MODE MOTOR PTY LTD v COL CRAWFORD PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL SAMUELS, MEAGHER JJA and Hope AJA 29 August 1989, 29 August 1989 [1989] NSWCA 146 Summary judgment — sale of motor vehicle — warranty as to no encumbrances — action for breach of warranty — denial of existence of valid encumbrance — District Court Rules Part 11A r2 onus on applicant to show no real question to be tried — appeal allowed. ORDERS Appeal allowed. Judgment below set aside and matter remitted to District Court. Respondent to pay costs of application and of appeal and to have a certificate under the Suitors' Fund Act in respect of the costs of the appeal. Hope AJA This is an appeal from a decision of his Honour Judge Conomos striking out the verified defence which the defendant had filed in proceedings brought against it by the plaintiff and ordering entry of summary judgment in favour of the plaintiff in the sum of $8,937.57, together with interest. The circumstances in which his Honour made these orders were these. On or about 3 July 1986 the plaintiff bought from the defendant a Ford motor vehicle registered number NOT 826. On 4 July 1986 Mr Lyall on behalf of the defendant gave to the plaintiff a document warranting that the vehicle was unencumbered. On 24 July 1986 the plaintiff sold the vehicle to Mr Michael Valkovich. In December of that year Mr Valkovich informed the plaintiff that the vehicle had been repossessed on behalf of UCL Finance Limited. Mr Crawford representing the plaintiff, having made inquiries of UCL Finance Limited, was told that there was an amount of $8,937.57 owing to UCL Finance Limited under a lease in respect of which an identification number was given. The plaintiff accordingly paid that sum to UCL Finance Limited and seeks to recover that amount from the defendant as damages for the breach of the warranty in respect of encumbrances. Before instituting the proceedings a representative of the plaintiff got in touch with Mr Lyall and a meeting was held at which Mr Lyall was told about the encumbrance and was asked for the outstanding sum. Mr Lyall agreed that he was liable and gave the representative a cheque for the amount. However the cheque was postdated by one year. In an affidavit filed by Mr Lyall in the proceedings he said that this postdating was inadvertent. The cheque was not met on presentation by reason of that postdating and no further cheque was given nor was the cheque corrected. The plaintiff accordingly commenced proceedings against the defendant, and in its statement of liquidated claim made the following allegations: "3. On or about 3rd July, 1986 the Defendant sold to the plaintiff a Ford Falcon motor vehicle registered number NOT 826 for the sum of twelve thousand dollars ($12,000.00), it being a term of the Agreement for Sale that the said vehicle was unencumbered. 4. The Plaintiff subsequently sold the said motor vehicle to Mr M Valkovich. 5. On or about Ist December, 1986 the Plaintiff was informed that the said motor vehicle was encumbered pursuant to a Lease No L26661696 with UCL Finance Ltd of 104 Mount Street, North Sydney, in an amount of $8,937.57. 6. The plaintiff was obliged to pay the outstanding moneys to UCL Finance Ltd. 7. The Plaintiff claims the sum of $8,937.57 plus interest." 2 UNREPORTED JUDGMENTS The defendant's verified defence alleged that it did not know and could not admit par 4 of the statement of liquidated claim, and denied pars 5, 6 and 7 of that claim. The plaintiff thereupon took proceedings to strike out the defence and applied for summary judgment. In the affidavit filed in support by Mr Crawford there were set out the facts that I have referred to but it gave no more particulars about the alleged transaction under which money was owing to UCL Finance Limited than that the plaintiff had been told by Mr Valkovich that the motor vehicle had been repossessed by representatives of that company and Mr Crawford was told by that company that the amount was owing to it. Evidence was also given as to the circumstances concerning the cheque to which I have referred. In an affidavit of Mr Lyall filed by the defendant Mr Lyall deposed as a result of inquiries which he had made he had learned that the motor vehicle was owned by Hertz Auto Lease, a division of Kay Rent-a-Car Pty Limited. It was leased by Hertz Auto Lease to Bagev Pty Limited by a lease agreement dated 29 August 1985. A copy of that lease was annexed to the affidavit. Mr Lyall went on to say that he gave the cheque to the plaintiff believing that UCL Finance Limited had a valid claim to the motor vehicle, but had later learned it had not. The annexed form of lease is dated 29 August 1985 and is between Hertz Auto Lease as lessor and Bagev Pty Limited as lessee, and was for a term of one year from 29 August 1985. It makes provision for the payment of moneys owing between the parties by instalments. His Honour took the view that the plaintiff quite properly paid out the amount claimed by UCL to meet the money which was owing under the encumbrance and did not agree with the proposition that the plaintiff had wrongly made that payment. He said the defendant warranted to the plaintiff that the motor vehicle was unencumbered, that was not the case, and there was no dispute that the amount of $8,937.57 was required to pay the encumbrance. He went on to say that once judgment was obtained by the plaintiff against the defendant the matter then became res judicata between the parties and the plaintiff could not look further to the defendant for any damages which might arise. I would respectfully disagree with the conclusion to which his Honour came. The application was made under r2 of Pt11A of the District Court Rules. It is well settled the onus is on the applicant for summary judgment under those rules, as is the case in respect of the analogous Supreme Court Rules, to show that there is no real question to be tried in the action. The evidence adduced in support of its claim for summary judgment by the plaintiff was entirely of a hearsay nature and in many respects was unsatisfactory. It may be that this was the only material available to the plaintiff when the affidavit was made, but that does not cure any deficiency. It does not appear how UCL Finance Limited came to have an interest in the motor vehicle, and its claim to have a valid encumbrance over the vehicle is only one of a number of possibilities which may have existed. One of the possibilities is that in fact it was not the owner of the vehicle and had no encumbrance over it. This view may be supported by the evidence adduced by Mr Lyall as to what appears to have been an interest in Hertz Auto Lease in the motor vehicle, an interest which, if the agreement were carried through in accordance with its terms, would still have existed at the time of the sale on 3 July 1986. However, that evidence is as unsatisfactory as the evidence adduced on behalf of the plaintiff. It does not appear how Hertz Auto Lease came to URJ MODE MOTOR PTY LTD v COL CRAWFORD PTY LTD (Meagher JA) 3 acquire a title or dispose of any title in the vehicle or how the defendant came to be in a position to sell the vehicle if Hertz Auto Lease was its owner as suggested by that agreement. The question of res judicata to which his Honour referred is, in my respectful view, somewhat beside the point. It is true that there would be a res judicata of some kind in respect of the dealing between the plaintiff and the defendant if judgment were entered in favour of the plaintiff against the defendant. However, that res judicata would be quite irrelevant if Hertz Auto Lease was the owner of the vehicle and took proceedings in conversion against the defendant by reason of the defendant's sale of the vehicle. In the circumstances, in my opinion, the plaintiff did not make out a sufficient case to justify the entry of summary judgment. Iam not to be taken as expressing any view as to the final rights of the parties. Iam concerned merely to deal with the question whether his Honour was correct in ordering summary judgment to be entered against the defendant upon the material which was before him. I would allow the appeal with costs. The orders by his Honour should be set aside, the respondent to pay the costs of the application at first instance. Samuels JA I agree. Mr Diamond for the respondent has furnished us with cases from which it appears that the principle is this: "Power to order summary or final judgment is one which should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried." It follows therefore that it must be possible to say without doubt that on the whole of the material there is no question to be tried between the parties. See Fancourt and Anor v Mercantile Credits Limited (1983) 48 ALR 1 at 10, and Sing and Anor v Varinder Kaur (1985) 61 ALR 720 at 722. The onus lies on the applicant to establish the absence of an issue. In the present case it seems to me from the learned Judge's references to the submission made by Mr Fordyce that his Honour may have approached the matter on the footing that the burden lay on the defendant to establish that there was an issue to be tried. That of course was an error. Accordingly despite Mr Diamond's helpful submission I agree with Hope AJA that the judgment below should be set aside. Meagher JA I agree. For the reasons given by my brethren in my view the learned District Court Judge was mistaken in the conclusion which he reached. I should, however, add that his Honour's error is to be explained by the fact that neither party sought to put before him any real evidence on the essential matters he had to decide. The orders of the Court therefore are the appeal is allowed; the judgment below is set aside, and the matter is remitted to the District Court to do therein as shall be just and consistent with the orders of this Court. The respondent must pay the costs here and below. The respondent if qualified is entitled to a certificate under the Suitors Fund Act for the costs of the appeal. Counsel for the Appellant: Ms CA Needham Solicitors for the Appellant: PA Somerset and Company Counsel for the Respondent: Mr SN Diamond Solicitors for the Respondent: O'Brien Collins and Kent