New South Wales Supreme Court CITATION : AGC v Johnson [1999] NSWSC 225 CURRENT JURISDICTION : Equity FILE NUMBER(S) : 4977 of 1998 HEARING DATE(S) : 15 March 1999 JUDGMENT DATE : 15 March 1999 PARTIES : Australian Guarantee Corporation Ltd (Plaintiff) Edwin David Johnson (Defendant) JUDGMENT OF : Windeyer J at 1 COUNSEL : Mr. P. Dowdy (Plaintiff) Mr. I Neil with him Ms B. Vukadinovic (Defendant) SOLICITORS : Henry Davis York (Plaintiff) Schweizer & Co (Defendant) CATCHWORDS : Falcke v Scottish Imperial Insurance Company (1887) 34 Ch D 234 CASES CITED : Ghana Commercial Bank v Chandiram (1950) AC 732 Meagher Gummow & Lehane, Equity Doctrines & Remedies 3rd ed para 913 DECISION : - 6 - THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION WINDEYER J MONDAY 15 MARCH 1999 4977/98 - AUSTRALIAN GUARANTEE CORPORATION LTD v EDWIN DAVID JOHNSON JUDGMENT 1 HIS HONOUR: The defendant by Notice of Motion filed on 1 March 1999 seeks orders, first that the proceedings be dismissed pursuant to Part 13 Rule 5 of the Supreme Court Rules, and second that injunctive orders made by this Court on 11 December 1998 and extended on 17 December 1998 be vacated by which I think it is meant dissolved. 2 It is convenient to deal with the application for dismissal first because that is the main claim of the defendant. To do that it is necessary to look at the substantive relief which is claimed by the plaintiff Australian Guarantee Corporation Ltd (AGC) in the summons. The substantive relief is for a declaration that a certain Kenworth motor vehicle is the property of AGC and an order that the defendant deliver up that vehicle to the plaintiff. 3 It is conceded by the defendant that the vehicle is within his control somewhere in North Queensland. He refused in the witness box to answer a question as to the address where it was kept and I was not asked to require him to do so. It is really immaterial as there is no doubt that the defendant knows where it is and that if he can he will deliver it to an agent for sale. 4 The plaintiff claims that the vehicle is its property. The facts which give rise to this claim are a little difficult but in brief can be stated as follows. 5 The vehicle was the subject of an agreement being a Credit Contract and Security Mortgage between the plaintiff and his former defacto companion Janet Duncan, and Esanda Finance Corporation Limited, (Esanda) under which that vehicle was subject to what is described as a "property mortgage", pursuant to which, in consideration of Esanda lending to the then applicants the sum of $60000 repayable on certain terms at interest rates set out, the borrowers, namely, Mr Johnson and Miss Duncan as beneficial owners conveyed to Esanda the truck by way of mortgage subject to the usual proviso for redemption that appears in this type of document. 6 It appears on the evidence at this stage that Mr Johnson and Miss Duncan severed their relationship; that Mr Johnson had made some arrangements with Esanda Limited to vary the terms of the loan agreement, he having made substantial payments under it in accordance with its terms; that the vehicle was stolen from him; that some days later an application was made to AGC for finance by a company Hasbar Pty Ltd of which a Mr Hasseldon was a director, by way of an offer to sell that vehicle, the offer purporting to be made by Mr Johnson and Miss Duncan with a request to Westpac Corporation Limited, presumably as agent of AGC, to accept the offer of sale, such offer on acceptance bringing into force the provisions of what seems to be described as a Standard Asset Purchase Agreement between the bank or AGC and Hasbar Pty Ltd. 7 On the date that agreement was to be finalised Mr Johnson, having apparently found out the location of the vehicle which he says is his sole property, took that vehicle back into his own possession where it has remained since. On that same day, however, AGC paid out the monies which it had agreed to lend pursuant to its acceptance of the offer to sell, and offer of finance, as a result of which $43,579.43 was paid to Esanda Finance Corporation Limited, and the balance of $18,420.57 was paid by cheque payable to the defendant and Miss Duncan, which apparently was endorsed by Miss Duncan and purported to be endorsed by Mr Johnson although his signature was forged. The cheque was negotiated through a bank account for the benefit of either Miss Duncan or Mr Hasseldon or his company. It does not matter which. 8 It is not necessary to set out any further facts because the rights of the parties at least at this stage depend upon the result of the monies having been paid to Esanda and the liability on Mr Johnson and Miss Duncan to that company having been discharged. 9 The applicant/defendant says that AGC has no interest in the truck. Thus, it says, its claim under the summons must fail and it should be struck out and therefore the injunctive orders dissolved, which they would be automatically if the summons were dismissed. 10 To enable an application under Part 13 Rule 5 to succeed on the basis on which it is put, it must be shown really that the plaintiff's claim is doomed to fail and there is no reasonable question to be tried as to any property interest asserted by the plaintiff in the truck. 11 The argument of the defendant is that there can be no claim for the right of subrogation which is asserted by AGC because AGC made the payment to Esanda without having been asked to do so by Mr Johnson who did not seek the benefit of that payment from AGC, and therefore no right can be conferred upon AGC by reason of the unsought benefit. 12 It is, of course, correct that if goods are sold by someone who does not own them then the purchaser, unless the circumstances are special, obtains no right or title to those goods as against the owner, but that is not really the question which arises here. 13 The applicant's claim is founded on the principles in Falcke v Scottish Imperial Insurance Company (1887) 34 Ch D 234, reliance being placed upon the general principle enunciated by Bowen LJ in that case that:- work and labour done or money expended by one man to preserve or benefit the property of another do not according to English law create any lien upon the property saved or benefited, nor, even if standing alone create any obligation to repay the expenditure. It is not suggested by the plaintiff/respondent that is not the position. 14 The case of the plaintiff is that it having paid out the mortgagee entitled to legal ownership of the truck it is entitled to be subrogated to the rights that original mortgagee had. It says that in those circumstances the principles enunciated in Falcke have no bearing on the matter and that the principles set forth in Ghana Commercial Bank v Chandiram (1950) AC 732 make it clear that when a third party pays off a mortgage or other security he is presumed to intend to keep that security alive for his benefit, perhaps in some cases until proper security is obtained, and that the fact that this is done without the knowledge or concurrence of the borrower or mortgagor does not bear upon that right to be regarded as if an assignment had taken place. 15 The applicant/defendant argues, that there is some discussion about this principle in other cases concerning a volunteer as to whether such a volunteer is purely an intermeddler. It is not necessary to go into this in detail other than to say that on the passage relied on by the defendant in Meagher Gummow & Lehane, Equity Doctrines & Remedies 3rd ed para 913 in no way sets out to state the position with complete certainty. 16 Whatever the position, in my view it would be impossible to say that there was not a serious question to be tried on the claim which the plaintiff makes that the vehicle is its property, although it cannot be said that the claim for it being its property could be otherwise than being subject to some equity in redemption in the defendant. 17 To that extent, the relief claimed in the summons may not be entirely appropriate but it would certainly not be correct to dismiss the proceedings as they stand because whether or not paragraph 1 is precisely correctly framed, it is capable of amendment, if that is required, and even as it is framed it is not possible to say that the claim that the vehicle is the property of the plaintiff is doomed to fail. 18 In those circumstances, the prime claim made by the defendant for the dismissal of the action must be dismissed. 19 It is probably unnecessary to point out that the right of subrogation to some extent flows from the desire to prevent what would otherwise be an unconscionable benefit going to somebody who ought not to have that benefit. The defendant here on his own evidence would, if he could, sell the truck and take the whole of the proceeds of it having had his liability paid out by AGC by mistake. That mistake was that it paid under the mistaken belief that it had taken a title from those entitled to give it and thus conferred a benefit on the defendant which he ought not in conscience be entitled to receive. However, that is just another matter for later argument which shows that the proceedings ought not to be dismissed under the rules as sought. 20 If that is the position, it is not contested that an appropriate injunction should remain in force. There is a question as to what the appropriate restraint should be. I have stated and, as I understand it, it was accepted by the plaintiff, that the plaintiff should be secured for the amount which it paid to Esanda, namely, $43,579.43 not by payment of that amount to it out of the proceeds of sale but by payment of that amount into Court to abide the final result of this hearing. In other words, any amount received on the sale of the vehicle in excess of that amount ought to, so far as AGC is concerned, go to Mr Johnson. 21 In my view an appropriate restraining order should be put in force to give effect to that preventing the disposal of the vehicle in a way otherwise than on the basis that that sum be paid into Court. Last Modified: DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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