B THE CONSTRUCTIONAL DISPUTE
6 Prior to the luncheon adjournment, having heard argument all morning, I raised with the parties certain preliminary views (which, I stressed, I had formed subject to hearing further argument): T52.11-53.9.
7 I explained that as I see it, the kernel of the construction argument is whether VAH is authorised to demand and require MPG to make periodic payments on account of amounts of "Costs" (as defined in the DOCA) pursuant to the creditor indemnity or whether VAH is instead required to wait until the conclusion of the proceeding before it can legitimately demand payment. This necessarily involves consideration of the proper construction of not only the creditor indemnity, but also the relevant provisions of the directors and officers insurance policy by which the fourth respondent, Liberty Mutual Insurance Company Australia, provided cover to VAH, including for defence costs, in the period 1 November 2019 to 1 November 2020 (policy).
8 Any consideration of these construction issues cannot be dealt with in a vacuum. An important part of the relevant context is that liability in relation to the payment of costs incurred as between a solicitor and a client is closely regulated. In particular, the Legal Profession Uniform Law (NSW) (Uniform Law) provides rights to "third party payers" (defined in s 171(1) as persons who have a legal obligation to pay all or any part of the costs for legal services provided to a client). Relevantly, pursuant to s 198(6) of the Uniform Law, a "non-associated third party payer" (defined in s 171(1)(c) as a third party who owes a legal obligation to a client or another person to pay all or any part of the costs for legal services provided to the client) is entitled to request the client's solicitor provide sufficient information to allow the third party payer to consider making an application for a costs assessment. If such an application is made pursuant to s 198(1), then the cost assessment must take place without any money being required to be paid into court on account of legal costs, and the client's solicitor must not commence proceedings to recover its costs until the costs assessment has been completed: s 198(7) of the Uniform Law.
9 At present, there is a live dispute as to the interrelationship between these statutory rights and the obligations of MPG pursuant to the creditor indemnity. The problem with the proposed declaration as it is currently framed is that its making or refusal does not resolve the relevant dispute between the parties in a complete way.
10 The issue is not only whether an indemnity should be provided on a periodic basis, but there are related issues as to what flows from a demand made pursuant to the creditor indemnity. These include whether the obligation to pay is limited by, as MPG says, a condition, implied by statute or the common law, that the only costs recoverable are those properly characterised as being reasonable; they also include how any such assessment is to take place, and the legal rights and obligations of VAH and MPG pending any such assessment.