Pacific Carriers Ltd v BNP Paribas

Pacific Carriers Ltd (the appellant) brought proceedings against BNP Paribas (the respondent) concerning a guarantee. The dispute arose from a loan agreement between the appellant and a third party, which the respondent had guaranteed. The appellant sought to enforce the guarantee, alleging that the third party had defaulted on its loan obligations. The respondent denied liability under the guarantee, asserting that the guarantee document was not properly executed and therefore invalid. The case was heard by the High Court of Australia.

The central legal issue before the High Court was whether the guarantee document, which bore the signature of an individual purporting to act on behalf of the respondent, was valid and binding on the respondent. Specifically, the court had to determine whether the individual had the actual or ostensible authority to bind the respondent to the guarantee, and if not, whether the respondent was estopped from denying the validity of the guarantee.

The High Court, in a joint judgment, held that the guarantee was binding on the respondent. Their Honours applied the principle that a party is bound by a document which appears on its face to be executed by its authorised representative, even if that representative lacked actual authority, provided the other party reasonably believed that the representative had such authority. The court found that the appellant had reasonably relied on the apparent authority of the individual who signed the guarantee, as there was nothing to suggest that the individual lacked the necessary authority. The respondent was therefore estopped from denying the validity of the guarantee.

The appeal was dismissed.