Summary disposal under s 31A and r 26.01
122 The essential requirement for an order under s 31A or r 26.01 (whichever sub-rule be chosen) is that the Court be satisfied that the applicant has no reasonable prospects of successfully prosecuting the claim: Spencer v Commonwealth [2010] HCA 28; 241 CLR 118 at 131-132 [24], 132 [25] and 141 [60]; that is, here, that there is no reasonable prospect that a judge would make the declarations sought. As Spencer makes clear, this is a lower standard than the "General Steel test" (Dey v Victorian Railways Commissioners [1949] HCA 1; 78 CLR 62 and General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; 112 CLR 125) of "hopeless" or "bound to fail". In Sop & Sop Pty Ltd v Commissioner of Taxation [2019] FCA 102 at [13]-[15], Kenny J said that "when well-established propositions of law deny the prospect of success" summary judgment is available. Though, as her Honour said, summary dismissal is a "serious step taken only with great care and if it is possible to conclude with confidence that there is no reasonable prospect of success", citing Danthanarayana v Commonwealth [2016] FCAFC 114 at [4].
123 It is no doubt upon the recognition of these principles that the case was put by the respondent reinsurers, primarily, as a matter of principle, not overwhelming evaluative discretion. That said, I would understand the arguments to extend to the latter, with which I will deal.
124 The question of principle was put on the basis of the relationships between ss 21 and 22, and the decisions in Neeta (Epping) Pty Ltd v Phillips [1974] HCA 18; 131 CLR 286, and the decision of Brereton J in Commonwealth v BIS 214 FLR at 279-280 [28], 281 [32], and 283 [41]. United Broadcasting International Pty Ltd v Turkplus Pty Ltd (No 2) [2010] FCA 1413 at [44] was also relied upon. In United Broadcasting, Yates J plainly dealt with the matter as one of proper discretion, not at the level of general principle drawn from ss 21 and 22.
125 It was submitted that summary judgment was appropriate because the only proper exercise of the Court's discretion would be to refuse to make the declarations sought because of inutility or hypotheticality. I have dealt with, and rejected, the argument that the declarations are hypothetical. The question of inutility will be examined in a little more detail in due course; but the primary manifestation of the argument was to the effect that the Court should decline to make a declaration where the proposed declaration would leave unresolved disputed issues, with the consequence that further litigation would be required to resolve the whole controversy. It was submitted that this was a matter of principle flowing from Neeta v Phillips and the decision of Brereton J in Commonwealth v BIS. I will come to Neeta v Phillips in a little more detail shortly, but in my view it is simply not correct as a matter of principle to put the matter so broadly and categorically. The decision of Brereton J, at least on one reading, however, does support that broad proposition, in particular by reference to some of the judgments of the New South Wales Court of Appeal to which his Honour refers.
126 The terms of s 21, of course read with s 22, are plain. Further, the potential utility of targeted issue resolution by the use of declaratory relief, in particular in, but by no means limited to, commercial disputes, has long been recognised. Of course, there are dangers of breaking up a dispute or being over-ambitious in a quest for short cuts. But the horrendous size and cost of modern litigation (of the very kind one can see in this controversy) legitimately moves parties to seek ways to lessen those burdens, and the risks involved in tackling them. The London Commercial Court, Court of Appeal and the House of Lords recognised this in a different era of litigation in 1921: Russian Commercial and Industrial Bank. That there will or may be litigation to follow the resolution of the declaration is not, by that fact alone, a bar to the making of declarations.
127 The utility of the construction summons, whether by questions posed and answered or by declaration has long been recognised. In 1993, in Re Security Projects Ltd; Re K Mart (Aust) Ltd & Roggette [1993] QSC 18, Thomas J referred to the Full Court of the Queensland Supreme Court in Re Bowman in 1985 (reported in [1994] 1 Qd R 251), which disapproved a statement (of the kind relied on here by the reinsurers) in Lewis v Green [1905] 2 Ch 340 at 344 to the effect that the construction summons procedure was only intended to decide questions when such a decision "will settle the litigation between the parties". That fact is one matter to be considered by the judge.
128 Re Bowman concerned the then construction summons rule in the Queensland rules: O 64 rr 1A, 1B and 1BB. (Though the Insurance List has no specific equivalent rule, wide case management powers and s 21 make such unnecessary.) Thomas J said the following at 252:
Applications under O. 64 rr. 1A, 1B and 1BB are very useful procedures, and when properly used can avoid heavier and lengthier formers of litigation. When improperly used they lead to the proliferation of litigation and fail to advance the determination of the ultimate disputes between the parties.
129 Then, speaking of Lewis v Green, Thomas J said at 252-253:
In the course of his reasons, the Chamber Judge referred to Lewis v. Green [1905] 2 Ch 340, 344, and to the observation of Lucas J. in Re Jones and the Commissioner for Railways [1968] Q. W. N. 29 that "perhaps the limits of the jurisdiction referred to in Lewis v. Green are not stated widely enough". The relevant limitation mentioned by Warrington J. was that the procedure "is only intended to enable the court to decide questions of construction where the decision of those questions, whichever way it may go, will settle the litigation between the parties". I share the view of Lucas J. that such a limitation is too rigid. There may be cases where a court may properly respond to a construction summons where the determination will assist the settlement of disputes between parties, or some of the disputes between parties, although it will not necessarily settle all litigation between them. However, whilst the observation in Lewis v. Green is not to be treated as a rigid rule, it expresses a factor which may properly influence a court in deciding whether or not to respond to a construction summons.
130 In 1997, the Queensland Court of Appeal reiterated this sentiment in Re Multiplex Constructions [1999] 1 Qd R 287, again in the context of a construction summons application. Davies JA and Lee J said at 288:
It is true that deciding the question of construction here would not "settle the litigation between the parties", to adopt a phrase from the decision of Warrington J. in Lewis v. Green [1905] 2 Ch. 340 at 344 relied on below by the present appellant. But, whatever the position may have been in England in 1905, that is certainly not the correct approach now either under O. 64 r. 1A or under O. 39 r. 12. In both cases judges have a wide discretion permitted by those rules to decide questions. There are often questions in a dispute the decision of which, whilst it may not necessarily resolve the whole dispute, may nevertheless lead to its resolution, in a way which results in considerable savings in time and cost, often for reasons which are neither strictly legal nor logical. It is therefore desirable that, whenever possible, judges should decide summarily questions which can be conveniently so decided.
131 Similar views were expressed by the Full Court of this Court in FQM Australia Nickel Pty Ltd v Bullen [2011] FCAFC 30; 191 FCR 261 at 274-275 [41]-[44] and by Ward J (as her Honour then was) in Quest Rose Hill Pty Ltd v White [2010] NSWSC 939 at [197]-[198]. The declaration made by the High Court in Edwards v Santos could not have been made if the proposition contended for was binding and universal.
132 Does Neeta v Phillips dictate a different result? Neeta v Phillips involved a conveyancing dispute. Both vendor and purchaser had been guilty of some delay. The vendor's solicitor issued a notice to complete, in circumstances disputed by the purchaser. The purchaser took out a summons claiming a declaration that the contract had not been validly rescinded by the vendor, in effect claiming that the notice to complete was ineffective to make time of the essence. Holland J dismissed the summons. The appeal was to the High Court directly from a judge of the Equity Division of the New South Wales Supreme Court. After a careful examination of the solicitors' correspondence, the High Court reversed the decision of the primary judge, finding the vendor in default and not entitled to issue the notice to complete. In the leading judgment, Barwick CJ and Jacobs J made some remarks about the procedure adopted. They said the following at 131 CLR 307:
When the power under s. 75 of the Supreme Court Act, 1970 is exercised the duty under s. 63 must be borne in mind. This is particularly important in relation to subject matters in which the appropriate curial relief depends upon equitable doctrine and rules, especially the rules relating to the specific performance of contracts. These rules have not been substantially changed by the introduction of the judicature system of procedure and pleading. The Court can still grant specific performance of a contract in any case where it could previously do so and cannot grant specific performance in any case where it could not previously do so.
Unless the parties are agreed on the consequences which flow from a declaration that such a contract has or has not been validly rescinded it is generally undesirable that a court should so declare without any orders for consequential relief. If a party to such a contract claims that a contract has not been validly rescinded such a judicial declaration is proper if that party continues ready and willing at the conclusion of the litigation to perform the contract. A consequence of the declaration should be that the party submit to the performance of the contract on his part and to an order for specific performance of the contract if that is appropriate. If such an order is not or cannot be made nor an inquiry into damages ordered then a declaration that on a certain day the contract has not been validly rescinded serves no purpose in the litigation. Before such a declaration is made the party seeking the declaration may already have elected to treat the other party's purported rescission as a repudiation and may have himself rescinded the contract. All that has then been achieved is an issue estoppel if and when the claim for damages for breach of contract is pursued in other proceedings. This was not the intention of the legislation as appears from s. 63. Conversely, if a declaration be made that a contract has been validly rescinded but no consequential orders for damages or for return or retention of the deposit are made in those proceedings the purpose of s. 63 is not achieved.
(Emphasis added.)
133 Their Honours were especially concerned with declarations where the balance of the proceedings would involve equitable rules and defences. The declaration in Neeta v Phillips had to be understood in the context of the availability of specific performance. Further, this was a vendor and purchaser suit of a typical kind in the Equity Division. They were not large cases, easily and commonly dealt with in a manner that would see specific performance ordered or the forfeiture of a deposit and damages upon the question of contractual entitlement or rescission being decided upon. Nowhere does the judgment lay down a rule for any case that, unless all substantive remedies are sought, declaratory relief must be refused, even though there may be practical consequences.
134 The decision in Neeta v Phillips led to some disagreement of emphasis in the New South Wales Court of Appeal. In Trans Realties Pty Ltd v Grbac [1975] 1 NSWLR 170, again a vendor and purchaser suit, two members of the Court (Hutley and Glass JJA) were critical of the use of a declaration that the contract had not been rescinded. One of the difficulties might be seen from the fact that the vendor had asserted a right to rescind for the fraudulent misrepresentation of the purchaser. Hutley JA referred (at [1975] 1 NSWLR 173) to the "false issue" in the pleading, because the validity of rescission did not depend upon the grounds given in the notice of rescission. His Honour succinctly set out the problem:
The effect of these pleadings was to offer to the Court a false issue. The validity of the rescission did not depend upon the grounds given in the notice of rescission. The defendant could succeed, if other grounds could be made out. The plaintiff could not anticipate every ground. As the plaintiff did not ask for an order for specific performance, the defendant did not have to set up these grounds, nor was she in a position to raise discretionary defences; they do not destroy the contract and it may remain on foot as the source of legal remedies. Where a party wants specific relief, and the most that could be said in justification for seeking a declaration is that it is a stage in obtaining specific relief, it is an abuse of the process of the Court for the party concerned to avoid relevant issues by merely seeking a declaration without seeking the substantive remedies. At a later stage the defendant obtained leave to amend her defence by setting up a discretionary defence to an order for specific performance, which had never been asked for, and because of this his Honour did not have to deal with it. This has produced an unfortunate result, in that, if the plaintiff were to succeed on appeal, it would be necessary for the issues involved in the discretionary defence to go back for trial, even though those issues are mixed up with the issues which were tried. In my opinion his Honour, before embarking on the hearing, should have ordered the parties to put their pleadings in order.
135 These difficulties and their expression do not, however, form the legitimate foundation of a categoric principle about declaratory relief, as contended for by the reinsurers. Glass JA, however, put the matter more categorically than Hutley JA at [1975] 1 NSWLR 176 saying:
At the trial the course was followed of permitting the parties to litigate certain issues of their selection. Upon some questions which divided them declarations were sought, but others were left outside the field of debate. Since 1965 the declaratory jurisdiction of the Equity Court has been established beyond peradventure: Law Reform (Miscellaneous) Provisions Act, 1965, s. 15, amending s. 10 of the Equity Act, 1901; Forster v. Jododex Australia Pty. Ltd.. From that time the practice has developed of granting declarations covering some only of the disputed ground. This was, no doubt, a service of some utility to the litigating public. The readiness of the Equity Court to provide the service might be seen as reparation for its former disclaimer of declaratory jurisdiction in the face of the most determined legislative attempts to invest it: Tooth & Co Ltd. v. Coombes; David Jones Ltd. v. Leventhal. Be that as it may, the High Court has emphatically laid down that the practice of incomplete adjudication requires reconsideration: Neeta (Epping) Pty. Ltd. v. Phillips. The declaratory jurisdiction now derived from s. 75 of the Supreme Court Act, 1970 is subject to the admonition in s. 63 that, in the interest of avoiding multiplicity of proceedings, all matters in controversy should be finally determined. Where equitable relief is concerned, in particular, the public interest in finality will generally override the private interest in selective litigation. Accordingly, in the present proceeding the outstanding issues of discretionary defences, and any other grounds validating the notice of rescission, should have been gathered in by requiring the plaintiff to claim specific performance.
(Footnotes omitted.)
136 This expression of the jurisdiction put the matter in its historical context, but laid emphasis on what his Honour saw as the High Court's general view as to "incomplete adjudication". The views of Glass JA were not shared by Mahoney JA, who in, if I may respectfully say, a powerful section of his reasons (at [1975] 1 NSWLR 181-185) defended the continuing use of the declaratory procedure by the Equity Division. At [1975] 1 NSWLR 183-184 Mahoney JA said the following as to the role of s 63 of the Supreme Court Act 1970 (NSW) (s 22 of the Federal Court of Australia Act) and the decision of Neeta v Phillips, with which I respectfully agree:
The terms of s. 63 of the Supreme Court Act, 1970, in my opinion, allow the parties some choice as to what "claims" shall be "brought forward in the proceedings" and it is the "matters in controversy" which are to be determined and concerning which multiplicity of proceedings is to be avoided. The Court before which, for example, a proceeding commenced by summons first comes must, in my opinion, give consideration to the form of the proceedings and the relief claimed and must determine, in the circumstances of the case, whether the proceedings constitute a proper compliance with the principles to which I have referred. In relation to a contract for sale of land, where the matter in substantial issue is whether a purported rescission is valid, that decision must be made in the light of the observations of Barwick C.J. and Jacobs J. in Neeta (Epping) Pty. Ltd. v. Phillips. In that case, the substantial issue was whether a contract for sale had been validly rescinded. The proceedings were commenced by summons and the only claim was for a declaration that the contract had not been validly rescinded.
[After quoting the relevant passages from Neeta]
This does not, in my opinion, mean that in all cases where the effect of a purported rescission is in issue, specific performance must be one of the claims made in the proceedings ; their Honours indicated merely that "it is generally undesirable" that a declaration be made without consequential relief. It may be that the contract in question contemplates the doing of a number of things prior to the point being reached, if it is reached at all, at which there is to be an exchange of a conveyance for the consideration and that as "the whole matter is (not) capable of being disposed of": Daniell's Chancery Practice (8th ed.) p. 362; in such a case it may be inappropriate for specific performance to be claimed at that stage. However, the observations of their Honours in the Neeta case are a reminder in strong terms that, where the validity of the rescission of a contract for sale of land is in issue, it is "generally undesirable" so to structure a proceeding that the Court is not in a position to determine completely and finally all matters in controversy concerning the subject matter of the proceedings.
(Footnotes omitted.)
137 A little over a year later the Court of Appeal again had cause to consider the declaration in the context of vendor and purchaser suits. In Lohar Corporation Pty Ltd v Dibu Pty Ltd (1976) 1 BPR 97014 p 9177 there was a dispute about whether a contract for sale of land had been terminated. After the suit for declaration as to the validity of the notice to complete and subsequent termination had been filed, further notices to complete and then of rescission were served. The suit for declaration was dismissed. The Court of Appeal allowed the appeal, and made a declaration that the contract had been determined and the deposit forfeited. Notwithstanding that he was prepared to make these orders, Hutley JA once again reiterated his warning as to false issues (at 1 BPR p 9179):
As was pointed out by the majority of this court (Glass JA and myself) in Trans Realties Pty Ltd v Grbac [1975] 1 NSWLR 170 an issue as to whether an event took place in a particular way or at a particular time can be a false issue in that it does not determine rights.
…
Declarations as to particular situations are appropriate where the declaration is as to an ultimate or decisive fact, upon which the rights of the parties finally depend.
They are not appropriate as to subsidiary or collateral facts which, however interesting to the parties, do not decide the controversy between them, and cannot do so.
138 At 1 BPR p 9185, Glass JA expressed his agreement with Hutley JA, referring to Neeta v Phillips and Trans Realties, but in terms that were specific to the issues before the Court:
I respectfully agree with him that it is otiose to litigate the question whether a contract was or was not rescinded by a specified notice instead of raising the more general question whether it has been validly terminated for any reason. Similarly, a decision that the contract is at an end which leaves undecided the question whether the deposit may or may not be retained for reasons still outstanding should generally be avoided. Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286; Trans Realties Pty Ltd v Grbac (1975) 1 NSWLR 170.
139 The Chief Justice wrote a judgment concurring in the orders, but powerfully defending the utility of the declaratory procedure in the effective and efficient despatch of business in a busy court such as the Equity Division. Though long, it bears recording here, not least because of its importance:
I wish, however, to express a reservation upon the extent to which significance should attach to some of the comments in the cases referred to in the judgments of the other members of the court, viz Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286; (1974) 3 ALR 51 and Trans Realities Pty Ltd v Grbac [1975] 1 NSWLR 170. It may well be that the comments in those two cases touching upon the exercise of declaratory jurisdiction are to be confined to the particular circumstances there under consideration. Experience in vendor and purchaser litigation at first instance confirms that a readiness on the part of the court to entertain and decide by means of a declaration particular disputes arising between vendor and purchaser has been a significant factor in assisting the flow of conveyancing business within the community and in limiting the number of disputes that develop into wide-ranging and lengthy litigation. Where a vendor and a purchaser have come to issue in connection with their contract and its fulfilment, and where the court can see that real utility will attach to resolving that issue on a summary application for a declaration, a court of first instance need not anticipate that an appellate court will fail to recognise the width of the declaratory jurisdiction as established by Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 or that the discretion to exercise that jurisdiction will be too freely reviewed. The sheer volume of vendor and purchaser disputes resolved through the declaratory jurisdiction after a hearing in the order of an hour or so will inevitably result in an occasional case emerging in which it can be seen in the wisdom of hindsight that the declaration, although believed to have utility when granted, has fallen short in its aim of resolving the dispute between the parties. It is to be borne in mind that the matters that find their way into the lists of the appellate courts are frequently those in which the declaration has to a greater or lesser extent miscarried and it is in this context that the comments in the two cases mentioned are to be evaluated. It cannot be overlooked that pursuit of ultimate procedural regularity and total finality of every aspect of an executory relationship between disputants will often be unnecessary, leading as it frequently does, to escalation in expense, prolongation of time and congestion in the court's first instance lists. Courts at first instance are not to be discouraged from a liberal exercise of the declaratory jurisdiction provided, of course, at all times that its use is both responsible and seen to be attended by utility.
140 From the second to the current 5th edition, the authors of Meagher, Gummow and Lehane, have quoted that passage in full with the introductory comments:
The position was put into its proper perspective … in Lohar … where Street CJ said…
141 The practice of the Equity Division has continued: Winchcombe Carson Trustee Co Ltd v Ball-Rand Pty Ltd [1974] 1 NSWLR 477 (Wootten J); Wighams Enterprises Pty Ltd v Smith [1975] 1 NSWLR 76 (Needham J); and Quest Rose Hill Pty Ltd v White [2010] NSWSC 939 (Ward J).
142 I agree with the authors of Meagher, Gummow and Lehane that the fact that the declaration might not conclude the dispute will hardly ever be a bar on its own: Meagher, Gummow and Lehane p 641 [19-305], citing Hope J in Integrated Lighting & Ceilings Pty Ltd v Phillips Electrical Pty Ltd (1969) 90 WN (Pt 1) (NSW) 693 at 702. I also agree with the authors that the proper perspective of authority is as expressed by Street CJ in Lohar. This is reflected in the approach of the High Court in Edwards v Santos.
143 In Commonwealth v BIS, Brereton J relied also on Coles v Wood [1981] 1 NSWLR 723. The case concerned an attack on the validity of an arrest warrant and search warrants by summons seeking certiorari and declarations. There were numerous difficulties with the procedure undertaken in all the circumstances. Hutley JA (with whom Samuels JA agreed) said (at [1981] 1 NSWLR 728-729):
If validity or invalidity is irrelevant in the criminal proceedings and the appellant does not want to bring proceedings for compensation for trespass either to his premises or goods, the time of the courts should not be wasted in determining what is either a purely theoretical question or a propaganda exercise. It is the responsibility of the courts to see this does not occur.
Where substantive remedies can be sought, the Supreme Court should insist on their being sought in addition to declarations. Where money is owing, a mere declaration is of less utility than a judgment. For example, it does not carry interest, as does a judgment, and will have to be followed by further proceedings to enable the remedies available to a judgment debtor to be obtained. If the goods of the appellant have been seized under an invalid warrant, there are remedies by way of proceedings for damages, specific recovery and sometimes injunctions, prohibitory or mandatory: assuming the need for an urgent remedy can be established, expedition in the hearing of the proceedings may be obtained. The fact that Roden J has given reasons on the substantive issues, and this reasoning may be challenged in the course of the trial, provides no justification for granting leave. His reasons are not binding on the trial judge or the committing magistrate.
The Supreme Court, in my opinion, should refuse to entertain proceedings for declarations in a case of this kind, unless the appropriate substantive remedies are sought in the proceedings. How and in what order remedies are granted is, of course, a matter for the judge seized of the case. I am, therefore, of the opinion that to grant leave to appeal in this instance would be to condone a course of proceedings which is contrary to the rationale of s 63 of the Supreme Court Act, 1970. Despite the fact that no objection was taken before him, the judge at first instance should of his own motion have refused to entertain the proceedings in limine, and dismissed the summons with costs. The applications for leave to appeal and for expedition should be dismissed.
144 Moffitt P put the matter thus (at [1981] 1 NSWLR 725):
The present proceedings are yet another example of civil proceedings brought apparently to pre-empt the determination of questions, which ought and normally can more properly be determined by the courts exercising criminal jurisdiction (and see now the decision of the House of Lords in Imperial Tobacco Ltd v Attorney-General [1980] 2 WLR 466; [1980] 1 All ER 866...
145 The decision is not authority for the general proposition contended for by the reinsurers. This case was one, in all the circumstances, unsuited for such declaratory relief.
146 On appeal in Commonwealth v BIS, the Court of Appeal expressed doubt about Brereton J's treatment of Neeta v Phillips: see Commonwealth v BIS Cleanaway Ltd [2008] NSWCA 170 at [4]-[5] per Hodgson JA, [13] and [21] per Ipp JA, and [23] per Campbell JA.
147 The proper approach is one of the proper discretionary exercise of power taking account of the terms of both ss 21 and 22. The perspective for its exercise should be that expressed by Street CJ in Lohar and Mahoney JA in Trans Realties. To interpret s 22 as demanding the refusal of declaratory relief because further litigation might be required to resolve the whole controversy is to destroy the utility of declaratory relief in otherwise appropriate cases. Sections 21 and 22 must be read together. They must be read together now with Pt VB. The Federal Court Rules do not have an equivalent of a construction summons rule, but the width of case management powers, Pt VB of the Federal Court of Australia Act, when read with ss 19, 21, 22 and 23, enable the Court to manage and decide cases in a manner most conducive to resolving disputes as efficiently as possible. The aim of the Insurance List (set up after consultation with lawyers, brokers, underwriting agents and insurers) was described in Delor Vue Apartments CTS 39788 v Allianz Australia Insurance Ltd [2019] FCA 639 at [10]:
One of the purposes of this list was to provide a facility for insureds and insurers to have resolved short issues, short of a full trial, to facilitate the resolution of a wider dispute. I fully recognise that long experience tells one that the shortest way home in litigation is sometimes just to hear the case in full. But experience also tells one, and the experience of this List is clear, that with willing parties demonstrating a commitment to the overriding purpose in Pt VB of the Federal Court of Australia Act 1976 (Cth) and to solving a mutual commercial problem in good faith, shorter, cheaper and targeted techniques can be used to resolve the heart of a problem, allowing the parties to exercise common sense in the resolution of the balance of the matter.
148 I reject the submission that, by reference to legal principle, the reinsurers are entitled to summary judgment on the basis that the declaration will not resolve all issues in the controversy.
149 I turn then to the question of discretion - not to exercise it, but to consider whether the judge hearing the application would be obliged to dismiss the application as inutile.
150 Much of the time in argument was taken by senior counsel for the second, and third and fourth, respondents revealing the interlocking complexities of what will remain unlitigated, for a future case. It is unnecessary to examine these complexities; they can be gleaned not only from the written and oral submissions on the interlocutory applications, but also from the detailed and comprehensive letters between the respective solicitors which I have set out. Senior counsel for NAB did not shy away from that complexity.
151 That overall complexity does, however, have a tolerably clear point of construction at its centre. At the risk of criticism for repetition, the views of the solicitors for the second respondent (adopted as they were by the solicitors for the third and fourth respondents) carry weight. This is the view of highly competent and experienced solicitors fully appreciating the importance of the point in seeking to drive home to NAB the weakness of its claim. The construction point was described by Kennedys as: an "important element" by way of a "fundamental bar to recovery" and an "insuperable problem" for NAB: see generally [38]-[46] above. Further, it is difficult to see why the argument could not be concluded within a day.
152 HSF put the utility in terms set out in their correspondence early this year: See [70] above. Senior Counsel for NAB expressed it similarly in argument.
153 The utility is said to be the avoidance (through a clarification of the meaning of the provisions) of the risk of being wrong about the meaning of the provisions and the need to show pre-existing legal liability. Without the benefit of the declaration, NAB, in order to avoid the risk of being wrong as to the meaning of the relevant provisions, will have to undertake the very large and costly task of proving pre-existing legal liability in circumstances where its position is that proof of such is unnecessary. If it does not, and if it is wrong about the construction, it will lose. The relief is calculated to provide certainty about what must be proved, not just for NAB, but for all parties and the Court, to reduce the scope, size and cost of the litigation.
154 It can be accepted that the reasonableness of the arrangements and payments arising from the reviews have a connection, obviously, with liability to customers. But it is quite a different question in focus and nature from individual proof of liability to each customer. In this regard the remarks of Hayne J in Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38; 192 CLR 603 at 653-654 [130]-[133] are relevant.
155 The above considerations have force. They are not, in my view, to be brushed aside by reference to the complexity and difficulty of the case otherwise. Indeed, they tend to reinforce the utility of deciding a central and important question which has the capacity to affect the length and cost of a potentially very large piece of litigation, especially if the argument over construction is confined and likely to take no more than a day. The views of Mr Rowan at paras 33 to 41 of his affidavit of 9 August 2019 (whether as evidence or submission) resonate as reflective of the reality of the potential advantage to the parties and to the Court of clearing the ground with this short issue.
156 The matter was also put on the basis that settlement may be promoted. I would only make one comment. The resolution of a central issue that is seen as a fundamental bar to recovery and an insuperable problem to one party (on one construction) is likely to have some effect on how parties view the litigation, its outcome and the wisdom and prospects of settlement.
157 It is unnecessary to deal with every submission of the reinsurers as to the issues which the declarations will not touch. None was such as to undermine the clarity of the questions posed in the declarations.
158 The question whether the redress payments came within the "carve-out" in Special Exclusion 15 ([29] above) or in the General Definition of "Loss" in cl 40 ([30] above) is a question of characterisation assessing the meaning of "Loss". It does not affect the meaning and content of the notion of "Loss".
159 The question whether there are claims that were statute-barred will affect the reasonableness of the claims. If individual pre-existing liability is required to be demonstrated the question of limitations will be sharp. If it is not, the question of limitations will be analysed from a different perspective. This reinforces, it seems to me, some utility in the declarations.
160 There are separate contentions by NAB under cll 11(c) and 11(d) of the definition of "Civil Liability" (the declarations being sought relate to cl 11(b)). No constructional issue touches these. It can be accepted that the validity of these separate contentions will remain to be resolved.
161 It is disputed that there is a "Claim" and, if so, when it was first made. These questions will remain unresolved, but do not touch the question sought to be raised.
162 There are also issues as to defence costs and why they are not reasonable, even leaving to one side the constructional issue sought to be decided, and the question of whether there is a single aggregated loss or not. Some involve questions of construction; some involve questions of characterisation.
163 Some of the submissions of the reinsurers seemed to assume that the arguments about construction sought to be decided in the declarations would only be directed to the clauses the subject of the orders sought. Thus it was pointed out that General Definition 11(b) as to Civil Liability had important provisions in parentheses referring to General Condition 2 (Notification of Losses or Third Party Claims), and General Condition 7 (Defence and Defence Costs). Neither of these provisions would, if relevant, be left out of any argument as to how General Definition 11(b) worked. The whole policy, its terms and purpose would be relevant to the argument about the subject provisions.
164 I am satisfied that the question sought to be resolved in the declaration sufficiently clearly arises from a consideration of the whole of the policies to enable it to be expressed in a manner substantially as sought.
165 I recognise that there will remain a significant body of issues to be litigated. I am satisfied, however, that a judge hearing the matter could reasonably take the view that there was sufficient utility in making the declarations, as on a construction suit. The matters put by NAB reveal that there may be real practical utility in making the declarations after a short construction suit to advance the aims and purposes of Pt VB of the Federal Court of Australia Act.
166 In the correspondence, but not in argument, the reinsurers raised the spectre of an Anshun argument. No doubt NAB has considered its own position on that matter. If it were the case that to grant the declaration would necessarily mean no further litigation were possible, the declarations would, undoubtedly, be inutile. No such submission was put. Principles based on Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; 147 CLR 589 at 602-603 and Henderson v Henderson (1843) 3 Hare 100; 67 ER 313 are not ones of mechanical application. They involve questions of reasonableness by way of value judgment referable to the proper conduct of modern litigation: Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33; 75 NSWLR 245 at 246-247 [3]-[4].
167 The third and fourth respondents (but I take it, not the second respondent) also (faintly) raised an issue as to the proper constitution of the suit. The extent of the submissions can be found at paras 91 and 92 of the written submissions:
NAB purports to sue the Third and Fourth Respondents "on their own behalf and on behalf of all underwriters that reinsured the liability of Nautilus" under the 2013/14 Policy and the 2014/15 Policy respectively.
The Later Reinsurers who have appeared in this proceeding are only some of the underwriters that reinsured the liability of Nautilus under those policies. They are not, and cannot be treated as, "representing" other reinsurers unless the Court makes an order to that effect under r 9.21. No such order has been sought.
168 Rule 9.21 is in the following form:
(1) A proceeding may be started and continued by or against one or more persons who have the same interest in the proceeding, as representing all or some of the persons who have the same interest and could have been parties to the proceeding.
(2) The applicant may apply to the Court for an order appointing one or more of the respondents or other persons to represent all or some of the persons against whom the proceeding is brought.
(3) If the Court makes an order appointing a person who is not a respondent, the order has the effect of joining the person as a respondent to the proceeding.
(4) This rule does not apply to a proceeding dealing with property that is subject to a trust or included in a deceased estate.
169 Paragraphs 4 and 5 of the statement of claim are in the following form:
4. The third respondents:
(a) are insurance syndicates at Lloyd's; and
(b) are sued on their own behalf and on behalf of all underwriters that reinsured the liability of Nautilus under the 2013/14 Policy.
5. The fourth respondents:
(a) are insurance syndicates at Lloyd's; and
(b) are sued on their own behalf and on behalf of all underwriters that reinsured the liability of Nautilus under the 2014/15 Policy.
170 Plainly NAB sues the subscribing reinsurance underwriters to the two policies of reinsurance affecting the third and fourth respondents, as stated in the Schedule to the statement of claim.
Third Respondent: CERTAIN UNDERWRITERS AT LLOYD'S LONDON SUBSCRIBING TO POLICY NUMBER B0509QA008613 (who are sued on their own behalf and as representing all underwriters that reinsured the liability of Nautilus under the policy issued to NAB titled "Crime and Professional Indemnity Insurance Policy" for the period 31 March 2013 to 31 March 2014)
Fourth Respondent: CERTAIN UNDERWRITERS AT LLOYD'S LONDON SUBSCRIBING TO POLICY NUMBER B0509QA009914 (who are sued on their own behalf and as representing all underwriters that reinsured the liability of Nautilus under the policy issued to NAB titled "Crime and Professional Indemnity Insurance Policy" for the period 31 March 2014 to 31 March 2015)
171 Rule 9.21(1) appears to be satisfied. The third and fourth respondents have been joined by the form of proceedings as representative parties (as well as in their own right). There was no suggestion that any of the following reinsurers have anything other than an entirely conforming interest. As Mason CJ, Deane and Dawson JJ said in Carnie v Esanda Finance Corporation Ltd [1995] HCA 9; 182 CLR 398 at 405:
Once the existence of numerous parties and the requisite commonality of interest are ascertained, the rule is brought into operation subject only to the exercise of the court's power to order otherwise.
172 The suit appears to be properly constituted under r 9.21(1). However, if there is any doubt about that matter an order should be made under r 9.21(2). I see no reason why it should not be made in terms of the schedule to the statement of claim. If there is any issue of substance, the third and fourth respondents should raise it promptly. (Their current submissions do not.) In the light of any matters raised, NAB can take its own course.
173 There was a submission that the statement of claim, or para 37 of it, should be struck out because of a failure to plead a cause of action. The statement of claim, seeking to explain, as it does with some clarity, the declaratory relief sought, could have been cast, without any complaint, as a concise statement. It should be taken as having that explanatory role. No purpose would be served in striking out any part of it.
174 At the interlocutory hearing on 21 August 2019, I asked the parties to continue to prepare the matter for hearing of the construction issues in the event that the interlocutory applications were dismissed and provide their mutual availability in October 2019 for such a hearing. There was no objection to this course. After conferring, the parties indicated that the only suitable date was 12 November 2019. In the circumstances, it is appropriate for the matter to be listed for hearing of the construction issues before the Honourable Justice Lee on 12 November 2019.
175 The orders that I would make are:
- The interlocutory applications of the second, and third and fourth, respondents be dismissed with costs.
- Within 7 days, the solicitors for the third and fourth respondents identify in a letter to the solicitors for the applicant any matter of substance that would prevent an order under r 9.21(2) being made.
- The originating application be fixed for hearing on 12 November 2019 before the Honourable Justice Lee.
- The parties have liberty to apply to Justice Lee for the making of any orders for further case management.
I certify that the preceding one hundred and seventy-five (175) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Allsop.