Public bug reported:

Seen with dnsmasq 2.75-1ubuntu0.16.04.3, after Trusty->Xenial update.

In my local network, I have two DNS servers; 192.168.1.1 is the local
DHCP/DNS server configured to reply to queries inside the local network,
and 192.168.1.4 is the forwarder in my DSL Router, responsible to answer
queries about the outside world. THe DHCP server returns these in the
order 192.168.1.4,192.168.1.1. The internal server replies REFUSED to
queries about external domains.

This configuration has worked well with Ubuntu 14.04 and other Linux
Distros (using Fedora and OpenSUSE internally here), as well as various
other OSes.

It does not work with Ubuntu 16.04. NetworkManager's dnsmasq instance
pushes the REFUSED reply from 192.168.1.1 to applications and ignores
the successful reply from 2.168.1.4. This causes all DNS queries to
external servers to fail.

I believe this is fixed in dnsmasq 2.76 and related to

http://lists.thekelleys.org.uk/pipermail/dnsmasq-
discuss/2016q1/010263.html

http://thekelleys.org.uk/gitweb/?p=dnsmasq.git;a=commitdiff;h=68f6312d4bae30b78daafcd6f51dc441b8685b1e
http://thekelleys.org.uk/gitweb/?p=dnsmasq.git;a=object;h=4ace25c5d6

According to these sources, the bug was introduced with 
http://thekelleys.org.uk/gitweb/?p=dnsmasq.git;a=object;h=51967f9807665dae403f1497b827165c5fa1084b

In my local setup at least, I can work around the problem by using the
"strict-order" option to dnsmasq.

echo strict-order >/etc/NetworkManager/dnsmasq.d/order.conf

But that's not a general solution. If dnsmasq has several forwarders,
and some return SERVFAIL or REFUSED and others return SUCCESS, the
successful answer should be returned to clients, independent of the
strict-order setting.

** Affects: dnsmasq (Ubuntu)
     Importance: Undecided
         Status: New

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https://bugs.launchpad.net/bugs/1726017

Title:
  dnsmasq prematurely returns REFUSED, breaking resolver

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