The order to strike out Mr Ion's defence
30In relation to the order to strike out his defence, Mr Ion's grounds of appeal are firstly, that the Magistrate erred on a question of law in striking out the defence because (a) the pleadings in the defence constituted a defence to the claim; (b) the facts deposed to by Mr Ion in his affidavit affirmed 14 October 2011 disclosed that he has a reasonable defence; and (c) if there was defect in the pleading of the defence the Magistrate ought to have given Mr Ion an opportunity to amend his defence.
31As previously stated, Mr Danutz relied on UCPR 14.28. This rule provides that the Court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading firstly, discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, or secondly, has a tendency to cause prejudice, embarrassment or delay in the proceedings, or thirdly, is otherwise an abuse of the process of the Court. UCPR 14.28(2) provides that the Court may receive evidence on the hearing of an application for an order under subrule (1).
32In Commonwealth of Australia v Griffiths [2007] NSWCA 370; (2007) 70 NSWLR 268 Beazley JA (with whom Mason P agreed) said:
"11The general principles relating to the summary disposal of proceedings are well-known: see General Steel Industries Inc v Commissioner for Railways (NSW) & Ors [1964] HCA 69; (1964) 112 CLR 125 at 129. If it is demonstrated that there is a real question to be tried, the matter is inappropriate for the entry of summary judgment: Dey v Victorian Railway Commissioners [1949] HCA 1; (1949) 78 CLR 62. The tests stated in the authorities as to whether it is appropriate that a case be disposed of by the entry of summary judgment include statements such as that the matter is "so obviously untenable that it cannot possibly succeed"; "manifestly groundless" or "would involve useless expense": see General Steel Industries at 129.
12The summary disposal of proceedings or part thereof deprives a party of the right to a contested hearing. For that reason it is said that the requirement for establishing that there is no triable issue is demanding: Air Services Australia v Zarb (Court of Appeal, 26 August 1998, unreported). In Webster & Anor v Lampard [1993] HCA 57; (1993) 177 CLR 598, Mason CJ, Deane and Dawson JJ said at 602:
'... the issue before the learned Master on the application for summary judgment was not whether [the plaintiffs] would probably succeed in their action against [the defendant]. It was whether the material before the Master demonstrated that that action should not be permitted to go to trial in the ordinary way because it was apparent that it must fail. 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.' (Citations omitted)"
33When deciding whether summary judgment should be entered, Mr Ion's case should have been taken at its highest. Counsel for Mr Danutz submitted that the Court could not look to Mr Ion's evidence over and above his pleading and that the Local Court is a court of pleading and the distinction between pleadings and evidence is sufficiently defined. Counsel for Mr Danutz submitted that proceedings are struck out on the basis of pleadings and whether they disclose a cause of action (or defence). He submitted that it is not right to say that recourse could be had to the evidence and, even if Mr Ion's affidavit were admitted into evidence, it would not have solved the problem because the affidavit did not disclose a defence. I disagree. While the Local Court is a Court of pleading, the same UCPR, rule 14.28 applies to that Court, the District Court and to this Court.
34In the Local Court both parties had referred to the contents of Mr Ion's affidavit. While it is not clear whether the Magistrate read its contents, where both parties referred to it, the Magistrate should have taken it into account in accordance with UCPR 14.28(2)(1). As the court emphasised in General Steel v Commissioner for Railways (1964) 112 CLR 125, a pleading should be only struck out in the clearest of cases. There is good reason for this. It is because if a pleading is struck out, a party is denied a hearing on its merits.
35As previously stated, Mr Ion in his defence traversed the plaintiff's allegations. He was entitled to do so. The pleading in the defence would not have caught Mr Danutz by surprise. Mr Ion denied (a) that there was an agreement between the parties; (b) that the loan was to be repaid by 31 December 2010; (c) that the debt had not been repaid; and (d) that he owed the amount outstanding. In these circumstances, the pleading in the defence was all that was required. In any event, Mr Ion's detailed affidavit made it clear what his case was. Even if Mr Danutz still did not understand the case it had to meet, he could have requested particulars. He did not do so. What that pleading meant was that Mr Danutz was to be put to proof on his pleading in the statement of claim.
36Mr Ion's affidavit detailed various agreements between the parties. At [8] Mr Ion set out a conversation he says took place via internet in 2010 between himself and Mr Danutz, while Mr Danutz was overseas. In that conversation, they reached an agreement to purchase a boat, each as to 50 per cent of the purchase price, and Mr Ion was to drive the boat because Mr Danutz did not have a boat licence. During that conversation Mr Ion told Mr Danutz that "I have no money", but in the following paragraphs Mr Ion described how his half share of the purchase price was to be paid by way of his contributions to the acquisition of the boat, including travel costs he incurred in going to view the boat and buying a wireless broadband connection so that he could show Mr Danutz the boat over the internet.
37Mr Ion described the acquisition of the boat in some detail:
"[15]I paid all the expenses to Queensland including of petrol, oil, etc. with my credit cards as we discussed which was part of my 50% of the boat and if not be reimbursed by Radu [Danutz].
[16]On 21st September 2010 whilst Radu [Danutz] was in Romania I arrived on Bribe Island in Queensland where I met Mr Mumford, the owner of the boat. I introduced myself to Mr Mumford and told him that my business partner Radu, who was in Romania and the person who was financing the boat purchase and wanted to see the boat before we bought it. I then saw the boat and I started the webcam so Radu could see the boat.
[17]I then told Radu on yahoo messenger the boat is an old boat. Radu saw the boat on the webcam and said he liked it. He said that it was okay to give the holding deposit of (sic) because he wanted to renovate the boat anyway. Radu told me to ask Mr Mumford that we would pay the balance amount when Radu returns from Romania. The asking price of the boat was $52,000.00.
[18]... I offered Mr Mumford $40,000 for the boat and he accepted $42,500...
[19]Because I didn't know the exact personal details about Radu, meaning Radu's full name and address and he was not available in Queensland Mr Mumford and I were deciding whose name to put the receipt under... I knew Radu to have different names in the past few years, so I told Mr Mumford to make the receipts in my name so if we have to lodge the registration of the boat in Sydney we will have no problems. I am familiar with boats and I know that to be able to get moorings from the maritime services board we had to register the boat in NSW."
38In his affidavit Mr Ion alleges that once he and Mr Danutz took possession of the boat in Queensland in October 2010, Mr Danutz claimed full ownership of the boat. Mr Danutz told him "I just changed the agreement and when we will get to Sydney I will pay all your expenses".
39Mr Ion's affidavit attached various documents including email correspondence, and bank and telephone records that demonstrated he had made payments towards obtaining the boat from Queensland and that the arrangements between them were changed unilaterally by Mr Danutz. These matters are not properly raised in a cross claim.
40At paragraph [53], the concluding paragraph of his affidavit, Mr Ion deposed:
"I have never borrowed money from Radu to buy a boat. I have never taken a loan from Radu to buy a boat either. I was always of the believe (sic) that the boat we were buying was going to be 50%/50% share. My contribution was the work I was doing to inspect the boat, to negotiate the price and to purchase it when Radu was overseas. I was going to incur some expenses which was going to be my contribution. At worst case if Radu was going to pay for my expenses I would be paying for half of my share. But when Radu told me from the minute he got in the boat that the boat was his. I accepted that and did not have anything to do with the boat, its ownership etc. It was because of my understanding that Radu was owning the whole boat that I helped him drop the 2 large motors to his place in Canely Vale."
41In my view the Magistrate erred in the exercise of his discretion to strike out the defence as the defence was properly pleaded and there was evidence to support this defence. This constitutes an error at law - see the well known case of House v King (1936) 55 CLR 499 at 504-505.
42As Mr Ion did not appear, the Magistrate could have, in the exercise of his discretion, proceeded with the hearing. His Honour would have then been entitled to reject Mr Ion's affidavit on the basis he could not be cross examined and put the plaintiff to proof on the issues pleaded in the statement of claim. There was no affidavit evidence filed by Mr Danutz to prove these allegations. His Honour did not take that course. It is my view that the Magistrate erred in law.