Matheson Property Group Pty Ltd (Trustee) v Virgin Australia Holdings Limited

Balance Indemnity 17. VAH be granted leave to file any application to stay the proceedings: (a) by 2 April 2024; or (b) in the event that MPG serves upon VAH any further evidence upon which it relies with respect to whether MPG will be (and continue to be) in a financial position, or have access to sufficient funds, to enable it to satisfy the Creditor Indemnity dated 25 July 2023, within 14 days of service of that evidence.

Costs 18. MPG pay VAH's costs of and incidental to the issue of the proper construction of the D&O Policy and the Balance Indemnity issue. 19. MPG pay Liberty's costs of and incidental to the issue of the proper construction of the D&O Policy.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

1. Were the legal costs the subject of the demand of 3 November 2023 reasonably and properly incurred? What is the amount of the legal costs reasonably and properly incurred?

(Delivered ex tempore, revised from the transcript)

A INTRODUCTION AND BACKGROUND 1 Before the Court is yet another collateral dispute in this proceeding concerning the practical operation of the deed of company arrangement executed between the applicant, Matheson Property Group Pty Ltd (MPG), and the first respondent, Virgin Australia Holdings Limited (VAH) (DOCA). 2 This interlocutory stoush is related to disputes referred to in three previous judgments of the Court, the quelling of which has distracted the Court and the parties from progressing the substantive issues in the underlying controversy: see Matheson Property Group Pty Ltd (Trustee) v Virgin Australia Holdings Limited [2022] FCA 1243; (2022) 165 ACSR 550; Matheson Property Group Pty Ltd (Trustee) v Virgin Australia Holdings Limited (No 2) [2023] FCA 899; Matheson Property Group Pty Ltd (Trustee) v Virgin Australia Holdings Limited (No 3) [2023] FCA 1329. 3 This judgment, like my last judgment, assumes familiarity with, and adopts the definitions used in, my earlier judgments. 4 The balance of these reasons is otherwise set out under the following headings: B THE CURRENT POSITION C THE POLICY AND RELEVANT PROVISIONS D THE RELEVANT ISSUE E CONSIDERATION F THE CREDITOR INDEMNITY G COSTS H CONCLUSION

B THE CURRENT POSITION 5 I have previously reserved for argument, if necessary, the following questions (see Matheson (No 3) (at [3])): 3. The parties agree to reserve for further argument, if necessary, the following questions: (a) whether the Indemnity authorises VAH to demand, or requires MPG to make, periodic payments on account of the Indemnity of amounts that are said to be costs and expenses falling within the Indemnity; and (b) if periodic payments can be demanded up to a limit of $5 million, whether any such periodic payments are subject to supervision and assessment by the Court. 6 Broadly speaking, and without descending into the brume of what has occurred since the reservation of these issues, before the Court today are two cross-claims brought by MPG and VAH (cross-claims) which seek relief in respect of both question 3(a) and (b) above. 7 VAH, by its amended cross-claim dated 17 November 2023 (VAH cross-claim), seeks: 1. Pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act), a declaration that, on its proper construction, the Creditor Indemnity provided by the Cross-respondent to the Cross-claimant on 25 July 2023, in Schedule 5 to the deed of company arrangement dated 25 September 2020, authorises the Cross-claimant to demand, and requires the Cross-respondent to make, periodic payments on account of amounts that are Costs (as defined) within the Creditor Indemnity, save to the extent (if any) that such Costs comprise legal costs that were unreasonably or improperly incurred. 2. An order that the Cross-respondent pay to the Cross-claimant the amount of $1,126,418.86 pursuant to the demand issued by the Cross-claimant on 3 November 2023 (3 November Demand). 3. In the alternative to paragraph 2, an order that: a. the amount of any legal costs the subject of the 3 November Demand that were unreasonably or improperly incurred be determined by a registrar; and b. the Cross-respondent pay to the Cross-claimant the amount of $1,126,418.86, less any legal costs the subject of the 3 November Demand determined pursuant to paragraph (a) to have been unreasonably or improperly incurred. 4. Pursuant to s 23 of the Federal Court Act, an order that, within 14 days of the date of this order, the Cross-respondent provide to the Cross-claimant an irrevocable indemnity or irrevocable letter of financial support from Balance Legal Capital LLP in favour of Balance Legal Capital Fund 1 LP and Balance Legal Capital I UK Ltd, with respect to Balance Legal Capital I UK Ltd's liabilities under the indemnity it provided to the Cross-respondent on 24 July 2023 in connection with these proceedings. 5. An order that, in the event the Cross-respondent does not comply with the order in paragraph 4 above, the proceedings brought by the Cross-respondent against the Cross-claimant on the amended originating application dated 25 July 2023 and the amended statement of claim dated 25 July 2023 be stayed. 6. Pursuant to s 51A of the Federal Court Act, an order that the Cross-respondent pay interest on the amount the subject of the 3 November Demand. 8 MPG, by its cross-claim dated 12 December 2023 (MPG cross-claim), seeks: 1. A declaration pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth) (FCA Act) that the cross-respondent has breached the deed of company arrangement executed by the cross-respondent on 4 September 2020 (DOCA). 2. A declaration pursuant to s 21 of the FCA Act that the cross-respondent's right to indemnity under the creditor indemnity dated 25 July 2023 executed by the cross-claimant in favour of the cross-respondent (Creditor Indemnity) does not crystallise until the cross-claimant's claims in the principal proceeding have been determined. 3. A declaration pursuant to s 21 of the FCA Act that, by reason of the Creditor Indemnity, the cross-claimant is a non-associated third-party payer within the meaning of the Legal Profession Uniform Law (NSW) (LPUL). 4. In the alternative to prayer 2 above, a declaration pursuant to s 21 of the FCA Act that the cross-claimant has no obligation to pay: (a) the sum of $1,126,418.86 sought by the cross-respondent's demand for payment made on 3 November 2023 (Demand); or (b) any sum sought by any further demand purportedly pursuant to the Creditor Indemnity, until the resolution of any application by the cross-claimant for the assessment of the costs the subject of the Demand or any further demand under Part 7 of the Legal Profession Uniform Law Application Act 2014 (NSW) (LPUL Application Act) and Part 4.3, Div 7 of the LPUL. 5. An order pursuant to s 23 of the FCA Act restraining the cross-respondent from: (a) enforcing, or seeking to enforce, the Demand; and/or (b) making any further demands purportedly pursuant to the Creditor Indemnity for the payment of costs it has incurred in these proceedings, until the cross-claimant's amended originating application filed in these proceedings on 26 July 2023 has been determined. 6. In the alternative to prayer 5 above, an order pursuant to s 23 of the FCA Act restraining the cross-respondent from: (a) enforcing, or seeking to enforce, the Demand; and/or (b) enforcing, or seeking to enforce, any further demands purportedly pursuant to the Creditor Indemnity for the payment of costs it has incurred in these proceedings, until any application by the cross-claimant for the assessment of costs of any demand under Part 7 of the LPUL Application Act and Part 4.3, Div 7 of the LPUL has been finally resolved. 7. Costs. 8. Such further or other orders as the Court sees fit. 9 What has become evident today is that there is a logic in determining whether MPG's construction of the directors and officers insurance policy (policy) by which the fourth respondent, Liberty Mutual Insurance Company Australia (Liberty) provided cover to VAH, as it relates to "Defence Costs" (as defined in cl 7.5 of the DOCA) (defence costs), is correct. 10 For this reason, I indicated that it would be appropriate to make orders for Liberty to be joined as a respondent to the cross-claims, and that leave be granted pursuant to s 33J(4) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) for the separate hearing of the VAH cross-claim to commence earlier than the date before which a group member may opt out of the proceeding: see Matheson (at 558-559 [41]). 11 I turn now to the initial issue concerning the proper construction of the policy.

C THE POLICY AND RELEVANT PROVISIONS 12 MPG brings this securities class action on the basis that the claims against VAH are "Insured Claims" within the meaning of the DOCA: see amended statement of claim (ASOC) (at [157]). 13 Under the policy, VAH was identified as the "Named Insured", covering the period 1 November 2019 to 1 November 2020. MPG avers that Liberty is required under the policy to indemnify VAH for any liability to MPG and group members with respect to the MPG's and group members' claims and/or securities claims against it: see ASOC (at [164]). 14 In order to aid comprehension, I have set out below the relevant provisions of the policy: Policy Schedule POLICY NUMBER DO-BN-19-584549 NAMED INSURED Virgin Australia Holdings Ltd ADDRESS OF INSURED 56 Edmondstone Road Bowen Hills QLD 4006 Australia POLICY PERIOD From: 4.00pm on 1 November 2019 local standard time To: 4.00pm on 1 November 2020 local standard time LIMIT OF LIABILITY $10,000,000 SUB-LIMITS OF LIABILITY 2.16 Public Relations Expenses $250,000 2.17 Reputation Protection Expenses $500,000 3.1 Company Securities Liability … $10,000,000 3.2 Company Employment Practices Liability … Not applicable ADDITIONAL SIDE A LIMIT OF LIABILITY 2.2 Additional Side A Limit Not applicable OPTIONAL EXTENSIONS 3.1 Company Securities Liability Included 3.2 Company Employment Practices Liability … Not Included EXCESS Insuring clause 1.1 Nil Insuring clause 1.2 $250,000 Insuring clause 1.3 (a) & (b) $250,000 Insuring clause 1.3 (c), (d), & (e) $250,000 Optional Extension 3.1 $5,000,000 Optional Extension 3.2 Not Applicable … Directors & Officers Liability Insurance In consideration of payment of the Premium by the Insured, and subject to all the terms, conditions and exclusions, including all definitions of this Policy, Liberty agrees as follows: 1. Insuring Clauses 1.1 Directors & Officers Liability Liberty will pay to or on behalf of an Insured Person the Loss which the Insured Person is legally liable to pay as a result of a Claim or the reasonable costs and expenses incurred under any applicable extension unless the Insured Person is entitled to be indemnified by the Company for such Loss. 1.2 Company Reimbursement Liberty will pay to or on behalf of the Company the Loss for which the Company is legally required or permitted to indemnify an Insured Person as a result of a Claim against an Insured Person or the reasonable costs and expenses incurred under any applicable extension. 1.3 Self-Report, Raid & Inquiry Representation Costs Liberty will pay to or on behalf of an Insured Person the reasonable costs and expenses incurred by an Insured Person, or the reasonable costs and expenses for which the Company is legally required or permitted to indemnify an Insured Person, in respect of: (a) the preparation of a Self-Report; (b) the preparation for and attendance at an internal inquiry conducted by the Company at the request of any authority or person (as included in the definition of Inquiry) including the provision of legal or other professional representation following the Self-Report in (a) above; (c) the preparation of submissions by an Insured Person in response to a request, direction or notice issued by an authority or person (as included in the definition of Inquiry); (d) the preparation for and attendance at an Inquiry of an Insured Person including the provision of legal or other professional representation, provided that Liberty's prior written consent (which consent shall not be unreasonably withheld or delayed) has been obtained; or (e) a Raid. "Self-Report, Raid & Inquiry Representation Costs" do not include salaries, wages, allowances, travel or accommodation expenses incurred by the Insured in assessing, investigating, dealing with and assisting others to deal with a Self-Report, Raid or Inquiry. 2. Extensions The following extensions are subject to all the terms, conditions and exclusions, including all definitions and the Limit of Liability, Sub-Limits of Liability and applicable Excesses of this Policy: 2.1 Advancement of Costs & Expenses Liberty will pay for Defence Costs and the reasonable costs and expenses incurred under any Insuring Clause or applicable extension as and when they are incurred prior to final resolution of any Claim, Self-Report, Raid or Inquiry. However, each Insured shall repay to Liberty all payments of Defence Costs or any other costs and expenses incurred on that Insured's behalf if, and to the extent, it is established that such Defence Costs or other costs and expenses are not in fact insured under this Policy. … 3. Optional Extensions The following optional extensions are subject to all the terms, conditions, extensions and exclusions, including all definitions and the Limit of Liability, Sub-Limits of Liability and applicable Excesses of this Policy and shall apply only if they are specifically included in the Schedule. 3.1 Company Securities Liability Liberty will pay to or on behalf of the Company the Loss which the Company is legally liable to pay as a result of a Securities Claim. The Co-Insurance Percentage which applies to this extension is specified in the Schedule. … 6. General Conditions … 6.1 Limit of Liability The maximum amount payable by Liberty under this Policy for all amounts insured under this Policy is the Limit of Liability specified in the Schedule. The Limit of Liability is inclusive of Loss (which includes Defence Costs), Self-Report, Raid and Inquiry costs, Sub-Limits of Liability and other amounts insured under this Policy but does not include any amounts insured under Extension 2.2 in respect of "Additional Side A Limit" or any costs incurred by Liberty in determining whether this Policy provides insurance to an Insured. 6.2 Excess Liberty will only pay in respect of a claim under this Policy the amount which is above the applicable Excess. The Excess shall be the first amount borne by the Company and shall remain uninsured. … 7. Definitions … 7.5 Defence Costs means the reasonable costs and expenses incurred by Liberty, or by an Insured but only with the prior written consent of Liberty (which consent shall not be unreasonably withheld or delayed), for the benefit of the Insured in the investigation, settlement, defence or appeal of any Claim covered under this Policy. Defence Costs does not include salaries, wages, allowances, and travel or accommodation expenses incurred by the Insured in assessing investigating, dealing with and assisting others to deal with any Claim. … 7.19 Loss means any amount an Insured Person (or the Company in respect of Optional Extension 3.1 "Company Securities Liability") is legally liable to pay including: (a) damages or claimant's costs or both pursuant to an award or judgment; (b) settlements negotiated by Liberty and consented to by the Insured; (c) settlements negotiated by the Insured but only with the prior written consent of Liberty; and (d) Defence Costs. …

D THE RELEVANT ISSUE 15 The starting point is the optional extension in cl 3.1, under which Liberty has agreed to pay on or behalf of VAH the "Loss" which VAH is legally liable to pay as a result of a "Securities Claim". This is subject to an "Excess" (defined in the Schedule) of $5 million (excess), the effect of which is that the first $5 million of VAH's defence costs "shall remain uninsured": see cl 6.2. 16 The evidence discloses that Liberty has agreed to indemnify VAH, including for defence costs, subject to: (a) the application of the $5 million excess; (b) various reservations of rights, including as to exclusions and the conditions imposed by cl 5.2 of the policy (headed "Defence and Settlement"); (c) VAH's obligation to repay any amounts paid by Liberty in whole or in part in the event that cover is not available; (d) hourly rates as agreed between Liberty and VAH; and (e) compliance with Liberty's litigation management guidelines (see Affidavits of Colleen Anne Platford affirmed 24 August 2023 (Annexure CAP1 (at 96)) and 17 October 2023 (at [14]-[15])). 17 Liberty and VAH maintain that the first amounts borne by VAH in respect of a claim under the policy are defence costs and, as noted above, the excess applies to those costs, with the result that the first $5 million in costs are uninsured. As soon as the $5 million excess has been exhausted, VAH would seek the advancement of defence costs from Liberty, meaning that should its construction of the policy be accepted, VAH need only have recourse to $5 million of funding under the creditor indemnity pending confirmation of coverage at the conclusion of this proceeding. 18 MPG contends, on the other hand, that the construction adopted by Liberty and VAH depend upon the "unexplained proposition" that the existence of a $5 million excess under the policy nullifies VAH's rights to the advancement of defence costs until the excess has been exhausted. It is submitted that this construction is not borne out by the terms of the policy. Clause 2.1 confers upon VAH an immediate right to the advancement of defence costs, providing that Liberty "will pay" such costs "as and when they are incurred". This must be read, it is said, with the second part of cl 2.1, which requires VAH to "repay" all defence costs received "if, and to the extent, it is established that such defence costs … are not in fact insured under the Policy". 19 Taken together, MPG contends that these provisions were intended to address the circumstance where the insurer has paid defence costs to the insured as and when the costs are incurred and it is subsequently established that those costs are not insured, whether that is because they are wholly or at least partially below the excess or because there is no insurance coverage at all. 20 This construction, it is said, aligns with the provisions of the policy. Clause 7.5 defines defence costs to mean "the reasonable costs and expenses incurred by Liberty, or by an insured but only with the prior consent of Liberty (which consent shall not be unreasonably withheld or delayed) for the benefit of the Insured in the investigation, settlement, defence or appeal of any Claim covered under this Policy". Liberty's liability under the relevant insuring clauses 2.1 and 3.1 is to pay the "Loss" which the insured is legally liable to pay, and "Loss" is expressly defined to include the defence costs that Liberty is bound to pay to VAH under cl 2.1: cl 7.19. Leaving aside Liberty's obligation to pay defence costs immediately, its obligation to pay under the policy only arises when the loss that it is legally liable to pay has been established. It is only at that point, MPG contends, that the excess is to be applied, with the result that Liberty is only obliged to pay the amount which is above the applicable excess: see cl 6.2. 21 Most importantly, MPG submits the reference to the "applicable Excesses" in the chapeaux says nothing about the time at which the excess is to apply. Indeed, the fact that the insurer can seek reimbursement of defence costs that are established to be uninsured under cl 2.1 speaks in favour of the application of the excess at the conclusion of the proceeding, when the full extent of the insurer's liability to indemnify is known. This is consistent with the broader scheme of the policy, which includes defence costs as one of various components of "Loss" (under cl 7.19), and the necessity of ascertaining the "Loss" to which the policy responds before application of the excess. 22 It follows, MPG submits, that the excess has no proper operation until the total loss sought to be recovered under the policy with respect to MPG's claims has been calculated, at which point the excess would serve to reduce Liberty's liability to indemnify. This conclusion is said to work harmoniously with the reality that Liberty could have incurred the reasonable costs and expenses as contemplated by cl 7.5.

E CONSIDERATION 23 There is no dispute between the parties as to the applicable principles in construing policies of insurance. It suffices to refer to the summary of the Full Court in Liberty Mutual Insurance Company Australian Branch t/as Liberty Specialty Markets v Icon Co (NSW) Pty Ltd [2021] FCAFC 126; (2021) 396 ALR 193 (at 231-232 [151]-[152] per Allsop CJ, Besanko and Middleton JJ): [151] The principles applicable to the construction of policies of insurance are those governing the construction of commercial contracts. The principles are derived principally from High Court authority which has been discussed most recently in decisions in the Full Court in Todd at [42], and Chubb at [98]-[104]. [152] The working out in a coherent and congruent fashion of the operation of a market specific insurance policy requires a businesslike interpretation to bring about a commercial result based on what a reasonable business person would have understood the policy to mean: Electricity Generation Corporation (t/as Verge Energy v Woodside Energy Ltd (2014) 251 CLR 640; 306 ALR 25; [2014] HCA 7 at [35] (Electricity Generation Corp). The principle that a policy is to be construed so as to avoid it "working commercial inconvenience": Zhu v Treasurer of New South Wales (2004) 218 CLR 530; 211 ALR 159; [2004] HCA 56 at [82] and so as to bring about commercial efficacy and reflect common sense: Gollin & Co Ltd v Karenlee Nominees Pty Ltd (1983) 153 CLR 455 at 464; 49 ALR 135 at 140 is to be given concrete operation, not passing lip-service. To the extent that words used in an insurance policy have the capacity for broader or narrower operation, such constructional choice or ambiguity will be resolved by appreciating the context, including the market, in which the parties are operating, and the extent to which a reading of the words may produce commercial inconvenience or commercial efficacy as part of the ascription of meaning that would be made by a reasonable businessperson considering the language used, the surrounding circumstances known to the parties and the commercial purpose or objects of the policy as a whole to be secured: Electricity Generation Corp at [35]; Homburg Houtimport BV v Agrosin Private Ltd [2004] 1 AC 715; [2003] 2 All ER 785; [2003] UKHL 12 at [10]. It should always be recalled, however, that a broad or a narrow meaning of a policy may only reflect the breadth or the narrowness of cover that has been purchased by the premium: cf Australasian Correctional Services Pty Ltd v AIG Australia Ltd [2018] FCA 2043 at [17]. (Emphasis added) 24 Before going further, I should say that one of the notable features of the policy is that company securities liability has a sub-limit of $10 million, together with an excess for the optional extension of $5 million. This says much about the market for company securities liability cover in the Australian market, including the fact that it is well known to those who have been involved in securities class actions over the course of the last 20 years the increasing sensitivity of various insurers to writing cover for this type of liability. I mention this because it is not counterintuitive from a commercial point of view that both the excess for this type of cover as a proportion of the total cover is unusually large compared to other forms of cover. 25 In my view, it is tolerably clear that MPG's reliance upon VAH's entitlement under both extension cl 2.1 and optional extension cl 3.1 of the policy in respect of payment of defence costs overlooks the significance of the chapeaux to clauses 2 and 3. The chapeaux set out the circumstances in which the extensions and optional extensions apply under the policy, as follows: Chapeaux to cl 2: "The following extensions are subject to all the terms, conditions and exclusions, including all definitions and the Limit of Liability, Sub-Limits of Liability and applicable Excesses of this Policy". Chapeaux to cl 3: "The following optional extensions are subject to all the terms, conditions, extensions and exclusions, including all definitions and the Limit of Liability, Sub-Limits of Liability and applicable Excesses of this Policy". (Emphasis added) 26 The chapeaux were plainly intended to qualify or condition the scope or application of the extensions in clauses 2 and 3. It follows that MPG's contention that these words "do not deny or alter the operative effect of the provisions" must be rejected. 27 Accordingly, properly construed, the scope of clauses 2.1 and 3.1 are qualified or delineated by the "applicable Excesses" in the policy. In turn, this directs attention to the "applicable Excesses", namely, cl 6.2 ("Excess"), and the applicable excess for the optional extension clause upon which VAH relies, being cl 3.1. 28 It is apparent that the bargain between the parties is that by reason of cl 6.2, Liberty will not bear any payment obligations under the policy before the excess. Clause 6.2 falls within cl 6 of the policy ("General Conditions") and provides that "Liberty will only pay in respect of a claim under this Policy the amount which is above the applicable Excess. The Excess shall be the first amount borne by the Company and shall remain uninsured" (emphasis added). 29 A further textual indication is cl 3.1, which provides that Liberty will pay to, on behalf of VAH, the "Loss" which the company is legally liable to pay as a result of the securities claim. As can be seen above, "Loss" is defined in cl 7.19 to include defence costs (see cl 7.5). It necessarily follows that VAH, by engaging solicitors and counsel on standard payment terms, has suffered a "Loss" under the policy in respect of its defence costs to which Liberty would be liable under cl 3.1, subject to the applicable excess. 30 Read as a whole, there is no proper basis for MPG's assertion that the total loss is required to be calculated before the excess is applied. Such a construction does not accord with a businesslike interpretation of the policy, having regard to the inclusion of defence costs within the definition of "Loss" and the intention that Liberty fund the insured's defence costs (above the excess) before the conclusion of any proceedings (see cll 2, 2.1, 7.5). 31 Accordingly, a claim by VAH for the payment of defence costs is, relevantly, "a claim under this Policy" for the purposes of cl 6.2. Notably, the word "claim" in this context is used in contradistinction to the defined term "Claim", which indicates that the parties did not intend to delimit the application of cl 6.2 to the payment of claims made by third parties. This construction is consistent with the last sentence of cl 6.2, which provides that "[t]he Excess shall be the first amount borne by the Company and shall remain uninsured". 32 As Liberty submits, if "a claim" in cl 6.2 is construed to exclude a claim for payment of defence costs under the policy, the practical effect of that construction would be that the excess would not be the first amount borne by VAH, as Liberty would be bearing that excess by paying defence costs below the excess. The excess for a securities claim is not insignificant ($5 million). MPG's assertion that Liberty would have rights at the conclusion of the proceedings (pending any appeal) to a refund of the excess does not accord with a sensible businesslike construction of the policy. 33 For these reasons, I intend to grant declaratory relief which reflects the proper construction of the policy so that this aspect of the controversy is resolved.

F THE CREDITOR INDEMNITY 34 The only other issue dealt with today concerns, yet again, cl 8.1 of the DOCA. As I previously explained in Matheson (at 554 [14]), cl 8 enables creditors, subject to certain conditions, to take action to recover amounts due to them in relation to "Insured Claims". More specifically, cl 8.1, titled "Rights of Creditors who have Claims covered by insurance", provides: If insurance is held by or on behalf of a Deed Company in respect of an Insured Claim: (a) the Creditor may, in relation to its Insured Claim and notwithstanding that Completion has occurred, take action to recover the amount due in respect of the Claim against the Deed Company, but such action must not exceed what is necessary to obtain payment from the insurer; (b) to the extent that the Creditor is able, by settlement, arbitral award or judgment, to obtain payment from the insurer on account of the Claim, the Creditor may retain that amount in full satisfaction of its right to receive a distribution from the Trust Fund in respect of that Claim; (c) the Deed Companies are not required to provide assistance to a Creditor in relation to a Claim under this clause or take any action in response to enforcement action taken by a Creditor in accordance with this clause; and (d) where a Creditor intends to take enforcement action in relation to a Claim under this clause: (1) if requested by a Deed Company, the Creditor must, prior to taking any enforcement action in relation to the Claim, provide the Deed Companies with an indemnity in the form of Schedule 5 (Creditor Indemnity); (2) if requested by the Deed Companies, provide the Deed Companies with evidence, to the reasonable satisfaction of the Deed Companies, that the Creditor will be (and will continue to be) in a financial position, or have access to sufficient funds, to enable it to satisfy the Creditor Indemnity; and (3) the Deed Companies may plead this Deed as a bar to any enforcement action taken by a Creditor in relation to the Claim in circumstances where the Creditor has not, prior to commencing that enforcement action, given the Creditor Indemnity referred to in clause 8.1(d)(1) to the Deed Companies. (Emphasis added) 35 There seems to be a vast number of communications between the parties as to the issue of whether MPG has provided sufficient evidence for the purposes of cl 8.1(d)(2). I expressed my preliminary view to senior counsel appearing on behalf of MPG today that I did not think it unreasonable for VAH to require a degree of transparency as to the basis upon which the funder, Balance Legal Capital 1 UK Ltd (Balance UK) (funder), has the support of Balance Legal Capital Fund 1 LP (Balance Fund). Balance UK is a wholly-owned subsidiary of Balance Fund, the latter being, I am told, the company in respect of which the relevant funds are located. 36 All I have on the evidence before me is an indication from the external fund administrator to Balance Fund and Balance UK that as at 30 September 2023, Balance UK may rely upon financial support from its parent, Balance Fund, to meet its financial liabilities in relation to litigation funded by Balance UK and that Balance Fund had "undrawn commitments in excess of AUD $10M available to be called from it's [sic] Limited Partners which can be used to provide this support". 37 The difficulty is that no one has seen any financial statements of Balance Fund, and previous evidence before the Court indicates as at February 2023, Balance Fund is "closed to further investments …" and that "[t]he amounts committed to the fund by investors have been fully allocated to case investments and the fund's investment period ended in March 2022" (emphasis added): see Affidavit of Simon Robert Burnett sworn 21 February 2023 (at [20]). 38 It seems to me incumbent upon the funder in this case to provide full and transparent information to allow a proper assessment to be made as to whether it is in a position to comply with its present and future obligations under the creditor indemnity. This is particularly so when the after-the-event (ATE) insurance policy on its terms: (1) covers adverse costs liability to all respondents (that is, to respondents other than VAH); and (2) raises some questions about the confidence that can be placed in the recovery of funds in circumstances where the litigation proceeds in a less than propitious way from the perspective of MPG. 39 The only remedy sought by VAH in respect of this matter today by way of cross-claim seemed to me to be misconceived, given the fact that the ultimate holding company, Balance Legal Capital LLP, is not the entity which holds the relevant funds (see prayer 4). Accordingly, I would decline to grant the relief sought by VAH. 40 I turn now to the question of costs.

G COSTS 41 In relation to the first issue concerning the proper construction of the policy, it is apparent that position adopted by MPG today somewhat resembles the view it had taken at an earlier stage of the proceeding. 42 On 17 July 2023, senior counsel for MPG disputed that it had any obligation to make periodical payments under Sch 5 of the DOCA, but did not, at least expressly, contest the notion that if periodical payments were required, they concern any payments below the $5 million excess (T11.27-39). Indeed, it was on this basis that I remarked then (T17.25-32): HIS HONOUR: It seems the only matter of substance between the parties is … the periodical payment issue. MR DARKE: That does seem to be so, your Honour. 43 Be that as it may, there is no reason why costs should not follow the event of the resolution of the separate question. 44 With respect to the second issue concerning cl 8.1 of the DOCA, as I noted above, it is apparent that as early as February 2023, questions had been raised concerning the funder's ability to meet its obligations under the creditor indemnity. 45 It is clear that had there been provision of transparent information by the funder, this issue would likely have been resolved a long time ago. In those circumstances, the costs of this aspect of the cross-claim should also be paid by MPG.

H CONCLUSION 46 I am going to conclude this judgment with a cri du coeur. 47 I have raised concerns on numerous previous occasions as to the way in which this litigation has been conducted by both parties. There seems to be an inordinate amount of process costs being incurred and a range of unnecessary collateral disputation which has diverted the parties away from the underlying justiciable controversy and from progressing the proceedings in a sensible way, consistently with the overarching purpose. 48 I am not prepared to allow unnecessary costs to be incurred by VAH in the future conduct of this proceeding. Procedures are going to be put in place to ensure costs that are not incurred reasonably and properly are not visited upon MPG pursuant to the terms of the creditor indemnity. On the other hand, it is incumbent upon MPG and the funder to think twice about taking points which have little or no merit and which distract from the duty that MPG has to represent the claims of group members in accordance with Pt IVA and Pt VB of the FCA Act. 49 Accordingly, I will make orders to facilitate the course I have outlined. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Lee.

SCHEDULE OF PARTIES NSD 346 of 2022 Respondents Fourth Respondent LIBERTY MUTUAL INSURANCE COMPANY ARBN 086 083 605 Fifth Respondent HDI GLOBAL SPECIALTY SE Sixth Respondent BEAZLEY LLOYD'S SYNDICATE 2623/623 Seventh Respondent ENDURANCE WORLDWIDE INSURANCE LIMITED Eighth Respondent ACT LLOYD'S SYNDICATE 9554 Ninth Respondent HISCOX LLOYDS SYNDICATE 0033 Eleventh Respondent CV STARR LLOYD'S SYNDICATE 1919 Twelfth Respondent HCC INTERNATIONAL INSURANCE COMPANY PLC Thirteenth Respondent ASPEN LLOYD'S SYNDICATE 4711 Fourteenth Respondent ASSICURAZIONI GENERALI S.P.A. UK BRANCH Fifteenth Respondent AVIVA INSURANCE LIMITED Sixteenth Respondent BERKSHIRE HATHAWAY SPECIALTY INSURANCE COMPANY ARBN 600 643 034 Seventeenth Respondent TRAVELERS LLOYD'S SYNDICATE 5000 Eighteenth Respondent RSG UNDERWRITING MANAGEMENT EUROPE LIMITED T/AS STARTPOINT EXECUTIVE RISKS