Bank of Queensland Limited v AIG Australia Limited

1. [1]

   BATHURST CJ: Clause 2.2 of the insurance policy, the subject of the present proceedings, contains a provision of the genre which are generally described as aggregation clauses. As is evident from the diversity of views of judges who have considered various clauses of this nature, such claims give rise to particular difficulties of construction, particularly in ascertaining what may be described as the unifying factor to enable two or more separate claims to be treated as a single claim for deductible or other purposes: Lloyds TSB General Insurance Co Ltd v Lloyds Bank Group Insurance Holdings Co Ltd [2001] 1 All ER (Comm) 13 at 24. The present case is no exception.

2. [2]

   I have had the advantage of reading the judgment of Macfarlan JA in draft. I agree with his Honour’s conclusions and with his reasons. What I write below is by way of elaboration of the reasons of Macfarlan JA. I came to the same conclusion and should not be taken as expressing disagreement with what has been written by his Honour.

3. [3]

   I agree with Macfarlan JA that the policy as a commercial contract should be construed by asking what a reasonable businessperson would have understood the relevant terms to mean. That task is to be undertaken by reference to the text, context and purpose of the agreement (in addition to the authorities cited by Macfarlan JA, see Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12 at [16]-[19]).

4. [4]

   Macfarlan JA has set out the relevant provisions of the policy at [35] below and it is unnecessary to repeat them.

5. [5]

   I agree that the representative proceedings involved a claim by each Group Member for the purpose of cl 2.2(i) of the policy. There were thus multiple claims.

6. [6]

   In considering this question the context is important. The policy is a claims-made policy and cl 5.1 provides that “[t]he insured shall as a condition precedent to its right to be indemnified under this policy give written notice of any claim to the insurer” during the policy period or the discovery period, or within 30 days after the end of the policy period or the discovery period, as long as the claim is reported no later than 30 days after the date on which the claim was first made against the insured. When a representative proceeding is brought during the currency of the policy, it would be anomalous to suggest that it was not a claim by each representative party, such as to give rise to a right of indemnity, subject to the notification requirements being complied with.

7. [7]

   Further, I agree with Macfarlan JA for the reasons given by him that the completion of the Class Member Registration Forms constituted a “written demand” by each of the persons who completed those forms for the purpose of cl 2.2(ii) of the policy.

8. [8]

   Thus as Macfarlan JA has pointed out, unless the claims can be aggregated each individual claim is subject to a retention of $2 million. Thus the question is whether the claims in question arise out of, are based upon or attributable to “one or a series of related Wrongful Acts” (as defined in the policy).

9. [9]

   In considering this issue it must be borne in mind that any aggregation clause in a particular policy must be considered in accordance with its terms and the context in which it appears. The cases dealing with different aggregation clauses in different types of policy and for that matter in different factual circumstances, can only provide limited assistance. Nevertheless, they do demonstrate the approach which has been taken to clauses of this nature.

10. [10]

    Macfarlan JA has referred in his judgment to the decision of the High Court in Distillers Co Biochemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd (1974) 130 CLR 1; [1974] HCA 3. Although the aggregation clause in that case differs from that the subject of the present proceedings, it is of assistance in considering the meaning of “series” in the construction of the present provision. As Macfarlan JA has pointed out at [88] below, the word “series” was construed by Stephen J in that case as referring to “a number of events of a sufficiently similar kind following one after the other in temporal succession”.

11. [11]

    In the present case what is required for the purpose of the aggregation clause is “one or a series of related Wrongful Acts”.

12. [12]

    In AIG Europe Ltd v Woodman [2017] Lloyd’s Rep IR 209 where the relevant clause was that “all Claims against any one or more Insured arising from … (iv) similar acts or omissions in a series of related matters or transactions”, Lord Toulson with whom the other members of the Supreme Court agreed, described the operation of the clause in the following terms:

13. [13]

    Similarly in the present case, there must not only be “one or a series of Wrongful Acts” but the acts themselves also must be related or interconnected.

14. [14]

    Courts have been astute in this area to distinguish between clauses where the unifying factor is an act or where it is a cause. Thus in AXA Reinsurance (UK) PLC v Field [1996] 3 All ER 517; Lord Mustill explained the distinction in the following terms at 526-527:

15. [15]

    Macfarlan JA has referred to the decision of the House of Lords in Lloyds TSB General Insurance Holdings Ltd v Lloyds Bank Group Insurance Co Ltd [2003] 4 All ER 43. In that case, the unifying relationship was said to be the failure by the insured to implement a proper training and monitoring scheme in breach of a statutory duty which led to allegations that its representatives gave misleading advice to 22,000 investors. It was the claims by these investors which were sought to be aggregated. The relevant aggregation clause is set out in the judgment of Macfarlan JA at [97] below.

16. [16]

    As both Lord Hoffman and Lord Hobhouse pointed out in the passages from their speeches cited by Macfarlan JA, the unifying act required by the aggregation clause was to be found in the acts or omissions not the cause of the acts or omissions. In those circumstances, the aggregation clause did not apply to the claims in question.

17. [17]

    As can also be seen from the passage of the speech of Lord Hoffman cited by Macfarlan JA, his Lordship gave the parenthetical words of “related series of acts or omissions” in the clause very little work to do. Lord Hobhouse, however, was prepared to give those words a somewhat more substantive operation. His Lordship made the following remarks:

18. [18]

    Lord Hobhouse was thus prepared to accept that the clause in that case could extend to aggregating acts which involved similar improper conduct by a single agent to a multiple group of clients. That is to some extent analogous to the present case.

19. [19]

    It should be noted that Lord Hoffman expressed reservation about this passage from the speech of Lord Hobhouse. However, the other members of the Court agreed with each of Lord Hoffman and Lord Hobhouse.

20. [20]

    I referred to the aggregation clause in AIG Europe Ltd v Woodman at [12] above. That case involved a claim against a firm of solicitors who acted as trustee for funds advanced by investors for the purpose of development of holiday resorts, one at a location referred to as Peninsula Village in Turkey and the other at Marrakesh. The funds were to be held by the solicitors in an escrow account and not to be released to the developers unless and until the value of the assets held by the trust created for the purpose of the development were sufficient to cover the investment to be protected, by applying what was described as a “cover test” set out in the trust deed.

21. [21]

    Monies were paid out in breach of the trust and the solicitors were sued by multiple investors in respect of each development, the investors alleging breach of contract, breach of trust, breach of fiduciary duty, misrepresentation and negligence.

22. [22]

    The Supreme Court held that the claims of the Peninsula Village investors could be aggregated, as could the claims for the Marrakesh investors. However, the claims of each of the two groups could not be. In reaching this conclusion Lord Toulson made the following remarks:

23. [23]

    The situation is similar in the present case. It should first be noted that the aggregation clause relates to “Claims arising out of, based upon or attributable to one or a series of related Wrongful Acts”. It is not necessary to consider in the present case the extent to which the juxtaposition of the words “arising out of, based upon or attributable to” widens the ambit of the clause.

24. [24]

    The circumstances surrounding the making of the claims is conveniently summarised in the judgment of the primary judge (PJ [6]-[12]).

25. [25]

    Each claim against the appellant was based on its vicarious liability for the acts of its agent DDH Graham Ltd (the agent).

26. [26]

    Further, each claim was attributable to a Wrongful Act by the agent in paying money out of the claimant’s individual “Money Market Deposit Account” to the client’s financial planner, Sherwin Financial Planners Pty Ltd, with knowledge that the financial planner was using the funds received in a fraudulent Ponzi scheme. In making the payments with that knowledge, the agent was alleged to have breached its contractual and fiduciary obligations for which the appellant was said to be vicariously liable.

27. [27]

    In my view, the payments were attributable to “a series of related Wrongful Acts” (defined in the policy to include breaches of contract and breaches of fiduciary duty). There was a series of payments (in a temporal sense) out of the funds of Money Market Deposit holders with knowledge of the fraudulent activities of the payee. Although the payments were made out of the funds of different claimants, the similarity in the circumstances in which the payments were made was sufficient to give rise to the conclusion that there was “a series of related Wrongful Acts”.

28. [28]

    Further, the circumstances in which the payments were made were such as to constitute them “related Wrongful Acts”. Each of the claimants had the same financial planner, a representative of which was an authorised signatory on each of the claimants’ “Money Market Deposit Account[s]”. The breach in each case was identical, namely, making the payment with knowledge of the fraudulent activities of the financial planner. In these circumstances, the Wrongful Acts were related Wrongful Acts for the purpose of the clause.

29. [29]

    It follows that for these reasons and the reasons given by Macfarlan JA the orders proposed by his Honour should be made.

30. [30]

    MACFARLAN JA: In proceedings in the Commercial List, the Bank of Queensland Ltd (“BOQ”) sought declarations and other relief as to its entitlement to indemnity from three insurers including the respondents (“the Insurers”) under a Civil Liability Insurance Policy issued to BOQ. BOQ claims that it is entitled to indemnity, subject to a single retention of $2 million, in respect of the sum of $6 million which it paid to settle a representative proceeding brought against it in the Federal Court of Australia, and in respect of BOQ’s costs of defending that proceeding.

31. [31]

    The Representative Proceeding was brought by Petersen Superannuation Fund Pty Ltd (“Petersen”) on its own behalf and on behalf of other investors alleging that they suffered loss as a result of their unwitting investment in a fraudulent Ponzi scheme conducted by Sherwin Financial Planners Pty Ltd (“SFP”) utilising BOQ bank accounts, and as a result of BOQ’s failure to protect the investors’ interests when it became aware of SFP’s fraud.

32. [32]

    The Insurers defended BOQ’s proceedings on the basis that BOQ’s loss arose, not out of a single claim by the investors, in which case a single retention of $2 million would have been payable, but multiple claims in relation to each of which a retention of $2 million was payable. If the latter was the case, BOQ has no entitlement to recovery from the Insurers because no single claim on BOQ exceeded $2 million in amount. The third of the insurers settled with BOQ prior to the hearing at first instance.

33. [33]

    By judgment of 6 November 2018, Stevenson J found in favour of the Insurers and dismissed BOQ’s proceedings. BOQ then appealed to this Court.

34. [34]

    For the reasons given below, I consider that BOQ’s appeal should be upheld and declarations made to the effect that only one retention is applicable.

35. [35]

    The Civil Liability Insurance Policy issued to BOQ for the relevant period was a claims made policy with a limit of liability of $40 million for all claims and, as earlier noted, a retention of $2 million for each claim. The relevant parts of the Policy Wording, as amended by a Financial Ombudsman Service Endorsement, were as follows:

36. [36]

    The Insurers accepted that the amounts BOQ claimed fell within the definitions of “Loss” and “Defence Costs” in the Policy and that the “Wrongful Act” (or Acts) that BOQ relied upon arose out of its provision of “professional services” as defined in the Policy.

The Originating Application

1. [37]

   Petersen commenced the Representative Proceeding against BOQ and BOQ’s agent DDH Graham Ltd (“DDH”) by filing an Originating Application in the Federal Court on 11 March 2016. The Originating Application stated that Petersen applied for the relief stated. This included damages and “such further order or other relief and orders as the Court considers appropriate”. It stated that the Originating Application was brought by Petersen on its own behalf and on behalf of Group Members who were defined in terms substantially according with those in the subsequently filed Further Amended Statement of Claim (“FASOC”) (as to which, see the Schedule to this judgment). Likewise, questions of law or fact common to the claims of the Group Members were identified in terms similarly subsequently defined.

The Further Amended Statement of Claim and Particulars

1. [38]

   As the argument on appeal involved close consideration of the allegations made in the Representative Proceeding, it is necessary to set them out at some length, which I do in the Schedule to this judgment.

2. [39]

   It is sufficient at this point to say that the Representative Proceeding was brought on behalf of former clients of SFP, a financial planner. The clients’ funds had been deposited, on SFP’s advice, into accounts with BOQ, known as money market deposit accounts (“MMDAs”) in respect of which SFP had authority to give instructions. These accounts were operated by DDH pursuant to an agency agreement with BOQ. The FASOC alleged that (i) SFP fraudulently used the investors’ funds in the operation of a Ponzi scheme; (ii) DDH wrongfully continued to implement all withdrawal instructions received from SFP in relation to SFP client accounts after DDH was on notice of the fraud being committed by SFP on its clients (“the Knowledge of Fraud” allegation); and (iii) by reason of the agency relationship, DDH’s conduct and knowledge were to be attributed to BOQ.

Federal Court of Australia Act 1976 (Cth)

1. [40]

   Representative proceedings in the Federal Court are regulated by Part IVA of the Federal Court of Australia Act. Section 33A in that Part defines a “group member” as “a member of a group of persons on whose behalf a representative proceeding has been commenced”. A “representative proceeding” is defined to mean a “proceeding commenced under section 33C”, subsection 33C(1) of which is in the following terms:

2. [41]

   Section 33E provides that, with presently irrelevant exceptions, the consent of a person to be a group member is not required.

3. [42]

   Further relevant provisions of Part IVA are:

4. [43]

   The Federal Court is given power by s 33Z to make awards of damages to group members, sub-group members or individual group members and to make such other orders as it thinks just.

Disposition of the Representative Proceeding

1. [44]

   On 6 October 2017, the Federal Court ordered that any investors on whose behalf the Representative Proceeding had been brought (“the Group Members”) who wished to participate in the distribution of any amount agreed in settlement of the Representative Proceeding submit a registration form by 4pm on 14 December 2017. As a result, 192 Group Members, including Petersen, completed a Class Member Registration Form.

2. [45]

   Following a court-ordered mediation, the parties agreed on 26 February 2018 that, subject to the Federal Court’s approval, the Proceeding would be settled by BOQ paying $6 million to the Group Members. The Federal Court subsequently approved the settlement on 30 May 2018.

THE JUDGMENT AT FIRST INSTANCE

1. [46]

   The primary judge concluded that determining the applicability of the definition in the Policy of “claim” first requires the determination of the number of claims in accordance with cll 2.2(i) and (ii) and then consideration of the final three lines of the definition which constitute an aggregation/disaggregation clause.

2. [47]

   His Honour then concluded that, by the Representative Proceeding, Petersen and each Group Member “brought” a claim against BOQ for the purposes of cl 2.2(i) but that there was only one “Claim” within the meaning of that paragraph. His Honour reasoned as follows:

3. [48]

   His Honour then rejected the Insurers’ submission that, by the FASOC, Petersen and each Group Member made a “written demand” within cl 2.2(ii), but accepted that the Class Member Registration Forms completed by Group Members constituted separate “written demands”, and therefore “Claims” under cl 2.2(ii) (see [84]-[85]).

4. [49]

   His Honour then concluded, contrary to BOQ’s submission, that the effect of the aggregation/disaggregation clause was not to require these multiple claims to be treated as one “Claim” for the purposes of the Policy. For that to occur, the Claims would have had to have arisen “out of, [or be] based upon or attributable to one or a series of related Wrongful Acts”. His Honour regarded the relevant “Wrongful Acts” to be BOQ’s actions in permitting withdrawals from the MMDAs. For the following reasons, his Honour concluded that the Wrongful Acts were not “related” for the purposes of the Policy and that the multiple Claims were not therefore to be aggregated:

5. [50]

   It seems that his Honour regarded these conclusions as reinforced by his finding that the withdrawals were alleged in the FASOC to be wrongful for different reasons: some because instructions came by email, some because signatories were not authorised, some because they were the subject of suspicious instructions, and some because they occurred after BOQ acquired knowledge of SFP’s fraud (at [164]-[167]). This approach reflected his Honour’s earlier finding that “some of the Wrongful Acts alleged in the FASOC were withdrawals made by the Bank prior to it acquiring Knowledge of the Fraud” (at [102]) and therefore not all of the Wrongful Acts were subject to the Knowledge of Fraud allegation.

6. [51]

   His Honour added that he would have reached the same ultimate conclusion (that there were multiple Claims) if he had concluded, on the basis of cll 2.2(i) and (ii), before considering the aggregation/disaggregation clause, that there was only one “Claim”. Thus, he would have concluded that that “Claim” would have been disaggregated into multiple claims because it involved “more than one unrelated Wrongful Act” (see [171]). The result would have been that each unrelated Wrongful Act constituted a separate “Claim”.

Whether one or multiple claim for the purposes of cll 2.2(i) and (ii)

1. [52]

   BOQ contends that there was only a single “Claim” against it within the meaning of cl 2.2(i) because there was only a single “suit or proceeding” (constituted by the Representative Proceeding in the Federal Court).

2. [53]

   In response, the Insurers contend that the effect of the Representative Proceeding was that each Group Member brought a “suit or proceeding” for the purposes of cl 2.2(i). Alternatively, they contend that each Group Member who opted to participate in the distribution made a “written demand” within cl 2.2(ii) by lodging a Class Member Registration Form.

3. [54]

   They therefore submit that both sub-clauses had the effect that there were multiple claims.

Effect of the aggregation/disaggregation clause

1. [55]

   For the following reasons, BOQ contends, and the Insurers deny, that if cl 2.2(i) and (ii) lead to the conclusion that there are multiple Claims, these Claims are, by reason of the aggregation clause, to be treated as a single Claim because they arose “out of, [or were] based upon or attributable to one or a series of related Wrongful Acts”.

2. [56]

   BOQ contends first that there was only one Wrongful Act, being DDH/BOQ’s conduct in “continuing to process withdrawals on SFP’s instructions after acquiring knowledge that it was conducting a fraudulent Ponzi scheme”.

3. [57]

   Alternatively, BOQ contends that, if there were multiple Wrongful Acts comprising the withdrawals from the MMDAs, those Wrongful Acts constituted a “series of related Wrongful Acts” because, in essence, they were all wrongful for the same reason, that is, that they were part of the fraudulent Ponzi scheme operated by SFP and of which BOQ was alleged to have had knowledge.

4. [58]

   In response, the Insurers deny that there was only one Wrongful Act and then contend in the alternative that, if there were in fact multiple Wrongful Acts, the Wrongful Acts were not related because not all of them, being those alleged to have occurred prior to March 2010 or alternatively prior to March 2005, were alleged in the FASOC to be wrongful on the basis that BOQ then had knowledge of SFP’s fraud.

5. [59]

   Alternatively, the Insurers contend that BOQ’s alleged Knowledge of Fraud is not a unifying factor which it is permissible to consider in determining whether the Wrongful Acts are “related”.

Disaggregation

1. [60]

   BOQ contends that if there was a single Claim for the purposes of cll 2.2(i) and (ii), that claim is not disaggregated because the Wrongful Acts out of which it arose were “related” for the reasons just given. The Insurers deny that they were “related”.

DETERMINATION OF THE APPEAL

1. [61]

   As the Policy is a commercial contract, the Court should, in construing it, “ask what a reasonable businessperson would have understood [the relevant] terms to mean” (Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [47]; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35]).

Whether one or multiple Claims for the purposes of cll 2.2(i) and (ii)

1. [62]

   As noted earlier, BOQ’s contention, which is consistent with the primary judge’s finding, is that for the purposes of cl 2.2(i) of the definition of “Claim”, there was only one “suit or proceeding” brought in the Federal Court by the Group Members.

2. [63]

   I agree that the Representative Proceeding was only one “suit or proceeding”, notwithstanding that Petersen brought the proceeding both on its own behalf and on behalf of the Group Members. The terms of the FASOC and Part IVA of the Federal Court of Australia Act require that conclusion. The conclusion does not however determine the issue arising under cl 2.2(i). As I read it, that sub-clause requires the question to be asked in relation to each person alleged to have brought a Claim whether that person has brought “any suit or proceeding” against BOQ “for monetary damages or other relief, including non-pecuniary relief”.

3. [64]

   In my opinion, a reasonable businessperson would, taking each Group Member separately in this way, consider that the Representative Proceeding was a “suit or proceeding” brought by that Group Member, at least from the time that the Group Member lodged its Class Member Registration Form (it being only Group Members who lodged such forms who are of relevance to these proceedings). Consistently with the provisions of Part IVA of the Federal Court of Australia Act, Petersen’s FASOC stated that the Representative Proceeding was brought on behalf of each of the Group Members. Sections 33D and 33E enabled Petersen to bring the Proceeding on their behalf without their consent. In any event, the consent of each Group Member to Petersen pursuing the Representative Proceeding on its behalf was given by lodgement of its Class Member Registration Form. Looked at in this way, there were multiple Claims because each Group Member brought a relevant proceeding against BOQ. In my view, it is of no consequence that the proceeding brought by each of the Group members was the same. It is sufficient that it can be said of each of them that they brought a proceeding.

4. [65]

   I add that the last phrase of cl 2.2(i) is satisfied as the Representative Proceeding was brought “for monetary damages or other relief, including non-pecuniary relief” for the benefit of each Group Member. The FASOC allegations of wrongdoing by BOQ were made on behalf of each Group Member, as were allegations of the suffering of consequent loss (see [59], [70] and [74] of the FASOC in the Schedule hereto). The FASOC concluded with the statement that the applicant and Group Members sought the relief in the Originating Application (see [86] of the FASOC in the Schedule). To give meaning to this assertion it must be understood as a contention that the Group Members asserted (through Petersen) that they were entitled to the relief that Petersen sought for itself in the Originating Application, there being no express prayer for relief in the Originating Application on behalf of the Group Members.

5. [66]

   Alternatively, the same result as stated in the last paragraph is arrived at by having regard to the Originating Application’s expression of it being brought by Petersen on its own behalf and on behalf of Group Members, and to Petersen’s claim for relief including damages, equitable compensation, interest, costs and “such further order or other relief and orders as the Court considers appropriate”. On the basis of this form of Originating Application, it would have been open to the Court to make orders for the benefit of Group Members under ss 33R, 33S, or 33Z of the Federal Court of Australia Act. In particular, s 33Z(1)(e) would have enabled the Court to make an award of damages in favour of Group Members.

6. [67]

   There were thus multiple Claims for the purposes of cl 2.2(i).

7. [68]

   I agree with the primary judge’s conclusion that the participating Group Members’ Class Member Registration Forms each constituted a “written demand” within the meaning of cl 2.2(ii). Read, as they must be, in the context of the Representative Proceeding, to which they refer and for the purposes of which they were signed, the Class Member Registration Forms convey, in the words of cl 2.2(ii), that it was “the intention of [each Group Member] to hold [BOQ] responsible for the results of [the alleged] Wrongful Act”. Allegations of duty, breach and damage having been made in the FASOC on behalf of each Group Member, the execution and lodgement of the Class Member Registration Forms conveyed the Group Members’ intention to seek a share of any damages obtained from BOQ as a result of those allegations. Questions in the forms as to whether the Group Members had been advised to deposit funds in MMDAs and whether the Group Members had been unable to recover those funds confirm the connection between the forms and the allegations made and the relief claimed in the FASOC.

8. [69]

   Contrary to BOQ’s submission, I do not consider that there is any reason why a third party’s claim to be indemnified by BOQ should not fall within both cll 2.2(i) and (ii). Most court actions for damages brought by a third party against an insured will be preceded by a written demand. That does not mean that, where there are similar policies to the present, the insurers will have multiple obligations to indemnify an insured in respect of the one set of circumstances. In defining the Insurers’ liability by reference to the “Claim” first made during the Policy period, the Insuring Agreement in the present Policy recognises that assertions of the Insured’s liability in respect of a particular set of circumstances will often be made by a third-party on multiple occasions. By its wording, the Insuring Agreement ensures that the Insurers’ liability however attaches only once, and by reference to the first assertion of liability made by the third party to the Insured.

9. [70]

   Contrary to the Insurer’s submission, I do not consider that they are assisted by the principle of construction that a contractual provision should, prima facie, be construed so as to give it some independent operation. The overlap between cll 2.2(i) and (ii) can readily be explained by the Policy’s intent to be a broad “catch-all” in respect of claims made on the Insured. Even if this is not so, it is sufficient for BOQ to demonstrate, as it has done, that it is within one of those paragraphs. That it might fail in an attempt to demonstrate that it is also within the other is of no consequence.

The aggregation clause

1. [71]

   As I have concluded that there were multiple claims for the purposes of cll 2.2(i) and (ii), it is now necessary to consider whether they arose “out of, [or were] based upon or attributable to one or a series of related Wrongful Acts”, that is, whether they should be aggregated.

2. [72]

   As noted earlier, BOQ contends, contrary to the primary judge’s finding, that there was a single Wrongful Act constituted by BOQ “continuing to process withdrawals on SFP’s instructions after acquiring knowledge that it was conducting a fraudulent Ponzi scheme”.

3. [73]

   I do not accept this submission. The Insuring Agreement requires that relevant Claims against BOQ result from a Wrongful Act (or Wrongful Acts). An unfulfilled intention of BOQ to continue to “process withdrawals” after acquiring knowledge of the Ponzi scheme could not of itself have resulted in any loss to the Group Members and therefore cannot have resulted in any loss to BOQ caused by Group Members’ claims. Rather, the acts that were alleged by the FASOC to have resulted in such loss to Group Members were BOQ’s acts in allowing withdrawals of funds from the MMDAs, notwithstanding BOQ’s knowledge of the fraudulent scheme. On the basis of the allegations made in the FASOC, a separate Wrongful Act occurred each time a request for a withdrawal was acted upon. There were therefore multiple Wrongful Acts. Even BOQ’s own statement of the allegedly single Wrongful Act (“continuing to process withdrawals on SFP’s instructions …”) goes close to implicitly recognising that there was a multiplicity of Wrongful Acts.

4. [74]

   The Insurers contend that even if it could be said that all of the transactions effected by BOQ after it acquired knowledge of SFP’s fraud were relevantly “related” because of that common knowledge, BOQ’s insurance claim nevertheless failed because there were other impugned transactions in relation to which the Knowledge of Fraud allegations were not made and, as these transactions gave rise to claims and were unrelated, there were multiple claims arising out of multiple unrelated acts.

5. [75]

   In support of this submission, the Insurers submit, seemingly accurately, that BOQ’s case was put at first instance on an “all or nothing basis”. That is to say, BOQ contended that all of the claims made against it in the FASOC (and by the Class Member Registration Forms) were, without exception, related. It did not contend, for example, that whilst some, or even most, were related because of the Knowledge of Fraud allegation, there were other unrelated claims of little, if any, monetary significance.

6. [76]

   The Insurers submit that, with one qualification, BOQ accepted at first instance that it would fail if the Court found that there were any claims to which the Knowledge of Fraud allegations were inapplicable. The qualification is that BOQ asserted at first instance that if there were some such claims, they could be disregarded as, due to their age, they would be statute barred, but that contention was rejected by the primary judge and was not pursued by BOQ on appeal.

7. [77]

   Although the FASOC could have been more clearly expressed, it is in my view tolerably clear that the Knowledge of Fraud allegations made in it are made in relation to all the Group Members’ transactions. Such doubt as there is arises from the fact that Petersen was the named Federal Court applicant and details of its claim, but not necessarily those of the Group Members, were no doubt known to it. Thus, the FASOC pleads the transactions applicable to Petersen with a degree of precision and particularisation, making clear that the transactions in which it was involved commenced in March 2010.

8. [78]

   Petersen, understandably, does not appear to have had equivalent information in relation to the transactions involving the Group Members. Indeed it asserted in relation to DDH’s request for particulars of the transactions referred to in [55] of the FASOC (see the Schedule to this judgment) that it was unnecessary for DDH to have that information in order to understand its case and it would be oppressive for it to be required to provide the information (see the particulars referred to in the Schedule).

9. [79]

   The following features of the FASOC lead me to reject the Insurers’ contention that there are Wrongful Acts alleged in the FASOC in relation to which the Knowledge of Fraud allegation is not made.

10. [80]

    First, as required by s 33H of the Federal Court of Australia Act, the FASOC identifies the questions arising in the Representative Proceeding common to the claims of all Group Members. Significantly, the Knowledge of Fraud allegations were stated to be common to all claims. The FASOC does not identify any exceptions.

11. [81]

    Secondly, the FASOC alleges that in the period 10 March 2004 to 24 January 2013 (defined in the FASOC as “the Relevant Period”), Petersen and each Group Member entered into a relevant contract with BOQ. The defined term “Relevant Period” is then used throughout the FASOC to identify the temporal ambit of the allegations of Wrongful Acts, including those Wrongful Acts alleged to be wrongful by reason of BOQ’s knowledge of SFP’s fraud (for example, [55.3], [56] and [57] of the FASOC).

12. [82]

    Thirdly, that some relevant paragraphs of the FASOC refer specifically to commencement in March 2010, when Petersen’s transactions commenced, does not detract from this conclusion. By appropriate qualifying words, each of those paragraphs preserves the application of the Knowledge of Fraud allegation to the whole of the period between 2004 and 2010 (that is, the “Relevant Period”). For example, the allegation in [46] of the FASOC of the existence of the Ponzi scheme commences with the words “[f]rom a time unknown to the Applicant, but commencing by around February 2010 at the latest, SFP had developed a practice...” (emphasis added). Likewise, the allegation that DDH had actual knowledge of the Ponzi scheme commences, at [65], with the words “[a]t all material times from at least early 2010, DDH had actual knowledge” (emphasis added).

13. [83]

    Fourthly, the particulars given in relation to [46] of the FASOC (alleging the creation of the Ponzi scheme) refer, as examples of emails relating to relevant withdrawals from MMDAs, to emails dated 6 September 2010 and 30 November 2010 (see the Schedule hereto). These references are expressly stated to be by way of example only of the relevant material contained in the Tender Bundle, which was described in correspondence between the parties as containing some 2,300 documents. The references confirm that the FASOC is to be read as making the Knowledge of Fraud allegations in respect of the whole of the Relevant Period including that part that occurred prior to 2010.

14. [84]

    Fifthly, the FASOC asserts that some transactions were wrongful because they were effected upon the basis of email instructions or on the instructions of unauthorised persons. These are allegations of additional bases upon which some transactions were alleged to have been wrongful. They do not detract from the conclusion that the Knowledge of Fraud allegations were made in relation to all of the transactions. If wrongfulness as a result of the Knowledge of Fraud allegation is a unifying factor that relates all of the transactions to each other, it is not significant that there may be other respects in which some of the transactions differ.

15. [85]

    BOQ contends on appeal that the Wrongful Acts, which were alleged in the FASOC and were the basis upon which it made a settlement payment of $6 million and incurred costs in defending the Representative Proceeding, constituted “a series of related Wrongful Acts” and therefore gave rise to only a single claim pursuant to the terms of the aggregation/disaggregation clause.

16. [86]

    On the other hand, the Insurers submitted that there was no “series of related Wrongful Acts” because the Wrongful Acts were “individual withdrawals from the multiple individuals’ accounts pursuant to multiple instructions that differed in nature, form and time”.

17. [87]

    In Distillers Co Biochemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd (1974) 130 CLR 1; [1974] HCA 3, the High Court considered an insurance policy that relevantly provided for indemnity for all compensation payable by the insured “in respect of or arising out of any one occurrence or in respect of or arising out of all occurrences of a series consequent on or attributable to one source or original cause” (at [7]). Paragraph (b) of this provision (“the proviso”) limited indemnity to compensation payable by the insured during any one period of insurance.

18. [88]

    Stephen J (with whom Gibbs J relevantly agreed) said the following concerning the meaning of the word “series” (at 21):

19. [89]

    His Honour thus referred to two aspects of the meaning of the word “series”. First, that the relevant events follow one another in temporal succession and, secondly, that they be “in a sufficient degree, similar in nature”. The latter attribute of the term is not significant in the present case because the word “related” independently requires such a connection to be present.

20. [90]

    Moreover, it does not appear that their Honours considered that the former attribute of “temporal succession” imposed any significant constraint. As Stephen J pointed out, absent the unlikely coincidence of events occurring simultaneously, events must of necessity occur in a temporal sequence.

21. [91]

    Gibbs J (at 10) agreed and added that the occurrences did not need to “take place in any progressive order”. These views were reflected in their Honours’ decision in the case. They (with Menzies J dissenting) held that the ingestion on a number of occasions by pregnant women of the drug “Distaval” (leading to injuries to their unborn children) constituted a “series” of events because they all arose from a similar cause, notwithstanding that there was no particular temporal relationship between these occurrences.

22. [92]

    In Ritchie v Woodward [2016] NSWSC 1715, Emmett AJA considered an insurance policy that relevantly provided for cover in respect of claims “arising out of, based upon or attributable to: (i) the same cause; or (ii) a single Wrongful Act; or (iii) a series of continuous, repeated or related Wrongful Acts” (at [509]). His Honour referred at [587] as follows to the word “series” in this provision:

23. [93]

    The issue in Ritchie arose in respect of losses suffered by insureds as a result of the acts and omissions of an accountant in relation to two separate investment properties. His Honour did not have to decide whether there was one claim or a number of claims but expressed a preference for the view that there were two claims, one in relation to each of the investment properties. His Honour’s reasoning was directed to the relationship between the claims concerning the two properties and did not suggest that they did not occur “in a temporal sequence”. Rather, as he saw it, the question was whether they were sufficiently related. Indeed, as his Honour said in the passage cited above, repeating what Stephen J said in Distillers, “[a]ny number of distinct events will, unless, by coincidence, they occur simultaneously, … necessarily occur in a temporal sequence”.

24. [94]

    In my view, the use of the word “series” in the aggregation/disaggregation provision in the present Policy adds little, if anything to the concept of relatedness of the acts which is integral to the provision. In the context of the present dispute, I read it, at most, as emphasising the need for the relevant acts to be “related”.

25. [95]

    The issue then to be addressed is whether the alleged Wrongful Acts are or are not “related”, a question to which the decision of the House of Lords in Lloyds TSB General Insurance Holdings Ltd v Lloyds Bank Group Insurance Co Ltd [2003] 4 All ER 43 is relevant.

26. [96]

    In that case, the insured companies had, through their representatives, marketed personal pension schemes in breach of regulatory strictures. On their claim for indemnity from their insurers, the question arose of whether the third party claims that were made against them resulted from a “related series of acts or omissions”.

27. [97]

    The aggregation clause in the relevant policy was in the following terms (at 624):

28. [98]

    Lord Hoffmann concluded that there was no relevant relationship, stating (at [27]-[28]):

29. [99]

    His Lordship referred in this context to the decisions in Cox v Bankside Members Agency Ltd [1995] 2 Lloyd’s Rep 437 and Municipal Mutual Insurance Ltd v Sea Insurance Co Ltd [1998] Lloyd’s Rep IR 421. In the former, the relevant policy wording referred to claims “arising from one originating cause”. In the latter it referred to “all occurrences of a series consequent on or attributable to one source or original cause” (Lloyds TSB at [15] and [16], emphasis added).

30. [100]

    Lord Hobhouse also concluded that there was no relevant relationship between the insured’s acts, stating (at [51]-[52]):

31. [101]

    The other three Lords who sat on the appeal agreed with both Lord Hoffman and Lord Hobhouse.

32. [102]

    The aggregation clause in the present case is not an explicitly cause-based clause similar to the clauses under consideration in the Cox and Municipal decisions to which Lord Hoffmann referred. Nor however is it, as the clause in Lloyds TSB was found to be, devoid of an indication as to the connecting factor that would make the Insureds’ acts “related” (whether as part of a “series” or otherwise) for the purposes of the clause. An identification of a sufficient connecting factor is in my view to be found in the present clause’s reference to Wrongful Acts. Whilst in Lloyds TSB the acts certainly had to be wrongful in order to be relevant to the claim for indemnity, the aggregation clause did not refer to their wrongfulness. The present clause does however do that. Moreover it does not use the somewhat clumsy expression used in the Lloyds TSB clause of a “related series of acts or omissions” but more clearly identifies the relevant question as whether the Wrongful Acts are related.

33. [103]

    In my opinion, the fact that all of the Wrongful Acts alleged in the FASOC are alleged to have been wrongful (albeit in the case of some Acts, inter alia) on the basis that they were engaged in by BOQ as part of SFP’s Ponzi scheme with knowledge of SFP’s fraud is a unifying factor rendering them “related” for the purpose of the aggregation clause. The primary judge concluded that the features to which he drew attention in [156] of his judgment (see [49] above) did not sufficiently relate the bank withdrawals one to the other. To his Honour’s reference in that paragraph to each withdrawal having been “made in the course of the fraud practiced by SFP” should be added the important connecting factor that the FASOC alleged that they were all made by BOQ with Knowledge of the Fraud. On this basis, I conclude that the withdrawals, and therefore the Wrongful Acts, were relevantly “related”.

34. [104]

    I thus consider that a reasonable businessperson, having knowledge of the matters alleged in the Representative Proceeding, would conclude that the Wrongful Acts referred to in the FASOC were “related” in the manner contemplated by the aggregation clause in the Insurance Policy. A significant indication that this would be so is that the grouping of claimants in the Representative Proceeding was only permitted by the Federal Court of Australia Act, and only occurred, because of the significant common questions that arose in connection with each of their claims. Significantly, these claims were identified as including SFP’s fraud and BOQ’s knowledge of it.

Disaggregation

1. [105]

   In light of my conclusion that, for the purposes of cll 2.2(i) and (ii) of the definition of “Claim”, there were multiple Claims, rather than a single Claim, the disaggregation provision is inapplicable. However, if, contrary to my view, there was a single claim for those purposes, it follows from my conclusion that the aggregation and disaggregation provisions are mirror images of each other that disaggregation would not occur because the acts giving rise to the Claim are all “related” in the relevant sense.

CONCLUSION AND ORDERS

1. [106]

   I have found that for the purposes of cll 2.2(i) and (ii) of the Policy definition of “Claim”, multiple claims were made against BOQ. However, because those claims arose out of related Wrongful Acts, the Policy requires them to be aggregated. Only one retention of $2 million is therefore applicable.

2. [107]

   I propose the following orders:

   1. (1)

      Allow the appeal.

   2. (2)

      Set aside Orders (1) and (2) made at first instance on 28 November 2018.

   3. (3)

      In lieu thereof, the Court makes the following declarations:

   4. (4)

      Direct the parties to attempt to agree upon the amounts of the judgments, including interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW), to be entered against the first and second respondents to give effect to the Court’s reasons for judgment and, failing agreement, to lodge by 16 August 2019 written submissions as to the amounts for which they contend that judgment should be entered, with any replies to be lodged by 23 August 2019.

   5. (5)

      Order the first and second respondents to pay the appellants’ costs of the proceedings at first instance and on appeal.

The Further Amended Statement of Claim

1. [108]

   Relevant parts of FASOC filed by Petersen on 12 October 2017 are as follows:

Statement of Particulars

1. [109]

   Petersen filed a Statement of Particulars on 16 September 2017. Although these Particulars were stated to be referable to the then current Amended Statement of Claim, the subsequently filed FASOC incorporated them by reference. The paragraph numbering in these two versions of the Statement of Claim coincided.

2. [110]

   In response to BOQ and DDH’s request for particulars of [43], Petersen identified, in respect of its claim, a number of emails, providing instructions, dated between 8 March 2010 and 10 October 2012. In respect of Group Members claims, Petersen said that it relied upon emails in the Tender Bundle that had been provided. It gave examples of such emails dating from 7 April 2005. Correspondence before the Court on the present appeal indicates that there were some 2,300 documents in the Tender Bundle.

3. [111]

   Similar particulars were provided in relation to paragraph [46] of the FASOC.

4. [112]

   In response to DDH’s request for particulars of the instructions referred to in [55.3] of the FASOC, Petersen responded that, insofar as the request was intended to apply to Group Members, as distinct from Petersen itself, it was oppressive and unnecessary to answer in order for DDH to understand the case it had to meet.

5. [113]

   WHITE JA: I have had the advantage of reading in draft the reasons for judgment of the Chief Justice and Macfarlan JA. I agree with the orders proposed by Macfarlan JA. I agree with what the Chief Justice and Macfarlan JA have said in relation to the decisions in Lloyds TSB General Insurance Holdings Ltd v Lloyds Bank Group Insurance Co Ltd [2003] 4 All ER 43 and AIG Europe Ltd v Woodman [2017] Lloyd’s REP IR 209.

6. [114]

   I take a different view on the question whether the institution of Representative Proceedings in the Federal Court constituted multiple Claims or a single Claim. In my view, the Representative Proceeding brought by Petersen Superannuation Fund Pty Ltd (“Petersen”) in the Federal Court was not a proceeding brought by all of the Group Members (as defined in the statement of claim in that proceeding). The claim was brought on behalf of each Group Member, but it was not on that account brought by each Group Member. In my view, the Federal Court proceeding was a single Claim within the meaning of cl 2.2(i) of the policy. I respectfully do not agree that by the Further Amended Statement of Claim in the Federal Court the Group Members asserted (through Petersen) that they were entitled to the relief that Petersen sought for itself in the originating application. Whilst the Further Amended Statement of Claim should be understood as a contention that the Group Members were entitled to the same kind of relief that Petersen sought for itself, that was a claim made by Petersen on behalf of Group Members, not by Group Members.

7. [115]

   However, I agree with the reasons of Macfarlan JA and those of the primary judge that the Class Member Registration Forms in substance (though not in form) constituted a written demand by those Group Members who registered to hold the Bank of Queensland responsible for the results of the Wrongful Acts alleged in the Further Amended Statement of Claim.

8. [116]

   Prima facie that means that there is both a single Claim, so that the disaggregation clause is to be considered, and multiple Claims so that the aggregation clause is to be considered. The insuring clause provides insurance against Loss and Defence Costs resulting from any Claim first made during the Policy Period. But those words do not denote any order of precedence. Rather they provide that the policy responds to a Claim (or Claims) first made in the Policy Period, that is, not made before the commencement of the Policy Period nor first made after its expiry.

9. [117]

   The Federal Court proceeding was filed on 11 March 2016. The Class Member Registration forms were completed between 6 October and 14 December 2017. The policy that responded to the Claims was the policy in force for the period from 1 September 2012 to 1 September 2013. This was because notice of a potential Claim or Claims was given by the insured on 29 July 2013. Clause 5.1 relevantly provided that where the Responsible Department gave notice of any fact or circumstance that might result in payment under the Policy, then any Claim which subsequently arose out of that fact or circumstance should be deemed to be a Claim made and notified during the Policy Period. It is impossible to say which assertion of BOQ’s liability came first when both were brought in under the relevant policy by a deeming provision.

10. [118]

    This does not matter because, as Macfarlan JA says, the aggregation and disaggregation provisions should be read as the mirror of each other. Only in this way can the policy be given a business-like operation when, as found by the primary judge (in my view correctly), there was both a single Claim constituted by Representative Proceeding and multiple Claims constituted by demands of Group Members all of which are taken to have been made and notified in the Policy Period.

11. [119]

    I therefore agree with Macfarlan JA and the primary judge that there were multiple Claims made against the Insured and that the aggregation clause in the footer to cl 2.2 of the policy was engaged.

12. [120]

    I agree with Macfarlan JA that the Wrongful Acts alleged in the Further Amended Statement of Claim formed a series and that the definition of “Wrongful Acts” in the policy identifies the sufficient connecting factors from which it can be concluded the Wrongful Acts alleged were related.

13. [121]

    By their notices of contention the respondents argued that the aggregation clause would only be engaged if the whole of the “series of related Wrongful Acts” gave rise to all of the Claims.

14. [122]

    The first difficulty with that submission is that it would result in a disconformity in the operation of the insuring clause, depending upon whether there were one or more Claims. If there were one Claim (as in my view there was in Petersen’s institution of representative proceedings in the Federal Court), then there would be multiple Claims if the Claim involved more than one unrelated Wrongful Act. In the present case, for the reasons given by Macfarlan JA, the Wrongful Acts were related, not unrelated. Considering only the institution of the representative proceeding in the Federal Court, which constituted a single Claim, there were no unrelated Wrongful Acts that were the subject of the claim and hence there was only one deductible.

15. [123]

    Treating the aggregation and disaggregation provisions at the foot of the clause as mirror provisions informs the construction of the opening words at the footer, namely, “... all Claims arising out of, based upon or attributable to one or a series of related Wrongful Acts shall be considered to be a single Claim; conversely ...”.

16. [124]

    The respondents argued that this was wrong and the word “conversely” did not suggest that the two limbs mirrored each other, but merely that one limb was directed to aggregation and the other to disaggregation. The respondents then submitted that where there was more than one Wrongful Act that gave rise to Claims, the causal relationship expressed by the words “arising out of, based upon or attributable to” was a causal relationship between “all Claims” and the “series of related Wrongful Acts”. They submitted that for the clause to be engaged all of the related Wrongful Acts that made up the series would have to be causative of all of the Claims.

17. [125]

    Even if the aggregation and disaggregation provisions were not the mirror of each other, there is nothing in the clause that requires that all Claims arise out of, be based upon or be attributable to every Wrongful Act that forms part of the series of related Wrongful Acts. The better construction is that if there is a series of related Wrongful Acts and there are multiple Claims that arise out of the related Wrongful Acts that form that series, then the Claims shall be considered to be a single Claim. In other words, the relevant causal connection is between Claims on the one hand and Wrongful Acts on the other hand that are related and form a series. That does not require that all Claims be caused by every Wrongful Act that forms part of the series.

18. [126]

    The same related Wrongful Acts gave rise to the single Claim constituted by Petersen’s institution of Representative Proceedings and multiple Claims constituted by the demands of Group Members who lodged Class Member Registration Forms. There was therefore only one Claim.

19. [127]

    For these reasons I agree with the orders proposed by Macfarlan JA.