QBE CORPORATE LTD T/AS DA CONSTABLE SYNDICATE 386 AT LLOYDS

LOIS NOMINEES PTY LTD and the persons detailed in the Schedule attached to the Appeal Notice (Civil)

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Citation : LOIS NOMINEES PTY LTD -v- QBE INSURANCE (AUSTRALIA) LTD [2011] WASC 208

Practice and procedure - Action for negligence by clients against bankrupt solicitor - Insurers refused to indemnify solicitor for claim - Action by clients against insurer for declaration that insurer liable to indemnify solicitor - Whether clients' claim for declaration arguable - Whether declaration had any utility - Whether declaration would be refused on basis of procedural disadvantages suffered by insurer in the action - Whether defence by insurer to subsequent claim by solicitor's trustee in bankruptcy for indemnity would be abuse of process

Bankruptcy Act 1966 (Cth), s 58, s 82, s 117

Corporations Act 2001 (Cth), s 562

Native Title Act 1993 (Cth)

Petroleum Act 1923 (Qld)

Supreme Court Act 1935 (WA)

Trade Practices Act 1974 (Cth), s 80

Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564

Anjin No 13 Pty Ltd v Allianz Australia Insurance Ltd [2009] VSC 371; (2009) 26 VR 148

Arthur J S Hall & Co (a firm) v Simons [2002] 1 AC 615

Asher v Secretary of State for the Environment [1974] 1 Ch 208

Ashmere Cove Pty Ltd v Beekink (No 2) [2007] FCA 1421; (2007) 244 ALR 534

Astley v Austrust Ltd [1999] HCA 6; (1999) 197 CLR 1

Aussie Airlines Pty Ltd v Australian Airlines Ltd (1996) 68 FCR 406

Australasian Oil Exploration Ltd v Lachberg [1958] HCA 51; (1958) 101 CLR 119

Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256

Bazem Pty Ltd v Bureau of Urban Architecture [2010] NSWSC 978

Beneficial Finance Corporation Ltd v Price Waterhouse (1996) 68 SASR 19

Burton v The President of the Shire of Bairnsdale [1908] HCA 57; (1908) 7 CLR 76

Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853

Carob Industries Pty Ltd v Simto Pty Ltd (in liq) [2000] WASCA 362; (2000) 23 WAR 515

CE Heath Casualty & General Insurance Ltd v Pyramid Building Society (in liq) [1997] 2 VR 256

Chandu Lal Agarwalla v Khalilur Rahaman [1949] LR 77 Ind App 27

Clyne v Deputy Commissioner of Taxation [1984] HCA 44; (1984) 154 CLR 589

Coles v Wood [1981] 1 NSWLR 723

Cummings v Claremont Petroleum NL [1996] HCA 19; (1996) 185 CLR 124

Doe de Foster v Earl of Derby [1834] EngR 845; [1834] 1 AD & E 783

Edwards v Insurance Office of Australia Ltd (1933) 34 SR (NSW) 88

Edwards v Santos Ltd [2011] HCA 8; (2011) 242 CLR 421

Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (Receivers and Managers appointed - in liq) [1993] FCA 342; (1993) 43 FCR 510

Employers Reinsurance Corporation v Ashmere Cove Pty Ltd [2008] FCAFC 28; (2008) 166 FCR 398

Employers Reinsurance Corporation v Ashmere Cove Pty Ltd [2008] HCATrans 296

Gleeson v J Wippell & Co Ltd [1977] 1 WLR 510

Gouriet v Union of Post Office Workers [1977] UKHL 5; [1978] AC 435

Habib v Radio 2UE Sydney Pty Ltd [2009] NSWCA 231

Haines v Australian Broadcasting Corporation [1995] NSWSC 136; (1995) 43 NSWLR 404

Hill End Gold Ltd v First Tiffany Resource Corp [2010] NSWSC 375

Hodson v Walker [1851] EngR 923; [1872] LR 7 Exch 55

Howden v Truth & Sportsman Ltd [1937] HCA 74; (1937) 58 CLR 416

Hunter v Chief Constable of the West Midlands Police [1981] UKHL 13; [1982] AC 529

IMF (Australia) Ltd v Sons of Gwalia Ltd [2004] FCA 1390; (2004) 211 ALR 231

In re S (Hospital Patient - Court's Jurisdiction) [1996] Fam 1

Interchase Corporation Ltd (in liq) v FAI General Insurance Co Ltd [1998] QCA 180; [2000] 2 Qd R 301

Jeans v Bruce [2004] NSWSC 539

Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd [2009] HCA 43; (2009) 239 CLR 75

JN Taylor Holdings Ltd (in liq) v Bond (1993) 59 SASR 432

Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298

Kadian v Richards [2004] NSWSC 382; (2004) 61 NSWLR 222

Lois Nominees Pty Ltd v Hill [2011] WASC 53

Lois Nominees Pty Ltd v QBE Insurance (Australia) Ltd [2011] WASC 208

Macchia v The Public Trustee [2008] WASCA 241; (2008) 251 ALR 385

Madell v Thomas & Co [1891] 1 QB 230

Marra Developments Ltd v BW Rofe Pty Ltd [1977] 2 NSWLR 616

Maung Sein Done v Ma Pan Nyun [1932] 59 LR Ind App 247

Morrell v Mercantile Mutual Insurance (Australia) Ltd [1999] WASCA 250; (1999) 21 WAR 451

Mulkerrins v PricewaterhouseCoopers [2003] UKHL 41; (2003) 1 WLR 1937

Munni Bibi v Tirloki Nath [1931] LR 58 Ind App 158

North West Water Ltd v Binnie & Partners (a firm) [1990] 3 All ER 547

O'Brien v Sheahan [2002] FCA 1292

Oil Basins Ltd v The Commonwealth [1993] HCA 60; (1993) 178 CLR 643

Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd [2011] WASCA 76; (2011) 248 FLR 193

Parker v Lewis (1873) 8 Ch App 1035

Partridge v McIntosh & Sons Ltd [1933] HCA 38; (1933) 49 CLR 453

PNJ v The Queen [2009] HCA 6; (2009) 83 ALJR 384

Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589

Powell v Wiltshire [2004] EWHC 2226; [2005] QB 117

Ramsay v Pigram [1968] HCA 34; (1968) 118 CLR 271

Rankin v Official Trustee in Bankruptcy (2005) FCA 1084; (2005) 220 ALR 723

Re Ashwell; Ex parte Salaman [1912] 1 KB 390

Re De Burgho's Estate [1896] 1 IR 274

Re Holland (1901) 2 Ch 145

Re Moore; Ex parte Ibbetson (1878) 8 Ch D 519

Re Multi-Tech Services Pty Ltd (in liq); Heard v Commonwealth Trading Bank of Australasia (1982) 30 SASR 218

Re Silverstein; Ex parte Evenage Pty Ltd & Sutherland (Unreported, FCA, 13 March 1998)

Re South American and Mexican Co; Ex parte Bank of England [1895] 1 Ch 37

Re Southern Cross Coaches Ltd (1932) 49 WN (NSW) 230

Re Thomas Christy Ltd (In Liq) [1994] 2 BCLC 527

Reichel v Bishop of Oxford (1889) 14 App Cas 259

Reichel v Magrath (1889) 14 App Cas 665

Ridgeway v The Queen [1995] HCA 66; (1995) 184 CLR 19

Rippon v Chilcotin Pty Ltd [2001] NSWCA 142; (2001) 53 NSWLR 198

Rogala v Caris Corporation Ltd (Unreported, WASC, Library No 5089, 27 September 1983)

Sandtara Pty Ltd v Abigroup Ltd (1997) 42 NSWLR 5

Sankey v Whitlam (1978) 142 CLR 1

Sea Culture International Pty Ltd v Scoles [1991] FCA 523; (1991) 32 FCR 275

Sonenco (No 77) Pty Ltd v Sylvia [1989] FCA 462; (1989) 24 FCR 105

South Australian Housing Trust v State Government Insurance Commission (1989) 51 SASR 1

Spalla v St George Motor Finance Ltd (No 6) [2004] FCA 1699

State Bank of New South Wales Ltd v Alexander Stenhouse Ltd (1997) Aust Torts Reports 81-423

Taylor v Ansett Transport Industries Ltd (1987) 18 FCR 342

The Normar [1968] P 362

The Old Kiama Wharf Company Pty Ltd (In Liq) v Betohuwisa Investments Pty Ltd [2011] NSWSC 823

Trawl Industries of Australia Pty Ltd (in liq) v Effem Foods Pty Ltd [1992] FCA 272; (1992) 36 FCR 406

Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd [2000] HCA 11; (2000) 200 CLR 591

Walker v Commonwealth Trading Bank of Australia (1985) 3 NSWLR 496

Walton v Gardiner [1993] HCA 77; (1993) 177 CLR 378

Williams v Spautz [1992] HCA 34; (1992) 174 CLR 509

Woodings v Stevenson [2001] WASC 174; (2001) 24 WAR 221

Yates Property Corporation Pty Ltd v Boland [2000] FCA 1106; (2000) 179 ALR 664

Young v Murphy (1996) 1 VR 279

1 McLURE P: I differ from Newnes JA in that I would allow the appeal.

2 The primary issue in the appeal is whether a third party stranger to a liability insurance contract is arguably entitled to a declaration that the insurer is obliged to indemnify the insured against whom the third party is seeking to establish liability in legal proceedings. There is a conflict of authority on that issue at intermediate appellate court level. However, that conflict does not prevent this court from resolving the issue in the appellant's favour.

3 All the necessary factual background is detailed in the reasons of Newnes JA. It is sufficient for present purposes to note the following. In 2004 and 2005 Mr Gordon Hill carried on practice as a solicitor, in which capacity he operated a trust account. During the same period, Mr Hill was also a director of Firepower Holdings Ltd (FHL). Mr Hill had professional indemnity insurance cover with the appellants in respect of claims first notified to him in the period 30 June 2008 to 30 June 2009 (the insurance contract).

4 In May 2009 the respondents' solicitors notified Mr Hill of certain claims and shortly after commenced Supreme Court proceedings against him (the liability action). In that action the respondents plead that on various dates in 2004 and 2005 they paid moneys into Mr Hill's trust account on the express basis that the money was to be held by him on trust for the purpose of the acquisition by the respondents of shares in FHL. The respondents allege that Mr Hill used the money for other purposes and make in personam claims for equitable compensation, restitution or an account. The sum in issue is approximately $3.392 million. Mr Hill pleads in his defence that the respondents agreed to the money being used to purchase shares in Firepower Holdings Group Ltd (FHGL), which was intended to replace FHL as the holding company. Hindsight has shown that it was a bad investment either way.

5 On being notified of the respondents' claims Mr Hill informed the appellants of them and sought indemnity under the insurance contract. On 26 February 2010 Mr Hill was made bankrupt and trustees in bankruptcy were appointed.

6 On 27 April 2010 the appellants informed Mr Hill that they were not liable to indemnify him in respect of the respondents' claims in the liability action. At no stage have Mr Hill or his trustees taken any steps to contest the denial of liability to indemnify.

7 Mr Hill's rights against the appellants under the insurance contract vested in his trustees on his bankruptcy: s 58 of the Bankruptcy Act 1966 (Cth). The appeal was argued on the assumption that the respondents' claims against Mr Hill in the liability action are provable debts under s 82 of the Bankruptcy Act.

8 Section 117 of the Bankruptcy Act relevantly provides:

(a) a bankrupt is or was insured under a contract of insurance against liabilities to third parties; and

(b) a liability against which he or she is or was so insured has been incurred (whether before or after he or she became a bankrupt);

the right of the bankrupt to indemnity under the policy vests in the trustee and any amount received by the trustee from the insurer under the policy in respect of the liability shall, if the liability has not already been satisfied, be paid in full forthwith to the third party to whom it has been incurred.

9 In May 2011 the respondents commenced Supreme Court proceedings against the appellants for a declaration that the appellants are severally liable to indemnify Mr Hill in respect of the claims made by the respondents in the liability action (the indemnity action).

10 In June 2011 the appellants applied for summary judgment in the indemnity action, alternatively for an order that it be dismissed as vexatious or an abuse of process. Shortly thereafter, the respondents applied to consolidate the liability action and the indemnity action. The primary judge dismissed the appellants' application and ordered consolidation. The effect of the orders was that the liability action and the indemnity action were to be carried on as one action (the consolidated action); the liability action was designated as the lead action; and the respondents were named as plaintiffs, Mr Hill as first defendant and the appellants as second defendants.

11 The primary judge assessed the appellants' summary judgment application on the basis that the liability action and the indemnity action would in fact be consolidated [39], [43], [44].

12 The trustees have never been a party to any relevant action. There are no third party proceedings or cross-claims. The trustees say they have no available funds. The evidence supports a finding that neither Mr Hill nor his trustees will cross-claim against the appellants in the consolidated action. In practical terms, the only 'contradictors' in relation to the indemnity claim against the appellants in the consolidated action will be the respondents and the appellants. Unless the appellants take an active role, there may be no contradictor in relation to the liability claims.

13 The appellants' denial of liability to indemnify relies on both the non-application of the insuring clause and exclusions in the insurance contract. In particular, the appellants contend that any liability Mr Hill incurred to the respondents is not a liability incurred 'in connection with Mr Hill's legal practice'. Mr Hill would bear the onus of establishing that any liability he owed to the respondents was within the insuring clause. Alternatively, if the liability is incurred in connection with Mr Hill's legal practice, the appellants say it is a liability that: (1) arises out of a contract other than a contract to provide legal services; (2) directly or indirectly arises out of Mr Hill acting as a company director; and (3) was brought about by the actual dishonest or fraudulent acts or omissions of Mr Hill. Thus the denial of liability to indemnify is not principally based on matters of contractual construction. It is fact-intensive.

14 There is a dispute in the appeal on one aspect of the facts. The appellants contend that neither Mr Hill nor his trustees have disputed the appellants' denial of liability to indemnify. The respondents contend the trustees' position is that 'the appellants should indemnify Mr Hill'. At the hearing below, counsel for the appellants submitted that the evidence on which the respondents relied for that contention should be given no weight because (as is the case) there was no evidence that it was a considered opinion and such evidence as there was suggested that the trustees did not have the funds to investigate or take advice on the issue. The primary judge did not make a finding on this issue. That course was open to him.

15 The respondents have refused a request by the appellants for an undertaking to call Mr Hill at trial or make him available for cross-examination.

16 It is accepted that there are alternative routes by which the appellants' denial of liability could be litigated. The respondents, who are funded by a commercial litigation funder, could pursue the orthodox approach of taking an assignment of the trustees' rights under the contract of insurance or fund the trustees to bring an action against the appellants for an indemnity.

17 The appellants' contentions in the appeal are that:

(a) the court does not have jurisdiction to grant the declaration sought, alternatively a court would inevitably decline to make the declaration as a matter of discretion, as it had no utility in that it would not bind the appellants and Mr Hill, either as a matter of law or in practical effect, because

(i) the doctrines of res judicata, issue estoppel, Anshun estoppel and abuse of process have no application;

(ii) as to abuse of process, the decision in Ashmere Cove Pty Ltd v Beekink (No 2) [2007] FCA 1421; (2007) 244 ALR 534 (French J) upheld on appeal in Employers Reinsurance Corporation v Ashmere Cove Pty Ltd [2008] FCAFC 28; (2008) 166 FCR 398, is wrong, alternatively distinguishable on its facts having regard to the procedural, evidentiary and forensic disadvantages occasioned to the appellants; and

(iii) the fact that those disadvantages could be avoided by the appellants bringing a cross-claim against Mr Hill is irrelevant in the assessment of disadvantage;

(b) the respondents have no standing to seek the declaration;

(c) even if Ashmere Cove is arguably correct, it is wrong to equate a conclusion that a declaration might have utility because of the abuse of process doctrine with a conclusion that it is arguable that the declaration might be granted; and

(d) the prosecution of the consolidated action against the appellants constituted an abuse of process.

18 A declaration is an equitable discretionary remedy. It is lawful for the court to make binding declarations of right without granting consequential relief: s 25(6) Supreme Court Act 1935 (WA). The term 'right' is given a broad construction to include privileges, powers and immunities: Sankey v Whitlam (1978) 142 CLR 1, 23 (Gibbs ACJ). A declaration is often used as an alternative to prerogative writ proceedings.

19 In relation to declarations, it is a challenge to disentangle issues of jurisdiction, power and standing as is evident from Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564, 581 - 582:

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'.

20 The consequences may be legal or practical: Ainsworth (582). I propose to proceed on the basis that the jurisdiction to grant a declaration is very wide, its limits being the boundaries of judicial power, but that the requirements listed by the High Court in Ainsworth would inevitably lead to the exercise of the discretion against the making of a declaration: JN Taylor Holdings Ltd (in liq) v Bond (1993) 59 SASR 432, 435 - 437 (King CJ); Ashmere Cove [36].

21 In Ainsworth a declaration was sought in an administrative law context; the authors of a statutory report containing adverse findings against the appellants breached the rules of procedural fairness. By contrast, the respondents in the consolidated action seek a declaration as to the private contractual rights and duties inter se of Mr Hill and the appellants. The declaration which it seeks will not be binding or enforceable as between those parties. If, as indicated at the hearing of the appeal, the appellants would not act on the court's findings relating to the insurance contract, the respondents would have no entitlement to any consequential (enforceable) order against them.

22 It was accepted by both parties that if the court made the declaration sought by the respondents in the consolidated action, the doctrines of res judicata, issue estoppel and Anshun estoppel would have no application in subsequent proceedings by Mr Hill's trustees against the appellants for an indemnity under the insurance contract. That is because it is accepted by the parties that there is no correlative (mutual or reciprocal) interest in the rights and duties in issue in the respondents' claim against the appellants, or between the co-defendants in the consolidated action. The appeal should be conducted on that basis.

23 A matter not raised by either party is whether, and if so to what extent, an insurer under a third party liability policy is bound by a judgment entered, and issues determined, in litigation between the third party and the insured. There is authority for the proposition that, as a matter of contractual construction, a judgment (at least after trial) binds the insurer. That is, the insurer cannot contest the insured's liability to the third party in subsequent proceedings under the policy: Parker v Lewis (1873) 8 Ch App 1035, 1059; Edwards v Insurance Office of Australia Ltd (1933) 34 SR (NSW) 88, 94; Jeans v Bruce [2004] NSWSC 539.

24 There is some authority for the proposition that an insurer may also be bound by the basis upon which the insured was adjudicated to be liable, at least where the insurer has conduct of the insured's defence: CE Heath Casualty & General Insurance Ltd v Pyramid Building Society (in liq) [1997] 2 VR 256, 293 - 294. Moreover, the doctrine of abuse of process is sometimes identified as a means by which the judgment entered, or issues determined, in liability proceedings between a third party and an insured could be rendered practically binding in subsequent proceedings between the insured and the insurer under the contract of insurance: South Australian Housing Trust v State Government Insurance Commission (1989) 51 SASR 1, 18; State Bank of New South Wales Ltd v Alexander Stenhouse Ltd (1997) Aust Torts Reports 81-423.

25 It might be thought that the extent to which the insurer in an indemnity action can relitigate the judgment or issues determined in a preceding liability action is relevant to the issues in these proceedings. However, it was not relied on by either party and can be put to one side.

26 As the declaration sought by the respondents is unenforceable against the appellants and will not be acted upon by them, the appellants' claim the declaration has no legal or practical utility or consequences. The respondents counter that proposition with the submission that there would, or may, be subsequent proceedings brought by Mr Hill's trustees against the appellants requiring them to indemnify Mr Hill in relation to the respondents' liability claims and that in those subsequent proceedings the court would, or may, strike out any defence that was inconsistent with the declaration on the basis that it was an abuse of process of the court. The only relevant category of abuse of process is that occasioned by the relitigation of an issue previously determined.

27 I turn now to the conflicting authorities. In Interchase Corporation Ltd (in liq) v FAI General Insurance Co Ltd [2000] 2 Qd R 301, the respondent commenced an action claiming damages for negligence against property valuers. After conducting the defence for some time, the insurer declined indemnity under its insurance contract with the valuers. The valuers did not institute third party proceedings against the insurer. The reason was not known. The valuers had not been made bankrupt or placed in liquidation. In any event there was nothing to indicate that the valuers may contest the insurer's decision. Subsequently, the respondent successfully applied to join the insurer as an additional defendant, seeking a declaration that the insurer was liable to indemnify the valuers. The Queensland Court of Appeal by a majority (McPherson JA & Byrne J, Davies JA dissenting) set aside the joinder of the insurer on the ground that it served no useful purpose.

28 Byrne J (with whom McPherson JA agreed) rejected the respondent's contention that the declaration would have some utility because in later proceedings initiated by a liquidator or trustee in bankruptcy to enforce the policy, a defence that was inconsistent with the declaration would be struck out as an abuse of process. He said:

Several considerations combine to show that there is no appreciable prospect that a defence denying liability to indemnify would be treated as such an abuse. In the later proceedings, FAI would not be resisting an obligation to indemnify for an ulterior or collateral purpose ... Secondly, the plaintiff[s] in the later case will have elected not to bring third-party proceedings in this litigation and instead will have waited to see the outcome of Interchase's action against FAI, which is not an immaterial consideration. Next, what would then be challenged as an abuse of process is not the prosecution of a claim but the defence of one. Finally, the subsequent proceedings would probably afford FAI procedural advantages that are not available to it in defending Interchase's action (320).

29 The capacity to interrogate and obtain discovery were identified as advantages. Interchase was referred to with approval in Morrell v Mercantile Mutual Insurance (Australia) Ltd (1999) 21 WAR 451.

30 Davies JA in Interchase concluded that the declaration would have utility because the insurer would be prevented from defending any subsequent action by the doctrine of abuse of process by relitigation. That conclusion was based on his assessment that 'there can be no doubt that, in the present case, both [the insurer] and the valuers will have full opportunity of contesting the question in respect of which the declaration is sought' (310). It is apparent from the report that the valuers were represented and playing an active role in the litigation. Davies JA relied on three cases, Reichel v Magrath (1889) 14 App Cas 665 (although he noted that mutuality may have existed there if, as seems likely, the respondent and the Bishop were privies); Hunter v Chief Constable of the West Midlands Police [1981] UKHL 13; [1982] AC 529; and North West Water Ltd v Binnie & Partners (a firm) [1990] 3 All ER 547. It is the case that improper motive or purpose is not a necessary condition of abuse of process by relitigation. Davies JA also concluded that any procedural disadvantages could be readily overcome by the insurer seeking a declaration in the proceedings against the valuers (311).

31 In Ashmere Cove the applicants, investors in a registered management scheme, had commenced proceedings against the former directors of the corporate responsible entity for the scheme which had gone into liquidation. The company was covered by a professional indemnity insurance policy for the relevant period. The insurers had declined to provide indemnity, relying upon an exclusion clause. The liquidator of the company was not prepared to contest the insurers' refusal to indemnify. He did not have the funds to defend the action against the insured or to take action against the insurers. The applicants applied to join the insurers as respondents and sought a declaration that they were liable to indemnify the company. The joinder was opposed. French J allowed the joinder.

32 Counsel for the insurers accepted that the court had the power to join the insurers for the purpose of obtaining the declaratory relief sought by the applicants. The joinder was opposed on discretionary grounds only. French J agreed with Davies JA in Interchase that there was utility in a declaration against an insurer in these circumstances [58]. He also relied on other discretionary considerations. First, s 562 of the Corporations Act (2001) (Cth) (which is similar in scope to s 117 of the Bankruptcy Act) gave the applicants a priority right in the proceeds of any successful claim against the insurers, which gave them a real interest in having the insurers' liability to its insured determined [59]. Secondly, the denial of liability was based on a discrete issue which should be capable of determination largely upon the pleadings, agreed facts and documents [59].

33 An appeal from French J's decision was unsuccessful: Employers Reinsurance Corporation. The insurers claimed in the appeal that the joinder of the insurer did not involve an exercise of the judicial power of the Commonwealth because, without the power to bind the parties to the insurance contract, there was no 'matter' (justiciable controversy) for the purposes of Ch III of the Australian Constitution. It was argued in the alternative that, if there was a justiciable controversy, leave to join the insurers should have been refused because the court lacked the power to authoritatively determine the rights and duties of the parties to the insurance contract. The Full Court held that the investors' claims against the insurers formed part of a larger justiciable controversy; that the investors had standing to claim declaratory relief against the insurers (relying on Aussie Airlines Pty Ltd v Australian Airlines Ltd (1996) 68 FCR 406); and that the grant of the declaration against the insurers would have practical utility for reasons ([53]) not relied on by the respondents in this appeal. However, the Full Court continued:

The reality is that the joinder of the Insurers ... will prove to be of practical utility. There are good reasons ... for all the issues to be litigated in the one proceeding.

In substance, the effect of the joinder orders made by the primary judge is no different to the situation involved in the everyday case of an insured joining its insurer as a third party (by whatever procedural means may be appropriate in the particular court). This enables issues of liability and assessment of damages or compensation, both as between claimant and insured and as between insured and insurer, to be heard and determined in the one proceeding [73] - [74].

34 With the greatest respect, it is difficult to see how that is correct. There was no 'lis' (in the sense of proceedings) between the insured and the insurers nor was there anything to indicate that the indemnity issues would be actively litigated between the co-defendants so as to bind them.

35 Special leave to appeal was refused: Employers Reinsurance Corporation v Ashmere Cove Pty Ltd [2008] HCA Trans 296. The special leave point relied on was the constitutional issue.

36 There must be a justiciable controversy (that is, a 'matter' for constitutional purposes) before there is jurisdiction to grant declaratory relief. A justiciable controversy is not limited to rights in which the parties have a correlative or mutual interest: Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (2000) 200 CLR 591. That case concerned the constitutional validity of s 80 of the Trade Practices Act 1974 (Cth) (TPA) which conferred on the Federal Court power to grant an injunction on the application of any person if it was satisfied that a person had engaged in conduct that contravened certain provisions of the TPA. The High Court rejected the proposition that there was no justiciable controversy with respect to which jurisdiction could be conferred under Ch III of the Constitution when an applicant had no direct or special interest in the subject matter of the dispute. However, Gaudron J said:

There may be cases where, absent standing, there is no justiciable controversy. That may be because the court is not able to make a final and binding adjudication. To take a simple example, a court could not make a final and binding adjudication with respect to private rights other than at the suit of a person who claimed that his or her right was infringed. Or there may be no justiciable controversy because there is no relief that the court can give to enforce the right, duty or obligation in question [46]. (emphasis added)

37 Contrary to Gaudron J's observation concerning private rights (which is consistent with the position of Lord Diplock in Gouriet v Union of Post Office Workers [1977] UKHL 5; [1978] AC 435, 501; cf In re S (Hospital Patient - Court's Jurisdiction) [1996] Fam 1, 22), there are a handful of cases in which courts have made a final and binding declaration at the suit of a plaintiff who claimed that another person's private right was infringed. Apart from Ashmere Cove and the cases in which it has been followed, the only other Australian case to which we were referred was Aussie Airlines. With the end of the two airline policy, the Commonwealth granted long term leases to each of Qantas and Ansett to enable them to develop terminal facilities at airports. The leases contained provisions compelling both airlines to provide subleases to 'new entrants to the domestic aviation industry'. The applicant was incorporated for the purpose of operating a domestic airline service. It requested Qantas to grant it a sublease. Qantas refused. There was a dispute between the applicant and Qantas as to what was required in order for the applicant to fall within the definition of a new entrant.

38 The Full Federal Court held that the applicant had standing to seek declaratory relief against Qantas. The court did not find it necessary to determine whether the applicant had enforceable rights under the head lease between the Commonwealth and Qantas (that is, whether the benefit of the promise was held on trust for new entrants). The court concluded that: (1) the question whether the applicant was a new entrant was of real practical importance because without a sublease the applicant would be denied a right to carry on its proposed airline business; (2) the applicant had a real commercial interest in obtaining the declaration; (3) there was a real controversy between the applicant and Qantas; and (4) both the applicant and Qantas were proper 'contradictors'. Indeed, the applicant was in the best position to establish, as a matter of fact, that it satisfied the requirement of being a new entrant.

39 Aussie Airlines was referred to with approval by Heydon J in Edwards v Santos Ltd [2011] HCA 8; (2011) 242 CLR 421 [38]. However that is not a case in which the plaintiffs sought to vindicate another person's private right. The plaintiffs were a registered Native Title claimant under the Native Title Act 1993 (Cth) (NTA). The petroleum defendants, who had Authorities to Prospect under the Petroleum Act 1923 (Qld), claimed that the grant of production licences which emanated from those Authorities were 'pre-existing rights based acts' with the consequence that they were not subject to the right to negotiate provisions of the NTA. The issue in dispute was whether the statutory right to negotiate provisions bound the plaintiffs and the petroleum defendants.

40 Accepting that a third party can in appropriate circumstances obtain declaratory relief in respect of the private rights and duties of others, such occasions are likely to be very rare.

41 The categories of abuse of process are not closed. Courts have an inherent power to prevent misuse of their procedures in a way which, although not inconsistent with the literal application of procedural rules of court, would nevertheless be 'manifestly unfair to a party to litigation ... or would otherwise bring the administration of justice into disrepute among right-thinking people': Walton v Gardiner (1993) 177 CLR 378, 393. The test involves questions of degree and judgment. One of the acknowledged categories of abuse of process is 'multiple or successive proceedings which cause or are likely to cause improper vexation or oppression': Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd [2009] HCA 43; (2009) 239 CLR 75 [27]. The jurisdiction to strike out proceedings or a defence as an abuse of process must be exercised with great circumspection: Howden v Truth & Sportsman Ltd [1937] HCA 74; (1937) 58 CLR 416, 418.

42 The appellants contend that the cases relied on by Davies JA in Interchase do not assist the respondents. In Reichel, the appellant brought an action against the Bishop and the patrons of a benefice claiming a declaration that he was the vicar of the benefice on the basis that a resignation which he had executed was void (the first action). The first action was tried and judgment was given against the appellant on the ground that his resignation was effective. Thereafter the respondent, having been duly appointed to the benefice as the appellant's successor, brought an action against the appellant claiming a declaration that the respondent was the vicar and an injunction restraining the appellant from depriving the respondent of the use and occupation of the house and lands of the benefice (the second action). In his defence in the second action the appellant set up the same case which had been rejected in the first action. The defence was struck out as an abuse of process. Thus the defendant in the second action had been the plaintiff in the first action in which there was a final and binding adjudication of the private rights and duties inter se of the primary contradictors.

43 In Hunter v Chief Constable a final decision had been made by a criminal court of competent jurisdiction which was the subject of a collateral attack in a subsequent civil action. It is of limited assistance.

44 The other decision referred to by Davies JA is North West Water. It too is uncontroversial. A water authority commissioned engineers to design and supervise an underground tunnel and valve house to take water from one river to another. An explosion occurred at the valve house which killed and injured a number of people. Personal injury actions were commenced against the water authority, the contractors who constructed the system and the engineers (the first action). By their defence, the water authority claimed that the explosion had been caused by the engineers' negligence. The trial judge held that all three defendants were to blame and apportioned liability between them. The Court of Appeal allowed the appeals of the water authority and the contractors and held that the engineers were wholly to blame.

45 Thereafter, the water authority issued proceedings against the engineers for the damage to the tunnel system caused by the explosion (the second action). The water authority alleged negligence. The engineers filed a defence denying negligence. The primary judge held that there was an issue estoppel. He also held in the alternative that it would be an abuse of process to allow the issue of negligence arising out of identical facts and dependent on the same evidence to be relitigated. Although the defendant in the second action was also a defendant in the first action, both parties in the second action had litigated between themselves the water authority's claim in the first action that the explosion was caused by the engineers' negligence. All proper contradictors had litigated their respective claims in the first action. There was no suggestion by the engineers that they were in any way disadvantaged in their conduct of the first action.

46 There are material differences between the abuse of process cases relied on by Davies JA in Interchase and the circumstances of this case. In the cases relied on (1) the first action had been determined prior to the commencement of the second action in which the claim of abuse of process was raised; and (2) the first action in each case involved a real controversy, actively litigated by parties whose legal rights and duties were directly in issue and who would be in possession of all relevant information and documents central to the determination of the action.

47 In this case the first action (the indemnity action) had only just commenced, the situation bearing a greater resemblance to a choice of forum dispute. The obvious and proper plaintiff/contradictor to pursue an indemnity claim against the appellants under the insurance contract is Mr Hill, or his privy, the trustees. Privies include any person who succeeds to the rights of a party on insolvency: Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853, 909 - 910; Trawl Industries of Australia Pty Ltd (in liq) v Effem Foods Pty Ltd [1992] FCA 272; (1992) 36 FCR 406, 413; Re South American and Mexican Co; Ex parte Bank of England [1895] 1 Ch 37. Mr Hill has all the information necessary to make a fully informed judgment as to the prospects of succeeding in an indemnity claim against the appellants. The issues in the indemnity claim are fact-intensive. Mr Hill would bear the onus of establishing that the liability claims are 'in connection with his legal practice'. The factual issues in the indemnity claim are significantly wider than those in the liability claim. It is Mr Hill's conduct (which is not co-extensive with the respondents involvement) that is central to the determination of the indemnity claim. He is the only party who can give discovery, answer interrogatories, give evidence at trial and most significantly be cross-examined on all relevant factual matters in the indemnity claim. There is no finding (or evidence to support one) that Mr Hill will defend or have any active involvement in the litigation of the indemnity claim, or indeed the liability claim. The respondents have refused to give an undertaking to call Mr Hill to give evidence at trial or make him available for cross-examination by the appellants. Unlike in Ashmere Cove, the indemnity claim is not a discrete issue capable of determination largely on the pleadings, agreed facts and documents.

48 It is apparent from all the listed circumstances that the appellants will be disadvantaged in their defence of the respondents indemnity claims. In particular, the appellants will be denied the procedural, evidentiary and forensic rules that are available as a matter of course between opposing parties to legal proceedings. That is an actual not just potential disadvantage. Moreover, it cannot be said that the disadvantages will be significantly ameliorated by the appellants becoming a plaintiff and cross-claiming against Mr Hill in relation to a 'controversy' that is not of his making.

49 It is also necessary to consider these circumstances in a broader perspective in the interests of coherence. An insured defendant who elects not to issue third party proceedings against his insurer is not, in the event he is found liable to the plaintiff, prevented by the doctrines of Anshun estoppel or abuse of process or otherwise from commencing indemnity proceedings against his insurer. Moreover, the judgment creditor, notwithstanding his commercial interest in the outcome of the indemnity proceedings, has no sufficient standing to be made a party to the indemnity proceedings: Morrell v Mercantile Mutual Insurance [14], [23], [51]. It is also relevant in the exercise of the discretion to refuse a declaration that there are alternative conventional routes to a claim against the appellants.

50 There is an additional coherence consideration. The respondents contend that any procedural or other disadvantages suffered by the insurers would flow from the insurers' failure to cross-claim against Mr Hill. That is a perfect wedge. A cross-claim by the insurers against Mr Hill would result in a binding judgment to which the principles of res judicata and issue estoppel would apply. There will be no second action, or not one in which the abuse of process doctrine will feature. The respondents will have secured an outcome that goes well outside what they can legitimately achieve in the indemnity action. It is unnecessary to determine whether that constitutes a collateral abuse of process. See Williams v Spautz [1992] HCA 34; (1992) 174 CLR 509. However, in my view there is merit in the appellants' contention that the availability of a cross-claim should be a mandatory irrelevant consideration in the determination of whether the respondents have an arguable claim for a declaration against the appellants.

51 However it is unnecessary for this court to determine whether Ashmere Cove is wrongly decided. That case is distinguishable on its facts. In the circumstances which I have detailed, the real controversy in this case is between Mr Hill and the appellants; the respondents are not proper contradictors in the indemnity claim. That being so, there is no arguable basis for the respondents claim that the appellants defence of any subsequent indemnity proceedings which may be brought by Mr Hill's trustees for binding and enforceable orders against the appellants would or could be an abuse of process. Thus there is no utility in the respondents claim for the declaration against the appellants, in which case the appellants should have succeeded in their summary judgment application in the indemnity action.

52 For these reasons, I would grant leave to appeal, allow the appeal, set aside the orders made by Beech J on 22 August 2011 in the indemnity action and the liability action and enter judgment for the defendants in the indemnity action under O 16 r 1 of the Rules of the Supreme Court 1971 (WA). I would hear from the parties on costs.

53 NEWNES JA: This is an appeal against a decision of Beech J, who dismissed the appellants' application for summary judgment. On the hearing of the appeal, the appellants applied, in the alternative to summary judgment, for a stay of the respondents' action on the ground that it was an abuse of process. No objection was taken by the respondents to that application being made for the first time on the appeal.

54 In the action, the respondents seek a declaration that the appellants, as the professional indemnity insurers of the respondents' former solicitor, are liable to indemnify the solicitor in respect of the respondents' claims against him. The appellants say that the action should be dismissed as it has no prospect of success or, alternatively, that it should be stayed as an abuse of process because it has been brought in an unconventional way so as to cause them serious and unfair forensic disadvantages that would not arise if the action was brought in a conventional way.

55 The respondents deny that the action is doomed to failure and say that the forensic disadvantages which the appellants assert, to the extent they may turn out to be real, can readily be overcome. The fact that the claim could have been brought in other ways is not to the point.

56 As the appeal is against an interlocutory order, the appellants require leave to appeal: Supreme Court Act 1935 (WA), s 60(1)(f).

57 In order to put the parties' competing contentions in context, it is necessary to set out briefly the relevant background.

58 Mr Gordon Hill carried on practice as a solicitor between 2001 and 30 June 2006. During that period, he was also a director of Firepower Holdings Ltd (FHL), a company incorporated in the Cayman Islands. It appears that FHL was the holding company for what was known as the Firepower group of companies. While he was in practice as a solicitor, Mr Hill had professional indemnity insurance cover under the statutory scheme applicable to lawyers in this State. The insurance cover was in the form of annual 'claims made' policies which covered any claims made against him and notified to the insurer during the period of the policy. After he ceased to practice Mr Hill obtained what is commonly known as 'run off' cover to indemnify him in respect of any breach of duty which occurred while he was in practice but for which a claim was not made until after that time. Relevantly, Mr Hill entered into a contract of insurance with the appellants in respect of claims first notified to him in the period 1 June 2008 to 30 June 2009.

59 Under the policy, the appellants agreed, subject to certain terms and conditions, to indemnify Mr Hill 'against any amount payable by [Mr Hill] to a Claimant in respect of any kind of civil liability incurred in connection with the Practice for any Claim first made against [Mr Hill] during the Period of Insurance'. A 'Claimant' was defined to mean 'the person or entity making a Claim against the Insured'. A 'Practice' was defined to mean a legal practice and to include a legal practice that had ceased to practice in Western Australia but which had been insured at the time the practice ceased. The policy contained a number of express exclusions to which it will be necessary to come in due course.

60 In May 2009, the respondents' solicitors notified Mr Hill of the respondents' claims. Mr Hill then informed the appellants of the claims and sought indemnity under the policy.

61 On 27 April 2010, the appellants informed Mr Hill that they would not indemnify him in respect of the claims. The appellants' denial of liability is based on four, alternative, grounds. The appellants say that Mr Hill's liability was not incurred in connection with his practice as a solicitor and therefore the policy has no application. In the alternative, they rely on one or more of three exclusions in the policy; namely, that the liability arose out of Mr Hill acting as a company director; that it arose out of a contract other than a contract to provide legal services in connection with the practice; or that it was brought about by a dishonest or fraudulent act or omission of Mr Hill.

62 Shortly after notifying Mr Hill of the claims, the respondents commenced proceedings against him (the 'Hill action'). In the Hill action, the respondents plead that on various dates in the second half of 2004 and in 2005 they paid money into Mr Hill's trust account on the express basis that the money was to be held by Mr Hill on trust for the purpose of the acquisition by the respondents of shares in FHL. The respondents allege that, in breach of trust, Mr Hill subsequently used the money for other purposes. The respondents seek to recover the money either by way of a claim for equitable compensation, restitution or an account. It appears that the amount claimed is some $3.39 million.

63 Mr Hill has filed a defence to the claim. It is unnecessary to canvass the defence in any detail. Suffice it to say that Mr Hill pleads, in substance, that whilst the money was originally paid into his trust account for the purpose of purchasing shares in FHL, in or about mid-2005 the respondents agreed to the money being used for the purchase of shares in a newly incorporated company, Firepower Holdings Group Ltd (FHGL), which it was proposed would replace FHL as the holding company for the Firepower group of companies. Mr Hill pleads that the money paid into his trust account by the respondents was subsequently used to purchase FHGL shares for the respondents and the shares were transferred to them. Some respondents, it is alleged, also received shares in FHL.

64 Both FHGL and FHL are now in liquidation. Mr Hill became bankrupt on 26 February 2010. It appears that the respondents obtained leave under s 58(3) of the Bankruptcy Act 1966 (Cth) to continue the action against Mr Hill. (I would note in passing that the parties appear to have proceeded throughout on the basis that the respondents' claims were for provable debts under the Bankruptcy Act.)

65 It would obviously be of little benefit to the respondents to pursue claims for damages against Mr Hill if he is not entitled to be indemnified under the insurance policy. Mr Hill's trustees in bankruptcy have said they do not have the funds to enable them to pursue a claim against the appellants for indemnity. Such circumstances are not, however, unprecedented. A common course in such circumstances is for the plaintiff to fund the defendant's trustee in bankruptcy to bring proceedings for indemnity against the insurer. For reasons which do not appear from the appeal papers, the respondents did not take that course.

66 Instead, the respondents initially made an application to join the appellants as defendants to the Hill action in order that the respondents might seek a declaration that the appellants were liable to indemnify Mr Hill in respect of the respondents' claims. In connection with that application, the respondents' solicitor wrote to the solicitors for Mr Hill's trustees in bankruptcy on 19 January 2011 referring to a telephone conversation earlier that day and saying:

1. the Trustees consider that Mr Hill's professional indemnity insurers (joinder of whom is sought by [the respondents]) should indemnify Mr Hill in relation to the claims made by the [respondents] in these proceedings; and
2. the Trustees support the application for joinder but, by reason of the fact that the estate lacks funds, do not propose to take an active role in the application.

67 The solicitors for Mr Hill's trustees responded the same day, saying:

We confirm that your understanding of the position of the trustee[s] of Mr Hill's bankrupt estate, as outlined in your letter, is correct save that the trustees do not oppose the application and do not propose to appear or make submissions in relation to it, unless of course, His Honour Justice Beech requires them to do so.

68 The joinder application was refused by the primary judge: Lois Nominees Pty Ltd v Hill [2011] WASC 53. His Honour concluded that the court had no power to order the joinder. That decision is not challenged.

69 Undeterred, on 11 May 2011 the respondents commenced a separate action against the appellants. In the action, the respondents plead Mr Hill's policy of insurance with the appellants and his alleged breaches of duty. They say that, by virtue of s 117 of the Bankruptcy Act, Mr Hill's rights to indemnity under the policy in respect of the respondents' claims have vested in his trustees in bankruptcy as property of Mr Hill and that any amount received by the trustees under the policy must be paid to the respondents. The respondents seek a declaration that the appellants are liable pursuant to the policy to indemnify Mr Hill in respect of the respondents' claims.

70 The respondents' evident purpose in seeking such a declaration is to preclude the appellants from denying liability in subsequent proceedings by Mr Hill's trustee for indemnity. The respondents' position is that if the declaration is made it would be an abuse of process in such proceedings for the appellants to deny liability, if indeed the issue of indemnity is not res judicata.

71 On 1 June 2011, the appellants applied for, among other things, summary judgment pursuant to O 16 of the Rules of the Supreme Court 1971 (WA), and alternatively, for the action to be dismissed on the ground that it was vexatious or an abuse of process. On 9 June 2011, the respondents applied to have the action consolidated with the Hill action.

72 The applications were heard together by the primary judge on 9 August 2011.

73 In support of the appellants' application it was contended, in substance, first, that as a matter of discretion the court would refuse to make the declaration sought by the respondents because it would have no utility, such a declaration not being binding as between the appellants and Mr Hill; secondly, that the court has no jurisdiction to grant the declaration because it is not directed to the determination of any legal controversy but involves an abstract or hypothetical question; and thirdly, that the respondents have no standing to seek the declaration as the respondents are not parties to the contract of insurance and it does not confer any benefit on them.

74 The appellants submitted that a declaration of the nature sought was of no utility because it would have no foreseeable consequences for the respondents. Such a declaration could not give rise to res judicata or an issue estoppel in any subsequent proceeding by Mr Hill's trustees for indemnity. Nor was there any appreciable prospect that in a subsequent action by Mr Hill for indemnity a denial of liability by the appellants would be held to be an abuse of process. In that connection, the appellants argued that the issue of indemnity did not involve simply a question of construction of the insurance policy but the proof of detailed facts. The appellants contended that in seeking to prove those facts they would suffer serious procedural and evidentiary disadvantages if the respondents were able to pursue the claim for a declaration, rather than pursuing the conventional course of taking an assignment of Mr Hill's rights under the policy or funding his trustees in bankruptcy to bring an action for indemnity.

75 In relation to those disadvantages, the appellants said that out of court admissions which they allege Mr Hill has made would not be admissible in the present action, whereas they would be admissible against Mr Hill in any action for indemnity brought by or through him. Similarly, even if they were able to interrogate Mr Hill in this action, the answers would not be admissible. Further, while it might be expected that Mr Hill would give evidence in an action brought by or through him against the appellants, there is not the same expectation he would give evidence in this action. (It was common ground that the respondents have declined to give an undertaking to call Mr Hill as a witness.) Nor was it likely that if Mr Hill did not give evidence in this action the appellants would be able to invoke the rule in Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298. It was submitted that the question of whether Mr Hill was likely to give evidence was of real significance in this case as the defence to a claim for indemnity would involve detailed factual issues.

76 The appellants further contended that the respondents' action was an abuse of process because those disadvantages made the proceedings manifestly unfair to the appellants in circumstances where the disadvantages would not exist if third party proceedings for indemnity were brought in the Hill action, in the conventional way.

77 In a reserved decision delivered on 22 August 2011, his Honour dismissed the appellants' application and granted the respondents' application for consolidation of the action with the Hill action: Lois Nominees Pty Ltd v QBE Insurance (Australia) Ltd [2011] WASC 208.

78 At the outset, the primary judge noted in particular two principles applicable to applications for summary judgment; first, that judgment is only appropriate in the clearest of cases where there was a high degree of certainty about the outcome if it went to trial, and, secondly, that a court should be careful to avoid stifling the development of the law where there was a reasonable possibility that as the law develops it will be found that a cause of action lies.

79 His Honour also concluded that in determining the summary judgment application the action should not be looked at in isolation but account must also be taken of the respondents' application to consolidate it with the Hill action. In such a consolidated action both the appellants and Mr Hill would be defendants.

80 In relation to the merits of the application, his Honour did not accept the appellants' submission that in a subsequent claim against them for indemnity by Mr Hill's trustee, there was no appreciable prospect that a defence by the appellants denying liability would be held to be an abuse of process. The appellants' submission was based on the decision in Interchase Corporation Ltd (in liq) v FAI General Insurance Co Ltd [1998] QCA 180; [2000] 2 Qd R 301.

81 The primary judge referred to his own earlier decision in Lois Nominees Pty Ltd v Hill [2011] WASC 53, in which he had considered Interchase and a number of cases which had declined to follow it, including, in particular, Ashmere Cove Pty Ltd v Beekink (No 2) [2007] FCA 1421; (2007) 244 ALR 534 (French J) and, on appeal, Employers Reinsurance Corporation v Ashmere Cove Pty Ltd [2008] FCAFC 28; (2008) 166 FCR 398. His Honour noted that in each of the cases subsequent to Interchase the court had concluded that if the declaration was granted it would at least arguably have foreseeable consequences for the plaintiffs, in that there was a sufficient prospect that the insurer would be precluded from denying liability to indemnify in any subsequent proceedings by the insured. The primary judge said he would follow that line of authority. He rejected a submission by the appellants that the reasoning in each of the post-Interchase cases was flawed and that consequently the reasoning in Interchase should be accepted. His Honour considered that that was an 'insecure foundation' upon which to grant summary judgment [49].

82 His Honour also rejected the appellants' contention that the post-Interchase line of authority was distinguishable because of the factual nature of the appellants' proposed defence and the substantial forensic disadvantages which the appellants say they would suffer if the respondents were able to pursue the claim for a declaration.

83 Beech J considered that whether there was a sufficient prospect that a denial of liability to indemnify by the appellants in subsequent proceedings by Mr Hill would be found to be an abuse of process was a matter to be assessed by the trial judge, taking into account all of the circumstances including the actual effect of the procedural and evidentiary difficulties which the appellants contend would arise in the course of the respondents' action. His Honour considered that the significance of any procedural and forensic disadvantages would depend upon the course the action took and were a matter for assessment by the trial judge in determining whether to grant a declaration. It could not be said at this stage that they were inevitably of a magnitude or character that would amount to an abuse of process.

84 In addition, the primary judge considered that most, if not all, of those difficulties could be overcome by the appellants bringing a counterclaim against Mr Hill for a declaration that he was not entitled to an indemnity. In assessing whether the procedural and evidentiary disadvantages to the appellants meant there was no realistic prospect of a subsequent defence by the appellants denying liability being struck out as an abuse of process, the trial judge would take into account the availability to the appellants of a counterclaim (and any grounds upon which such a counterclaim had not been pursued, if that was the case).

85 The primary judge also noted that, based on the finding in JN Taylor Holdings Ltd (in liq) v Bond (1993) 59 SASR 432, res judicata may apply in subsequent proceedings between the insurer and the insured, and (notwithstanding his Honour's own reservations as to its merit) that point was sufficiently arguable to defeat a summary judgment application.

86 His Honour observed that the questions of jurisdiction and standing were also founded on the argument that the declaration would have no practical consequences for the parties and accordingly it was not necessary to consider those issues separately.

87 The contention by the appellants that the respondents' action for a declaration was itself an abuse of process was rejected by the primary judge. His Honour did not accept the appellants' contention that the procedural and evidentiary disadvantages to them, viewed in the context that it was open to the respondents to fund Mr Hill's trustees to bring third party proceedings which would avoid those disadvantages, meant that the action was unjustifiably and manifestly unfair to the appellants. His Honour reiterated that he was not satisfied that the action would necessarily give rise to the alleged unfairness. He considered it was not enough that there were other means by which the respondents could have sought to resolve the issue of indemnity.

88 The appellants now appeal against the dismissal of their application for summary judgment. As mentioned earlier, they also seek in the alternative an order staying the action as an abuse of process. If the appeal is unsuccessful, the appellants do not challenge the order for consolidation of the action with the Hill action.

89 The grounds of appeal, in substance, are as follows:

1. The primary judge erred in law in holding that the respondents' claim for a declaration was arguable; his Honour should have held that a declaration would not be granted as it had no utility as a matter of law or in practical effect because the doctrine of res judicata would have no application and a denial of liability by the appellants in any subsequent claim against them by Mr Hill or his trustees would not be an abuse of process.
2. The primary judge erred in law in holding that the procedural, evidentiary and forensic disadvantages the appellants would suffer in the present action were to be assessed taking into account that the appellants could bring a claim against Mr Hill. The possibility that the appellants could bring a claim against Mr Hill was irrelevant in assessing those procedural, evidentiary and forensic disadvantages.
3. The primary judge should have held there was no utility in the declaration sought and the court therefore lacked jurisdiction to grant the declaration.
4. The primary judge should have held that the respondents had no standing to seek a declaration in respect of a contract to which they were not a party and which conferred no benefits on them.
5. The primary judge erred in finding that the respondents' claim was arguable. He should have held that even if it was arguable that a declaration of the nature sought was available, such a declaration would not be granted in the circumstances of this case because neither Mr Hill nor his trustee had disputed the appellants' denial of indemnity and they had not sought to participate in the action or to contest the respondents' claims against Mr Hill; the respondents were not parties to the contract of insurance; the denial of liability was based on proof of detailed facts and the appellants' forensic difficulties would preclude relevant evidence being adduced; and it was highly unlikely a declaration would bind the appellants and Mr Hill so it would not finally conclude the dispute between them but would cause prejudice or embarrassment in any subsequent proceedings between them.
6. The primary judge should have held that the respondents' action was an abuse of process because it was manifestly unfair to the appellants by reason of the procedural, evidentiary and forensic disadvantages the appellants would suffer, and allowing a dispute under the insurance contract to be litigated by a person who was not a party to the contract was likely to bring the law into disrepute.
7. The primary judge erred in finding that the appellants' procedural, evidentiary and forensic disadvantages were to be assessed taking into account that the appellants could bring their own claim against Mr Hill, as that was irrelevant in assessing the disadvantages.

The disposition of the appeal Grounds 1 and 2

90 In Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564, Mason CJ, Dawson, Toohey and Gaudron JJ said:

It is now accepted that superior courts have inherent power to grant declaratory relief. It is a discretionary power which 'it 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' (581 - 582). (citations omitted)

91 The appellants contended that the declaration sought by the respondents 'would produce no foreseeable consequences for the parties'. It would have no legal or practical effect in any subsequent proceedings by Mr Hill's trustees against the appellants for indemnity for the respondents' claims. In particular, there was no realistic prospect that a defence denying liability would be struck out as an abuse of process. The appellants submitted that as the declaration would have no utility, it would be refused.

92 In their written submissions, the respondents argued that if the declaration were granted Mr Hill's entitlement to be indemnified by the appellants for the respondents' claims would be res judicata in any subsequent proceedings between the appellants and Mr Hill or his trustees. That point was not pressed on the appeal (ts 8, 56 - 57). (On the question of res judicata in similar circumstances to the present, see JN Taylor Holdings; Employers Reinsurance Corporation [67]; cf Beneficial Finance Corporation Ltd v Price Waterhouse (1996) 68 SASR 19; CE Heath Casualty & General Insurance Ltd v Pyramid Building Society (in liq) [1997] 2 VR 256.) Rather, the respondents put their case solely on the basis of abuse of process.

93 The respondents submitted that it was not necessary that the declaration would produce foreseeable consequences for the parties. It was sufficient that it 'may' (counsel referred to Ainsworth (582); The Old Kiama Wharf Company Pty Ltd (In Liq) v Betohuwisa Investments Pty Ltd [2011] NSWSC 823 [44]), or, at this stage, that it arguably may. The respondents submitted that the declaration would or may do so because in any subsequent proceedings between the appellants and Mr Hill's trustees in relation to indemnity, a defence by the appellants denying liability would, or at least would arguably, be liable to be struck out as an abuse of process. In support of that proposition, the respondents relied on the decision of the Federal Court in Ashmere Cove Pty Ltd v Beekink (No 2) and, on appeal, Employers Reinsurance Corporation.

94 The appellants, in turn, submitted that Ashmere was wrongly decided and should not be followed or, alternatively, was distinguishable on its facts. Senior counsel for the appellants argued that the court should follow the decision of the Queensland Court of Appeal in Interchase.

95 It is therefore necessary to turn to a consideration of those cases.

96 In Interchase, valuers who had carried out a valuation of a commercial property for Interchase were sued by Interchase for negligence. The valuers' insurer, FAI, had initially conducted the defence of the claim by Interchase but then declined liability under the policy. The valuers did not dispute that decision or foreshadow the possibility of contesting it. Whilst the valuers were not the subject of any insolvency administration, they did not have sufficient assets to justify Interchase proceeding to trial. Interchase sought to join FAI as a defendant to the action to obtain a declaration that FAI was liable to indemnify the valuers in respect of the claim. The application succeeded at first instance but, by a majority, that decision was reversed on appeal.

97 Byrne J (with whom McPherson JA agreed) noted that the factual questions which might be expected to arise in the case against the valuers were much the same as some which were relevant to FAI's decision to decline indemnity. But his Honour pointed out that the valuers had not contested that FAI was entitled to decline indemnity. There was therefore no issue between FAI and the valuers, the proposed co-defendants. Byrne J considered, relevantly, there was no appreciable prospect that in subsequent proceedings a defence by the insurers denying liability would be liable to be struck out as an abuse of process. His Honour said:

In the later proceedings, FAI would not be resisting an obligation to indemnify for any ulterior or collateral purpose; and in deciding whether a pleading that raises fairly arguable grounds of claim or defence constitutes an abuse of process, the propriety of the litigant's motives is commonly a significant factor. Secondly, the plaintiff(s) in the later case will have elected not to bring third-party proceedings in this litigation and instead will have waited to see the outcome of Interchase's action against FAI, which is not an immaterial consideration. Next, what would then be challenged as an abuse of process is not the prosecution of a claim but the defence of one. Finally, the subsequent proceedings would probably afford FAI procedural advantages that are not available to it in defending Interchase's action, and the issues so far raised to justify the refusal to indemnify suggest that those advantages - in particular, a capacity to interrogate - could affect the result in a second contest.

As it may be taken that FAI would not accept a determination adverse to it in the present litigation, the declaration would be in the nature of an advisory opinion, without beneficial effects. It cannot produce useful, 'foreseeable consequences for the parties' and would be refused at trial (11 - 14). (footnotes omitted)

98 His Honour concluded that as it could be taken that FAI would not accept a determination adverse to it in the action, the declaration would be in the nature of an advisory opinion without beneficial effects. It could not produce useful 'foreseeable consequences for the parties' and would be refused at trial (13). The joinder of FAI was therefore erroneous.

99 Davies JA dissented. His Honour accepted that the joinder would serve no purpose if the declaration did not, in practice, effectively determine the issue of FAI's liability to the valuers as between them. His Honour considered that Interchase and the valuers were not privies and therefore neither res judicata nor issue estoppel would operate to bind them inter se. However, he did not consider the joinder would lack utility because it was not binding between FAI and the valuers at law if, in its practical effect, it was binding. Davies JA considered that abuse of process, which he described as a mechanism like Anshun estoppel (Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589) which protected against 'the scandal of conflicting decisions', could afford the same protection as Anshun estoppel where mutuality was absent. His Honour said that if FAI were joined, FAI and the valuers would have full opportunity in the action to litigate the question in respect of which the declaration was sought and accordingly it would be an abuse of process to permit either to litigate that question again in subsequent proceedings. The declaration would effectively determine the question of FAI's liability to indemnify the directors as between those parties.

100 Davies JA considered that whilst there were contingencies - that Interchase might not succeed against FAI, or the valuers and FAI might resolve their differences, or the valuers may never become insolvent and, if they did, their trustee or liquidator may not proceed against FAI - in light of the impecuniosity of the valuers, their failure to seek an indemnity, and the ineffectuality of any judgment against them without indemnity, Interchase had a real interest in seeking relief by way of the declaration. So far as Interchase may have procedural advantages in the proceedings, those could be overcome by FAI seeking a declaration in the proceedings against the valuers in respect of the existing issue in the action.

101 In Ashmere, French J (as his Honour then was), having reviewed the relevant authorities, followed the approach taken by Davies JA in Interchase. In Ashmere, the applicants, who were investors in a managed investment scheme, commenced proceedings against the former directors of the company which was the responsible entity for the scheme. The applicants subsequently sought leave under s 471B of the Corporations Act 2001 (Cth) to proceed against the company, which was then in liquidation. The company had a professional indemnity insurance policy during the relevant period and duly gave notice to its insurer of the claim. The insurer declined indemnity, relying on an exclusion clause in the policy. The liquidator of the company did not have the funds to contest the insurer's refusal to indemnify and declined to pursue a claim for indemnity against the insurer on the basis of the applicants' offer to indemnify him in respect of any costs ordered against him.

102 French J found it unnecessary to decide whether res judicata or issue estoppel would operate, albeit his Honour appeared to doubt that either would. He found, on the basis enunciated by Davies JA in Interchase, that there was utility in a declaration being obtained by the applicants against the insurer as it would be an abuse of process for the issue of indemnity to be litigated again in any proceedings between the insurer and the company. His Honour referred in that connection to his review of the authorities concerning abuse of process in Spalla v St George Motor Finance Ltd (No 6) [2004] FCA 1699 [59] - [69].

103 In relation to other discretionary considerations, French J noted that there was a dispute between the company and its insurer as to policy liability but the liquidator of the company was unwilling to proceed against the insurer. Although s 562 of the Corporations Act did not confer any legal right on the applicants against the insurer, the priority right which the applicants would have under that section in any successful claim against the insurer gave the applicants a real interest in having the insurer's obligations to the company determined. His Honour also noted that the insurer had foreshadowed it might rely on a defence of reckless conduct by the directors which, if relied on, was likely to mean that the factual issues raised would overlap with some of the issues raised by the applicants against the directors. That militated in favour of joinder of the insurer.

104 An appeal against his Honour's decision was dismissed by the Full Federal Court in Employers Reinsurance. Again, the court did not find it necessary to express any final view as to whether a declaration would give rise to res judicata. The court considered that even if res judicata did not apply, any attempt by the insurer to relitigate their liability under the policy in subsequent proceedings would give rise to an issue concerning the application of the Anshun principle. It held that whether or not that principle would apply could not be predicted with certainty as it may be influenced by the course the trial took, but if the insurer had a full opportunity to agitate any defence they wished to raise in answer to the claim for declaratory relief, it was difficult to see why that principle would not preclude them from relying on such a defence in subsequent proceedings involving the same parties.

105 An application for special leave to appeal from that decision was dismissed by the High Court: Employers Reinsurance Corporation v Ashmere Cove Pty Ltd [2008] HCATrans 296.

106 I would observe in passing that, as the primary judge noted in Lois Nominees Pty Ltd v Hill at [112], the observation by the Full Court in Employers Reinsurance that the Anshun principle was applied by Davies JA in Interchase and French J in Ashmere is not, with respect, an entirely accurate statement of the reasoning in the latter cases. While Davies JA and French J each referred to the Anshun principle, ultimately they both relied on a wider principle of abuse of process. Nevertheless, in substance the Full Court approved the approach that was taken.

107 It is an approach which has since been followed in two decisions at first instance. In Anjin No 13 Pty Ltd v Allianz Australia Insurance Ltd [2009] VSC 371; (2009) 26 VR 148, the plaintiff had commenced an action for negligence against two firms of architects, one of which had gone into liquidation and the other was in prospect of being wound up. Having reviewed the authorities, Vickery J applied the approach in Ashmere and Employers Reinsurance and ordered that the insurer, which was found to have impliedly denied indemnity for the plaintiff's claim ([78] - [79]), be joined as a defendant. Similarly, in Bazem Pty Ltd v Bureau of Urban Architecture [2010] NSWSC 978, Gzell J, applying the approach in Ashmere and Employers Reinsurance, ordered the joinder of the defendant's insurer.

108 It was submitted on behalf of the appellants that Ashmere was wrongly decided. Senior counsel for the appellants argued that French J did not articulate why a subsequent defence of an insurer would be struck out as an abuse of process, the authorities upon which his Honour relied not being concerned with comparable circumstances, and nor did his Honour address the four factors mentioned by Byrne J in Interchase (see [97] above) as reasons why there was no appreciable prospect that a subsequent defence by the insurer denying liability to indemnify would be struck out as an abuse of process.

109 I do not accept that Ashmere was wrongly decided and, in my view, the authorities support the conclusion reached by French J.

110 It has often been said that what constitutes an abuse of process cannot be reduced to hard and fast rules or closed categories because notions of justice and injustice, as well as other considerations that bear on public confidence in the administration of justice, must reflect contemporary values and, as well, take account of the circumstances of the case: see Ridgeway v The Queen [1995] HCA 66; (1995) 184 CLR 19, 74 - 75; Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256 [9]; PNJ v The Queen [2009] HCA 6; (2009) 83 ALJR 384 [3]. But a recognised species of abuse of process, separate from res judicata, issue estoppel or Anshun estoppel, is an attempt to litigate afresh a case which has already been finally determined, adversely to the party propounding it, in earlier proceedings: see Spalla [66]; Macchia v The Public Trustee [2008] WASCA 241; (2008) 251 ALR 385 [32]; Habib v Radio 2UE Sydney Pty Ltd [2009] NSWCA 231 [89].

111 In Walton v Gardiner [1993] HCA 77; (1993) 177 CLR 378, Mason CJ, Deane and Dawson JJ said (392 - 393) that proceedings before a court should be stayed as an abuse of process if, notwithstanding that the circumstances do not give rise to an estoppel, their continuance would be unjustifiably vexatious and oppressive for the reason that it is sought to litigate anew a case which has already been disposed of by earlier proceedings. Their Honours referred to Reichel v Magrath (1889) 14 App Cas 665, and continued:

The jurisdiction of a superior court in such a case was correctly described by Lord Diplock in Hunter v Chief Constable of the West Midlands Police [1981] UKHL 13; [1982] AC 529, 536 as 'the inherent power which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people' (393).

112 In the celebrated case of Reichel v Bishop of Oxford (1889) 14 App Cas 259, the plaintiff was the vicar of Sparsholt. After a scandal, the plaintiff's resignation, which he sought to revoke, was accepted by the bishop. The plaintiff unsuccessfully brought proceedings against the bishop seeking a declaration that his resignation was void and that he remained the vicar. Subsequently, the new vicar (Magrath) brought proceedings against the plaintiff for a declaration that he (Magrath) was the vicar and for an injunction to prevent the plaintiff from depriving him of the use and occupation of the house and lands comprising the ecclesiastical living. The plaintiff pleaded in his defence the same claim which had failed in his action against the bishop. The defence was struck out as an abuse of process. In a frequently-cited passage, Lord Halsbury LC said that it would be:

[A] scandal to the administration of justice if, the same question having been disposed of by one case, the litigant were to be permitted by changing the form of the proceeding to set up the same case again. ... it surely must be in the jurisdiction of the Court of Justice to prevent the defeated litigant raising the very same question which the Court has decided in a separate action (668).

113 In Arthur J S Hall & Co (a firm) v Simons [2002] 1 AC 615, Lord Hoffman pointed out that there are two policies by which the law discourages relitigation of the same issues except by means of an appeal. The first is that a person should not be troubled twice for the same reason, which has generated the rules which prevent relitigation when the parties are the same: autrefois acquit, res judicata and issue estoppel. The second, which is wider and is concerned with the interests of the state, is that there is a general public interest in the same issue not being litigated over again. The courts have a power to strike out attempts to relitigate issues between different parties as an abuse of the process of the court. But the power is used only in cases in which justice and public policy demand it; where relitigation of an issue previously decided would be 'manifestly unfair' to a party or would bring the administration of justice into disrepute.

114 Underlying the power that courts have to stay or dismiss proceedings for abuse of process is a policy of preventing waste of judicial resources and of maintaining confidence in and respect for the authority of the courts: Sea Culture International Pty Ltd v Scoles [1991] FCA 523; (1991) 32 FCR 275, 279; Re Thomas Christy Ltd (In Liq) [1994] 2 BCLC 527, 537; Haines v Australian Broadcasting Corporation [1995] NSWSC 136; (1995) 43 NSWLR 404, 413; Spalla [69]. As Lord Bingham observed in Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1, 31, the underlying public interest in preventing relitigation of an issue is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole.

115 In State Bank of New South Wales Ltd v Alexander Stenhouse Ltd (1997) Aust Torts Reports 81-423, Giles CJ Comm D, in an oft-cited passage, considered the circumstances in which an abuse of process justifying a stay may occur where a party seeks to litigate an issue previously decided between that person and a third party. His Honour said:

[W]hether proceedings are, or an aspect of proceedings is, an abuse of process because a party seeks to relitigate an issue already decided depends very much on the particular circumstances. The guiding considerations are oppression and unfairness to the other party to the litigation and concern for the integrity of the system of administration of justice, and amongst the matters to which regard may be had are -

(a) the importance of the issue in and to the earlier proceedings, including whether it is an evidentiary issue or an ultimate issue;

(b) the opportunity available and taken to fully litigate the issue;

(c) the terms and finality of the finding as to the issue;

(d) the identity between the relevant issues in the two proceedings;

(e) any plea of fresh evidence, including the nature and significance of the evidence and the reason why it was not part of the earlier proceedings; all part of -

(f) the extent of the oppression and unfairness to the other party if the issue is relitigated and the impact of the relitigation upon the principle of finality of judicial determination and public confidence in the administration of justice; and

(g) an overall balancing of justice to the alleged abuser against the matters supportive of abuse of process.

116 In my view, the decision in Ashmere is consistent with the authorities on abuse of process. The considerations referred to in Alexander Stenhouse led in Ashmere to the conclusion reached by French J that a subsequent denial of a liability to indemnify would be an abuse of process. They lead in this case to the position that the same result is at least arguable.

117 It is the case, as the appellants submit, that French J did not expressly address the four reasons given by Byrne J in Interchase as to why he considered that a subsequent defence of the insurer would not constitute an abuse of process. It is, however, implicit in the reasons French J gave that he did not accept Byrne J's reasoning. I, too, would respectfully decline to accept it.

118 While in some cases the propriety of a party's motives may be a significant factor in determining whether there is an abuse of process, that is not necessarily the case: see Batistatos [70]. (Indeed, in Interchase Byrne J said only that the propriety of a litigant's motives is 'commonly' a significant factor in determining whether a pleading constitutes an abuse of process.) In my view, in a case such as the present where the issue is whether the relitigation of an issue which has already been determined adverse to a party is an abuse of process, what is significant is the objective effect of the continuation of the action, not the propriety of the litigant's motives.

119 Nor do I consider that the absence of third party proceedings by the insured (or his privy, his trustee in bankruptcy) is necessarily a material factor. Much may turn on the reason the insured did not take such action, but where the insured is insolvent a lack of enthusiasm on the part of his or her trustee for possibly protracted litigation, and therefore the lack of any action by the trustees of the insured to pursue indemnity, is readily explicable. In this case, the correspondence to which I referred earlier does not, perhaps understandably, reflect any enthusiasm on the trustees' part to undertake litigation to establish Mr Hill's right to indemnity. The trustees are without funds to do so and there is, in any event, little commercial incentive for them to do so in circumstances where, by virtue of s 117 of the Bankruptcy Act, the respondents have priority in respect of any funds recovered. The position in Interchase was, of course, somewhat different, the valuers not having disputed the denial of liability, or indicated that they would do so, and the valuers not being subject to any insolvency administration.

120 I also do not consider it is material that what is challenged as an abuse of process is raised by way of defence rather than by way of claim. The same public interest considerations arise in either case. That it is not of significance is, I think, illustrated by Reichel v Bishop of Oxford where it was the former vicar's defence which was struck out as an abuse of process. See, too, North West Water Ltd v Binnie & Partners (a firm) [1990] 3 All ER 547, where the defence was struck out as an abuse of process. In that case, consulting engineers had been found liable for negligence in an action brought by the victims of an explosion in an underground tunnel they had designed. The water authority for whom they had designed the tunnel had also been a defendant in the action but had not been found to be negligent. In a subsequent action for negligence brought against the consulting engineers by the water authority to recover the cost of the damage to the tunnel system the consulting engineers denied they had been negligent. It was held to be an abuse of process for them to deny what had been decided against them in the earlier action, albeit that the action had been brought by different parties.

121 And finally, whether in the first proceeding the insurer suffers procedural disadvantages which deny it a full opportunity to litigate the indemnity claim is, at least in the present case, something which in my view is not capable of being properly assessed at this stage, for reasons I will come to.

122 In the alternative, the appellants contended that if Ashmere was correctly decided it was distinguishable. It was submitted that on the facts of this case it was not arguable that in a subsequent action by Mr Hill's trustees a defence by the appellants denying liability to indemnify would be held to be an abuse of process. That, it was submitted, was because the basis upon which the appellants deny liability to indemnify Mr Hill will require proof of detailed facts, not merely the proper construction of the policy as in Ashmere, and in these proceedings the appellants would necessarily suffer substantial procedural and evidentiary disadvantages in proving those facts.

123 I do not consider that Ashmere can be distinguished on the basis that it involved only the proper construction of the policy. French J noted in Ashmere that the insurer had reserved as a fallback position reliance on a defence of reckless conduct by the directors. His Honour considered that that militated in favour of joinder of the insurers as it was likely to mean that the factual issues raised by such a defence would overlap with some of the factual issues raised by the applicants against the directors. That is the position in the present case.

124 In any event, the distinction sought to be made would be significant only if the appellants are substantially disadvantaged in proving the relevant facts. I do not accept that, at this stage, it can be said that these proceedings will be unfair or oppressive by virtue of the disadvantages which the appellants assert they will suffer. I have referred earlier (at [74] - [75]) to the disadvantages which the appellants say they would suffer if the claim for a declaration is permitted to proceed. The appellants say they would wish to cross-examine Mr Hill on a range of matters involving his knowledge of, and involvement in, the business and affairs of FHL, FHGL and the 'Firepower Group'; the circumstances in which he paid the money out of the trust account and the nature of the directions given to him; and his state of mind at various times in relation to the transactions which took place and his communications with the participants. The appellants say that whilst it is reasonable to expect that Mr Hill would give evidence if he had sued the appellants, that is not the case in this situation. They also submit that they will experience difficulties obtaining relevant discovery, and that statements which Mr Hill has made in other court proceedings and elsewhere concerning the nature of his involvement in the Firepower group will not be admissible against him in the current action. And even if leave to interrogate were granted in the action, the answers would not be admissible against him. Such problems would not exist if the appellants were sued by Mr Hill under the contract of insurance.

125 The appellants submit that it is not an answer to say that those difficulties, or some of them, could be overcome by the appellants bringing their own claim against Mr Hill. Whether a subsequent defence by the appellants would be an abuse of process is to be assessed on the basis of the respondents' proceeding as it stands, not on the basis of hypothetical solutions of that nature. That is particularly so, it was submitted, as the appellants have no reason to bring such an action in circumstances where neither Mr Hill nor his trustee in bankruptcy have contested the denial of liability, there is no indication that Mr Hill would actively participate in such an action, and Mr Hill could not meet the appellants' costs of the action.

126 In my view, as the primary judge found, what, if any, procedural and evidentiary disadvantages the appellants do in fact suffer, and the effect of them, are matters to be assessed by the trial judge in determining whether there is a sufficient prospect that the appellants would be precluded from denying liability in subsequent proceedings by Mr Hill's trustee for indemnity. Whether, or to what extent, the appellants will actually suffer any such disadvantages cannot properly be assessed at this stage. As the primary judge observed, the significance of Mr Hill's alleged admissions can only be assessed in the context of the action and the trial as a whole, in the light of (among other things) the facts admitted or denied by the respondents and the other evidence that is available to the appellants. Whether Mr Hill gives evidence is yet to be determined and, if he does not, the significance of the absence of his evidence is again a matter that can only be assessed in the context of the trial as a whole.

127 Similarly, the extent to which such disadvantages (if they materialise) could be overcome by the appellants bringing their own claim against Mr Hill or his trustees cannot properly be assessed at this stage. However, I do not accept the appellants' submission that the perceived disadvantages must be assessed without regard to whether some, at least, of them could be overcome by the appellants bringing such a claim. There is no doubt that such a course is an option open to the appellants. It is not at this point a manifestly unreasonable step and it may ameliorate or overcome at least some of the suggested disadvantages. It is therefore a factor to be weighed in the balance. As the primary judge pointed out at [54], the effect of the asserted disadvantages is properly to be assessed by the trial judge in light of the fact that such a claim is available to the appellants, taking into account, if such a claim is not brought, whether in light of all the circumstances it was reasonable for the appellants not to bring it. Whether or not to bring a claim is just one of the forensic decisions the appellants will be required to make in the proceedings.

128 While the appellants have raised the spectre of fresh evidence becoming available after the completion of the current action and before any proceedings for indemnity are brought against them by Mr Hill's trustees, nothing has been advanced to suggest why that might come about. Mere speculation as to such a prospect is not sufficient.

129 In my view, these grounds of appeal have not been made out.

130 The third ground of appeal depends on ground one and must fall with it.

131 The fourth ground of appeal seeks to challenge the respondents' standing to seek the declaration. In his oral submissions, senior counsel for the appellants explained that, notwithstanding the terms of the ground of appeal, it was not contended the respondents lack standing simply because they are not parties to the contract of insurance. Rather, it was submitted that the respondents lack standing because the declaration is of no real interest, or of no practical importance, to them. That, it was argued, was because it would not entitle the respondents to any relief. The respondents have no enforceable rights against the appellants under the insurance policy which it might facilitate. Any benefit the respondents might derive from the existence of the insurance policy would depend upon separate proceedings being commenced against the appellants by Mr Hill's trustees, something which the latter have not foreshadowed doing and which they lack the financial means to do.

132 I do not accept that the respondents lack standing. It is not necessary that the respondents have rights which they can enforce against the appellants. Reciprocity is not a requirement. It is sufficient that the declaration is of practical importance to the respondents; that they have a real commercial interest in obtaining it: Aussie Airlines Pty Ltd v Australian Airlines Ltd (1996) 68 FCR 406; Edwards v Santos Ltd [2011] HCA 8; (2011) 242 CLR 421 [37] - [38]. For the reasons set out earlier, that is made out in this case. The respondents have claims against Mr Hill, who is bankrupt. There is a dispute between Mr Hill and the appellants as to the appellants' liability to indemnify him for the claims. If Mr Hill's right to indemnity is established, the respondents have priority rights in any money recovered from the appellants under the policy pursuant to s 117 of the Bankruptcy Act. Mr Hill's trustees have not taken proceedings to resolve the dispute as to indemnity because they lack the funds to do so. The declaration arguably would resolve the question of indemnity and assist the respondents in causing Mr Hill's trustees subsequently to take action against the appellants for indemnity.

133 In my view, the respondents have standing. I would dismiss this ground of appeal.

134 As I understood this ground, as clarified in argument, it was contended that whilst there might be a theoretical possibility that in subsequent proceedings the appellants could be bound either in law or practical effect by a declaration of the nature sought, as a matter of discretion the court would refuse to make the declaration in this case and the primary judge should have so found.

135 In dealing with the other grounds of appeal I have dealt with a number of the specific matters relied upon by the appellants for that contention and it is unnecessary to repeat what I have said there. Insofar as the appellants rely for this ground upon the procedural, evidentiary and forensic difficulties which they say will come about because of the form of the proceedings, those are matters for the trial judge to evaluate in determining whether a declaration should be granted, in the light of how the proceedings unfold. They are not matters which can properly be assessed at this stage. The further submission that there may be relevant facts which either are not admissible because of the form of the proceedings or come to light subsequently, is speculative. If, as submitted by the appellants, it will be apparent to the court at trial that there is material evidence which cannot be put before the court because of the nature of the proceeding, that is a matter which will fall to be assessed by the trial judge in the exercise of the discretion to grant the declaration.

136 The appellants also rely upon a contention that neither Mr Hill nor his trustees has contested the appellants' denial of liability. If by that it is meant that Mr Hill and his trustees accept that the appellants were entitled to deny liability, then I consider it misstates the position. What is evident from the correspondence is that the denial of liability is not accepted but that Mr Hill's trustees do not have the funds to contest it. I would observe that that appears to mirror the situation in Ashmere (see [59]). It is apparent that there is an issue between the appellants and Mr Hill's trustees as to whether the appellants are entitled to deny indemnity.

137 I do not accept that the matters relied upon by the appellants, individually or cumulatively, lead at this stage to the conclusion that the declaration must be refused at trial. In large part they involve speculation as to how the proceedings will unfold and invite conjecture that the forensic and other disadvantages asserted by the appellants will come to pass and will have the effect they claim. They are matters for trial. The conclusion the appellants contend for under this ground is premature. I would dismiss this ground of appeal.

138 The appellants submitted that the primary judge should have found that the respondents' action against the appellants was an abuse of process because the proceedings are 'manifestly unfair to [the appellants] ... [and] would otherwise bring the administration of justice into disrepute among right thinking people': Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd [2009] HCA 43; (2009) 239 CLR 75 [28]; Batistatos [6].

139 It was contended that the action was manifestly unfair by reason of the aforementioned procedural, evidentiary and forensic disadvantages which would result from the appellants being sued by a person who was not a party to the contract of insurance. It was further contended that the respondents' action would bring the administration of justice into disrepute because right-thinking people would consider that, except in the specific cases provided for by statute, a person should not be able to sue on a contract to which they were not a party and which conferred no benefit on them, or, at least, that if such a person could sue, the party sued should not be under a greater disadvantage than they would be under if sued by a party to the contract.

140 A somewhat more limited version of this contention was also advanced. It was submitted that it would bring the administration of justice into disrepute if the respondents could litigate about the effect of the contract of insurance between the appellants and Mr Hill when there was another, more conventional means, by which the issue of indemnity could be resolved (that is, by funding Mr Hill's trustee to bring third party proceedings against the appellants) which would avoid those procedural, evidentiary and forensic disadvantages and would enable Mr Hill's liability to the respondents and the appellants' liability to indemnify Mr Hill to be finally resolved in one proceeding. It was argued that on the approach the respondents have taken there would still need to be proceedings by Mr Hill's trustee against the appellants even if the respondents were successful in obtaining the declaration. Presumably the respondents would have to fund the trustee to bring those proceedings. If the respondents wish to have the indemnity issue determined there is no reason why they should not now fund Mr Hill's trustee to bring third party proceedings in the usual way.

141 Accepting for present purposes that there are disadvantages to the appellants inherent in the present action which would be avoided by third party proceedings, that is not of itself sufficient to establish that the present action is an abuse of process. Abuse of process extends to proceedings that are 'seriously and unfairly burdensome, prejudicial or damaging' or 'productive of serious and unjustified trouble and harassment'. Proceedings are not an abuse of process simply because they can be characterised as in some sense unfair to a party: Jeffery & Katauskas Pty Ltd [28]. Nor is it sufficient to make them an abuse of process that there is an alternative form of proceeding that would, or may, be fairer to the appellants or more efficacious.

142 For the reasons I have set out earlier, I am not satisfied that the action will necessarily give rise to the unfairness the appellants assert. In short, it is simply too early to tell if the alleged disadvantages will eventuate and have the effect the appellants say they will. If and to the extent that those disadvantages do eventuate, that is a matter which will fall to be taken into account by the trial judge when determining whether to grant the declaration.

143 I also do not accept the submission that the action would bring the law into disrepute among right-thinking people because the respondents are not parties to the contract of insurance. The appellants' case does not depend upon a general proposition that a person is entitled to litigate about a contract to which they are not a party and which confers no benefit on them. Nor is it a situation where the respondents simply have the commercial interest that all creditors have in the right of an insolvent debtor to recover funds from a third party. In the present case the respondents have a statutory priority in respect of the proceeds of an insurance policy in circumstances where the appellants have denied indemnity and Mr Hill's trustees in bankruptcy have neither the funds nor any commercial incentive to pursue litigation to resolve the issue of indemnity.

144 The fact that the legislature has specifically provided for certain circumstances in which a person may sue in respect of a contract to which they are not a party is not, in my view, significant. I understood the appellants' submission to refer, in particular, to s 48 and s 51 of the Insurance Contracts Act 1984 (Cth), which in certain circumstances give a person who is not a party to an insurance policy a right to recover under the policy.

145 The appellants argued, in effect, that those legislative provisions marked the metes and bounds of the circumstances in which proceedings may be brought by a person who is not a party to an insurance contract. There are, in my view, at least two difficulties with that argument. In the first place, the legislation deals with circumstances in which a third party may recover from an insurer under an insurance policy. The respondents do not in the current action seek to recover under the insurance policy; they seek a declaration as to the insured's right to indemnity. In any event, I do not consider that the fact the legislature has specifically provided that in certain circumstances a person may bring proceedings under a contract to which they are not a party excludes the existence of any such right outside those circumstances. It cannot be concluded that such provisions were intended to state exhaustively the circumstances in which such rights can arise, in the absence of a clearly manifested legislative intention to that effect. No such intention appears.

146 Nor, as I have said, does the fact that the respondents could have taken the alternative course of funding Mr Hill's trustees to bring a third party claim against the appellants (if the trustees agreed to do so) have the result that the current action is an abuse of process.

147 As French J observed in Spalla at [62], the category of 'right-thinking people' is elusive. I should observe, however, that the body of authority which supports the right to seek a declaration as to indemnity in circumstances such as the present is at odds with a conclusion that such a right would bring the law into disrepute among right-thinking people. I am of the same view; I do not consider that it would.

149 I have already sufficiently dealt in relation to ground 2 with the issues raised by this ground. I would for the same reasons dismiss this ground of appeal.

150 In my view, none of the grounds of appeal have been made out. The primary judge was not in error in dismissing the appellants' application for summary judgment and no grounds have been established which would justify a stay of the respondents' action against the appellants.

151 I would grant leave to appeal but dismiss the appeal.

152 This is an appeal (for which leave is required) from an interlocutory decision in which the primary judge dismissed a defendant's application for summary judgment. The appellant (the defendant in the court below) is an insurer. The respondents (the plaintiffs in the court below) are individuals who claim that they suffered loss as a result of certain breaches of duty by a solicitor, Mr Hill. I will refer to the appellant as the 'insurer', the respondents as the 'plaintiffs', and Mr Hill as the 'solicitor'.

153 In May 2009 the plaintiffs notified the solicitor of claims made against him in respect of moneys they had lost in a proposed investment in a particular company (Firepower). They shortly afterwards commenced proceedings against him. They alleged that they had paid the moneys into the solicitor's trust account on trust to be used for the acquisition of shares in Firepower, and that the solicitor had used the money for unauthorised purposes. The plaintiffs sought various monetary orders for relief including restitution, equitable compensation and an account. In his defence, the solicitor contended, inter alia, that the plaintiffs subsequently authorised the moneys to be used to purchase shares in a related company (Firepower Holdings), and that they received shares in that other related company.

154 Firepower and Firepower Holdings are both in liquidation.

155 The solicitor notified the insurer of the claims against him and sought indemnity under a professional indemnity insurance policy. The solicitor was made bankrupt on 26 February 2010. Trustees in bankruptcy were appointed.

156 On 27 April 2010 the insurer informed the solicitor that it was not liable to indemnify him under the insurance policy in respect of the claims made against him by the plaintiffs. The insurer contended, in effect, that the insuring clause did not apply, and that even if it did, there were three

exclusions which applied to preclude indemnity, including one relating to the alleged dishonesty of the insured solicitor.

157 On 11 May 2011, the plaintiffs issued separate proceedings against the insurer seeking, in effect, a declaration that on the proper construction of the insurance policy, and in the events which have happened, the insurer is liable to indemnify the solicitor against the plaintiffs' claims. The primary judge who is case managing the litigation, ordered the consolidation of the two actions. The declaration sought by the plaintiffs is now, in effect, against the insurer and the solicitor as co-defendants. The trustees in bankruptcy are not a party to the action.

158 In the consolidated statement of claim the plaintiffs plead, as a fact, that the solicitor and the trustees in bankruptcy, in addition to the plaintiffs, contend that the insurer is liable to indemnify the solicitor under the policy with respect to the plaintiffs' claims. There is some evidence on that topic (referred to by Newnes JA at [66] - [67] of his Honour's reasons). For present purposes it is appropriate to proceed on the basis that the plaintiffs will lead admissible evidence to that effect at trial.

159 Although the solicitor, before becoming bankrupt, had filed a defence to the plaintiffs' claims, the solicitor has taken no part in the proceedings since that time.

160 The insurer contends that the declaratory proceedings against it should be terminated as disclosing no arguable cause of action or as an abuse of process, and that the primary judge erred in failing to dismiss summarily the proceedings. Newnes JA has set out the grounds of appeal in his reasons and has set out in greater detail the relevant background.

161 It is convenient to note, at the outset, the statutory framework within which the declaratory relief is sought. This also involves a consideration of the position of the trustees in bankruptcy.

The Bankruptcy Act and the trustees in bankruptcy

162 Section 58 of the Bankruptcy Act 1966 (Cth) provided:

1. Vesting of property upon bankruptcy - general rule

(1) Subject to this Act, where a debtor becomes a bankrupt:

(a) the property of the bankrupt, not being after-acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee; and

(b) after-acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee.

(2) Where a law of the Commonwealth or of a State or Territory of the Commonwealth requires the transmission of property to be registered and enables the trustee of the estate of a bankrupt to be registered as the owner of any such property that is part of the property of the bankrupt, that property, notwithstanding that it vests in equity in the trustee by virtue of this section, does not so vest at law until the requirements of that law have been complied with.

(3) Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:

(a) to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or

(b) except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.

163 Section 117 of the Bankruptcy Act relevantly provided:

1. Policies of insurance against liabilities to third parties [see Table B]

(a) a bankrupt is or was insured under a contract of insurance against liabilities to third parties; and

(b) a liability against which he or she is or was so insured has been incurred (whether before or after he or she became a bankrupt);

the right of the bankrupt to indemnity under the policy vests in the trustee and any amount received by the trustee from the insurer under the policy in respect of the liability shall, if the liability has not already been satisfied, be paid in full forthwith to the third party to whom it has been incurred.

(2) Subsection (1) does not limit the rights of the third party in respect of any balance due to him or her after the payment referred to in that subsection has been made.

(3) This section applies notwithstanding any agreement to the contrary, whether entered into before or after the commencement of this Act.

164 Section 5(1) of the Bankruptcy Act defines 'property' and 'the property of the bankrupt'.

165 Where property is vested under s 58 in the trustee in bankruptcy, it is divested from the bankrupt: Cummings v Claremont Petroleum NL [1996] HCA 19; (1996) 185 CLR 124, 135 - 136.

166 There was no dispute that the plaintiffs' monetary claims against the solicitor are debts or liabilities provable in the bankruptcy of the solicitor within the meaning of s 82(1) of the Bankruptcy Act, and it appears that the plaintiffs had obtained leave pursuant to s 58(3) of the Bankruptcy Act to proceed with their monetary claims against the solicitor. (Counsel for the plaintiffs told the primary judge that leave was not sought in respect of the declaratory proceedings against the solicitor on the basis that they were not in the nature of a claim for a provable debt: GB 38).

167 There was also no dispute that s 58(1) applies to property which includes choses in action and that an insurance policy is a chose in action - see, eg Re Moore; Ex parte Ibbetson (1878) 8 Ch D 519. Nor was it disputed that insurance policies the subject of s 117 of the Bankruptcy Act and claims under such policies are vested in the trustee - as to which see Re Silverstein; Ex parte Evenage Pty Ltd & Sutherland (Unreported, FCA, 13 March 1998) (North J), 11 - 12. (See appeal ts 55 - 56, 66 and 86; in the court below GB 86 - 88).

168 The trustees in bankruptcy are owed duties of co-operation by the solicitor. The duties owed by the solicitor include giving to the trustees all documents in his possession relating to his 'examinable affairs'; attending the trustees whenever the trustees reasonably require it; providing information to the trustees about any of his conduct and 'examinable affairs' as the trustees may require; and aiding to the utmost of his power the trustees in their administration of his estate: see s 77 of the Bankruptcy Act. The trustees, for their part, are required to take possession of all of the property of the bankrupt including deeds, books and documents and it is the trustees who may enforce possession accordingly: s 129 of the Bankruptcy Act. The term 'examinable affairs' is given a wide definition in s 5(1) of the Bankruptcy Act, and includes the bankrupt's dealings, transactions, property and affairs.

169 The requirement of a proper contradictor in declaratory proceedings is to ensure that persons whose rights or obligations which are the subject of the suit are bound by it, and also to ensure that the court is provided with all relevant materials: IMF (Australia) Ltd v Sons of Gwalia Ltd [2004] FCA 1390; (2004) 211 ALR 231 [47].

170 A positive declaration of right is final and operates as a cause of action estoppel or issue estoppel: Marra Developments Ltd v BW Rofe Pty Ltd [1977] 2 NSWLR 616, 626; Coles v Wood [1981] 1 NSWLR 723, 727. However, a declaration is a discretionary remedy and may be refused on the grounds of utility. As circumstances affecting utility can change, a refusal to grant a declaration may not be final: Coles v Wood (727).

171 Although a declaration will only bind the parties to the litigation and their privies, generally no final declaration will be made that certain rights or obligations exist, or do not exist, without the person whose rights or obligations are in question being made a party to the proceedings: Australasian Oil Exploration Ltd v Lachberg [1958] HCA 51; (1958) 101 CLR 119, 124, 133 - 134 (a case where a third party to a contract sought a declaration without joining both parties to the contract); Kadian v Richards [2004] NSWSC 382; (2004) 61 NSWLR 222 [98].

172 There is no requirement that all defendants in an action claiming a declaration must oppose the plaintiff: Oil Basins Ltd v The Commonwealth [1993] HCA 60; (1993) 178 CLR 643, 650.

173 Where, by virtue of a legal assignment, a contracting party has no right of title or interest in the contractual chose in action, the assignee is a necessary party for the proper conduct of the proceedings, for the purposes of O 18 r 6 of the Rules of the Supreme Court 1971: Carob Industries Pty Ltd v Simto Pty Ltd (in liq) [2000] WASCA 362; (2000) 23 WAR 515, 526 - 528.

174 The principle may be seen to be illustrated in the bankruptcy context, involving a statutory assignment of property under s 58(1) of the Bankruptcy Act: Bendigo Bank Ltd v Demaria (2001) VSC 218. In that case a plaintiff mortgagee brought proceedings against a man and a woman (seemingly a husband and wife) and sought, amongst other things, possession of certain property owned by the wife. The wife defended the claim and alleged that the mortgage was unenforceable against her. After she had become bankrupt and the property had vested in her trustee in bankruptcy under s 58 of the Bankruptcy Act, the trustee in bankruptcy was added, at an interlocutory stage, as a defendant to the action. The trustee in bankruptcy did not enter an appearance and judgment was entered for possession against the trustee in default of appearance. The court observed at the final hearing that the wife had no interest in the proceedings brought against her for recovery of the land and she would have had no standing to be heard in the proceeding in defence of the plaintiff's claim. See Bendigo Bank v Demaria [12] - [15] and [18].

175 The phrase 'necessary to ensure that all matters in dispute ... may be effectually and completely determined' within O 18 r 6(2)(b) encompasses 'modern notions of case management and the desire of the justice system to minimise time and costs in litigation': Woodings v Stevenson [2001] WASC 174; (2001) 24 WAR 221, 226 - 227.

176 The test of standing for the purposes of obtaining a declaration is a wider and more flexible test than whether a party ought to be joined or is a necessary party in the context of O 18 r 6 of the Rules of the Supreme Court: Morrell v Mercantile Mutual Insurance (Australia) Ltd [1999] WASCA 250; (1999) 21 WAR 451 [42].

177 Questions of joinder and standing with respect to claims for declaratory relief in circumstances not dissimilar to those the subject of this appeal have been discussed in a number of cases which the parties in this appeal spent considerable time debating: Interchase Corporation Ltd (in liq) v FAI General Insurance Company Ltd [1998] QCA 180; (1998) 2 Qd R 301; JN Taylor Holdings Ltd (In liq) v Bond (1993) 59 SASR 432; Ashmere Cove Pty Ltd v Beekink (No 2) [2007] FCA 1421; (2007) 244 ALR 534 and, on appeal sub nom Employers Reinsurance Corp v Ashmere Cove Pty Ltd [2008] FCAFC 28; (2008) 166 FCR 398; Beneficial Finance Corporation Ltd v Price Waterhouse (1996) 68 SASR 19; CE Heath Casualty and General Insurance Ltd v Pyramid Building Society (In liq) [1997] 2 VR 256.

178 Those cases referred to questions of res judicata and abuse of process with particular reference to those principles as they apply to co-defendants. Before considering in detail those decisions, I would mention the broader legal background of res judicata and abuse of process against which those cases were decided. I will use the term 'res judicata estoppels' to cover what is sometimes called 'cause of action estoppel' as well as 'issue estoppel'.

Res judicata estoppels and abuse of process

179 Cause of action estoppel and issue estoppel involve mutual rights and obligations. The only persons who can take advantage of such estoppels are those who, if the decision had gone the other way, would have been bound by the estoppel, as res judicata estoppels are mutual: Ramsay v Pigram [1968] HCA 34; (1968) 118 CLR 271, 276, 282; Sandtara Pty Ltd v Abigroup Ltd (1997) 42 NSWLR 5, 8 - 9; Spencer, Bower & Handley, Res Judicata (4th ed, par 9.05).

180 Mutuality is a corollary of the principle that cause of action and issue estoppels bind only the parties or their privies. In Partridge v McIntosh & Sons Ltd [1933] HCA 38; (1933) 49 CLR 453 at 462 - 463, Starke J said:

Estoppel, however, is only a personal matter, between the particular parties. 'Outside this transaction, and in respect of matters unconnected with it, there is no ground whatever for exacting the admission, from either party; and, of course, so far as third parties not privy with nor claiming under either of them are concerned, their rights cannot be thereby affected in any way, either beneficially or prejudicially; the rights and liabilities of such parties depending upon the actual facts, which must be proved in the ordinary way. ... But although the estoppel is only a personal matter between the particular parties, yet to really give the parties the benefit of it, and subject them to the burden of it, it is essential that not they only, but those of whom it can be predicated, that they are their 'representatives in interest' should likewise have the benefit of and be subject to the burden of the admission. Upon any one, therefore, upon whom all the rights and obligations of any legal entity devolve, such as an executor, administrator, or trustee in bankruptcy, there will devolve, as one of such rights and obligations, the right to exact, or the obligation to be subjected to the admission; and so, too, upon any one, upon whom the rights and obligations arising out of the particular transaction that give rise to the estoppel devolve, as, for example, a purchaser or assignee, that will also devolve this right and this obligation' (Cababé, Principles of Estoppel, (1888), pp 111 - 113. (emphasis in original)

181 A party includes the person who intervenes in the proceedings and takes an active part: Cheesman v Waters (1997) 77 FCR 221, 227.

182 A person may be a privy of a party by blood, title or interest: Ramsay v Pigram (279). The basic requirement of a privy in interest is that the privy must claim 'under', or 'through' the person of whom he or she is said to be a privy: Ramsay v Pigram (279); Trawl Industries of Australia Pty Ltd (in liq) v Effem Foods Pty Ltd [1992] FCA 272; (1992) 36 FCR 406, 413. The latter decision was confirmed on appeal: Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (Receivers and Managers appointed - in liq) [1993] FCA 342; (1993) 43 FCR 510. Privity has also been described as a 'mutual or successive relationship to the same right of property': Trawl v Effem (413 - 414). In ascertaining the requisite relationship for privity, the courts have looked to the legal rather than the economic indicia of the relationship: Trawl v Effem (414); Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd [2011] WASCA 76; (2011) 248 FLR 193 [124].

183 However, for the alleged privy to be bound, he or she must have acquired the claim or interest (at least in personalty) subsequent to the judgment which is alleged to create the estoppel: Powell v Wiltshire [2004] EWHC 2226; [2005] QB 117, 126, 128, 131 - 132; Hill End Gold Ltd v First Tiffany Resource Corp [2010] NSWSC 375 [34]; Doe de Foster v Earl of Derby [1834] EngR 845; [1834] 1 AD & E 783, 790; Hodson v Walker [1851] EngR 923; [1872] LR 7 Exch 55, 61; Re De Burgho's Estate [1896] 1 IR 274, 280.

184 In relation to privity in blood, in Locke v Norbonne 3 Mod 141 the court said:

But if an ancestor has a verdict, the heir may give it in evidence, because he is privy to it; for he who produces a verdict must be either party or privy to it, and it shall never be received against different persons, if it do not appear that they are united in interest.

185 Spencer v Williams LR 2 P & D 230 was a case in which it was held that no privity in blood existed because the heir did not claim through the ancestor but as the result of an independent right which had been acquired (236 - 237).

186 In relation to identity of estate, where several estates in remainder were limited by the one deed, and one remainderman obtained a verdict in an action brought by a plaintiff for the land, the plaintiff was precluded from asserting a second action against the other remaindermen for the same land, not because the defendant remaindermen in the second action claimed under the first remainderman, but because they all claimed under the same deed: Pike v Crouch 1 LD Raym 730; 8 Will 3.

187 The beneficiaries of a trust or a subsequent trustee of the trust, may be regarded as privies of the former trustee of the trust, and thereby precluded from litigating a claim in respect of trust property previously determined in litigation by the former trustee: Young v Murphy (1996) 1 VR 279, 285 - 286. Similarly, in relation to trust property, a trustee will generally be regarded as the privy of the beneficiaries: Gleeson v J Wippell & Co Ltd [1977] 1 WLR 510, 515.

188 The trustee in bankruptcy, insofar as the trustee stands in the place of the bankrupt, is the privy of the bankrupt in respect of estoppels arising prior to the insolvency. This accords with the more general principle that the trustee in bankruptcy takes the property of the bankrupt subject to all the liabilities and equities which affect it in the bankrupt's hands - as to which, see Sonenco (No 77) Pty Ltd v Sylvia [1989] FCA 462; (1989) 24 FCR 105, 112 - 113. However, the estoppel does not arise where the trustee is acting pursuant to a paramount right given by the bankruptcy statute which overrides the title of the bankrupt, so that the trustee is asserting a higher or better title. See, for example, Madell v Thomas & Co [1891] 1 QB 230, 234, 236 and 238; Re Holland (1901) 2 Ch 145, 158 - 159; Re Ashwell; Ex parte Salaman [1912] 1 KB 390. In the last case, the question arose, in preference proceedings, as to whether an estoppel arising by representation made by a bankrupt anterior to the bankruptcy but during the period which fell within the relation back period, was binding on the trustee in bankruptcy. Phillimore J said:

No doubt, when a bankrupt is estopped by some representation of his made in the course of carrying on his business, his trustee who takes his estate would be, just as much as an executor, bound, quoad the estate, by the representation, and be estopped. But here the trustee takes by a higher title. This 125ℓ [the alleged preference sum] was the trustee's money by reason of the doctrine of relation back, and any statement made at the time of payment on behalf of Ashwell [the bankrupt] that it was not Ashwell's money cannot estop the trustee from claiming the money. For this purpose, Ashwell and the trustee are different persons, and it is just the same as if Ashwell had represented that it was the money of somebody else ... This was not Ashwell's money to make any representation about at all. It was in the contemplation of the law the trustee's money, and, therefore, there is no estoppel.

189 Conversely, the bankrupt's creditors are privies of the trustee in bankruptcy and generally bound by res judicata estoppels binding a trustee: Mulkerrins v PricewaterhouseCoopers [2003] UKHL 41; (2003) 1 WLR 1937 [11] per Lord Millett, with whom Lords Bingham and Scott of Foscote agreed. The creditors are, in effect, in the position of cestui que trust of the trustee who have a right to prove against the estate which has vested in the trustee: see Clyne v Deputy Commissioner of Taxation [1984] HCA 44; (1984) 154 CLR 589, 594.

190 The decision of Munni Bibi v Tirloki Nath [1931] LR 58 Ind App 158 is frequently cited in relation to the principles of res judicata insofar as they apply to co-defendants. See, eg Handley, Spencer Bower par 9.08; Yates Property Corporation Pty Ltd v Boland [2000] FCA 1106; (2000) 179 ALR 664 [105].

191 In Munni Bibi v Tirloki Nath, a dispute had arisen in relation to certain land which had originally been owned by an ancestor of the disputing descendants. The genesis of the dispute was a purported inter vivos gift of the land by the man to his wife. The disputants were, on the one side, in effect the lineal descendants of the man's sons and on the other, the descendants of the widow to whom he had originally (purportedly) gifted the land before his death. The former (the son's side) contended that the gift to the widow had not been perfected before the man's death and that the sons took the land. The descendants of the widow said that the gift had been perfected and that the widow had obtained good title. The dispute was labyrinthine in nature and involved members of various generations. Sir George Lowndes, delivering the advice of the Privy Council observed (161) that the land in question 'has provided the parties with litigation for over 40 years'.

192 In the action the subject of the appeal, commenced in 1919, the plaintiff (Munni Bibi) was the lineal descendant of one of the sons. The defendant (Tirloki Nath) was a lineal descendant of the widow. Many years earlier, a house on the land had been mortgaged by one of the sons prior to his death in 1884. In 1909, the assignee of the mortgage sought to execute against the house in respect of the mortgage debt. The widow's daughter (whose name was Kashi) resisted the assignee's claim to the land, on the basis of her mother's alleged title. The assignee then commenced proceedings in 1909 against the widow's daughter (Kashi) and her appointee, claiming that he was entitled to a declaration that he could execute against the house. In addition to suing Kashi, he also joined Munni Bibi (ie the plaintiff in the litigation the subject of the appeal before the Privy Council). Munni Bibi did not enter an appearance in the litigation by the assignee. It appears that there were no cross-claims between Kashi and Munni Bibi as co-defendants. Although the assignee failed at first instance, his right to sell the house was affirmed on appeal. Before the house was sold pursuant to the court order, however, Kashi's son paid off the mortgaged debt and retained possession of the home. It was his descendant who was the defendant in the litigation the subject of the appeal to the Privy Council.

193 That litigation, the subject of the appeal, was commenced in 1919 by Munni Bibi (the lineal descendant of the son) in which she commenced proceedings against the defendant who was a lineal descendant of the widow. In those proceedings, Munni Bibi contended that the defendant, ie the widow's descendant, was bound by the decision in the 1909 proceedings commenced by the assignee of the mortgage in which both Munni Bibi and Kashi had been defendants. Munni Bibi's allegation of res judicata was upheld in the Privy Council. As to the principles, the Board said (165 - 166):

The conditions under which this branch of the doctrine should be applied are thus stated by Wigram VC in Cottingham v Earl of Shrewsbury [1843] EngR 487; 3 Ha 627, 638: 'If a plaintiff cannot get at his right without trying and deciding a case between co-defendants, the Court will try and decide that case, and the co-defendants will be bound; but if the relief given to the plaintiff does not require or involve a decision of any case between co-defendants, the co-defendants will not be bound as between each other by any proceeding which may be necessary only to the decree the plaintiff obtains.' This statement of the law has been accepted and followed in many Indian cases ... In such a case, therefore, three conditions are requisite: (1) There must be a conflict of interest between the defendants concerned; (2) it must be necessary to decide this conflict in order to give the plaintiff the relief he claims; and (3) the question between the defendants must have been finally decided.

194 In their application of the principles, the Board said with respect to the 1909 action by the assignee:

Their Lordships are of the opinion that these conditions are established in the present case. There was clearly a conflict of interests between the appellant as the daughter and heir of [the son], and Kashi, as the heir of [the widow]. It was only if the house belonged to [the son] that the plaintiff's [assignee's] suit could succeed; if it belonged to [the widow] he must fail. It was therefore, necessary to decide between the conflicting claims of the defendants.

195 In response to the submission that there was no res judicata because Munni Bibi had not entered an appearance in the suit in 1909, and that she was not, moreover, a necessary party to it, the Board said:

It is true that the appellant [Munni Bibi] did not enter an appearance in the suit, and it is also said that she was not a necessary party to it; but their Lordships do not regard either of these factors as really material. The appellant [Munni Bibi] was at all events a proper party to the suit and had the right to be heard if she so desired. If she chose to stand by and let the plaintiff [assignee] fight her battle, it could not affect her legal position. The test of mutuality is often a convenient one in questions of res judicata. If the decision had gone the other way the appellant [Munni Bibi] could hardly have claimed that because she did not choose to appear she was not bound by it, and so have compelled Kashi to litigate the matter over again; and if the appellant [Munni Bibi] would have been bound, so must Kashi be. There is, however, evidence on the record of the present suit emanating from one of the principal witnesses for the respondents that the appellant [Munni Bibi] did, in fact, support the plaintiff [assignee]in the 1909 suit.

196 The principles in Munni Bibi were applied in Chandu Lal Agarwalla v Khalilur Rahaman [1949] LR 77 Ind App 27 at 30 where Lord Simonds, speaking for the Privy Council said:

In Munni Bibi v Tirloki Nath the conditions for the application of the doctrine of res judicata as between parties who have been co-defendants in a previous suit are thus laid down ... It may be added that the doctrine may apply even though the party, against whom it is sought to enforce it, did not in the previous suit think fit to enter an appearance and contest the question. But to this the qualification must be added that, if such a party is to be bound by a previous judgment, it must be proved clearly that he had, or must be deemed to have had, notice that the relevant question was in issue and would have to be decided.

197 Munni Bibi was also followed in Maung Sein Done v Ma Pan Nyun [1932] LR 59 Ind App 247 where Lord Russell, speaking for the Board said (256):

It was urged that the doctrine of res judicata could not apply as between co-defendants to a previous suit, if no relief had been granted to the plaintiff in that suit. Their Lordships are aware of no principle or authority which justifies this contention. In Ma Sein's suit there had necessarily to be an adjudication upon the issues involved before the suit could have been dismissed. It was not any less an adjudication because its consequence was the dismissal of the suit, than it would have been if its tenour had been the other way.

198 In Yates v Boland, the plaintiff was a client who had sued its legal advisers. It sued its solicitors, junior counsel and senior counsel. In an aftermath to the litigation, on what was essentially an issue of costs, consideration was required to be given to the question of whether senior counsel, in proceedings commenced by a cross-claim against him by the solicitors, would have had the benefit of an issue estoppel arising from the principal action in which the client's claim against the senior counsel was dismissed. Two points relevantly arose. One was whether a dismissal of the client's claim against senior counsel would operate as an issue estoppel to preclude the solicitors from alleging that senior counsel had breached his duty to them (as opposed to the client). On this point, Goldberg J held that the issues were different and no issue estoppel would arise (see [100] - [102]). The other point was whether the three criteria outlined in Munni Bibi applied as between the co-defendants (ie senior counsel and the solicitors) so as to preclude the solicitors from raising a cross-claim against senior counsel in contribution proceedings. As to this, Goldberg J said (at [106] and [107]):

Although there may have been a conflict of interest between Abbott Tout [solicitors] and Mr Simos [senior counsel], it was not necessary to decide that conflict in order to give Yates [the client] the relief it claimed, and the issue between Abbott Tout [solicitors] and Mr Simos [senior counsel] was not determined by Branson J [the trial judge]. It follows that the three conditions referred to by the Privy Council in Munni Bibi v Tirloki Nath were not satisfied.

The difficulty with the proposition that there was a conflict of interest between Abbott Tout [the solicitors] and Mr Simos [senior counsel] is that at the time of Branson J's [the trial judge's] judgment the amended cross-claim was not before her for decision.

199 Goldberg J also rejected a submission to the effect that the decision of the English Court in North West Water Ltd v Binnie & Partners (a firm) [1990] 3 All ER 547 assisted senior counsel in his contention that the solicitors would be precluded from bringing a cross-claim against him. As to this, Goldberg J observed that the discussion of the principle of issue estoppel in that case was inconsistent with the law of issue estoppel as it applied in Australia (at [107]). He also distinguished it in these terms (at [109]):

In any event the decision is distinguishable from the facts presently before the court. In that case there was a substantive dispute between two of the defendants in the primary proceeding albeit there were no cross-claims filed between them as one defendant (the water authority) in its defence had alleged that the engineers had been guilty of negligence and had caused the explosion. No such allegation had been made in the present proceeding.

200 North West v Binnie was a case in which the Water Authority had engaged engineers to design a tunnelling and pumping system. Complaints were made by local residents. In order to allay the local residents' concerns, the Water Authority arranged a meeting with them and invited them to the site. At the meeting there was an explosion of the system, killing and injuring various residents. The victims sued the Water Authority, the engineers, and the contractors who had constructed the works. No contribution notices had been filed and at trial none of the defendants expressly sought an apportionment of liability. Nevertheless, the trial judge found for the plaintiffs and then apportioned liability as between the defendants - 55% against the engineers, 30% against the Water Authority and 15% against the contractors. All three defendants appealed. The Court of Appeal set aside the apportionment orders and found the engineers to be wholly liable. In later proceedings, the Water Authority sued the engineers to recover its own losses arising from the incident. In those later proceedings, the Water Authority contended that the engineers were precluded from defending the claim for negligence. The trial judge (Drake J) decided the application on two bases, one being an abuse of process and the other issue estoppel. In relation to issue estoppel, I have noted above that Goldberg J considered that the trial judge's approach to issue estoppel was inconsistent with the law of Australia. In relation to abuse of process, his Lordship considered authorities including Reichel v Magrath [1889] 14 App Cas 665 and held that notwithstanding 'procedural technicalities or defects', including the absence of any formal contribution claim in the first set of proceedings, 'the reality is that the respective liability of each party was litigated, and very fully litigated' in the earlier proceedings (see 554 - 555). It is to be noted that Drake J held (554 - 555) that in the earlier litigation, it was properly open to the judge to apportion liability amongst the defendants despite the procedural absence of contribution notices. Presumably the parties must be taken to have known that when they came to fight the case in the way that they did.

201 Abuse of process in this sense is referred to below.

202 It is not necessary, for a proceeding to amount to an abuse of process by way of attempted re-litigation of a dispute already judicially determined, that one of the doctrines of res judicata, issue estoppel or Anshun estoppel is applicable: Macchia v The Public Trustee [2008] WASCA 241; (2008) 251 ALR 385 [32]; Spalla v St George Motor Finance Ltd [No 6] [2004] FCA 1699 [66].

203 An abuse of process on the basis that subsequent proceedings involve a re-litigation by the party of the same issue decided in earlier proceedings may occur where the other party in the subsequent proceedings was not itself a party to the earlier proceedings or a privy to a party in the earlier proceedings: Reichel v McGrath; Rippon v Chilcotin Pty Ltd [2001] NSWCA 142; (2001) 53 NSWLR 198, 203 - 205.

204 More generally, in Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256, 267 - 268, the High Court observed that the abuse of process doctrine extends to proceedings that are seriously and unfairly burdensome, prejudicial or damaging, or productive of serious and unjustified trouble and harassment. The court also noted that although the categories are not closed, one common category of abuse is where the use of the court's procedures is unjustifiably oppressive to one of the parties, and said that a failure to take, as well as the taking of, procedural steps in the conduct of proceedings are capable of constituting an abuse of process of the court.

205 The insurer applied for summary judgment against the plaintiffs pursuant to O 16 r 1 of the Rules of the Supreme Court, alternatively that the plaintiffs' claim be struck out under O 20 r 19(1) on the basis that it disclosed no cause of action, was frivolous and vexatious and an abuse of process, alternatively that the plaintiff's action be dismissed in the court's inherent jurisdiction on the basis of abuse of process. The hurdles for such relief are high and the court's powers to grant such relief are generally to be exercised sparingly: Spalla v St George [70]. The inherent jurisdiction of the court to protect its process from abuse by summarily disposing of an action as vexatious or frivolous in point of law is only exercised if the claim is so obviously untenable that it cannot possibly succeed: Burton v The President of the Shire of Bairnsdale [1908] HCA 57; (1908) 7 CLR 76, 92.

206 In proceedings for a declaration, questions of standing or 'sufficient interest', jurisdiction and whether the relief claimed is merely hypothetical, are questions which 'cannot be wholly disentangled': Edwards v Santos Ltd [2011] HCA 8; (2011) 242 CLR 421 [36].

207 At the outset, I do not accept the insurer's argument that the declaration proceedings are oppressive or vexatious merely because the plaintiffs could have adopted the alternative courses of either taking an assignment of the policy or funding the trustees to commence indemnity proceedings. Ordinarily, a plaintiff may sue in any cause of action available to it. See for example Astley v Austrust Ltd [1999] HCA 6; (1999) 197 CLR 1 at [46] and [48], and Re Southern Cross Coaches Ltd (1932) 49 WN (NSW) 230, 231. However, where the adoption of a particular cause of action raises particular procedural issues, such as necessary parties, the issues should be addressed.

208 The following propositions are, in my view, at least arguable for present purposes. The plaintiffs have a sufficient interest to claim declaratory relief. Although the chose in action vests in the trustees in bankruptcy, the plaintiffs have a singular interest in recovering under the policy by virtue of s 117 of the Bankruptcy Act. The legislative scheme confers on them a special entitlement to the proceeds of a successful claim for indemnity. The operation of s 117, whilst contingent upon the success of the plaintiffs' money claims, is not speculative or remote in this case in that the solicitor is in bankruptcy, and, for present purposes, it must be taken that the assertion of the entitlement to indemnity under the policy is an arguable claim. The insurer is a proper contradictor. The dispute is real in the sense that the insurer has declined indemnity under the policy and specified the grounds upon which it has done so. These matters point to the plaintiffs having an arguable claim to the declaration they seek.

209 However, declaratory relief can also be theoretical if it lacks utility. Ordinarily the utility of declaratory proceedings of the kind commenced by the plaintiffs inheres in the determination being binding as between the insurer and the trustees in bankruptcy, as the parties with enforceable rights or obligations under the policy. Unless the insurer and the trustees in bankruptcy were bound by the determination, in any subsequent action by the trustees to claim indemnity under the policy, the subject matter of the declaratory proceedings would, at least generally, need to be litigated afresh. In this respect, utility is ordinarily achieved by the proper joinder of all necessary parties, and questions of joinder and utility themselves become 'entangled'.

210 In this appeal it was common ground that, on the basis of the suit as presently constituted, there would be no res judicata estoppels binding the insurer in subsequent proceedings by the trustees. In my view that is correct. I should state my reason for that assent. The trustees could not take advantage of a declaration in any subsequent proceedings against the insurer because the trustees would not be privies of the solicitor (and they are clearly not privies of the insurer). The trustees, in subsequent proceedings in which they claimed an indemnity under the policy, would not be asserting the same interest which the solicitor had in the declaratory proceedings, because the solicitor had no legal (or even commercial) interest in the declaratory proceedings. It could not be said that as a defendant in the declaratory proceedings, the solicitor was, either in form or substance, a representative of the trustees. Moreover, there would be no privity because the trustee's rights with respect to the policy would precede any judgment in favour of the plaintiffs against the solicitor in the declaratory proceedings; the trustees' rights would not be acquired after the date of that judgment. In this appeal both parties also proceeded on the basis that there would be no applicable Anshun estoppel arising from the declaration proceedings which would bind the insurer. I also agree with that, on the basis that it would not be unreasonable for the insurer not to claim against the trustees for a negative declaration within the plaintiffs' suit. For the reasons given above, the trustees could not contend that they were the privies of the solicitor for the purposes of Anshun estoppel. Also, even though Anshun estoppel has been held, in certain circumstances, to preclude a plaintiff who has failed in its action against one party in the first litigation, from subsequently suing another person who is not a privy to the party sued in the first action, those circumstances are far removed from this case whilst ever the trustees are not parties to the suit, and provide no proper comparison with it. See in this regard Asher v Secretary of State for the Environment [1974] 1 Ch 208; Rippon v Chilcotin Pty Ltd. In the suit as presently constituted, the absence of any resulting res judicata or Anshun estoppels would itself make it unlikely that the plaintiffs would obtain a broad positive declaration as to the rights under the policy, and accordingly there would be no likelihood of conflicting judgments.

211 In these circumstances, the insurer would not be required, at the risk of res judicata or Anshun estoppels, to participate in the plaintiffs' suit. If the trustees subsequently took proceedings, there could be no conceivable oppression to the trustees if the insurer defended any subsequent action. The trustees could not contend that they were vexed twice, as they would not have been, on this hypothesis, a party (or a privy of a party) to the plaintiffs' declaratory proceedings. Further, the insurer, in its defence of any subsequent action by the trustees, could not properly be equated with the defendant in Reichel v Magrath. In that case Lord Halsbury LC said (668):

... it would be a scandal to the administration of justice if, the same question having been disposed of by one case, the litigant were to be permitted by changing the form of the proceedings to set up the same case again ... there must be an inherent jurisdiction in every Court of Justice to prevent such an abuse of its procedure ...

212 Moreover, to strike out the insurer's defence in the subsequent action would reward the plaintiffs, who would be the real beneficiaries of any order striking out the insured's defence in the indemnity proceedings, for not properly constituting their own suit with respect to the insurance policy in the first place.

213 Further, there is no suggestion that there is anything in the evidence which would raise the question of whether the trustees could conceivably be bound by estoppel by conduct by, in effect, leaving the solicitor to defend their interest in the litigation. As to the question of estoppel by conduct by a trustee in bankruptcy, compare O'Brien v Sheahan [2002] FCA 1292 [42] - [45], with Rankin v Official Trustee in Bankruptcy (2005) FCA 1084; (2005) 220 ALR 723 [41].

214 For these reasons, in my view the plaintiffs' suit is not properly constituted, and an abuse of process could not subsequently be imputed to the insurer if it left its defence to the alleged application of the policy to any proceedings brought by the trustees.

215 If the plaintiffs' properly constituted their suit by joining the trustees as either co-plaintiffs or, if they do not agree to become co-plaintiffs, co-defendants to the declaratory proceedings, the position would be different.

216 As I have indicated earlier, it is appropriate to proceed on the basis that the plaintiffs will lead evidence at trial, to the effect that the trustees are in conflict with the insurer over the application of the policy to the plaintiffs' claims. The plaintiffs could not succeed in obtaining a declaration as to the application of the policy without deciding that conflict. If the trustees were joined, there would be a risk (in the sense that there would be an arguable contention - it need not be put any higher than that for present purposes) of res judicata and Anshun estoppels applying to the insurer, or at least an abuse of process becoming operative along the lines discussed by Davies JA in Interchase and French J in Ashmere (see [223] and [226] below). In that event, I would respectfully adopt the observations of the Full Court in Employers Reinsurance Corp v Ashmere Cove Pty Ltd [72] that 'a court hearing the hypothetical second proceedings would be unlikely to view with sympathy a decision by the Insurers not to play an active part in the first proceedings'. If the trustees were joined, the matters which could be pleaded by the insurer in its defence to the plaintiffs' claim could readily be pleaded against the trustees, pursuant to a notice under O 19 r 8. The forensic disadvantages about which the insurer presently claims would then largely disappear, or at least be similar to those which would arise in any litigation over the policy between the trustees and the insurer. It is to be borne in mind that the insurer would always bear the onus of proving the application of the exclusion clauses, whether the insurer was sued by, or sued, the trustees. Although it is not incumbent on the insurer to see that the plaintiffs' suit is properly constituted in the first place, that, to my mind, is a material consideration once the plaintiffs have brought the insurer and the trustees in bankruptcy before the court as parties.

217 Nevertheless, the thrust of the appeal is that the insurer contends that it is inevitable that no declaration will be made in the proceedings, with the result that the proceedings ought now be struck out summarily.

218 In my view, it would be premature to strike out or dismiss the plaintiffs' action at this stage. The plaintiffs' claim is not legally untenable, vexatious or otherwise ripe for summary dismissal. There is nothing in the papers to suggest that the insurer has raised with the plaintiffs the need to join the trustees in bankruptcy as either co-plaintiffs or co-defendants.

219 The evidence referred to in [158] above, arguably indicates that the trustees considered that the policy applied to the plaintiffs' claims, and, that they supported the plaintiffs' application to join the insurer in declaratory proceedings, but did not propose to attend or participate in the joinder application, due to insufficient funds, unless required to do so by the primary judge. They in fact did not participate in the application in the court below. In earlier correspondence, the trustees, by their solicitors, raised the possibility that they 'could file a notice to abide ... the outcome of the proceeding' (GB 201). Even if they were joined as a defendant and played no role because, in effect, the plaintiffs declined to fund their participation in the suit, they would still be bound by any applicable res judicata or Anshun estoppels.

220 As to the grounds of appeal, I would dismiss grounds 1 and 5. The declaration sought by the plaintiffs is arguable in the sense of being legally tenable, although for the reasons explained, there is a real issue, in my opinion, as to the joinder of necessary parties. Similarly, I would dismiss grounds 3 and 4. In my view, the plaintiffs have standing to seek a declaration and the court has jurisdiction to grant it. Grounds 2, 6 and 7 fail for essentially similar reasons. The insurer could not properly complain of forensic disadvantages if the trustees were joined and it is premature to terminate the proceedings, at least ahead of the insurer raising with the plaintiffs the more limited prospect of a stay pending a joinder application. Nor do I accept that the proceedings are an abuse of process because the plaintiffs have declined to give an undertaking to call the solicitor so that he is available for cross-examination by the insurer. It would be a very odd thing for the plaintiffs to have to call, as a witness in their own case, the solicitor against whom they seek equitable compensation for alleged breach of duty. Moreover, if the trustees in bankruptcy sued under the policy, they could not be compelled to call the solicitor as a witness. If they did not, a question might arise as to whether a Jones v Dunkel inference could be drawn. But no assurance would be given that the solicitor would be available for cross-examination.

221 None of the authorities referred to earlier (see [177] above) would seem to me to compel a different conclusion from the one reached above.

222 Interchase was a case where the defendant insureds were parties to the proposed declaratory claim and the legal interest in the policy remained vested in them. It was not suggested that any declaratory judgment obtained by the plaintiffs would not, by reason of want of privity, bind the representatives of the insureds in the event that they were subsequently put into insolvent administration. Rather, Byrne J (with whom McPherson JA agreed) found (317- 318) as a fact that the co-defendants were not in controversy and that the criteria for res judicata outlined in Munni Bibi had no application. It was for this reason that the insurer would not be bound in any subsequent proceedings brought by the insured or their subsequent privies, their insolvency representatives. McPherson JA (at 315) said, in effect, that a counterclaim or third party notice 'would be needed' before the defendants could be bound as between themselves, and referred to The Normar [1968] P 362, 372. It would appear to me, with respect, that The Normar states that such procedural claims or notices would result in res judicata estoppels, but that it is not necessarily authority for the proposition that absent such procedural steps, co-defendants can never be bound as between themselves.

223 In Interchase, Davies JA was in dissent. His Honour nevertheless agreed that no res judicata estoppels, as between the insurer and the insureds, would apply in any subsequent proceedings between them or their privies. His Honour seems to have based that conclusion on the ground that the insurer and the insureds were not in privity with each other - which, with respect, was plainly correct. His Honour nevertheless said, in effect, that the abuse of process doctrine exemplified by Reichel v McGrath would 'in practical terms' bind each of the insurer and the insureds to the earlier result. It is important, I think, to note that his Honour was referring to a suit in which the insurer and the insureds were both parties and his Honour was holding (as I understand it), that in that context, even if the co-defendants had not formally exchanged cross-claims, it would be an abuse of process for either of them, or their privies (including subsequently appointed insolvency administrators), to litigate afresh the application of the insurance policy to the plaintiffs' claims when the plaintiffs had litigated that matter in the first action to which both the insurer and the insureds had been parties. His Honour, unlike the majority, also considered (309) that the Queensland rules regarding joinder were sufficiently wide to empower the court to hear a claim by a third party to an insurance policy for a declaration that the policy responded to that party's claims against the insured, where the insurer had declined indemnity and the insured had failed to join the insurer as a third party.

224 In JN Taylor Holdings, three directors were sued. Each had a policy of insurance. One director was bankrupt and the other two were absent from the jurisdiction. Unlike in Interchase, the insurer had denied liability under the policy from the outset. There was, it appears, no suggestion that the trustee in bankruptcy of the director who was bankrupt was a necessary party under the relevant court rules. Indeed the plaintiffs had purportedly taken an assignment of the policy from the trustee in bankruptcy. In that case, King CJ (441) referred to the three criteria derived from Munni Bibi and said that the existence of an actual lis, in the sense of proceedings, between the defendants concerned, is not one of the requisites.

225 Whilst the decision on the facts of Munni Bibi bears that out, his Honour seems to have rested his proposition on the case of Re Multi-Tech Services Pty Ltd (in liq); Heard v Commonwealth Trading Bank of Australasia (1982) 30 SASR 218. In that case, Jacobs J permitted a defendant to a preference claim to join a second defendant to the proceedings where neither the liquidator plaintiff, nor the defendant (alleged) preferee had any cause of action against the second defendant, whether by declaratory relief or otherwise. There was no reference to Munni Bibi or the relevant criteria for res judicata to operate as between defendants. The second defendant was joined without any cross-claim by the alleged preferee (and indeed was expressly joined on the basis that there would be no cross-claim) and in the absence of any finding of a controversy between the defendants. In virtually identical circumstances, Needham J in Walker v Commonwealth Trading Bank of Australia (1985) 3 NSWLR 496 declined to follow Re Multi-Tech and held that the proposed second defendant was not a necessary party within the meaning of the New South Wales court rules. Needham J's analysis appears to me, with respect, to be compelling. It was referred to by Byrne J in Interchase, who also referred to King CJ's reliance on Re Multi-Tech in JN Taylor Holdings (at 319 - 320). I agree, with respect, with those observations by Byrne J. The decision in Multi-Tech also appears to me to be difficult to reconcile with the decisions of this court on joinder and O 18 r 6 in Morrell v Mercantile Mutual Insurance (Australia) Ltd [1999] WASCA 250; (1999) 21 WAR 451 and Rogala v Caris Corporation Ltd (Unreported, WASC, Library No 5089, 27 September 1983) (Burt CJ), at 3 - 4.

226 In Ashmere Cove the applicant investors lost money in a company that had gone into liquidation. They had claims against the company and its directors. The claims against the directors were not pursued. The applicant sought leave under s 471B of the Corporations Act to begin proceedings and to proceed against the company, and also sought to join the company's insurer and, in that regard, sought a declaration that the policy responded to its claims against the company. It was accepted by the applicants that unless they could join the insurer, there was no point in seeking leave to proceed against the company and if the insurers were not joined, the leave application should be dismissed [11]. The insurer declined indemnity [17]. The liquidator had no funds to cause the company to pursue a claim under the policy [16]. French J (as his Honour then was) followed the reasons of Davies JA in Interchase and allowed the joinder of the insurer and granted leave to proceed against the company in liquidation. It was a case, like Interchase, in which the company, which retained the chose in action with respect to the policy (unlike in bankruptcy), and the insurer, were both proposed defendants to the action. On appeal, the Full Court rejected the insurer's contention that there was no current controversy between the co-defendants: Employers' Reinsurance Corporation v Ashmere [62]. Their Honours' observations at [74] to the effect that the situation that pertained was in substance no different from where the insurer is joined as a third party may also indicate that the court considered that there was an existing controversy between the insurer and the insured in that case. I would add here that the need for controversy was also referred to by Fisher J in Taylor v Ansett Transport Industries Ltd (1987) 18 FCR 342, 358.

227 In Beneficial Finance v Price Waterhouse, the insurer had not denied liability and was, moreover, at that time treating the claim as attracting indemnity under the policy and was defending the claim on behalf of its insured (see 27, 36, 46 - 47, 54 - 55). A similar situation pertained in CE Heath Casualty v Pyramid Building Society. The court also emphasised that there was no existing bankruptcy and the important discretionary consideration that any joinder of the insurer would disrupt the orderly conduct of the insurer's defence on behalf of the insured (see 258, 260, 263 - 264, 270 - 271 and 283).

228 For these reasons, in my view, the plaintiffs' action is arguable and does not, at least presently, fall into the limited category of case where the proceedings should be determined summarily. There is nothing inherently untenable in the plaintiffs' claim. The insurer has not suggested that the plaintiffs apply to join the trustees in bankruptcy and the trustees' attitude to joinder, at least as defendants, has not, on the evidence, been fully explored. There is no basis upon which, at this early stage in the litigation, to dismiss the proceedings. In my view the application for leave to appeal should be dismissed.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : QBE INSURANCE (AUSTRALIA) LTD -v- LOIS NOMINEES PTY LTD and the persons detailed in the Schedule attached to the Appeal Notice (Civil) [2012] WASCA 186 (S)

QBE CORPORATE LTD T/AS DA CONSTABLE SYNDICATE 386 AT LLOYDS

LOIS NOMINEES PTY LTD and the persons detailed in the Schedule attached to the Appeal Notice (Civil)

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Citation : LOIS NOMINEES PTY LTD -v- QBE INSURANCE (AUSTRALIA) LTD [2011] WASC 208

Practice and procedure - Costs - Majority decision dismissing appeal - Costs follow the event

QBE Insurance (Australia) Ltd v Lois Nominees Pty Ltd [2012] WASCA 186

1 JUDGMENT OF THE COURT: On 26 September 2012, this court, by a majority (Newnes & Murphy JJA, McLure P dissenting), dismissed an appeal against an order of Beech J, who had refused the appellants' application for summary judgment: QBE Insurance (Australia) Ltd v Lois Nominees Pty Ltd [2012] WASCA 186. When judgment on the appeal was delivered, counsel for the appellants sought an opportunity to make written submissions on the costs of the appeal. It was ordered that written submissions be filed by both parties and the question of costs be determined on the papers.

2 In their written submissions, the appellants contend that the costs of the appeal should be costs in the cause of the action. They argue that such an order is ordinarily made on an unsuccessful summary judgment application and there was no reason to depart from that practice on the appeal.

3 The appellants further submit that it was relevant to the question of costs that McLure P would have allowed the appeal and that Murphy JA, while he ultimately concluded that the appeal should be dismissed, considered there was an issue as to the joinder of necessary parties. In those circumstances, it was submitted, it would not be appropriate for the appellants to be exposed immediately to the costs of the appeal but any exposure to costs should only crystallise in the event that the appellants are unsuccessful at trial.

4 The respondents' position was simple. They had been successful on the appeal and there was no reason to depart from the usual practice that costs follow the event. The respondents sought an order that the appellants pay the respondents' costs of the appeal (including any reserved costs) to be taxed.

5 There is no substance in the appellants' submissions. The practice as to costs at first instance where an application for summary judgment is refused has no application on an appeal against that decision. On such an appeal, costs will ordinarily follow the event. There is nothing in this appeal which would justify a departure from that.

6 The fact that the court was divided on the outcome of the appeal is beside the point. Nor is it to the point that Murphy JA considered there was an issue as to the joinder of relevant parties. That was not relevant to his Honour's conclusion as to the outcome of the appeal.

7 The appropriate order is that the appellants pay the respondents' costs of the appeal (including any reserved costs) to be taxed. There will be an order accordingly.