Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Croc's Franchising Pty Ltd v Alamdo Holdings Pty Ltd (No 3) [2023] NSWCA 316 Hearing dates: On the papers Date of orders: 15 December 2023 Decision date: 15 December 2023 Before: Payne JA; Stern JA; Basten AJA Decision: (1) First respondent to pay 70% of the appellants' costs of the appeal filed 19 August 2021; (2) No order for costs of the proceedings on the Amended Commercial List Statement filed 19 August 2021; (3) The amount of $184,190.14 paid into court by the appellants as a condition of the stay judgment, together with any interest which has accrued, be released to, or otherwise at the direction of, the first respondent; (4) The amount of $110,000 paid into court by the appellants as security for the first respondent's costs, together with any interest which has accrued, be released to, or otherwise at the direction of, the appellants. Catchwords: COSTS – party/party – costs of appeal and primary claim – amendment to original costs order – where mixed success on appeal but appellants prevailed on principal issue – where cross-claim remitted for further hearing – where judgment below $500,000 ­­– whether UCPR r 42.34 applies PRACTICE AND PROCEDURE – funds paid into court – whether and to whom funds should be released Legislation Cited: Civil Procedure Act 2005 (NSW) s 98 Conveyancing (General) Regulation 2018 (NSW), Sch 5 Uniform Civil Procedure Rules 2005 (NSW) rr 36.16, 36.17, 42.34 Cases Cited: Alamdo Holdings Pty Ltd v Croc's Franchising Pty Ltd (No 3) (Supreme Court of New South Wales, unreported, 8 March 2023) Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 Croc's Franchising Pty Ltd v Alamdo Holdings Pty Limited [2023] NSWCA 85 Croc's Franchising Pty Ltd v Alamdo Holdings Pty Ltd [2023] NSWCA 256 Croc's Franchising Pty Ltd v Alamdo Holdings Pty Ltd (No 2) [2023] NSWCA 286 Doppstadt Australia Pty Ltd v Lovick & Sons Developments Pty Ltd (No 2) [2014] NSWCA 219 Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20 James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 Mahaffey v Mahaffey (2018) 97 NSWLR 119; [2018] NSWCA 42 Category: Costs Parties: Croc's Franchising Pty Ltd (first appellant) Brett Christopher Aldons (second appellant) Lawrence John Cusdin (third appellant) Alamdo Holdings Pty Ltd (first respondent) State of New South Wales (second respondent) Representation: Counsel: M Ashhurst SC; D Meyerowitz-Katz (appellants) JAC Potts SC; AR Langshaw (first respondent) Submitting appearance (second respondent) Solicitors: Newhouse & Arnold Solicitors (appellants) Speed & Stracey Lawyers (first respondent) Karen Smith, Crown Solicitor (second respondent) File Number(s): 2023/90820 Publication restriction: Nil Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity – Commercial List Citation: [2023] NSWSC 60 Date of Decision: 9 February 2023; 8 March 2023 Before: Stevenson J File Number(s): 2021/136164 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] JUDGMENT 1. THE COURT: On 27 October 2023, the following orders were made for the reasons given in Croc's Franchising Pty Ltd v Alamdo Holdings Pty Ltd [2023] NSWCA 256: "(1) Appeal allowed. (2) Set aside orders 1 and 2 of Stevenson J dated 28 February 2023 and all orders dated 8 March 2023 and in lieu thereof order: (a) The Amended Commercial List Statement filed 19 August 2021 is dismissed. (b) First respondent to pay the appellants' costs of the Amended Commercial List Statement. (c) The Commercial List Cross-claim Statement filed 15 November 2022 remitted to the Equity Division to deal with damages, if any, to which the first appellant is entitled. (d) Costs of the cross-appeal to be costs in the cause of the remitted hearing. (3) First respondent to pay the appellants' costs of the appeal." 1. On 29 November 2023, this Court amended and replaced its original orders in Croc's Franchising Pty Ltd v Alamdo Holdings Pty Ltd (No 2) [2023] NSWCA 286. The orders made were: "(1) Pursuant to rr 36.16(3A) and 36.17 of the Uniform Civil Procedure Rules 2005 (NSW), the orders entered by the Court on 27 October 2023 are varied by deleting orders 1 to 3 and, in lieu thereof, entering the following orders: '(1) Appeal allowed in part. (2) Set aside orders 1 and 2 of Stevenson J dated 28 February 2023 and all orders dated 8 March 2023 and in lieu thereof order: (a) Judgment be entered for the first respondent in the sum of $189,279.87. (b) The Amended Commercial List Statement filed 19 August 2021 is otherwise dismissed. (c) The Cross-Summons filed 15 November 2022 be remitted to the Equity Division to deal with damages, if any, to which the first appellant is entitled. (d) Costs of the Cross-Summons to be costs in the cause of the remitted hearing. (3) The parties each be granted liberty to file further written submissions as to the appropriate orders for costs of the Summons below, costs of the appeal, and payment out or release of amounts paid into Court including the security for Alamdo's costs of the appeal as follows: (a) The appellants are to file and serve written submissions (not to exceed 3 pages) by 4pm Tuesday 5 December 2023. (b) The first respondent is to file and serve written submissions (not to exceed 3 pages) by Friday 8 December 2023. (c) The appellants are to file and serve written submissions in reply (not to exceed 1 page) by Monday 11 December 2023. (4) The questions the subject of order 3 be dealt with on the papers.'" 1. In these reasons familiarity with Croc's Franchising and Croc's Franchising (No 2) is assumed. The remaining questions the subject of this judgment are: 1. The order, if any, which should be made in relation to costs of the appeal; 2. The order, if any, which should be made in relation to the costs of the Amended Commercial List Statement filed 19 August 2021; 3. The order, if any, which should be made in relation to payment out of following sums paid into court: 1. $184,190.14, paid into court by the appellants as a condition of obtaining a stay pending appeal; and 2. $110,000 paid into court by the appellants as security for the first respondent's costs of the appeal. Issue 1 - Costs of the appeal 1. The appellants' position was that the first respondent ("Alamdo") should pay 80% of the appellants' costs of the appeal. They submitted that they appellants were "substantially if not entirely successful on the appeal". That was because the judgment below in Alamdo's favour was for $987,105.67. After the appeal, that sum was reduced to $189,279.87 (being $161,446.76 plus interest), approximately 16% of the original judgment (or 19% if interest is included). 2. The appellants submitted that its area of success was the most important issue on appeal, namely the construction of former Sch 5 of the Conveyancing (General) Regulation 2018 (NSW) ("the COVID Regulation"). Alamdo conceded on appeal it had led the Court below into error on a significant issue, whether the first appellant, Croc's Franchising Pty Ltd ("Croc's"), was an "impacted lessee" under the COVID Regulation. In these circumstances, the appellants said, and applying Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38], the Court should as a matter "of impression and evaluation" exercise its discretion to apportion the bulk of the costs of the appeal against Alamdo. 3. Alamdo accepted that this was an appropriate case for an apportionment of costs. Alamdo submitted that it should pay 30% of the appellants' costs of the appeal, essentially for two reasons. First, that the appeal was only partly allowed. Secondly, that the appellants were unsuccessful on the majority (seven out of 11) of issues they raised on appeal. Alamdo relied upon the number of pages of submissions and transcript which were devoted to successful versus unsuccessful issues. Consideration of issue 1 1. Section 98 of the Civil Procedure Act 2005 (NSW) confers on the court a wide discretion with respect to costs. Under r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) the "general rule" is that the court is to order that costs follow the event. The "event" may be characterised in more than one way. Generally the "event" refers to the result of the claim or counterclaim, as the case may be, and may be understood as referring to the practical result of a particular claim: Doppstadt Australia Pty Ltd v Lovick & Sons Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15] (Ward, Emmett and Gleeson JJA). Where there has been a mixed outcome in the proceedings, and it is appropriate to entertain the process of apportioning costs as between different issues in the proceedings, in general such an exercise will be carried out on a relatively broad brush basis, and largely as a matter of impression and evaluation by the court: Doppstadt at [19]; James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [36]; Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20 at 22; Mahaffey v Mahaffey (2018) 97 NSWLR 119; [2018] NSWCA 42 at [275]. 2. This is a case where there were a number of separable issues dealt with on the appeal. As the parties agreed, it is one where it is appropriate the costs of the appeal be apportioned. In examining the separate issues, it is true that Alamdo was successful on a greater number of the discrete issues raised on the appeal. On the other hand, it was only in oral submissions on the appeal that Alamdo abandoned the "impacted lessee" issue which had been dispositive in their favour before the primary judge. Critically, despite failing on a number of discrete issues, the appellants were successful on the issue of the COVID Regulation, which was the critical issue on the appeal. It is unhelpful in those circumstances to attempt to measure pages of submissions or transcript devoted to each issue. 3. As numerous authorities such as Surf Road Nominees Pty Ltd (No 2) make clear, where there is a mixed outcome in proceedings, the question of apportionment of costs is very much a matter of discretion. Mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation. Adopting that approach, Alamdo should pay 70% of the appellants' costs of the appeal. Issue 2 - Costs of the Amended Commercial List Statement 1. In the proceedings below, the primary judge ordered the appellants to pay 90% of Alamdo's costs, acknowledging that the appellants had some limited success in resisting Alamdo's claims. 2. The appellants' primary submission was that any determination of the costs below should await the outcome of the remitted cross-claim. In the alternative, the appellants submitted that the appropriate order was that each party bear its own costs of the Amended Commercial List Statement. The appellants submitted that, given the appeal outcome, they have now "successfully resisted the bulk of Alamdo's claim", and that Alamdo has recovered only a fraction of the $1,283,199.41 it originally sought. 3. The appellants also relied on r 42.34 of the Uniform Civil Procedure Rules, which tends against an award of costs to a plaintiff who obtains a judgment below $500,000. Alamdo ultimately recovered an amount of $161,446.76 plus interest, well below that figure. The appellants submitted there was no reason Alamdo could not have commenced a simple contractual debt claim in the District Court instead. 4. Alamdo submitted that the appellants should pay 30% of its costs of the proceedings below, and that those costs should be on an indemnity basis, in line with what the primary judge found was a contractual entitlement to indemnity costs: see Alamdo Holdings Pty Ltd v Croc's Franchising Pty Ltd (No 3) (Supreme Court of New South Wales, unreported, 8 March 2023) at [10]-[12]. Alamdo accepted that, because its judgment for loss of bargain damages was reversed on appeal, the costs awarded to it below should be proportionately reduced. However, it maintained that most of the time and resources expended below went to determining the appellants' "myriad" defences, most of which were unsuccessful (at first instance and on appeal) except for, decisively, their construction of the COVID Regulation 5. To the appellants' argument that the proceedings were caught by r 42.34, Alamdo submitted that its potential recovery was over $1 million, because its claim for the contractual debt was brought alongside a claim for loss of bargain damages which was "plainly arguable", even though it failed on appeal. Alamdo pointed to other reasons it was justified in bringing its action in the Supreme Court, including its challenge to the validity of the COVID Regulation, rectification of the relevant agreement for lease and other "complex issues". Consideration of issue 2 1. Alamdo is correct that, given its total original claim ($1,283,199.41) was both clearly arguable and above the District Court's jurisdictional limit ($1,250,000), proceedings in the Supreme Court were warranted. In addition, the question of the validity of the COVID Regulation was appropriately the subject of proceedings in the Supreme Court and Alamdo cannot be criticised for commencing proceedings there. 2. The proceedings at first instance arising from the Amended Commercial List Statement involved a number of separable issues. That was recognised by the primary judge in awarding Alamdo 90% of its costs of the Amended Commercial List Statement. 3. In the light of the decision of this Court, it remains correct that Alamdo was successful on a greater number of the discrete issues raised on the appeal. It is also true that Alamdo successfully recovered $189,279.87. 4. On the other hand, Alamdo's claim that Croc's was not an "impacted lessee" protected by the COVID Regulation was a critical and difficult issue litigated before the primary judge, which was dispositive of a great deal of the case in Alamdo's favour at first instance. Alamdo's case on this issue was abandoned on appeal. In this Court, despite failing on a number of discrete issues, the appellants were successful on the construction of the prohibitions on termination created by the COVID Regulation, which was the other critical issue before the primary judge. 5. As noted above, where there is a mixed outcome in proceedings, the question of apportionment of costs is very much a matter of impression, evaluation and judgment. The focus of the litigation before the primary judge was on the operation and application of the COVID Regulation. The additional matters raised unsuccessfully by the appellants involved, for the most part, confined questions of contractual construction. The bulk of the case before the primary judge addressed the application of the COVID Regulation and the quantum of Alamdo's damages. The parties enjoyed mixed success on separable points addressing both of those issues. 6. One possible way of dealing with the costs of the trial would be to award Alamdo 20% of their costs reflecting the issues they succeeded on (albeit on an indemnity basis as that finding by the primary judge was not challenged in this Court) and award the appellants 30% of their costs reflecting their success in this Court on the principal separable issue in the litigation. Rather than make competing orders for costs, the more appropriate outcome is that there be no order as to costs of the Amended Commercial List Statement, with the intention that each party should bear its own costs. 7. It will be recalled that the costs of the appellants' remitted cross-claim remain costs in the cause of the remitted hearing, as this Court ordered in the principal judgment. Issue 3 - Sums paid into court 1. There remains the issue of payment out of sums paid into court: 1. $184,190.14, paid into court by the appellants as a condition of obtaining a stay pending appeal: Croc's Franchising Pty Ltd v Alamdo Holdings Pty Limited [2023] NSWCA 85; and 2. A sum of $110,000 paid by the appellants as security for Alamdo's costs of the appeal. 1. It was common ground that the $184,190.14 should be released (together with any interest accrued) to, or at the direction of, Alamdo. 2. It was also common ground that the $110,000 should be released to, or otherwise at the direction of, the appellants. 3. The Court will make orders for payment out in accordance with that agreement. Orders 1. The Court makes the following orders: 1. First respondent to pay 70% of the appellants' costs of the appeal filed 19 August 2021; 2. No order for costs of the proceedings on the Amended Commercial List Statement filed 19 August 2021; 3. The amount of $184,190.14 paid into court by the appellants as a condition of the stay judgment, together with any interest which has accrued, be released to, or otherwise at the direction of, the first respondent; 4. The amount of $110,000 paid into court by the appellants as security for the first respondent's costs, together with any interest which has accrued, be released to, or otherwise at the direction of, the appellants. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 December 2023