The National Australia Bank (NAB) brought an action in the Federal Court seeking certain declarations regarding the construction of a policy of insurance issued by Nautilus Insurance (Nautilus). The dispute arose out of actions taken by Clydesdale Bank, a NAB subsidiary, in paying remediation to customers in the United Kingdom between 2012 and 2015. In November 2016 and again in November 2017, NAB submitted claims to Nautilus and the reinsurers, seeking coverage in relation to the remediation scheme. Nautilus and the reinsurers denied the claim on several bases, including that the claim for reimbursement of the remediation amounts was not a ‘Civil Liability’ under the policies, and the payment of remediation was not a ‘Loss’ as defined. The reinsurers (as opposed to Nautilus) brought an interlocutory application to set aside NAB’s originating application on the basis that it did not disclose a ‘matter’ that was properly justiciable by the Federal Court, or alternatively that the application be dismissed on the basis that it did not disclose a cause of action or had no reasonable prospects of success.
In dismissing the reinsurers’ interlocutory application, Allsop CJ held that the controversy was a ‘matter’ arising under a law made by Parliament (and therefore a federal matter) and that the ‘matter’ was sufficiently before the Court in order for it to be determined. In doing so, his Honour noted that NAB relied on certain provisions of the Insurance Contracts Act 1984 (Cth) which modified the effect of contractual rights that Nautilus or the reinsurers were otherwise entitled to rely upon. His Honour also dismissed the reinsurers’ submission that a declaration would be futile, holding that a declaration would assist in determining the meaning of the contract, even if the decision would not resolve the whole controversy between the parties. Finally, Allsop CJ rejected the reinsurers’ argument that the originating application should be dismissed because a declaration would not resolve the indemnity under the policies. His Honour held that a declaration regarding the construction would have a practical consequence on the claim because it was relevant to whether there was a bar to coverage which amounted to an insuperable barrier to NAB’s claim, and also because it would have potentially significant practical consequences for the conduct of any trial on indemnity.
