New South Wales Supreme Court CITATION : Nominal Defendant v Dana Australia Pty Limited [2002] NSWSC 1104 CURRENT JURISDICTION: Common Law Division FILE NUMBER(S) : SC 20526/00 HEARING DATE(S) : 17 October 2002 JUDGMENT DATE : 21 November 2002 PARTIES : The Nominal Defendant (Plaintiff) Dana Australia Pty Limited (Defendant) JUDGMENT OF : Studdert J LOWER COURT Supreme Court JURISDICTION : LOWER COURT 20526/00 FILE NUMBER(S) : LOWER COURT Master Harrison JUDICIAL OFFICER : COUNSEL : F.S. McAlary QC/D. Ronzani (Plaintiff/Respondent) I. Harrison SC (Defendant/Appellant) SOLICITORS : PricewaterhouseCoopers Legal (Plaintiff/Respondent) Connery & Partners (Defendant/Appellant) CATCHWORDS : Summary dismissal application relating to claim pleaded by Nominal Defendant - rights of Nominal Defendant following satisfaction of claim in respect of uninsured vehicle - whether subrogated to rights of owner of vehicle who would have been liable on claim but for satisfaction by Nominal Defendant - nature of burden on applicant for summary dismissal. LEGISLATION CITED : Motor Accidents Act Motor Vehicles (Third Party Insurance) Act Dey v Victorian Railway Commissioners (1948-49) 78 CLR 62 General Steel Industries Inc. v Commissioner for Railways (1964) 112 CLR 125 CASES CITED : Webster & Anor v Lampard (1993) 177 CLR 598 Air Services Australia v Zarb (unreported, NSWCA, 26 August 1998) Castellain v Preston (1883) 11 QBD 380 Sydney Turf Club v Crowley (1971) 1 NSWLR 724 DECISION : See para 50 IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION STUDDERT J Thursday 21 November 2002 20526/00 THE NOMINAL DEFENDANT v DANA AUSTRALIA PTY LIMITED JUDGMENT 1 HIS HONOUR: The matter presently before the Court is an appeal from a decision of Master Harrison, who, on 7 November 2001, dismissed an application for summary dismissal of a claim pleaded by the Nominal Defendant (the respondent to this appeal) against Dana Australia Pty Limited (the appellant on this appeal). 2 At the outset it is important to address those principles relevant to an application for summary dismissal of proceedings. The master referred at some length to relevant decisions on this issue and there is no suggestion of any misdirection in that regard. However, it is important that I remind myself of the heavy onus of persuasion which the appellant here bears on an application for summary dismissal. 3 I propose to refer only briefly to leading expressions of principle. In Dey v Victorian Railway Commissioners (1948-49) 78 CLR 62 Dixon J said at p 91: "A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process." 4 Then, in General Steel Industries Inc. v Commissioner for Railways (1964) 112 CLR 125 Barwick CJ said at 129 (referring to the authorities addressing the issue of summary dismissal): "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 a 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'." 5 Then, in Webster & Anor v Lampard (1993) 177 CLR 598 at 602 Mason CJ, Deane and Dawson JJ said: "The power to order summary judgment must be exercised with 'exceptional caution' (General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, at p 129) and 'should never be exercised unless it is clear that there is no real question to be tried' (Fancourt v Mercantile Credits Ltd (1983), 154 CLR 87 at p 99)." 6 Their Honours referred in that expression of principle to the decision in General Steel and then proceeded to cite the dicta of Dixon J in Dey which I have already set out. 7 In Air Services Australia v Zarb (unreported, NSWCA, 26 August 1998) Rolfe AJA referred to those authorities in the course of stating the following expression of principle: "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 Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241." 8 The central issue before the master and before this court on appeal concerns the rights of the Nominal Defendant under the Motor Accidents Act. 9 Before examining the relevant provisions of the Act and the competing submissions, it is necessary to address the background to the claim which the Nominal Defendant pleaded against the appellant and then to examine the pleadings that attracted the application for summary dismissal. 10 In November 1994 there was a motor vehicle accident on the Pacific Highway at Kew. Members of the Ranieri family were proceeding in a vehicle travelling north on the highway when that vehicle was involved in a collision with a bushfire tanker travelling in the opposite direction. It is alleged that the tanker crossed on to its incorrect side of the road. In the collision one member of the Ranieri family was killed and others were injured. 11 Claims for damages were pursued in this court and were heard before Master Malpass. Ultimately the Nominal Defendant admitted liability and damages were recovered by the various plaintiffs against the Nominal Defendant. This brings me to a consideration of the pleadings in the present case. 12 In its claim against the appellant the respondent alleges the appellant agreed with the owner of the tanker, the Shellharbour Municipal Council, to effect repairs to the braking system, and it failed to do so. Such failure was allegedly causative of the collision. 13 The statement of claim pleads the respondent's claim against the appellant in two ways: (1) as a concurrent tortfeasor; (2) by reason of having satisfied the Ranieri claims, the Nominal Defendant became subrogated to the rights the Council had against the appellant because of the latter's breach of its contractual responsibilities to the Council. 14 The pleading asserted relevantly: (a) reliance upon s 28B of the Motor Accidents Act ; (b) the occurrence of the collision; (c) the ownership of the tanker by the Council; (d) the exemption from registration of the tanker; (e) the pursuit of the claims against the Nominal Defendant and the settlement of these claims following admission of liability. 15 In para 12, the respondent pleaded the contractual obligation undertaken by the appellant: "On or about 1 November 1994 the Nominal Defendant says that that Dana entered into a contract with Shellharbour for the repair of the 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 consisted of the following documents: (i) Dana Work Order dated 1 November 1994; (ii) Data 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." 16 Then in para 13 the breach of contract was pleaded: "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 efficiency on the right and left sides of the tanker's brakes." 17 The causative link between the appellant's breach and the accident was pleaded in para 14, and the resultant loss in para 15: "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." 18 The expression of the claim by the Nominal Defendant for breach of contract is to be found in para 16: "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 as 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 or bodily injury suffered by them in the said accident." 19 The claim in tort is pleaded then in paras 17 and 18: "17. Alternatively, the Nominal Defendant says, and the fact is, that by failing to repair the tanker's braking system, and by returning the said tanker to Shellharbour without restoring the braking system to a roadworthy condition fit for use on the highway, Dana was in breach of a duty of care it owed to members of the public, including members of the Ranieri family, lawfully using the highway which breach caused or materially contributed to the death and bodily injuries suffered by members of the Ranieri family in the said accident. 18. The Nominal Defendant, as a statutory entity liable as if a tort feasor in respect of the death and bodily injuries suffered by members of the Ranieri family in the said accident seeks indemnity or contribution from Dana as a tort feasor in respect of the same damage." 20 It is the claim advanced in paras 12-16 of the statement of claim that prompted the unsuccessful application to the master. 21 It is the appellant's contention that the Nominal Defendant, being neither a party nor privy to the contract between the Council and Dana, was not able to base any cause of action against Dana on that contract. The contrary argument was, of course, advanced on behalf of the Nominal Defendant, its contention being that once it paid the various claims it became by way of subrogation entitled to pursue the rights of the Council against the appellant under the contract. 22 This brings me to a consideration of the relevant provisions of the Motor Accidents Act 1988. These appear in Div 5 of Pt 3 of the statute. 23 Section 26 provides for proceedings to be taken against or by the Nominal Defendant: "(1) The Authority is, for the purposes of this Act, the Nominal Defendant. (2) Any action or proceeding by or against the Nominal Defendant shall be taken in the name of the 'Nominal Defendant'." 24 Section 27 enables the bringing of a claim against the Nominal Defendant in respect of an uninsured vehicle: "(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. (2) Any such action may be brought despite the fact that the owner or driver of the motor vehicle is dead or cannot be found or is the spouse of the person whose death or to whom injury has been caused. (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. (4) There is no right of action against the Nominal Defendant under this section: (a) if the motor vehicle is owned by the Commonwealth or by any person or body of persons representing the Commonwealth, or (b) if the regulations provide that in the circumstances specified in the regulations there is no right of action against the Nominal Defendant, or (c) if there is a right of action under section 28A in respect of the death or injury. (5) For the purposes of this section, and any regulations made for the purposes of this section: motor vehicle means a motor vehicle: (a) that is exempt from registration, or (b) that is not exempt from registration and that: (i) is required to be registered to enable its lawful use or operation on a road or road related area in New South Wales, and (ii) immediately before the motor accident occurred, was capable, or would, following the repair of minor defects, have been capable, of being so registered." 25 Section 28 makes provision for the pursuit of a claim against the Nominal Defendant in respect of an unidentified vehicle: "(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 in the use or operation of the vehicle on a public street in New South Wales may, if the identity of the vehicle cannot after due inquiry and search be established, be brought against the Nominal Defendant. (2) The inquiry or search may be proved orally or by affidavit of the person who made the inquiry or search. (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." 26 Section 28B treats the Nominal Defendant as if it is a tortfeasor. Section 28B(1) and s 28B(9) provide: "(1) The Nominal Defendant may join another person, or may be joined, for contribution or indemnity in respect of a claim or proceedings under this Act as if the Nominal Defendant were a tortfeasor……. (9) Except as provided by this section, nothing in this section affects any rules of court relating to the joinder of parties." 27 Section 29 preserves the Nominal Defendant from any personal liability: "The Nominal Defendant shall not be personally liable to pay any amount payable in satisfaction of any claim made or judgment obtained under section 27, 28 or 28A or the amount of any costs or expenses incurred by it in relation to any such claim or judgment, but every such amount shall be paid by the Nominal Defendant out of the Nominal Defendant's Fund established under this Division." 28 Section 31 provides for recovery proceedings: "(1) Any amount properly paid by the Nominal Defendant in satisfaction of a claim made or judgment obtained under section 27, 28 or 28A and the amount of any costs and expenses properly incurred by it in relation to any such claim or judgment may be recovered by the Nominal Defendant as a debt: (a) from the person who, at the time of the occurrence out of which the claim arose or in respect of which the judgment was obtained, was the owner of the motor vehicle, or (b) where at the time of such occurrence some other person was driving the vehicle, from the owner and the driver jointly or from either of them severally." …………………. (3) The Nominal Defendant is not entitled to recover any amount under this section from the owner or driver of a motor vehicle which, at the relevant time, was not required to be registered or was exempt from registration or, if required to be registered, was not required to be insured under this Act." (It is to be observed in passing that s 31(3) would here preclude any recovery proceedings against the Council or the tanker driver because the tanker was a vehicle exempt from registration.) 29 Section 32 provides for the establishment of a fund for the Nominal Defendant: "(1) There is established a fund, to be known as the Nominal Defendant's Fund, belonging to and vested in the Authority. (2) There shall be paid into the Fund: (a) money collected under section 33, and (b) the interest from time to time accruing from the investment of the Fund, and (c) money recovered by the Nominal Defendant under this Part, and (d) money required to be paid into the Fund by or under this or any other Act. (3) There shall be paid from the Fund all money: (a) required to be paid from the Fund under section 29, and (b) required to be paid from the Fund by or under this or any other Act." 30 I will now review in summary form the competing submissions advanced in this Court, (touched upon earlier), which, as I understand it, are essentially the same as those before the master. The appellant's submissions 31 The appellant has submitted that the respondent cannot sue upon a contract to which it was neither a party nor a privy. Nor has any assignment been pleaded or effected by the Motor Accidents Act. 32 The Nominal Defendant became liable by judgment to the Ranieris and the Council did not. 33 No relationship such as that between the Nominal Defendant and the Council has been recognised as giving rise to rights of subrogation and there is nothing in Pt 3 Div 5 upon which such rights can be supported. The liability of the Nominal Defendant under s 27 is an original liability and its rights of recourse are defined in s 31. Because the tanker was an exempted vehicle and no right of recovery existed against the owner or driver of the tanker, the Nominal Defendant's liability is to be funded out of the Fund established under s 32. 34 Had Parliament intended that the Nominal Defendant should have any subrogated rights it could have made express provision to achieve this. 35 In short, it was submitted by Mr Harrison that the right contended for is not to be found either in the statute or in the general law. The respondent's submissions 36 The contrary argument advanced by the Nominal Defendant can be shortly summarised. Section 27(1) does not make it mandatory for an action to be brought against the Nominal Defendant. Rather it permits an action to be brought against the Nominal Defendant instead of the owner or driver. However, once sued the Nominal Defendant becomes liable "as if it were the owner or driver" (s 27(3)). The framework of Div 5, and s 27 in particular, means that the Nominal Defendant's liability is co-extensive with that of the owner or driver and once the Nominal Defendant has discharged any liability in proceedings brought under s 27 it has effectively indemnified the owner or driver. 37 Mr McAlary then submitted that having indemnified the Council the Nominal Defendant became entitled by subrogation to the rights and entitlements of the Council, including rights and entitlements of the Council arising under the Council's contract with the appellant. Hence the Nominal Defendant was entitled to pursue the claim pleaded in paras 12-16 of the statement of claim. 38 The principle upon which Mr McAlary relied found its authoritative expression in the dicta of Brett LJ in Castellain v Preston (1883) 11 QBD 380 at 388: "In order to apply the doctrine of subrogation, it seems to me that the full and absolute meaning of the word must be used, that is to say, the insurer must be placed in the position of the assured. Now it seems to me that in order to carry out the fundamental rule of insurance law, this doctrine of subrogation must be carried to the extent which I am now about to endeavour to express, namely, that as between the underwriter and the assured the underwriter is entitled to the advantage of every right of the assured, whether such right consists in contract, fulfilled or unfulfilled, or in remedy for tort capable of being insisted on or already insisted on, or in any other right, whether by way of condition or otherwise, legal or equitable, which can be, or has been exercised or has accrued, and whether such right could or could not be enforced by the insurer in the name of the assured by the exercise or acquiring of which right or condition the loss against which the assured is insured, can be, or has been diminished. That seems to me to put this doctrine of subrogation in the largest possible form, and if in that form, large as it is, it is short of fulfilling that which is the fundamental condition, I must have omitted to state something which ought to have been stated. But it will be observed that I use the words 'of every right of the assured'. I think that the rule does require that limit." 39 Whilst, generally, an insurer who is subrogated to the rights of the insured brings any action in the name of the insured (Sydney Turf Club v Crowley (1971) 1 NSWLR 724 at 734E), s 26 of the Motor Accidents Act makes express provision for any proceedings to be taken in the name of the Nominal Defendant. This provision ought not to be taken as any expression of legislative intention negativing a right of subrogation. 40 I have broadly summarised the competing submissions that were advanced on the appeal. 41 The statutory provisions for proceedings against the Nominal Defendant in the Motor Accidents Act of 1988 are to be contrasted with the corresponding provisions in the Motor Vehicles (Third Party Insurance) Act, 1942, as amended. Section 30 of the 1942 statute provided, in sub-s (1): "every claim for damages in respect of the death of or bodily injury to any person caused by or arising out of the use of an uninsured vehicle upon a public street shall be made to the Nominal Defendant and not to the owner or driver of the uninsured motor vehicle, and any proceedings to enforce any such claim for damages shall be taken against the Nominal Defendant and not against the owner or driver of the uninsured motor vehicle." 42 Under the earlier statute the owner or driver of an uninsured motor vehicle could not be directly sued, although recovery proceedings could later be taken by the Nominal Defendant against the owner or driver under s 32 of the 1942 Act. 43 Had s 27 of the 1988 Act made it obligatory for any claim for damages to be pursued against the Nominal Defendant and not the owner or driver, Mr McAlary's argument would clearly be untenable because the Ranieris could not have opted to sue the Council. However, under the 1988 Act they could have done. Liability was avoided for the Council by the satisfaction of the plaintiffs' claims by the Nominal Defendant. 44 It is true, of course, as Mr Harrison submitted, that the legislature could have made express provision for a right of subrogation but, on the other hand, the statute does not expressly negative any such right. The question is whether, having regard to general principles governing subrogation and the provisions of Pt 3 Div 5, the Nominal Defendant can enjoy any such right in the present circumstances. 45 The claim against the appellant in tort as expressed in paras 17 and 18 will require evidence to be introduced at the trial as to the work which the appellant carried out, the basis upon which such work was carried out and whether such work was defective. It will involve therefore proof of the contract between the appellant and the Council and proof of the breach of that contract. The same claim will require proof that the faulty brakes on the tanker were causative of the accident on 13 November 1994. 46 It seems to me that essentially the same factual issues would have to be addressed if the matter is allowed to go to trial on the alternative claim pleaded in paras 12-16 of the statement of claim. The amount recovered if the Nominal Defendant succeeds on the subrogation argument may well be different, but little additional time and expense would be incurred in proof of facts if the matter proceeds to trial on all the issues presently pleaded. This is a material consideration on the present application. 47 The claim pleaded in paras 12-16 raises an important issue as to the extent of the Nominal Defendant's rights following the satisfaction of a claim against it. 48 If the matters pleaded against the appellant in paras 12-15 are established, then there is much to be said for the proposition that the appellant would gain an unfair advantage if a claim that could have been made against it by the Council if the Ranieris had proceeded to judgment against the Council cannot be made by the Nominal Defendant having compensated the Ranieris in damages and having thus relieved the Council of exposure to liability. 49 The statement of principle by Brett LJ in Castellain v Preston remains undisturbed. The categories of relationships in which subrogation is permitted should not be regarded as closed, and having reflected on the competing submissions of counsel, I am by no means persuaded that Mr McAlary's argument is untenable. I do not consider that the subrogation issue should be determined on an application for summary judgment, but following trial and relevant findings of fact then made. Accordingly, this appeal should be dismissed. Formal orders 50 1. The appeal is dismissed. 2. The appellant is to pay the respondent's costs of this appeal. 3. I direct that the matter be placed in the next call up list before the List Judge for the allocation of a hearing date. ********** Last Modified: 11/22/2002 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.