BNP Paribas v Pacific Carriers Ltd

The dispute in this matter concerned liability under a contract of indemnity for the misdelivery of cargo. Pacific Carriers Ltd (PCL) sought to recover damages from BNP Paribas (BNP) under letters of indemnity (LOIs) issued by NEAT. The case reached the Court of Appeal after the High Court had determined that BNP was liable in contract to indemnify PCL.

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.