National Australia Bank Limited v Nautilus Insurance Pte Ltd

Factual background 8 The factual background is taken from the various claims, submissions and responses that form the expression of the controversy between and among the parties, and from the submissions before the Court. 9 In or about 2012, the United Kingdom Financial Services Authority (which later became the Financial Conduct Authority), to which I will refer as the UK Regulator, identified failings in the way some banks, including Clydesdale Bank Plc (Clydesdale), a subsidiary of NAB (until 2013), had sold certain products to customers. These included Interest Rate Hedging Products (IRHPs), being so-called stand-alone derivative products (SADs) and tailored business loan products (TBLs), sold from 2001. A review and redress investigation scheme was instituted by Clydesdale and NAB with the aim of identifying and settling reasonably apprehended liabilities in respect of these products. 10 The review revealed to Clydesdale and NAB that there were grounds for redress for many customers. Many customers were paid redress in accordance with agreements entered into with Clydesdale and NAB. 11 It is unnecessary for present purposes to explain in any detail the nature of the IRHPs and the misselling that occurred. SADs enable customers to hedge against the risk of interest rate changes or variable rate loans by a separate derivative agreement. TBLs were loans which had some features of SADs. They were developed for small to medium customers in order to give them a hedging capacity without a separate derivative agreement. There were different types of SADs and TBLs. Some were regulated by the UK Regulator, some were not. 12 Clydesdale and NAB also conducted a complaints redress and review process in relation to fixed rate loans. There had been complaints from customers about the circumstances in which these were sold. There were agreements reached with a large number of customers along the same lines as the agreements to resolve the IRHP review and redress program. 13 After some communication in the previous year and in early 2016, NAB submitted, on 14 November 2016, a formal claim submission for the IRHP review and redress program to Nautilus and the reinsurers for the 2012/2013 policy. On 11 August 2017, NAB submitted a formal claim submission for the fixed rate complaints redress program to Nautilus and the reinsurers for the 2013/2014 and 2014/2015 policy years. 14 Thereafter, detailed correspondence followed these two formal claim submissions. In respect of the claim on the 2012/2013 policy and reinsurances, on 31 October 2017 the reinsurers for the 2012/2013 policy year (through their solicitors) denied indemnity for the IRHP review and redress claim. By letter dated 1 December 2017, NAB (through its solicitors) responded to that denial of indemnity. The reinsurers (again through their solicitors) responded in substance to NAB's solicitors by letter dated 23 April 2018. 15 In respect of the claim on the 2013/2014 and 2014/2015 policies, by letter dated 13 June 2018 from their solicitors the reinsurers for those years denied indemnity. In this letter, the 2013/2014 and 2014/2015 reinsurers adopted the position articulated by the 2012/2013 reinsurers in relation to the IRHP redress claims. 16 A number of things should be noted about this correspondence. First, reinsurers took the running in the debate about the claim because of the terms of the following clauses in the reinsurances, the size of the claims and the engagement of the reinsurances. Secondly, as will be discussed later, the legal representatives engaged, if I may respectfully say, in a clear, full, and sophisticated way with the various issues that attended the claims for indemnity. Thirdly, from these communications, supplemented by later correspondence and the submissions before the Court, one can obtain not only an outline, but also the detail, of a significant existing and substantial commercial dispute as to a present (claimed and denied) entitlement of over £350 million. There is nothing hypothetical about the controversy reflected by the correspondence. 17 Before returning to the character, limits and contours of that controversy, it is necessary to turn to the policies of insurance and reinsurance.

The policies of insurance and reinsurance 18 Because of the substantial identical terms of the policies, discussion of the policies can be focused on the underlying 2012/2013 policy and reinsurance.

The 2012/2013 primary insurance and reinsurance 19 The policyholder was NAB (Schedule item 2). 20 Items 7 and 8 of the Schedule set out the limits of indemnity and retentions, the latter (retentions) being amended by endorsement on 23 October 2012. 21 Item 9 of the Schedule and General Condition 3 provided for the jurisdiction and proper law of the insurance. The policy was expressed to be subject to the provisions of the Insurance Contracts Act 1984 (Cth) (Insurance Contracts Act). The policy also provided that any dispute between NAB and Nautilus would be subject to Australian law and further that, in relation to any dispute, Nautilus would submit to the exclusive jurisdiction of any competent court in Victoria. 22 In the reinsurance policy for the same period between Nautilus and the reinsurers, there was a following clause which stated: Follow Form: This Reinsurance shall be subject to the same terms, conditions, exclusions, definitions and other provisions as are contained in or shall be added to the Original Policies except as otherwise specified herein. This Reinsurance shall follow the meaning and interpretation of the Original Policy in all respects except as otherwise specified herein. It is warranted that the original wording is as attached and any amendments are to be agreed by Reinsurers hereon. (Emphasis added.) 23 By cl 4 of the reinsurance policy there was a specific clause dealing with the Insurance Contracts Act, as follows: Insurance Contracts Act: Save in the cases arising in relation to Subrogation, it is agreed by Reinsurers hereon that in spite of this contract being structured as a reinsurance, the provisions of the Insurance Contracts Act 1984 (Cth) will apply to this Reinsurance, as if this Reinsurance was a direct insurance. Without limiting the generality of the foregoing, Reinsurers hereon acknowledge that their rights under and in relation to this Reinsurance, and the remedies available to them in the case of any of the following, shall be limited to those which would be available to them if the Reinsurance were in fact a direct insurance: (a) any non-disclosure or misrepresentation by or on behalf of the Reassured; (b) any breach of condition, breach of warranty, or failure to comply with any condition precedent; and (c) the existence of any other insurance or reinsurance covering the risks reinsured hereunder. (Emphasis added.) 24 Further, by cl 10 of the reinsurance policy dealing with proper law and jurisdiction, the reinsurers agreed to an identical clause as between them and Nautilus, as was agreed between Nautilus and NAB in General Condition 3 referred to at [21] above. 25 Clause 3 of the reinsurance policy was the claims control clause. Nautilus was required to notify any loss or claim to the broker identified in the underlying insurance. That company was related to the reinsurance placing broker (both being companies in the Marsh group). Such person was stated by cl 3 to act on behalf of the reinsurers. Subclause (ii) of cl 3 also made clear that the reinsurers controlled the handling of the underlying claim: … the Reinsurers shall have the right to appoint adjusters, assessors and/or surveyors and to control all negotiations, adjustments and settlements in connection with any Single Loss arising therefrom. 26 The substantial identity of the terms of the insurance and reinsurance, including the application of the Insurance Contracts Act, and the effective control of all primary claims by the reinsurers perhaps explains why there is no complaint by the reinsurers to being joined in these proceedings with Nautilus. 27 Referring to the primary policy between NAB and Nautilus, sections I and II concern crime - conventional and electronic. Section III is entitled "Professional Indemnity". It is the section in respect of which the claim and dispute as to indemnity arises. 28 The insuring clause is set out at the beginning of the section and relevantly states: (A) Civil Liability arising out of: (a) The provision by or on behalf of the Assured (or failure to provide) Financial or Professional Services to third parties; … (B) the incurring of Defence Costs in relation to any actual or alleged Civil Liability as described in (A) above… 29 Immediately after the indemnity clause is a part of the policy entitled "Special Exclusions". Two provisions are said to be relevant to the present debate, Special Exclusions 1 and 15 and the chapeau thereto: This Section III of the Policy shall not indemnify the Assured in respect of; 1. Any Loss arising out of a contract but only to the extent that the legal liability giving rise to the Loss arises from a breach of a duty, warranty, guarantee or other term that exists solely under contract and which would not have attached to the Assured in the absence of such contract. … 15. For the reimbursement, restitution or disgorgement of fees, profits, commissions, costs or other charges paid or payable to the Assured, or based on, arising out of, relating to or involving, directly or indirectly, the actual or alleged charging of excessive, undisclosed or otherwise improper fees, profits, commissions, costs or other charges by the Assured. 30 After the Special Exclusions, there is a part of the policy entitled "General Definitions". There are a number of provisions relevant to the present debate: (a) The phrase "Civil Liability" is defined in cl 11 as follows: "Civil Liability" shall mean: (a) a legally enforceable obligation to a third party for compensation, damages, legal costs or a Restitutionary Order in accordance with an award of a court or tribunal by whose jurisdiction the Assured is bound; (b) a legally enforceable obligation to a third party for compensation, damages, legal costs or a Restitutionary Order acknowledged (subject always to the provisions of General Condition 2, Notification of Losses or Third Party Claims and General Condition 7, Defence and Defence Costs, clause (c) 2)) by an agreement made between the Assured and a third party in settlement of a Claim; (c) any liability pursuant to any award, directive, order or similar act of a Authority or self regulating organisation, the result of which is binding upon the Assured; (d) any liability pursuant to arbitration or other alternative dispute resolution process the result of which is binding upon the Assured; (e) liability under Section 95 (1) of the Cheques and Payments Orders Act in Australia or similar legislation elsewhere for conversion; (f) any liability to retail clients due to breaches of obligations under Chapter 7 of the Corporations Act 2001 (Cth) but only as required to be covered under ASIC Regulatory Guide 126; (g) any liability to consumers due to breaches of obligations under the National Consumer Protection Act 2009 (Cth) but only as required to be covered under ASIC Regulatory Guide 210… (b) The word "Claim" is defined in cl 12 as follows: "Claim" means any: (a) demand, suit or proceeding, including any civil proceeding, third party proceeding, counterclaim, arbitration or alternative dispute resolution process, regulatory or administrative proceeding (and any appeal therefrom) brought by any party against the Assured either for or which could reasonably result in the payment of compensation, damages, or a Restitutionary Order; or (b) hearing, examination, investigation or inquiry into the affairs of the Assured. (c) The phrase "Defence Costs" is defined in cl 20 as follows: "Defence Costs" means reasonable and necessary legal fees, legal costs and other expenses and costs of investigation, defence and settlement paid or incurred by or on behalf of the Assured in connection with any Claim, other than the normal salary of any Employees. (d) The phrase "First Made" is defined in cl 32 as follows: "First Made" means the date at which the Responsible Department: (a) becomes aware that the Assured has received a Claim; or (b) becomes aware of the intention of any person to make a Claim against any Assured. (e) The word "Loss" is defined for the purposes of Section III of the policy in cl 40 as follows: "Loss" means: … (B) In respect of Section III only: (a) The total amounts which the Assured becomes or may become legally liable to pay, including but not limited to: (i) damages, judgments and settlements, including legal costs; (ii) payments to third parties (including civil penalties) in restitution which are of a compensatory nature, in compliance with the directions of any body or Authority empowered to govern the conduct of the business of the Assured between the Assured and such third parties (not to include for the avoidance of doubt any such payment to or for the benefit of such body or Authority); (iii) any award of costs made against the Assured; (iv) the cost (including the acquisition cost of securities) of restoring a person to a register or record where the Assured is legally liable for the wrongful removal or non-appearance of that person from or on the register or record; (v) all other costs and expenses, incurred with the written consent of Underwriters; (b) Defence Costs. There is a qualification to this definition of Loss immediately following, as follows: "Loss" under (B) (a) and (C) (a) above only does not, include: … (d) fees, commissions, or other charges paid or due to the Assured… (f) The phrase "Responsible Department" is defined in cl 54 as follows: "Responsible Department" means that part of the Assured's organisation specified in the Schedule. Item 13 of the Schedule specified Group Insurance & Operational Risk Financing, Melbourne as the Responsible Department. (g) The phrase "Single Loss" is defined in cl 60 as follows: "Single Loss" means all Loss arising from or attributable to one originating cause. 31 After the General Definitions there follows a part of the policy entitled "General Conditions". 32 Clause 2 of the General Conditions deals with notification of losses, or third party claims, investigation of losses and dispute resolution. It included the following: (i) The Responsible Department shall give written notice of: (I) any actual or potential Loss where Discovery occurs during the Policy Period (or Extended Reporting Period in accordance with General Condition 12), and/or (II) any Claim First Made against the Assured during the Policy Period (or Extended Reporting Period in accordance with General Condition 12) in accordance with the following procedures agreed between the Assured and Underwriters: … (c) any Loss or Claim of more than the applicable 'Business Unit Retention' shall be notified to the Underwriters as soon as is reasonably practicable after Discovery or such Claim is First Made; … (e) with respect to any Loss or Claim of more than AUD 1,000,000, the Responsible Department shall consult with the Underwriters as to how the matter shall be dealt with and the Underwriters shall have the right, at their discretion, to control the appointment of adjusters and/or legal advisors and the investigation, negotiation and settlement thereof; The Extended Reporting Period concerns the position when renewal is declined. The Assured was entitled to an extended period upon payment of a further premium. 33 Clause 7 of the General Conditions provided for Defence and Defence Costs, relevantly as follows: Defence and Defence Costs (a) The Underwriters shall indemnify the Assured against reasonable Defence Costs paid or incurred by or on behalf of the Assured, with the approval of Underwriters (which approval shall not be unreasonably withheld, denied or delayed), in the defence of any suit, demand, claim, legal proceedings or action in respect of which the Assured establishes that the circumstances were such that they would, if established against the Assured, give rise to a claim by the Assured under this Policy. Such Defence Costs and other costs paid by Underwriters in defending any suit, legal proceedings or action shall be applied, firstly, to the retention amount and then, subject to General Condition 9, Limits of Indemnity, to the reduction of the Aggregate Limit of Indemnity of the relevant Section of this Policy and any Sub-limit applicable to the relevant Insuring Clause. (b) Underwriters shall not indemnify the Assured for Defence Costs incurred in the defence of any causes of action which, if established against the Assured, would not give rise to a claim under this Policy, unless the Underwriters have consented to do so in writing. (c) The Assured or their legal representatives shall not: (1) take any action which is prejudicial to Underwriters' interests; or (2) without the prior consent of the Underwriters (such consent not to be unreasonably withheld, denied or delayed), admit liability for or settle any third party Claim in excess of the Retention specified the Schedule. [There followed a Queen's Counsel Clause.] 34 In cl 9 of the General Conditions concerning the limits of indemnity subclauses (e) and (f) are in the following terms: Limits of Indemnity … (e) Non Cumulative Liability: Regardless of the number of years this Insurance has been in force or may continue to be in force and of the premiums paid or payable in respect thereof the liability of the Underwriters with respect to any Single Loss shall not be cumulative in amount from year to year or from period to period and in no case shall exceed the Limit of Indemnity stated in the Schedule. (f) Retention: The Underwriters shall be liable hereunder only in excess of the applicable retention stated in the Schedule, provided always that: (i) only one retention (being the highest of any of the applicable retentions) shall apply to any Single Loss, even if such Single Loss is covered under more than one Section or Insuring Clause of the Policy or if such Single Loss is covered by either or any Policy issued by Nautilus Insurance Pte Limited; and (ii) if the Assured is indemnified by any other insurance policy in respect of any Loss, any recoveries therefrom shall to the extent of such recoveries be deemed to contribute towards the satisfaction of the retention. 35 The 2013/2014 and 2014/2015 policies are in substantially the same form.

The nature and terms of the controversy in the claims correspondence

The 2012/2013 policy period 36 It is necessary to examine the claims correspondence in order to understand the width and detail of the dispute. This is necessary so that what is sought to be agitated by the current proceedings can be placed in context. 37 It is convenient to commence with the response of Kennedys (London solicitors for the reinsurers) dated 31 October 2017 in respect of the IRHP redress claim on the 2012/2013 policy. Nautilus did not express a view about the claim and so (in the light of the following clause) the reinsurers' position can be taken as not only their position but also that of Nautilus. The letter dealt with issues "critical" to cover; expressed as "fundamental bars to coverage". Rights were reserved on all other issues. Eight critical issues or fundamental bars to coverage were identified in paras 2.2 and 2.3 of the letter, as follows: 2.2 As fully set out below, Reinsurers consider that the vast proportion of the claim is not covered. The fundamental bars to coverage are as follows: 2.2.1 The redress payments (except those relating to consequential loss) are carved-out of the definition of Loss at Definition 40 of the Policy. 2.2.2 The redress payments (except those relating to consequential loss) are similarly excluded by Special Exclusion 15 of the Policy. 2.2.3 For the purpose of the definition of Loss, the Insured has not shown it was under any legal liability to make redress payments in respect of sales of TBLs or, in some cases, SADs. 2.2.4 The Insured has not shown that the requirement of Civil Liability (as per definition 11 of the Policy) is satisfied in respect of sales of TBLs or, in some cases, SADs. 2.2.5 Further to paragraphs 2.2.3 and 2.2.4, the Insured apparently made payments to customers whose claims were time barred under UK law and to whom it therefore had no legal liability for the purpose of the Definitions of Loss and Civil Liability. 2.2.6 NAB has not demonstrated that the claimed losses constitute a Single Loss per the Policy definition 60. 2.2.7 The costs of the SAD and TBL reviews are not covered as Defence Costs (as per Definition 20 and General Condition 7 of the Policy). 2.3 It may also be that any losses do not result from a "Claim First Made" within the Policy Period. 38 Paragraphs 2.2.3, 2.2.4 and 2.2.5 all contain a feature said to be within the definition of "Loss" and of "Civil Liability" that there is required to be a legal liability antecedent to the review and redress agreement. As will be seen the same issue underlies the position reflected by para 2.2.7. The questions of construction of the policy sought to be resolved by NAB in the declarations sought are directed to this feature. 39 In section 3 of the letter Kennedys identified (at para 3.2) the necessity for there to be (a) "a Loss", (b) resulting from "Civil Liability", (c) arising out of the provision of "Financial or Professional Services", (d) resulting in a "Claim", and (e) being a claim "First Made" against the Insured during the policy period. Elements (a), (b) and (d) were denied; rights were reserved as to (c) and (e). 40 In section 4 of the letter Kennedys dealt with (a): the question of Loss in Definition 40(B) and (C) (see [30(e)] above). Kennedys identified two "important elements" by way of fundamental bars to coverage. The first, which was dealt with over two pages in paras 4.3 to 4.9 was the operation of the carve out clauses (see paras 2.2.1 and 2.2.2 of the letter set out above and the definition of Loss and Special Exclusion 15, at [30(e)] and [29] above). The validity of these contentions are later taken up by Herbert Smith Freehills (HSF, the solicitors for NAB). These contentions and disputes will ultimately involve questions of construction of the stated provisions, as well as their application to the complex and detailed facts of the underlying claim. 41 The second "important element" is briefly expressed at para 4.2 as "the Insured has to be legally liable to pay any loss". This is elaborated on at para 4.10, as follows: …It is not enough simply to show that a particular claim has been settled by the Insured. Evidence is instead required to show that the Insured was liable to the third party and that the amount of the settlement represented a genuine assessment of the third party's loss. This assessment is similar to that required when assessing whether there is a "Civil Liability" (see below). 42 In para 4.11 Kennedys referred to this as an "insuperable problem" for NAB in respect of TBL customers because they were not regulated. In para 4.14, Kennedys stated: These matters are crucial to coverage because Australian case law, like English case law, holds that "legally liable", as used in liability policies, refers to a liability that is attributable to the operation of law, and one that is imposed by law. They refer to QBE Insurance Ltd v Nguyen [2008] SASC 138; 100 SASR 560 and Cacciola v Fire & All Risks Insurance Co Ltd [1971] 1 NSWLR 691. 43 In para 4.15, Kennedys stated: It follows that, absent express policy wording to the contrary, the Insured's legal liability to make redress payments to customers is not established simply because the Insured assumed liability to make the payments by its Undertaking to the FCA (which in any case did not include payments to TBL customers) or in its dealings with the customers themselves. Instead the Insured was only liable to make those payments to customers to whom it had a pre-existing liability. This may be the case for SAD customers whose claims were correctly assessed and which are not time barred, but it cannot be the case for TBL customers whose claims were assessed by reference to rules that did not apply to those products. (Emphasis added.) 44 In Section 5 of the letter Kennedys dealt with (b) in [39] above: the question of whether there was "Civil Liability" for the insuring clause. This issue was said to raise the same question of "the requirement of legal liability for the purpose of the definition of Loss": see para 5.1. The point was elaborated upon at para 5.5: Reinsurers agree that this limb may include liability to SAD customers pursuant to the SAD review, subject to time bar. However the "legally enforceable obligation" must be acknowledged by the settlement agreement and so exist independently of the settlement agreement, rather than being created by it. This limb would not, therefore, include "Civil Liability" to TBL customers to whom there was no independent liability, for the reasons discussed above. 45 In sections 6 and 7 of the letter the related questions of whether there are Claims and when they were made were discussed. 46 In section 8 of the letter Kennedys dealt with Defence Costs. An important aspect of the rejection of Defence Costs for a large proportion of the claim was said (in para 8.7) to be the same requirement of a pre-existing legal liability. 47 In section 8 of the letter Kennedys also dealt with the "carve out" in Special Exclusion 15. 48 Finally, in section 9 of the letter the question of the single loss and aggregation was addressed. 49 HSF responded by letter of 1 December 2017. The letter was divided into 6 sections. Section 1 concerned overarching questions of contractual interpretation and policy purpose. Section 2 contained NAB's answers to the assertion by Kennedys of the need for a pre-existing legal liability. HSF set out what it saw as six misconceptions that underlay Kennedys' position: • First, the extent of the Bank's obligation to establish the existence of a legal liability is governed by the terms of the definition of Civil Liability in GD 11 and not the definition of Loss in GD 40(B). • Secondly, the Policy - more particularly, the definition of Civil Liability - does not require the establishment of a pre-existing legal liability to each IRHP customer. • Thirdly, to the extent that it is relevant, the Bank did have a reasonably anticipated pre-existing liability to all SAD customers to whom it paid redress. • Fourthly, to the extent that it is relevant, the Bank did have a reasonably anticipated pre-existing liability to TBL customers to whom it paid redress. • Fifthly, in any case, the Bank entered into the IRHP Review process pursuant to a binding regulatory action or ADR process. Because it did so, there is no requirement to inquire into the existence of its pre-existing liability to IRHP customers. • Sixthly, the application of limitations periods does not affect the Bank's entitlement to indemnity. 50 Each of these points was then dealt with in detail at paras 2.1 to 2.5. At the heart of these submissions was a disagreement with the proposition that a pre-existing liability was called for by the policy. The articulation of NAB's position can be seen in paras 2.1 and 2.2. In para 2.1, HSF referred to a mischaracterisation of the policy for five reasons: (a) Section III of the Policy indemnifies the Bank for 'Loss which results from Civil Liability'. The first criterion that must be met is therefore whether the Bank can prove a Civil Liability. (b) In GD 11, the Policy sets out a detailed regime for establishing whether the Bank had a Civil Liability within the meaning of the Policy. In so doing, it expressly contemplated that a Civil Liability for the purposes of the Policy might exist even if the existence of actual underling [sic] liability remained undetermined. For example, the parties evinced an intention that any liability pursuant to a settlement agreement or binding ADR process would be covered under the Policy. (c) The meaning of the phrase 'legally liable to pay' in GD 40(B) should be construed to ensure that all of the components of the Policy operate as a congruent whole. (d) It would make no commercial sense if the general language in the definition of Loss imposed a different test to the precise requirements of Civil Liability, particularly in circumstances where the Loss must flow from the Civil Liability. (e) In light of the above, the Bank will be 'legally liable to pay' an amount for the purposes of the definition of Loss if the Bank has established a Civil Liability under GD 11. 51 The argument was further developed in para 2.2 as follows: The definition of Civil Liability does not impose on the Bank a requirement to establish a pre-existing liability to customers as a condition of indemnity. This follows from the Policy provisions cited below, which express a discernible intention that the Bank will be entitled to indemnity in the absence of a pre-existing legal liability. (a) As noted, the definition of Civil Liability under GD 11(b) allows for a legally enforceable obligation to be created pursuant to a reasonable settlement. The clause deliberately uses the words 'legally enforceable obligation' rather than the word 'liability', which is used in clauses GD 11(c)-(g). This makes obvious commercial sense as, if the Bank was known to be actually liable to the customer at law, then there would be no point to a compromise. GD 11(b) must be construed by reference to GC 7, to which it refers. Relevantly, GC 7 permits the Bank to settle a claim pursuant to a counsel opinion, which may have regard to matters other than the Bank's legal liability, including the Bank's reputation and operations. This interpretation of GD 11(b) is consistent with Australian case law which recognises that an insured may, in various contexts be entitled to indemnity for loss arising from a reasonable and bona fide settlement. [Distillers Co Bio-Chemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd (1974) 130 CLR 1, 9, 32; Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603, [63]; Hurlock v Council of the Shire of Johnstone [2002] QCA 256, [30]-[31]; Vero Insurance Ltd v Baycorp Advantage Ltd (2005) 13 ANZ Insurance Cases ¶61-630, [48]-[52], [62], [66]-[69]; Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243, [324].] The case law on which Reinsurers rely in support of their construction of the expression 'legally liable to pay' in GD 40(B) does not address this issue. (b) The definitions of Civil Liability under GD 11(c) and (d) allow for a liability to be created 'pursuant to' - that is, as a result of - regulator action or an ADR process, respectively, and do not require the establishment of an antecedent legal liability. (c) The definition of Claim under GD 12(a) refers to, amongst other things, a demand or ADR process which could 'reasonably result in the payment of' a loss rather than an actual pre-existing liability. 52 In para 2.3, HSF addressed the question of civil liability, shorn of the necessity to prove a pre-existing civil liability: that NAB had a reasonably anticipated liability for SADs and TBLs. 53 In dealing with the asserted limitation defence, HSF in para 2.4(c) also referred to the lack of a need for pre-existing civil liability: Limitations periods do not affect whether the Bank incurred a Civil Liability under GD 11(d) because such a liability arises 'pursuant to' - that is, as a result of - a binding ADR process. Again, it follows that satisfaction of GD 11(c) is not conditional on proving the existence of an underlying liability. 54 Section 3 of HSF's letter dealt with the exclusions. Section 4 dealt with Defence Costs. Section 5 dealt with other matters. Section 6 contained a request for payment. The "request" is properly construed as a demand in civil language. It is important because it contained a claim for interest under s 57 of the Insurance Contracts Act: The Bank maintains the totality of its claim for indemnity in the IRHP Claim Submission. We request Nautilus and Reinsurers quantify the amount of the IRHP Claim which they consider is indemnified under the Policy and immediately pay that amount to the Bank, including statutory interest calculated in accordance with s 57 of the Insurance Contracts Act 1984 (Cth). We consider an appropriate date for s 57 interest to commence would be 3 months after submission of the IRHP Claim Submission, being 14 February 2017. 55 Thus, one can see in this correspondence between Kennedys and HSF an important question, and in Kennedys' words "a fundamental bar to coverage", and an "insuperable problem", arising from the proper construction of the policy and the meaning of "Civil Liability", "Loss" and, relatedly, "Defence Costs": the necessity for there to be pre-existing legal liability. 56 Kennedys responded in substance to HSF on 23 April 2018. In section 3 of the letter, Kennedys took up the challenge of the debate about the proper construction of the policy. The reinsurers' position remained firm: in para 3.4 Kennedys said: Reinsurers remain firmly of the view that General Condition 11 (b) requires a pre-existing legally enforceable obligation. The significance of this (in terms of proof of the claim) can be seen in para 3.9 of Kennedys' letter: HSF maintains that the Bank entered into reasonable and bona fide settlements with IRHP customers. Given that GD 11(b) requires the Bank to have a pre-existing liability independent of the settlement agreement it makes, then entry into reasonable and bona fide settlements is not sufficient to meet that requirement. The same applies if the Bank failed to obtain Nautilus' prior consent to the settlements. However, even if those matters are assumed in the Bank's favour, it is plain that not all of the Bank's settlements with IRHP customers were "reasonable". 57 The balance of the letter discussed the other issues, including the satisfaction of Civil Liability, questions of the operation of General Definition 11(c) ("award, directive, order or similar act") and 11(d) (liability due to alternative dispute resolution), the time bar, the carve out in the Definition of Loss and Special Exclusion 15, whether there was a claim, when it was first made, and defence costs, aggregation and the request for payment. In the last section of the letter on the question of payment, Kennedys said: Reinsurers also reject HSF's assertion that an appropriate date for interest under s57 of the Insurance Contracts Act 1984 to commence (on any part of the claim that may be covered) would be 3 months after the 14 November 2016 formal IRHP Claim Submission. In the first place, Reinsurers do not agree that they have any liability under the Policy. In any event, Reinsurers do not accept that it is unreasonable for them to have withheld payment of interest on any amount owing to the Bank in the current circumstances.

The 2013/2014 and 2014/2015 policy periods 58 On 22 December 2016, Yeldham Price O'Brien Lusk (YPOL), then the lawyers for the reinsurers under the 2014/2015 policy, wrote to King & Wood Mallesons (KWM), the lawyers for Nautilus, about the Fixed Rate Claims that had been asserted in relation to the 2014/2015 policy. On 3 May 2017, HSF responded to YPOL's letter of 22 December 2016. HSF summarised what it saw as the reinsurers' position as follows: As matters stand, the Reinsurers make four primary arguments in support of their decision to deny indemnity for the Fixed Rate CRP Claim. The Reinsurers say that each of these grounds is dispositive of the entire Fixed Rate CRP Claim under the 2014/15 Policy and that they presently have sufficient information to make that determination. We summarise the Reinsurers' primary grounds for denying coverage as follows: 1 The Fixed Rate CRP Claim was notified under the 2012/13 Policy by reason of the IRHP Notification; 2 The Fixed Rate CRP Claim is deemed to be aggregated with the IRHP Claim under the 2012/13 Policy and therefore is excluded from coverage under the 2014/15 Policy; 3 The Fixed Rate CRP Claim was 'First Made' during the 2013/14 Policy Period and, implicitly, is therefore properly brought under the 2013/14 Policy; 4 Even if the Fixed Rate CRP Claim may properly be brought under the 2014/15 Policy, it will be excluded by the revised definition of 'Claim' in the 2014/2015 Policy to the extent that the Fixed Rate CRP was a voluntary process. The Reinsurers raise further grounds which they say are likely to exclude some, part or all of the Bank's claim for indemnity. The further grounds set out by the Reinsurers do not operate to preclude the Bank from making a claim under the 2014/15 Policy. Consequently we do not consider it presently necessary for the Bank to address these matters. However, it should not be assumed that, in the absence of any positive response to such matters in this letter, the Bank agrees with Reinsurers, and the Bank expressly reserves its position. 59 In response to the third point, factual matters were taken up. Then HSF stated: As a consequence of the matters set out above, the Bank will take the prudent step of notifying under the 2013/14 Policy (in reliance on section 54 of the Insurance Contracts Act 1984 (Cth)). In making that notification, the Bank reserves its rights to pursue a claim under the 2014/15 Policy and the 2012/13 Policy. We request YPOL to confirm whether they act for the 2013/14 Reinsurers. 60 The prudence of this step was required by the temporal requirement for notification under General Condition 2(i)(e) set out at [32] above. 61 The formal claims submission by NAB against Nautilus in respect of fixed rate loans under the 2013/2014 and 2014/2015 policies was made under cover of a letter from HSF dated 11 August 2017. NAB reserved its position under the 2012/2013 policy. This claim involved the reinsurers who are the third and fourth respondents to the present proceeding. 62 In the making of the Fixed Rate Claim in the submission of 11 August 2017 the following was stated at para 109 (implicitly referring to the issue raised by General Condition 2(i)(e)): The 2013/14 Complaints were notified under the 2013/14 Policy on 9 May 2017 in reliance on Insurance Contract Act 1984 (Cth) s 54 (the 2013/14 Notification). (Footnote omitted.) 63 After a detailed explanation of the claim, the claim document focused on the response of the policy. At para 117 of the claim, NAB stated: Upon its proper construction, General Definition 11(b) is engaged by the legally enforceable settlements reached with customers in the course of the Fixed Rate CRP. This assertion (challenged in later correspondence) implicitly asserted the lack of a requirement for there to be a pre-existing legal liability. 64 Later, in paras 131 and 132, NAB submitted that it satisfied General Definitions 40(B)(a) and 40(B)(b) as to "Loss" and "Defence Costs" by incurring a legal liability to pay redress. Again this raised the same point about the proper construction of those definitions. 65 On 24 November 2017, YPOL responded to the claim in a letter to KWM. The letter was provided to NAB. The letter sought a variety of information, including in relation to the IRHP Review Claim on the 2012/2013 policy. YPOL put its denial of liability by reference to an earlier letter of 22 December 2016 that had been sent to KWM. In the letter of 22 December 2016, YPOL set out various bases for denial. These included the claim being first made prior to the policy, and the operation of the "carve out" provision. 66 In December 2017 and January 2018, HSF provided information to YPOL and KWM of the kind requested by YPOL. 67 On 23 March 2018, YPOL sent a detailed letter restating its position on the denial of indemnity under the two policies. For present purposes I will adopt as a summary of that position the encapsulation of the points made by YPOL in HSF's response of 10 May 2018, as follows: YPOL's position, on behalf of the 2013/14 and 2014/15 Reinsurers (Reinsurers), in relation to the year of attachment for the Fixed Rate TBL Claims appears to be as follows: 1 The IRHP Potential Claim Notification dated 31 July 2012 notified the circumstances giving rise to Fixed Rate TBL Claims; 2 By reason of this, General Condition (GC) 9(e) or GC 2(vi) of the 2012/13 Policy prevents Fixed Rate TBL Claims from attaching to the 2013/14 or 2014/15 Policy; 3 There is a factual issue, requiring further investigation, as to when the Bank's Responsible Department was first aware of Fixed Rate TBL Claims; 4 If, prior to the commencement of the 2013/14 or 2014/15 Policy, the Responsible Department was aware of: - Fixed Rate TBL Claims; - aggregated Fixed Rate TBL Claims; or - the likelihood of Fixed Rate TBL Claims, then Fixed Rate TBL Claims would not attach to the Insuring Clause of either the 2013/14 or 2014/15 Policy or would be excluded from coverage under either Policy by Special Exclusion (SE) 6. 68 As yet, the construction implicit within paras 117, 131 and 132 of the claim had not appeared with any clarity in YPOL's correspondence. By letter dated 13 June 2018, however, YPOL made clear that it adopted precisely the same position for the 2013/2014 and 2014/2015 policies as Kennedys had in relation to the 2012/2013 policy on the question of the requirement (or not) for the pre-existence of a legal liability.

The declarations sought 69 It is convenient to set out the declarations sought in respect of the 2012/2013 policy year (being substantially identical to the declarations sought in relation to the 2013/2014 and 2014/2015 policy years): 1. A declaration that on the proper construction of the definition of Civil Liability in General Definition 11(b) of the policy of insurance issued to National Australia Bank Ltd (NAB) by Nautilus Insurance Pte Ltd (Nautilus) for the policy period 31 March 2012 to 31 March 2013 and titled "Comprehensive Crime / Electronic Crime and Civil Liability Insurance Policy" (the 2012/13 Policy), there is a Civil Liability when an Assured (as defined in the 2012/13 Policy) enters into an agreement with a third party which contains a legally enforceable obligation to pay a third party damages or compensation in settlement of a Claim (as defined in the 2012/13 Policy). 2. A declaration that on the proper construction of the definition of Loss in General Definition 40(B)(a) of the 2012/13 Policy, there is a Loss when an Assured pays a third party damages or compensation pursuant to a settlement agreement with a third party entered into in settlement of a Claim (as defined in the 2012/13 Policy). 3. A declaration that on the proper construction of the 2012/13 Policy, it is unnecessary for the purposes of: a. satisfying the definition of Civil Liability in General Definition 11(b); or b. satisfying the definition of Loss in General Definition 40(B)(a); or c. satisfying the Assured's entitlement to indemnity in respect of Defence Costs (as defined in the 2012/13 Policy) in General Condition 7(a), for the Assured to establish that it was legally liable to the third party independently of the legally enforceable obligation to pay arising under the settlement agreement relied on to establish Civil Liability under General Definition 11(b).

The pre-proceeding correspondence 70 By letters dated 27 February 2019 to Kennedys and KWM, and to YPOL and KWM, HSF proposed the commencement of proceedings to resolve the construction issues concerning General Definitions 11(b) and 40(B)(a) and General Condition 7(a), being the provisions raising the requirement (or not) for a pre-existing legal liability. The letter to Kennedys recited the issues as follows: As revealed by the Correspondence, two intractable issues in dispute between the Bank and the reinsurers under the 2012/13 Policy (Reinsurers) as to the proper construction of the Policy are: • whether on the proper construction of the definition of Civil Liability in GD 11(b) of the Policy, there is a Civil Liability when an Assured enters into an agreement with a third party which contains a legally enforceable obligation to pay a third party damages or compensation in settlement of a Claim; and • whether on the proper construction of the definition of Loss in GD 40(B)(a) of the Policy, there is a Loss when an Assured pays a third party damages or compensation pursuant to an agreement with that third party entered into in settlement of a Claim. The Bank's answer to both of these issues is 'Yes'. The Reinsurers' answer to both issues is 'No'. The Reinsurers contend that satisfaction of GD 11(b) and GD 40(B)(a) requires the Bank to prove that it had an underlying liability to each customer that it remediated in the IRHP Review. By reason of the Reinsurers' position on the above issues, they further contend that, where indemnity is sought in respect of a Civil Liability under GD 11(b), the Bank must establish the existence of an underlying liability in respect of each customer to whom redress was paid in order to establish an entitlement to indemnity in respect of Defence Costs under GC 7(a). The Bank denies this contention. The letter proposed the following course for the following reasons: The Bank has given consideration to the most appropriate course to resolve the Construction Issues in the IRHP Claim and the equivalent issues arising in the Fixed Rate CRP Claim. It has concluded that the most appropriate course is to issue a proceeding confined, and directed, to determination of these issues (Construction Proceeding). The Bank proposes to issue the Construction Proceeding in the Victorian Registry of the Federal Court of Australia. The Bank considers that a proceeding by way of the Construction Proceeding has significant benefits for all of the parties (and the Court). The issues raised concern the proper construction of the Policy. Proceeding by way of a Construction Proceeding will therefore allow critical issues between the parties to be resolved quickly and efficiently, with minimal impost on the parties and the Court. Further, the resolution of the Construction Issues may assist the parties to come to a consensual settlement of the Bank's IRHP Claim and Fixed Rate CRP Claim or otherwise substantially assist in the efficient disposal of any subsequent indemnity proceedings by resolving a key issue of proof. The proposed declarations were in the form claimed in the proceedings and set out above. (The letter to YPOL was in the same terms, mutatis mutandis.) 71 The proposed course was objected to by Kennedys and YPOL. Their objections were common and expressed by Kennedys in its letter of 25 March 2019. Two reasons were given: first, that the majority of the issues in dispute would remain undecided; and secondly, the proposed declarations (that had been foreshadowed) did not finally resolve those issues in question. 72 Kennedys identified the issues that would not be resolved as follows: a. Whether, and if so to what extent, there was a Claim (as defined at GD 12 of the Policy) by customers for the purpose of the Insuring Clause; b. Whether the settlements agreed between the Bank and the customers to whom it paid redress were reasonable. This issue gives rise to questions such as whether the UK regulator had power to compel the TBL review and whether and to what extent customers' claims were time-barred; c. Whether the Claim was First Made (as defined at GD 32 of the Policy) during the Policy Period. (Of relevance to this issue is the full explanation we have sought concerning the TBL notification made by the Bank to the 2007/8 year of account); d. Whether the losses which are the subject of the Bank's claim for indemnity arise from, or are attributable to, a "systemic failure" in the marketing and sale of IRHPs, such as to satisfy the definition of "Single Loss" at GD 60 of the Policy; e. Further to (d) above, whether the claimed losses fall to be aggregated pursuant to the definition of Single Loss at GD 60. f. Whether amounts claimed by the Bank in respect of Defence Costs: o were reasonable and necessary for the purpose of GD 20 of the Policy; o were incurred "in the defence of…any demand [or] claim" within the meaning of General Condition 7; o are covered in respect of customers who did not make a Claim (as defined at GD 12 of the Policy) against the Bank. 73 Kennedys challenged the utility of the proposed course by reference to each proposed declaration: Even if NAB were successful, it would still have to show the reasonableness of settlement agreements which it was said would involve a similar factual enquiry as the question of pre-existence of a legal liability; the carve out from the definition of Loss was not addressed; and the relevance to Defence Costs was said to be marginal. Kennedys said: In summary, determination of the Constructions Issues would not bring the parties any closer to a resolution of the Bank's claim for indemnity and full proceedings may still be necessary. The Construction Proceeding would therefore be of little utility and so would not involve the efficient use of the Court's time and resources. Reinsurers accept that this case gives rise to issues of policy construction that may benefit from early determination. The right time for the parties to seek to agree on such issues, perhaps by reference to particular sample files of the Bank's customers, is following exchange of pleadings. This would allow each party's case to be properly set out and understood in advance of any preliminary hearing/early determination of issues. Reinsurers are keen to cooperate as far as possible to enable an early resolution of the claim and would therefore be open to discussing after close of proceedings whether there are any issues suitable for an early determination. To be clear, therefore, if proceedings are to be commenced by the Bank at all, Reinsurers consider they should be full proceedings for a claim for indemnity under the Policy. 74 Kennedys summarised its future course of action (as it turned out, accurately) as follows: 1. Reinsurers will consider whether to apply to set aside the Construction Proceeding on the basis that it does not invoke the jurisdiction of the Federal Court, on the following grounds: a. The declaratory relief proposed does not appear to require the determination of any matter arising under a federal law and would not therefore engage the federal jurisdiction. b. For the reasons given, the proposed Construction Issues are theoretical and lack utility, as they do not sufficiently engage with the matters in dispute between the parties, which would mean there is no "matter" which engages the jurisdiction of the Federal Court. 2. Having regard to the fact that the Construction Proceeding will not resolve all issues between the parties, Reinsurers may argue that any subsequent proceedings that the Bank may be required to commence would constitute an abuse of process (see eg UBS AG v Tyne (2018) 360 ALR 184; [2018] HCA 45, [38]-[46] and [70]; Johnson v Gore Wood & Co [2002] 2 AC 1, 31; Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507 at [26]).

The filed proceedings 75 Proceedings were filed on 14 May 2019. The originating application was supported by a statement of claim. The only substantive claim for relief was declaratory of the provisions referred to by the parties in correspondence on the Construction Issues. The statement of claim recited the history of the dispute: the sale of the IRHPs, the Review and Redress Program, the settlement agreements and payment thereunder; the fixed rate loans, their misselling, the Fixed Rate Complaints Redress Program, the settlement agreements and the payments thereunder. It recited the relevant provisions of the policies. It recited the notifications. In respect of the 2013/2014 notification, para 34 of the statement of claim stated as follows: The 2013/14 Policy Notification was made after the expiry of the 2013/14 Policy Period, in reliance on s 54 of the Insurance Contracts Act 1984 (Cth). The statement of claim then referred to the construction dispute in paras 36 and 37 as follows: 36. The Bank contends that a Claim within the meaning of the Policies was made by or on behalf of each customer to whom redress was paid pursuant to a settlement agreement. 37. The Bank and the respondents are in dispute regarding the proper construction of GD 11(B) and GD 40(B)(a) of the Policies: (a) the Bank contends, relevantly: (i) it is sufficient, in order to establish Civil Liability under GD 11(b) and Loss within the meaning of GD 40, to show that in settlement of a Claim (as defined), the Bank entered into an agreement containing a legally enforceable obligation to pay compensation or damages to a customer; and (ii) it is, therefore, entitled to rely on the settlement agreements entered into with customers as part of the IRHP Review and Redress Program and the Fixed Rate Complaints Redress Program in order to establish the existence of Civil Liability and Loss (as defined) without the need to separately establish its actual liability to each such customer. (b) the respondents contend that: (i) in order to establish Civil Liability under GD 11(b) and Loss within the meaning of GD 40, the Bank is not entitled to rely on the settlement agreements and must establish the existence of actual liability in respect of each customer to whom redress was paid pursuant to those settlement agreements; and (ii) it follows that it is also necessary, where indemnity is sought in respect of Civil Liability under GD 11(b), for the Bank to establish the existence of an actual liability in respect of each customer to whom redress was paid in order establish [sic] an entitlement to indemnity in respect of Defence Costs under General Condition 7(a).

The interlocutory applications 76 In early June 2019, the second, third and fourth respondents filed interlocutory applications seeking the following orders: (1) an order under r 13.01(1)(a) of the Federal Court Rules 2011 (Cth) (Federal Court Rules) setting aside the originating application; (Though not articulated in the body of the interlocutory application, the attack on the Court's jurisdiction is the basis of this relief sought.) (2) an order that the proceedings be dismissed under s 31A(2) of the Federal Court of Australia Act 1976 (Cth) (Federal Court of Australia Act), in that the Court is satisfied that NAB has no reasonable prospect of successfully prosecuting the proceeding; or (3) an order for summary judgment under r 26.01(a) because NAB has no reasonable prospects of successfully prosecuting the proceedings, r 26.01(c) because no reasonable cause of action is disclosed, or r 26.01(d) because the proceeding is an abuse of process; or (4) an order that para 37 of the statement of claim be struck out under r 16.21(1)(c) as evasive or ambiguous, r 16.21(1)(d) as likely to cause prejudice, embarrassment or delay in the proceeding, r 16.21(1)(e) as failing to disclose a reasonable cause of action, or r 16.21(f) as otherwise an abuse of process.

Jurisdiction 77 The primary submissions of the respondents on jurisdiction were that there was no "matter"; and if there were a matter, it did not engage any part of ss 75 and 76 of the Constitution in particular and, relevantly, it was not a matter arising under a law of the Parliament.

What is the controversy or matter? 78 The first consideration to appreciate is that there is a large, complex and interconnected controversy about the entitlement of NAB to indemnity under these policies of insurance issued by Nautilus, which are reinsured by the second to fourth respondents. The policies are in substantially identical terms. The reinsurances follow the form of the underlying policies. The claims for indemnity under all three policies arise from a common body of facts. The IRHP redress claim is directed to the 2012/2013 policy; but the third and fourth respondents assert that the Fixed Rate Loan redress claim also falls under the 2012/2013 policy. There is a common body of issues, including the issue as to the construction for the policies which NAB wishes to have resolved in these proceedings. Putting to one side the proceedings, it is clear that, as between and among NAB, Nautilus, and the reinsurers for the three policy years, the real and fully articulated legal dispute reveals a single controversy. To paraphrase what was said by Gummow J and Hayne J in Re Wakim; Ex parte McNally [1999] HCA 27; 198 CLR 511 at 585-586 [140] and the cases to which their Honours referred, from what the parties have done, the relationships between or among them and the laws which attach rights or liabilities to their conduct and relationships, there is a single matter because the claims arise out of common transactions and a common substratum of facts, albeit the facts did not wholly coincide; and because it cannot be said that NAB's claims under the different policies are completely disparate or completely separate and distinct or distinct and unrelated. 79 The expression of the width of the word "matter" by Gummow J and Hayne J in Re Wakim reflected what Griffith CJ said in South Australia v Victoria 12 CLR at 675 that: The word "matters" was in 1900 in common use as the widest term to denote controversies which might come before a Court of Justice. 80 This passage from Griffith CJ's reasons is important not only as to the width of the conception of "matter" as a controversy or dispute, but also for the distinction between controversy and the proceeding in which the controversy might be resolved. This is not idle taxonomy. It reflects that it is the real human dispute to be quelled that is within the jurisdiction (being authority of the Court, if s 75 or s 76 is engaged, to adjudicate and decide) not merely what is within the confines of the articulation as to how relief may be framed from time to time. 81 As Mason, Murphy, Brennan and Deane JJ said in Fencott v Muller [1983] HCA 12; 152 CLR 570 at 603: The concept of 'matter' [is] a justiciable controversy, identifiable independently of the proceedings which are brought for its determination and encompassing all claims made within the scope of the controversy… In support of that expression of the matter their Honours referred to aspects of the reasons of the majority of the Court in Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd [1981] HCA 7; 148 CLR 457. It is important to appreciate that the passages from Philip Morris cited in Fencott v Muller established that once federal jurisdiction was attracted in relation to the controversy, to the matter, the jurisdiction is not limited to the questions incidental to that aspect of the matter that has attracted federal jurisdiction. It extends to the resolution of the whole matter. That is because, if s 75 or s 76 is engaged, the controversy, the whole of the controversy, is one in federal jurisdiction. In this respect, see also Australian Securities and Investments Commission v Edensor Nominees Pty Ltd [2001] HCA 1; 204 CLR 559 at 571 [7]; Felton v Mulligan [1971] HCA 39; 124 CLR 367 at 373-374 and 411-413; Moorgate Tobacco Co Ltd v Philip Morris Ltd [1980] HCA 32; 145 CLR 457 at 471; and see Rana v Google Inc [2017] FCAFC 156; 254 FCR 1 at 7 [20]. 82 The importance of the distinction between "matter" as the widest term "to denote controversies which might come before a Court of Justice" (Griffith CJ in South Australia v Victoria 12 CLR at 675) and the expressions "cases" and "controversies" used in Art III of the United States Constitution was remarked upon by Mason J in Philip Morris 148 CLR at 507-508. In the United States, "By cases and controversies are intended the claims of litigants brought before the courts for determination by… regular proceedings…": Field J in In re Pacific Railway Commission 32 F 241 (1887) at 255, citing earlier decisions of the Supreme Court. Thus, in the United States one must look to the case brought (the proceeding) to ascertain the authority to decide. For the concept of "matter" under Ch III one looks to the controversy between or among the parties as identified independently of the proceedings which are or may be brought for its determination. See also Crouch v Commissioner for Railways (Qld) [1985] HCA 69; 159 CLR 22 at 37-38; and Croome v Tasmania [1997] HCA 5; 191 CLR 119 at 124-125. 83 The distinction between proceeding and controversy was of critical importance in the reasoning and decision in Hooper v Kirella Pty Ltd [1999] FCA 1584; 96 FCR 1 that jurisdiction can be conferred on the Court in respect of preliminary discovery in respect of a controversy, even though proceedings claiming substantive relief in respect of that controversy had not been, and may not ever be, commenced. The Court said at [53] and [55]: Of course, if a controversy is the subject of existing proceedings claiming substantive relief the scope of the controversy (or "matter") is likely to depend, in part, on what the parties allege in the pleadings and how they have conducted the litigation: Abebe at 561 [139]; 38-39 [139], 562-563 [145]; 40 [145], per Gummow and Hayne JJ. But that does not mean that unless a party has instituted proceedings claiming substantive relief there can be no matter in respect of which jurisdiction can be conferred on the Federal Court. It is the justiciable controversy which constitutes the matter. That controversy may or may not be co-extensive with legal proceedings already instituted. … In determining whether there is a "subject matter for determination in a legal proceeding" in respect of which Parliament can define the jurisdiction of a federal court, it is doubtless necessary for the relevant matter to be capable of identification. Doubtless, too, there can be no matter unless a claim is made that can be seen to involve "an immediate right, duty or liability to be established by the determination of the Court". But it is only a claim (with the necessary federal elements) that is necessary. A matter can exist even though a right, duty or liability has not been established and, indeed, may never be established: Abebe at 528 [32]; 12 [32], per Gleeson CJ and McHugh J. It is for this reason that the Federal Court may have jurisdiction in respect of a matter, even though the only federal element of the matter has failed: Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212 (FC) at 218-219; Unilan Holdings Pty Ltd v Kerin (1993) 44 FCR 481 (FC) at 481-482 (where the federal claim was struck out). 84 Once one appreciates that the controversy identified independently of the proceedings is the matter, and if the matter is one that engages s 75 or s 76, the whole or part of that matter can be the subject of proceedings in a federal court if that court has jurisdiction to hear the matter by conferral of the relevant jurisdiction by reference to s 75 or s 76. If only part of the matter is sought to be resolved by the proceeding the court will not be denied authority to decide it because no federal issue is involved in the proceeding, as long as the question that arises in the proceeding can properly be seen to be part of a matter within federal jurisdiction, that is as part of "the controversy which is amenable to judicial determination in the proceeding": Croome v Tasmania 191 CLR at 125; Fencott v Muller 152 CLR at 591 and 603, Crouch v Commissioner for Railways (Qld) 159 CLR at 37-38; and In re Judiciary and Navigation Acts [1921] HCA 20; 29 CLR 257 at 265-266. To require the proceeding itself to raise the federal issue, if only part of the controversy is the subject of the proceeding, is to import the narrower conception of "case and controversy" into Ch III of the Constitution and thereby to narrow it. Any restriction on bringing part of the controversy before the court in a proceeding that does not seek to resolve the whole controversy must be found elsewhere. 85 Reliance was placed by the reinsurers upon Re McBain; Ex parte Australian Catholic Bishops Conference [2002] HCA 16; 209 CLR 372 and in particular the following paragraph from the reasons of Gaudron and Gummow JJ at 209 CLR 405-406 [62]: These statements suggest that the task of identification of the "matter" said to be the subject of the present litigation is to be approached as a tripartite inquiry: first, the identification of the subject matter for determination in each of C22 and C6; secondly, the identification of the right, duty or liability to be established in each proceeding; thirdly, the identification of the controversy between the parties to C22 and C6 for the quelling of which the judicial power of the Commonwealth is invoked. Whilst each of these inquiries may be pursued separately, all are related aspects of the basal question, "is there a 'matter' in the sense required by Ch III of the Constitution?" In our view, there is no such "matter", and this is so whether the moving party here is seen either as the Attorney-General or the ecclesiastical authorities. (Footnotes omitted.) There was no suggestion in Re McBain that the whole controversy was not before the Court. It would be to take this paragraph out of context completely to use it, as the third and fourth respondents sought to do, to support the proposition that one looked for the controversy between the parties only ever by reference to the pleadings. In Re McBain, the parties to the proceedings in the Federal Court did not appeal; they rested content with the result. Amici curiae below (the Bishops) and the Commonwealth Attorney sought by writ of certiorari to set aside the decision (unappealed from) by reference to asserted non-jurisdictional error. The Court had no occasion to be directed to the kind of considerations discussed at [78]-[84] above.

Is any part of s 75 or s 76 engaged? 86 It is then necessary to ascertain whether the controversy that has been outlined and discussed in the detailed correspondence to which I have referred engages an aspect of s 75 or s 76 that has been conferred on the Federal Court of Australia. 87 Reliance is placed by NAB on s 39B(1A)(c) of the Judiciary Act 1903 (Cth) which engages s 76(ii) of the Constitution to confer original jurisdiction on the Court "in any matter… arising under any laws made by the Parliament, other than a matter in respect of which a criminal prosecution is instituted or any other criminal matter." 88 In Rana v Google 254 FCR at 5-6 [18], the Full Court said the following about "arising under" a law of the Parliament: A matter will "arise under" a law of the Parliament in a number of ways. These include cases where a cause of action is created by a Commonwealth statute; where a Commonwealth statute is relied upon as establishing a right to be vindicated; where a Commonwealth statute is the source of a defence that is asserted; where the subject matter of the controversy owes its existence to Commonwealth legislation - that is where the claim is in respect of or over a right which owes its existence to federal law; where it is necessary to decide whether a right or duty based on a Commonwealth statute exists even where that has not been pleaded by the parties, or where a federal issue is raised on the pleadings but it is unnecessary to decide: see generally R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett (1945) 70 CLR 141 at 154; Felton v Mulligan (1971) 124 CLR 367 at 374, 388, 403; Moorgate Industries Ltd v Philip Morris Ltd (1980) 145 CLR 457 at 476; LNC Industries Ltd v BMW (Australia) Ltd (1983) 151 CLR 575 at 581-582; Re McJannet; Ex parte Australian Workers' Union of Employees (Qld) (No 2) (1997) 189 CLR 654 at 656-657; CGU Insurance Ltd v Blakeley (2016) 259 CLR 339; Australian Solar Mesh Sales Pty Ltd v Anderson (2000) 101 FCR 1 at 7-8. A matter may also exist prior to the commencement of formal proceedings and be federal in character at that point: Hooper v Kirella Pty Ltd (1999) 96 FCR 1 at [45]-[55]. There is a difference, however, between a matter "arising under" a law of the Parliament and a matter that merely involves the interpretation of a federal law (and which will not on its own attract federal jurisdiction): see Felton at 374, 408-409, 416. 89 Also, as Latham CJ said in R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett [1945] HCA 50; 70 CLR 141 at 154, a matter arises under a law if a right or duty in question depends on federal law for its enforcement. See also generally G Lindell, Cowen and Zines's Federal Jurisdiction in Australia (Federation Press, 4th ed, 2016) at pp 106-112. 90 NAB relies on a number of bases for the conclusion that the matter is one that arises under a law of the Parliament. 91 First, in para 34 of the statement of claim, reliance is placed on s 54 of the Insurance Contracts Act. The notification of the Fixed Rate Loan Claims was made on Nautilus after the expiry of that policy period. That would have been a ground (being "an act of the insured") for a refusal to pay a claim: see General Condition 2(i)(e). This reliance on s 54 was made clear in HSF's letter to YPOL dated 3 May 2017. (See [58] above.) The same reliance on s 54 was made in the Fixed Rate Claim submission dated 11 August 2017. (See [62] above.) 92 NAB has claimed interest under s 57 of the Insurance Contracts Act by its letter of 1 December 2017 to Kennedys and KWM. (See [54] above.) 93 The third and fourth respondents raised General Conditions 2(i)(e) and 7(c)(2) (see [32] and [33] above) as a defence to the claim in written submissions on the application and in oral hearing. It was said that because NAB did not consult as required by General Condition 2(i)(e) and because it settled without prior consent contrary to General Condition 7(c)(2) the claims can be denied. The second respondent adopted the submissions of the third and fourth respondents. By written submission in reply NAB expressed reliance on s 54 of the Insurance Contracts Act. 94 It was submitted by the third and fourth respondents that "passing references" to s 54 were inadequate. It was submitted that such a provision only "deprives insurers of what would otherwise be a basis for refusing to pay a claim under an insurance contract; it does not confer upon the insured a right that owes its existence to Federal law." 95 I reject that submission. In relation to any contractual term such as requiring notification within the policy period, General Condition 2(i)(c), or General Condition 2(i)(e) that would in contract deny the insured a right to claim by giving the insurer a basis in contract not to pay, s 54 operates as the foundation for the legal entitlement to deny the insurer's contractual right. Without it, and without its operation, a contractual claim would fail; with it, and with its operation, the contractual claim can be made and enforced, subject to the statutory regime in the section. The federal law and its operation lie at the foundation of the insured's rights; and at the foundation of the enforcement of the insured's rights. Section 54 is a section which modifies the effect of contractual rights to enable a contractual claim to be made, by denying a contractual basis for refusal to pay and substituting statutory rights based on proportionality. 96 Further, a substantial claim for interest is based on a right granted by s 57 of the Insurance Contracts Act. The provision is a code for the right to claim interest: NRMA Insurance Ltd v Tatt (1989) 94 FLR 339. 97 I am satisfied that the whole of the controversy arises under a law of the Parliament.

Whether the proceeding is in respect of the matter arising under a law of the Parliament 98 The respondent reinsurers also submit that the nature of the proceeding was such as not to raise a matter. Given that there is a matter arising under a law of the Parliament, this submission must, for its success, be focused upon the absence from the proceeding of an essential aspect or aspects of judicial power so as to lead to the conclusion that there is no matter of any kind before the Court. 99 It is appropriate to commence the analysis by recognising that, by s 21 of the Federal Court of Australia Act, the Court has power to grant a declaration, without other relief, and that before doing so it should be satisfied that the question to be resolved is real and not theoretical and that the person raising it has a real interest to do so: Forster v Jododex Australia Pty Ltd 127 CLR at 437. 100 The reinsurers submit that there is no matter because the making of the declarations first "will produce no foreseeable consequences for the parties": Ainsworth v Criminal Justice Commission 175 CLR at 582; and Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd 200 CLR at 631 [52]; and secondly, will be divorced from the facts, and be theoretical and hypothetical: Bass v Permanent Trustee Co Ltd 198 CLR at 356-357 [48]; and Palmer v Ayres [2017] HCA 5; 259 CLR 478 at 491 [27]. 101 As with any expression of principle one needs to understand the context in which the principle was stated. Ainsworth concerned a breach of procedural fairness by the respondent towards Mr Ainsworth and another in the preparation and tabling in Parliament of a report. The High Court agreed with the Full Court of the Queensland Supreme Court that mandamus and certiorari did not lie. Mr Ainsworth and his company were, however, entitled to a declaration. In stating the entitlement to declaratory relief in terms restating the width of the relief as expressed by Gibbs J in Forster v Jododex 127 CLR at 437, Mason CJ, Dawson, Toohey and Gaudron JJ ascribed the limits of the wide power as only the confines of the exercise of judicial power, saying at 175 CLR 581-582: It is now accepted that superior courts have inherent power to grant declaratory relief. It is a discretionary power which "[i]t is neither possible nor desirable to fetter … by laying down rules as to the manner of its exercise." However, it is confined by the considerations which mark out the boundaries of judicial power. Hence, declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions. The person seeking relief must have "a real interest" and relief will not be granted if the question "is purely hypothetical", if relief is "claimed in relation to circumstances that [have] not occurred and might never happen" or if "the Court's declaration will produce no foreseeable consequences for the parties". (Footnotes omitted.) 102 The notions of hypotheticality and the absence of foreseeable consequences referred to in this paragraph are features that assist in the description of the limits and confines of judicial power. There was an undoubted controversy in Ainsworth, as to the Commission's duty of fairness. The foreseeable consequences that existed from the making of the declaration of the breach of duty were described in the next paragraph as alleviating the reputational effects of the report. Their Honours said the following at 175 CLR 582: … That report has already had practical consequences for the appellants' reputations. For all that is known, those consequences may extend well into the future. It is appropriate that a declaration be made in terms indicating that the appellants were denied natural justice. That may redress some of the harm done. (Emphasis added.) 103 Thus, the Court looked to the practical potentiality of amelioration of reputational harm. 104 In Edwards v Santos Ltd [2011] HCA 8; 242 CLR 421, the Court held that the jurisdiction to grant a declaration included the power to declare that conduct that had not yet taken place would be a nullity in law. In dealing with an argument that the declaration had no foreseeable consequences and was hypothetical, Heydon J (with the agreement of French CJ, Gummow, Crennan, Kiefel and Bell JJ) said at 436 [37]: …The questions which the plaintiffs wished to agitate were not hypothetical. The first defendant's letter of 4 November 2005 had sufficiently indicated the intention of the petroleum defendants to make an application to the Minister under s 40 of the Petroleum Act and it had predicted that success would be "automatic". If so, the plaintiffis would be seriously disadvantaged because their negotiating position would be gravely weakened; if not, the plaintiffs would be correspondingly better off. If the plaintiffs obtained the first declaration sought, it would produce foreseeable consequences for the plaintiffs and the petroleum defendants by allowing them to continue the process of negotiating the new ILUA armed with knowledge of the correct legal position in relation to the ATP. (Emphasis added.) 105 Thus, in circumstances where a real controversy existed the declaration would enable the parties to negotiate an indigenous land use agreement on the correct legal foundation. That was a practical and real consequence about the future course of affairs between parties to a controversy that gave a real interest to seeking a legal answer by declaratory relief. 106 In Truth About Motorways, Gaudron J emphasised at 200 CLR 613 [52] that the inability to make a declaration if it will produce no foreseeable consequences for the parties was not simply a question of discretion, but, for a federal court, involves a question of jurisdiction, because if it be the case, that is if a declaration produces no foreseeable consequences, it is so divorced from the administration of the law as not to involve a matter; and so cannot engage the judicial power of the Commonwealth. So much can be accepted; but foreseeable consequences are to be assessed by the place of the declaration in the controversy that otherwise exists or existed, and the practical and real effect that it may have on the controversy or the consequences of the controversy. In Ainsworth it was that there may be amelioration of reputational harm. In Edwards v Santos it was establishing a legal certainty in the operation of the legislation which was relevant to the respective bargaining positions of the parties in a wider controversy. 107 The notion of hypotheticality by being divorced from the facts was discussed by the Court in Bass 198 CLR at 357-358 [48]. The whole of this paragraph should be set out: It is true that some have seen the use of the declaratory judgment as little more than the giving of an advisory opinion. However, one crucial difference between an advisory opinion and a declaratory judgment is the fact that an advisory opinion is not based on a concrete situation and does not amount to a binding decision raising a res judicata between parties. Thus, the authors of one recent text on declaratory judgments emphasise that, where the dispute is divorced from the facts, it is considered hypothetical and not suitable for judicial resolution by way of declaration or otherwise. They say: "If … the dispute is not attached to specific facts, and the question is only whether the plaintiff is generally entitled to act in a certain way, the issue will still be considered theoretical. The main reason for this is that there may be no certainty that such a general declaration will settle the dispute finally. Subsequent to that declaration a person (the defendant himself or someone else) may be adversely affected by a particular act of the plaintiff. It may then be doubtful whether this act is covered by the declaration. In such a case the affected person will probably be entitled to raise the issue again on its special facts. Indeed, such a declaration will in effect be a mere advisory opinion." (Footnotes omitted.) 108 The fact that the whole controversy will not be settled is not the point. It is if the declaration is not grounded in concrete facts. The consequence of that is that the same question might have to be litigated again between the parties if and when the question is raised on special or concrete facts. In Bass the answers to the question asked and answered in the Federal Court were given by reference to a pleading, not by reference to agreed or found facts. Their Honours said at 198 CLR 357 [49]: As the answers given by the Full Court and the declaration it made were not based on facts, found or agreed, they were purely hypothetical. At best, the answers do no more than declare that the law dictates a particular result when certain facts in the material or pleadings are established. What those facts are is not stated, nor can they be identified with any precision. They may be all or some only of the facts. What facts are determinative of the legal issue involved in the question asked is left open. Such a result cannot assist the efficient administration of justice. It does not finally resolve the dispute or quell the controversy. Nor does it constitute a step that will in the course of the proceedings necessarily dictate the result of those proceedings. Since the relevant facts are not identified and the existence of some of them is apparently in dispute, the answers given by the Full Court may be of no use at all to the parties and may even mislead them as to their rights. Courts have traditionally declined to state ⁠ - let alone answer - preliminary questions when the answers will neither determine the rights of the parties nor necessarily lead to the final determination of their rights. The efficient administration of the business of courts is incompatible with answering hypothetical questions which frequently require considerable time and cause considerable expense to the parties, expense which may eventually be seen to be unnecessarily incurred. 109 It is the declaration that must be tied to found or agreed facts. Those facts must be relevant facts for the subject of the declaration. If a declaration is sought as to the proper construction of a contract the relevant facts are the facts relevant to the construction of the contract: that is, the form and terms of the contract and any relevant surrounding circumstance said by the parties to be relevant. If the contract can be relevantly interpreted on those found or agreed facts, it is irrelevant that what might be myriad other facts relevant to the wider controversy to which the proper construction of the contract is relevant are not attached to the resolution of the dispute as to the proper meaning of the contract. 110 It is difficult to see what is advisory or hypothetical about declaring the meaning of a contract in circumstances where there is no dispute about the terms of the contract, where the relevance of any surrounding circumstances can be debated and found, where the parties are in precise and clearly articulated disagreement as to the meaning of or part of the contract, and where the proper construction of that part is clearly a part, indeed an important part, of an overall controversy about one party's asserted and disputed entitlement to be indemnified under the whole of the contract. 111 Before turning to the submissions of the respondent reinsurers on these issues, something further should be said about declarations. 112 Sections 21 and 22 of the Federal Court of Australia Act are as follows: 21 Declarations of right (1) The Court may, in civil proceedings in relation to a matter in which it has original jurisdiction, make binding declarations of right, whether or not any consequential relief is or could be claimed. (2) A suit is not open to objection on the ground that a declaratory order only is sought. 22 Determination of matter completely and finally The Court shall, in every matter before the Court, grant, either absolutely or on such terms and conditions as the Court thinks just, all remedies to which any of the parties appears to be entitled in respect of a legal or equitable claim properly brought forward by him or her in the matter, so that, as far as possible, all matters in controversy between the parties may be completely and finally determined and all multiplicity of proceedings concerning any of those matters avoided. 113 As discussed in Meagher, Gummow and Lehane's Equity: Doctrines and Remedies (LexisNexis Butterworths, 5th ed, 2015) (Meagher, Gummow and Lehane) at 610-616 [19-010]-[19-075], the history of declaratory relief has been one of attempted statutory expansion of the remedy and judicial tendency to restriction on its grant. The width of declaratory relief under provisions such as s 21 was made clear by the High Court in Forster v Jododex. The width of that jurisdiction was confirmed in Ainsworth. It is, of course, as the above discussion of Ainsworth makes clear, confined by considerations that mark out the boundaries of judicial power. Examples can be given in a commercial context of proper and legitimate subjects of declarations: as to the proper construction of a contract as to the currency of repayment: Russian Commercial and Industrial Bank v British Bank For Foreign Trade Ltd [1921] 2 AC 438; that a contract has or has not been concluded: Jager v Tolme & Runge and the London Produce Clearing House, Ltd [1916] 1 KB 939; that a contract has been breached: Union of India v Compania Naviera Aeolus SA [1962] 1 QB 1; as to what are the consequences of a breach of contract: Rajbenback v Mamon [1955] 1 QB 283; that a contract has been terminated: Schering Ltd v Stockholms Enskilda Bank Aktiebolag [1946] AC 219. 114 The terms of s 22 do not deny the width of s 21. A suit is not open to objection on the ground that only declaratory relief is sought. Section 22, of course, expresses another important consideration in the exercise of jurisdiction, in examining judicial power, but it does not cut down the width of the power when properly exercised to grant declarations without other relief. For this reason, the importance of the relationship between ss 21 and 22 is not to be assessed by reference to jurisdiction and whether there is a matter. It is about the proper exercise of power. 115 The respondent reinsurers submitted that there will be no foreseeable consequences. First, they say that the declaration will not resolve indemnity. That, with respect, is not to the point. It is not necessary for the declaratory relief to resolve the liability question. The question is whether the resolution of a disputed question of construction of what has been accepted to be an "important element" as a "fundamental bar to coverage", being a "insuperable problem" for NAB's claim, has foreseeable consequences, including practical consequences. The answer is not dissimilar to the answer in Edwards v Santos - the parties will have the correct legal foundation for the resolution or negotiation of a settlement of the claim. 116 Secondly, they say that the issue of pre-existing liability will still be relevant in proving the reasonableness of the settlements. That may be so, but it is not the same question as whether that matter has to be proved in relation to each claim, and it would arise in a significantly different, and likely more attenuated, way. 117 Thirdly, there remain many other issues attending the ultimate question as to indemnity. I will identify those issues in due course, but at this level of an assertion of lack of the characteristics of a matter the answer simply given by NAB is to accept as plain that there are other issues, but that the declaration will resolve one way or the other a disputed question of law important to the resolution of the whole controversy. 118 The reinsurers submitted that the dispute was hypothetical and not attached to specific facts. This submission was really another way of saying that there are no foreseeable consequences in that indemnity will still be in doubt. That the declarations do not raise facts other than those concerned with the entry into the policies does not mean that the declaration is hypothetical. It is a real dispute about the meaning of the policy that has the importance described by Kennedys. 119 It was submitted that there is no immediate right, duty or liability raised for determination. In Commonwealth v BIS Cleanaway Ltd [2007] NSWSC 1075; 214 FLR 271 a claim for declarations that a licence had been novated and that the defendant had obligations under it was held to be a matter. It was submitted that the declarations here would not be as to rights and duties, but only the meaning of a contract. That, with respect, is artificial and unhelpful as a distinction. The applicant here seeks to resolve one aspect of an overall dispute, to clarify the context of its legal rights and the content of the legal obligation of the insurer and reinsurers. That is a matter; it is a contested issue, important to the resolution of the overall controversy. It is a declaration of right as to the meaning of part of a contract and the rights that flow from such. 120 The proceeding discloses a matter, being the resolution of one aspect of the overall controversy. There are foreseeable consequences in that NAB (and all parties) will have the content of its (and their) rights and obligations under the policies clarified for the making of choices as to the conduct of litigation. There is nothing theoretical or hypothetical whatsoever about the claim. The declaration will be given by reference to the agreed or found facts relevant to the relief claimed. The answer to the questions involved in the declaration have been said by the reinsurers' solicitors to be important in the language that I have already quoted. 121 Thus, I would dismiss the claim under r 13.01(i)(a) of the Federal Court Rules seeking to set aside the originating application for want of jurisdiction.

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:

1. The interlocutory applications of the second, and third and fourth, respondents be dismissed with costs.
2. 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.
3. The originating application be fixed for hearing on 12 November 2019 before the Honourable Justice Lee.
4. 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.