Option Holdings Pty Ltd v Meng Yu

Court of Appeal (NSW)|2025-02-25|Before: Ward P, Fagan J

[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

THE COURT: Before the Court, for determination on the papers by consent, is an application brought by the applicants (Option Holdings Pty Ltd and Howard Hao Ting Cao) for leave to appeal from a decision of Fagan J (the primary judge) in the Common Law Division, granting an application by the respondent (Meng Yu) for summary judgment against the applicants in the sum of $1,096,955.83 and ordering that the applicants pay the respondent's costs of the proceedings in the gross sum of $19,254. The primary judge gave ex tempore reasons for that decision (Yu v Option Holdings Pty Ltd (Supreme Court (NSW), Fagan J, 3 September 2024, unrep)).
The underlying dispute between the parties related to a sum of $1 million (the settlement sum) payable pursuant to a Settlement Deed (the Deed) entered into on 16 November 2022 to settle earlier court proceedings between the parties in respect of a loan made by the respondent to the first applicant (Option Holdings), the repayment of which was guaranteed by the second applicant (Mr Cao). In particular, the dispute was as to whether the settlement sum was repayable by 30 June 2023 (as the Deed provided and the respondent contended) or on completion of an extension to 31 October 2024 (as the applicants contended).
For the reasons set out below, the summons for leave to appeal will be dismissed with costs.

Proposed grounds of appeal

The proposed grounds of appeal, if leave be granted, were as follows: 1. His Honour erred in finding that the allegations pleaded in paragraph 8 of the Statement of Claim and the affidavit evidence of Howard Hao Ting Cao dated 8 July 2024 cannot sustain the [applicants'] claim that the extension of time became an agreed variation as set out in [12] of the Judgment. 2. His Honour erred in not finding that the second [applicant's] deposition to the effect that the [applicants] "were of the belief and assumed that the [respondent] had agreed to [their] requested variation to extend the time for payment" notwithstanding that such deposition was not directed to any pleaded defence. 3. His Honour erred in finding that there could not be any reasonable basis for the [applicants] or any representative of them assuming or believing that their proposed extension of time had been accepted by the [respondent] in the absence of any conduct or communication from the [respondent] to convey a response to that effect. 4. His Honour erred in finding that the [applicants'] case of estoppel which, although it had not been pleaded but was the subject of unobjected affidavit evidence, could not be regarded as unconscionable for the [respondent] to insist upon payment of the overdue debt just on the basis that the plaintiff made no response to the proposal for extension of time that on that insufficient ground of Mr Cao had decided to devote the resources of himself and the first defendant to other purposes than repaying the due debt. [As pleaded.]

Applicants' submissions

The applicants maintained their position that the respondent's non-response to their lawyer's 30 October 2023 request for a variation to the Deed to extend the time for payment (i) constituted implicit agreement to that request and (ii) constituted a representation to them that the respondent had agreed to the requested variation. Accordingly, the time for payment of the settlement sum due under the Deed had been extended to 31 October 2024. They contended that "in the circumstances" the first applicant had applied its financial resources from about November 2023 to 22 March 2024 towards the Trust's ongoing operational requirements, rather than applying them towards payment of the settlement sum. (This seems to have been an assertion of detrimental reliance on the alleged representation.)
The applicants argued that the pleadings (none of which was put before this Court but to which we have had regard by reference to the court file) disclosed two triable issues: first, whether the Deed was varied by extending the date of the payment to 31 October 2024 ([8] of the defence); and, second, whether there was a defence based on promissory estoppel (apparently based on Mr Cao's affidavit of 8 July 2024).
As to the first submission, the applicants submitted that the respondent's acceptance of the request to vary the Deed was to be inferred from the conduct particularised at par 8 A-C of their defence. They argued that such variation was supported by consideration being the first applicant's commitment of its financial resources (including loans referred to as the Xiaowen Su Loan Facility for a total amount of $1.465 million) towards the Trust's ongoing operational requirements, rather than applying them towards the payment of the settlement sum. They submitted that the respondent's acquiescence to the variation of the Deed was to be inferred from the respondent's silence and conduct particularised in the defence.
As to the second submission, the applicants referred to the well-known authorities as to the principles of equitable estoppel, namely Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 675 (Dixon J); [1937] HCA 58; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 423, 428 (Brennan J); [1988] HCA 7.

Respondent's submissions

The respondent contended that there was no error in the primary judge's findings that there was no variation of contract and that the estoppel claim was not sustainable.
As to the first submission, the respondent noted that there was an express rejection of the requested variation on 22 March 2024 and contended that the silence between 30 October 2023 and 22 March 2024 did not amount to acceptance because silence (without more) cannot constitute acceptance. Further, the respondent argued that the supposed variation was not supported by consideration, submitting that performance of an existing contractual duty - the source of which was not identified - is not consideration. As to the second, the respondent submitted that no estoppel arose because no representation or promise capable of grounding an estoppel had been made; and further, that there was no foundation for the claim that it was unconscionable to insist upon payment (pointing to the requirements of an equitable estoppel articulated by Brennan J in Waltons Stores), because there was no reliance on any representation.
The respondent emphasised that, even on the applicants' best case, the settlement sum became payable on 31 October 2024, a date now long in the past. Therefore, the respondent maintained that the appeal which the applicants seek leave to bring is now moot. The applicants resisted that contention, arguing that the proposed appeal is not moot "on the basis that the issue of costs still remains open".

Determination of leave application

The parties assumed that the judgment of the primary judge was a summary judgment requiring leave pursuant to s 101(2)(l) of the Supreme Court Act 1970 (NSW), being an appeal from "a judgment or order of the Court in a Division on an application for summary judgment under the rules". However, as recently explained in Hynash Constructions Pty Ltd v BRP Industries Pty Ltd [2025] NSWCA 14 at [53], dealing with an equivalent provision in s 127(2)(d) of the District Court Act 1973 (NSW): "On its face, that provision was engaged by the listing of a notice of motion filed by the respondent seeking 'summary judgment'. However, as counsel for the respondent accepted, the motion was filed in order to obtain an expedited hearing. What in fact happened was that evidence was filed by both parties and, there being no dispute as to the facts, the matter was determined by the judge on the basis of the proper construction of the statute. Where there has been a full determination of a matter on the merits, the judgment and orders were not properly characterised as 'summary'; they were merely obtained expeditiously. The orders were not interlocutory but final. There is no apparent purpose in requiring leave in such a case."
Bell CJ observed in Hynash, that "the judgment was given following the fixing for hearing of a motion for summary judgment however, as a matter of substance, the issue was determined on a final basis": at [1]; and see Adamson JA at [4].
A refusal of a claim for a summary judgment would of course be an interlocutory order. Granting an order sought by a defendant summarily dismissing proceedings would commonly be an interlocutory order according to legal rather than practical principles. However, where a defence is found to be clearly untenable, following a contested hearing on the merits (which does not appear here to have been the case), the justification for requiring leave to appeal must be to avoid delay in giving effect to a judgment finally disposing of a claim, though that could be achieved by refusing a stay. Nevertheless, as in Hynash, it is not necessary to determine the scope of the rule: the applicants required leave on a separate basis, namely that the monetary threshold in s 101(2)(r) of the Supreme Court Act was not satisfied.
According to the applicants, the proposed appeal is not moot, notwithstanding that even on their case the settlement sum was due in October last year. The applicants seem to have accepted that the only utility of the proposed appeal lies in the issue of costs. That does not assist them. The quantum of the costs ordered against the applicants (just under $20,000) is far less than the monetary threshold for an appeal as of right in this Court and that alone would provide a powerful reason not to grant leave to appeal. Further, the Court would not grant leave merely to challenge a costs order, which could only be overturned if the substantive orders were erroneous, but their validity is moot.
It should be noted that the applicants made no reference to the question of interest payable in accordance with the orders of the primary judge in an amount of $96,955.83, calculated from 30 June 2023 to the date of judgment (3 September 2024). It appears from the judgment below that interest was payable on the original loan.
Leave to appeal is ordinarily appropriate only in matters that involve questions of principle, questions of public importance or an injustice which is reasonably clear in the sense of going beyond what is merely arguable: Carolan v AMF Bowling Pty Ltd [1995] NSWCA 69 at 3 (Kirby P); Clarke v State of New South Wales [2015] NSWCA 27 at [19]. Further, leave to appeal will not be granted where the appeal is doomed to fail: Young v Hones (No 2) [2014] NSWCA 338 at [63]. See also Cheng v Motor Yacht Sales Australia Pty Ltd t/as The Boutique Boat Company (2022) 108 NSWLR 342; [2022] NSWCA 118 at [14]-[21] (Bell CJ) in relation to small claims.
Assuming leave is required because the judgment below was given pursuant to a motion for summary judgment, an applicant will ordinarily bear a heavy burden in establishing that it should have been allowed to run a defence. But in this case, the relevant defences were raised (including the unpleaded estoppel) and dismissed as untenable. No issue of principle or public importance is raised. Nor does the proposed appeal raise an injustice which is reasonably clear in the sense of going beyond what is merely arguable; the prospects of an appeal in relation to the finding that the claimed contractual variation did not raise an arguable defence are low. The alleged agreement to vary the Deed turns on the proposition that simply not responding to a request for a variation of the time for payment of the debt (and forbearing from making a demand for the debt) amounts to an implicit acceptance of the request. Such a proposition on its face rises no higher than being merely arguable. And in any event the applicants would also need to establish consideration to support any contractual variation, the basis for which is not demonstrated on the face of the pleading.
As to the prospects of an appeal on the unpleaded equitable estoppel defence, this also relies on little more than the lack of a response to the request for a variation. It is by no means clear how the applicants could establish detrimental reliance on any such representation, or that it was unconscionable for the respondent to insist upon timely payment.
Thus, any error in the primary judge's conclusion that no arguable or viable defence was discernible from the pleadings or material before him is either not apparent or does not go beyond the merely arguable.
Even leaving aside these difficulties, leave should not be granted given the limited utility of the proposed appeal. Accordingly, leave to appeal will be refused.

Costs

In the event that leave were refused, the respondent sought a gross sum costs order, calculated on an indemnity basis. The motivation for a gross sum costs order was the respondent's wish to avoid further expense and delay through a cost assessment or negotiation process. The respondent sought to achieve a quick and final resolution of this matter, which has been ongoing since April 2024, noting that the earlier proceedings for payment under the original loan were on foot from September 2020.
The basis for an indemnity costs order was said to be that this was "a hopeless case from the outset" and had the effect of delaying payment under the Deed. The respondent submitted that, at the time of filing the summons seeking leave to appeal, it would have been clear that, at best, the applicants would achieve "a due date already in the past".
The respondent claimed that it would be unlikely (due to the first applicant's financial position as disclosed in its balance sheet which was tendered in the proceedings before the primary judge but is not before this Court) that the respondent would recover costs from the applicants. The respondent referred to a balance sheet, said to have been referred to in Mr Cao's affidavit, suggesting that the first applicant had net assets of negative $1.8 million as at 31 March 2024. However, no evidence as to either applicant's current financial position was before this Court.
With respect to the amount of such an order, the respondent sought leave to rely on an affidavit of the respondent's solicitor, Leo Lam, affirmed on 3 February 2025 and filed in the Registry. Mr Lam set out the respondent's costs of defending this leave application (on the papers) calculated on an indemnity basis at $8,210.36 (including GST). That amount comprised counsel's fees of $4,950 and solicitors' fees of $3,260.36.
The applicants did not respond in their written submissions (filed after the respondent had foreshadowed an application for indemnity costs) to the submissions made by the respondent as to the costs of the application for leave to appeal.
The principles to be applied in determining an application for a gross sum costs order were outlined in Hamod v State of New South Wales [2011] NSWCA 375. The amount in issue is small and the costs of assessment are likely to be disproportionate to that amount. Accordingly, such an order is warranted.
However, the respondent's costs should be assessed on the ordinary basis. The appeal was not entirely moot, although it was of limited practical utility (since the due date for payment of the settlement sum has on any view long since expired). There is no reason why the bringing of the appeal should have delayed the payment of what the applicants accept was due as at 31 October 2024. While there is force to the suggestion that the application for leave was doomed to fail, not least having regard to the applicants' acceptance that the utility of an appeal was limited to the issue of costs, the bringing of the application does not warrant an order for indemnity costs.
The description of the work involved in preparation for the hearing on the papers of this application was reasonable. A discount should be applied to reflect the vicissitudes of the costs assessment process, and the fact that costs are not being assessed on the indemnity basis as sought. Counsel's fees may be allowed in full and a discount of 25% applied to the solicitor's fees (allowing the sum of $2,445 for those fees). The gross sum costs will be allowed in the amount of $7,395.36.

Orders

Accordingly, the Court makes the following orders: 1. Dismiss the applicants' summons seeking leave to appeal. 2. Order that the applicants pay the respondent's costs in the sum of $7,395.36.

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: 25 February 2025

(2022) 108 NSWLR 342

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