Nominal Defendant v Dana Australia P/L

[2001] NSWSC 993

CITATION:	Nominal Defendant v Dana Australia P/L [2001] NSWSC 993
CURRENT JURISDICTION:	Common Law
FILE NUMBER(S):	SC 20526/2000
HEARING DATE(S):	28 September 2001
JUDGMENT DATE:	7 November 2001
PARTIES :	The Nominal Defendant (Plaintiff) Dana Australia Pty Limited t/as Truckline Parts Centre
JUDGMENT OF:	Master Harrison

COUNSEL :	Mr F S McAlary QC with Mr D Ronzani (Plaintiff) Mr J E Maconachie QC with Mr G Laughton (Defendant)
SOLICITORS:	PriceWaterhouseCoopers (Plaintiff) Connery & Partners (Defendant)
CATCHWORDS:	Strike out part of the statement of claim - Nominal Defendant suing repairer for breach of contract
LEGISLATION CITED:	Motor Accidents Act 1988 Supreme Court Rules Workplace Injury Management and Workers Compensation Act 1998
CASES CITED:	Agar v Hyde [2000] HCA 41 Air Services Australia v Zarb (NSWSC unreported, 26 August 1998) Dey v Victoria Railway Commissioners (1948-49) 78 CLR 62 General Steel Industries Inc v Commisioner for Railways (1964) 112 CLR 125 Webster & Anor v Lampard (1993) 177 CLR 598 Sydney Turf Club v Crowley (1971) 1 NSWLR 724 King v Victoria Insurance Co Limited [1896] AC 250 State Government Insurance Office of Queensland v Brisbane Stevedoring Pty Limited (1969) 123 CLR 228 Craythorne v Swinburne (1807) 14 Ves 160; 33 ER 482 Aetna Life Insurance Co v Middleport 124 US 534 (1887)
DECISION:	(1) The defendant's notice of motion filed 19 March 2001 is dismissed; (2) The defedant is to pay the Nominal Defendant's costs.

- 13 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

MASTER HARRISON

20526/2000 - THE NOMINAL DEFENDANT v
DANA AUSTRALIA PTY LIMITED t/as

Judgment ( Strike out part of the statement of claim -
Nominal Defendant suing repairer for

breach of contract)

1 MASTER: By notice of motion filed 19 March 2001 the defendant seeks an order that paras 12, 13, 14, 15 and 16 of the plaintiff’s statement of claim be struck out, or alternatively that the plaintiff’s claim for relief in the proceedings to the extent that it depends, or is based, upon paras 12, 13, 14, 15 and 16 of the statement of claim be stayed or dismissed generally.

The statement of claim

2 There will be a trial to establish whether Dana is liable as a concurrent independent tort feasor. Paragraphs 12 to 16 of the statement of claim relate to a claim for breach of contract only. Paragraphs 12 to 16 state:

“12.On or about 1 November the Nominal Defendants says that Dana entered into a contract with Shellharbour for the repair of tanker’s braking system and the restoration of the braking system to a roadworthy condition fit for use on the highway.

PARTICULARS OF CONTRACT
(a) The contract was partly written, partly oral and partly implied.
(b) In so far as the contract was written, it considered of the following documents:
(i) Dana Work Order dated 1 November 1994;
(ii) Dana Invoice numbered 049378 dated 10 November 1994.
(c) In so far as the contract was oral, it was made on 1 November 1994 at the premises of Dana when the tanker was delivered to it in order for it to carry out the said repairs, in a conversation between Nicholas Pearson acting for Shellharbour and the person acting for Dana.
(d) In so far as the contract was implied, it arose from the course of dealing between Shellharbour and Dana in relation to the repair and maintenance of its vehicles including the subject tanker.
(e) The terms of the contract are as pleaded.

13. In breach of contract Dana did not repair the tanker’s braking system and did not restore the braking system to a roadworthy condition fit for use on the highway.

PARTICULARS OF BREACH OF CONTRACT
(a) Failure to correct properly or at all the seizure of the left front wheel cylinder adjuster;
(b) Failure to adjust properly or at all the brakes, particularly the front shoe in order for the braking system to operate properly;
(c) Failure to perform properly or at all the work required to ensure no difference in the performance between each of the two front wheels and each of the two rear wheels during braking;
(d) Failure to perform properly or at all the work required so that there was no difference in braking on the right and left sides of the tanker’s brakes.
14. The accident was caused or materially contributed to by the defective braking system of the tanker arising from the breach of contract by Dana.
15. By reason of Dana’s breach of contract Shellharbour suffered loss and damage including the liability in damages to the plaintiffs in the Ranieri proceedings for the injuries and deaths suffered in the accident.
16. The Nominal Defendant, as the statutory entity responsible for the liability of Shellharbour, in respect of the death and bodily injury suffered by members of the Ranieri family arising out of the use of the said tanker, being an uninsured motor vehicle, upon a public highway to wit the Pacific Highway seeks to recover from Dana damages for Dana’s breach of contract with Shellharbour all damages and costs paid or payable by the Nominal Defendant to the Ranieri Family in respect of death of bodily injury suffered by them in the said accident.”

3 The Nominal Defendant seeks indemnity or alternatively contribution from Dana for the sum of money it has paid to the Ranieri family.

The judgment of Master Malpass dated 9 March 2000

4 On 9 March 2000 Master Malpass delivered judgment in relation to the Ranieri family. Four proceedings were heard by Master Malpass. Each matter arises out of a motor vehicle accident which occurred on the Pacific Highway at Kew at about 7.55 pm on 13 November 1994. There was a collision involving two vehicles. One vehicle was a Toyota Landcruiser. Its occupants were members of the Ranieri family. The other vehicle was a Bush Fire Brigade tanker. It was driven by Mr Brotherson (he was the captain of Oak Flats Fire Brigade) and had a passenger (Colin Crawford, another member of the Fire Brigade).

5 The landcruiser was travelling in a northerly direction as the Ranieri family were returning to Coffs Harbour from Sydney. The tanker was travelling in a southerly direction. The tanker was the last of a group of vehicles travelling in convey from South Grafton to Oak Flats. It had been involved in fire line duties. The tanker was exempt from insurance.

6 At paras 6 and 7 of the judgment Master Malpass stated:

“For present purposes, the tanker is an uninsured vehicle (registration of it is not required as a matter of law). The Nominal Defendant is a party to each of the proceedings (the first defendant). Shellharbour City Council is the legal owner of the tanker. It is also a party to Cross-Claims in each of the proceedings. The tanker had been borrowed by the Oak Flats Fire Brigade from the Dunmore Fire Brigade. Dunmore is in the Shellharbour area. Prior to the accident, some work had been done in relation to the brakes by Dana Australia Pty Limited (Dana). It is also a defendant in each of the proceedings (the second defendant). The Roads and Traffic Authority of New South Wales (RTA), is also a party to each of the proceedings (the third defendant). Allegations were made against it in relation to the road surface. Pursuant to inter alia the Crown Proceedings Act 1988, the State of New South Wales is deemed to be an owner of the tanker. It has liability for the action of servants and/or agents of the Dunmore Bush Fire Brigade. It is also a party to Cross-Claims in each of the proceedings.
There are two proceedings in which Mr Ranieri is the plaintiff. One is brought on behalf of himself and the two surviving daughters (Jennifer and Elizabeth) pursuant to the Compensation to Relatives Act 1897. In the other proceedings he had brought a claim for personal injury suffered in the accident. Settlement had been reached between the plaintiff and the Nominal Defendant in those personal injury proceedings. Each of Jennifer and Elizabeth has brought proceedings for damages in respect of the personal injuries suffered in the accident. In the proceedings brought by Elizabeth, there had also been settlement between the plaintiff and the Nominal Defendant.”

7 On the sixth day of the trial, all questions of liability were resolved. The second defendant (Dana Australia Pty Limited t/as Truckline Parts Centre) and the third defendant (Roads and Traffic Authority) obtained judgment against the plaintiff. The plaintiff obtained judgment against the first defendant (the Nominal Defendant) following an admission of liability – see para 31 of the judgment.

8 The issue in dispute is of fairly narrow compass. The Nominal Defendant is not a party to the contract for repair of the tanker. Dana is a motor vehicle repairer. The contract for the repair of the tanker was between Shellharbour and Dana. Dana submitted that the provisions of the Motor Accidents Act 1988 regime give the Nominal Defendant original liability in that the action can be brought directly against it. An action cannot be brought against the Nominal Defendant by a derivative means. According to Dana, for the Nominal Defendant to characterise itself as an “indemnifier” it requires a leap of faith. The Nominal Defendant submitted that both at common law and equity indemnification gives rise to a right in the indemnifier to be subrogated to the rights of the indemnified.

The law in relation to summary judgment

9 The relevant parts of Pt 13 r 2 (SCR) says:

“2(1)Where, on application by the plaintiff in relation to any claim for relief or any part of any claim for relief of the plaintiff -

(a) there is evidence of the facts on which the claim or part is based; and

(b) there is evidence given by the plaintiff or by some responsible person that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part, or no defence except as to the amount of any damages claimed,
the Court may, by order, on terms, give such judgment for the plaintiff on that claim or part as the nature of the case requires.

10 In Agar v Hyde [2000] HCA 41 the High Court held at 57 that:

“Ordinarily a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formula which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were to go to trial in the ordinary way.”

11 According to their Honours, this is because:

“It would be wrong to deny a plaintiff resort to the ordinary processes of a court on the basis of a prediction made at the outset of a proceeding if that prediction is to be made simply on the preponderance of probabilities.”

12 Similarly, in Air Services Australia v Zarb (NSWSC unreported, 26 August 1998) Rolfe AJA found it useful to remind himself of the highly demanding test imposed on a party seeking summary judgment. His Honour referred to Dey v Victorian Railway Commissioners (1948-49) 78 CLR 62; General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 and Webster & Anor v Lampard (1993) 177 CLR 598. I have reproduced some of the passages quoted in Zarb.

13 In General Steel Barwick CJ, who heard the application alone stated:

“Although I can agree with Latham CJ in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings, in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff’s claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed.”

14 Barwick CJ also said:

“It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of cause of action - if that be the ground on which the Court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; ‘so obviously untenable that it cannot possibly succeed’; ‘manifestly groundless’; ‘so manifestly faulty that it does not admit of argument’; ‘discloses a case which the Court is satisfied cannot succeed’; ‘under no possibility can there be a good cause of action’; be manifest that to allow them’ (the pleadings) ‘to stand would involve useless expense.

15 In Webster Mason CJ, Deane and Dawson JJ reinforced the rigorous testing stating, at p 602:

“The power to order summary judgment must be exercised with ‘exceptional caution’ and ‘should never be exercised unless it is clear that there is no real question to be tried.”’

16 According to Rolfe AJA in Zarb:

“The demanding nature of the test is in no way lessened in circumstances where there are the potential for difficult factual and legal issues to arise. Rather, as the decision in Webster made clear, it is heightened: see also Wickstead & Ors v Browne (1992) 30 NSWLR 1 and Esanda Finance Corporation Limited v Peat Marwick Hungerfords (1997) 188 CLR 241.”

17 Shellharbour as owner of the truck was liable for any damage arising from negligence in its use. By operation of s 27 of the MAA the plaintiffs had the option to sue either the Nominal Defendant or Shellharbour. If Dana’s argument is correct then the nominal defendant cannot sue an alleged negligent repairer for breach of contract. But if a claim for breach of contract could be brought and was successful, the repairer could be liable for the whole of the damage, not just a proportion of it.

18 As previously stated, s 27 of the MAA is permissive not mandatory and gives a right in the injured person to sue the Nominal Defendant if he so elects. The relevant portions of s 27 of the MAA are as follows.

“(1) An action for the recovery of damages in respect of the death of or injury to a person caused by the fault of the owner or driver of a motor vehicle that is not an insured motor vehicle in the use or operation of the vehicle on a public street in New South Wales may be brought against the Nominal Defendant.
…
(3) In respect of any such action, the Nominal Defendant shall be liable as if it were the owner or driver of the motor vehicle.”

19 According to Dana, the Nominal Defendant is a creature of statute whose existence, rights and liabilities are to be found in Division 5 Part 3 of the Motor Accidents Act 1988. It is made directly and personally liable to injured persons or their dependants in particular situations which for present purposes are to be found in s 27, particularly s 27(3). The Nominal Defendant is liable as if it were the owner or driver. According to Dana, the Nominal Defendant’s liability is original. Its rights of recourse are defined by the statute. In some cases (an exempt vehicle is one), the social purpose of the statutory scheme is achieved by the loss suffered by the Nominal Defendant being borne by the fund established by s 32.

20 The Nominal Defendant submitted that s 27 should be compared with s 30 of the Motor Vehicles (Third Party Insurance) Act 1942. Section 30 took away the right in the injured person to sue the owner or driver and substituted the Nominal Defendant. According to the Nominal Defendant, the right of the injured person to sue the owner or driver is not abrogated or destroyed by the Motor Accidents Act 1998. An exempt motor vehicle is an uninsured motor vehicle – see s 27(5). In respect of an unregistered and uninsured motor vehicle the Nominal Defendant has the right of recovery against the owner and driver by virtue of s 31 of the Motor Accidents Act 1988. However this section does not extend to include a right of recovery against a repairer of a motor vehicle.

21 Section 28B of the MAA gives the Nominal Defendant powers as a tortfeasor. So it appears that the Nominal Defendant takes up all the liabilities of the owner of an uninsured and unregistered vehicle but does not take on the full status of the owner. There is no specific legislative provision in the MAA giving to the Nominal Defendant the right of subrogation. By contrast s 230 of the Workplace Injury Management and Workers Compensation Act 1998, provides that if the authority has paid or is liable to pay an amount as compensation for which an employer is liable under this Act or the authority is subrogated to any right of the employer and any insurer of the employer to recover any amount from any other person in respect of that, whether the right arises by way of a liability for contribution, apportionment of liability or otherwise. Dana submitted that if Parliament had intended the Nominal Defendant to have rights of subrogation it would have been a simple matter for it to say so.

22 The Nominal Defendant submitted that it has a statutory obligation to indemnify the owner or driver of an exempt motor vehicle if the injured party elects to sue it in lieu of them and the injured party has subrogated to their right in relation to all matters which reduced the indemnity payment to the Nominal Defendant. The Nominal Defendant further submitted that it is entitled to bring the action in its own name – see s 26(2).

23 As previously stated Dana has submitted that the Nominal Defendant purports to sue upon a contract between Shellharbour and Dana to which it is neither a party nor a privy, and accordingly it cannot do so. Dana further submitted that if the Nominal Defendant asserts some indirect or acquired right, none exists to entitle it to sue upon, or for the benefit of, a contract to which it is not a party. No assignment of any right is pleaded and none is effected by the Motor Accidents Act 1988 – see s 27.

24 Dana submitted that the concepts addressed in paras 7 and 8 might permit an action to be brought otherwise than in the name of the contracting party. Otherwise the only possible right or remedy, subrogation, required the action to be brought in the name of the person in whom the rights originally arose. - see Sydney Turf Club v Crowley (1971) 1 NSWLR 724 where Mason J (at 734E) stated that the plaintiff is required, in the circumstances of the case, to sue in its own name, which demonstrates the unavoidability of subrogation.

25 Dana submitted that the Nominal Defendant became liable by judgment to the plaintiff but Shellharbour did not. For the right of subrogation to arise there has to be an actual payment made with the fact that it is made pursuant to a bona fide and reasonable belief that it is required by the basic and original contract of indemnity and that there is such a contract – see King v Victoria Insurance Co Limited [1896] AC 250; State Government Insurance Office of Queensland v Brisbane Stevedoring Pty Limited (1969) 123 CLR 228. Alternatively, the right springs from well recognised relationship such as surety and debtor; the surety is entitled to every remedy which the creditor has against the debtor – see Craythorne v Swinburne (1807) 14 Ves 160; 33 ER 482.

26 In Aetna Life Insurance Co v Middleport 124 US 534 (1887) at 548-9 the Supreme Court of United States approved the formulation found in H N Sheldon’s text, Law of Subrogation. The court said:

“The doctrine of subrogation is derived from the civil law, and it is said to be a legal fiction, by force of which an obligation extinguished by a payment made by a third person is treated as still subsisting for the benefit of this third person, so that by means of it one creditor is substituted to the rights, remedies, and securities of another … Subrogation, as a matter of right, independently of agreement, takes place only for the benefit of insurers; or of one who, being himself a creditor, has satisfied the lien of a prior creditor; or for the benefit of a purchaser who has extinguished an incumbrance upon the estate which he has purchased; or of a co-obligator or surety who has paid the debt which ought, in whole or in part, to have been met by another [ Sheldon on Subrogation ss 2, 3 ]”

27 In Aetna it was also held that the doctrine of subrogation is not applied for the mere stranger or volunteer, who has paid the debt of another, without any assignment or agreement for subrogation, without being under any legal obligation to make the payment, and without being compelled to do so for the preservation of any rights or property of his own.

28 The doctrine of subrogation is described in general terms by Ashburner (Principles of Equity 2nd ed p 243) as a payment by A to B that may have the effect of swelling the assets or diminishing the liabilities of C, but it may not give A in law any direct remedy against C. In such a case a court of equity allows A to stand in the shoes of B to enforce against C in equity corresponding rights to those which B would have against him at law or in equity.

29 The central issue in this matter is whether the Nominal Defendant, being neither a party nor a privy to the original contract between Shellharbour and Dana Australia Pty Limited, may be subrogated to the rights of Shellharbour and so sue Dana for alleged negligence stemming from an alleged breach of contract to recover monies paid to the Ranieries.

30 The Act is silent as to whether the Nominal Defendant takes on the full status of the motor vehicle owner. Section 29 of the Act expressly states that even though the Nominal Defendant fund shall satisfy any successful claim against the authority, the Nominal Defendant ‘shall not be personally liable to pay any amount payable’.

31 It is arguable that the Nominal Defendant may have a direct or acquired right to be subrogated to the rights of Shellharbour. In Aetna the court held that ‘the doctrine of subrogation is not applied for the mere stranger or volunteer who has paid the debt of another…without any obligation to make the payment’. ‘Rather, the quest always is to isolate that attribute of the relations between A, B and C (in the example of Bowen LJ and Ashburner) which makes A more than a stranger to the nexus between B and C and generates in his favour an equity satisfied only by requiring B to pursue his legal rights against C for the benefit and at the direction of A. It is arguable the Nominal Defendant was not a mere stranger to the nexus between Shellharbour and Dana.

32 To the contrary, it is arguable that the Nominal Defendant indemnified Shellharbour by paying the Ranieries for the damage they sustained. It can also be argued that the Nominal Defendant was not personally liable for the relevant accident, and therefore that the Nominal Defendant indemnified Shellharbour and thereby acquired subrogatory rights. Although the Act does not explicitly grant subrogatory rights to the Nominal Defendant, as does s 230 of the Workplace Injury Management and Workers Compensation Act 1998, it does not expressly deny such rights. It is my view that this issue is one which should be permitted to go to trial.

33 Costs are discretionary. Costs should follow the event. Dana is to pay the Nominal Defendant’s costs.

I order that:

(1) The defendant’s notice of motion filed 19 March 2001 is dismissed.

(2) The defendant is to pay the Nominal Defendant’s costs.
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Last Modified: 11/08/2001