Supreme Court New South Wales Medium Neutral Citation: Chen v Fang [2019] NSWSC 960 Hearing dates: On the papers Date of orders: 30 July 2019 Decision date: 30 July 2019 Jurisdiction: Equity Before: Darke J Decision: Leave granted to Cross-Claimants to discontinue Cross-Claim on the basis that the Cross-Claimants pay the Cross-Defendants' costs of the Cross-Claim on the ordinary basis. Catchwords: COSTS – discontinuance of proceedings – whether positive ground or good reason to depart from the default position under Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), r 42.19 – cross-claimants guaranteed repayment of a loan under a Deed of Loan and Deed of Guarantee – where cross-claimants filed a Cross-Claim seeking to be discharged from various agreements including the Deed of Loan and Deed of Guarantee – where loan subsequently repaid by borrower – whether repayment of loan rendered Cross-Claim futile due to a supervening event – only part of Cross-Claim rendered futile by reason of the repayment – no reason to depart from the default position under UCPR r 42.19 COSTS – discontinuance of proceedings – terms of discontinuance – application by cross-defendants for the cross-claimants to pay indemnity costs – whether Cross-Claim raised hopeless or futile claims – whether pursuit of Cross-Claim involved an abuse of process – where pleadings in Cross-Claim were in certain respects deficient – whether cross-claimants unnecessarily prolonged the prosecution of the Cross-Claim – costs assessed on the ordinary basis Legislation Cited: Competition and Consumer Act 2010 (Cth), s 87, Sch 2 Uniform Civil Procedure Rules 2005 (NSW), rr 13.4, 42.19 Cases Cited: Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 Fordyce v Fordham (2006) 67 NSWLR 497; [2006] NSWCA 274 McGuirk v University of New South Wales [2009] NSWSC 1424 One.Tel Ltd v Commissioner of Taxation (2000) 101 FCR 548 Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 Ralph Lauren 57 Pty Limited v Byron Shire Council [2014] NSWCA 107; (2014) 199 LGERA 424 Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 Category: Costs Parties: Changqui Chen (Plaintiff/First Cross-Defendant) Leo Shi Ran Fang (First Defendant/First Cross-Claimant) Weixiong Liu (Second Defendant/Second Cross-Claimant) Newton Park Pty Ltd (Third Defendant/Second Cross-Defendant) Peter Lord (Third Cross-Defendant) Jingxiong Liang (Fourth Cross-Defendant) The International Equine Group Pty Ltd (Fifth Cross-Defendant) Representation: Counsel: Mr F Santisi (Plaintiff/First Cross-Defendant) Mr J Baird (First Defendant/First Cross-Claimant and Second Defendant/Second Cross-Claimant) Mr A Hopkins (Third Defendant/Second Cross-Defendant, Third and Fifth Cross-Defendants) Solicitors: Goh Lawyers (Plaintiff/First Cross-Defendant) Ark Capital Advisors (First Defendant/First Cross-Claimant and Second Defendant/Second Cross-Claimant) Prime Lawyers (Third Defendant/Second Cross-Defendant, Third and Fifth Cross-Defendant) File Number(s): 2015/52202 Publication restriction: None Judgment Introduction 1. These proceedings were commenced by the plaintiff Changqui Chen in February 2015. By his Summons, Mr Chen sought a judgment in the sum of $1 million (plus interest) against the first defendant Leo Shi Ran Fang and the third defendant Newton Park Pty Ltd ("NP") who were respectively a guarantor under a Deed of Guarantee and a borrower under a Deed of Loan, each executed in June 2014. In connection with those agreements, various charges and a mortgage were granted, including over properties co-owned by Mr Fang and the second defendant Weixiong Liu situated in Crown Street Wollongong ("Crown Street Properties"). Mr Chen sought orders for judicial sale in respect of these properties. 2. In April 2018 Mr Fang and Ms Liu filed a Cross-Claim seeking relief under the Competition and Consumer Act 2010 (Cth) and the general law to be discharged from their obligations under the various agreements entered into in June 2014. Mr Chen and NP were named as cross-defendants. 3. Three other parties were joined as cross-defendants. Peter Lord was named as the third cross-defendant. Mr Lord is the sole director of NP and another company called The International Equine Group Pty Ltd ("IEG"), which was named as the fifth cross-defendant. At all relevant times IEG was the sole shareholder and parent company of NP. Jingxiong Liang was named as the fourth cross-defendant. Mr Liang is an associate of Mr Chen and both are said to be members of a China-based syndicate called the Shunde Investment Chamber of Private Entrepreneurs ("Shunde"). 4. In September 2018 the loan to Mr Chen was fully repaid as a result of NP selling land it owned at Kembla Grange (referred to by the parties as the "Newton Park Properties") and applying the proceeds of sale towards the discharge of the loan. Insofar as Mr Chen and NP were concerned, the dispute in respect of the main claim appears to have been resolved, although no orders have been made in that regard. 5. Mr Fang continued to prosecute the Cross-Claim, and in October 2018 foreshadowed that an amended Cross-Claim would be served on the cross-defendants. Mr Fang filed a Notice of Motion on 11 January 2019 seeking leave to file an amended Cross-Claim. After the most recent version of the proposed amended Cross-Claim was served, Mr Lord, NP and IEG filed a Notice of Motion on 5 April 2019 seeking to strike out or dismiss the Cross-Claim. 6. Both motions were listed for hearing on 10 May 2019. However, on that day, Mr Fang did not press the application to amend the Cross-Claim. Instead, leave was sought to discontinue the existing Cross-Claim. The cross-defendants indicated that they did not oppose the application for leave to discontinue, save as to the appropriate terms in relation to costs. Directions were made for the parties to provide written submissions as to the appropriate costs orders to be made in the circumstances. An order was also made dismissing with costs the Notice of Motion seeking leave to file an amended Cross-Claim. 7. In broad terms, Mr Fang and Ms Liu seek leave to discontinue the Cross-Claim on terms that there be no order as to the costs of the Cross-Claim. The cross-defendants oppose that course. They seek an order that Mr Fang and Ms Liu pay the costs of the Cross-Claim (including the costs of the motion seeking leave to file an amended Cross-Claim, and the costs of the present application) on an indemnity basis. Further, they seek orders that any further proceedings commenced by Mr Fang or Ms Liu concerning the same or substantially the same subject matter be stayed until an earlier costs order against Mr Fang has been satisfied. 8. Various affidavits were relied upon by each party in support of their cases. Mr Fang and Ms Liu relied upon the affidavit of Mr Fang dated 26 April 2019 and certain parts of the affidavit of Mr Lord dated 5 April 2019. Mr Lord, NP and IEG relied upon Mr Lord's affidavit and also upon certain parts of Mr Fang's affidavits of 8 August 2018 and 26 April 2019. Mr Chen relied upon the affidavit of Frank Ngo dated 28 May 2019. The Court has read and considered the evidence sought to be relied upon. All parties were content for the questions of costs to be dealt with on the papers. Uncontroversial Background to the Cross-Claim 1. In June 2014 Mr Chen, Mr Lord (in his own right and in his capacity as a director of NP and IEG), Mr Fang and Mr Liang entered into a suite of agreements, all of which concerned an investment opportunity involving the acquisition and the development of the Newton Park Properties. The agreements included the following: 1. A Deed of Loan dated 6 June 2014 between Mr Chen as lender and NP as borrower, as well as Mr Lord and Mr Fang as guarantors. Under the terms of this agreement, Mr Chen agreed to lend $1 million to NP to be used primarily to discharge an existing second ranked mortgage over the Newton Park Properties. The repayment obligations of NP were guaranteed by Mr Lord and Mr Fang. Repayment of the principal was to occur on 3 September 2014, with the payment of interest dependent on whether Mr Chen (or his nominee) acquired the Newton Park Properties. The Newton Park Properties were charged to secure the repayment of the loan; 2. A Deed of Guarantee dated 6 June 2019 between Mr Chen as lender and Mr Fang as guarantor. Under the terms of this agreement, Mr Fang guaranteed NP's repayment obligations under the Deed of Loan; 3. A mortgage dated 6 June 2014 over one of the Crown Street Properties; 4. An Option to Purchase dated 6 June 2014. Under this agreement, NP granted to Mr Liang and Mr Fang (identified as the purchasers) an option to purchase the Newton Park Properties. The option was capable of being exercised by the purchasers within 42 days of the agreement; 5. A Deed of Agreement dated 6 June 2014 between NP, IEG, Mr Liang and Mr Fang. Under the terms of this agreement, the parties acknowledged the existence of an Option to Purchase with respect to the Newton Park Properties. It was then stated that IEG was indebted in the amount of $1,160,000 to Power Rock Pty Ltd, and that this debt had been assigned to Mr Liang and Mr Fang. The agreement then went on to state that NP and IEG agreed that Mr Liang and Mr Fang could offset the assigned debt against the purchase price of the Newton Park Properties; 6. An undated Deed supposedly entered into in around June 2014 between Mr Fang and Mr Liang. Under the terms of this agreement, Mr Fang agreed to guarantee Mr Liang a certain return on investment in consideration for Mr Liang agreeing to invest in the Newton Park Properties. 1. By his Cross-Claim, Mr Fang seeks to be discharged from "the contracts for the purchase of the [Newton Park Properties]". This most likely is a reference to two contracts for sale entered into with respect to the Newton Park Properties: a contract dated 17 April 2014 between NP (as vendor) and Mr Fang (as purchaser), and a contract dated 24 July 2014 between NP (as vendor) and Mr Fang and Mr Liang (as purchasers). The evidence suggests that the parties intended the July 2014 contract to supersede the April 2014 contract. The evidence also reveals that the July 2014 contract was entered into as a result of an exercise of the option under the Option to Purchase. 2. The parties did not complete the July 2014 contract for sale of the Newton Park Properties. The contract was subsequently terminated. It seems that the investment opportunity involving the Newton Park Properties did not materialise. Mr Chen then called upon NP and Mr Fang to pay the amount due under the Deed of Loan. As noted earlier, the main proceedings were commenced by Mr Chen in February 2015. 3. Various events occurred between the commencement of proceedings and the filing of the Cross-Claim in April 2018. It is only necessary to mention that in November 2016, Mr Fang lodged a caveat on the title of the Newton Park Properties. This caveat was subsequently withdrawn in October 2017. A second caveat over the Newton Park Properties was lodged by Mr Fang in November 2017. That caveat was subsequently removed by order of the Court made on NP's application on 10 August 2018. On that occasion, the Court ordered that NP's costs of the application be paid by Mr Fang on an indemnity basis. The Cross-Claim 1. By his Cross-Claim, Mr Fang outlines much of the factual background referred to above. Crucially, Mr Fang alleges that Mr Liang informed him that the $1 million paid by Mr Chen was a deposit paid towards the acquisition of the Newton Park Properties. Mr Fang alleges that he was not aware that the $1 million was in fact a loan that was repayable by NP. Mr Fang alleges that he relied upon Mr Liang's representations in entering into the agreements signed in June 2014. Mr Fang also alleges that he did not receive or was not given an opportunity to receive any independent legal advice concerning the execution of the documents in June 2014. Although by his pleadings Mr Fang seemingly intends to seek relief under the well-known consumer protection provisions within the Australian Consumer Law, the Cross-Claim actually invokes s 87(2) of the Competition and Consumer Act 2010 (Cth) which is concerned with relief in respect of breaches of various provisions of the Competition and Consumer Act. 2. The Cross-Claim goes on to allege in the alternative several bases as to why Mr Fang ought to be discharged from his obligations under the Deed of Loan, Deed of Guarantee and mortgage. First, Mr Fang alleges that Mr Chen withdrew caveats that he had earlier lodged over the Newton Park Properties, and the effect of such withdrawal was to "discharge" Mr Fang's obligations under the Deed of Loan and Deed of Guarantee. Secondly, Mr Fang alleges that Mr Chen and Mr Lord signed a handwritten document which varied the terms of the Deed of Loan without Mr Fang's consent. He alleges the effect of this agreement is to discharge the Mr Fang from his obligations under the Deed of Loan and Deed of Guarantee. Thirdly, Mr Fang alleges that Mr Chen allowed a further mortgage to be registered on the title of Newton Park Properties (without Mr Fang's consent) to secure a debt owing to a third party which purported to have priority over the loan by Mr Chen. As a result of registering that mortgage, Mr Fang's obligations under the Deed of Loan and Deed of Guarantee were allegedly discharged. Finally, Mr Fang alleges that Mr Chen allowed a third party to lodge a caveat on the title of the Newton Park Properties without Mr Fang's consent, resulting in the discharge of Mr Fang's obligations under the Deed of Loan and Deed of Guarantee. 3. Mr Fang does not claim any damages for the alleged misleading and deceptive conduct. The only relief sought was for a "discharge" from the agreements entered into in June 2014. 4. A Defence to the Cross-Claim was filed on behalf of Mr Lord and NP on 24 May 2019. A Defence to the Cross-Claim was filed on behalf of Mr Chen on 6 September 2018. No Defences were filed by IEG or Mr Liang. Relevant Events from September 2018 1. In early September 2018 Mr Chen's loan was fully repaid as a result of NP selling the Newton Park Properties to a third party and applying the proceeds of sale to payment of the outstanding loan. 2. On 17 September 2018, the solicitor for Mr Chen, Frank Ngo, sent an email to the solicitor for Mr Fang noting that the loan had been repaid. Mr Ngo stated that the proceedings in relation to the main claim were to be discontinued. The email went on to state that insofar as the Cross-Claim concerned Mr Chen and Mr Liang, it was now superfluous. Mr Fang was invited to discontinue the Cross-Claim. 3. On 18 September 2018, Mr Ngo returned the certificates of title in relation to the Crown Street Properties to Mr Fang's solicitor. 4. On 20 September 2018 the solicitor for Mr Fang responded to Mr Ngo's email of 17 September 2018. It was stated that the issue of costs would need to be addressed before any discontinuance of the Cross-Claim could occur. Mr Ngo (and the other parties copied into the communication) were requested to agree to adjourn the next directions hearing (scheduled for 21 September 2018) in order to deal with that issue. 5. Later that day, Mr Ngo responded by attaching a Notice of Discontinuance in relation to the main claim. The form noted that the main claim would be discontinued on terms that there be no order as to costs. Mr Ngo asked Mr Fang to sign the form and to send it back. The email also stated that if Mr Fang did not consent to the discontinuance of the Cross-Claim, Mr Ngo would raise the issue at the directions hearing on 21 September 2018. 6. The matter came on for directions in the Real Property List on 21 September 2018 where it was adjourned by consent to 11 October 2018. 7. On 27 September 2018 Mr Ngo returned to Mr Fang's solicitor a Discharge of Mortgage form with respect to the mortgage over one of the Crown Street Properties. 8. When the matter was next listed for directions on 11 October 2019, it was further stood over to 26 October 2018. 9. On 23 October 2018 the solicitor for Mr Fang sent an email to several parties including Mr Ngo and Mr Lord. The email noted that Mr Fang did not consent to the discontinuance of the main claim until the issue of costs had been resolved by the parties. The email went on to state that Mr Fang required Mr Lord and NP to pay his costs. The email also foreshadowed that Mr Fang would soon serve a proposed amended Cross-Claim. The email concluded by attaching proposed Consent Orders seeking to adjourn the next directions hearing on 26 October 2018. 10. Later the same day, Mr Ngo responded noting that his client did not consent to Mr Fang's proposal. Mr Ngo again requested Mr Fang to discontinue the Cross-Claim against his client, failing which a Notice of Motion seeking to strike out the Cross-Claim would be filed. Mr Ngo also expressed his view that there was no legal basis to refuse to consent to the Notice of Discontinuance in relation to the main claim. 11. On 24 October 2018, Mr Fang's solicitor responded. He noted that in accordance with Uniform Civil Procedure Rules 2005 (NSW) r 42.19, Mr Chen would be required to "pay the defendants costs incurred to the date of the discontinuance". The solicitor then noted that he was instructed by Mr Fang that consent to a discontinuance will not be withheld if his costs relating to the Summons were resolved. The email concluded by inviting Mr Ngo to draft proposed orders for the directions hearing on 26 October 2018. 12. Later on 24 October 2018, Mr Ngo responded, reiterating that all issues between Mr Chen and Mr Fang were now resolved. Mr Ngo invited Mr Fang to accept what he called a "final open offer" which involved an agreement to dismiss the main claim, and the Cross-Claim insofar as it concerned Mr Chen and Mr Liang, with no order as to costs. Mr Ngo stated that if the offer was not accepted a motion would be filed seeking costs orders in relation to the Summons, and summary disposal of the Cross-Claim. 13. On 26 October 2018 the Court made directions for a draft amended Cross-Claim to be provided by 16 November 2018 and for Mr Chen to indicate whether he consented to its filing. Directions were made for the filing and service of a Notice of Motion seeking leave to file an amended Cross-Claim in the event that no consent was given. The matter was stood over to 7 December 2018. 14. The evidence indicates that the draft amended Cross-Claim was served by email on the cross-defendants on 20 November 2018. On 4 December 2018, Mr Ngo indicated that Mr Chen did not oppose the filing of the Cross-Claim on the condition that Mr Fang pay Mr Chen's costs in relation to the preparation and filing of an amended Defence to Cross-Claim. 15. The matter next came before the Court for directions on 7 December 2018. The Court made further directions that NP indicate whether it consented to or opposed the amended Cross-Claim by 21 December 2018, and made further directions that in the event that consent was not obtained that Mr Fang file a Notice of Motion by 11 January 2019 seeking leave to file the amended Cross-Claim. 16. On 11 January 2019 Mr Fang filed the Notice of Motion seeking leave to file the amended Cross-Claim. The motion was made returnable on 22 February 2019. 17. On 21 February 2019 Mr Ngo sent an email to the solicitor for Mr Fang stating that his client did not oppose leave to file the proposed Cross-Claim provided that Mr Fang paid the costs associated with amending Mr Chen's Defence to Cross-Claim. 18. At the directions hearing on 22 February 2019, the Court made a direction that any further revised version of the Cross-Claim be served by 1 March 2019. 19. By 4 March 2019 the further revised Cross-Claim had been served on the cross-defendants. On 14 March 2019 Mr Ngo sent an email to the solicitor for Mr Fang seemingly reiterating his previous position, that is, that leave to file the amended Cross-Claim was not opposed provided that Mr Fang paid the costs of preparing and filing the amended Defence to Cross-Claim. 20. On 15 March 2019 the Court granted leave to Mr Lord, NP and IEG to file a Notice of Motion seeking to strike out or summarily dismiss the Cross-Claim in its unamended form. A timetable was then made for the filing and service of evidence and written submissions in relation to the strike out/summary dismissal motion as well as Mr Fang's motion for leave to file the amended Cross-Claim. Both motions were listed for hearing on 10 May 2019. 21. As noted earlier, when the motions came on for hearing on 10 May 2019, Mr Fang did not press his application to amend the Cross-Claim. He instead sought leave to discontinue the Cross-Claim. The Court then made orders dismissing the motion to file an amended Cross-Claim with costs, and directed the parties to provide written submissions in respect of costs. The Proposed Amended Cross-Claim 1. It is necessary to identify the salient features of the proposed amended Cross-Claim. 2. The proposed amended Cross-Claim removed Ms Liu as the Second Cross-Claimant. It also proposed to join a new cross-defendant, Mr Vittorio Cuoco, a solicitor who allegedly acted for Mr Fang as well as Mr Lord on several transactions in the underlying factual matrix. 3. As against Mr Chen, the proposed amended Cross-Claim alleges that Mr Chen's actions (as set out above at [14]) not only caused Mr Fang to be "discharged" from his obligations as guarantor and under the mortgage, but also caused Mr Fang to suffer loss or damage. No particulars or further pleadings describe the nature of this loss or damage. 4. The proposed amended Cross-Claim then goes on to allege that Mr Chen, Mr Lord and Mr Liang represented that the $1 million advance was a deposit when in fact it was a short-term loan. That conduct, it was alleged, was misleading and deceptive and caused Mr Fang to execute the June 2014 agreements and provide the certificates of title to the Crown Street Properties. As a result, Mr Fang alleges that he suffered loss or damage. Again, no particulars or further pleadings describe the nature of the loss or damage. 5. The proposed amended Cross-Claim then makes new allegations that Mr Fang, Mr Chen and Mr Liang were in a partnership or joint venture in relation to the proposed acquisition of the Newton Park Properties. After setting out the scope of the alleged partnership or joint venture, Mr Fang alleges that the sale of the Newton Park Properties in September 2018 and the payment of money to Mr Chen and Mr Liang in satisfaction of the loan resulted in Mr Fang's obligations as guarantor being "discharged" and, further, that Mr Chen and Mr Liang derived an unauthorised benefit from receipt of that money. It also alleges that the "breach by [Mr Chen] and [Mr Liang] caused [Mr Fang] to execute the [June 2014 agreements] and to suffer loss or damage". It is not clear what "breach" is referred to, nor what "loss and damage" was suffered as a result. 6. In relation to the proposed joinder of Mr Cuoco, the proposed amended Cross-Claim alleges that Mr Cuoco had a retainer with Mr Fang and that retainer extended to advising on transactions with respect to the Newton Park Properties. The pleadings go on to allege that the retainer contained a number of express or implied terms which, in summary, obliged Mr Cuoco to "advise or properly advise" Mr Fang with respect to the various June 2014 agreements. The pleadings then allege that Mr Cuoco "breached the fundamental terms of the Retainer" which caused loss or damage. There are no particulars or further pleadings in respect to such loss or damage, nor are there any further pleadings which identify how Mr Cuoco breached his duties. An additional or alternative claim in negligence is made against Mr Cuoco containing materially similar allegations. 7. Mr Fang also alleges that Mr Cuoco owed fiduciary duties to Mr Fang. A number of features of the fiduciary duty are pleaded, including that Mr Cuoco was obliged to act in the best interests of Mr Fang; Mr Cuoco could not put himself in a position of conflict of interest and duty; Mr Cuoco had to declare any conflict of interest to Mr Fang; and that Mr Cuoco was obliged to give advice or properly advise Mr Fang on the effect of the June 2014 transactions. The pleading then goes on to allege that Mr Cuoco breached those duties. Those allegations are made in conclusionary form and do not allege how it is that Mr Cuoco has breached his duties. The pleading then goes on to allege that "[Mr Fang] did not sign the [June 2014 agreements] in the presence of [Mr Cuoco]", "[Mr Fang] is not aware of how the signature of [Mr Cuoco] on [the June 2014 agreements] came to be", and "[Mr Cuoco] never provided legal advice to [Mr Fang] regarding the contents of [the June 2014 agreements]". The pleadings then allege that Mr Fang suffered loss and damage as a result of Mr Cuoco's breaches of duty. Submissions 1. Before summarising the parties' written submissions, some observations should be made at the outset. First, apart from referring to the Court's general powers to award costs, none of the parties identified the specific provisions that govern costs in circumstances where a party seeks leave from the Court to discontinue proceedings (that is, Uniform Civil Procedure Rules 2005 (NSW) r 42.19). No party referred to any of the relevant principles and case law in this regard. Secondly, counsel for Mr Chen submitted, in both his principal submissions and submissions in reply, that Mr Fang should pay the costs of the main claim in addition to the costs of the Cross-Claim. The orders made on 10 May 2019 do not in terms indicate that the Court would determine the costs of the main claim in this application, and Mr Chen has not made any formal application for costs, or for leave to discontinue his proceedings. Thirdly, it was difficult at times to differentiate between the submissions relating to the extant Cross-Claim and the submissions relating to the amendment application. These two aspects of this application may overlap to some degree, but they are not identical. 2. The cross-defendants made uniform submissions in support of the contention that Mr Fang should pay the costs of the Cross-Claim on an indemnity basis. First, the cross-defendants submitted that Mr Chen's Cross-Claim raised allegations that were "fanciful or hopeless" or so weak as to be futile (Wentworth v Rogers (No 5) (1986) 6 NSWLR 534), with the application to discontinue a tacit acknowledgement of such weakness. Secondly, the cross-defendants submitted that certain aspects of Mr Fang's Cross-Claim amounted to an abuse of process. The cross-defendants referred in particular to Mr Fang's lodging of the second caveat over the Newton Park Properties as evidence of an abuse of process where Mr Fang sought to defend the caveat in the removal application in August 2018 when he was simultaneously seeking in his Cross-Claim a discharge from the very agreement said to support the caveat. The cross-defendants also submitted that Mr Fang made various allegations of fraud, misleading conduct and sham which were said to constitute an abuse of process. Thirdly, the cross-defendants submitted that Mr Fang's conduct in prolonging the Cross-Claim following the repayment of the loan to Mr Chen constituted "relevant delinquency" (see Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [44]) which caused the parties to incur wasted legal costs to defend the Cross-Claim which was ultimately abandoned. Fourthly, the cross-defendants submitted that the fact that the loan had been repaid in September 2018 meant that to there was no longer any utility in the declaratory relief sought in the Cross-Claim. 3. Counsel for Mr Chen separately submitted that the solicitors for Mr Chen "wrote time and time again that no cause of action was disclosed as against them" and would discontinue as to the Summons and sought a discontinuance for the Cross-Claim, but each time they were met with resistance without identifying a proper basis. I understood this submission to mean that the legal representatives for Mr Fang unreasonably refused to accede to Mr Ngo's requests such that the proceedings were continued unnecessarily. 4. Counsel for Mr Lord, NP and IEG seperately submitted that neither the extant Cross-Claim nor the proposed amended Cross-Claim identified any pleaded case for relief as against NP and IEG. Nor did Mr Fang's affidavit identify any such case. It was submitted that the proceedings as against those parties could have been summarily dismissed under UCPR r 13.4, and this meant the proceedings were hopeless and delinquent, grounding an order for indemnity costs. Insofar as the Cross-Claim pleaded claims as against Mr Lord, counsel submitted that the claims for misleading and deceptive conduct were embarrassing or so imprecise in their identification of the material factual allegations as to deprive the opposing party of proper notice of the real substance of the claim (McGuirk v University of New South Wales [2009] NSWSC 1424 at [21]-[35]). Finally, counsel submitted that the affidavit of Mr Fang raised allegations of fraud that were never properly pleaded or particularised in either the extant Cross-Claim or the proposed Cross-Claim. This was said to highlight the underlying deficiencies in the Cross-Claim. 5. Counsel for Mr Fang contended that there should be no order as to costs in relation to the extant Cross-Claim. Counsel submitted that Mr Fang had an arguable case at the time the Cross-Claim was filed in April 2018 to seek a discharge under the Deed of Loan, Deed of Guarantee and the mortgage. It was submitted that it was not improper, hopeless or an abuse of process to file the Cross-Claim in the first place, and Mr Fang acted reasonably at all times up to at least 26 October 2018 in pursuing the Cross-Claim. The reality is, it was submitted, that the supervening event that occurred in September 2018 with the loan being paid out made it unnecessary or futile for the Court to determine the issues arising on the Cross-Claim. 6. Furthermore, counsel for Mr Fang contended that insofar as the substantive claims on the Cross-Claim were concerned, it would be inappropriate for this Court to conduct a hypothetical trial on the merits of the Cross-Claim for the purpose of determining costs. 7. In relation to the amendment application, counsel for Mr Fang contended that he has already conceded liability to pay the costs of the 11 January 2019 motion on the ordinary basis and that there was no reason for any special costs order to be made. In particular, counsel submitted that there was no relevant delinquency on Mr Fang's part in seeking "to ventilate [Mr Fang's] substantial grievances against the second and third cross-defendants in the way that was pleaded", pointing to Mr Fang's affidavit as evidence of the substance of the allegations. Counsel also submitted that there was no significant delay in putting on the amended Cross-Claim. Counsel noted that a commercial decision was made not to press the amendment application and instead seek to discontinue the Cross-Claim and commence fresh proceedings elsewhere, due in part because of the proposed joinder of Mr Cuoco as the sixth cross-defendant. Determination 1. It is convenient to first consider the question of costs in relation to the discontinuance of the extant Cross-Claim. The starting point is whether the Court should make no order as to costs notwithstanding r 42.19(2) of the Uniform Civil Procedure Rules ("UCPR"). That rule relevantly provides: Unless the court orders otherwise or the notice referred to in rule 12.1(2) otherwise provides, the plaintiff must pay such of the defendant's costs as, at the date on which the notice of discontinuance was filed, had been incurred by the defendant in relation to each claim in respect of which the proceedings have been discontinued. 1. The effect of this rule is to create a default position concerning costs for discontinued proceedings. However, the rule does not create a presumption; it remains for the discontinuing party to show "some positive ground or good reason for departing from the ordinary course" of awarding costs pursuant to that rule (see Ralph Lauren 57 Pty Limited v Byron Shire Council [2014] NSWCA 107; (2014) 199 LGERA 424 at [21]; Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 at [54]; Fordyce v Fordham (2006) 67 NSWLR 497; [2006] NSWCA 274 at [84]). 2. In some circumstances, a positive ground or good reason may include a supervening event that removes or modifies the subject matter of the dispute (Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 at [5], citing One.Tel Ltd v Commissioner of Taxation (2000) 101 FCR 548 at 552–3; see also Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 at [50]-[51]). In the present case, I understood counsel for Mr Fang to contend that the repayment of the loan in September 2018 removed the substratum of the dispute between the parties, meaning that the continued prosecution of the Cross-Claim became unnecessary. 3. The principal difficulty with this submission is that Mr Fang's case under the Cross-Claim did not seek only to protect his position in respect of the Deed of Loan, Deed of Guarantee and the mortgage. Mr Fang's primary case was that the conduct of cross-defendants was misleading and deceptive so that the Court could afford relief in the nature of a "discharge" in respect of all the agreements executed in June 2014. Relief was sought in respect of the Option to Purchase, Deed of Agreement, undated Deed and the two contracts for the sale of the Newton Park Properties, none of which by their terms had any direct relationship with the terms of the Deed of Loan, Deed of Guarantee and the mortgage (apart from being executed at around the same time and being related to the Newton Park Properties). Mr Fang could have limited his Cross-Claim to seeking to be discharged from his obligations under the Deed of Loan, Deed of Guarantee and mortgage. Instead, the primary relief in the Cross-Claim significantly expanded the nature of the factual dispute between the parties so as to include agreements that were not the subject of the main claim. 4. In these circumstances, repayment of the loan in September 2018 effectively rendered only part of the subject matter of the Cross-Claim unnecessary. This fact is borne out of the subsequent conduct of Mr Fang in seeking, for a time, to continue and amend the Cross-Claim. For these reasons, I do not think that the repayment of the loan itself amounts to a good reason to depart from the usual position under UCPR r 42.19(2). 5. Mr Fang has indicated that, for commercial reasons, he no longer seeks to pursue the remaining issues on the Cross-Claim in these proceedings but may wish to pursue them and other issues in fresh proceedings (that may also include Mr Cuoco). This provides a reason to discontinue but in my view does not justify any departure from the usual position. I am prepared to accept that there was a reasonable basis for the claims advanced in the Cross-Claim. However, viewing the matter overall, I do not think that the Court should make an order that departs from the usual position embodied in r 42.19(2). 6. The next question is whether Mr Fang should be ordered to pay the costs of the Cross-Claim on an indemnity basis. I will deal first with the submission that Mr Fang's claims were "fanciful or hopeless" or so weak as to be futile. The effect of this submission was to invite the Court to undertake an assessment of the likely prospects of success of the Cross-Claim. However, I accept the submission of counsel for Mr Fang that where leave is given to discontinue the Cross-Claim, and there will be no final hearing on the merits, it would be inappropriate for the Court to conduct a hypothetical trial on the likely success of the Cross-Claim (see Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624; Fordyce v Fordham (supra) at [87]). It is enough to say that this is not one of those clear cases where a Court can be confident that a party would almost certainly have succeeded if the matter had been fully tried (Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (supra) at 624). 7. I also do not accept the submission that the proceedings on the Cross-Claim, or certain aspects of them, constituted an abuse of process. As noted earlier, this submission focused on Mr Fang's second caveat which he lodged over the Newton Park Properties in November 2017 and which was removed by order of the Court in August 2018. On that occasion the Court ordered indemnity costs against Mr Fang because he sought to sustain a caveat on a basis that was inconsistent with his Cross-Claim. That conduct does not lead to the conclusion that the Cross-Claim itself involves any abuse of process. 8. I otherwise reject the balance of the submission that the claims raised in the Cross-Claim amounted to an abuse of process for raising false issues of fraud, sham and misleading conduct. The Cross-Claim does not raise any allegations of fraud or sham, and the allegations relating to misleading and deceptive conduct were not shown to be baseless. 9. The repayment of the loan in September 2018 meant that the practical utility of the Cross-Claim was largely although not entirely removed. Mr Fang indicated reasonably promptly, by 23 October 2018, that he proposed to pursue an amended Cross-Claim. In my view, there was no undue prolongation of the Cross-Claim itself that would amount to "relevant delinquency" as suggested. Moreover, any additional costs incurred by the cross-defendants thereafter would largely be referrable to Mr Fang's application for leave to file an amended Cross-Claim rather than to defending the Cross-Claim itself. 10. For similar reasons, I am unable to accept the submission that Mr Fang's failure to promptly agree to a discontinuance of the Cross-Claim was so unreasonable as to warrant an award of indemnity costs. 11. I have not overlooked the submissions advanced by counsel for Mr Lord, NP and IEG about the inadequacies of the Cross-Claim as a pleading. I accept that the pleadings contained in the Cross-Claim are deficient in certain respects, including in relation to the nature of any claims against NP and IEG. I note, however, that the nature of the relief sought meant that as parties to agreements sought to be set aside, NP and IEG were apparently necessary parties. The deficiencies in the pleadings do not seem to me to be so egregious or productive of wasted costs that they call for an award of indemnity costs. 12. Similarly, I am not persuaded that an award of indemnity costs is justified in respect of the motion for leave to file an amended Cross-Claim. Again, there are plainly deficiencies in the proposed pleading, but not to the extent that the pursuit of the application should be regarded as frivolous or vexatious, or an abuse of process. Refinement of the pleading and the provision of further particulars may well have overcome most if not all of the deficiencies had the application proceeded. I have taken note of the submission that Mr Fang's affidavit of 26 April 2019 contains allegations of fraudulent conduct which are not contained in any pleading. The making of the allegations in that fashion is inappropriate but in circumstances where no response to the allegations was required, and none has been given, indemnity costs is not called for on that account alone. 13. The various matters raised by the cross-defendants, even when considered cumulatively, do not in my opinion justify the imposition of an award of indemnity costs as a term of the discontinuance of the Cross-Claim. The Court will grant leave for the Cross-Claim to be discontinued on the basis that the cross-claimants pay the cross-defendants' costs of the Cross-Claim on the ordinary basis. Those costs will include the costs of Mr Lord, NP and IEG in respect of their Notice of Motion filed on 5 April 2019. 14. I do not propose to make any order for a stay in respect of future proceedings that may be brought by Mr Fang and Ms Liu. It is preferable that any stay of the kind sought be considered in the circumstances that pertain if and when any claims are brought in the future. The question could then be considered having regard to the nature of the claims then formulated, and the extent to which any relevant costs orders remain unsatisfied. 15. As each party has had some measure of success and some measure of failure on the present application, the Court will further order that each party bear its own costs after 10 May 2019. 16. Finally, I note that these reasons do not deal with the costs of the main proceedings brought by Mr Chen. As noted earlier, it seems that there are no outstanding issues as between Mr Chen and NP, although no orders finally disposing of the matter as between them have been made. Further, it appears that there remain issues as to costs as between Mr Chen and Mr Fang and Ms Liu. It would be appropriate in these circumstances for Mr Chen to bring a formal application for orders disposing of the main proceedings (presumably by way of discontinuance) in order to bring the matter entirely to a close. The Court will grant leave for such an application, and will direct that it be brought within eight weeks. The parties are urged to attempt in the meantime to reach an agreement on these remaining matters. If that proves impossible, the Court will give directions for further brief written submissions to be made, with a view to dealing with the application on the papers. ********** 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: 30 July 2019