By Stuart Eustice, Partner and Ashleigh Shankly, Lawyer

SEC New Line Pty Ltd and Donbiao Sui (applicants) entered into a franchise agreement with Muffin Break Pty Ltd (Muffin Break), for a retail premises in Frankston in 2019. The agreement was terminated in 2020, leading to disputes over reinstatement costs.

In May 2024, the Magistrates’ Court dismissed the applicants’ claim and upheld Muffin Break’s counterclaim, awarding nearly $7,000 in reinstatement costs. Costs were fixed at $51,741.74 on the claim and $10,000 on the counterclaim.

Appeal and Security for Costs

The applicants appealed to the Supreme Court’s Trial Division, which dismissed the appeal in April 2025. They then sought leave to appeal, challenging findings on the counterclaim and reinstatement costs.

Irving AsJ had previously ordered $30,000 security for costs, which the applicants paid. Muffin Break sought a similar order in the Court of Appeal. While entitlement was not disputed, the amount was.

Consistent with the provisions of the Civil Procedure Act 2010 (Vic) (Civil Procedure Act), the Court of Appeal was prepared to determine the application on the papers. Both parties had filed comprehensive affidavits articulating their position. However, the applicants sought time to file a further affidavit and submissions. The Court of Appeal found this request unnecessary and inconsistent with achieving a speedy and cost-effective resolution and accordingly dismissed the applicants request.

Muffin Break estimated $139,000 in defence costs, including $93,000 in counsel fees, and sought $90,000 in security. The applicants argued the demand was unreasonable, lacked cost breakdowns, and overstated the need for multiple solicitors and senior counsel. They proposed $30,000 as reasonable.

The Court of Appeal criticised the escalation of a $7,000 dispute to appellate level, calling it disproportionate under the Civil Procedure Act. It also found Muffin Break’s cost estimates excessive and the timeframe for their demand unfair.

Ultimately, the Court of Appeal accepted the applicant’s arguments, both as to the precipitous nature of the application for security for costs and the significant overstatement by Muffin Break of the costs of the application for leave to appeal. It was ‘totally unpersuaded’ by the estimate provided by Muffin Break, noting that it had required only junior counsel both at the Magistrates’ Court and at the Trial Division of the Supreme Court.

Given the applicants for leave is confined to an order for less than $7,000 relating to a refitting of a premises, the Court of Appeal considered it did not warrant the attention of three solicitors and the engagement of senior counsel, as contended by Muffin Break. The Court commenting the purpose and provisions of the Civil Procedure Act, and in particular the parts relating to proportionality, strongly mitigate against any significant sum being fixed.

Having regard to the security for costs previously fixed at $30,000 by the Trial Division, the Court of Appeal reaffirmed that being the appropriate amount.