‑appealed;

(7) whether the respondent has delayed in applying for security for costs;

(8) whether there are aspects of the public interest which ought to be taken into consideration in deciding whether security should be provided; and

(9) whether there are particular discretionary matters that are relevant in the case.[6]

1. Each party relied upon an affidavit sworn by their solicitor handling this application: Ms Alana Giles on behalf of Muffin Break and Mr Ajai Thapliyal on behalf of the applicants.
2. As to the quantum of the security, the points made by Ms Giles in her affidavit were as follows:

(a) The applicants were already subject to two adverse costs orders (in the Magistrates' Court and in the Supreme Court proceedings).

(b) Muffin Break had been ordered to pay $30,000 for security for costs, which order was made on the basis that SEC had no assets.

(c) Prior to making the application for security for costs in the Supreme Court proceeding, the parties' lawyers exchanged correspondence in an attempt by Muffin Break to understand the financial position of SEC. SEC did not provide any details of its financial position or assets owned in the jurisdiction. There are significant concerns regarding the applicants' ability to meet another adverse costs order if their application for leave to appeal is refused.

(d) SEC still owed $51,741 to Muffin Break in relation to the Magistrates' Court costs order.

(e) Muffin Break had, by its lawyers, sent a letter to the applicants' solicitor on 7 August 2025 enclosing a bill of costs of just short of $150,000 in relation to the costs of the Trial Division proceeding. As at the date of the affidavit, those costs remained unpaid.

(f) Muffin Break estimated that its costs of defending this application for leave to appeal to the conclusion of the appeal would amount to approximately $139,000, of which $93,300 would be constituted by counsel's fees. The estimate of counsel's fees included significant allowances for the engagement of senior counsel, as well as junior counsel.

1. Muffin Break sought security in respect of future costs in the sum of $90,000 which was said to represent 65% of the total of Muffin Break's estimated costs for a one day hearing of the application for leave to appeal.
2. Mr Thapliyal, in his affidavit, responded:

(a) Muffin Break's initial demand for security of costs of $90,000, made on 7 August 2025, gave the applicants until 4 pm on Monday, 11 August 2025, to pay that sum. The timeframe for a 'demand of that magnitude' was said to be 'unreasonable and not capable of being complied with'. Further, Mr Thapliyal was of the view that the methodology for the calculation of the sum demanded was 'wholly inadequate' to enable the applicants to consider the amount sought.

(b) Mr Thapliyal emailed Ms Giles on 13 August 2025 concerning the demand; however, at the time he swore his affidavit on 1 September 2025, he had received no response or any endeavour to resolve the issues between the parties.

(c) All orders for payment of moneys made against the applicants at the Magistrates' Court had been complied with.

(d) The first quantification by Muffin Break of its costs in the Supreme Court proceeding (approximately $150,000) was received by the applicants on 7 August 2025, accompanied by a demand for payment by 14 August 2025. Muffin Break subsequently filed and served a summons for taxation of its costs, which is listed for mediation on 5 November 2025. This, it was said, was in breach of the orders of Judicial Registrar Roberts (in which it was recorded that issues relating to costs orders made by the lower courts could be included in the issues to be mediated on this application for leave to appeal).

(e) The issues in dispute in the appeal are particularly limited. They are confined to only that part of the counterclaim relating to the lease expenses in respect of the reinstatement obligations. Mr Thapliyal estimates that the issues would involve less than 10% of the paperwork generated in the proceedings and occupy less than 10% of the hearing time both at the Magistrates' Court and at the Trial Division level. It only involves consideration of pleadings at the Magistrates' Court level, limited evidence as to the reinstatement obligations, the amended notice of appeal, the transcript of the hearing before K Judd J in the Trial Division and the papers filed in this application.

(f) Ms Giles overstated the estimate of Muffin Break's costs for the present application. It was provided by reference to hourly rates without any breakdown of the costs or basis on which the applicants can assess the reasonableness of the costs sought, having regard to the nature and extent of the work and the necessity of engaging three solicitors and two counsel, including senior counsel who had not been retained previously.

1. Mr Thapliyal opined that the involvement of senior counsel is not reasonable and the reasonable costs for the application for leave to appeal should not exceed $30,000.

1. Given the concession by the applicants as to the fixing of security, it is unnecessary and undesirable to say anything about the ultimate resolution of the application for leave to appeal.
2. As an aside, we reiterate that the hearing before the Magistrate resulted in an order in favour of Muffin Break against each of the applicants on its counterclaim for just under $7,000. That is now the only issue on the application for leave to appeal. Notwithstanding the applicants' desire to pursue their claim, it defies common sense and the provisions of the Civil Procedure Act that this case has found its way to this Court, let alone to the Court of Appeal. That said, the parties have a right to be heard, and the application for leave to appeal must be dealt with in accordance with the law.
3. In the main, we accept the applicants' arguments both as to the precipitous nature of this application and the significant overstatement by Muffin Break of the costs of the application for leave to appeal.
4. Muffin Break should have given the applicants more time to consider its demand regarding the quantum of security. However, given the history of this case and the applicants' financial position, we doubt whether this would have made much difference to the resolution of this application.
5. We are totally unpersuaded by the cost estimate provided by Muffin Break. The case, when involving a multiplicity of issues, required junior counsel in the Magistrates' Court. The s 109 appeal required junior counsel only in the Trial Division of this Court. The application for leave is confined to a dispute over an order for less than $7,000 concerning the refitting of the premises. It does not merit the attention of three solicitors, nor does it merit the engagement of senior counsel, as Muffin Break contends. The purpose and provisions of the Civil Procedure Act, and in particular those parts relating to proportionality, strongly militate against any significant sum being fixed as security.
6. Irving AsJ, who has considerable familiarity with these applications, fixed security for costs in the Trial Division of $30,000. We agree with the applicants' submissions and think a similar allowance should be made on the application for leave to appeal.
7. We will order that the applicants provide security for costs in the sum of $30,000 on or before 30 October 2025. If they fail to do so, then the application for leave to appeal is dismissed.

[1] SEC New Line Pty Ltd v Muffin Break Pty Ltd [2024] VSC 728 (Irving AsJ).

[2] SEC New Line Pty Ltd v Muffin Break Pty Ltd [2025] VSC 183, [32] (K Judd J).

[4] SEC New Line Pty Ltd v Muffin Break Pty Ltd [2024] VSC 728, [60].

[5] [2025] VSCA 53, [21]-[23] (Beach and Kennedy JJA) ('Cwalina'). See also Mikkelsen v Li [2022] VSCA 126, [10] (Kyrou and Walker JJA) ('Mikkelsen'); Szwarcbord v Charbord Investments Pty Ltd [2024] VSCA 92, [27] (Beach and Orr JJA) ('Szwarcbord').

[6] Mikkelsen, [11]; Szwarcbord, [29].