Pacific Carriers Ltd v BNP Paribas

[2004] HCATrans 163

[2004] HCATrans 163

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S585 of 2003

B e t w e e n -

PACIFIC CARRIERS LIMITED

Appellant

and

BNP PARIBAS

Respondent

GLEESON CJ
GUMMOW J
HAYNE J
CALLINAN J
HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 20 MAY 2004, AT 10.23 AM

Copyright in the High Court of Australia

MR D.F. JACKSON, QC:  If the Court pleases, I appear with my learned friends, MR A.W. STREET, SC and MR G.J. NELL, for the appellant.  (instructed by Norton White)

MR B.W. RAYMENT, QC:  May it please your Honours, I appear with my learned friend, MR I.E. DAVIDSON, for the respondent.  (instructed by Corrs Chambers Westgarth)

GLEESON CJ:   Yes, Mr Jackson.

MR JACKSON:   Your Honours, as will be apparent from the written submissions, the case involves four principal questions.  Two arise on the appeal, two by virtue of the notice of contention.  The two which arise on the appeal are, if I could put them in broad terms firstly – the first is whether the respondent is bound by the letters of indemnity – and I will take your Honours to those in a moment – contractually.  The second is, if not, whether the respondent is liable on the basis of negligence or pursuant to the Trade Practices Act, section 52, or by reason of estoppel. 

Your Honours, the two issues which arise on the respondent’s notice of contention are, first, whether the respondent was liable under the contract – that is a construction issue – secondly, whether the letters of indemnity were spent, if I can use that expression, because of the replacement of bills of lading.  Your Honours, may I deal with the two issues that arise on the appeal.  Could I come immediately, your Honours, to the question of contract. 

The case concerns the two documents which have been described as letters of indemnity.  One was given on 28 January 1999, the second on 19 February 1999.  The first of those may be seen in volume 21, page 4804, the second in the same volume, page 4810.

Your Honours will see that a translation, as it were, of the documents can be seen immediately following them to make them rather more legible.  Can we just say something, your Honours, about the documents before moving onto the argument.  Your Honours will see that each of the documents contains in its heading a summary of its intended purpose, “STANDARD FORM OF UNDERTAKING TO BE GIVEN BY CARGO RECEIVERS IN RETURN FOR RECEIVING CARGO WITHOUT PRODUCTION OF THE BILLS OF LADING”.

Your Honours will see that the documents are addressed to the appellant described as being, and I am looking particularly at page 4804, about line 12:

To      PACIFIC CARRIERS LTD

The owners of the M/V NELSON -

Could I invite your Honours to note one thing in passing.  We were actually a time charterer of the Nelson, but the contention that we were thus not the owner for the purposes of the letters of indemnity was abandoned.  Your Honour will see the primary judge referring to that in volume 20, page 4563, paragraph 432.

Now, your Honours, the documents refer to goods shipped on the vessel and they were goods which were shipped by New England Agricultural Traders for delivery at Calcutta.

GLEESON CJ:   New England Agricultural Traders became insolvent, did they?

MR JACKSON:   That or nearly so.  I think that is so, your Honour.  In administration, I think.

GLEESON CJ:   I presume it is their lack of financial capacity to meet their liabilities under these documents that brings this together.

MR JACKSON:   Yes, your Honour, and the fact that they were never in reality paid by Royal, the consignee.  When I say that, I mean actually paid.  Could I just say that the company, New England Agricultural Traders, is commonly referred to in the papers as NEAT, as one might expect.  The document, as your Honours will see – again at page 4804 – contains a request by that company to deliver the goods and a request to deliver the goods – that is at the bottom of the page – without production of bills of lading.

CALLINAN J:   Page 4807 is the more legible. 

MR JACKSON:   Yes, your Honour.  Could I just say, your Honours, that the document – in return for compliance with the request, there is a liability to indemnify.  The liability to indemnify, if I could go to page 4808, can be seen in paragraph 1, first of all, as a liability to indemnify:

and to hold all of you harmless in respect of any liability loss or damage ‑ ‑ ‑

GLEESON CJ:   Who was the “we” referred to in line 15?

MR JACKSON:   Your Honour, we would submit that the “we” consists of the two persons who execute the document shown on page 4809.  Your Honours will see in paragraph 1, “To indemnify”, and I have read out the passage from it, but your Honours will see from paragraph 1, or clause 1, that it is:

damage of whatsoever nature which you may sustain by reason of delivering the goods to RECEIVERS AS DIRECTED BY M/S ROYAL TRADING COMPANY –

in Calcutta ‑ ‑ ‑

GLEESON CJ:   I am sorry, just before you pass to that, on your argument then, the “we” on line 15, on page 4808, is different from the “we” on the second last line on page 4807?

MR JACKSON:   Your Honour, that is so, in the sense that, what your Honours will see, is that the form of the document is one which starts off as a document dealing with circumstances in which the goods were shipped by New England Agricultural Traders.  Now, the document would be perfectly intelligible as being only an undertaking by that company, if there were no addition of another party to it.

GLEESON CJ:   And also different from what is signified by the word “FROM” on line 22, on page 4807?

MR JACKSON:   Yes your Honour, I accept that.  Your Honour, there is no doubt there are two, perhaps three versions, three views available as to the proper interpretation of the documents.  One view was the view on which we succeeded in the Court of Appeal, though not before the primary judge, that being that if one looked at the whole of the document, the commercial purpose could only be, as we had requested, for the letter of indemnity, in return for releasing the cargo, to be given not merely by the person who was the consignor, but also by a reputable bank.  That is why we would give it up.  Another view, which was the view contended for principally by the respondent, was that the document was purely a document which had the effect that the only undertaking was one given by the consignor, with the bank’s execution of the document being purely to verify the signatures of the consignor.  The third view was one adopted by the primary judge which ‑ ‑ ‑

GLEESON CJ:   There is the heading of the document, too.  It is a form of undertaking to be given by cargo receivers.

MR JACKSON:   Quite, your Honour, but one also sees too clause 5, for example, on page 4808, which refers to:

The liability of each and every person under this indemnity shall be joint and several –

and so on.

GLEESON CJ:   Where is the original of this document, Mr Jackson?

HAYNE J:   Volume 5 at 851 is at least a place where it is in evidence.

MR JACKSON:   Your Honour, it is in evidence in a number of places.  I think, your Honour, that the document which is photographed at 4810 and its equivalent, 4804 - and 4810 is the photograph of the ‑ ‑ ‑

GLEESON CJ:   I am just curious, it may matter not at all, to try and work out what this document would have looked like before it was filled in with anything.

MR JACKSON:   Well, your Honour, I will be taking your Honour to where that is to the extent to which it is possible to do, because what happened with each of the two documents was that it derives from a form.  I will come to that, but ‑ ‑ ‑

GUMMOW J:   But it is a printout of some sort, is it not?

MR JACKSON:   Yes, your Honour.  We had required that the document be in a particular form.  The document was sent by NEAT to the bank, and it had been executed by NEAT in each case, and then there was provision for the execution by the bank, and the bank did so.

HAYNE J:   Was there anything that might properly be described as the original of this document in evidence at trial, or was everybody gaily sailing on photocopies of things that had passed?

MR JACKSON:   I will have to check that, your Honour.  I cannot give your Honour an exact answer to that because at this point everything is photocopied.

HAYNE J:   Yes.

GLEESON CJ:   Is there an inconsistency between the heading of the document and its substance?  It is described as a “FORM OF UNDERTAKING TO BE GIVEN BY CARGO RECEIVERS”.

MR JACKSON:   Yes, there is, your Honour.

GLEESON CJ:   Now, neither NEAT nor the bank were cargo receivers.

MR JACKSON:   No.

GLEESON CJ:   If you look at the substance of it on the bottom of 4807, it is to be given by the shippers.

MR JACKSON:   Yes, your Honour, that is so.  What your Honour puts to me is correct.  What I suspect has happened in relation to it is that there were, in fact, three letters of indemnity.  One of the letters of indemnity, which was not acceptable to us, was a letter of indemnity in this form to be given by the persons who were to receive the cargo.  That is the Royal Trading Company in Calcutta.  We did not accept it because a limitation was placed by the bank of America, which was the bank in that case, upon the extent to which it would be bound by signing it.  It was saying that it was not signing it as being a party indemnifying.  I suspect what has happened is that the document we required to be given was one which picked up the heading, as being the wrong heading, but otherwise it was followed through.

GLEESON CJ:   So this is not really a standard form of document at all.  It is an amalgam of a standard form of document and some substantial alterations.

MR JACKSON:   Well, some alterations.  The heading is slightly different.

GUMMOW J:   Do you have the text of the Bank of America – the failed instrument, as it were?

MR JACKSON:   Yes we have, your Honour.  I will give your Honour a reference to that.  I think it is referred to by the primary judge and perhaps by the Court of Appeal.  May I give your Honour that in a moment?  Your Honours, if I could stay for a moment with the text of the document.  Going back to page 4808, apart from the general statement of the ambit of the indemnity in clause 1, your Honours will see clause 2, which I will not dwell on, but also clause 3 which says that:

If, in connection with the delivery of the cargo as aforesaid, the ship . . . should  be arrested or detained –

et cetera, and your Honours will see the indemnity that follows from that.  The ship, in fact, was detained.  Now, your Honours, I mention also clause 5 which provided:

The liability of each and every person under this indemnity shall be joint and several –

et cetera, and then your Honours will see clause 6.

CALLINAN J:   Mr Jackson, was there ever any possibility of the bills of lading ever coming into the possession of the respondent?  The reason why I ask that is because of paragraph 4 on page 4808.

MR JACKSON:   In a sense, not, your Honour, no.  The position was, in relation to the respondent, that there were arrangements between NEAT and the respondent dealing with letters of credit, but there was not a particular need for the bills of lading to come into their possession.

CALLINAN J:   Clause 4 could never have any operation in relation to the respondent then? 

MR JACKSON:   Your Honour, of course, if the goods had been delivered in accordance with the ‑ ‑ ‑

CALLINAN J:   They would come back, I suppose.

MR JACKSON:   Yes.  The bills of lading would come back but ‑ ‑ ‑

GUMMOW J:     But that is not what clause 4 is ‑ ‑ ‑

CALLINAN J:   They would not come back to the bank.

MR JACKSON:   They would be unlikely to come except that if the bank had had to pay, then the bank would be entitled to bills of lading. 

CALLINAN J:   Yes, but only in those circumstances. 

MR JACKSON:   I would expect so, your Honour, yes.

GLEESON CJ:   Was that reference to “Banker’s signature” on the bottom of page 4809 part of the standard form or was it, as it were, specially added for this transaction?

MR JACKSON:   Part of a pretty standard form, your Honour.  I will take your Honours to that in a moment.

GLEESON CJ:   What is signified by that electronic reference in the bottom right‑hand corner of pages 4807, 4808 and 4809? 

MR JACKSON:   Your Honour, nothing relevant, I think.  It belongs to my instructing solicitor’s firm as some method of identification of documents.

GLEESON CJ:   I see.

MR JACKSON:   Your Honours will see in relation to each of these letters of indemnity that one has upon it the name of the bank, the bank’s address, the document is signed by Ms Dhiri, who is an officer of the bank, and the bank’s stamp has been affixed to the document.  Your Honours, the circumstances which led to the giving of the letters of indemnity are summarised in the reasons of Justice Sheller in the Court of Appeal.  May I take your Honours to the essential parts of that.

GUMMOW J:   Before you do that, Mr Jackson, nothing turns on clause 7, does it, the choice of law clause?

MR JACKSON:   No.  In fact, it is referred to in one of the judgments as no point having been raised in relation to it.  Your Honours, may I commence at page 4744 of volume 21.  Your Honours will see at paragraph 15, the starting point, in effect, once the journey had been completed but discharge had not taken place.  Your Honours will see paragraph 15, the vessel arriving at the “Sagar Roads anchorage at the mouth of the Hugli River”.

GUMMOW J:What was the purpose of splitting the bills of lading?

MR JACKSON:   Because, your Honour – and there is some evidence about that; I will give your Honour a reference later if I may – apparently, the situation which obtains, particularly in Asian markets, is that whereas one might expect in perhaps Australia and perhaps other markets for there to be people taking large consignments, in fact, in Asian markets it is not uncommon for there to be very small amounts taken – 600 metric tonnes, for example – and the splitting of the bills of lading allows that to happen. 

The evidence concerning it your Honour will see in volume 1, page 34, Mr Chua.  It commences at page 34, about line 16.  It goes towards the bottom of that page.  Your Honours will see the question at line 35 which was objected to and then the answer a little further down the page.  Your Honours will then see the aspect being dealt with more fully at page 35, lines 25 to about 45.

GLEESON CJ:   Does this mean it would permit subcontracts by Royal and perhaps it would permit trading while the cargo was on the water?

MR JACKSON:   Yes.  I referred your Honours to paragraph 15 at page 4744.  Could I move from that – and, your Honours, I am simply picking out what seem to be the most important parts for present purposes – to paragraphs 24 to 27, which are at page 4747.  Your Honours will see in paragraph 24 that there were delays in negotiation of bills of lading at Singapore and then your Honours will see at paragraph 24 a reference to the fact that there needed to be a letter of indemnity if original bills were not to be produced at the point of discharge.  Now, your Honours will then see ‑ ‑ ‑

HAYNE J:   Now, just pausing there.  That appears to be recording an exchange in which the participants well understood what they were talking about, as though a letter of indemnity was a common transaction, carrying with it a great deal of baggage.

MR JACKSON:   Yes.

HAYNE J:   Yet we seem to find little of the baggage, do we, revealed in evidence?

MR JACKSON:   Well, your Honour, that is so, in one sense.  So in the sense that there was not a deal of evidence about it, but there was some.  One sees – and I will come to this in a few moments if I may – the evidence given by two of the principal officers of our company, who are involved in the trade.  Then in paragraph 25 at page 4748, if I could go to about halfway down that paragraph, your Honours will see that it was said:

In the result on 19 January 1999 Bolton’s manager –

if I could pause there, your Honours, to say Bolton was the company which had chartered the ship to us –

sought an LOI from PCL and provided its standard form of wording for an indemnity to be given in return for delivering cargo without production of the original bill of lading.

Your Honours will see then that that standard form was substantially one issued for that purpose by the P&I Clubs and recommended for use by members, and there is a reference then to that document.

GLEESON CJ:   Was there evidence as to what, if anything, your client knew about the financial strength of NEAT at this time?

MR JACKSON:   Yes.  I will give your Honour a reference to it – there is something, but not much, and perhaps I can tell your Honour what it is a little later.  What we thought about it was exemplified by the fact that we would not allow discharge of the goods at Calcutta unless we had a letter of indemnity from NEAT, but also from what was described as a “reputable bank”.

GLEESON CJ:   Yes.  The commercial security given by a letter of indemnity from a proprietary company would all depend on what you thought you knew about the financial position of the proprietary company.

MR JACKSON:   Indeed, your Honour, and that is why one would want to have it backed by a bank.

GLEESON CJ:   Is there an expression “banker’s letter of indemnity”?

MR JACKSON:   Well, in some contexts, your Honour.  I do not know that it is quite a term of art, with respect.  In relation to our knowledge of their situation, could I give your Honours one reference to Mr Tan’s evidence.  It is volume 7, page 1525, paragraph 3 of his statement.

HAYNE J:   Sorry, what page?

MR JACKSON:   Page 1525, your Honour, paragraph 3.

HAYNE J:   Thank you.

MR JACKSON:   Your Honours will see paragraphs 3 and 4, and your Honours will see in paragraph 4 also a reference to the Royal Trading Company letter of indemnity, where the Bank of America had qualified its acceptance of liability.  If I could go back to page 47 ‑ ‑ ‑

HAYNE J:   Sorry, may I just delay you a moment on this point about Mr Tan.  That may tell us what Mr Tan wanted, Mr Tan thought, et cetera.  What is the immediate use that you say we may make of that sort of material?

MR JACKSON:   Well, I would say two things about it, your Honour.  The first is, I referred to it in response to the Chief Justice’s question. 

HAYNE J:   I understand that, yes.

MR JACKSON:   That second thing is this, that in circumstances where the financial circumstances of the person who is seeking the release of the cargo are not known to the person who may incur liability by release of the cargo, that is why one would expect the letter of indemnity, the indemnity given, to be one given not merely by the person, but also for a reputable bank – or perhaps other financial institution – to be a party to the indemnity.

CALLINAN J:   Mr Jackson, there is no objection to any of that paragraph? 

MR JACKSON:   No.

CALLINAN J:   It does not, at first sight, strike me as if much of it was really admissible, but no objections? 

MR JACKSON:   No objection.  Your Honour will appreciate that very often objections are not taken to material that might otherwise be capable of objecting to for reasons of economy of time, amongst other things, or because matters are not in dispute.

GLEESON CJ:   You would have to rely on it in some way as a surrounding circumstance, would you not?  I am surprised you did not say matrix of facts.

HAYNE J:   The last resort of the forensically destitute.

MR JACKSON:   Your Honour, I did not use that expression.  It is a surrounding circumstance and one is dealing, of course – your Honour, this is dealing with something in international trade in the ordinary ‑ ‑ ‑

CALLINAN J:   You would say it was a rational inference from the mere fact that the Chief Justice has referred to, that it was a proprietary company, and any prudent person would be looking for more than an assurance from such a company.

MR JACKSON:   Indeed, your Honour, and if one had a circumstance where, as one knows, companies large and small go under.  The same thing, your Honour, was said again in volume 7 by Mr Chua at page 1516, paragraph 7.  I was taking your Honours to page 4748, in volume 21 and paragraph 25.  Your Honours have seen a reference to the Bolton letter of indemnity there.  Your Honours will then see, if I could go to paragraph 26, that then there is a facsimile from NEAT to an agent in Calcutta saying that:

it appeared that the receivers would have difficulty in ensuring that original bills of lading would be available at Calcutta for vessel discharging.  The facsimile stated:

“To avoid delay in discharge we have prepared LOI text for Royal to open to shipping company to commence discharging against LOI pending B/Ls arrival.  This needs to be signed by Royal Trading’s bank and original lodged with shipowner agent it Calcutta:  please fax us copy of LOI which has been lodged.”

Now, your Honours will see a reference to that, and then your Honours at paragraph 27, one sees that we informed them that we:

would be giving its LOI to Bolton –

to the person who had chartered the ship to us, but we:

would require a similar LOI from NEAT.

Now, your Honours will see then, if I could move on to paragraph 30, that on 25 January, Mr Sniekers of NEAT spoke to Ms Dhiri, and she had been the person with whom they dealt to get their letters of credit in place, saying that they needed to get a letter of indemnity in place.

GLEESON CJ:   Was there evidence as to the functions of the bank’s documentary credits department?

MR JACKSON:   Yes, your Honour, it was in relation to letters of credit and other such documents, and the evidence did not indicate that, insofar as the bank was concerned internally, that the documentary credits department would itself give indemnities.

GUMMOW J:   Now, with respect to commercial practice, 1515 is helpful to you, I think, the affidavit of Mr Chua.  It is true he is an executive of PCL, but he had been with the Wheat Board for 12 years as their charter manager.  At paragraph 4 of 1515, “quite normal” et cetera; “not uncommon” et cetera; “letters of indemnity” and so on.  Then he goes on at 1516 to say “NEAT is not a big company” and so on, and so forth.

MR JACKSON:   Yes.

GLEESON CJ:   I suppose if you wanted authentication of a signature you would be contacting a notary rather than a bank.

MR JACKSON:   Well, your Honour, that is one of the functions of notaries, of course.  They do that, and part of the work of a notary derives from the maritime trade, used perhaps more in times gone past than the need for it today, but it certainly is part of the work of a notary.  Your Honours, when one comes to the question of verification of signatures, it is really a very curious thing, in our submission, to think that the bank, without a word of explanation, is putting its signature to a document of this kind just for the purpose of verifying a signature.  It seems, with respect, a rather bizarre thing to be doing, but I will come to that a little later.

Your Honours, could I just say in relation to paragraph 30 at page 4749, Mr Sniekers spoke to Ms Dhiri saying they needed the letter of indemnity.  Some of the telephone conversations were recorded:

“I guess we need t open a back to back LOI with the shipowner” -

and then your Honours will notice, and this is germane - but you might notice in passing, your Honours, to the second notice of contention point raised by our learned friends that the judge accepted Mr Sniekers’ evidence that by that date he had already:

disclosed to Ms Dhiri that the initial bills of lading were to be “cut” or switched.

Your Honours will then see in paragraph 31 that on 28 January the Royal letter of indemnity was forwarded to NEAT.  Your Honours will see that it was in the relevant form, but the provision for execution by the bank had been left blank and an endorsement as set out there was contained.  So that was one, your Honours, that limited or took away a liability for the bank and made it clear that it was confirming a signature and no more.  But we were “not prepared to discharge”, as your Honours will see in the same paragraph, “unless the LOI was endorsed by a reputable bank”.

Now, your Honours, could I go then to paragraph 32.  The actual document that is quoted at paragraph 32 which contains the letter of indemnity which we sent appears in volume 14 at page 2951, and perhaps I should take your Honours to that.  What your Honours will see at 2951 is the document has a covering letter and then three pages following are the form of undertaking.  The document was already signed by the NEAT officers and it contained the provision for execution by the bank.

GLEESON CJ:   Whose writing is that in the bottom right‑hand corner?

MR JACKSON:   I am sorry, your Honour, of page 2951?

GLEESON CJ:   Yes.

MR JACKSON:   Your Honour, that is all after the event.  It is the writing of, I think, Ms Dhiri but it is after the event, your Honour, and was not there.

HAYNE J:   The judge was not accepting of some, at least, of Ms Dhiri’s evidence.

MR JACKSON:   Perhaps if I could describe it as – I will not say a recent invention – a recent reconsideration.  What your Honours will see from that document is that it says – I am sorry, page 2951.  It is addressed to the bank, it is addressed to Ms Dhiri.  The subject matter is set out there and what is said:

As discussed this morning please find attached LOI –

and it is made clear what it is for –

to cover discharge of field peas at Calcutta.

Could I pause to say there were two sorts of peas on the vessel.  One were field or dun peas – the same thing.  The others were chickpeas.  This related to the field or dun peas, the other one related to the chickpeas.

GLEESON CJ:   Did the bank charge a fee for this?

MR JACKSON:   I do not think it was ever paid a fee, your Honour, and it does not appear whether it ever charged one.  I do not think it did. 

GUMMOW J:   Did the bank hold any security over NEAT?

MR JACKSON:   It had arrangements with NEAT, including securities, your Honour, but no particular arrangement was made with NEAT to augment the securities.

GUMMOW J:   No, but do we know what the securities were?  Did they have all moneys clauses?

MR JACKSON:   There was a charge, your Honour, yes, charge in the ordinary way, but no particular arrangements were made in relation to these documents.

GLEESON CJ:   Were there general arrangements between NEAT and the bank, pursuant to which from time to time – or which envisaged that from to time – the bank would undertake obligations of indemnity for the benefit of NEAT?

MR JACKSON:   Well, there was a reference to bank guarantees, your Honour.  There is no document, as I understand it, which was in evidence which would deal specifically with this class of case.

GLEESON CJ:   What was in this for the bank?

MR JACKSON:   Well, your Honour, two things, if I may say so.  One was that letters of credit had been arranged, and the letters of credit were ones the money from which would or should have come into the bank at a time prior to the delivery of the cargo.  Your Honours will see that in relation particularly to the letters of indemnity, I think the second one, the letter of indemnity would not be signed until there had been draw down on the letter of credit.  So there were letters of credit.  The bank would get money pursuant to the letters of credit, on the one hand; on the other hand, no doubt the bank was free to charge an appropriate sum for doing what it did.

HAYNE J:   Was there any evidence about limits or other terms affecting the accommodation – if I can use that in its most general sense – that the bank would provide NEAT?

MR JACKSON:   There was, your Honour, I will give your Honour a reference to it in a moment.  I think it is more in general than in absolutely specific terms.  But no particular arrangement was made to cover these documents.

GLEESON CJ:   Mr Jackson, do not take time over it now, but at some stage before the argument concludes I would like to understand a little better than I do at the moment the commercial interest of the bank in complying with the request made in this communication.

MR JACKSON:   Yes, very well, your Honour.  I will endeavour to do that and put it in a short form.

CALLINAN J:   Mr Jackson, I am sorry, could you just read – because my copy is not clear – what the handwriting is on 2951 and whose handwriting it is?  No doubt there is evidence about that.  Two lots of handwriting. 

MR JACKSON:   Your Honour, at the bottom right‑hand corner is:

Advised Peter that we are only verifying sigs [signatures] and will fax to you not the shipper as we have no arrangements with them. 

Now, that appears to be all after the event.

CALLINAN J:   There is no date.  Is there any evidence about the date of that notation?  This was no doubt in the files of the respondent, is that right? 

MR JACKSON:   It was, your Honour, yes.  It is in relation to this notation and a number of other notations that the primary judge was not satisfied and led to a rather stronger view than that, that these were done at the time.

CALLINAN J:   And the other one, Mr Jackson, it is “file with”?

MR JACKSON:   “File with” – I think it is “Acceptance file” and it says something “TO NEAT ONLY”.  I will endeavour to get your Honour a photocopy of the page with the words written on it.

CALLINAN J:   Thank you, Mr Jackson. 

MR JACKSON:   Your Honours, if I could stay with page 2951 for the moment ‑ ‑ ‑

GUMMOW J:   But Mr Sniekers wrote the other material.  It seems to be his initials.

MR JACKSON:   Yes, your Honour.  Your Honours will see that he was saying:

We need to get LOI in place at Calcutta to allow the vessel to commence lightening pending documents acceptance for the chickpeas. 
 . . . 
If possible would like to get LOI fax signed and returned to shipowners agents by this afternoon/tomorrow morning.

GLEESON CJ:   Once again, the references would do, but you see it begins by saying, “As discussed this morning”?

MR JACKSON:   Yes.

GLEESON CJ:   Was there evidence of the discussion?

MR JACKSON:   I think there is some slight evidence about it, your Honour, not a great deal, and it is to the same effect as the material that is contained in the letter itself.  I do not think it is specifically referred to by the Court of Appeal, but I will endeavour to give your Honour a reference to what there is about it in both the judgment at first instance and in the actual evidence of Mr Sniekers.  Your Honours will then see the form of undertaking commences at page 2952, and one can see the parts of it that have been, in effect, put in.  One then sees on page 2954 ‑ ‑ ‑

GLEESON CJ:   The heading really is quite inappropriate, is it not?

MR JACKSON:   Yes, it is, your Honour, and that is no doubt because it is taken from the earlier one.  Your Honours will then see at page 2954 that it has been signed by Mr Sniekers and also Mr Howard, two directors of the company.  There is also some handwriting, which, again, is after the event handwriting, a little difficult to read – about line 25, “Sig[nature] Verified”, and then there is a qualification also under the banker’s signature, but that, again, is after the event.

Your Honours, if I could return for the moment to – I am sorry your Honours, I should also have said, your Honours will see that referred to – the evidence your Honours, in relation to what your Honour, the Chief Justice asked me about, where that can be found, is Mr Sniekers’ affidavit.  It is in volume 6, page 1057, paragraph 30 and Ms Dhiri’s affidavit, volume 5, page 1026, paragraphs 15 and following.  Your Honours will then see, if I could go then back to page 4751, in volume 21 and paragraph 35 that:

Ms Dhiri’s signed the first NEAT LOI in the space reserved for “Banker’s signature” and affixed BNP’s stamp.  The LOI was forwarded to NEAT . . . It went forward to and reached PCL later that afternoon.

Your Honours will then see, if I could move on to the second letter of indemnity, paragraph 36 on page 4751:

By 3 February 1999…the commencement of lightering the vessel was no closer . . . discussions had taken place between NEAT and Ms Dhiri about the issue of another LOI –

and your Honours will see that the result of it at that point was that the bank would not countersign the letter of indemnity “without the formal Bangkok Bank’s advice that documents” – that some of the letters of credit – “have been accepted”, and your Honours will see what took place at the remainder of the letter, the top of page 4752, “that fax went to Ms Dhiri”.

Your Honours, if I can just give the reference as I pass through, that is volume 14, page 3123.  There is a later fax referred to at about line 15 on 4752.  That is in volume 14, page 3124 and it recorded NEAT’s observation that we would not discharge the cargo without BNP countersigned NEAT letter of indemnity and then on 18 February, NEAT faxed to Ms Dhiri an attached letter of indemnity already executed and that document is in volume 14 at page 3133.

GLEESON CJ:   All this was on the basis that Royal was waiting to receive the cargo?

MR JACKSON:   Yes, and your Honour, we wanted to get the cargo off the ship too, I may say.

GLEESON CJ:   Yes.  Well now, there is a Swiss company hanging around in the background here?

MR JACKSON:   Yes.  That is the Singaporean company, your Honour.  It was held by the primary judge that although there had been some transactions between Royal and that company, that that company had not, in fact, purchased the goods from Royal, but there were some dealings with it.  In the end, the dealings, whilst perhaps complicated, do not seem to matter.

GLEESON CJ:   At the moment I do not understand how the loss came to be suffered, but perhaps you will explain that to us in due course.

MR JACKSON:   Yes, your Honour.  The position, to put it shortly, was that our vessel was arrested by the instance of, I think, the Swiss company your Honour referred to, they claiming that the goods had been delivered to someone who was not entitled to them.  So the vessel was detained and claims were made against us by Bolton in relation to the ship being detained.  We in the end settled – there was an arbitration, which we settled with Bolton, and the moneys we expended, which were ultimately some millions of United States dollars, in getting the ship out of arrest, released from arrest, paying out Bolton and some other matters were the subject of the claim.

GLEESON CJ:   Did you, in fact, hand over the goods to people who were not entitled to them?

MR JACKSON:   We handed them over to Royal, because we had been given the letters of indemnity, but claims were then made saying that Royal were not entitled to them and we had given them to the wrong people.

GLEESON CJ:   And we are not interested in the merits of those claims?

MR JACKSON:   No.  Your Honours, could I just say in relation to the second letter of indemnity – perhaps I should take your Honours to it.  It is volume 14, page 3133.  Once again your Honours will see this is a document which is sent to Ms Dhiri:

Please find attached LOI in readiness for bank’s signature to allow M/V Nelson to recommence discharging grain at Calcutta.

The document is in the same form as before and was already signed, as your Honours will see at page 3136, on behalf of NEAT.

If I could return to volume 21 at page 4752, your Honours will see at about line 26 that, as I said, it had already been executed by NEAT.  It referred to the cargo of chickpeas and it was otherwise in the same form.  Perhaps if I could pass through paragraph 37, your Honours will see then at the top of page 4753 that:

On 19 February 1999 Ms Dhiri signed the second NEAT LOI, which was, mutatis mutandis, in the same form as the first NEAT LOI, in the space reserved for Banker’s signature and affixed BNP’s stamp to it.

It was sent to us.  We faxed our agent in Calcutta saying we were in possession of it and said:

“Consequently, you have our authority to release 3,800 mts chick peas to Royal Trading Co –

and your Honours will see that document at volume 14, page 3160.

Your Honours will see then in paragraph 39 the passage is quoted from the primary judge, where he said – in our submission, perfectly correctly – that the facts: 

evidenced the fact that [Ms] Dhiri was made well aware of the purpose for which NEAT required BNP’s execution of the second NEAT LOI and that it would be forwarded directly to the ‘owners’ once signed by the bank ‘so discharging’ could commence –

and your Honours will see the remainder of that passage was quoted.  Your Honours will also observe the passage in paragraph 40 on that page, which dealt with the recorded telephone conversations.  It said that:

the exchanges between NEAT and BNP fitted uncomfortably beside BNP’s [the bank’s] case that the execution of the NEAT LOIs by BNP was expressly made known to NEAT as being for verification of signatures. 

The primary judge’s reasons in that regard are in volume 20, page 4521, paragraph 324.  The highest that any contention got that there had been some communication to NEAT of any limitation on the authority of Ms Dhiri appears in one paragraph in his Honour’s reasons in volume 20 at page 4523, paragraph 331, where he said:

I have to accept that something must have been said by [Ms] Dhiri at one time or another to a NEAT representative that, in her mind, conveyed the message that she was signing the NEAT LOIs merely for verification of signatures.  I am unable to accept that it was said in circumstances or in terms that effectively communicated the limitation to either Sniekers or Howard, or any other representative of NEAT. 

CALLINAN J:   Mr Jackson, was there any evidence about a practice of obtaining verification of signatures to LOIs?

MR JACKSON:   Within the bank, your Honour?

CALLINAN J:   Generally, in this sort of commerce.

MR JACKSON:   There was an instance of verification in relation to the Royal letter of indemnity, there being the qualification by the Bank of America.  But apart from that, your Honour, the position, broadly speaking, was no, and there is a discussion of the earlier letter of indemnity which had been given in respect by the bank.  I will come to that when dealing with the question of construction. 

GLEESON CJ:   Is what appears at pages 4517 through to 4521 a transcript of a recording of a telephone conversation?

MR JACKSON:   Yes.

GLEESON CJ:   Who had made the recording?

MR JACKSON:   These were recordings within the bank, as I ‑ ‑ ‑

HAYNE J:   NEAT, NEAT was a trader ‑ ‑ ‑

MR JACKSON:   I am sorry, by NEAT.  Not all conversations were fully recorded, but there were recordings.

HAYNE J:   Just on this question of the exchanges between NEAT and the bank, of what present significance is it to know what NEAT thought it was getting or did not think it was getting?

MR JACKSON:   Your Honour, the ultimate question, of course, is the position as between us and the bank.  The particular matters from which we draw some comfort in dealing with the situation as between NEAT and the bank was that in the first place one has the documents coming in circumstances where it is known that they are required in order to permit discharge of the cargo.  So it was known that these documents, when obtained from the bank, will be used for a particular purpose and will be communicated to us. 

Your Honour, that is probably about it in relation to that aspect, but it also provides the background so far as the activities of the bank are concerned because it demonstrates that the bank knew a number of things, not just that they would go to us, but it knew what the cargo was:  chickpeas on the one hand and dun peas on the other.

HAYNE J:   Let it be assumed that the evidence had gone further than the primary judge found.  Let it be assumed that both NEAT and Ms Dhiri had understood that the instrument being executed would bind the bank as indemnifier.  What consequence would follow once the bank walked away, as it has, from the authority of its employee and says she was unauthorised to do that?

MR JACKSON:   Your Honour, leaving aside questions of breach or warranty of authority, which was not an issue in the case – Ms Dhiri was not sued – the question would be one as between ourselves and the bank.  In relation to that question, the situation really in a sense would not be different from the situation obtaining now.  The relevance of referring to the matters which took place between NEAT and the bank are, first of all, they provide the basic framework of what was going on in terms of NEAT being a consignor of the goods, we being a person who had carried.  They provide also knowledge of the bank to the extent to which that may be relevant to one or more of the causes of action, particularly other than contract.

Your Honours, could I come then to say that the Court of Appeal was of the view that as a matter of construction of the letters of indemnity the bank had agreed to indemnify.  If I could just mention this, your Honours, that is dealt with by Justice Sheller commencing in volume 21 at page 4759.  It goes between paragraphs 51 and 72.  Your Honours, I will have to come to it in more detail in reply, but I may indicate the core of what was said by his Honour in that regard.  Could I refer your Honours to paragraph 56, first of all, at page 4761 where he set out what he described as “the 1998 standard form”, and that is referred to at the bottom of page 4759 going through to the end of paragraph 55.

GUMMOW J:   Now, this 1998 standard form ‑ ‑ ‑

MR JACKSON:   Your Honour will see the top of 4760 ‑ ‑ ‑

GUMMOW J:   Yes, I do.  Do we have that extract?

MR JACKSON:   I do not think so, your Honour.  I will endeavour to get it for your Honours.  Your Honours will then see the substance of the form set out and provision referred to at page 4761, paragraph 55, that the form to conclude by being signed by the requestor and a bank.  Now, his Honour Justice Sheller said at the bottom of page 4761, the last four lines:

a bank would have no reason to sign the 1998 standard form in the space reserved for a signature for and on its behalf unless the bank agreed to join with the requestor in giving the indemnity.

Then, your Honours, if I could move on to paragraph 58, where he quotes from the authors of that document, saying that, in the third line:

It provides protection for the carrier up to a certain figure set out in paragraph 6 . . . It will normally be backed by a bank.”  I repeat that I cannot conceive of any other reason for the 1998 standard form to be signed “for and on behalf of” a bank.  Ordinarily one would not expect a bank to do so unless it was satisfied that the requestor, no doubt its client, had an entitlement to the delivery of the goods, and had assets sufficient to enable it to meet the indemnity.  The bank would, I expect, require security from the requestor.

And then, your Honours, paragraph 69 ‑ ‑ ‑

GUMMOW J:   Now, paragraph 58 is just a little mysterious, I think, on 4762.  It says:

The learned authors . . . say that the 1998 standard form “is designed as a letter of indemnity . . . It will normally be backed by a bank.” 

What does that mean?  Is it a guarantee of indemnity, is it a secondary level liability, or is it a concurrent undertaking with the party immediately given the indemnity?

MR JACKSON:   Well, concurrent, as we would understand it, your Honour.

HAYNE J:   Concurrent you understand because of the way the document is structured, or because of other baggage that one brings to reading the document?

GUMMOW J:   You see the document is not constructed that way.

MR JACKSON:   Your Honour, it does say – and, your Honour, this is paragraph 5 on page 4761:

The liability of each and every person under this indemnity shall be joint and several –

Now, of course, if there were two persons other than a bank, it is capable of referring to them both, but equally ‑ ‑ ‑

GUMMOW J:   I imagine that an analogy may be people who sign as an accommodation party to a bill of exchange.

MR JACKSON:   Well, it is possible, your Honour, but one does have a situation that, in effect – if one looks at the type of liability that is in question – and, for example, at the bottom of page 4760, the liability is:

If, in connection with the delivery of the cargo as aforesaid, the ship . . . should be arrested or detained . . . to provide on demand such bail or other security . . . and to indemnify you in respect of any liability, loss –

One would think, in our submission, that what is contemplated is that there is the ability to get the money now and to get it quickly so that it can be used to deal with at least getting the ship out of the situation of arrest.

GUMMOW J:   There is no evidence as to what is the understanding of this expression “backed by a bank” means in relation to this form, is there?

MR JACKSON:   No, your Honour, although “backed by a bank” ‑ ‑ ‑

GUMMOW J:   It is an ambiguous expression.

MR JACKSON:   It is in the sense of being capable of a number of meanings, certainly.  Our submission is, however, that whichever it may mean of those possibilities, the one thing it does not mean is simply verification of the signature of someone above it.

GLEESON CJ:   Well, part of the commercial context in which this is happening is that there is an urgent requirement for an indemnity and the primary party to the indemnity is a proprietary company, about which the party seeking indemnity evidently knows nothing as to its financial position and makes no enquiries as to its financial position.  What it says is, “Get this signed by a bank”.  It does not say, “Show us your financial statements for the last year”.

MR JACKSON:   Yes.

GLEESON CJ:   It says, “Get this document signed by a bank”.  The question that you then have to ask is:  what is the commercial purpose of the bank’s participation?

MR JACKSON:   Your Honour, whether the obligation be, in a sense, a primary obligation of the bankers we would contend for, or whether it be an obligation which is secondary, one sees, in any event that it is an obligation.  It is an obligation to pay either first up or second up, as it were, but in any event, the one thing that it does not seem to be is either the view taken by the primary judge or the view contended for by the respondent. 

I was going to take your Honours, if I may, to paragraphs 69 to 72, at page 4768, where his Honour referred to there being a degree of ambiguity about it but went on to say, in the fifth line in paragraph 69:

As I have said I cannot imagine that a reputable bank would execute such a document . . . unless it intended to be bound by the indemnity and I would not be surprised if this was the accepted practice. 

He went on then to say, in paragraph 70, that:

if it had been shown that Ms Dhiri had authority on behalf of BNP to agree to indemnify PCL on the terms of the 1998 standard form, the nature and intention of the LOI as essentially a document of indemnity would lead me to the conclusion that –

the bank was a co-indemnifier.  Then, your Honours, at the bottom, the last four lines on the page:

The obvious purpose of the LOI requires that “we” be defined by reference to the parties whose signatures appear in the subscription rather than by reference to the party or parties who made the request.

And then, at paragraph 72, your Honours will see that, in the end, the view was taken that:

the clear purpose of the 1998 standard form to be used as a joint indemnity -

and then the conclusion, your Honours, appears a little further on at page 4773, paragraph 77, where in the last three lines on the page he said:

subject only to the question of whether Ms Dhiri by her signature could bind BNP, the NEAT LOIs were in form contracts by BNP to indemnify PCL.

Your Honours, that is the construction issue.  I will have to come back to it in good time.

HAYNE J:   On that construction issue, is any significance to be attached to the form providing for what appears to be at least an informal method of execution by the bank.  All that appears to be required is a bank employee’s signature which is the least formal means by which the bank might indicate its agreement, I would have thought.

MR JACKSON:   Your Honour, could I say this.  I am looking, for example, at page 4812, what you see is provision in the document for a signature by NEAT and by the bank.  Your Honour will see it said, “Yours faithfully” – this is about line 23 - “For and on Behalf of” NEAT, to put it shortly, “For and on Behalf of” the bank.  Now, all that was said in the document that was sent was “Banker’s signature”.  How the bank chose to do it would be a matter for the bank.  If one has a situation where you get an officer of the bank signing the document, there is no question she was an officer of the bank, you get an officer of the bank affixing the bank’s stamp to it, then, in the ordinary course of events, one would expect that to be the bank engaging itself to do whatever the document, on its proper construction, engaged it to do. 

So, your Honour, there is not any particular reason, in our submission, why the document conveys necessarily informality.  It simply allows the document to be signed by whatever means the bank chooses.

HAYNE J:   What I had in mind was that with instruments like bank cheques, for example, the form of instrument is the bank’s form under its control.  Here, we have an instrument created by another party for use by persons other than those who are party to its creation.  Perhaps the practice of the trade is you simply rely on the bank not walking away from its employee.  That is not an implicitly surprising result at which to arrive.

MR JACKSON:   No.  Your Honour, may I just say in relation to it, the types – and I use the expression without particular exactness – of guarantees and indemnities that banks are required to give are likely to vary very considerably depending on the type of activity that is involved.  If I could just go to a different area altogether, if you took the area of construction contracts where there has to be sometimes a bank guarantee given, a principal may specify the type of guarantee, and the same is likely to be true in cases of this kind where you have ourselves in the position of the – we have the ship, we have the cargo, we will not give the cargo unless we get an indemnity executed by a reputable bank and we say, “This is the form”.  Now, it is up to the bank whether it does or it does not accept that proposition but ‑ ‑ ‑

GUMMOW J:   What is the consideration moving to the bank?

MR JACKSON:   Well, moving to the bank, your Honour, is ‑ ‑ ‑

GUMMOW J:   From PCL.

MR JACKSON:   From PCL, your Honour, we undertake to release the cargo if we are given this undertaking.  Your Honour, I suppose it comes like lifting, as it were, the barrels.  We are requested to do something.  We will only comply with the request in certain circumstances, if certain things are undertaken.  Your Honour, that is essentially what it is.  It is a position that commonly obtains where – and it may well be why one sees these things framed in a sense as a matter of request.  So you are requested to do something and we are not obliged to do it.  We will only do it on terms that the people who are making the request undertake certain obligations to us.  So it is a consideration for, in a sense, I suppose, varying other arrangements.

GLEESON CJ:   Well, more specifically, complying with a request to do something that exposes you to a liability that you would not otherwise have.

MR JACKSON:   Yes, that is so, your Honour.  That really appears quite starkly in a sense from the terms which set out the ambit of the indemnity in the documents themselves.

GLEESON CJ:   Because you are being asked to take a risk.  You are being asked to hand over the goods to the people who cannot produce the bills of lading.

MR JACKSON:   Yes, your Honour, and if one looks at the terms in which the letters of indemnity are framed when they speak of the ambit of the indemnity, not only do they speak in, for example, clause 1 in general terms, but what one sees also is that the very thing which is likely to happen, which did happen in this case, and which may very well happen in circumstances where cargo is delivered without the documents being – that is, the specific reference to clause 3, arrest or detention of the vessel.

GLEESON CJ:   Did the evidence show whether the bank was NEAT’s financier in relation to this export transaction?

MR JACKSON:   Yes, it was, it did.  Your Honour, I have endeavoured to put that with the references I said I would give your Honour.

GUMMOW J:   Well, that circumstance could answer my question.

MR JACKSON:   Yes.  Your Honours, could I just say, I took your Honours to paragraph 77 where the conclusion was reached by Justice Sheller on the question whether the contract was one of indemnity by the bank, and the answer was yes.  We failed on the issue however, because it was held that Ms Dhiri did not have authority to give indemnities.  Your Honours will see that conclusion at page 4505 – I should say the volume.  If one goes first of all to Justice Hunter, volume 20 I should have said, at page 4505, it was there held, at paragraph 292, that Ms Dhiri did not have:

authority to commit BNP to a liability as a party to the LOI –

It was also held, however, that she did have authority to execute the letters of indemnity in verification of the signature of other persons.  Your Honours will see that first of all, again in volume 20, at page 4524. 
The paragraph commences at the bottom of the preceding page.  Mr Ryan, whose evidence is being quoted, was the State manager of the bank.

GLEESON CJ:   That finding in paragraph 292 is not in dispute, is it?

MR JACKSON:   No, no.

CALLINAN J:   The evidence is at page 317, I think.

MR JACKSON:   Yes.

CALLINAN J:   A cross‑examination of Ms Dhiri.

MR JACKSON:   Yes.  Your Honour, it also appears, and I will take your Honours to it in just a moment, I think, at page 382 and 383 in the evidence of Mr Kavanagh in relation to the first letter of indemnity.

CALLINAN J:   Mr Jackson, there is just one thing in her cross‑examination I see at page 318, which is in volume 20, at about line 40.  She seems to make it clear that she explained to NEAT what she was doing, but after that she just left it to NEAT, in effect, on one reading, to tell whomever might receive the LOI what the purpose of the bank’s signature on it was.  She says:

And therefore I relied that my client will do the right thing.

MR JACKSON:   Yes.  Your Honour, of course, one did have the finding I referred to earlier by the primary judge that she had not, in fact, communicated to NEAT that there was any limitation on it.

CALLINAN J:   Right, but what may be, and I am not suggesting it necessarily is, what may be implicit in that passage is that she had a realisation possibly, that something further had to be done by way of explanation of the bank’s execution of the LOI, and that she left it to NEAT to give that explanation.

MR JACKSON:   Your Honour, she understood the document would go to NEAT.  The requests for the documents made it clear that the documents would then go ‑ ‑ ‑

CALLINAN J:   I understand that, but she seems to be accepting, or it is arguable that she accepts in that passage, that there might be ambiguity, to put it at its lowest, absent some explanation of what the bank was doing.

MR JACKSON:   Yes, your Honour.  I think I was endeavouring to take your Honours to page 4531.  At page 4531, in paragraph 358, your Honours will see in the last sentence in that paragraph, the last four lines, the primary judge saying: 

It is common ground that Dhiri was aware of Pacific’s requirement of NEAT’s LOI, signed by NEAT’s banker, before releasing the MV Nelson’s cargo without presentation of a bill of lading.

So it was clear that she was aware of it and she knew the purpose for which they were to be used.  One can see that referred to, in addition, in the Court of Appeal’s reasons at volume 21, page 4750, paragraph 32, where your Honours will see the letter I referred to earlier, and also paragraph 36, where the other correspondence is referred to.  I took your Honours before to volume 20, at page 4524, where one sees some of the evidence given by Mr Ryan in relation to her authority.  In particular, about line 20, he was asked:

Q.  How would you have been more specific?
A.  I would have specified that it was signatures verified, no liability on the part of BNP.

Q.  I think you have agreed with me earlier, just to be clear, Miss Dhiri had actual authority to sign this document but as you say for verification?
A.  Correct. 

Your Honours will see the remainder of that, the questions and answers there extracted – the word “chop”, of course, meaning the seal.  One also sees a letter, after the event, from the bank, in volume 8 at page 1585.  This is 8 April 1999; we had made a claim in relation to the matter.  Your Honours will see paragraph 2, where, whilst there are assertions about what its effect was, it is noted that: 

BNP has verified the signatures on these LOI’s –

and then paragraph 4, the first line: 

the role of BNP in verifying signatures. 

So it is really absolutely clear that she had actual authority to execute the document.

GUMMOW J:What does that mean?

HAYNE J:   It is a beautiful flourish from its content ‑ ‑ ‑

MR JACKSON:   Your Honour, that is what I am about to come to, if I may say so, with respect. 

GUMMOW J:It is authority to bring about a particular legal relationship between the principal and the third parties.  The question is, what is the particular legal relationship?

MR JACKSON:   Well, your Honour, could I come then to our written submissions ‑ ‑ ‑

GUMMOW J:It is not to put one’s signature on a document which, it transpires, properly construed, has another legal effect to that which was the subject of the actual grant of authority.  That seems to be the ‑ ‑ ‑

MR JACKSON:   That is the heart of the case, of course.  The point that we would seek to make is that – if I could endeavour to take your Honours to some of the things we say about it in our written submissions, first of all, at page 6, paragraph 25. 

The first thing is perhaps what your Honour has described as the flourish, but if one is going to have a flourish it is not a bad one to start with because what one sees is that there is a document which it is known is to be given to third parties.  It is known that the document is to be used to affect the legal relations of those third parties so far as other persons are concerned.  It is known that the document is one which is to be acted upon by third parties, and they are third parties with whom there is no direct legal relationship; no particular communication between the parties beforehand.

Now, in circumstances of that kind, in our submission, where there is an authority to sign the document knowing it is to be used for the particular purpose and to sign the document in the form in which it takes – in our submission, your Honour, this is a case where the person on whose behalf the form is executed, the person on whose behalf the document is sent out to the third party is as between the person on whose behalf it is executed and the person by whom it is received and who is to act on it, that each is bound by its proper construction. 

Now, your Honours, that is the submission which we make.  The submission which we make is one that says that that is, in effect, the only way, in our submission, that documents of this kind should be treated as operating.  I will come to a couple of reasons for that in just a moment if I may.  Your Honours, these are documents which are of a legal kind.  Documents inevitably bear the construction which a court will put upon them and a party should be treated, in our submission, as bound by the construction which the court does put upon them.

Could I say, your Honours, just one further factual thing about the matter before going on in a little more detail, and that is that this was not a case where Ms Dhiri was the only person who dealt with the matter at the bank.  There was the evidence of Mr Kavanagh, who was her superior.  Your Honours will see that in volume 2 at page 382.  Your  Honours will see, in particular, at about line 15, in a passage which commences at about line 15 and goes through to page 383, line 14 – essentially it consists of two things.  One, that the authority that she in fact had was authority to execute the document, in his belief, to verify it.  The second thing was that there were no specific instructions as to the method by which she was to do so because she was herself head of a department.  Your Honours will see that last part referred to specifically at page 382 about line 30 and page 383, line 6. 

GLEESON CJ:   What representation, if any, is communicated by the use of the words “Banker’s signature” on this document before the indecipherable writing and stamp?

MR RAYMENT:   Nothing with authority, first of all, to answer your Honour’s question, in our submission.  If you ask, “What is her authority?”, it is to look at the signatures which appear at page 4806, line 15, Sniekers and Howard, and to state whether or not they appear to be genuine.

GLEESON CJ:   Is a possible point of view that the words “Banker’s signature” on this document themselves convey a representation that the writing that follows if that of somebody who is authorised to sign this document on behalf of the banker?

MR RAYMENT:   Obviously, possibly, but the only person who knows that she has and who does, in fact, sign this document is a person with no authority to make such a representation and, indeed, no ostensible authority to make such a representation.  As your Honour asked earlier, that might have become relevant if she had been sued for breach of warranty of authority, but she was not.  Indeed, it might have been relevant if there was an action against the bank claiming that the bank was vicariously liable for some breach of duty by her, which it was not.  No such case was brought against the bank.

Your Honours, you ask yourself, “Was any representative made by BNP that any person had its authority?”  The only person who was associated with the way in which this document was signed is Ms Dhiri.  She was the only person who saw it before it went out, as would be the case in that example of the receptionist who acknowledges receipt.

HEYDON J:   Did Mr Kavanagh not see it before it went out?

MR RAYMENT:   No, your Honour, he did not.  He saw it before it was signed by Ms Dhiri.

HEYDON J:   Well, he saw everything except her signature.  He saw a black line which was prefaced with the words “Banker’s signature”.

MR RAYMENT:   Yes.  The finding is paragraph 320 of Justice Hunter’s judgment.  He tells her to sign it only for the purposes of signature verification.  By the way, he does not read it and pore over it.  What he says is he had a quick look at it.  What he saw of it in a quick look we do not know.

HEYDON J:   Perhaps he should have had a longer look at it.  What is the name of the officer who would be in charge of issuing letters of indemnity?  What was the name of ‑ ‑ ‑

MR RAYMENT:   It is a totally different section of this bank.

HEYDON J:   Who was the man who had the actual authority to manage the business in respect of those matters to which the contract, namely, the letter of indemnity, relates?

MR RAYMENT:   The guarantee department was the department that issued both bank guarantees and letters of indemnity.

HEYDON J:   Yes, and Mr Kavanagh was not in charge?

MR RAYMENT:   No, he was nothing to do with that.

HEYDON J:   He was the NEAT account executive.

MR RAYMENT:   That is right.  We have a list of the persons who are the donees of powers of attorney in Mr Ryan’s affidavit in volume 8, your Honour.  We will seek to put that on the note dealing also with the question of the facilities.

Actually, I can deal with it immediately.  In volume 8, page 1564 paragraph 14, Mr Ryan there says:

(a)      all guarantees/letters of indemnity to which BNP is a party must be signed under power of attorney by a person who holds a BNP power of attorney (the persons who hold a BNP power of attorney are senior management (including:  myself and my two deputies (Mr Trevor Lipman and Mr Donald Backhouse) and Mr Peter Dvorak . . . and his deputy Mr John Forrest)).

(b)      the guarantees/loans department present the guarantee/letter of indemnity for execution under power of attorney to a relevant person in management (namely, a person who holds a BNP power of attorney) together with evidence that the above practice and procedure has been followed and that requirements set out in paragraph 13 have been met.

(c)      the guarantee/letter of indemnity is then executed under power of attorney and the relevant power of attorney stamp affixed to the document.

Your Honours, as matter of fact we have the form of letters of indemnity actually issued by this bank, how they do it.  Volume 19, page 4322, there is a good example.  Your Honours will see that is a Nippon Line letter of indemnity.  It is signed on behalf of the shipper or consignee, who was no doubt the bank’s customer, and then does your Honour see right at the – if your Honour turns it on the side, the last line of typing is, “We join in the above Indemnity and Guarantee.”  Then above that there is the stamp used by the persons holding the power of attorney, “SIGNED in my presence by” BNP “by its Attorney” - Mr Ryan, in fact, in that case.

GLEESON CJ:   Mr Rayment, as the relationship person for dealings between the bank and NEAT, Mr Kavanagh would have had authority to represent to NEAT the identity of people who had authority to do things on behalf of the bank.

MR RAYMENT:   Yes, probably, your Honour.  He would be able to direct them where they should go in the bank, for various purposes.

HAYNE J:   And represent to them whether, for example, one signature, two signatures, signature by attorney under power was, by the bank’s internal regulation of its affairs, required.

MR RAYMENT:   I do not believe there was evidence of him having discussions about this particular matter ‑ ‑ ‑

HAYNE J:   I am not suggesting ‑ ‑ ‑

GLEESON CJ:   I know, but I am just exploring the possibility of an implied representation by Mr Kavanagh to NEAT and through NEAT to the party to be given this document about the authority of Ms Dhiri.  As I would understand it, while you would deny that there was any such representation made, if any such representation were made, there would not be any problem about the authority of Mr Kavanagh to make it, would there?

MR RAYMENT:   There would be a problem if he said Ms Dhiri could – he did not say Ms Dhiri could execute a letter of indemnity and, indeed, Ms Dhiri says that she could not have got such instructions from him.  That material was received into evidence before Justice Hunter. 

GLEESON CJ:   He would have authority to communicate information to NEAT about who were the officers of the bank ‑ ‑ ‑

MR RAYMENT:   With whom they should deal, yes, your Honour.

GLEESON CJ:   ‑ ‑ ‑ with whom they should deal.

MR RAYMENT:   Yes, your Honour.  That was his purpose, in part.

HAYNE J:   This rather points, does it not, to the profound commercial consequences for your client bank that would follow from the arguments that you put.

MR RAYMENT:   Yes, your Honour, the bank ‑ ‑ ‑

HAYNE J:   That, for example – correct me if I am wrong – other bankers may find it difficult to deal with the bank without making strict inquiry about whether its internal authorisations have sufficiently been met.

MR RAYMENT:   I will take instructions about your Honour’s question and seek to answer it. 

HAYNE J:   We are not concerned directly, of course, with the commercial consequences.  We are concerned only with the legal consequences.  I understand that. 

CALLINAN J:   It is a little like the internal management rule, in a sense, is it not?  You do not need a resolution, but what, are you bound to inquire when anybody signs a document whether that person had the authority to sign what it appears to say?

MR RAYMENT:   It is a very low grade authority to a person to verify a signature, and it is a very different thing to enter into a letter of indemnity under which ‑ ‑ ‑

CALLINAN J:   The problem about this is, it is all part of a banking business, is it not?  Giving letters of indemnity, guaranteeing transactions for a fee.  That is much more, I would have thought, banking business than merely verifying the authenticity of signatures or not.  How is that banking business, verifying the authenticity of signatures?  Why is that part of a banking business, to verify somebody’s signature?  You can get a JP to verify them. 

MR RAYMENT:   You can, but a banker would not know a signature if the persons are authorised signatories and he would be ‑ ‑ ‑

CALLINAN J:   Why a bank?  Why not a JP or a solicitor or an agent?

MR RAYMENT:   Well, indeed, but from the point of the view of the bank it was no different from any other person who might be able to verify this signature doing so.

CALLINAN J:   There was no evidence that this was an ordinary or a regular commercial practice for banks to be merely verifiers of signatures?  Is that right?

MR RAYMENT:   I think there was no evidence about whether this was the general practice or not.  As my learned friend, Mr Jackson, responded to you earlier, there was one other instance proving evidence in the case involving the Bank of America.

GUMMOW J:   No, but of this bank.  Was there any indication that it was part of this bank’s business?

MR RAYMENT:   I think not, your Honour.

GLEESON CJ:   Mr Justice Hunter seems to have had trouble swallowing either of the competing contentions that were put to him.  He was not prepared to accept that the activity of the bank in relation to this document was solely a verification of a signature, but he seems to have found it equally difficult to accept that in the commercial circumstances that existed between NEAT and the bank this was the bank entering into an indemnity, and so he settled for an intermediate position.  Is that a position that you support?

MR RAYMENT:   Not at all, your Honour.  We went back to his Honour and said, after he gave the first judgment, that it had not been pleaded, it had not been suggested in argument and there was not a breath of it in the examination of the witnesses.  His Honour maintained the judgment and it was set aside inter alia on the ground of denial of natural justice, in our submission.  That is what appears from Justice Sheller’s judgment.

GLEESON CJ:   And his conclusion that the document involved a representation by the bank about the creditworthiness of NEAT was, was it not, the foundation of his finding of negligence?

MR RAYMENT:   Yes, they were ‑ ‑ ‑

GLEESON CJ:   They were negligent because they had not taken proper steps to ascertain NEAT’s financial position.

MR RAYMENT:   Yes, it was in the nature of a ‑ ‑ ‑

GLEESON CJ:   Which seems radically different from the case of negligence that we have had put to us this afternoon.

MR RAYMENT:   It was not investigated at all, and, indeed, there was no reliance on it because according to the evidence that his Honour accepted PCL believed that NEAT was not a viable company.  So it would not have relied upon any such representations the bank might have made.

Now, your Honours, Tan does not know who has signed this document.  He does not know where she is from.  He does not know what her stamp said on the first document.  We submit even if there were any question of compliance with the – going back to Justice Sheller’s judgment, paragraphs – the first base, as it were - the representation having been made, there would be no relevant reliance.  For those reasons, in our submission, the ostensible authority case ‑ ‑ ‑

GLEESON CJ:   What did the trial judge find about ostensible authority?

MR RAYMENT:   His Honour really did not focus on these questions as fully as he might because he did not find that the contract bore any meaning which could be relied upon in a contract.

HEYDON J:   He said it was unnecessary to consider the question of ostensible authority.

MR RAYMENT:   That is right, your Honour.  He made findings about actual authority but not ostensible.

GLEESON CJ:   Did he find that Ms Dhiri had actual authority to bind the bank to a representation as to the credit worthiness of NEAT?

MR RAYMENT:   Well, not expressly.  One of the grounds on which we – suggested in the Court of Appeal it was all to be set aside was that he had not even heard evidence upon that matter, or considered it.  It had not been exposed for consideration.

GLEESON CJ:   So he decided the case, in every respect, on the basis of an interpretation of the document that nobody supports before us.

MR RAYMENT:   That is right, your Honour, yes.  And nobody supported it before him before the first trial – before the first judgment.  Your Honours, I want to come back, if I may, in the morning, to my learned friend’s reliance upon Article 87 in Bowstead, but could I ‑ ‑ ‑

GUMMOW J:   In doing that, you might look at what Sir Owen Dixon said in Tobin v Broadbent (1947) 75 CLR 378 at 407. In particular, I wonder whether it cannot be that Mr Kavanagh induced or assisted the assumption by Mr Jackson’s client as to what this instrument was, by virtue of what was being put to you earlier this afternoon by other members of the Bench.

MR RAYMENT:   Yes, thank you, your Honour.  Now, I wanted to come, if I may, on contract, to the first ground in the matters of contention, before dealing with negligence.  The documents are conveniently found at the end of volume 21.

GLEESON CJ:   So, at this point of your argument, you are setting out to persuade us that this really was only an authentication of NEAT’s signature?

MR RAYMENT:   No, I am setting out to persuade your Honours, if I can, that BNP was not, on the proper construction of this document – even assuming that Ms Dhiri was authorised to sign it, for example, in the form in which it was taken – a promisor.

HAYNE J:   So that is what it was not.  What was it?

MR RAYMENT:   It was a document, pursuant to which – the promisor was NEAT – BNP, on that view, joined itself without assuming the obligations of a promisor.

GLEESON CJ:   In what capacity?  Joined itself in what capacity?

MR RAYMENT:   In an unstated capacity.

CALLINAN J:   Ms Dhiri was just practising her signature.

MR RAYMENT:   She was ‑ ‑ ‑

HAYNE J:   Making the document look pretty.

MR RAYMENT:   She was adding her name to a document which bound other parties, in our submission.  If one looks at it, at 4804 to 4806 ‑ ‑ ‑

HAYNE J:   Tomorrow morning, Mr Rayment, you are going to have, I suspect, to grapple with, not what BNP was not, but on your construction of the document what was BNP.  This is a commercial document.  We are talking about a bank, traders, not just fluffing up a document with a pretty stamp and indecipherable signature.  So you are going to have to grapple with what is the role of BNP on the document.

MR RAYMENT:   What effect is to be given to it, very well, your Honour.  I can only begin, I think, now in a couple of minutes.  First of all, it is addressed to Pacific Carriers from NEAT and that, one sees at page 4804, is not part of any standard form.  It is one of the first of the changes from a standard form.  So it is expressed to be a bipartite document, not a tripartite document.  Secondly – and this is a significant change, in our submission, from the standard form – the word “we” at the foot of page 4804 is defined effectively, by the words which follow it:

we, NEW ENGLAND AGRICULTURAL TRADERS PTY LTD hereby request you –

Your Honour the Chief Justice asked whether the other side’s case was that “we”, five lines later, meant something different, but that has to be their case, that “we” changes five lines after it is first used at the foot of 4804.

GLEESON CJ:   Subject, perhaps, to one qualification only, and you might let us have something on this in the morning - is the concept of bank endorsement of an instrument relevant to this case?

GUMMOW J:   Is there a practice where particular significance is attached to it in this field of commerce?

MR RAYMENT:   Not so far as the evidence revealed in this case, certainly.  

HAYNE J:   There is, of course, BNP’s own document which you took us to which rather suggested that banks, at least on occasions, your bank, your

client’s bank on occasions plays a particular role in transactions not very different from this one.

MR RAYMENT:   Yes, it does it in a different way.  It would not do it ‑ ‑ ‑

HAYNE J:   I understand that. 

GUMMOW J:   There does seem to be some evidence that banks do join in in indemnity.  That is what your document says, the Japanese one.

MR RAYMENT:   Yes, it certainly can happen, there is no doubt about that.

GLEESON CJ:   All I had in mind, Mr Rayment, was that you can explain what is otherwise inconsistent.  You cannot explain the heading.  That heading is just nonsense, but you may be able to explain what would otherwise appear to be some inconsistency in language by treating the references to “we” as encompassing the possibility either of a reference to a corporation in the plural, which is not unusual, or as a reference to the possibility that there are two people in the position of NEAT and simply treating the signature of BNP as an endorsement of a document which otherwise operates according to its terms.

MR RAYMENT:   Yes.

GLEESON CJ:   I am just suggesting to you that that overcomes the language problems.

MR RAYMENT:   All right.  Well, I will address that in ‑ ‑ ‑

GLEESON CJ:   Perhaps if this is a convenient time we will adjourn until 10 o’clock tomorrow morning.

AT 4.16 PM THE MATTER WAS ADJOURNED
UNTIL FRIDAY, 21 MAY 2004