Pacific Carriers Limited v BNP Paribas [2004] HCA 35
5 August 2004 S585/2003
ORDER
1. Appeal allowed with costs.
2. Set aside the orders of the New South Wales Court of Appeal made on 29 November 2002.
3. Remit the matter to the New South Wales Court of Appeal to deal with outstanding issues in conformity with the reasoning of this Court and to makeorders disposing of the costs of the appeal to the Court of Appeal.
On appeal from Supreme Court of New South Wales
Representation:
D F Jackson QC with A W Street SC and G J Nell for the appellant (instructed by Norton White)
B W Rayment QC with I E Davidson for the respondent (instructed by Corrs Chambers Westgarth)
Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.
CATCHWORDS
Pacific Carriers Limited v BNP Paribas
Contract – Carriage of goods – Carriage by sea – Delivery of goods without surrendering bills of lading – Indemnity to carrier.
Contract – Construction and interpretation – Relevant principles – Objective interpretation of commercial documents – Letters of indemnity executed by trader in favour of carrier relating to unloading cargo without bills of lading – Where documents also signed by officer of the respondent bank – Whether letters of indemnity purported to bind the respondent as an indemnifying party.
Contract – Agency – Ostensible authority – Documents of the kind commonly relied upon and intended to be relied upon by third parties – Whether the assumption made by the appellant that the respondent was party to the letters of indemnity was induced or assisted by the respondent's conduct in such a way that it would be unjust to permit the respondent to depart from the assumption.
GLEESON CJ, GUMMOW, HAYNE, CALLINAN AND HEYDON JJ. The issues in this appeal are narrower than the claims and cross-claims litigated before Hunter J in the Supreme Court of New South Wales[1], or those aspects of the matter that went to the Court of Appeal[2].
The proceedings arose out of the sale of a cargo of legumes, comprising 10,000 metric tonnes of chick peas and 10,000 metric tonnes of dun peas, by an Australian grain trader, New England Agricultural Traders Pty Ltd (NEAT), to Royal Trading Company (Royal), an Indian grain trader operating out of Calcutta. The respondent, BNP Paribas (BNP), was NEAT's Sydney banker, and was financing the export transaction. A company based in Singapore, Swiss Singapore Overseas Enterprises Pte Ltd (SSOE), was Royal's financier. The appellant, Pacific Carriers Limited (Pacific), was the time charterer of the MV Nelson, the vessel on which the cargo was carried.
The venture…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35
Case
[2004] HCA 35
Decision Date
CaseChat Overview and Summary
Pacific Carriers Limited appealed to the High Court of Australia against a decision of the New South Wales Court of Appeal, which had overturned a judgment in favour of Pacific Carriers Limited. The dispute concerned two letters of indemnity executed by NEAT, a trader, in favour of Pacific Carriers Limited, a carrier. These letters related to the unloading of cargo without the surrender of bills of lading. The critical issue was whether the respondent bank, BNP Paribas, was bound by these letters of indemnity as an indemnifying party, given that an officer of the bank had signed them.
The High Court was required to determine the true construction of the letters of indemnity, specifically whether they purported to bind BNP Paribas as an indemnifying party or merely to authenticate NEAT's execution. Additionally, the Court had to consider whether, if the construction favoured Pacific Carriers Limited, BNP Paribas was liable on the basis that the bank officer lacked the authority, actual or ostensible, to bind the bank to such an indemnity. Pacific Carriers Limited also pursued alternative claims in negligence and misleading or deceptive conduct under the Trade Practices Act 1974 (Cth), which the Court noted would be unnecessary to consider if the appeal succeeded on the contract issue.
The High Court applied the principle of objective interpretation to commercial documents, considering what a reasonable person in the position of Pacific Carriers Limited would have understood the letters of indemnity to mean. The Court found that the language of the letters, when read in context and with regard to their commercial purpose, indicated an intention to create a joint indemnity involving both NEAT and BNP Paribas. The Court reasoned that the bank's signature was not merely for authentication but signified its intention to be bound as an indemnifying party. Consequently, the Court held that the New South Wales Court of Appeal erred in finding that BNP Paribas was not liable under the letters of indemnity.
The High Court allowed the appeal with costs, setting aside the orders of the New South Wales Court of Appeal. The matter was remitted to the New South Wales Court of Appeal to deal with the outstanding issues, including the calculation of damages and the costs of the appeal to that Court, in conformity with the High Court's reasoning.
Orders
Orders of the court
1. Appeal allowed with costs.
2. Set aside the orders of the New South Wales Court of Appeal made on 29 November 2002.
3. Remit the matter to the New South Wales Court of Appeal to deal with outstanding issues in conformity with the reasoning of this Court and to make orders disposing of the costs of the appeal to the Court of Appeal.
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
GLEESON CJ, GUMMOW, HAYNE, CALLINAN AND HEYDON JJ
It is unnecessary to explain the nature or the amount of the loss suffered by Pacific in consequence of delivery of cargo to, or in accordance with the direction of, Royal. There was no issue before this Court about that matter. Hunter J, who, for reasons to be mentioned below, awarded damages to Pacific against BNP, not in contract but in tort, assessed damages at US$4,237,207.47 together with interest. A number of BNP's grounds of appeal to the Court of Appeal related to the calculation of damages, but the Court of Appeal did not reach that question. It allowed BNP's appeal on liability.The decisions of Hunter J and the Court of Appeal Pacific's primary claim against BNP, NEAT being insolvent, was that BNP was liable in contract as a party to the two letters of indemnity. BNP's defence was that, on the true construction of the letters of indemnity, only NEAT was bound to indemnify Pacific, and BNP's role was merely to verify or authenticate NEAT's execution of the documents. In addition, BNP argued that, if it failed on the construction issue, then it was not liable on the letters of indemnity because Ms Dhiri had no authority to bind the bank to an indemnity. Those competing arguments were maintained in the Court of Appeal and in this Court. Hunter J took a view of the construction of the documents which was not advanced by either party, and which was not supported by either party on appeal. He concluded that BNP's role was that, by signing the letters of indemnity, it was representing to Pacific that NEAT had the financial capacity to honour its obligations under the letters of indemnity. Pacific made alternative claims against BNP in negligence, and for misleading conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth). Hunter J held that the negligence case, though argued on a different basis, was wide enough to cover negligent misrepresentation as to NEAT's financial strength. He held that NEAT's conduct amounted to actionable negligence, and assessed and awarded damages as mentioned above. In the Court of Appeal, Sheller JA, with whom Handley JA and Giles JA agreed, accepted the construction of the letter of indemnity for which Pacific contended. He said that the contest was "between, on the one hand, language which might be read so as to limit to one party, the requestor [NEAT] alone, an agreement to indemnify, and on the other hand, the clear purpose of the ... standard form to be used as a joint indemnity by the requestor and a bank". He rejected the construction contended for by BNP, and also the alternative construction preferred by Hunter J. However, he upheld BNP's defence based on lack of authority. He held that Ms Dhiri had neither actual nor ostensible authority to bind the bank to an indemnity. He also rejected the claims in negligence and under the Trade Practices Act. If Pacific's appeal to this Court succeeds on the contract issue, it will be unnecessary to consider those alternative claims. The construction issue
Ratio Decidendi
Legal Principle Established
Established by:
GLEESON CJ, GUMMOW, HAYNE, CALLINAN AND HEYDON JJ