Abstract

A Federal Court has Jurisdiction to make a declaratory judgment on the construction of a policy -

A Settlement by an insured may attract indemnity -

A Declatory Judgment on a matter of Construction of a policy where several similar claims have been made

Article

Federal Court Jurisdiction

 

The Federal Court is nnot without jurisdiction just because the application before it is limited to the construction of a policy by way of declaratory judgment, and the application will not be refused simply on the ground that the proceedings lack utility, are hypothetical and otherwise not appropriate for disposition by the Court: Nat’l Aust Bank Limited v Nautilus Insurance Pte Ltd (No 2) [2019] FCA 1543

 

There is a distinction between a controversy and the proceedings in which it might be resolved, before a Court of Justice: South Australia v Victoria [1911] HCA 17; 12 CLR 667. There is a controversy under a law of the Parliament for the purposes of s 39B(1A)(c) of the Judiciary Act 1903 (Cth) and s 76(ii) of the Constitution.if it is is a matter of contestwhether there is a “matter” before the Court, or whether there is any exercise of federal jurisdiction that has been engaged, These issues are intertwined. The word “matters” is the widest term to denote controversies which might come before a Court: South Australia v Victoria 12 CLR at 675. But there is a distinction between controversy and the proceeding in which the controversy might be resolved. This reflects that it is the dispute to be resolved that is within the jurisdiction of the Court: Nat’l Aust Bank Limited v Nautilus Insce (No 2) (supra),: Nat’l Austr Bank Limited v Nautilus Insce (No 2) [2019] FCA 1543, where the authorities are closely analysed.

Once federal jurisdiction was attracted in relation to the controversy, to the matter, the jurisdiction is not limited to the questions incidental to that aspect of the matter that has attracted federal jurisdiction. It extends to the resolution of the whole matter. It is not necessary that the proceeding itself to raise the federal issue,: Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd [1981] HCA 7; 148 CLR 457; Fencott v Muller [1983] HCA 12; 152 CLR 570; Nat’l Aust Bank Limited v Nautilus Insce (No 2) [2019] FCA 1543.

It is the Court’s first duty to decide whether it has that authority: Federated Engine-Drivers and Firemen’s Assn of A’asia v The Broken Hill Proprietary Company Ltd [1911] HCA 31; 12 CLR 398 at 415; Nat’l Austr Bank Limited v Nautilus Insce (No 2) [2019] FCA 1543. An issue of jurisdiction requires an examination of the nature of the controversy between and among the parties, and the legitimacy of the choice made by the plaintiff for resolution by the Court of any part of it, for exmple, a construction of a policy of insurance, before judicial power is engaged to determine questions of the final determination of liability.

Indemnity in respect of a Settlement

In various contexts an insured may, be entitled to indemnity for loss arising from a reasonable and bona fide settlement. [Distillers Co Bio-Chemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd [1974] HCA 3; (1974) 130 CLR 1, 9, 32; Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38; (1998) 192 CLR 603, [63]; Hurlock v Council of the Shire of Johnstone [2002] QCA 256, [30]-[31]; Vero Insurance Ltd v Baycorp Advantage Ltd [2004] NSWCA 390; (2005) 13 ANZ Insurance Cases 61-630, [48]-[52], [62], [66]-[69]; Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243, [324].]
”Legally liable”, as used in Liability policies, refers to a liability that is attributable to the operation of law, and one that is imposed by law: QBE Insurance Ltd v Nguyen [2008] SASC 138; 100 SASR 560 and Cacciola v Fire & All Risks Insurance Co Ltd [1971] 1 NSWLR 691, but that may not address this issue: Nat’l Austr Bank Limited v Nautilus Insce (No 2) [2019] FCA 1543.

Declaratory Judgment as to Construction

A declaratory judgment is not merely advisory or hypothetical about if the parties are in precise and clearly articulated disagreement as to the meaning of or part of the contract, and its proper construction is clearly a part of an overall controversy about the insured’s disputed entitlement to be indemnified under the policy. There must be found or agreed facts, which must be relevant for the subject of the declaration, and if it seeks the proper construction of a policy the relevant facts are those which are relevant to the construction: that is, the form and terms of the contract and any relevant surrounding circumstance. It is then irrelevant that other facts relevant to the wider controversy to which the proper construction of the contract is relevant are not brought within the dispute as to the proper meaning of the contract. But if construction proceeding will not resolve all issues between the parties, it may be arguable that any subsequent proceedings that the applicant may be required to commence would constitute an abuse of process: UBS AG v Tyne (2018) 360 ALR 184; [2018] HCA 45, [38]-[46] and [70]; Johnson v Gore Wood & Co [2002] 2 AC 1, 31; Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; (2015) 256 CLR 507 at [26]). Nat’l Austr Bank Limited v Nautilus Insce (No 2) [2019] FCA 1543

A construction point may be decided on declaratory judgment despite that there are several claims against the insured of the same nature under a succession of different policies, and the construction issue applies to all of the claims, if from the circumstances there is a single matter because the claims arise out of common transactions and a common substratum of facts, not necessrily coincident, and not completely disparate or completely separate and distinct or distinct but unrelated: Re Wakim; Ex parte McNally [1999] HCA 27; 198 CLR 511 at 585–586 [140]; Nat’l Aust Bank Limited v Nautilus Insce (No 2) (supra).