BNP Paribas v Pacific Carriers Ltd

In the New South Wales Court of Appeal, BNP Paribas (BNP) appealed against a judgment in favour of Pacific Carriers Ltd (PCL). The dispute concerned letters of indemnity (LOIs) issued by a bank employee, which PCL argued bound BNP to indemnify them for the discharge of certain cargo without production of original bills of lading. PCL had sought to rely on these LOIs to avoid liability for the loss of the original bills of lading.

The Court was required to determine whether BNP was contractually bound by the LOIs signed by its employee, whether the employee had ostensible authority to bind the bank to such an indemnity, and whether BNP had been negligent in the execution of the LOIs or had made misrepresentations in contravention of the Trade Practices Act. The central question was the legal effect of the signature of a bank employee on LOIs that were not in accordance with the bank's internal policies and standard practice for such instruments.

The Court found that the employee who signed the LOIs did not have actual or ostensible authority to bind BNP to an indemnity. The Court reasoned that PCL had not made out a case for ostensible authority, as there were no representations by BNP that the employee possessed such authority. Furthermore, the Court held that the LOIs did not create a contractual obligation on BNP to indemnify PCL, nor did they constitute a misrepresentation under the Trade Practices Act. The Court also found that PCL had not established negligence on the part of BNP.

Consequently, the Court allowed BNP's appeal, setting aside the judgment of the court below. PCL's summons was dismissed with costs, and PCL was ordered to pay BNP's costs of the first cross-claim. The Court also entered judgment for BNP against PCL for restitution of sums paid by BNP to PCL, together with interest. PCL was ordered to pay BNP's costs of the appeal and cross-appeal.