YOUNG INVESTMENT GROUP PTY LTD -v- QBE INSURANCE (AUSTRALIA) LIMITED [2019] WASC 74 (11 March 2019)

A person may recover from the insurer of a company that is deregistered an amount that was payable to the company under the insurance contract if:

(a) the company had a liability to the person; and

(b) the insurance contract covered that liability immediately before deregistration.

1. As the Court of Appeal observed in Fairweather Pty Ltd v QBE Insurance (Australia) Ltd at [3],[1] s 601AG creates a new cause of action against an insurer to recover an amount that was payable to the deregistered company under an insurance contract.
2. Pullin JA observed in that regard:[2]

The new cause of action does not arise until the company having the benefit of the insurance is deregistered. Any defences that the insurer may have at that point to an action on the insurance contract may be pleaded by it in defence to the s 601AG claim and any defence the insured may have had to the claim against the insured may be advanced to show that the insured had no liability to the plaintiff.

(b) At the time of its deregistration, the company had a liability to the plaintiff; and

(c) At the time of the company's deregistration, an insurance contract with the defendant covered the liability.

1. As will be apparent, it is the last of these three elements that is in issue. That is, QBE admits that ASANDAS was deregistered (on 9 November 2016),[3] and that at that time, ASANDAS had a liability to each of the plaintiffs.
2. The remaining element is whether an insurance contract covered the relevant liability. This issue necessarily includes consideration both as to whether the liability falls within the insuring clause in the insurance contract, and whether any relevant exclusions in the insurance contract apply.
3. Again, as will be seen, it is only the latter question that arises for determination in the present case. QBE relevantly accepts that ASANDAS' liability to the plaintiffs was covered by the insuring clause of a contract of insurance provided by the defendant to ASANDAS (the Policy).[4] The Policy was a Financial Institutions Civil Liability Professional Indemnity Policy.[5]
4. QBE alleges, however, that two exclusions in the Policy applied to the liability owed by ASANDAS to the plaintiffs.
5. Before turning to those exclusions it is necessary to set out some of the background to the liability owed by ASANDAS to the plaintiffs.

1. At the time that it was deregistered, ASANDAS had a liability to each of the plaintiffs pursuant to a judgment of the Federal Court of Australia dated 28 March 2013 and varied on 9 March 2017.
2. Significantly, that judgment was entered by default.
3. There is no dispute, and I accept, that a default judgment constitutes a liability for the purposes of s 601AG(a). In this regard, QBE referred to the decision of the Full Court of the Supreme Court of South Australia in QBE Insurance Ltd v Nguyen,[6] to the effect that a default judgment gives rise to a civil liability for the purposes of the Policy (and in particular the insuring clause). Similarly, there can be no doubt that a default judgment is capable of giving rise to a 'liability' within the meaning of s 601AG(a).
4. The background to that liability is as follows.
5. The plaintiffs are each corporations that, at all material times, were related to Ms Beverley Lorraine Margetts.[7] The first plaintiff, Young Investments Group Pty Ltd (Young Investments), was an investment company controlled by Ms Margetts. The second plaintiff, Rastus Group Pty Ltd (Rastus), was the trustee for two superannuation funds known as TY superannuation fund and BY superannuation fund. The third plaintiff, Reid Park Investments Pty Ltd (Reid Park), was a trustee for the Bev Young Investment Trust.
6. The plaintiffs commenced an action against three respondents in the Federal Court of Australia in WAD 201 of 2009 (the Federal Court action). The three respondents were Stripe Capital Pty Ltd (Stripe Capital), Todd King and ASANDAS. The Federal Court action related to allegations of breach of duty, breach of contract and other breaches by Stripe Capital and Mr King for which ASANDAS was responsible, Stripe Capital being an authorised representative of ASANDAS.
7. The allegations in the Federal Court action concerning Stripe Capital and Mr King are critical to the resolution of this action. Those allegations were set out in a substituted statement of claim filed in Federal Court action dated 19 July 2012 (the statement of claim).[8]
8. The statement of claim included the following pleadings in relation to the relationship between the plaintiffs and Stripe Capital:
   1. In or about July 2006 Rastus appointed Stripe as its financial advisor to provide financial services including financial product advice ('Rastus Agreement').

1. In or about June 2007 Young Investments appointed Stripe as its financial advisor to provide financial services including financial product advice ('Young Investments Agreement').

1. In or about June 2007 Reid Park appointed Stripe as its financial advisor to provide financial product advice ('Reid Park Agreement').

1. The Rastus Agreement, Young Investments Agreement and Reid Park Agreement were subject to the implied term that in providing services under the said agreements Stripe would use all reasonable skill, care and diligence.

1. Further the Rastus Agreement, Young Investments Agreement and Reid Park Agreement were subject to the following express and or implied terms ('Trading Terms') in respect of any financial advice given by Stripe in relation to the purchase and sale of securities.

(a) Companies listed on the Australian Stock Exchange ('ASX');

(b) Companies with high net asset backing which secured the value or price of the securities of that company;

(c) Companies which could reasonably be expected to achieve capital growth;

(d) Companies that paid dividends which were greater than existing bank deposit rates.

('Authorised Securities')

14.2 Ms Young on behalf of Rastus, Young Investments or Reid Park would give instructions in response to any recommendation made and Stripe would only act in accordance with those instructions.

14.3 If a positive instruction was given Stripe would make an offer to purchase the recommended shares on behalf of (as instructed) one or other of Rastus, Young Investments or Reid Park.

14.4 Thereafter, Stripe was required to provide details to Rastus, Young Investments and or Reid Park in relation to any shares purchased, the price paid (including commission or other fee charged) and the holding details of those shares.

14.5 If instructed by Ms Young to do so, Stripe would sell the relevant shares and provide details of the shares and account for the sales.

1. Further or in the alternative, Stripe, in providing financial services, was under a duty of care to Rastus, Young Investments and Reid Park to use all reasonable skill, care and diligence.

1. The statement of claim goes on to plead particular breaches and defaults by Stripe Capital. Of particular significance to the resolution of this action are the allegations that appear in [23] of the statement of claim:
   1. Between in or about June 2007 and June 2008 Stripe engaged in the following conduct:

23.1 without instructions bought and sold securities on behalf of Rastus, Young Investments and Reid Park;

23.2 bought securities on behalf of Rastus, Young Investments and Reid Park; which were not Authorised Securities including options and derivatives;

23.3 without authority to do so undertook high volume trading of securities in order to effect transactions on which commissions would be earned by Stripe without any or any reasonably commensurate benefit being earned by Rastus, Young Investments and or Reid Park;

23.4 in relation to Young Investments and Reid park entering into the LE Margin Loan Agreement and in respect of draw downs on the said loan agreement was paid commissions by Leveraged Equities without disclosing those commissions to Young Investments and or Reid Park and accounting for benefits received;

23.5 without instructions or authorisation drew down funds from the LE Margin Loan Agreement;

23.6 used the unauthorised draw downs from the LE Margin Loan Agreement to undertake high volume trading in securities (including options and derivatives) for the purposes of earning commissions without any or any reasonable commensurate benefit being earned by Young Investments and or Reid Park;

23.7 undertaking discretionary trading without complying with the financial services laws.

1. The references to the LE Margin Loan Agreement in [23.4] to [23.6] relate to particular allegations concerning an agreement with the firm Leverages Equities (the Leverages Equities allegations). Those allegations relevantly include:[9]
   1. Further, in or about July 2007 Stripe, acting through Mr King, recommended to Young Investments and Reid Park that those companies should enter into an agreement with the firm Leveraged Equities the effect of which was to allow securities owned by Young Investments and Reid Park to be pledged as security for a loan facility to be drawn down upon for the dedicated purpose of purchasing further securities ('LE Margin Loan Agreement').
   2. Prior to execution of the LE Margin Loan Agreement, Stripe represented to Young Investments and Reid Park that:

19.1 the purpose of the LE Margin Loan Agreement was to provide a loan facility to be drawn upon if the opportunity arose to make a profit by trading in securities in a falling market ('Short Selling')

19.2 any Short Selling would only be entered into on express instructions from Ms Young together (the 'Margin Loan Representations').

PARTICULARS

The Margin Loan Representations were made in or about July 2007 by Stripe acting through Mr King to Ms Young for Young Investments and Reid Park.

1. Young Investments and Reid Park entered into the LE Margin Loan Agreement:

20.1 on the basis that Stripe in making the Margin Loan Representations was providing financial services advice;

20.2 in reliance of Margin Loan Representations;

20.3 in good faith.

1. In fact and in breach of s1041H of the Corporations Act the Margin Loan Representations were misleading or deceptive in that the purpose of Stripe in representing to Young Investments and Reid Park that they enter into the LE Margin Loan Agreement and in making the Margin Loan Representations was for Stripe and or Mr King:

21.1 to obtain a secret commission or commissions from Leveraged Equities; and/or

The secret commission or commissions were by way of fees paid to Stripe or Mr King by Leveraged Equities calculated by reference to the drawings made by Young Investments or Reid Park on the facility provided by the LE Margin Loan Agreement.

21.2 to allow Stripe to draw down on the facility provided by the LE Margin Loan Agreement to purchase further securities and to trade those securities in an attempt to recover losses already incurred by Young Investments and Reid Park on unauthorised trading undertaken by Stripe; and/or

21.2 to allow Stripe to draw down on the facility provided by the LE Margin Loan Agreement to undertake high volume trading of securities in order to effect transactions on which commissions would be earned by Stripe without any or any reasonable commensurate benefit being earned by Young Investments and or Reid Park.

1. In the alternative to paragraph 21 above Stripe, in making the Margin Loan Representations Stripe failed to disclose that the purpose of Stripe in recommending Young Investments and Reid Park enter into the LE Margin Loan Agreement and in making the Margin Loan Representations was for Stripe and or Mr King:

22.1 to obtain a secret commission or commissions from Leveraged Equities; and/or

The secret commission or commissions were by way of fees paid to Stripe or Mr King by Leveraged Equities calculated by reference to the drawings made by Young Investments or Reid Park on the facility provided by the LE Margin Loan Agreement

22.2 to allow Stripe to draw down on the facility provided by the LE Margin Loan Agreement to purchase further securities and to trade those securities in an attempt to recover losses already incurred by Young Investments and Reid Park on unauthorised trading undertaken by Stripe; and/or

22.3 to allow Stripe to draw down on the facility provided by the LE Margin Loan Agreement to undertake high volume trading of securities in order to effect transactions on which commissions would be earned by Stripe without any or any reasonable commensurate benefit being earned by Young Investments and or Reid Park,

which failure to disclose was in breach of s1041H of the Corporations Act as the said representations were misleading and deceptive.

1. Paragraph 24 of the statement of claim then provides:[10]
   1. Stripe's conduct as pleaded in:

24.1.1 the terms of the Rastus Agreement, Young Investments Agreement and the Reid Park Agreement pleaded in paragraph 13 and 14 herein;

24.1.2 the duties pleaded in paragraph 15 herein.

24.2.1 the terms of the Rastus Agreement, Young Investments Agreement and the Reid Park Agreement pleaded in paragraph 13 and 14 herein;

24.2.2 the duties pleaded in paragraph 15 herein.

24.3.1 the terms of the Rastus Agreement, Young Investments Agreement and the Reid Park Agreement pleaded in paragraph 13 and 14 herein;

24.3.2 the duties pleaded in paragraph 15 herein.

24.4.1 the terms of the Young Investments Agreement and the Reid Park Agreement pleaded in paragraph 13; and

24.4.2 the duties pleaded in paragraph 15 herein.

24.5.1 the terms of the Young Investments Agreement and the Reid Park Agreement pleaded in paragraph 13; and

24.5.2 the duties pleaded in paragraph 15 herein.

24.6.1 the terms of the Young Investments Agreement and the Reid Park Agreement pleaded in paragraph 13 herein; and

24.6.2 the duties pleaded in paragraph 15 herein.

24.7.1 the terms of the Young Investments Agreement and the Reid Park Agreement pleaded in paragraph 13; and

24.7.2 the duties pleaded in paragraph 15 herein.

1. Paragraph 25 pleads the relevant loss and damage alleged by the plaintiffs, as follows:
   1. As a result of the breaches pleaded in paragraph 24:

(a) Trading losses.

Super TY

($1,820,290.06) from the following trading:

Super BY

($1,917,758) from the following trading:

(b) Further particulars of the value of commissions received by Stripe and not disclosed and accounted for will be provided following discovery.

25.2 Young Investments has suffered loss and damage.

(a) Trading losses.

($1,343,251.70) from the following trading:

(b) Further particulars of the value of commissions received by Stripe and not disclosed and accounted for will be provided following discovery.

25.3 Reid Park has suffered loss and damage.

(a) Trading losses.

Reid Park General Account

($3,418,862.20) from the following trading:

(b) Further particulars of the value of commissions received by Strip and not disclosed and accounted for will be provided following discovery.

1. I have referred to the five tables of losses, pleaded in [23] of the statement of claim, later in these reasons as Tables 1 to 5. In that context, it may at once be observed that, of the losses pleaded, only Table 5 (in relation to the third plaintiff) refers to Leveraged Equities, the entity involved in the Leverages Equities allegations.
2. ASANDAS' liability for the conduct of Stripe Capital, as alleged in the statement of claim, appears in [26], which provided:

As a result of the matters pleaded in paragraphs 9 and 20 herein ASANDAS is also responsible for the conduct of Stripe pleaded in paragraphs 21, 21A and 23 herein and is also responsible for the loss and damage pleaded in paragraph 25 herein.

1. As noted above, the Federal Court action did not proceed to trial. Rather, the plaintiffs brought a successful application for default judgment against both Stripe Capital and ASANDAS.
2. In that regard, on 23 March 2013, Gilmour J made orders including that:[11]
   1. In default of filing an amended defence to the first, second, third and fourth applicants' substituted statement of claim, the first and third respondents' defence be struck and judgment be entered pursuant to the Federal Court rule 5.23(2)(c) in the following terms:

(a) The first and third respondents pay to the second applicant $1,343,251.70 as pleaded in paragraphs 25.2 and 26 of the substituted statement of claim;

(b) The first and third respondents pay to the first applicant $3,738,009.70 as pleaded in paragraphs 25.1 and 26 of the substituted statement of claim;

(c) The first and third respondents pay to the third applicant $7,136,542.20 as pleaded in paragraphs 25.3 and 26 of the substituted statement of claim.

1. His Honour gave brief written reasons for entering judgment.[12]
2. The orders made by Gilmour J were varied on 9 March 2017. The orders were relevantly identical to those set out above, save that the amount in Order 1(b) was varied from $3,738,009.70 to $3,738,047.73.[13]
3. It is that judgment that establishes the liability of ASANDAS to the plaintiffs.
4. The plaintiffs did not receive any moneys from ASANDAS prior to the company becoming deregistered, nor did they receive any moneys from Stripe Capital under the judgment.[14]
5. Turning then to the relevant provisions of the Policy.

1. The insuring clause of Policy provided as follows:
   • 1.1 Insuring Clause A - Civil Liability Insuring Clause

QBE agrees to indemnify the Insured against civil liability for compensation arising from any Claim first made against the Insured during the Period of Cover and notified to QBE during the period of cover as a result of breach of professional duty in the conduct of the Financial Service.

1. As is apparent from this insuring clause, the Policy was a 'claims made' Policy and covered the insured in relation to liability arising from claims made during the period of cover. There is no contest between the parties that QBE relevantly received notice of facts giving rise to a claim against ASANDAS with respect to the conduct of Mr King (on behalf of Stripe Capital) as required by the Policy. In particular, it is admitted on the pleadings that ASANDAS was deemed to have received notification for the purposes of cl 1.1 of the Policy with respect to the claims made by the plaintiffs against ASANDAS.[15]
2. While there is some dispute as to whether the allegations made by the plaintiffs in the present case constitute one 'Claim' or more than one 'Claim' within the meaning of the Policy (an issue I have addressed below), there is no issue that the Claim or Claims were relevantly made to the insured during the period of cover.
3. There is also no doubt, based on the matters pleaded in the statement of claim, that the Claim or Claims related to a breach of professional duty in the conduct of the financial service. That is, it is accepted by QBE for the purpose of these proceedings that the insuring clause covers the relevant liability.
4. As noted above, however, QBE may raise, in this action, any relevant exclusion that it may have been able to raise against ASANDAS in relation to the Policy. QBE, in its defence, has done just that. The issue in the present case is, therefore, whether one of the exclusions set out in cl 4 of the Policy apply to the claim (or claims) against ASANDAS.
5. The two exclusions relied upon by QBE are:

(a) the Unauthorised Transactions exclusion (in cl 4.24 of the Policy); and

(b) the Conflict exclusion (in cl 4.3 of the Policy).

1. The Unauthorised Transaction exclusion (in cl 4.24) provides that:

QBE shall not be liable under this Policy to provide indemnity in respect of any Claim against any Insured ...

in connection with:

(a) the Financial Service provided by the Insured or any Representative, Authorised Representative or other agent while without:

(i) an Australia Financial Services Licence (AFSL), including but not limited to the suspension, non-renewal, withdrawal or cessation of an AFSL, or

(ii) an appropriate authorisation for the provision of the Financial Service under an AFSL, unless the Insured, Representative, Authorised Representative or agent is exempt from having an AFSL or an authorisation under the AFSL for the provision of the Financial Service.

where such Licence is required by law.

1. The Conflict exclusion (in cl 4.3 of the Policy) provides that:

QBE shall not be liable under this Policy to provide indemnity in respect of any claim against an insured ... directly or indirectly based upon, or attributable to or in consequence of a Conflict.

1. There are two provisos to cl 4.3 that are not relevant.
2. 'Conflict' is defined in cl 7.11 of the Policy as follows:

Conflict shall mean:

(a) a conflict of duty and duty, where an Insured acts for a client whilst being subjected to a contrary interest, being an interest of another client; or

(b) conflict of interest and duty where an Insured acts for a client whilst being subjected to a contrary interest, being a personal advantage interest.

1. As is apparent from cl 7.11, the Conflict exclusion only applies to conflicts of an 'Insured', within the meaning of the Policy. The definition of 'Insured' is found in cl 7.26 of the Policy. Clause 7.26 provides:

Insured shall mean:

(a) the incorporated body stated in item 4.1 of the Schedule;

(b) any Subsidiary specified in item 4.2 of the Schedule, and declared in the Proposal form as constituting the Proponent, engaged in the provision of the Financial Service in part or in whole;

(c) any person who is or was:

(i) a Director, Officer or Employee; or

(ii) a Representative, Authorised Representative or Proper Authority Holder who is or was also a Director, Officer or Employee of the incorporated bodies referred to in sub-clauses 7.26(a) and 7.26(b) of this definition, but only in respect of work performed while a Director, Officer or Employee of the incorporated bodies referred to in sub-clauses 7.26(a) and 7.26(b) of this definition.

1. While I will return to this later, it is apparent from these provisions that, while Stripe Capital was relevantly an 'authorised representative' within the meaning of cl 4.24 of the Policy, it was not an 'Insured' within the meaning of cl 7.26 of the Policy. That is because, while Stripe Capital was an authorised representative of ASANDAS, it was not also a director, officer or employee of ASANDAS or its subsidiary.
2. As I will come to later, QBE's case is that the Conflict exclusion applied to claims against ASANDAS involving conflicts on the part of Stripe Capital by reason of (and only by reason of) the effect of an endorsement to the Policy Schedule issued on 27 February 2008, which extended indemnity, inter alia, to Stripe Capital (the Stripe Endorsement).[16] QBE accepts that, absent the Stripe Endorsement, conflicts on the part of Stripe Capital would not fall within the Conflict exclusion in cl 4.3 in relation to the claims made in these proceedings.[17]
3. QBE says, however, that the Stripe Endorsement has the effect that Stripe Capital is an 'Insured' for all purposes under the Policy, including for the purposes of cl 4.3 (via cl 7.11) in relation to conflicts. I will return to this issue when dealing with the Conflict exclusion.
4. Before turning to the terms of the exclusions relied upon by QBE, it is necessary to say something in relation to the fact finding process required in determining whether any particular exclusion applies.

Onus of proof and fact finding in relation to exclusions

1. As is apparent from the terms of the exclusions themselves, each exclusion clause requires certain facts to be found in order to bring a claim within the scope of the exclusion. Whether the insured held a certain financial services licence, or whether it had a certain personal interest, for example, are factual issues to be determined.
2. In this regard, the onus of establishing the existence of a particular exclusion in an insurance contract rests with the insurer.
3. The High Court referred to this as 'well accepted' in Wallaby Grip Ltd v QBE Insurance (Australia) Ltd in which it stated:[18]

[A] condition necessary to the accrual of liability of an insurer, a 'condition precedent', was contrasted with one which creates a particular exception to the insurer's obligation. The insured bears the onus of proving the fulfilment of the firstmentioned condition. It is well accepted that the insurer must prove that a loss falls within an exception.

1. This principle, which can be traced back to the decision of Munro, Brice & Co v War Risks Association Ltd,[19] was discussed at some length by the Court of Appeal in New South Wales in McLennan v Insurance Australia Ltd. [20]
2. Accordingly, in the present case, it is a matter for QBE to discharge the onus of establishing the relevant facts and circumstances necessary to bring the liability created by the judgment against ASANDAS within one of the two exclusions it has identified.
3. In this respect, the fact that the judgment was a default judgment takes on some significance.
4. That is because no party led evidence, beyond the evidence of the proceedings in the Federal Court action (including the statement of claim and the judgment), as to the facts giving rise to the liability of Stripe Capital or ASANDAS. That is, for the purpose of establishing facts relevant to the applicability of the exclusions in the Policy, QBE relied solely upon the facts as alleged and set out in the statement of claim in the Federal Court action.
5. In support of its submissions as to the status of the facts as they appear in the statement of claim, QBE relied upon the basis upon which default judgment may be entered under r 5.23(2)(c) of the Federal Court Rules (the Rules). In this regard, QBE referred to Flick J's decision in Speedo Holdings B.V. v Evans (Speedo Holdings).[21]
6. In Speedo Holdings, his Honour confirmed that the power to enter default judgment under the current form of the Rules required the Court to be satisfied on the face of the statement of claim that the applicant is entitled to the relief claimed:[22]

Third, there is a difference in the terms in which the ambit of the power conferred by the former r 3(2)(c) ('the relief ... that the applicant appears entitled to on the statement of claim') and the wording of the current r 5.23(2)(c) ('the relief claimed in the statement of claim to which the Court is satisfied that the applicant is entitled'). Notwithstanding that difference in language, the requirement imposed is not that an applicant prove by way of evidence the claim sought to be advanced; the requirement is that the court needs to be 'satisfied' on the face of the statement of claim that the applicant is entitled to the 'relief' claimed. The facts as alleged in the statement of claim are deemed to have been admitted by a respondent...

Fourth, to be satisfied that an applicant 'is entitled' to the relief claimed in the statement of claim, the Court needs to be satisfied that 'each element of the relevant civil wrong involved is properly and discretely pleaded in the statement of claim'.

Fifth, in addition to the facts alleged in a statement of claim, the Court may permit recourse to limited further evidence. But it may not admit evidence which would alter the case as pleaded. (original emphasis; footnotes omitted)

1. It is clear from the brief reasons given by Gilmour J in the Federal Court action, to the effect that the plaintiffs' claim was 'properly and discretely pleaded', that his Honour applied these principles in the Federal Court action. Accordingly, for the purposes of that action, the facts as alleged in the statement of claim were deemed to be admitted by the respondents in the Federal Court action (including ASANDAS).
2. Those facts, QBE contends, are equally binding on the plaintiffs in the present case. I accept that contention. Indeed, the plaintiffs accepted that the factual matters set out in the statement of claim were binding upon them for the purposes of these proceedings.
3. The jurisprudential basis for why that is so, is best explained, in my view, by treating the allegations in the statement of claim as admissions by the plaintiffs. As Ryan J stated in Australian Competition and Consumer Commission v Pratt (No 3):[23]

...[I]t is a question of fact in the circumstances whether the particular statement in a pleading or analogous document constitutes an admission. The relevant circumstances will include the type of pleading or other document and the terms in which the alleged admission has been expressed. Thus, an assertion in a statement of claim in an action for damages for personal injuries that a plaintiff, X, was the driver of a motor car when it collided with another vehicle at a particular time and place will generally constitute an admission ... so as to be admissible against X in subsequent civil or criminal proceedings. That I consider to be consistent with the observations of Cockburn CJ in Richards v Morgan [1863] EngR 997; (1863) 4 B & S 641; 122 ER 600. In a passage, at 661; 607, which has been cited with approval by Rares J in Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd [2008] FCA 369; (2008) 167 FCR 314, at [34], his Lordship said;

It cannot be doubted that a man's assertions are admissions, whether made in the course of a judicial proceeding or otherwise, and, in the former case, whether he was himself a party to such proceeding or not. It may be given in evidence against him in any suit or action in which the fact so asserted or admitted becomes material to the issue to be determined. And in principle, there can be no difference whether the assertion or admission be made by the party himself who is sought to be affected by it, or by someone employed, directed or invited by him to make the particular statement on his behalf. In like manner, a man who brings forward another for the purposes of asserting or proving some fact on his behalf, whether in a court of justice or elsewhere, must be taken himself to assert the fact that he thus seeks to establish.

1. In the present case, I am satisfied that the assertions in the statement of claim are properly to be regarded as admissions for the purposes of the proceedings and, in the absence of further evidence, may be taken to have been proven. This is particularly so given that the statements were not only proffered in the Federal Court action, in the pleading itself, but were relied upon by the plaintiffs to establish the 'deemed to be admitted' facts in the application for default judgment.
2. In those circumstances, as the plaintiffs quite properly accept, QBE is entitled to rely upon those allegations as admissions for the purpose of seeking to discharge its onus of proof in relation to whether any exclusion within the Policy applies.
3. I note, that in the course of the trial QBE made submissions to the effect that the plaintiffs should be precluded from leading further evidence in relation to the underlying facts of the claim against ASANDAS, or to otherwise resile from the facts pleaded in the statement of claim in the Federal Court action. In that respect QBE relied upon the principles of res judicata, estoppel and the doctrine of approbation and reprobation.[24]
4. In the result, however, the plaintiffs did not seek to lead any evidence seeking to contradict the facts pleaded in the statement of claim. Indeed, neither party, as it were, sought to depart from, or add to, the facts as they appear in the statement of claim.
5. For that reason, the issues of res judicata, estoppel and the doctrine of approbation and reprobation do not arise.
6. Nevertheless, the fact that relevant facts are sought to be proved, by QBE, on the basis of the statement of claim, and not by direct evidence, requires, as a consequence, a degree of construction of the statement of claim itself. That is, it is necessary to construe the statement of claim so as to determine exactly what facts can be established on the basis of the assertions in the statement of claim.
7. In deciding whether QBE has discharged its onus, in my view, it is necessary to determine from the statement of claim, interpreting it in a common sense way, whether any particular loss claimed by the plaintiffs falls within one of the exclusions to the Policy.
8. Turning then to each of the exclusions relied upon by QBE.

1. In relation to the first of the exclusions relied upon by QBE, the Unauthorised Transactions exclusion, QBE's further amended defence pleads at [14] to [15]:
   1. The conduct pleaded and relied upon by the Plaintiffs in the Substituted Statement of Claim as pleaded in paragraphs 12.2 above is conduct in connection with discretionary and unauthorised trading by Stripe for and on behalf of ASANDAS without the appropriate authorisation for the financial service;
   2. The discretionary and unauthorised trading referred to in paragraph 14 above was not permitted under the terms of ASANDAS' AFSL.

PARTICULARS

Sub-paragraph 23.7 of the Substituted Statement of Claim alleged that Stripe had undertaken discretionary trading without complying with the financial services laws.

Condition 29 of the AFSL prohibited ASANDAS (or its authorised representatives, including Stripe) from operating a 'Managed Discretionary Account Service'.

1. The further amended defence goes on to plead (at [17]) that ASANDAS' liability under the Federal Court judgment was directly or indirectly based upon, or attributable to, or in consequence of a claim against it in connection with a financial service provided by its representative, Stripe Capital, without an appropriate authorisation under its Australian Financial Services Licence (AFSL).
2. The further amended defence pleads (at paragraph [18]), that in the premises, by reason of the Unauthorised Transactions exclusion, the Policy does not respond to ASANDAS's liability to the plaintiffs.
3. QBE's pleaded case (and its submissions for trial),[25] accordingly, confined its case, in relation to the Unauthorised Transactions exclusion, to a breach of the prohibition in condition 29 of ASANDAS' AFSL against operating a 'Managed Discretionary Account Service'.
4. The AFSL was tendered in evidence.[26] The authorisation set out in the AFSL is a broad one in relation to dealing in financial products. For example, it provides in condition 1:
   1. This licence authorises the licensee to carry on a financial services business to:

(i) issuing, applying for, requiring, varying or disposing of a financial product in respect of the following classes of financial products:

...

(f) securities ...

1. The prohibition on the provision of a managed discretionary account service appears in condition 29 of the AFSL. Condition 29 provides:

The licensee must not provide an MDA service to a retail client except when operating a registered scheme.

a service with the following features:

(a) a person (the client) makes contributions; and

(b) the client agrees with another person that the client's portfolio assets will:

(i) be managed by that other person at their discretion, subject to any limitation that may be agreed, for the purposes that include investment, and

(ii) not be pooled with property that is not the client's portfolio assets to enable an investment to be made or made on more favourable terms, and

(iii) to be held by the client unless a beneficial interest, but not legal interest in them will be held by the client; and

(c) the client and the person intend that the person will use client contributions of the client to generate a financial return or other benefit from the person's investment expertise.

1. The plaintiffs also tendered in evidence further documents that included descriptions and definitions of managed discretionary account services, including a Regulatory Guide issued by the Australian Securities and Investments Commission[27] and an ASIC class order dated 21 September 2005.[28] Those documents do not, in my view, materially add to the definition of 'MDA service' as it appears in the AFSL itself.
2. The issue in relation to the Unauthorised Transactions exclusion is, therefore, whether the admissions in the statement of claim in the Federal Court action, and in particular the allegation in [23.7] that Stripe had undertaken 'discretionary trading without complying with the financial services laws', establishes that Stripe Capital was operating an 'MDA service' contrary to the AFSL.
3. In my view, it is clear from the definition in the AFSL that an 'MDA service' is one based upon a broad authorisation being given, and necessarily agreed to, by the client for the particular financial services professional to manage portfolio assets at the professional's discretion. The provision of an MDA service, in my view, necessarily involves the agreement or authorisation of the client.
4. There is no suggestion in the statement of claim that any of the plaintiffs agreed with Stripe Capital that Stripe Capital could manage their portfolio assets at its discretion. Indeed, quite the opposite. The allegations in the statement of claim, as a whole, are to the effect that the agreement between the plaintiffs and Stripe Capital was that it would manage the plaintiffs' portfolio assets solely on the basis of individual instructions to purchase or sell those assets.[29]
5. The fact that a person, without the agreement of the client, engages in trading with portfolio assets in a way that may broadly be described as discretionary cannot, in my view, be characterised as that person providing an MDA service contrary to the licence. Such conduct might, of course, be in breach of tortious or contractual duties, and actionable. However, what cannot be said is that the person is thereby providing the particular form of service defined in the AFSL as an MDA service.
6. Less still, in my view, could it be said that the pleading in [23.7] of the statement of claim that Stripe Capital engaged in the conduct of 'undertaking discretionary trading without complying with the financial services laws' is an admission, or otherwise establishes, that Stripe Capital operated an unauthorised MDA service within the meaning of AFSL. In my view, it is an allegation in perfectly general terms, that cannot reasonably be given such a construction.
7. For these reasons, in my view, QBE's pleaded reliance on the Unauthorised Transactions exclusion is not made out.
8. In the course of oral submissions at trial, QBE appeared to expand its reliance upon the Unauthorised Transaction exclusion by reference to the broader expression 'discretionary and unauthorised trading' that appears in [15] of its defence. That is, Senior Counsel for QBE submitted that if a lack of agreement meant that Stripe Capital could not be characterised as providing an MDS service, 'you are worse than that because you're not even bothering to tell your client, [and] you are necessarily outside your licence'.[30]
9. I reject that broader contention for the following reasons.
10. First, it was not QBE's case. As I have noted above, in both QBE's pleaded case and its submissions for trial,[31] the only matter relied upon by QBE, in the context of the Unauthorised Transactions exclusion, was the provision of an MDA service within the meaning of the AFSL.
11. Secondly, and in any event, the Unauthorised Transactions exclusion is directed to whether the Insured has an AFSL and an appropriate provision of a 'Financial Service' under the AFSL.
12. Financial Service is defined in the Policy by reference item 6 of the Policy Schedule. Item 6 of the Schedule identifies the Financial Services as 'Practising as a securities broker including but not limited to', inter alia, purchases, sales and dealings in and subscriptions to securities. That is, relevantly, the 'service' (or activity) that must be authorised by the AFSL for the purposes of the Unauthorised Transactions exclusion. It is clear from condition 1 of the AFSL under the heading 'Authorisation' (reproduced, in part, above), that the AFSL authorised those activities.
13. While the actual conduct of Stripe Capital in buying and selling securities alleged by the plaintiffs in the Federal Court action may properly be characterised as being in breach of its duties and in breach of the terms of the agreement provided by the plaintiffs, it cannot be said that the AFSL did not authorise the 'Finance Service' itself (i.e. dealing in securities) within the meaning of the Unauthorised Transactions exclusion. The fact that a person may be in breach of its duties under their licence is not the same as the licence not authorising, in general terms, the service or activities undertaken by the licensee.
14. Put another way, on its proper construction, the Unauthorised Transactions exclusion does not apply simply because the claim relates to conduct that is contrary to an AFSL by reason of that conduct being a breach of professional duty.
15. Indeed, in my view, were the Unauthorised Transactions exclusion in the Policy to be construed such that any departure from the authority of the client or the proper conduct of the professional service provider's business would thereby be regarded as without the appropriate authorisation for the provision of the financial service under the AFSL, it would negate the Policy itself.[32]
16. Rather, the Unauthorised Transactions exclusion is to be construed so as to ensure that particular prohibitions or limits on the services that a person is entitled to provide will be observed and excluded from the Policy.
17. Accordingly, in my view, taking the factual matters in the statement of claim at their highest, QBE has not discharged its onus of establishing that the Unauthorised Transactions exclusion applied to the claim or claims made by the plaintiffs.
18. The Unauthorised Transactions exclusion does not apply.

1. The Conflict exclusion raises more difficult questions. In that regard there are a number of issues between the parties.
2. First, a central question is whether the Conflict exclusion applies to claims against ASANDAS in relation to conflicts by Stripe Capital. As noted above, in accordance with the Standard Policy Form, Stripe Capital is not an 'Insured' within the meaning of cl 7.26 of the Policy because, while an authorised representative, it was not also a director, officer or employee of ASANDAS or its subsidiary.
3. In order to bring conflicts by Stripe Capital within the Conflict exclusion as it applies to ASANDAS, QBE relies upon the Stripe Endorsement.[33] As a matter of construction, QBE accepts that, absent the Stripe Endorsement, conflicts on the part of Stripe Capital would not fall within the Conflict exclusion in cl 4.3 in this case.[34]
4. The second issue that arises in relation to the Conflict exclusion relates to a number of submissions made by the plaintiff to the effect that, even if it were 'Insured' within the meaning of cl 7.26 of the Policy, on its proper construction the Conflict exclusion could not apply to the conduct of Stripe Capital.
5. The final issue in relation to the Conflict exclusion, is whether (in the event that Stripe Capital is an Insured to whom the Conflicts exclusion applies), the facts as set out in the statement of claim sufficiently connect a conflict on the part of Stripe Capital to the loss for which the plaintiffs claim.
6. The second and third issues only arise in the event that the Stripe Endorsement has the effect that Stripe Capital is an 'Insured' within the Conflict exclusion as it applies to a claim under the Policy by ASANDAS.
7. I turn to that issue first.

1. Whether the Stripe Endorsement has the effect contended for by QBE is a matter of contractual construction. As a contract of insurance, the Policy (including any endorsements that form part of the contract) is to be interpreted in accordance with the rules applicable to the construction of commercial contracts generally.
2. As stated by the High Court in Wilkie v Gordian Runnoff Ltd:[35]

In McCann v Switzerland Insurance Australia Ltd, after observing that, as a commercial contract, a policy of insurance should be given a businesslike interpretation, Gleeson CJ added:

'Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure'.

... In construing the Policy, as with other instruments, preference is given to a construction supplying a congruent operation to the various components of the whole.

1. Similarly, as to the construction of commercial contracts generally, the plurality in Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd confirmed:[36]

...The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean ... As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating.' ... [U]nless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties...intended to produce a commercial result'. A commercial contract is to be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience. (footnotes omitted)

1. This is, of course, an objective exercise, which 'depends on finding the meaning of the language of the contract'[37] and 'what each party by words and conduct would have led a reasonable person in the position of the other party to believe'.[38]
2. Applying these principles to the present case, it is appropriate to commence by observing that, as accepted by QBE, absent the Stripe Endorsement, there can be no doubt that the indemnity provided to ASANDAS by the Policy was not subject to a Conflict exclusion in relation to claims based upon a conflict on the part of Stripe Capital.
3. This construction is the only one that can be placed on the language used by the parties in this Policy in confining the meaning of 'Conflict' to those of an 'Insured', as defined. In this regard, the Conflict exclusion may be contrasted with other exclusions in the Policy, which extend to conduct by persons other than the Insured, as defined (such as cl 4.2, 4.8 and 4.24).
4. The question then is whether, and to what extent, the Stripe Endorsement brought about a variation in operation of the Policy. In this respect, I accept that the Stripe Endorsement forms part of the contract as a whole and that all of the various components are to be construed so as to give a congruent operation to the various parts.[39]
5. The Stripe Endorsement, signed by QBE on 27 February 2008, provides as follows:[40]

Named Insured: Australian Stockbroking & Advisory Services Limited

Endorsement attaching to and forming part of policy no. 776342FIP

With effect from 25 February 2008 the following amendments applies:

It is hereby noted and agreed that the following has been added in the Endorsement Section of the Policy Schedule:

Nominated Authorised Representative Extension - 120905 (amended 200208)

QBE agrees to indemnify a Nominated Authorised Representative as if an Employee, against civil liability arising from any Claim first made against the Nominated Authorised Representative and notified to QBE during the Period of Cover as a result of a breach of professional duty in the conduct of the Financial Service provided on behalf of the Insured.

PROVIDED ALWAYS THAT:

(a) such Nominated Authorised Representative has entered into a written Authorised Representative agreement with the Insured for the provision of representative services to the Insured in accordance with the Financial Service.

(b) such Nominated Authorised Representative is subject to the training, monitoring and supervision of the Insured;

(c) such indemnity shall be specifically excess of any other indemnity available to the Nominated Authorised Representative;

(d) the Nominated Authorised Representative shall observe and be subject to all the terms of this Policy Insofar as they can apply;

(e) such Claim would otherwise be covered by this Policy if made against the Insured;

(f) this endorsement does not otherwise provide indemnity to the Nominated Authorised Representative;

(g) such indemnity shall not apply to any Claim brought by or on behalf of the Nominated Authorised Representative;

(h) the indemnity provided by this endorsement shall be part of and not in addition to the Limit of Indemnity stated in the Schedule;

For the purpose of this endorsement Nominated Authorised Representative shall mean:

It does not mean a Director, Officer or Employee.

Where the provisions of the endorsement conflicts with Clause 7.18 Employee, then the terms of this endorsement will prevail.

In all other respects this policy remains unchanged.

1. The object which the Stripe Endorsement is intended to secure is clear from the document itself.
2. That object is to confer a right of indemnity under the Policy on Stripe Capital,[41] which it did not otherwise have the benefit of prior to the endorsement. This, of course, did not make Stripe Capital a party to the contract. It did, however, confer upon Stripe Capital a right to indemnity in relation to any liability that it (Stripe Capital) may have as a result of a claim made against it in relation to services provided on behalf of ASANDAS. Stripe Capital would be entitled to recover from QBE pursuant to that indemnity, notwithstanding that it is not a party to the Policy, by reason of s 48 of the Insurance Contracts Act 1984 (Cth).
3. The mechanism adopted by the parties to bring about this result in the Stripe Endorsement was for QBE to agree indemnity Stripe Capital 'as if an Employee'. It is, in a sense, a deeming provision for the purposes of the Stripe Endorsement and in particular for the purpose of indemnifying Stripe Capital.
4. In this regard, at the conclusion of the trial, I raised with the parties the admonition, in the case of statutory construction, to the effect that an 'as if' or deeming provision should be construed so as to be confined to the purpose for which it is employed (recognising, of course, that not all deeming provisions create a 'fiction' or operate in the same way).
5. In the context of statutory construction, for example, in East Finchley Pty Ltd v Federal Commissioner of Taxation, Hill J said the following:[42]

As Fisher J said in FCT v Comber [1986] FCA 92; (1986) 64 ALR 451, 'In my opinion, deeming provisions are required by their nature to be construed strictly and only for the purpose for which they are resorted to: Re Levy; Ex parte Walton (1981) 17 Ch D 746 per James J at 756. It is improper in my view, to extend by implication the express application of such a statutory fiction.' See too Muller v Dalgety & Co Ltd [1909] HCA 67; (1909) 9 CLR 693 at 696 and Wiest v Director of Public Prosecutions [1988] FCA 450; (1988) 86 ALR 464 at 485-6 per Burchett J.

1. Applying such an approach to this case, if it be appropriate, would recognise that Stripe Capital was to be treated 'as if' an Employee for the purposes of the indemnity given to Stripe Capital, and for that purpose only. It would not mean, for example, that Stripe Capital was thereby an 'Employee' within the meaning of the Policy for all purposes, including in relation to the indemnity provided to ASANDAS.
2. I am mindful, of course, that approaches to the construction of statutes, such as that reflected in in East Finchley Pty Ltd v Federal Commissioner of Taxation, cannot, and should not, too readily be applied to contractual construction. Statutory construction and contractual construction are different exercises. Nevertheless, both involve attention to the language of the particular instrument, informed by its purpose or object.
3. The parties were invited to file supplementary submissions in relation to the effect of the Stripe Endorsement on the construction of the Policy as a whole and, in particular, the extent to which the construction of a deeming provision should be confined to the purpose for which it is resorted to.
4. QBE's contention, in essence, was that the deeming ('as if') provision was a mechanism to make Stripe Capital an 'Employee' and therefore an 'Insured' for all purposes under the Policy, including for the purposes of the indemnity to ASANDAS. This contention is reflected in QBE's supplementary submissions as follows:[43]

...The 'as if' agreement that they are to be treated in this way does no more that provide the mechanism for making, through the 'Employee' route, [Stripe Capital] an 'Insured' for the purposes of the contract.

Given that a capital E 'Employee' already forms part of the privately agreed dictionary between the parties to the contract, the 'as if' agreement in this case is best characterised as providing for an expansion of the definition of 'Employee' beyond the previously agreed dictionary definition that had hitherto been agreed to, rather than to be seen as the parties seeking to create any form of fiction as the words 'as if' are sometimes said to achieve in a statutory context (but if the words are to be treated as a synonym of deemed that is not always the result). That is because the parties have already sought to depart from the constraints of common English meaning by the selection of their own dictionary. The words 'as if' in this context are akin to adding to the definition of Employee the words 'including the Nominated Authorised Representatives referred to in the Endorsement'. (emphasis added)

1. The first sentence of these submissions, with one qualification, may be readily accepted. That is, treating Stripe Capital 'as if' an Employee did provide the mechanism for making, through the 'Employee' route, an 'Insured'. It is the words 'for the purposes of the contract', however, that are the contentious part of this submission. In its terms, the Stripe Endorsement does not go that far. That is, by its terms, the Stripe Endorsement does not make Stripe Capital an Insured 'for the purposes of the contract'; rather, by its terms, it does so for the purposes of 'indemnifying Stripe Capital.
2. Providing a direct indemnity to Stripe Capital (and Chess Capital) was, in my view, the only purpose of the Stripe Endorsement. That was, to use Gleeson CJ's expression in McCann v Switzerland Insurance Australia Ltd,[44] the object it was intended to secure.
3. Put another way, in my view, it overstates the position to submit (as in the passage emphasised above) that the words used in the Stripe Endorsement are 'akin to adding to the definition of Employee the words "including the Nominated Authorised Representatives referred to in the Endorsement"'.
4. That is precisely what the Stripe Endorsement does not do. It does not simply vary, or add to, the definition of 'Employee' to include Stripe Capital (and Chess Capital). Had the parties, by words they used, done just that (simply varied the Policy to add Stripe Capital to the definition of 'Employee'), there would be no doubt that Stripe Capital would be an 'Employee' and 'Insured' for all purposes under the Policy.
5. Indeed, that would have been a simple thing to do. The parties could have varied the Policy by an endorsement providing that Stripe Capital (and Chess Capital) were 'Employees' within the meaning of the Policy. This was not, however, what the parties did and it was not the language that they chose.
6. Rather, in my view, objectively construed, the Stripe Endorsement, reveals a common intention that Stripe Capital was to be treated 'as if an Employee' for the purposes of the indemnity given to Stripe Capital, and only for that purpose. In such a case, in applying the Policy to a claim against Stripe Capital it would be treated as an Employee and thereby covered by the definition of 'Insured'. It did not, however, deem or define Stripe to be an 'Employee' or 'Insured' for all purposes under the Policy; and in particular, for the purposes of ASANDAS' indemnity.
7. My reasons for that conclusion follows.
8. First, as I have said, the language used by the parties in the Stripe Endorsement, objectively, confines its application to the indemnity given to Stripe Capital. The provision of a limited indemnity (for example it only applies to conduct 'on behalf of the Insured') is the only purpose or object that can be discerned from the Stripe Endorsement.
9. Secondly, while it is to be treated as forming part of the Policy, the indemnity provided by the Stripe Endorsement is clearly intended to have a distinct and separate operation from the other indemnities provided by the Policy. The indemnity is, for example, subject to particular provisos that do not apply in the same way to other persons insured under the Policy.
10. Thirdly, the limited operation of the Stripe Endorsement is expressly confirmed in the endorsement document itself.
11. For example, the Stripe Endorsement concludes with the words, "In all other respects this policy remains unchanged."
12. Prior to the Stripe Endorsement, as QBE accepts, conflicts on the part of Stripe Capital would not fall within the Conflict exclusion in cl 4.3 to ASANDAS' right of indemnity under the Policy.[45] And the Stripe Endorsement does not, in its terms purport to reduce or affect ADANDAS' right of indemnity under the Policy.[46]
13. Given that the Stripe Endorsement contains no express words purporting to affect ASANDAS' right of indemnity under the Policy (or the exclusions that apply to it), and that it expressly confirmed that 'in all other respects [the] policy remains unchanged', a reasonable businessperson would not conclude that, by granting an indemnity to Stripe Capital, ASDANDAS was intended to lose part of its own indemnity.
14. In this context, QBE seeks to emphasise that the Stripe Endorsement also provides, in the previous sentence, that 'where the provisions of the endorsement conflicts with Clause 7.18 Employee, then the terms of this endorsement will prevail.'
15. QBE submits that this 'evidences a clear intention of the parties to the contract to amend the definition of Employee to include Stripe'. I disagree. That is not what the sentence says. It says 'where the provisions of the endorsement' conflicts with the definition of 'Employee', the endorsement prevails. That begs the question as to the circumstances in which (i.e. 'where') the provisions of the endorsement so conflicts. In light of the object and the language of the Stripe Endorsement that could only be 'where' the indemnity to Stripe Capital is concerned. Similarly, the words 'the terms of this endorsement will prevail' invite attention to what the endorsement, objectively construed, purports to do, which, as I have concluded, is to provide an indemnity to Stripe Capital.
16. For example, if a claim were made by Stripe Capital under the indemnity provided by the Stripe Endorsement, it would be necessary, in that case, to read the words 'Employee' and 'Insured' as references to Stripe Capital. That is indeed the consequence contemplated by proviso (e) in the Stripe Endorsement, which is to the effect that claims against Stripe Capital would be covered 'if made against the Insured'.
17. In reaching this conclusion, I recognise that such a construction involves reading the references to 'Insured' in the Policy distributively, depending upon which particular person seeks to claim indemnity under the Policy. In particular, it would involve a construction that would read 'Employee' and 'Insured' as Stripe Capital only in claims against Stripe Capital itself.
18. There is, however, in my view, nothing unusual about such a result. Indeed, it is a construction which gives the Policy as a whole (including the Stripe Endorsement) a business-like interpretation. It is also consistent with the approach that is applied in different, but related, contexts in relation to insurance contracts.
19. This issue, for example, often arises in the need to distinguish, in particular contexts, between 'the Insured' and 'an Insured', where more than one person is covered by a particular insurance contract (but where there is only one contracting party). There are many such examples in the Policy in the present case.[47] It is apparent from the Stripe Endorsement itself, for example, that it uses 'Insured' (for example in proviso (a), (b), (e)) to refer exclusively to the 'Named Insured' (i.e. ASANDAS).
20. A useful example of such a distributive approach to insurance policies may be seen in relation to cross-liability clauses, which commonly use the expression 'as if' in the context of applying policies in relation to multiple 'Insured'.
21. In Speno Rail Maintenance Australia Pty Ltd v Hamersley Iron Pty Ltd (Speno Rail v Hamerlsey),[48] for example, the cross-liability clause in relevant policy provided:

For the purpose of this Policy, each of the parties comprising the Insured shall be considered as a separate legal entity and the word 'Insured' shall apply to each party as if a separate policy had been issued to each of the said parties but nothing herein contained shall operate to increase the Company's Limits of Liability stated in the Schedule. (emphasis added)

1. The policy in that case was a General Liability policy issued by Zurich Australian Insurance Ltd (Zurich) which covered both Hamersley Iron Pty Ltd (Hamersley) and, its contractor, Speno Rail Maintenance Australia Pty Ltd (Speno). The issues in that case concerned a claim by an employee of Speno, Mr Nolan.
2. One of the issues in Speno Rail v Hamersley concerned whether an exclusion clause in the policy excluding liability to any person 'arising out of ... the employment of such person in the service of the Insured' (the employee exclusion) applied to a claim against Hamersley. The trial judge held that, because Mr Nolan was employed by Speno (an insured) the employee exclusion applied to exclude indemnity for a claim against Hamersley.
3. The Full Court disagreed. Relying upon the cross-liability clause to the effect that the policy applied 'as if' a separate policy had been issued to each party comprising the 'Insured', their Honour's concluded that the reference to 'Insured' in the employee exclusion was to be read as applying to the employees of the particular insured the subject of the claim (and not all insured under the policy).
4. In this regard, Wheeler J stated:[49]

On its face, as I have noted, the effect of the cross liability clause would appear to be to require that the reference to the 'Insured' in the employer's liability exclusion be read as a reference to Hamersley where the claim is made by Hamersley in respect of its interest. In the context of a policy in which many, but not all, of the clauses are capable of being read as the cross liability clause would appear on its face to suggest, the question is whether there is anything in the wording, nature or context of the employer's liability clause which would suggest that that clause should be read as if the reference to the insured were a reference to Speno.

In relation to this issue, Zurich suggests that to read the word 'Insured' as if it referred to Hamersley rather than Speno, would be to create a 'dramatic and totally different risk ... when it could not have been intended by the parties.' However, there is nothing in the circumstances of the contract which, to my mind, indicates that the intention of the parties was to exclude liability only in respect of persons employed by Speno. One can readily imagine circumstances in which liability would arise in Hamersley for injury arising out of the course of employment of one of its employees as a result of the performance of the contract by Speno. ... A risk of this kind would, one would assume, be covered by Hamersley's own employer's liability policy, and it would appear to me to be entirely possible that the parties would have intended that Zurich's liability to Hamersley in respect of Hamersley's own employees should therefore be excluded. There appears to me to be no particular reason, having regard to the purpose and scope of the policy, to consider that the parties would have intended the reference to the Insured in this clause always to read as a reference to Speno.

...

... I would therefore respectfully disagree with his Honour's view that the employer's liability exclusion in the general liability policy operated so as to exclude Zurich's liability to Hamersley in relation to the injury sustained by Speno's employee, Mr Nolan...

1. Conclusions to the same effect were reached by Malcolm CJ,[50] and Ipp J.[51]
2. A similar, distributive, approach to identifying the 'insured' can be seen in the New South Wales Court of Appeal in National Vulcan Engineering Insurance Group Ltd v Transfield Pty Ltd.[52]
3. While Speno Rail v Hamersley was clearly dealing with a different contractual provision, in my view, it is nevertheless consistent with the construction I prefer. Where, as in the present case, there is a provision indemnifying Stripe Capital 'as if' it was an Employee, the terms of the Policy as a whole may be readily applied to according to their tenor in relation to claims made against Stripe Capital, without altering the Policy as it is intended to apply to claims against ASANDAS.
4. Such a construction gives a congruent operation both to the indemnity to Stripe Capital and the provision in the Stripe Endorsement leaving the Policy otherwise 'unchanged'.
5. Of course, the present action relates to a claim against, and a liability owed by, ASANDAS, not a claim against, or a liability owed by, Stripe Capital.
6. For the above reasons, in my view, in relation to a claim against ASANDAS, Stripe Capital is not an 'Insured' for the purposes of the Conflict exclusion. There is no suggestion of a Conflict on the part of ASANDAS.
7. As set out above, it is both the language chosen by the parties and the object of the Stripe Endorsement that, in my view, require a construction of the Policy that, in relation to a claim against ASANDAS, Stripe Capital is not an 'Insured' for the purposes of the Conflict exclusion.
8. Accordingly, in my view, the Conflict exclusion does not apply in the present case.
9. In light of this conclusion, it is not strictly necessary for me to determine the other issues in relation to the application of the Conflict Exclusion.
10. Nevertheless, in the event that I am wrong about the first issue, I turn to those issues.

Could the Conflict Exclusion otherwise apply to Stripe Capital?

1. As noted above, the plaintiff made a number of submissions to the effect that, as a matter of construction, even if Stripe Capital were an 'Insured' within the meaning of cl 7.26 of the Policy for the purposes of a claim against ASANDAS, the definition of 'Conflict' in cl 7.11 could not apply to the conduct of Stripe Capital.
2. I will deal with each of those submissions in turn.[53]
3. First, the plaintiffs submitted that the second part of the definition of Conflict in cl 7.11 (i.e. 'where an Insured acts for a client whilst being subjected to a contrary interest, being a personal advantage interest': cl 7.11(b)) was only capable of applying to 'Insured' who were natural persons.[54]
4. In this regard, the plaintiffs relied upon the expression 'personal advantage' interest as it appears in that part of the definition of Conflict. In essence, the plaintiffs submitted that the word 'personal' could only apply to natural persons, and that it could have no application to an insured who was a body corporate.
5. In that respect, the plaintiffs relied upon various definitions of the word 'personal' in the New Shorter Oxford English Dictionary, including:

Of, pertaining to, concerning or affecting a person as an individual (rather than as a group or of the public, or in a professional capacity etc.); individual; private; One's own.

1. This argument, in my view, must be rejected.
2. It is clear from the terms of cl 7.11 that the clause, as a whole, reflects an intention to include both:

(a) conflicts of duty between clients of an insured, (i.e., the conflict identified in subparagraph (a)); and

(b) conflicts of interest that occur between the interest of the client and the interest of the insured (i.e., the conflict identified in subparagraph (b)).

1. As to the latter, it is in this sense, and only this sense that the word 'personal' is used. As reflected in one of the dictionary definitions referred to by the plaintiffs, it is intended to refer to an interest that is to 'one's own' advantage. It is not, in my view, intended to exclude interests of corporate insured or professional advisers (who are, of course, legal 'persons') which conflict with the interests of the client.
2. Otherwise, the definition would have the absurd result that no conflict between a corporate adviser and its client could fall within the definition of conflict within the meaning of the Policy (including, in this case, the named Insured, ASANDAS). Such a construction would truly make 'commercial nonsense' of the provision. [55]
3. The second textual matter relied upon by the plaintiffs in relation to the construction of the 'Conflict' definition was the words 'whilst being subjected to' (as in 'whilst being subjected to a contrary interest'). The plaintiffs submitted that the words 'being subjected to' indicated that there must be some external inducement or pressure on the insured; as the plaintiffs put it 'some other thing is subjecting the conflicted party to its conflict'.[56]
4. Again, the plaintiffs relied the New Shorter Oxford English Dictionary definition of 'subject' including:

Under the control or influence of, subordinate to. ... Under obligation or bound ... Submissive obedient.

Make submissive or dependent subordinate.

1. By way of illustration, the plaintiffs referred, on more than one occasion, to the Oxford English Dictionary's example of Joseph Heller having described Athens as being 'subjected to Macedonian rule, first, by Philip, then by Alexander'.[57]
2. This submission, also, must be rejected.
3. While I agree that the use of the expression 'subjected to' in the definition of Conflict is not particularly elegant, in my view a person who prefers their own interests to that of their client may properly be described as being 'subjected to' an interest contrary their client. It is not necessary that the contrary interest be imposed from outside, as with Philip II of Macedon's conquest of Athens at the Battle of Chaeronea.
4. Indeed, in my view, it would turn the concept of a conflict of interest and duty on its head to construe a personal advantage interest giving rise to a conflict with a duty to a client as needing to be imposed from the outside. The whole basis of the law as it relates to conflicts between a fiduciary's duty to its client and its personal interest is that the conflict derives from within the fiduciary (contrary to their conscience), not from without.
5. The final textual matter raised by the plaintiffs as displacing the Conflict exclusion related to the Fraud and Dishonesty exclusion. That exclusion, which appears in cl 4.8 of the Policy, is the subject of an extended indemnity.
6. Clause 4.8 itself excludes indemnity in respect of any claim (original emphasis):

directly or indirectly based upon, attributable to, or in consequence of:

• (a) any actual or alleged dishonest, fraudulent, criminal, or malicious act or omission of any Insured or their consultants, sub-contractors, or agents; or
• (b) any act or omission of any Insured or their consultants, sub-contractors, or agents committed or alleged to have been committed with a reckless disregard for the consequences thereof; or
• (c) wilful breach of any statute, contract or duty by an Insured or their consultants, sub-contractors or agents.

1. The relevant Policy Extension appears in cl 2.2, which provides in relation to fraud and dishonesty (original emphasis):

2.2 Fraud & Dishonesty

QBE agrees to indemnify the Insured against civil liability for compensation arising from any Claim made against that Insured which would otherwise be excluded by reason of Exclusion 4.8 (Fraud and Dishonesty) PROVIDED ALWAYS THAT:

• (a) such indemnity shall not be provided to any person committing or condoning any act, omission or breach excluded by reason of Exclusion 4.8 (Fraud and Dishonesty);
• (b) at the Insured's expense, the Insured must take or cause to be taken all reasonable steps to obtain reimbursement from any such person who acted dishonestly or fraudulently or from the legal representatives of any such person in the event of their death; and
• (c) the Insured shall cause any reimbursement so obtained to be paid to QBE after deducting any expenditure reasonably incurred by the Insured in obtaining such reimbursement.

1. In essence, the plaintiffs submitted that, because fraud and dishonesty by the Insured's agents is included within the cover provided by the Policy, the Conflict exclusion should thereby be read down. That is, the plaintiffs submitted, that as QBE 'cannot invoke the Fraud and Dishonest exclusion ... it would be inexplicable if [it] can rely upon the [Conflict exclusion] with the respect to allegations that plainly involve dishonesty'.[58]
2. That submission cannot be accepted.
3. On the contrary, it is clear from the Policy as a whole that each exclusion is intended operate independently, according to its terms. The fact that conduct would not be 'caught' by one exclusion does not mean that another exclusion cannot apply. As Lord Phillips observed in Kiriacoulis Lines SA v Compagnie D'Assurances d'Assurances Maritime Aeriennes et Terrestres (Camat) (The Demetra K):[59]

The effect of an exception is to save the insurer from liability for a loss which but for the exception would be covered. The effect of the cover is not to impose on the insurer liability for something which is within the exception.

1. Accordingly, in my view the Conflict exclusion is to be applied according to its own terms, and is not relevantly read down by reference to the Policy Extension in relation to fraud and dishonesty.
2. As a result, while they do not strictly arise (given my conclusion in [146] - [147]), I would reject the plaintiffs' further submissions as to the construction of the Conflict exclusion.
3. It remains to consider whether, if (contrary to my conclusion in [146] - [147] above) Stripe Capital is an 'Insured' for the purposes of the Conflict exclusion as it applies to ASANDAS, QBE has discharged its onus of establishing that any of the loss or liability relied upon by the plaintiffs is covered by the Conflict exclusion.

1. Again, this issue only arises if I am wrong as to whether Stripe Capital is an 'Insured' for the purposes of the Conflict exclusion in a claim brought by ASANDAS.
2. In that event it would be necessary to determine whether, as a matter of fact, the claim (or claims) by the plaintiffs are based on or attributable to a Conflict. This is a question, essentially, of causation; that is, of establishing the nexus between the exclusion and the loss claimed.
3. In this regard the nexus in cl 4.3 of the Policy is of the broadest kind: 'directly or indirectly based upon, or attributable to or in consequence of a Conflict'. The relationship need not be the proximate or direct cause.[60] All that is required is that there by some 'non-coincidental nexus' between the loss claimed and the relevant Conflict.[61]
4. Determining this issue is, to a significant extent, a matter of construing [23] of the statement of claim, which sets out the alleged conduct of Stripe Capital and the pleadings in the statement of claim as to the loss suffered by the plaintiffs.
5. In that regard, QBE's case is that the following allegations in the statement of claim prove the relevant 'personal advantage interest' for the purposes of the Conflict exclusion:

(a) Obtaining secret commissions from Leveraged Equities and using loan funds to trade securities to recover existing losses (pleaded in [21.1], [22.1] and [23.4] of the statement of claim);

(b) Drawing down funds from the LE Margin Loan Account to undertake high volume trading to earn commissions without any commensurate benefit to the plaintiffs ([21.3], [22.3] and [23.6] of the statement of claim);

(c) Undertaking high volume trading to earn commissions without any commensurate benefit to the plaintiffs ([23.3] of the statement of claim).[62]

1. Accordingly, to engage the Conflict exclusion, QBE relies upon [23.3], [23.4] and [23.6] of the statement of claim.
2. Assuming Stripe Capital to be an 'Insured' for present purposes, each of the allegations in [23.3], [23.4] and [23.6] of the statement of claim would, in my view, fall within the Conflict exclusion. They plainly involve an allegation of Stripe Capital preferring its own interests over those of the plaintiffs. Each of those sub-paragraphs pleads conduct by Stripe Capital in which it was alleged to have preferred its own interests over that of the client. In relation to [23.4] and [23.5] in relation to the Leverages Equities allegations, it is apparent from the pleas at [18] to [22] of the statement of claim that the entirety of the plaintiffs' relationship with Leveraged Equities was alleged to arise in a circumstance of conflict on the part of Stripe Capital.
3. Accordingly, as a matter of fact, the application of the Conflict exclusion depends upon it being the proper conclusion, from the admissions in the statement of claim, that some or all of the losses claimed by the plaintiffs in the Federal Court action (and for which they obtained judgment) were 'directly or indirectly based upon, attributable to, or in consequence' of the conduct pleaded in [23.3], [23.4] and [23.6] of the statement of claim.
4. QBE's case is that all of the losses claimed by the plaintiffs in [25] of the statement of claim are attributable to the conduct pleaded in [23.3], [23.4] and [23.6] of the statement of claim.
5. The plaintiffs deny that all of the losses can be attributed to those allegations in the statement of claim. Rather, the plaintiffs submit, by reference to the five tables that appear in [25] of the statement of claim, that at least in relation to the first four tables, those losses are attributable only to conduct pleaded in [23.1] and [23.2] of the substituted statement of claim.
6. The losses pleaded in those four tables are:

(a) Trading losses of Rastus as trustee of TY Super (Table 1);

(b) Trading losses of Rastus as trustee of BY Super (Table 2);

(d) Trading losses of Reid Park General Account (Table 4);

1. In that respect, the plaintiff relies in particular upon the fact that each of those tables identifies the securities traded by reference to a classification of either D (being 'Derivatives') or ONA (being 'Ordinary Shares Not Authorised Securities'[63]). As can be seen, every stock from which the losses in those tables were derived is classified in [25] of the statement of claim either as a derivative or otherwise not 'Authorised Securities'.
2. The significance of the reference to Authorised Securities and Derivatives can be readily seen in [23.2] of the statement of claim, which pleads that Stripe Capital 'bought securities on behalf of Rastus, Young Investments and Reid Park; which were not Authorised Securities including options and derivatives'.[64]
3. It may, therefore, be concluded from the references to 'Derivatives' and 'Ordinary Shares Not Authorised Securities', and I find, that all of the losses in Tables 1 to 4 are directly attributable to the conduct pleaded in [23.2]. That conduct is not conduct that would fall within the definition of 'Conflict'. As is apparent from QBE's pleaded case, QBE did not suggest otherwise.
4. The real issue is whether or not those losses can also be said to be directly or indirectly attributable to the conduct pleaded in [23.3], namely that Stripe Capital:

[W]ithout authority to do so undertook high volume trading of securities in order to effect transactions on which commissions would be earned by Stripe without any or any reasonably commensurate benefit being earned by Rastus, Young Investments and or Reid Park[.]

1. If the losses pleaded in Tables 1 to 4 can be so attributed, they would be attributable to a Conflict, within the meaning of the Policy.
2. Given that the onus is on QBE to establish that the loss claimed is loss within an exclusion, it is for QBE to demonstrate that the allegation in [23.3] has the necessary connection with the losses (i.e. 'directly or indirectly based upon, or attributable to or in consequence of').
3. It is correct to say, in my view, that such a finding is made more difficult by the fact that, other than the references to 'Derivatives' and 'Ordinary Shares Not Authorised Securities', the statement of claim provides little or no information as to the precise circumstances attending the trading referred to in Tables 1 to 4.
4. That is, the statement of claim does not directly link the conduct in [23.3] with any particular trading losses referred to in those tables. The causal connection pleaded in the statement of claim is entirely general (i.e. 'as a result of the breaches pleaded in [24]'). Other than the references to 'Derivatives' and 'Ordinary Shares Not Authorised Securities' (and in Table 5 to Leveraged Equities), the pleading does not link particular breaches with particular losses.
5. For example, in relation to [23.3] itself, there is no specific pleading (or other evidence) as to 'high volume trading of securities' that would enable the reader to conclude that a particular loss was the result of high volume trading. It may be that some of them were and some of them were not, a matter that may have become clearer had the Federal Court action gone to trial (or evidence been led in this action). For present purposes, however, it is not possible to tell from the statement of claim itself and, as set out above, the allegations in the statement of claim are the only evidence available.
6. It may also be accepted that, at least insofar as the Leveraged Equities allegations are concerned, some of the sub-paragraphs in [23] of the statement of claim relate only to Young Investments and Reid Park. It cannot, therefore, be said, as a matter of the pleading as a whole, that each of the allegations in [23.1] through to [23.7] were operative in relation to all activity undertaken by Stripe Capital. Nevertheless, it is clear that the allegation in [23.3] relates to all of the plaintiffs.
7. In this regard, QBE seeks discharge its onus by a construction of the statement of claim as a whole, for example, to identify [14.1] as identifying the plaintiff's trading strategy as being a purchase and hold strategy and that the entirety of the conduct pleaded in [23.1] to [23.3] was, in essence, 'of a piece' and in pursuit of 'an ongoing trading strategy over that entire period, on the general accounts, for the purposes of earning commission'.[65]
8. There is, in my view, much force in this submission. The statement of claim as a whole presents Stripe Capital, through Mr King, as having embarked on a course of conduct, with no reference to the plaintiffs, which course of conduct was directed to its own interests rather than the interests of the plaintiffs. The proper inference from the facts pleaded in the statement of claim is that Stripe Capital was motivated by its own interests, in a manner in conflict with the interests of the plaintiffs. Given that none of the trading alleged by the plaintiffs to have occurred was authorised by them, a common sense reading of the statement of claim cannot be that some of the trades undertaken by Stripe Capital were unaffected by its conflict of interest and duty.
9. In that regard, I accept the submission of QBE that it would require an irrational reading of the statement of claim to reach the conclusion that, in a particular circumstance, Stripe Capital put aside its self-motivation to trade in a security that was nevertheless outside the authority that the client had given. Rather, the proper inference from the statement of claim as a whole is that all of the relevant activity by Stripe Capital was motivated by its 'conflicted' self-interest.
10. I am, therefore, satisfied and, were it necessary to do so, would find that the necessary causal connection exists between [23.3] and the losses claimed in Tables 1 to 4. This is particularly so given the expansive test for causation in relation to cl 4.3 of the Policy.
11. That is, I would, if necessary, have found that the losses claimed in Tables 1 to 4 were 'directly or indirectly based upon, or attributable to or in consequence of' a conflict on the part of Stripe Capital.
12. That conclusion is even more readily able to be reached in relation to Table 5, being the losses arising from to the Leveraged Equity account of Reid Park.
13. Table 5 does not classify the nature of the securities. It simply lists the stock name and the losses from each stock. In relation to these losses, which result from the Leveraged Equity loan, in my view it is clear that the trading in respect of that loan must necessarily be related to the conduct pleaded at [23.4] and [23.6] of the statement of claim. Of course, this trading was alleged to occur in a context in which (on the pleaded case) the plaintiffs' entry into the leveraged equity margin loan agreement was itself for the purpose of Stripe Capital's self-interest.
14. Indeed, the plaintiffs accepted, in submissions, that if Stripe Capital was an 'Insured' for the purposes of the Conflict exclusion, that only rational way that the judgment could have been delivered in relation to the Reid Park Leveraged Equity account was based on a conflict on the part of Stripe Capital as pleaded in [23.4] to [23.6] of the statement of claim.[66]
15. For those reasons, if necessary, I would also have found that the losses claimed in Table 5 were 'directly or indirectly based upon, or attributable to or in consequence of' a conflict on the part of Stripe Capital.
16. Accordingly, if (contrary to my conclusion in [145] above) Stripe Capital is an 'Insured' for the purposes of the Conflict exclusion as it applies to ASANDAS, QBE would be entitled to rely upon the Conflict exclusion in relation to all of the losses claimed by the plaintiffs.
17. Nevertheless, for the reasons that I have given, Stripe Capital is not an 'Insured' for the purposes of the Conflict exclusion as it applies to ASANDAS.
18. Accordingly, the Conflict exclusion does not apply.
19. As neither exclusion clause applies, the plaintiffs are entitled to judgment against QBE in the sum which corresponds to its liability to ASANDAS under the Policy.
20. This leaves, as the final matter for consideration, the issue as to how many 'Claims' there are within the meaning of the Policy.

1. One of the issues identified by the parties prior to trial was: 'what is the number of claims made by the plaintiffs in these proceedings?'
2. The issue joined between the parties was whether, as QBE contended, there was one 'Claim' within the meaning of the Policy[67] or whether, as the plaintiffs contended, there were four Claims.[68] In the course of submissions at trial QBE advanced, as an alternative, that there were three Claims.
3. While the parties identified this as an issue for determination, and made extensive written submissions in relation to it, it was not clear, prior to the trial, precisely what the relevance of the number of claims was to the action. Nor did the pleadings reveal how the resolution of this issue would affect the ultimate outcome.
4. As became apparent in the course of submissions, however, the only potential relevance of the issue was as to whether, and if so to what extent, a deductible might need be applied to any sums ordered under s 601AG of the Corporations Act.[69]
5. In that regard, it was not in dispute that the deductible for each 'Claim' under the Policy was $50,000. Potentially, therefore, an amount of $50,000 would need to be deducted from each Claim made against the Policy.
6. It will immediately be apparent that, once the relevance of the issue was identified in this way, the parties were, somewhat paradoxically, each contending for positions that were contrary to their respective interests. That is, QBE was contending for a maximum possible deductible of $50,000, whereas the plaintiffs were contending for a maximum possible deductible of $200,000.[70]
7. This issue is, however, further complicated by the fact that, under the Policy, there is a Limit of Indemnity of $10,000,000 for each Claim, and an Aggregate Limit of Indemnity of $10,000,000 for all Claims. Whether any deductible would need to be applied would, therefore, depend upon whether the Claim or Claims were within, or in excess of, the Limit of Indemnity and Aggregate Limit of Indemnity.
8. In this regard, the total liability owed to the plaintiffs by ASANDAS under the judgment in the Federal Court Action was $12,217,841.63 being:

1. As can be seen, while each amount is less than the Limit of Indemnity, the three amounts in total exceeded the Aggregate Limit of Indemnity.
2. In that regard, both parties accepted that the plaintiffs could not, in aggregate, receive an order under s 601AG for an amount exceeding $10,000,000. That is, $10,000,000 is the total amount that could be payable by QBE pursuant to that section. From QBE's perspective, it accepted that, if all of the sums fell within the Policy (i.e. the sums totalling $12,217,841.63), the plaintiffs would receive $10,000,000. In those circumstances, there would be no deductible applied as the total otherwise payable under the Policy would exceed the Aggregate Limit of Indemnity.[71]
3. While this may be correct from the perspective of QBE's total liability under the Policy, the issue as to the number of Claims (and the application of deductibles) does remain potentially relevant, as between the plaintiffs. That is because the individual liability owed to each of the plaintiffs by ASANDAS did not exceed the limit of liability for each Claim. For example, assuming that a $50,000 deductible applied to each plaintiff, the maximum that each plaintiff could have received under the Policy (leaving aside the Aggregate Limit of Indemnity) would be:

1. Accordingly, depending the number of deductibles applicable under the Policy, and whether the judgment sum is apportioned before or after taking account of the deductible, the individual award to each of the plaintiffs (while totalling $10,000,000) may well be different.[72]
2. It is, therefore, necessary that I determine the issue.
3. In that regard, the resolution of the issue turns on the definition of 'Claim' in cl 7.8 of the Policy, together with the aggregation clause in cl 5.4 of the Policy.
4. Clause 7.8 provides (original emphasis):

7.8 Claim

Claim shall mean:

(a) the receipt by the Insured of any written notice of demand for compensation made by a third party against the Insured.

(b) any writ, statement of claim, summons, application or other originating legal or arbitral process, cross-claim, counter claim or third or similar party notice served upon the Insured which contains a demand for compensation made by a third party against the Insured.

5.4 Multiple Claims

All casually connected or interrelated acts, errors or omissions shall jointly constitute a single act, error or omission under this Policy.

Where a single act, error or omission gives rise to more than one Claim, all such Claims shall jointly constitute one Claim under the Policy, and only one Deductible and, if there is an Aggregate Limit of Indemnity, only one Limit of Indemnity shall be applicable in respect of such Claim.

1. In construing these clauses, while I accept that all of the conduct with respect to the plaintiffs may be broadly described as causally connected and interrelated, in my view it is not possible to aggregate the individual plaintiffs into a single 'Claim' for the purposes of the Policy.
2. While the meaning of the word 'claim' will depend upon the terms of the policy in each case, in applying such clauses it is generally necessary to focus on the underlying facts.[73]
3. In that regard it is necessary to read cl 7.8 and cl 5.4 together. The Policy being a Professional Indemnity, it is a central aspect (and underlying fact) of any 'Claim', that it is a claim for compensation 'by a third party'. The making of a claim by a third party being a central aspect of the notion of a 'Claim' under the Policy, in my view, on its proper construction a claim for compensation by one third party against the insured must be regarded as a separate and distinct claim from one made by another third party against the insured.[74]
4. The identity of the third party making the particular claim may be a critical feature in the application of the provisions of the Policy, and in particular as to whether the 'Claim' is, or is not, covered by the Policy.[75] To aggregate claims by separate clients in respect of a 'connected' course of conduct could well lead to quite uncommercial results in the application of the Policy. In my view, a reasonable businessperson would understand cl 5.4 as confined to multiple claims made by the same third party.
5. While the plaintiffs in the present case are, no doubt, related companies, they are separate third parties who had at all times a separate and distinct claim against ASANDAS. For that reason, I conclude that there are, relevantly, three Claims within the meaning of the Policy. There is no basis, however, for treating the two sums claimed by Reid Park as separate claims. Consistent with the conclusions I have reached above as to the proper construction of the statement of claim in the Federal Court action, all of the amounts claimed by Reid Park are causally connected and interrelated.
6. Accordingly, in my view there are three Claims in the present case.

(a) Neither the Unauthorised Transactions exclusion nor the Conflict exclusion apply to the Claims in the present case;

(b) the plaintiffs are entitled to judgment against QBE pursuant to s 601AG of the Corporations Act 2001 (Cth) up to the Aggregate Limit of Indemnity of $10,000,000; and

(c) there are three Claims within the meaning of the Policy, being a Claim in respect of each Plaintiff.

1. I will hear the parties in relation to the final orders, including in relation to apportionment between the plaintiffs and the plaintiffs' claim for interest.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

Research Associate to the Honourable Chief Justice Quinlan

[1] Fairweather Pty Ltd v QBE Insurance (Australia) Ltd [2012] WASCA 270 (Pullin JA; Newnes & Murphy JJA agreeing).

[2] Fairweather Pty Ltd v QBE Insurance (Australia) Ltd [4].

[3] See further amended statement of claim dated 16 October 2017 [4], further amended defence dated 2 November 2018 [4].

[4] See Defendant's Submissions for Trial [15]-[18].

[5] Relevantly, the Policy comprised a Policy Schedule 7776342FIP dated 25 January 2008, together with Standard Policy Form QPLDFIPIW 2004 (Exhibit 5). A further endorsement to the Policy Schedule was issued on 27 February 2008 (Exhibit 6).

[6] QBE Insurance Ltd v Nguyen [2008] SASC 138; (2008) 100 SASR 560 [51]-[55] (Doyle CJ), [134]-[136] (Gray J), [185] (Layton J).

[7] Formally known as Beverley Lorraine Young.

[10] The formatting as it exists at [24] of the statement of claim has been amended in this reproduction to reflect continuing numbering.

[12] Exhibit 10 (Young Investments Group Pty Ltd v Stripe Capital Pty Ltd [2013] FCA 528).

[14] Witness statement of Beverley Lorraine Margetts dated 4 April 2018.

[15] See further amended statement of claim dated 16 October 2017 [6(g)]; further amended defence dated 2 November 2018 [6.7].

[18] Wallaby Grip Ltd v QBE Insurance (Australia) Ltd [2010] HCA 9; (2010) 240 CLR 444 [25] (French CJ, Gummow, Hayne, Heydon and Kiefel JJ).

[19] Munro, Brice & Co v War Risks Association Ltd [1918] 2 KB 78, 88 (Bailhache J).

[20] McLennan v Insurance Australia Ltd [2014] NSWCA 300 [6] - [19] (Beazley P, Meagher and Ward JJA).

[21] Speedo Holdings B.V. v Evans (No 2) [2011] FCA 1227.

[22] Speedo Holdings B.V. v Evans (No 2) [23]-[25].

[23]Australian Competition and Consumer Commission v Pratt (No 3) [2009] FCA 407 [72]; [2009] FCA 407; (2009) 175 FCR 558 [72] (Ryan J).

[24] QBE, for example, relied upon the advice of the Privy Council in Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993, 1018 to the effect that where a litigant is shown to have acted positively in the face of the court, making an election and procuring from it an order affecting others apart from himself, court should hold the litigant to his or her conduct and refuse to start again on the basis that he or she has abandoned.

[25] Defendant's Submissions for Trial [41]-[42].

[29] See, in particular, statement of claim [14].

[31] In addition to its further amended defence and Submissions for Trial, QBE's Answers to the Plaintiffs' Request for Further and Better Particulars dated 6 August 2018 confined its allegation pleaded in [17] of defence to the admissions in [23.7], [24], [25], and [26] of the statement of claim in the Federal Court action.

[32] When construing an exclusion clause, of course, it is necessary to construe the particular clause in the context of the Policy as a whole, and arrive at a construction which gives effect to the intention of the Policy. A construction that would render the Policy illusory should not be adopted. See Alex Kay Pty Ltd v General Motors Acceptance Corporation & Hartford Fire Insurance Company [1963] VicRp 66; [1963] VR 458, 463 (Sholl J).

[35] Wilkie v Gordian Runnoff Ltd [2005] HCA 17; (2005) 221 CLR 522 [15] - [16] (Gleeson CJ, McHugh, Gummow & Kirby JJ).

[36] Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35] (French CJ, Hayne, Crennan & Kiefel JJ).

[37] Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253 [98] (Heydon & Crennan JJ).

[38] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40] (Gleeson CJ, Gummow, Hayne, Callinan & Heydon JJ). See also Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 544 [16] (Kiefel, Bell & Gordon JJ).

[39] Wilkie v Gordian Runnoff Ltd [15] - [16] (Gleeson CJ, McHugh, Gummow & Kirby JJ)

[41] The Stripe Endorsement also confers an indemnity to another authorised representative, Chess Capital Partners Pty Ltd (Chess Capital). In the reasons which follow, in relation to the Stripe Endorsement, I have referred only to Stripe Capital.

[42] East Finchley Pty Ltd v Federal Commissioner of Taxation [1989] FCA 481; (1989) 90 ALR 457 [478] (Hill J).

[43] Supplementary Submissions of the Defendant Pursuant to Direction of the Chief Justice dated 12 December 2018 [3] and [4].

[44] McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579.

[46] The only way in which the Stripe Endorsement contemplates any effect on ASANDAS is the fact that the Limit of Indemnity under the Policy remains the same $10,000,000.

[47] Clauses 2.5, 3.3, 4.6, 4.8 and 4.19 provide examples which expressly distinguish between 'the Insured' and 'any Insured'. Other uses of 'the Insured' clearly contemplate 'any Insured' (see eg cl 4.16 and cl 5.2).

[48] Speno Rail Maintenance Australia Pty Ltd v Hamersley Iron Pty Ltd [2000] WASCA 408; (2000) 23 WAR 291 [18] (Malcolm CJ).

[49] Speno Rail Maintenance Australia Pty Ltd v Hamersley Iron Pty Ltd [148]-[149], [153] (Wheeler J).

[50] Speno Rail Maintenance Australia Pty Ltd v Hamersley Iron Pty Ltd [20] (Malcolm CJ).

[51] Speno Rail Maintenance Australia Pty Ltd v Hamersley Iron Pty Ltd [75]-[81].

[52] National Vulcan Engineering Insurance Group Ltd v Transfield Pty Ltd [2003] NSWCA 327; (2003) 59 NSWLR 119 [46]-[51] (Santow JA; Ipp JA & Young CJ in Eq agreeing).

[53] There was an additional submission in which the plaintiffs said that Stripe Capital was not 'acting' for the plaintiff. That submission was abandoned at trial (see ts 135).

[54] There is no suggestion in the present case that cl 7.11(a) (i.e. conflicts between clients) could apply.

[55] Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [35] (French CJ, Hayne, Crennan & Kiefel JJ).

[56] Plaintiffs' Responsive Submissions for Trial dated 3 December 2018 [14].

[58] Plaintiffs' Responsive Submissions for Trial dated 3 December 2018 [17].

[59] Kiriacoulis Lines SA v Compagnie d'Assurances Maritime Aeriennes et Terrestres (Camat) (The Demetra K) [2002] EWCA Civ 1070; [2002] 1 Lloyd's Rep IR 795 [18] cited in McCarthy v St Paul International Insurance Co Ltd [2007] FCAFC 28; (2007) 157 FCR 402 [81].

[60] Mitor Investments Pty Ltd v General Accident Fire & Life Assurance Corporation Ltd [1984] WAR 365, 370 (Burt CJ).

[61] See McCann v Switzerland Insurance Australia [195] (Callinan J). While Callinan J dissented, his Honour has here summarised non-proximate clauses in a manner not different from the majority.

[62] See QBE's Answers to the Plaintiffs' Request for Further and Better Particulars dated 6 August 2018 as to [25] of the amended defence.

[63] Table 4 defines ONA as "Ordinary Shares Unauthorised Securities", rather than "Ordinary Shares not Authorised Securities". The difference is not material and I accept that, in context, the meaning is the same.

[64] 'Authorised Securities' is itself defined in [14.1] of the statement of claim.

[67] Further amended defence dated 2 November 2018 [13].

[70] The pleadings, again, provided little assistance on this point. While the prayer for relief (in [9] of the further amended statement of claim) contemplated one deductible, it does not specify the amounts to be paid to each plaintiff.

[71] See ts 94. In such as case, as Senior Counsel put it, 'the question of excesses doesn't make a lick of difference' as the plaintiffs would get $10,000,000 under the Policy.

[72] By way of example, the relative proportions of $10,000,000 to each of the plaintiffs based on the amounts in [217] (i.e. without reference to the deductibles) would be $1,099,418.16: $3,059,499.25: $5,841.082.59, whereas based on the based on the amounts in [220] (i.e. with reference to the deductibles) would be $1,071,651.20: $3,056,095.57: $5,872.253.23.

[73] McCarthy v St Paul International Insurance Co Ltd [2007] FCAFC 28; (2007) 157 FCR 402 [75] (Allsop J).

[74] This conclusion is, in my view, consistent with that reached by Allsop J in McCarthy v St Paul International Insurance Co Ltd at [77], in which his Honour found there to be a single claim 'for each applicant'.