NEW SOUTH WALES COURT OF APPEAL
CITATION: BNP PARIBAS v PACIFIC CARRIERS LTD [2005] NSWCA 72
FILE NUMBER(S):
40852/01
HEARING DATE(S): 15 February 2005, 16 February 2005, 17 February 2005
JUDGMENT DATE: 28/04/2005
PARTIES:
BNP Paribas - Appellant
Pacific Carriers Ltd - Respondent
JUDGMENT OF: Handley JA Sheller JA Giles JA
LOWER COURT JURISDICTION: Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S): SC 8/99
LOWER COURT JUDICIAL OFFICER: Hunter J
COUNSEL:
B W Rayment QC/I E Davidson - Appellant
A W Street SC/GJ Nell - Respondent
SOLICITORS:
Corrs Chambers Westgarth - Appellant
Norton White - Respondent
CATCHWORDS:
CONTRACT LAW - liability under contract of indemnity for misdelivery of cargo - assessment of damages - whether costs incurred in settling claim at arbitration recoverable - whether settlement reasonable - consequences for the damages assessed when settlement was unreasonable - whether contract of indemnity allowed for recovery of legal costs
LEGISLATION CITED:
Trade Practices Act 1974
DECISION:
(1) Grant leave to amend ground 15 of the notice of appeal by substituting "in contract" for "in tort"; (2) Appeal allowed; (3) Set aside the judgment for PCL against BNP for $US4,378,788.49 and in lieu thereof judgment for such sum calculated in accordance with these reasons as the parties may agree and advise the Registrar within 21 days, taking effect on 24 October 2001; (4) Cross-appeal dismissed; (5) PCL pay seventy-five per cent of BNP's costs of the appeal and cross-appeal; (6) Liberty to apply on seven days notice in the event of inability to agree upon the substituted judgment sum.
JUDGMENT:
IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA 40852/01
SC 8/99 (Equity)HANDLEY JA
SHELLER JA
GILES JA
BNP PARIBAS v PACIFIC CARRIERS LTD [NO 2]
This is a remitted appeal from the decision of the High Court, Pacific Carriers Ltd v BNP Paribas [2004] HCA 35, that held BNP Paribas (BNP) liable to Pacific Carriers Ltd (PCL) under contracts of indemnity (NEAT LOIs).
PCL contracted to deliver a shipload of legumes to SSOE. However, the cargo arrived before the bills of lading and delivery was in fact made to the purchaser, Royal, other than on presentation of the bills of lading. A claim for conversion by SSOE against the ship owner, Bolton, was settled in London at arbitration (the London Arbitration). Bolton was indemnified by PCL, who in turn, sought to rely on their contract of indemnity with BNP.
The issues for determination by the Court of Appeal included:
whether the monies paid by PCL to Bolton to fund the settlement of the London Arbitration, were recoverable by PCL from BNP under the contract of indemnity;
whether SSOE consented to the delivery of the legumes to Royal thereby providing a defence to conversion and whether the settlement of the London arbitration was, in the circumstances, reasonable and if the settlement was not reasonable, whether the court was able to undertake a reassessment to determine what a reasonable settlement would have been; and
whether the contract…
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- Case
- [2005] NSWCA 72
- Decision Date
CaseChat Overview and Summary
The primary legal issues before the Court of Appeal were the assessment of damages payable by BNP to PCL under the NEAT LOIs, and whether costs incurred by PCL in settling a separate arbitration claim were recoverable. This included determining the reasonableness of that settlement and its consequences for the damages assessed.
The Court of Appeal, disagreeing with the first instance judge, found that the settlement of the London arbitration was not reasonable. It reasoned that PCL's defence in that arbitration was misconceived, as the purpose of the LOI scheme was to protect PCL against claims from the party entitled to possession of the goods, which was SSOE. The court concluded that PCL had not contracted under the NEAT LOIs to indemnify BNP for its costs of the litigation.
The Court of Appeal allowed the appeal, setting aside the judgment for PCL against BNP and ordering a substituted judgment sum to be agreed by the parties. PCL was ordered to pay seventy-five per cent of BNP's costs of the appeal and cross-appeal.
Orders
Orders of the court
(1) Grant leave to amend ground 15 of the notice of appeal by substituting "in contract" for "in tort"; (2) Appeal allowed; (3) Set aside the judgment for PCL against BNP for $US4,378,788.49 and in lieu thereof judgment for such sum calculated in accordance with these reasons as the parties may agree and advise the Registrar within 21 days, taking effect on 24 October 2001; (4) Cross-appeal dismissed; (5) PCL pay seventy-five per cent of BNP's costs of the appeal and cross-appeal; (6) Liberty to apply on seven days notice in the event of inability to agree upon the substituted judgment sum.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
I am confident that SSOE did not intend its facsimile to be read as insisting that before delivery of the goods to Royal, Bolton would obtain a bank backed LOI from SSOE. In what circumstances would a bank, at the request of SSOE as the financier and unpaid creditor of Royal, be prepared, even with recourse to SSOE, to agree to indemnify the shipowner for delivering goods to Royal without production to it of the original bills of lading? If the bank guarantee intended before delivery to Royal was from Royal it would only have been available if in fact a bank was satisfied that Royal was indeed entitled to or the holder of the bills of lading, though not available for presentation in Calcutta and that Royal was financially able to reimburse the bank if Royal was in fact not entitled to delivery.Settlement of the London arbitration I, like Giles JA, and for the reasons he has given, respectfully disagree with Hunter J’s conclusion that the settlement of the London arbitration was reasonable. Though for somewhat different reasons, I agree with Mr Teare when he said in dealing with what he described as the pleaded defence “delivery in accordance with the instructions of Swiss Singapore” that PCL’s defence in the London arbitration was misconceived and ought to fail. As Mr Teare said in his postscript, the whole purpose of the scheme whereby PCL provided a letter of indemnity to Bolton was to protect Bolton against the claims of the person entitled to possession of the goods, who in the present case, happened to be SSOE. PCL in its turn obviously wanted protection, hence its demand that NEAT provide a letter of indemnity backed by a bank. I do not think the observations of Mr Popplewell are really in point. I agree that it would be counter productive for SSOE to instruct the shipowner to discharge the goods without production of the original bills of lading but at the same time insist that the shipowner obtain indemnity backed by a guarantee from a party such as the original true shipper. As Mr Popplewell said it seems commercially far-fetched to expect the recipient of 13 January facsimile to construe it as meaning that SSOE was seeking to protect its position by requiring that the shipowner be able to draw on a bank guarantee should the shipowner be sued by SSOE. The words of the facsimile might be, in a commercial sense, meaningless unless they be read as a requirement that before delivery to Royal, Royal provide a bank guarantee. But PCL did not act on the instruction of SSOE but at the request of NEAT. I agree with Giles JA for the reasons that he has given that the facsimile of 13 January 1999 played no part as an instruction to deliver the cargo to Royal. I also agree with his Honour’s reasons for concluding that the settlement of the London arbitration between SSOE and PCL was not for the purposes of assessing the extent to which BNP was bound to indemnify PCL, a reasonable settlement. I agree with his Honour that it is appropriate that this Court undertake a re-assessment and with the conclusion his Honour reaches in making that re-assessment.Cross-appeal