FEDERAL COURT OF AUSTRALIA Todd v Alterra at Lloyds Ltd (on behalf of the underwriting members of Syndicate 1400) [2016] FCAFC 15 Appeal from: Sienkiewicz (As Trustee for the Sienkiewicz Superannuation Fund) v Salisbury Group Pty Limited (in Liquidation) (No 2) [2015] FCA 147 File number: NSD 306 of 2015 Judges: ALLSOP CJ, GLEESON AND BEACH JJ Date of judgment: 19 February 2016 Catchwords: INSURANCE – insurance policy – interpretation and construction – whether, by reason of the doctrine of strictissimi juris, any doubt as to the proper construction of the policy should be resolved in favour of the insurers – whether statements of the High Court relating to contracts of guarantee and indemnity apply to insurance policies – contracts of insurance distinguishable from contracts of guarantee and indemnity and possess a different purpose INSURANCE – financial services errors and omissions policy – interpretation and construction – whether insurers liable for errors or omissions of the insureds in the performance of professional services, defined relevantly to mean financial planning encompassing advice on approved investment products and life insurance products – meaning of terms "approved investment products" and "encompassing" – whether liability restricted to financial advice given on investment products contained in an "Approved Product List" –primary judge erred in giving the terms a narrow construction – the insurance clause covered all aspects of financial planning, as long as the financial planning contained advice on approved investment products, being products that were approved by the licensee from time to time Legislation: Corporations Act 2001 (Cth), ss 761A, 716G, 716GA, 766A, 766B, 912B, 913B, 916A, 917A-917E Corporations Regulations 2001 (Cth), reg 7.6.02AAA Insurance Contracts Act 1984 (Cth) Cases cited: Andar Transport Pty Ltd v Brambles Ltd [2004] HCA 28; 217 CLR 424 Ankar Proprietary Limited v National Westminster Finance (Australia) Limited [1987] HCA 15; 162 CLR 549 Arbuthnott v Fagan [1996] LRLR 135 Australian Casualty Co Limited v Federico [1986] HCA 32; 160 CLR 513 Bofinger v Kingsway Group Limited [2009] HCA 44; 239 CLR 269 British Traders' Insurance Company Limited v Monson [1964] HCA 24; 111 CLR 86 Chan v Cresdon Proprietary Limited [1989] HCA 63; 168 CLR 242 Chapman v Hoage 296 US 526 (1936) Charter Reinsurance Co Ltd v Fagan [1997] AC 313 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; 149 CLR 337 Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; 76 NSWLR 603 Horsell International Pty Ltd v Divetwo Pty Ltd [2013] NSWCA 368 In re Sherry; London and County Banking Co v Terry (1884) 25 Ch D 692 Johnson v American Home Assurance Company [1998] HCA 14; 192 CLR 266 Legal & General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390 Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184; 310 ALR 113 McCann v Switzerland Insurance Australia Limited [2000] HCA 65; 203 CLR 579 Miskovic v Stryke Corporation Pty Ltd t/as KSS Security (No 2) [2010] NSWSC 1495; (2011) 16 ANZ Ins Cas 61-873 Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited [2015] HCA 37; 89 ALJR 990 Nicholson v Paget (1832) 1 C & M 48; 149 ER 309 Prudential Insurance Company v Commissioners of Inland Revenue [1904] 2 KB 658 Seaton v Heath; Seaton v Burnand [1899] 1 QB 782 Stratton Finance Pty Ltd v Webb [2014] FCAFC 110; 314 ALR 166 Tricontinental Corporation Ltd v HDFI Ltd (1990) 21 NSWLR 689 Wallaby Grip Limited v QBE Insurance (Australia) Limited [2010] HCA 9; 240 CLR 444 Wilkie v Gordian Runoff Limited [2005] HCA 17; 221 CLR 522 Beale H, Chitty on Contracts – Volume 2: Specific Contracts (31st ed, Sweet & Maxwell, 2012) Enright I & Merkin R, Sutton on Insurance Law (4th ed, Thomson Reuters, 2015) Parkington M et al, MacGillivray and Parkington on Insurance Law (8th ed, Sweet & Maxwell, 1988) Australian Securities and Investment Commission, Regulatory Guide 126: Compensation and insurance arrangements for AFS licensees (2010) Date of hearing: 5 August 2015 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 91 Counsel for the Appellant: Mr R McHugh SC with Mr L Gor Solicitor for the Appellant: MBP Legal Counsel for the Respondents: Mr G Rich SC with Ms E Bathurst Solicitor for the Respondents: Norton Rose Fulbright ORDERS NSD 306 of 2015 BETWEEN: JOHN TODD Appellant AND: ALTERRA AT LLOYDS LIMITED (ON BEHALF OF UNDERWRITING MEMBERS OF SYNDICATE 1400) First Respondent BARBICAN FINANCIAL & PROFESSIONAL LINES CONSORTIUM NO. 9562 (BEING BARBICAN MANAGING AGENCY LTD) Second Respondent CANOPIUS MANAGING AGENTS LIMITED (ON BEHALF OF UNDERWRITING MEMBERS OF SYNDICATE 4444) Third Respondent CHAUCER SYNDICATE LIMITED (ON BEHALF OF UNDERWRITING MEMBERS OF SYNDICATE 1084) Fourth Respondent JUDGES: ALLSOP CJ, GLEESON AND BEACH JJ DATE OF ORDER: 19 FEBRUARY 2016 THE COURT ORDERS THAT: 1. The appeal be allowed with costs. 2. Order 1 of the Court made on 6 March 2015 dismissing the Appellant's cross-claim be set aside and in lieu thereof: (a) declare that the Financial Services Errors and Omissions Insurance Policy B 0309 WP 120250b (the "Policy") issued by the Fourth to Seventh Respondents and Cross-Respondents, responds to the claim made by the Applicants below against the Second Respondent (Mr Todd) and that the Second Respondent (Mr Todd) is entitled to indemnity with respect to the liabilities identified at [3] of the Court's Reasons for Judgment published on 6 March 2015; (b) declare that pursuant to the Policy, the Fourth to Seventh Respondents and Cross-Respondents are obliged to indemnify the Second Respondent (Mr Todd) for his liability to the Applicants below for the liabilities identified at [3] of the Court's Reasons for Judgment published on 6 March 2015 and for the Second Respondent's (Mr Todd's) defence costs with respect to the claims of the Applicants below, subject to any applicable excess; (c) order that the Fourth to Seventh Respondents and Cross-Respondents pay the Applicants the amount they are liable to pay the Applicants pursuant to paragraph (b) above, excluding defence costs, in reduction of any judgment in favour of the Applicants against the Second Respondent (Mr Todd); (d) order that the Fourth to Seventh Respondents and Cross-Respondents pay the Second Respondent's (Mr Todd's) costs of the proceedings on the cross-claim; and (e) order that the separate questions described at [7] of the Court's Reasons for Judgment published on 6 March 2015 be referred for further hearing. 3. Should either party wish to make submissions on the form of order, submissions of no more than three pages are to be filed within seven days and the Court will consider the need for further argument. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT ALLSOP CJ AND GLEESON J: 1 The appellant, Mr Todd, was an authorised representative of The Salisbury Group Pty Ltd ("TSG"), which held an Australian Financial Services Licence from 2003, issued pursuant to the Corporations Act 2001 (Cth). 2 The substantive issue on appeal is the proper interpretation and construction of the financial services errors and omissions insurance policy underwritten by the fourth to seventh respondents and first to fourth cross-respondents in the proceedings before the primary judge. The lead underwriter on the policy was the fourth respondent and first cross-respondent, Alterra at Lloyd's Limited, on behalf of the underwriting members of Syndicate 1400 at Lloyd's ("Alterra"). The brokers were Howden Insurance Brokers Limited ("Howdens") and the policy indemnified certain named insureds listed on the opening page entitled "Risk Details" being AFS Group Limited, Australian Financial Services Limited ("AFSL"), TSG and Strategy Portfolio Limited. By the terms of the insuring clauses (cl 1) cover was extended to the "Insured" as defined in Endorsement No. 1 as including authorised representatives, relevantly of TSG, thus including Mr Todd. 3 The primary judge found that the policy did not respond to cover agreed losses suffered by clients of Mr Todd. These clients were the applicants in the proceedings below. They lost money as a result of purchasing investment products on Mr Todd's advice. For the reasons that follow, we respectfully disagree with the primary judge's interpretation and construction of the relevant policy wording. 4 The clients, Mr and Mrs Sienkiewicz and AT Melville Pty Ltd, sued TSG, Mr Todd and another person. The clients alleged that Mr Todd gave negligent investment advice, and breached fiduciary duties or contravened statutory provisions. The advice sought to be impugned concerned units in, and unsecured loans to, an investment described as the Hervey Bay Trust and investments in other funds or securities. On the first day of the hearing a settlement was reached which resolved all issues except Mr Todd's claim against the insurers. 5 The following facts were agreed between Mr Todd and the insurers (see [3] and [4] of the reasons of the primary judge): [3] … Mr Todd's liability to the Applicants (excepting costs) is limited to $1,000,000, apportioned between the individual investments the subject of the proceedings in the manner set out below: to Mr and Mrs Sienkiewicz as trustees for the Sienkiewicz Retirement Fund Hervey Bay Trust $226,613 Multiplex Development and Opportunity Fund $26,190 Great Southern Plantations $14,000 Ventracor $14,000 Hastings High Yield Fund $11,000 Mariner Floating Notes $30,000 Valad Property Group – Stapled Securities $20,000 Total $341,803 to AT Melville Pty Ltd as trustee for the AT Melville Retirement Fund Hervey Bay Trust $586,187 Mariner Floating Notes $36,000 Valad Property Group – Stapled Securities $36,000 Total $658,187 [4] … none of the following products appeared on any Available Approved Product List (APL), defining the term "Available APL" to mean any approved product list of, applicable to, or adopted by The Salisbury Group that was produced in discovery or under subpoena in the proceeding; served in evidence by a party in the proceeding; or included in the Tender Bundle in the proceeding. a) The Hervey Bay Trust; b) Great Southern Plantations; c) Ventracor; d) Hastings High Yield Fund; e) Mariner Floating Notes; and f) Valad Property Group – Stapled Securities. It follows that, of the investments of Mr and Mrs Sienkiewicz as trustees for the Sienkiewicz Retirement Fund, only Multiplex Development and Opportunity Fund appeared on an Available APL and none of the investments made by AT Melville Pty Ltd so appeared. As to the Multiplex Development and Opportunity Fund, those parties agreed that it appeared on a number of available APLs, in the main dated from 8 December 2006 to 19 December 2008. The two exceptions were an unnamed APL of an unknown date and an unnamed APL dated 1 March 2005 to 30 June 2005. 6 The insurers agreed that the settlement sum of $1 million plus costs was reasonable and that it was a "Loss" under the policy. 7 The significance of the Approved Product List, or APL, will shortly become evident. 8 The debate between Mr Todd and the insurers concerns the reach of the deceptively simple terms of the relevant insuring clause (cl 1.1) when read with two other relevant provisions of the policy: Endorsement No. 11 (agreed at the time of the entry into the policy, 8 May 2012), and Endorsement No. 002 (agreed variously by the insurers on 20 March 2013 by Alterra, as slip leader, 25 March 2013 by Canopius, 15 April 2013 by Barbican and 16 April 2013 by Chaucer, towards the end of the policy period). 9 The policy period was from 30 April 2012 to 30 April 2013. This was the first year that these insurers had assumed this risk for these insureds. Cover in materially similar terms had previously been provided by Liberty International Underwriters who had declined to continue cover after 30 April 2012. 10 It is crucial to understand the contractual terms of the 2013 amendment. The endorsement had a title: "Contract Changes". Immediately thereunder appeared the words: This Contract is amended as follows: Endorsement effective date: 30th April 2012 It is hereby agreed and understood with effect from inception that the attached endorsement is to apply to the policy: 11 Thus, there can be no doubt that the task of the Court is to interpret and construe the policy as a whole, reading it as including at all times, from inception of risk (30 April 2012), Endorsement No. 002. To the extent that the argument for the insurers put by Mr Rich SC required the interpretation of the insuring clause (cl 1.1) assuming a lack of presence of Endorsement No. 002, we would reject that argument. It is not to the point, and irrelevant, to assert that there can be no difference in the meaning of the insuring clause (cl 1.1) before and after the amendment in 2013. Such a juxtaposition is contrary to the agreement of the parties reflected in the opening words of Endorsement No. 002 to which we have referred above. The dispute is to be resolved under the amended terms which are (contractually) taken to have always included Endorsement No. 002. 12 There is thus no need to refer to the circumstances of the amendment dealt with by the primary judge at [23] of his reasons. 13 The insuring clause (cl 1) was in the following terms: AUSTRALIAN FI PROFESSIONAL INDEMNITY POLICY WORDING In consideration of payment of the Premium by the Insured and subject to all the terms, conditions and exclusions, including all definitions of the Policy, Underwriters agrees [sic] as follows: 1. Insuring Clauses 1.1 Professional Liability Underwriters will pay on behalf of the Insured the Loss which the Insured is legally liable to pay in respect of a Claim alleging an act, error or omission of the Insured in the performance of Professional Services. 1.2 Advancement of Defence Costs Underwriters will pay for Defence Costs in respect of a Claim covered under Insuring Clause 1.1 or under any applicable extension. Underwriters will pay for these Defence Costs as and when they are incurred prior to the final resolution of the Claim. However, each Insured shall repay to Underwriters all payments of Defence Costs incurred on that Insured's behalf if and to the extent it is established that such Defence Costs are not insured under the Policy. Defence Costs are subject to the Excess and shall form part of the Limit of Liability. 14 The phrase contained therein "Professional Services" was defined in Endorsement No. 11 as follows: It is agreed between Underwriters and the Insured that Professional Services means: Financial planning encompassing advice on approved investment products and life insurance products. The provision of software programs and technical support to product suppliers. Mortgage Broking. Referring clients who are in need of Credit Products to a referral source, a Mortgage Broker or another originator in return for a commission. Coverage for such activities is limited to defence costs only for a sublimit of AUD 100,000. Writing applications for mortgage products which are then referred to an originator for a credit decision. Completing sign-offs for reverse mortgage products from CBA and St George in return for a fee. Credit Services. Managed Discretionary Account Operator services Operator of Strategy Portfolio Limited Wrap Platform 15 Only the first of the listed services is immediately relevant to the dispute; but the whole list reveals both a breadth and a particularity of coverage. 16 Reading the relevant part of Endorsement No. 11 into the relevant insuring clause (cl 1.1), the terms of the cover are as follows: Underwriters will pay on behalf of the Insured the Loss which the Insured is legally liable to pay in respect of a Claim alleging an act, error or omission of the Insured in the performance of [f]inancial planning encompassing advice on approved investment products and life insurance products. 17 One aspect of the dispute concerns the extent to which, if at all, the breadth of the phrase "financial planning" is narrowed by the present participle "encompassing" and the following words. Does "encompassing" merely connote a non-limiting illustration of financial planning? Or does it limit the financial planning, in respect of which cover is granted, to that which is advice on (relevantly) approved investment products? Or is there some midway position? A second aspect of the dispute concerns the question as to what is an "approved investment product". 18 Endorsement No. 002 contains an exclusion clause, entitled "RG126 NON-APPROVED PRODUCTS EXCLUSION". The numbers and letters "RG126" are a clear reference to the Regulatory Guide 126 published by the Australian Securities & Investments Commission ("ASIC") entitled "Compensation and insurance arrangements for AFS licensees". (The acronym "AFS" stands for "Australian Financial Services"; and such a licence is defined in ss 761A and 913B of the Corporations Act.) We will return to the overall significance of the regulatory framework in due course. For present purposes, it is sufficient to note that s 912B(2)(a) of the Corporations Act and reg 7.6.02AAA(1) of the Corporations Regulations 2001 (Cth) require that a licensee hold professional indemnity cover that is "adequate". The Regulatory Guide 126 in force in 2012 dealt with, amongst other things, scope of cover and terms and exclusions in RG 126.44 - RG 126.46. In RG 126.44 it was noted that s 912B (read with reg 7.6.02AAA) required that the insurance be adequate to cover loss or damage suffered by clients by breaches of obligations under Ch 7 of the Corporations Act for all financial services covered by Ch 7. Dealing with terms and exclusions, the guide stated at RG 126.45 - RG 126.46: RG 126.45 If exclusions in a PI insurance policy undermine the policy objective, it is hard to see how the cover can be adequate. This applies especially to exclusions that relate directly to the minimum scope of cover described above. RG 126.46 Of special concern are exclusions that mean cover is not available for breaches of obligations under Ch 7 (by a licensee or its representatives) for services (most often advice) that relate to moving a client from products that are outside the licensee's approved product list to products that are on the licensee's approved product list. 19 As we have said, we will return to the regulatory framework in due course in dealing with the commercial context of the policy, but for now it is important to recognise the terms of RG 126.46 in considering the terms of Endorsement No. 002 which, relevantly, were in the following form under the matters set out at [10] above: RG 126 NON-APPROVED PRODUCTS EXCLUSION It is hereby understood and agreed that Underwriters will not cover the Insured for any Loss, Defence Costs or any other amounts insured under the Policy which arise out of or are in any way connected with any representation or advice relating to any fund or product which is not approved by the Named Insured for distribution by its Authorised Representatives. This exclusion shall not apply to any representation or advice given by the Authorised Representative relating to any non-approved fund or product if such representation or advice relates directly to the switching of an investment from a non-approved fund or product to an approved fund or product and is in accordance with the guidelines and procedures of the Named Insured. … Authorised Representative means any person or company included on the ASIC AFS Authorised Representatives Register who has or had a written contract with the Named Insured under which the Named Insured engages the Authorised Representative to act for or on behalf of the Named Insured in the performance of Professional Services. This exclusion shall not apply to Australian Financial Services Ltd or AFS Group Limited. For the avoidance of doubt this exclusion does apply to The Salisbury Group Pty Ltd and Strategy Portfolio Limited 20 It can be noted that the second paragraph set out above from Endorsement No. 002 appears to fulfil a broad purpose to avoid (by the operation of the exclusion in the first paragraph) the "special concern" referred to in RG 126.46. It is also to be noted that RG 126.46 uses the phrase "approved product list". 21 With the exception of one issue, there was no dispute as to the principles to apply in the interpretation and construction of the policy. The one contentious issue was the proposition, contained in paragraph 13 of the insurers' written submissions, that was adhered to by the insurers in oral address, that in case of any doubt as to the proper construction of an insuring clause of a policy of indemnity insurance (which this was), the doubt should be resolved in favour of the insurers. This proposition was said to rest on the High Court authority of Ankar Proprietary Limited v National Westminster Finance (Australia) Limited [1987] HCA 15; 162 CLR 549 at 561; Chan v Cresdon Proprietary Limited [1989] HCA 63; 168 CLR 242 at 256; Andar Transport Pty Ltd v Brambles Ltd [2004] HCA 28; 217 CLR 424 at 433-437 [17]-[23] and 452-453 [68]-[71]; and Bofinger v Kingsway Group Limited [2009] HCA 44; 239 CLR 269 at 292 [53]. 22 The proposition rests on a syllogism: (1) the settled principle in Australia governing the interpretation of contracts of guarantee and indemnity is that a doubt as to the construction of a provision in such a contract should be resolved in favour of the surety or indemnifier; (2) insurance (at least this insurance) is a contract of indemnity; therefore, (3) the principle in (1) applies to this contract. 23 The proposition was accepted by Rothman J in Miskovic v Stryke Corporation Pty Ltd t/as KSS Security (No 2) [2010] NSWSC 1495; (2011) 16 ANZ Ins Cas 61-873 at [12]-[13] where, in dealing with an insurance contract, his Honour said: In relation to insurance contracts, which are, by definition, contracts of indemnity, some other rules apply. 24 His Honour then went on to express the settled principle, most recently restated in Bofinger at [53], in terms of (1) in [22] above. 25 With the utmost respect to Rothman J, we cannot agree. That the notion of indemnity is present in many contracts of insurance (though not all: see, for example, sickness and accident, life insurance, and agreed value policies – British Traders' Insurance Company Limited v Monson [1964] HCA 24; 111 CLR 86 at 92-93; and Wallaby Grip Limited v QBE Insurance (Australia) Limited [2010] HCA 9; 240 CLR 444 at 457 [30]) does not make contracts of insurance arrangements of a kind to which the principle expressed by the High Court applies. The kinds or classes of contract to which the principle in Ankar, Chan, Andar and Bofinger is concerned are of a different character to insurance, including indemnity insurance. They concern making good a creditor by way of secondary or primary financial accommodation. 26 The distinctions between contracts of indemnity, insurance and guarantee are discussed at length in Enright I and Merkin R, Sutton on Insurance Law (4th ed, Thomson Reuters, 2015) from paragraph 2.130. Notably, contracts of insurance have contractual characteristics or requirements, including insurable interest and utmost good faith. Enright and Merkin say: [2.160]…while the insurer stands in a position analogous to that of the surety and the insured is in a similar position to the principal debtor, the substance of a contract of insurance is, in this context, the insurer's promise to pay the insured. In the same way, while the creditor has the benefit of the surety's promise, the creditor is in an analogous position to a third party claimant against an insured, but the insurer makes no promise to the third party claimant; there is no legal relationship between them except in special circumstances…. [2.180]…While the primary obligation in both an indemnity and an insurance is an obligation to indemnify, the distinction between an indemnity and insurance arises from other characteristics and circumstances. If the indemnity is structured as or as a part of a contract which is characterised as a guarantee, it will not be a contract of insurance. The description of the document or contract can be influential. The circumstances in which the contracts are effected will also be relevant. The issues about whether the risk was rated or assessed or whether there is a premium or payment for the risk can also be relevant. The general nature of the indemnifier's business will also be relevant. An indemnity, as a matter of practical commercial observation, is often contained within a contract where the indemnity obligation is ancillary or collateral to the principal purpose of the contract and the primary obligations under the contract. 27 The rule of strict construction, referred to in Miskovic, applies to contracts, referred to as contracts of suretyship, by which one person (the surety) agrees to answer for some liability of another (the principal debtor) to a third person (the creditor): Beale H, Chitty on Contracts – Volume 2: Specific Contracts (31st ed, Sweet & Maxwell, 2012) Chapter 44 "Suretyship", especially 44-001 and 44-061, and compare Chapter 41 "Insurance", especially 41-059. This was the type of contract under consideration in each of Ankar, Andar and Bofinger. 28 In Ankar at 561, Mason ACJ, Wilson, Brennan and Dawson JJ said: At law, as in equity, the traditional view is that the liability of the surety is strictissimi juris and that ambiguous contractual provisions should be construed in favour of the surety. The doctrine of strictissimi juris provides a counterpoise to the law's preference for a construction that reads a provision otherwise than as a condition. A doubt as to the status of a provision in a guarantee should therefore be resolved in favour of the surety. 29 At 560, their Honours referred to the law of the United States, under which the rule of strict construction, though applied in favour of sureties who receive no reward, is not applied to a compensated surety, i.e., a surety for reward. Their Honours explained the rationale for the United States' position, saying: This is largely because surety bonds are thought to resemble insurance contracts, the premiums are calculated against estimated risks and the contracts incorporate forms prepared by the surety. … it is of some importance to note that the different approach taken in the United States with respect to the special principle rests on the view that it arises not so much from the terms of the suretyship contract, as from the relationship between the parties which the contract creates. 30 In Andar, at 435 [20], Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ referred to the discussion of the United States' law in Ankar, and quoted the following statement in Chapman v Hoage 296 US 526 at 531 (1936), expressing the United States' position: One who engages in the business of insurance for compensation may properly be held more rigidly to his obligation to indemnify the insured than one whose suretyship is an undertaking uncompensated and casual. 31 Their Honours continued: In Ankar, this Court declined to adopt the distinction in the United States cases. No party in the present case has sought to dispute Ankar. Moreover, in any consideration of the law in the United States it is important to note that the mere circumstance that a surety undertakes its obligations for consideration or profit does not automatically result in the characterisation of that surety as "compensated". Rather, the expression "compensated surety" appears to be directed toward corporations whose regular business is the writing of surety agreements and who, as a result, are able to assess the risk involved under each agreement and charge compensatory premiums accordingly. So much was made clear by the Restatement of the Law of Security promulgated in 1941. This defined the expression to mean: "[A] person who engages in the business of executing surety contracts for a compensation called a premium, which is determined by a computation of risks on an actuarial basis." Other sureties, whether strictly gratuitous or whether receiving some pecuniary advantage, whose surety contracts were occasional and incidental to other business, did not fall within the definition of a "compensated surety". It follows that the present case falls outside the approach adopted in the United States with respect to compensated sureties. 32 The distinction which the High Court declined to adopt in Ankar was the distinction between compensated and uncompensated sureties. No consideration was given in either Ankar or Andar to the proper interpretation of an insurance contract. Chapman v Hoage is not authority for the application of the doctrine of strictissimi juris to an insurance contract. Rather, it is authority for the obverse: that the doctrine does not apply to a compensated surety. Nor can the reference to Chapman v Hoage, in explaining the distinction between Australian and United States' law, justify the application of the doctrine of strictissimi juris to an insurance contract. Nor can the reference be interpreted as a refusal on the part of the High Court to draw a distinction between insurance contracts and indemnities, as suggested in Miskovic. 33 Following Ankar, in Tricontinental Corporation Ltd v HDFI Ltd (1990) 21 NSWLR 689 at 694-695, Kirby P compared the United States' approach to interpretation of the corporate compensated surety's contract: to that adopted in the contracts of insurance with which Australian and English law have been long familiar…The positions of an insurer and of a corporate compensated surety are, of course, different. Insurance liability is generally expressed in terms of purely chance happenings. Compensated sureties, on the other hand, typically assume obligations which depend upon the foreseeable actions of the persons named. But both insurers and corporate compensated sureties have opportunities of investigation and evaluation of risks to exert control or influence over the terms of their contract. Each accepts payments which represent a pre-assessed commercial evaluation of the risks which they agreed to assume. In his judgment in Andar, his Honour said nothing to suggest that an insurance contract should be construed in favour of the insurer. 34 Finally, we disagree with the observation in Miskovic at [13] that the principle of strict construction of contracts of suretyship depends upon the contra proferentem rule. A consideration of at least equal significance is the historical position of the surety, which may be contrasted with that of an insurer. In Tricontinental at 693, Kirby P said: Most legal systems have regarded the surety as a favoured debtor: see Holdsworth, History of English Law (1924) at 298. The common law has traditionally demonstrated a solicitude to the surety because the surety typically accepts a dangerous obligation, depending upon the defaults of others, and usually assumes the obligations gratuitously. Originally, the surety was typically a friend or relative of the principal, lending the surety's credit to the principal without compensation for doing so. This is often the case still. A variety of defences were developed by the law to an action on the contract or bond of suretyship designed to protect the surety. Equity would assure the surety relief by enjoining an action at law where a principal had deviated in the subsisting obligation without the surety's assent cf Rees v Berrington (1795) 2 Ves Jun 540; 30 ER 765. It was the very precariousness of the position of the typical surety which led courts of equity to seek ways to free the surety from liability considered unjust. Such solicitude produced the doctrine of strictissimi juris by which the surety could escape liability if some provision in the contract had not been strictly complied with. 35 The nature or character of a contract of insurance is "elusive" to define: Parkington M et al, MacGillivray and Parkington on Insurance Law (8th ed, Sweet & Maxwell, 1988) [1] at 1. The working definition given over 100 years ago by Channell J in Prudential Insurance Company v Commissioners of Inland Revenue [1904] 2 KB 658 at 663-664 remains the foundation of analysis: for a monetary consideration (the premium) the person (the underwriter) agrees to pay to the other (the insured) a sum of money or some benefit upon the occurrence of one or more specified events. Other relationships could well fit such a simple mould. One needs, however, before identifying or characterising the contract as one of insurance, to elaborate upon each element – premium, promise to pay, sum of money or other benefit, upon a specified event – not by way of further definition, but by reference to the purpose and character of the arrangement to share the risk of, or spread the loss from, unhoped-for, but possible, contingencies that may or may not happen (in life insurance, as to timing of an ultimately certain contingency). 36 The categorisation or characterisation of contracts of guarantee, of indemnity and of insurance, requires, above all, an understanding of their purpose and nature. All, at one level, contain an element of indemnity; all can be said at one level of abstraction to be contracts of indemnity (subject to the qualification expressed earlier as to different types of insurance). But each has a relevant difference from the other; and contracts of guarantee and indemnity, for the operation of the principle in Ankar, are to be categorised and characterised as quite different from contracts of insurance. 37 Each of a guarantee and an indemnity has the object or purpose of making good the financial position of a creditor of someone other than the guarantor or indemnifier. The two categories do this by different means: the guarantor as surety assumes a secondary obligation to the primary obligation of the principal debtor. In a contract of indemnity the indemnifier is primarily liable to the creditor, not collaterally. This difference in character, ascertained by construction, is important in the identification of the parties' mutual rights and obligations. But both are a species of financial accommodation to support the credit risk of the principal debtor and to hold the creditor harmless. 38 A contract of insurance has the object or purpose of sharing the risk of, or spreading loss from, a contingency. Relevant to its character as insurance will be how the contract came to be effected, its nature and purpose and how it is to be performed: see generally Seaton v Heath; Seaton v Burnand [1899] 1 QB 782 at 792-793 (Romer LJ). 39 The protection of the guarantor or indemnifier by the principle of construction referred to in Ankar had its origin in the nature and common circumstances of the formation of contracts of guarantee: Tricontinental at 693-694. The importance of how the contract of guarantee commonly comes about can be seen in the judgment of Bayley B in Nicholson v Paget (1832) 1 C & M 48 at 52; 149 ER 309 at 311, cited in Andar 217 CLR at 433 [18]. 40 Ultimately, of course, such tasks of categorisation or characterisation depend on the context, in particular, the purpose of the enquiry. From the nature, character and purpose of insurance there is no reason, and no precedent, for according an insurer the tenderness accorded to guarantors and indemnifiers as reflected in the general principle recently restated in Bofinger 239 CLR at 292 [53]. 41 With respect, the proposition in Miskovic is wrong. 42 The principles, otherwise, to apply in relation to the interpretation and construction of insurance policies as commercial contracts were not in dispute. Such principles can be found in authorities dealing with the construction of commercial contracts, to some of which reference was made in Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; 76 NSWLR 603 at 618-619 [19]-[23]; and also in authorities dealing specifically with contracts of insurance: McCann v Switzerland Insurance Australia Limited [2000] HCA 65; 203 CLR 579 at 589 [22] (Gleeson CJ), 600-603 [73]-[74] (Kirby J); Wilkie v Gordian Runoff Limited [2005] HCA 17; 221 CLR 522 at 528-529 [15] and [16] (Gleeson CJ, McHugh, Gummow and Kirby JJ); Australian Casualty Co Limited v Federico [1986] HCA 32; 160 CLR 513 at 520-521 (Gibbs CJ), and see also the valuable discussion of principle by Kirby J (though in dissent) in Johnson v American Home Assurance Company [1998] HCA 14; 192 CLR 266 at 272-276 [19]. The principles need not be restated here beyond some essential considerations, which for present purposes can be taken to be that the policy is to be given a businesslike interpretation, paying attention to the language used by the parties in its ordinary meaning, and to the commercial, and where relevant, the social purpose and object of the contract, in the context of the surrounding circumstances, including the market or commercial context in which the parties are operating, by assessing how a reasonable person in the position of the parties would have understood the language. Preference is to be given to a construction supplying a congruent operation to the various components of the whole. 43 The importance of the commercial purpose in the interpretation and construction of a policy can be seen in the cases referred to by McHugh JA (as his Honour then was) in Legal & General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390 at 405. 44 To refer to "social" purpose (where relevant) is not to detach the process of interpretation and construction from the objective enquiry as to the meaning of a document regulating the private rights of the parties. It is to identify the reality that in some circumstances a policy of insurance as a commercial document will find its place in some aspect of the organisation of society through the rights and obligations thereby created by it. That place or purpose will have its weight in the description of meaning to the words in question. 45 Turning to the policy here, three considerations are of importance by way of introduction. First, the "Policy" was defined by cl 7.12 as meaning: this policy wording, any endorsements to it, the Schedule and the Proposal. The "Proposal" was defined by cl 7.16 as meaning: the proposal form and any other information submitted by the Insured in proposing for this insurance. 46 A large body of information was submitted to the insurers by the insureds in proposing for the insurance. It was sent by email. Both sides referred to parts of it in support of their contentions. Much of it was not in any way promissory in nature. The effect of cll 7.12 and 7.16 was, however, that recourse could be had to the material as relevant to the interpretation and construction of the wording without any need to give consideration to the legitimacy of the material as contextual surrounding circumstances: cf Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; 89 ALJR 990. Mr McHugh SC, on behalf of Mr Todd, submitted that the page early in the policy entitled "Information" affected this conclusion. On this page, the following appeared under the heading: INFORMATION The following documents and information have been seen, read and understood by Underwriters hereon: — AFS Group Limited proposal form signed and dated 15th February 2012 — The Salisbury Group Pty Ltd. proposal form signed and dated 15th February 2012 — AFS Group Limited claims information for the period of 31st December 2002 to 31st March 2012 — The Salisbury Group Pty Ltd. claims information for the period of 30th June 2007 to 31st March 2012 — Renewal presentation dated 16th February 2012 — Australian Financial Services Ltd. advice review – 3rd report dated 15th February 2012 — AFS Group Limited annual report 2011 — The Salisbury Group Pty Limited annual report 2011 47 Mr McHugh SC submitted that only those listed documents could be seen as contractual, and reference to the balance of the documents could only be made as contextual material. We reject that submission. The contractual significance, if any, of this page is not clear. It is not promissory, and does not qualify (or purport to qualify) the wording and effect of cll 7.12 and 7.16. It may have significance for the purposes of the operation of Part IV of the Insurance Contracts Act 1984 (Cth), but it does not limit the ability of the Court to refer to particular documents as "information submitted" for the purposes of cl 7.16 in the interpretation and construction of the policy. We will come to some of those documents shortly. 48 Secondly, the regulatory framework of Ch 7 of the Corporations Act dealing with financial services and markets is of some importance. This was not a policy the terms of which were mandated by statute. But, nevertheless, licensees were legally obliged to have "adequate" professional indemnity insurance. The terms of the policy in a number of places recognise the existence of a legislative framework: Endorsement No. 9 which in terms recognised that there was mandated professional indemnity insurance; Endorsement No. 10 which in terms recognised that there was mandated professional indemnity insurance under the Corporations Act; and Endorsement No. 002 which recognised RG126 in its heading. Whilst this background should not be over-emphasised, it tends against a construction of the wording which would give an overly narrow operation to the policy which might be seen to make the policy inadequate and so place the licensee in breach of its conditions. 49 Thirdly, the evidence was clear that an important and widespread practice of licensees was to have approved product lists to which authorised representatives were required to limit themselves in advising clients about financial products. We will come to the reflection of this in the documentation shortly. It can be accepted that the use of approved product lists, and the restriction of authorised representatives to advising on them was widespread. 50 Before turning to the wording of the policy, a number of aspects of the documentation that was part of the "Proposal", and so part of the "Policy", should be noted. 51 The proposal had questions about the approved product listings, including whether or not an investment committee existed. This revealed, as one would expect, a concern on the part of the underwriters to understand the degree of good practice, or otherwise, that existed in the prospective insured's business. One of the documents provided to underwriters with the proposal was the compliance and procedures manual of AFSL. In Chapter 12, entitled "Reasonable Basis for Product Recommendation", there was discussion of product research, the approved product list, and the addition to and removal from such list. Both sides emphasised this document. It can be seen to reinforce the fundamental and structural importance of the approved product list for regulating and controlling the behaviour and standards of competence of authorised representatives. One crucial consideration is that the document (and so the "Policy", in the wide sense defined by cll 7.12 and 7.16) recognised in Parts 12.3 and 12.4 of the manual that there were circumstances where a representative could advise on a product not on the approved list. This feature of the manual is of significance when one comes to the meaning of the phrase "approved investment products" in Endorsement No. 11 and the primary judge's view that this meant only products that were on the approved product list. 52 One of the documents provided to the underwriters with the proposal was a powerpoint display made at a meeting in February 2012 between representatives of the insureds, of their broker (not Howdens) and of Liberty International. The document sought to explain how the group had improved its risk profile. Included in that was a page concerned with "approved product list changes". Provided with this document was an "APL Review" by a firm called Lonsec which had undertaken a comprehensive review of the approved product list of the group. 53 Turning to the wording of the policy, it is convenient to deal first with the question of the meaning of "approved investment products". We cannot agree with the primary judge that the background and the comments provided to the underwriters would lead to the conclusion that a reasonable person would understand the ordinary words "approved investments products" to mean only investments contained in an Approved Product List. First, that is not what the words say. Secondly, accepting the importance of approved product lists, the prospective insured told the underwriters that there would be occasions when advice would be given on products not on the approved product list. Thirdly, no enquiry was ever made about past lists which might have been crucial in a claims made policy if the coverage was restricted to approved product lists. The focus was on the risk profile of a new insured (no doubt in the light of claims history information). This third consideration may perhaps be of marginal weight as tending to a subjective rather than objective consideration; but it is worthy of note. 54 In a fall-back argument on the appeal the underwriters accepted the significance of Parts 12.3 and 12.4 of the compliance and procedures manual. Mr Rich SC submitted (at appeal transcript p 82) that "approved investment products" meant that the investment product must be on the approved product list or if not approved it must be dealt with in a manner consistent with the policies and procedures that were disclosed to the underwriters at the time of negotiating the policy. We cannot agree. The words "approved investment products" naturally mean approved by the licensee from time to time. There is no warrant to read such a complex arrangement into the simply expressed question of approval. Approval would be a question of fact. 55 The evidence was overwhelming that advice by Mr Todd on the Hervey Bay investment and the investment itself were approved by TSG through Mr Euvrard, TSG's managing director. That there may have been a misunderstanding as to whether the clients were sophisticated investors does not detract from the fact of the approval of the advice on the investment and of the investment. The primary judge found as much in [49] of his reasons. 56 Thus, the appeal should be allowed insofar as it concerns the Hervey Bay investment, irrespective of the other issue of the construction of the insuring clause. 57 One other product can be dealt with before going to the other issue of construction: the Multiplex Development and Opportunity Fund. The primary judge found (at [48] of his reasons) that Mr Todd had not proved that this product was on an approved list at the relevant time. The advice was given on 17 February 2005. The inference is and was available that this product was on an approved list (and so approved) in February 2005, or was approved at least by February 2005. First, the product appeared on an approved product list for the period commencing two weeks later (1 March 2005 to 30 June 2005). This was described by the primary judge as an "unnamed Approved Product List". The documentation appears, however (see appeal reference Tab 38 Folder 3 Vol 6, p 2435) to identify this as a TSG approved list. Secondly, the investment was recommended to the clients in a statement of advice dated 17 December 2004 (appeal reference Tab 38 Folder 2 Vol 1 p 203) that stated that the SMSF (self-managed superannuation fund) investments of a combined value of $1.6 m for the two clients was based on the "Approved Product List" (appeal reference Tab 38 Folder 2 Vol 1 p 223) which can be seen to include the Multiplex investment (appeal reference Tab 38 Folder 2 Vol 1 p 216). It was thus approved in December 2004, only two months before the advice. 58 This is a foundation for an inference that TSG had approved the Multiplex investment at the time of the advice in February. For this reason, the appeal in relation to the Multiplex investment should be allowed. 59 As to the resolution of the dispute concerning the other investments, it is necessary to turn to the other important interpretation and construction issue: the meaning of Endorsement No. 11 and the insuring clause and the words "financial planning encompassing advice on approved investment products". 60 The primary judge concluded at [32] of his reasons that the insuring cl 1.1 meant, "relevantly, advice on approved products", and restricted such products to those on Approved Product Lists. This construction would restrict the cover to advice on particular (individual) products that were approved. It would not cover any advice on products or investments that were not approved, or any general financial planning advice – arguably any advice about classes of products and dealing in products or investments (even if approved). 61 In oral argument, Mr Rich SC on behalf of the underwriters submitted that the cover was not limited to advice on particular approved investment products, though he sought to maintain such restrictive meaning as not to cover advice on non-approved products. He submitted that the cover was not to be understood as meaning only advice on particular approved investment products. He accepted that the cover included financial planning services that did not involve any product advice. He drew attention to the primary judge's use of the word "relevantly" in [32] of the reasons. Whilst one can appreciate the reasons for this concession, it is not entirely easy to reconcile this outcome with a coherent interpretation and construction of the clause. If the concession were good, it must mean that there is cover for "financial planning" per se. That was Mr Todd's position. If the qualification and concession produce the result that the coverage clause (cl 1.1) means any financial planning advice, but if advice is given on products the products must be approved and there is no coverage on non-approved investments, it is very difficult to see how that comes out of the words of the insuring clause (as opposed to the words of the exclusion in Endorsement No. 002). 62 The construction put on the clause by Mr McHugh SC on behalf of Mr Todd would have the word "encompassing" as meaning "including" in an illustrative sense, such that the core activity covered was financial planning. 63 The difficulty with the insurers' construction is that it does much of the work of the exclusion in Endorsement No. 002. The exclusion is wider than this posited limitation of cover in the issuing clause, by the effect of the words "arise out of or are in any way connected with any representation or advice relating to". Nevertheless, an exclusionary operation of the insuring clause would do much of the work of the exclusion. Further it is not easy to give coherent operation to the words of the clause, especially "encompassing", to accommodate the concession referred to at [61] above. 64 The difficulty with Mr Todd's construction is that it leaves no real operative work to do for most of the sentence of a definition. Everything that would follow the phrase "financial planning" would be illustrative only. 65 Set in a definition clause such as Endorsement No. 11, the words from "encompassing" appear to us to define and limit the scope of the activities of the insured of financial planning that are the subject of the liability insurance: cf Horsell International Pty Ltd v Divetwo Pty Ltd [2013] NSWCA 368 at [262] per Meagher JA. 66 The word "encompassing" in this context naturally connotes the meaning of "containing". Thus, the cover is for financial planning containing advice on approved investment products. This would mean that the coverage clause covered all aspects of that financial planning as long as the financial planning contained advice on approved investment products. Given the practical likelihood, in any given circumstances, of advice being given on financial products, we doubt whether this limitation would be likely to limit in any practical way the insureds' coverage for claims for financial planning advice. Any such advice is likely to have been given in the context of advice on products. This construction, which was debated on appeal, would leave to the exclusion the task of removing from cover the effects of advice on non-approved products. This more happily gives a congruent operation to the coverage clause (cl 1.1 and Endorsement No. 11) and the exclusion clause (Endorsement No. 002). 67 We have read the reasons of Beach J. His Honour prefers the broader construction propounded by Mr Todd. We accept that the language of the policy is open to different possible views, but we have difficulty in concluding that the word "encompassing" means, in effect, "illustratively including". The difference of view between Beach J and us may identify a difference in cover that, in other circumstances, may be important for the market in which financial advisers operate. Parties and their advisers can deal with such questions by altering the wording in question. 68 The consequence of our construction is that the policy covered Mr Todd because he undertook financial planning for the claimants that encompassed approved investment products. It was thus for the underwriters to prove that the exclusion in Endorsement No. 002 applied. On the material debated on appeal, one could not conclude that the underwriters had discharged that onus of proof. They did not seek to essay that task. 69 The orders that we would make are as follows: 1. The appeal be allowed with costs. 2. Order 1 of the Court made on 6 March 2015 dismissing the Appellant's cross-claim be set aside and in lieu thereof: (a) declare that the Financial Services Errors and Omissions Insurance Policy B 0309 WP 120250b (the "Policy") issued by the Fourth to Seventh Respondents and Cross-Respondents, responds to the claim made by the Applicants below against the Second Respondent (Mr Todd) and that the Second Respondent (Mr Todd) is entitled to indemnity with respect to the liabilities identified at [3] of the Court's Reasons for Judgment published on 6 March 2015; (b) declare that pursuant to the Policy, the Fourth to Seventh Respondents and Cross-Respondents are obliged to indemnify the Second Respondent (Mr Todd) for his liability to the Applicants below for the liabilities identified at [3] of the Court's Reasons for Judgment published on 6 March 2015 and for the Second Respondent's (Mr Todd's) defence costs with respect to the claims of the Applicants below, subject to any applicable excess; (c) order that the Fourth to Seventh Respondents and Cross-Respondents pay the Applicants the amount they are liable to pay the Applicants pursuant to paragraph (b) above, excluding defence costs, in reduction of any judgment in favour of the Applicants against the Second Respondent (Mr Todd); (d) order that the Fourth to Seventh Respondents and Cross-Respondents pay the Second Respondent's (Mr Todd's) costs of the proceedings on the cross-claim; and (e) order that the separate questions described at [7] of the Court's Reasons for Judgment published on 6 March 2015 be referred for further hearing. 3. Should either party wish to make submissions on the form of order, submissions of no more than three pages are to be filed within seven days and the Court will consider the need for further argument. I certify that the preceding sixty-nine (69) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Allsop and Justice Gleeson. Associate: Dated: 19 February 2016 REASONS FOR JUDGMENT BEACH J: 70 I have had the advantage of considering the reasons in draft of Allsop CJ and Gleeson J. I agree with their conclusions and the orders proposed, but I would proceed through a different constructional pathway concerning the insuring clause of the policy. 71 Before analysing the policy, it is necessary to discuss several construction principles. 72 First, the policy is to be read and construed as a whole. It should not be construed narrowly or pedantically. Moreover, a construction that gives a congruent operation to its applicable provisions is to be preferred to another construction that does not. 73 Second and generally, textual analysis is to be given primacy. Nevertheless, words cannot be construed in a vacuum. The meaning of words cannot be divorced from their context. To proceed by only analysing the text with the aid of dictionary meanings is sterile and productive of error. One does not need the assistance of modern philosophy including Ludwig Wittgenstein's model of language games to recognise as much. Words and their use must be construed in context. Moreover, uncertainty or ambiguity in the words used may only be ascertainable once context is first appreciated. Extra-textual context may reveal uncertainty or ambiguity that is not otherwise apparent from the text. 74 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 89 ALJR 990 recognises, at least implicitly, that the approach of Mason J (as he then was) in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352 may not rule out an approach which first uses context to ascertain otherwise latent textual uncertainty or ambiguity. Mason J's approach is not inconsistent with the notion that it may first be necessary to consider context. Mason J stated that: The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. (my emphasis) 75 But "plain meaning" is a conclusion. How is such a conclusion to be reached? Mason J's approach would not deny the proposition that before reaching such a conclusion you can consider context. By first considering context, you may conclude that there is no one plain meaning. Context can therefore be used to perform two functions. It can enable you to assess whether there is a plain meaning. And if one concludes that there is no plain meaning, it can assist in resolving the latent textual imprecision. I agree with the observations of Allsop P (as he then was) in Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 at [14] to [17], Leeming JA's analysis in Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 310 ALR 113 at [71] to [80] and this Court's observations in Stratton Finance Pty Ltd v Webb (2014) 314 ALR 166 at [40] per Allsop CJ, Siopis and Flick JJ. 76 Third, in construing the policy, the commercial purpose or object to be secured by the policy is to be considered. To say as much also demonstrates why exogenous factors need to be considered. If text, considered in context, permits of more than one meaning, the commerciality of a particular construction consistent with such a purpose or object is preferable where it is implausible that the parties could be taken to have intended otherwise, such intention to be ascertained in accordance with objective contractual theory. I would prefer to use the language of commercial purpose rather than social purpose where one is dealing with a private instrument regulating the rights and obligations of parties to a commercial relationship or transaction. But in any event, the utilisation of commercial purpose ought not to be taken too far. A balanced approach that is "neither uncompromisingly literal nor unswervingly purposive" (Charter Reinsurance Co Ltd v Fagan [1997] AC 313 at 350 per Mance J (as he then was) adopting the language of Sir Thomas Bingham MR in Arbuthnott v Fagan [1996] LRLR 135 at 139) is to be preferred. 77 Fourth, there is no occasion to apply to the policy idiosyncratic rules of interpretation developed for other species of indemnity contracts. I agree with the analysis of Allsop CJ and Gleeson J at [21] to [41] on this aspect. Special rules of interpretation developed for the benefit of those who agree to indemnify a creditor against the credit risk of a debtor, who have been in various ways "the object of some favour both at law and in equity" (In re Sherry; London and County Banking Co v Terry (1884) 25 Ch D 692 at 703 per the Earl of Selborne LC), have little to do with policies of indemnity insurance. In the latter case, the indemnifier is in a quite different category. It is engaging in the business of providing indemnities. It is doing so for reward, calculated in part by reference to the risk assessment of whether the relevant contingent event will occur. Moreover, the indemnified in the latter case is in a quite different situation to the indemnified in the former case. Different risk allocations are involved, although superficially each situation involves an indemnity contract. 78 It is appropriate to now turn to the insuring clause of the policy. 79 Clause 1.1 provides: Underwriters will pay on behalf of the Insured the Loss which the Insured is legally liable to pay in respect of a Claim alleging an act, error or omission of the Insured in the performance of Professional Services. 80 Endorsement No 11 provides: Definition of Professional Services It is agreed between Underwriters and the Insured that Professional Services mean: Financial planning encompassing advice on approved investment products and life insurance products. The provision of software programs and technical support to product suppliers. Mortgage Broking. Referring clients who are in need of Credit Products to a referral source, a Mortgage Broker or another originator in return for a commission. Coverage for such activities is limited to defence costs only for a sublimit of AUD 100,000. Writing applications for mortgage products which are then referred to an originator for a credit decision. Completing sign-offs for reverse mortgage products from CBA and St George in return for a fee. Credit Services. Managed Discretionary Account Operator services Operator of Strategy Portfolio Limited Wrap Platform 81 There are several textual features to note concerning the definition of "Professional Services". First, a broad range of activities is defined. Second, in the prefatory phrase, the word "mean" is used. So, when the clause is intended to refer to something exhaustive, it uses the language of "mean". Contrastingly, in the phrase "[f]inancial planning encompassing advice on approved investment products and life insurance products" the word "means" is not used. It is therefore inappropriate to treat "encompassing" as a synonym for "means" (in substance the primary judge's approach (see [32] to [34] of his reasons)). 82 What does "encompassing" then mean in the first part of the definition of "Professional Services"? Does it mean "including"? This is the appellant's construction. If so, one can provide financial planning that does not include giving advice on approved products, but still fall within the insuring clause (assuming no other part of the "Professional Services" definition is relevant other than the first part). Or does "encompassing" mean that the financial planning must include advice on approved products, but is not limited thereto (again assuming that only the first part of the definition of "Professional Services" is relevant)? This is the construction given by Allsop CJ and Gleeson J. In other words, other aspects of financial planning not involving such advice are covered, providing that advice on such products is also given. 83 In my view, the word "encompassing" in context means "including". 84 First, as I have said, the text indicates that "encompassing" is less than "means". 85 Second, the natural meaning of "encompassing" includes concepts such as "encircling", "surrounding", "enclosing" or "containing". But this all suggests and is not inconsistent with the notion that "financial planning" is the broader set, with advice on approved products being a subset thereof whose boundaries are within but not co-extensive with the boundaries of "financial planning". In other words, there are activities of "financial planning" that do not involve advice on approved specific products. So, it is quite consistent to read "encompassing" to mean "including". 86 Third, it is apparent from the context that the appellant as an authorised representative was contemplated as part of the relevant licence and his derivative authorisation to be able to give advice generally about investment products, as I later elaborate on when dealing with the legislative framework. This could be advice on asset classes and general asset allocation. It could include advice on overall market risk (factors that influence share market movements such as political, economic, taxation and legislative factors), domestic versus international factors (currency risk) and sector specific factors (commodity market risks for example). Such advice might not involve any advice on specific investment products, let alone approved specific products. Further, part of financial planning may have involved dealing in financial products. Such services, by their nature, may not have involved giving advice on specific products. Further, part of financial planning was contemplated to involve advice concerning switching from a fund or product that was not on an approved list or had been but had ceased to be. Perhaps that may have involved advice to switch to a product that was approved, but not necessarily. The advice may have simply involved going liquid. Generally, there were many contemplated activities within financial planning that did not encompass advice on approved products. Such breadth of contemplated activities supports an inclusive definition. 87 Fourth, an important aspect of the context is the regulatory setting within which the policy was entered. Section 912B(2)(a) of the Corporations Act 2001 (Cth) with reg 7.6.02AAA(1) of the Corporations Regulations 2001 (Cth) required the licensee to hold professional indemnity insurance cover that was "adequate". This requirement implicitly covered the activities of an authorised representative acting in that capacity (see also ss 916A and 917A to 917E). The statutory purpose of this regime is apparent from s 912B(1): adequate arrangements had to be in place for compensating retail clients (see ss 761G and 761GA) "for loss or damage suffered because of breaches of the relevant obligations under this Chapter by the licensee or its representatives". Chapter 7 was not confined to advice on approved investment products. This is apparent from the breadth of the definitions of "financial service" (s 766A(1)) and "financial product advice" (s 766B(1)). Further, the breadth of the Australian Financial Services Licence given to the licensee in the present case (s 913B) covered the broader range of activities, with the authorisation given to the appellant under s 916A covering that broader range, but subject to the relevant Dealer/Proper Authority Holder Agreement. Clause 5.1 of this agreement did not limit the authority to only advice on specific products. But if recommendations on specific products were made, they had to be approved (clauses 5.2 and 5.3(n)); but even this was not an inflexible requirement (clause 12.4 of the relevant compliance and procedures manual). Generally, the policy was entered into within a regulatory setting to cover broader potential exposure to compensation claims than that pertaining to advice on approved products. This supports a broad reading of "encompassing". 88 Fifth, all parts of the policy should be given a congruent operation. Endorsement No 002, containing a non-approved products exclusion, excluded cover for any loss connected with any representation or advice relating to any fund or product which was not approved. This supports reading "encompassing" as "including" and leaving the question of approval or non-approval to be dealt with by the exclusion. If the primary judge's position or the respondents' contentions were correct, most of the operative parts of the exclusion would have little work to do. A fair reading of the exclusion is that it presupposes that the insuring clause covers advice on non-approved products, whether switching out of or into the same. 89 Sixth, it has been suggested that if "encompassing" means "including", then the words after "[f]inancial planning" are otiose. It is said that one should strive to give operative effect to all words. It is also said that by treating such words as otiose, one is ignoring words of limitation in the latter part of the phrase. But several points can be made. One is here dealing with a definitional clause where general illustrative references have been made. If one is dealing with an inclusive definition, it is unremarkable that some parts of the definition may not be operable in a particular case. Further, any words of apparent limitation are dealt with by the exclusions. 90 Finally, the construction given by Allsop CJ and Gleeson J is to the effect that the insuring clause covered all aspects of financial planning as long as the financial planning in a particular case also contained advice on approved investment products (see at [66]). But first, as I have said, there may be significant areas of financial planning not involving any such advice. Second, let it be assumed that all financial planning came with advice on approved investment products. What if the loss to a claimant arose from that part of the financial planning not involving the advice on the approved investment products? On the construction of Allsop CJ and Gleeson J, this would be covered by the insuring clause. But if that be so, then one may as well have taken the starting position of construing "encompassing" as "including". 91 In summary, the appellant provided financial planning to the claimants within the definition of "Professional Services" that was the cause of their loss, whether or not it encompassed advice on approved investment products. The respondents did not prove that the exclusion in Endorsement No 002 applied. The appeal must be allowed. I agree with the orders of Allsop CJ and Gleeson J. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Beach. Associate: Dated: 19 February 2016