Pacific Carriers Ltd v BNP Paribas [2004] HCATrans 164 (21 May 2004)

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Pacific Carriers Ltd v BNP Paribas [2004] HCATrans 164 (21 May 2004)

Last Updated: 21 May 2004

[2004] HCATrans 164

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 FRIDAY, 21 MAY 2004, AT 10.01 AM

(Continued from 20/5/04)

Copyright in the High Court of Australia

GLEESON CJ: Yes, Mr Rayment.

MR RAYMENT: If your Honours please. Could I first of all answer your Honour Justice Hayne’s question of yesterday. Your Honour, a senior member of the bank heard your Honour’s remarks, and it would, I think, with respect, be inappropriate for me to deal with any question of reasoning, because it could be almost evidentiary in nature. I am simply instructed that the bank maintains its position in this matter, if the Court pleases.

Could I correct an answer, please, that I gave to your Honour Justice Heydon yesterday about what Mr Kavanagh saw precisely before he gave instructions to Ms Dhiri. May I invite the Court’s attention to volume 2 of the appeal book, page 390, line 35. Looking at the left-hand margin and following, he is shown the letter of indemnity and asked by my learned friend, Mr Street, SC:

Q. I see. Well, is this the position, you didn’t read the whole of the document?
A. That’s correct.

Q. Could you turn please to page 778. Did you read clause 5 of the document –

which is the joint and several liability provision –

A. No. I perused the document and I looked at it in the first page and the details there.

That would not take the matter very far –

I took note of the fact who was issuing it and who it was in favour, who it was addressed to. There was no need for me to read the details.

Q. I see. The position is you have a clear recollection you did not read clause 5; is that right?
A. I have a clear recollection of just perusing the document and I did not read clause 5 or the other clauses on that page.

He is asked whether he has now read it, and to read it again, and this question:

Q. If you had read clause 5 would you have been happy for the bank to sign the document without clear qualification as to the role in which it was signing the document?
A. Without clear qualification?

Q. As to the role?
A. I assumed the document would be signed in clear clarification, sorry, so I would have had no objection.

And then at 396, 45, at the foot of the page, the witness is asked again by Mr Street:

Q. Mr Kavanagh, earlier I think you stated that you would have inserted words to the effect that the bank was signing as a verifying party only. Why would have you done that?
A. Why would I have done that?

Q. Yes?
A. Well, I would do that as a matter of course. It’s just my way of, as a banker. If I have been asked to confirm something I would sort of ensure that it is - -

And then his Honour asked a question and the answer was:

A. I look at the document in its entirety and it’s form, three sheets that are there, and reading it just on face value, as I said, perusing the document, it is a letter by NEAT addressed to another party. I assumed and understood that we are not party to that document and countersigning it – it’s countersigned – verifying the signature, we didn’t, it was not as a particular party to that particular document.

Q. Do you see any problem in signing it without clarifying words such as you have indicated?
A. There could be if it was not made clear to the parties who requested it in the first instance in what capacity it was being done when I believe that was very clearly done.

Your Honour Justice Callinan and Justice Gummow as well asked questions yesterday about whether there was evidence as to the – whether the issuing of certificates as to the verification of signatures was part of the bank’s business or regular part of the business. Some material which goes to that, we have ascertained, is in the same volume at 406, 35. Mr Kavanagh indicated there that:

This type of request is not normal practice and if it was normal practice and it was deemed necessary I am sure we would have had a policy and procedure in place for such a thing.

Then at 408, line 20 he says:

We don’t get these requests, our bills department don’t get these type of requests on a regular basis. It was a one-off.

CALLINAN J: So that anybody dealing with the bank or seeing the document would not expect or assume it to be bearing a mere verification of signatures, because this was not part of the normal practice or business of the bank or, indeed, of banks generally it appears.

MR RAYMENT: Well, the bills department, certainly, he is limiting himself to, which is documentary credits.

CALLINAN J: Whereas the issue of letters of indemnity is part of the bank’s business.

MR RAYMENT: The issue of letters of indemnity is part of the bank’s business.

GLEESON CJ: But although there seems to have been some interest at the trial in psychoanalysing Mr Kavanagh and others, the real question is what a reasonable person in the position of Mr Jackson’s client, or some other third party into whose hands this document came, would take it to mean.

MR RAYMENT: When one comes to the first ground of contention, that is certainly so.

GLEESON CJ: Yes, that is what you are on at the moment, as I understand it.

MR RAYMENT: Well, I am answering some questions at the moment. I want to come back more particularly to those questions in a moment, if I may. I am about to pick it up again directly, but I am just at the moment dealing with some matters I was asked to deal with, if I may please, Chief Justice.

Your Honour Justice Gummow referred to what was said by Justice Dixon in Tobin v Broadbent (1947) 75 CLR 378 at 407. That question was not examined at this trial and was not within the pleadings. If I may take your Honours please to volume 1 of the appeal book, page 30, the estoppel pleading is paragraphs 1 to 8 and your Honours will see that it is framed in representation, paragraph 2. In effect, there is a misrepresentation case made and detriment alleged by reliance on the representation. Then there is material alleged in paragraphs 5 - - -

GUMMOW J: This is by way of reply.

MR RAYMENT: Yes, 5 and 6, 7 and 8. Now, it is fair to say that at the trial, in the written submissions of the plaintiff at the conclusion of the hearing, paragraph 203 was included in the submissions and under the heading of estoppel.

GUMMOW J: Do we have that?

MR RAYMENT: No, I was just about to read it. I can certainly give your Honours a copy of it, but it is very short. 203 reads “The first defendant was clearly imprudent in failing to implant” - that must mean implement – “any verification factors and this imprudence supports the estoppel”. Then there is a reference to Thompson v Palmer at 547.6.

Beyond that, in our respectful submission, the estoppel pleading did not raise the kind of matter referred to by Justice Dixon, page 407. For example, if there had been issue at the trial about that kind of matter it would have been necessary, amongst other things, to examine the conduct of the appellant in seeking to demand the letters of indemnity in the first place from NEAT, because there was an allegation, which on the pleadings before his Honour went nowhere, that the appellant had misled NEAT into thinking that it was necessary in some way for NEAT to provide a letter of indemnity by demanding demurrage charges which it knew were not payable.

There was cross-examination of Chua at volume 1, pages 37 to 38, to the effect that he was aware that demurrage charges being incurred for this vessel until she reached Diamond Harbour were for the account of the appellant, whereas, for example, if your Honours look at the amended chronology filed on 12 May incorporating the respondent’s amendments in mark up, at page 35, your Honours will see examples of demands being made - and it follows several pages thereafter – demands being made of NEAT for this letter of indemnity because they say demurrage charges are incurring to your account or continuing to accrue to your account.

GLEESON CJ: I think we may have been told something about this yesterday, but did NEAT take an active part in this trial?

MR RAYMENT: They did at various points of time, and did not at others, I think it is fair to say, your Honour, depending on who was representing them and what that person was doing. There was counsel at one point and not at other points.

GUMMOW J: Where do you actually see “demurrage” referred to at 37 and following?

MR RAYMENT: No, that is not the expression, but for the account of PCL.

GUMMOW J: That is the context in which - - -

MR RAYMENT: It is the context, yes, your Honour, and his Honour does not make a final finding about this. If your Honours go to appeal book, volume 20, page 4540, paragraph (d), his Honour says that “there may be some substance in” in the suggestion that there was a misleading, but he does not need to deal with it for the purpose for which it was then relevant.

GLEESON CJ: It was by reference to a potential claim for demurrage that NEAT asked the bank to do whatever they were asked to do in relation to this document, was not it?

MR RAYMENT: Yes, they were. Yes, that is so. That was why they wanted to give a letter of indemnity of their own in the first place, which otherwise they would not have done. Indeed, one of the directors said that if he had known there was going to be a fee at any point of time, involved in his decision to get the bank involved – it was one per cent fee – he would never have signed it for himself, in the first place.

Your Honours, can I please revert to track and include what we wish to put about the first ground in the notice of contention. First of all, in general, we would submit this. If A, B and C sign a document whereby A and B alone make mutual promises, the only conclusion may be that the joinder of C is by mistake or that possibly some rectification is required, depending on what the underlying antecedent agreement may be. But a conclusion based on the fact that C is the banker for whoever of A and B has a monetary obligation, and that C thereby joins into that monetary obligation, we submit, is not warranted, especially in the context where the document is to be construed against the party with the benefit of a promise.

GLEESON CJ: A lot would depend on commercial practice, would it not? If a bank writes its name on the back of a bill of exchange, the obligations of the bank are clear and are settled by established mercantile practice.

MR RAYMENT: Yes. They are settled by the law of merchant and now by statute.

GLEESON CJ: Yes, and the consequences of the bank endorsement of certain kinds of mercantile instrument were really originally established by custom.

MR RAYMENT: Yes.

GLEESON CJ: Was there any evidence in this case about any commercial practice in relation to bank participation – if I can use that neutral expression – in documents of this kind? Except the evidence that we were shown yesterday, that is, from time to time this bank participates in indemnities as an indemnifying party.

MR RAYMENT: Yes. I think the answer is no. In fact, that matter is commented on in the Court of Appeal. It is observed by Mr Justice Sheller, with regret, that there was no evidence in the case led as to the usual practice in the community of bankers. There is some evidence in this case on a related question, but not on how these documents may be signed in practice by bankers. All you know is that in this case, if BNP voluntarily entered into such a document, it had a practice of expressing its joinder into the agreement expressly, “We join into this undertaking”, and sealing – or, rather, powers of attorney – being exercised in respect of that form of communication.

GLEESON CJ: And did the evidence show whether it had a practice of charging fairly substantial fees?

MR RAYMENT: Yes, it did. The evidence shows that in this case it would have had a one per cent fee.

GUMMOW J: Where do we see the one per cent fee?

MR RAYMENT: Mr Davidson, and I think, your Honours, volume 4, page 774, there was cross-examination of Mr Howard by Mr King, line 15:

the cost to you of the bank providing a guarantee on your behalf is of one percent?

GLEESON CJ: One per cent of what?

MR RAYMENT: One per cent of the possible exposure under the document.

GLEESON CJ: Four million, here?

MR RAYMENT: Yes, five million. Your Honours, the somewhat similar case which we have found about this question of possible meaning of a promise of indemnity - - -

GLEESON CJ: Just before you pass from that point for a moment, about the fee, there is a problem, is there not? Mr Jackson’s client would have had no way of knowing whether or not a fee was charged?

MR RAYMENT: No. He would have known that a fee would be charged, but he would not know how much it was or whether - - -

GLEESON CJ: He might have expected that a fee would have been charged if the bank had been an indemnifier, but he would not have had any way of knowing whether in this particular case any fee was charged.

MR RAYMENT: Correct, and they would have also expected that there would have been required to be in place appropriate securities and appropriate facilities pursuant to which this will happen. Your Honours are to be given a document which is agreed, which shows that there was a $500,000 facility which was fully wrong. There was no capacity left in the facility.

GLEESON CJ: I do not know what the rates of exchange were at the time, but on the basis of this evidence at 774, the bank’s usual fee for giving this kind of indemnity would have been pretty close to $A60,000 or $A70,000.

MR RAYMENT: Yes, that is correct, but that is apart from the fact that security would be required and the facilities themselves need to be in place. It is not just the fee. Your Honours, a case which is somewhat similar on this question of construction of a promise of indemnity is Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd (1985) 9 ACLR 909. Your Honours, there there was a promise, in effect, in the form of an indemnity by the individuals, Reginald Austin and Lynette Austin. They were named as the “we” who gave the indemnity. The document was then put under the common seal of their company and they both signed as apparently directors of that company.

The question before the New South Wales Court of Appeal was who was a party to the instrument and the court split on it - Justice McHugh and Justice Mahoney holding that the individuals were parties and Justice Kirby dissenting. The test applied by Justice McHugh in his judgment at page 924 - there is a paragraph which begins “The Indemnity opens with the words” which specifies the way in which his Honour approached the matter:

A reasonable person, reading the document before the affixing of the company seal and the signature, would see that it imposed personal obligations on the Austins. No doubt a keen reader might be puzzled by the words “signed on behalf of: Reg Austin Insurance Pty Ltd”. Nevertheless, I think that, despite his puzzlement, he would understand that the Austins were indemnifying the appellant.

It is because really of the promise, the promisor being clearly identified in the document.

GLEESON CJ: A document like this is almost a textbook example of a document that is intended to come into the hands of third parties and people who would not normally know what went on between NEAT and the bank.

MR RAYMENT: It has come into the hands only of the parties to it. It is not negotiable - - -

GLEESON CJ: By third party I meant somebody outside NEAT and the bank.

MR RAYMENT: Yes, that is so.

GLEESON CJ: And the question is, as Justice McHugh indicates, what would a reasonable person in the position of Mr Jackson’s client, not knowing whether the fee had been charged, not knowing anything except – the history of how the document came to be produced you would take from the document.

MR RAYMENT: Yes, but, nevertheless, we really would need to know that the indemnity will be construed strictly against the promisee. Your Honours, we were asked about the question of using the analogy of endorsement of negotiable instruments. We suggest that because that comes from the law merchant or statute, such a rule would not generally be appropriate to be imported into the general law of contract. Your Honours, that is really what we wanted to put in support of the first ground of the notice of contention.

One matter of practice was proved by BNP about these letters of indemnity in this field and it was that letters of indemnity issued by banks are issued as originals, just like bank guarantees, and are delivered by the bank to the promisee. That is Mr Ryan’s affidavit and some oral evidence that he gave. His affidavit is at volume 8, 1565, paragraphs 17 and18. He says in 18:

I am not aware of any other instance where a shipping company has been prepared to accept a fax copy of a document purported to represent a bank endorsed absent bill of lading guarantee and not sought to correspond directly with that bank to confirm its endorsement before discharging cargo.

HAYNE J: Was there any exploration in oral evidence of that expression “bank endorsed absent bill of lading guarantee”?

MR RAYMENT: He gave this evidence, which we submit is, in effect, to the same effect more particularly to this case, at volume 2, page 259, line 35. He is asked:

Q. Assuming that the bank knew that it was a document going to a third party; would you agree that the execution of the document by the bank without any qualifying endorsement offered some form of assurance to that third party?

GLEESON CJ: Mr King’s objection to the judge’s question was overruled.

MR RAYMENT: Yes, your Honour. I am grateful to his Honour.

THE WITNESS: I would say, my answer would be yes for an original document, signed original. In a faxed copy it has a very different connotation and, as a bank, you would not expect any third party to rely on a faxed copy without confirming directly with the bank themselves.

Your Honour, of course, the practice that occurred in this matter – the first thing appellant did when a problem arose in Calcutta was belatedly to ask for the original letter of indemnity. They were refused and it was then that the letter was written at volume 8, page 1585, by the State manager with a countersignature of Ms Dhiri. That letter itself makes the point, in paragraph 4):

To the degree that your client required indemnification from a bank, we fail to understand why would they release the cargo without first holding an original indemnity or confirming with the bank that such indemnity was forthcoming.

GUMMOW J: Who is this written to? Who are Drew & Napier?

MR RAYMENT: Yes, your Honour, written to PCL’s Singapore lawyers.

HEYDON J: Would the course of events have been different if they had got the original letter of indemnity as distinct from the faxed one? Would anything have changed in the events which unfolded?

MR RAYMENT: Well, it would have been an authentic document is really his point. You see, you seek this letter of indemnity - - -

HEYDON J: The fax was not a forgery. It was a genuine copy of the original. But what difference would it have made - - -

MR RAYMENT: Well, the shipowner is delivering cargo without anything. He does not have the bill of lading. Instead, he is looking to another document to give him security. If he does not have that either, then this problem may appear to a shipowner to be multiplied.

HEYDON J: My point is simply that the difference in character between the original and the faxed version does not seem to have been determinative in any event. The calamities which have happened were not caused by that.

MR RAYMENT: It is just that everybody expected the original in this context. When you look at what the appellant did with Bolton, it was not enough that they faxed a copy of some indemnity. Bolton would not do anything until they actually had PCL’s original document couriered to them. It just happens to be a fact that in this trade shipowners require such security, for better or worse. I should say there was no challenge to the evidence given by Mr Ryan about this matter, or any contrary evidence.

GLEESON CJ: We still have to come to your positive submission as to what you say a reasonable person in the position of Mr Jackson’s client would have understood the bank was doing.

MR RAYMENT: Yes. The matter I have just referred to goes to a number of other issues like vulnerability and the like, but I do not wish to go beyond what we have put in writing and orally so far about the first ground of notice of contention to answer your Honour’s question.

GLEESON CJ: So you say what a reasonable person in the position of Mr Jackson’s client would have understood that the bank was authenticating the signature of NEAT?

MR RAYMENT: We say that the reasonable reader is in no different position from the reasonable reader of any document under which three parties appear to join in the document by which two parties - - -

GUMMOW J: This is not just any document. That is the trouble, Mr Rayment. That is the whole trouble.

HAYNE J: It is what your client’s manager described, apparently, as not being a bank endorsed absent bill of lading guarantee. Apparently it is something other than that creature which is a creature he obviously knew and recognised.

MR RAYMENT: The question in the case is really what meaning is one to give to the additional signature, what is he to understand by the additional signature? There is a possibility that has not been excluded, and, indeed, turns out to be correct, namely, that the signature was entirely erroneous. If they wanted to make sure that the bank was liable under this document, the very least they should have done, we submit, was to call for the original or have the bank certify that it would be providing its original indemnity.

GLEESON CJ: But there only appear to have been three possibilities that have so far ever occurred to anybody associated with this case. One is the possibility for which you contend, which has not attracted any judicial support so far.

MR RAYMENT: Correct.

GLEESON CJ: The alternative is the possibility for which Mr Jackson contends, which appealed to the Court of Appeal, and the only other possibility is that that occurred to Mr Justice Hunter, which neither of you support.

MR RAYMENT: Correct.

GUMMOW J: One question is whether your client did not assist an assumption that this was a guarantee of the sort Mr Ryan was talking about by not stipulating what it really was, namely, just a verification, which we know is a unique – at least from the point of view of your bank – a unique event.

MR RAYMENT: Yes. I think I sought to deal with that a little earlier – if your Honour has in mind, as it were, the issue in Justice Dixon’s judgment, I have previously dealt with that.

GUMMOW J: Ostensible authority is all part of the law of estoppel.

MR RAYMENT: Yes, it is, but you need to have an authorised holding out of a person for a purpose, and there is no authority, in our submission, in Ms Dhiri, in effect, to represent her own authority. No one held out Ms Dhiri as being able to enter into a binding agreement on behalf of the bank.

HAYNE J: The bank armed her with the seal or stamp or chop which was affixed to this document. Now, do we know from the evidence whether any significance is attached in this trade to the fact that a bank stamp is affixed to a document?

MR RAYMENT: We have, again, no trade usage evidence. The stamp shows that the person affixing it is employed by the bank and which branch of the bank that is, and, in our submission, nothing more than that. It is certainly not a seal. As a matter of fact, if you look at the stamp, which is on the main letter of indemnity in this case – the only one that existed before the discharge of the cargo – and you ask yourself what would they have found if they had asked for a legible copy of it, the answer is that they would have found it to contain a row of dots which was not filled in. In fact, Ms Dhiri appears to have used the stamp to include her file reference on that lower row of dots to documentary credits that she was dealing with.

We submit if a receptionist is authorised to acknowledge receipt of documents – the example I gave yesterday – he or she may well be given a stamp indicating where she comes from for that purpose without thereby representing her to have any authority other than that of a receiving party.

GLEESON CJ: Mr Rayment, if you are right about the true construction of this document, we never get to this estoppel point.

MR RAYMENT: Yes.

GLEESON CJ: But if you are wrong about that, we consider this question, do we not, as though the heading of this document was not the nonsensical words that appear on it, but as though it were headed, “bank endorsed, absent bill of lading guarantee”. Suppose this document had been headed “bank endorsed, absent bill of lading guarantee”, and down the bottom there had appeared the words “Banker’s signature, indecipherable writing” stamp, what would be the legal consequence of that in terms of estoppel?

MR RAYMENT: You would still need to know who signed it. If that was a person with authority, then that may be the end of the matter. If that was a person without authority, then you would need to ask yourself, was that person held out as having authority.

GLEESON CJ: Yes, and she could not hold herself out as having authority if that is all there was to it.

MR RAYMENT: No.

GLEESON CJ: If it had been the tea lady who signed the document you would not perhaps have a problem.

MR RAYMENT: Something has been said in this case about the transmission of a document for the purposes of the Trade Practices Act. We submit one is in this position about this matter, with great respect. If a servant of corporation goes to the premises of the complainant under section 52 and makes a misrepresentation, a question may undoubtedly arise about the authority of that person to bind the corporation, one would need to look at section 84 and the like, but we submit that the fact that the communication might happen by post or by telephone, by someone ringing up by the corporation’s telephone, the same person, makes the case no different.

The mail boy might take a bag of letters to the mail office and would obviously be authorised to carry his bag to the mail office and incur the postal charges, but it does not follow from that that the quality of what is in that mail is any different in law, we submit, from someone sitting down in the office and telling a person over a table a certain thing.

GLEESON CJ: Does not this all turn on Turquand’s Case? It is the indoor management rule, is not it? Are you not entitled to assume – is Mr Jackson’s client not entitled to assume that the internal regulations of the bank have been complied with when it came to producing the document entitled, “bank endorsed, absent bill of lading guarantee”?

GUMMOW J: In particular, using the stamp?

MR RAYMENT: We submit a useful analogy is the question of the receiving clerk, who may have a stamp to acknowledge receipt and who may use it in any way, but whose authority only is to acknowledge receipt.

HAYNE J: That is why you arm the receptionist with a stamp that clearly says “AB Pty Ltd received”, but that is why that stamp is there.

MR RAYMENT: We respectfully submit the way to analyse this case is by reading the principles referred to in Freeman v Lockyer.

GLEESON CJ: Are they different from the indoor management rule? Is not the indoor management rule simply a particular application of those principles to the case of a corporation?

MR RAYMENT: Yes, it is.

CALLINAN J: You have to read the company’s charter and you can assume that if what has been done is within the company’s charter everything leading up to the particular act which is in issue is assumed to have been done regularly. That is the rules.

MR RAYMENT: Could I go back to, first of all, the question of this stamp because I have just been asked a question about the stamp and I would like to take it directly, if I may. This is a case that was referred to by Justice Dawson, which whom Justice Toohey agreed, in the Northside Case. It is The Governor and Company of the Bank of Ireland; it is in the materials we handed up yesterday.

GUMMOW J: This is V HLC 389.

MR RAYMENT: Yes, your Honour, and Baron Parke at - we just really included the only critical passage which is on page 410.

GUMMOW J: What was the instrument involved there?

MR RAYMENT: It was the common seal of the corporation which the secretary held.

CALLINAN J: This is before Turquand’s Case, is it not?

MR RAYMENT: Yes. There were various transfers to which the common seal was affixed incorrectly, and your Honours see it actually in the headnote on the second page, I think. Your Honours, at page 410 Baron Parke says:

If there was negligence in the custody of the seal, it was very remotely connected with the act of transfer. The transfer was not the necessary or ordinary or likely result of that negligence. It never would have been, but for the occurrence of a very extraordinary event, that persons should be found either so dishonest or so careless, as to testify on the face of the instrument that they had seen the seal duly affixed. It is quite impossible that the bankers could have maintained an action for the negligence of the trustees, and recovered the damages they had sustained by reason of their having made the transfer.

That was referred to by Justice Dawson, page 201 in Northside 170 CLR. It is footnote (72) on that page.

GLEESON CJ: Your client is a foreign corporation?

MR RAYMENT: Either in substance or in fact, yes, your Honour.

GLEESON CJ: It is just you described it as BNP Paribas.

MR RAYMENT: Yes.

GLEESON CJ: What does a French corporation have that corresponds to a memorandum and articles?

MR RAYMENT: There is no evidence to answer the question quickly. It is a société - - -

HAYNE J: You can explain to me then about Australian registered bodies and the like, Mr Rayment - - -

MR RAYMENT: I think I can quickly get some instructions to answer that question – there is a French statute which answers your Honour’s question.

GLEESON CJ: I take it that there was no attempt to prove at the trial that the constating instrument, corresponding to the memorandum and articles of association of a local corporation, contained any provision which would be inconsistent with the possibility that Ms Dhiri had authority to commit the bank to a bank-endorsed absent bill of lading guarantee by writing her name and chopping?

MR RAYMENT: That is my understanding, that there was no such attempt. There was no attempt to prove anything about the constitution of the respondent’s - - -

GLEESON CJ: There was no attempt to prove, for example, if you looked at the constitution, you would find that it was only by a power of attorney that anybody could effectively commit the bank to such an instrument.

MR RAYMENT: In order to reach this conclusion, you need to know the details of the arrangements within the bank.

GLEESON CJ: Yes. We know – I think we were told yesterday – that the internal management arrangements within the bank were that only pursuant to a power of attorney could an instrument like this be executed - - -

MR RAYMENT: That is so.

GLEESON CJ: - - - but that would not be evident from an inspection of the public documents of the company.

MR RAYMENT: Probably not. It certainly was not proved to be. But this is not, as it were, a document which on its face was signed by anybody with any particular authority, and it in fact was signed by somebody without authority.

GLEESON CJ: That is the usual context in which the internal management rule comes into play.

MR RAYMENT: You rather have a little more than that, do you not, your Honour? The mere fact of signature on behalf of a corporation - - -

CALLINAN J: You have that it was not the business of the corporation to authenticate signatures, but it was part of the business of the corporation to issue letters of indemnity. So why should not a third party, looking at the document, say, “Well, this is a letter of indemnity, this is an indemnity given by one of the signatories to it”. There is no reason to suppose, having regard to banking practice and the business of this bank, that this is a mere authentication.

GUMMOW J: Just picking up what Justice Callinan says, in Northside [1990] HCA 32; (1990) 170 CLR 146 at 212 there is a discussion by Justice Gaudron of the intermingling, if you like, of ostensible authority notions and Turquand’s Case as a species of a genus of estoppel. I think also in Justice Brennan, which I cannot quite find at the moment. Justice Gaudron at 212.

HAYNE J: Chief Justice Mason at 154 to 155 I think is to be read as saying that it is certainly not a rule confined to documents executed under common seal.

MR RAYMENT: I wonder if I might seek your Honours’ leave to put a note in within two days about this question that I have just been asked.

GLEESON CJ: Yes, certainly.

GUMMOW J: The point may come to this, that by equipping this officer with the seal and given the ordinary course of business of the bank in providing indemnities indicated by some form of endorsement on the instrument, one would ordinarily say there was encouraged by that practice and by that arming of the officer an assumption in the third party to the arrangement that the affixing of the stamp or the signature had a particular effect.

MR RAYMENT: Yes, I follow the matter.

CALLINAN J: Then I could add to that, in the passage to which Justice Gummow drew your attention in Justice Gaudron’s judgment, the last sentence is:

If the latter has knowledge of facts or ought to have knowledge of facts putting him or her to further inquiry, that is a matter which tells against the former having played such a part in the adoption of the assumption that he or she should be held to it.

The relevant facts and the knowledge or assumption about them is that this is not banking business to verify signatures, but to issue letters of indemnity is. It seems to me that that passage tells very much against your case, at the moment.

MR RAYMENT: May it please your Honours, we would wish to give consideration to that matter and I will do it in writing within two days.

GLEESON CJ: All right. You can put it in some written submissions and Mr Jackson can put in any written reply that he wants to make within the same number of days after that.

MR RAYMENT: Thank you. Your Honours, then may I move then to the questions in this case of duty of care. Your Honours, for reasons that we have put in writing and which fell from the Bench yesterday in discussion with my learned friend, Mr Jackson, we are at issue with the other party about this matter. The principal submission we make is that it would not coincide with notions of coherence to impose a duty of care in this matter. Real questions arise, in our submission, about vulnerability. You have a document which does not identify the person involved. It does not identify the employment of the person. You do not have the original of the document and the matters I referred to before. It must be such as to raise doubt in the mind of a reasonable person about whether this is binding, and the other side could have ascertained what the authority of the person involved was by inquiry.

As Justice Sheller said in the Court of Appeal, there was ample time to make inquiries about this matter. Legal advice given to the other party, in our submission, would certainly have drawn attention to the need to know whether the person who had signed this document had relevant authority. That, in our submission, bears upon the issue of whether there was relevant vulnerability. If there was a duty of care of this kind, it is very hard to stop it from applying to cases where one enters into a contract which is ambiguous. Both parties in that contract might have a duty of care, if there were one here, to advise the other of what the true meaning of the document was.

Your Honours, finally I would like to come to the second ground of the notice of contention. What happened to these bills of lading was that there was both splitting and switching. Your Honours were told about one yesterday but not the other.

GUMMOW J: Can I understand the splitting? The splitting was to deal with the two species of peas, was it?

MR RAYMENT: No, apparently it was to deal with the sale of small parts of the consignment, so that a document could be given to a buyer.

GUMMOW J: Mixed peas still?

MR RAYMENT: So many mixed peas.

GUMMOW J: But it was just small consignments. We do not know whether the consignments were discrete as to species of pea, do we?

MR RAYMENT: It would be so many metric tonnes, or a lesser quantity, of peas which would be sold to a particular buyer and he could obtain delivery of it by presenting one bill of lading, that is, one which was endorsed to him. Now, switching is an entirely different thing. All of these bills of lading were switched and some of them were split. When I say all of these bills of lading, every bill of lading involved in both letters of indemnity were switched. The switching involved changing the parties to the bill of lading. Bills of lading in which NEAT was shipper and Swiss was the notify party, they being the original bills, were cancelled, and later bills were issued in which Swiss were the shippers and Royal were the notify party.

Now, at the time of the entry into of each of the two letters of indemnity the only bills of lading which were in existence were the original bills of lading, and under those bills of lading, absent endorsement, NEAT had the right to possession of the goods. In the switched bills, absent endorsement, Swiss had the right to possession of the goods, absent endorsement.

GLEESON CJ: Who issued the new bills?

MR RAYMENT: The appellant. The letters of indemnity sued upon were to be construed strictly in favour of the indemnifiers, and assuming for the purpose of this argument the present respondent was one of those. The letters of indemnity referred to the original bills in their introductory words. If one goes to volume 21, to the example of the letter, page 4804 - - -

GUMMOW J: It identifies the bills by dates, does it not?

MR RAYMENT: Yes. They are Nos 1, 2 and 3, dated certain dates, but one sees then in the next few lines:

The above goods were shipped on the above vessel by Messrs NEW ENGLAND AGRICULTURAL TRADERS PTY LTD –

and all the original bills, Nos 1, 2 and 3, were bills in which the shipper named was NEAT, consistently with that description.

GLEESON CJ: Clause 4 of the letter of indemnity – and I am reading from page 4808, just because it is easier to read – contemplates that the original bills of lading will come into the possession of one party and be delivered to the other party.

MR RAYMENT: Yes, the indemnifier, as soon as he gets possession of the bill, normally this would be the receiver making this promise. The person taking delivery of the goods would ordinarily be making this promise. He promises to deliver the same to you, whereupon our liability under this document will cease. If I could just go back to the top of that page - - -

GUMMOW J: The “our possession” in 4 is the possession of?

MR RAYMENT: NEAT. At the top of the page, 405, the request is for:

delivery of the said cargo to:

RECEIVERS AS DIRECTED BY

M/S ROYAL . . .

without production of the original Bills of Lading.

That is, we would submit, a reference back to what appears on the previous page, Nos 1, 2 and 3. The same is true, correspondingly, on the other letter of indemnity, which is at 4810. Those bills of lading have different number and different date, but again they are the original bills. Now, before delivery of the cargo, apparently pursuant to these letters of indemnity, but after the execution of these documents, all those bills of lading were cancelled.

GLEESON CJ: Cancelled?

MR RAYMENT: Cancelled, and new bills of lading were issued, in some respects, as my learned friend Mr Jackson said, by way of a split, so that some of those bills of lading became larger in number, but in all cases, by way of switch, so that the parties to the later bills of lading were different.

GUMMOW J: Just explain to me again the difference in the parties if you would, Mr Rayment?

MR RAYMENT: Yes, your Honour. Under the original bills of lading, shipper was NEAT, notify party, Swiss, Royal not mentioned.

GUMMOW J: Do we have the bills?

MR RAYMENT: Yes. In just a moment, I will give your Honour a reference to them, but under the later bills, shipper completely different company, that is Swiss, notify party, Royal. So Swiss could have caused them to be – the bills in their cancelled form appear at volume 18, page 3969. That is a good example. So your Honour sees there a document called “Austwheat Bill” in which the shipper is NEAT, consigned “TO ORDER” as were these later bills. Notify address “SWISS SINGAPORE”. Swiss Singapore, at least, were the financiers of Royal. Perhaps they were in a larger capacity. The loss was suffered, may I point this out, ultimately because Swiss said that they did not consent to the delivery to Royal, that PCL had delivered without the consent of Swiss. Now, looking still at the document at page 3969 that is cancelled and there is a whole series of these which are cancelled - - -

GUMMOW J: What does “cancel” mean in this kind of discourse?

MR RAYMENT: It is withdrawn, in effect, as an instrument, your Honour.

GLEESON CJ: Well, it says it “has no continuing contractual force”, according to the stamp on it that is recording the endorsement.

MR RAYMENT: That is right. The question arising under this - - -

GUMMOW J: Who has the legal authority to cancel, on what reason?

MR RAYMENT: Well, it is an instrument under which the primary liability is on the shipowner. It is his bill of lading, he carries the goods, so it certainly has to be done with his consent. It probably could not be done without the consent, one would think, of the shipper, unless it had been endorsed.

GLEESON CJ: It is the master, is it not? This document peters out at the bottom of page 3969. I cannot read everything that is down in the bottom right-hand corner, but it is the agent for the master who issued this bill of lading.

MR RAYMENT: Yes, that is right.

GLEESON CJ: And Bolton Navigation SA were the owners of the vessel.

MR RAYMENT: Yes, and they do this at the request of the appellant. The agents who do it are the agents for both of them.

GLEESON CJ: I presume the master is the employee of Bolton Navigation.

GUMMOW J: Well, it was a time chart.

MR RAYMENT: Yes, this being a time chart. The new bills in volume 8 - - -

GUMMOW J: There is nothing in the 1924 statute about cancellation, is there? The Sea Carriage of Goods Act 1924?

MR RAYMENT: I would like to check it, but I do not remember anything.

GUMMOW J: I think it should be checked, yes.

MR RAYMENT: Volume 5, page 888, shows your Honours the new bills. Your Honours see the shippers are Swiss and signed an order and the notify address is Royal. So entirely new bills, in which the shipper is no longer NEAT, were issued.

GLEESON CJ: But the complaint is that the goods were delivered to Royal.

MR RAYMENT: Finally, the complaint is that the goods were delivered to Royal.

GLEESON CJ: And these were the current bills of lading?

MR RAYMENT: These were the bills of lading pursuant to which the delivery happened. In other words, we are being sued on a letter of indemnity which was issued for an earlier version of bills of lading which were cancelled prior to reliance. In our submission, you read these letters of indemnity against the promisor. They plainly refer on their face to particular bills of lading with particular number, and they were no longer relevant instruments of commerce at the time of delivery, so they have no application to this matter.

GLEESON CJ: What did the Court of Appeal have to say about this?

MR RAYMENT: The Court of Appeal, I think I am right in saying, said nothing about it, because they reached a similar result.

GLEESON CJ: They did not need to - - -

MR RAYMENT: Perhaps they did not need to.

GUMMOW J: Anyhow, there is a different shipper, you say. The Swiss people took over and became the shipper.

MR RAYMENT: Yes.

GLEESON CJ: What did Mr Justice Hunter say about it?

MR RAYMENT: It is paragraph 422 of his judgment. He said in paragraph 422, in substance - - -

GLEESON CJ: What page is this?

HEYDON J: Page 4556, volume 20.

MR RAYMENT: It is said that the construction for which we contend, namely, that you read it strictly, about certain rules of lading, would lead to an absurdity:

Given the knowledge of Pacific and of NEAT . . . that the initial bills would be cancelled and switched bills issued –

Now, that does not mean that the letters of indemnity do not mean exactly what they say unless and until such an event occurs. It would mean, in our submission, not that there was any absurdity involved in the matter, but merely that the utility of the document may be of limited duration.

GLEESON CJ: But the whole purpose of the letter of indemnity was to deal with the situation in which the goods were delivered not in response to the original bills of lading.

MR RAYMENT: Yes.

GLEESON CJ: The contemplation was not that they would be delivered to some stranger but that they would be delivered pursuant to some commercial practice which was to be adopted in substitution for delivery in accordance with the original bills of lading, was it not?

MR RAYMENT: Yes. The contemplation was that there would be delivery without the production of the original bills of lading.

GLEESON CJ: Yes, but not, as it were, reckless delivery without the production of the original bills of lading.

MR RAYMENT: No. What should have happened actually is that they should have gone into bond. One of the questions that his Honour Justice Hunter asked himself is why did they not, and says that he has never been told why they did not. It was only an urgency to get them off the vessel. If they had gone into bond - - -

GLEESON CJ: Because of the demurrage threat flapping around in the background.

MR RAYMENT: Yes. If they had gone into bond, we would have never been here, any of us.

GLEESON CJ: Why not?

MR RAYMENT: Because in bond they would not have been then delivered without the consent of Swiss.

CALLINAN J: Justice Hunter found at page 4563 that the risk was the same – the top of the page in paragraph 428.

MR RAYMENT: Yes, he found that the risk was the same whether NEAT or Swiss was the shipper, your Honour is right about that, and I am not seeking to - - -

CALLINAN J: But he says that is so be they the initial bills or switched bills.

MR RAYMENT: Yes, that is all correct. Nevertheless, on the proper construction of the instrument, we submit it ceases to apply at all once the bills of lading are cancelled. In order to make my client liable for delivery without later forms of bill of lading, assuming we are a promisor, you need either an amendment agreed to the document or a new document. If you are going to construe it strictly, in our submission, that is the consequence.

Your Honours, I think I said yesterday that, in our submission, no question of vicarious liability arose at this trial on the pleadings. That is our submission. It is apparent both from the judgments below and from pleadings in the case that that is so, in our submission. The only question in the case was one of actual or ostensible authority at the contract level. Those are our submissions, if it please your Honours.

GLEESON CJ: Thank you, Mr Rayment. Yes, Mr Jackson.

MR JACKSON: Your Honours, may I deal first with the aspect last dealt with by our learned friend, that is the question of whether the bills of lading were spent. In that regard, your Honours, our submission is that the respondent’s contention should not be accepted, and it does face an initial difficulty, in our submission. The initial difficulty is that it was not found by the trial judge only that NEAT and the appellant were aware that the bills were to be switched, but that before the issue of the first letter of indemnity, it was known by the respondent that the bills of lading were to be bills of lading which were switched.

Now, your Honours will find that aspect referred to by the primary judge in volume 20 at page 4552, paragraph 411, and your Honours will see reference to the date there, and that observation is adverted to also by the Court of Appeal at volume 21 page 4749 paragraph 30. So the situation in which the letters of indemnity were executed was a situation in which it was known that, to the extent to which the precise identity of the bills of lading might be germane, that the bills of lading, the lack of presentation of which was to be the occasion for the delivery of the cargo, would or may not be the bills of lading that were specifically identified in the document. That is the first thing, your Honours.

I will come to the construction of the documents in just a moment, if I may, but one sees also the passages referred to by our learned friends first of all, at paragraphs 418 through to 422. Your Honours will see particularly paragraph 420, at page 4556, where his Honour referred to clause 4 of the letters of indemnity and said, and in our submission correctly, that:

delivery up of the initial bills in terms of cl 4 contemplated a delivery for the purposes of discharge –

It was not in circumstances:

where the initial bills were given to . . . cancellation in the process of switching –

Thirdly, your Honours, we would refer to the passage to which your Honour Justice Callinan drew attention at page 4563 at the top of the page, where your Honours will see that his Honour took the view, again in our submission correctly, that the risk was unaltered.

Having said that, your Honours, may I come to the terms of the letters of indemnity in the back of volume 21, because what one sees is that the letters of indemnity are designed to deal with the situation where no bill of lading is produced. Could I, in that regard, your Honours, go to page 4808. What your Honours will see - - -

GUMMOW J: There it is, “without production of the original Bill”.

MR JACKSON: Yes, your Honour.

GUMMOW J: Without production of any bill.

MR JACKSON: Any, originals, copies, ones that by some curious mistake have been only verified or anything, I mean by someone or anything of that kind. Your Honours, that is essentially what it is. It is a document which provides an indemnity for delivering goods without the production of, to put it loosely - - -

GUMMOW J: That was the whole purpose of the instrument.

MR JACKSON: Yes, and, your Honours, that, to put it shortly, is the submission that we would make in relation to it as a matter of construction, but secondly, if one looks at it from the other point of view, assume that as a matter of construction, it would have a different operation, it would seem very difficult to apply that construction in favour of the respondent in circumstances where it knew at the time of issue of the documents, that the documents could not have an operation according to their terms. In those circumstances, your Honours, we would submit it would be a case where it would be inappropriate for them to be estopped from relying upon that point. Your Honours, that is the submission I wish to make - - -

GLEESON CJ: Just how does clause 4 operate in relation to this instrument?

MR JACKSON: Your Honour, in relation to the document, one sees it is addressed to Pacific Carriers. Now, Pacific Carriers is the carrier which has the ship, of course. In the ordinary course of events, it would have – when I say, in the ordinary course of events, in the most common situation, it would have delivered to it at the port of discharge, bills of lading, and by virtue of receipt of the bills of lading, would then discharge the cargo. The circumstance in which it is entitled to discharge the cargo, pursuant to the letter of indemnity, is that the letter of indemnity is given and then there is an entitlement to discharge it.

GLEESON CJ: Is this the sort of document that would ordinarily be produced by someone who was claiming delivery of the goods to him?

MR JACKSON: Yes. Your Honours will see then that clause 4 says that:

As soon as all original bills of lading . . . shall have come into our possession –

then it takes operation from the opening words at page 4808, line 15, “we hereby agree”, as it were:

to produce and deliver the same to you whereby our liability hereunder shall cease.

So their liability under the indemnity comes to an end at a point where the cargo having been delivered, the bills of lading covering it are produced to the person to whom the indemnity is given.

GLEESON CJ: This document would normally be required to be signed, and perhaps endorsed, by a consignee or a purchaser from a consignee, who turned up at the wharf and said, “I am entitled to delivery of those goods”, and the carrier says, “Where is your bill of lading?” Answer, “I have not got one, but I will indemnify you if you deliver the goods to me, and in due course, when I come into possession of the bills of lading, I will hand them over and my liability will come to an end”.

MR JACKSON: Your Honour, if one looks at the situation, a difficulty that has always existed in relation to bills of lading is that if one took the days before there were aircraft, the situation which would obtain would be that assuming one put the bills of lading, issued to the consignor, at the place of loading, on the fast clipper, as it were, they would or would not get there before the vessel carrying the cargo.

If they got there before the vessel carrying the cargo, as ordinarily would be the designed thing – let us assume they were mailed, for example, and the mail ship went faster than the cargo ship, they would be there and produced but, of course, in the course of trade, both in those days and now, not everyone who is to receive and pay for goods, and sometimes not every person consigning them, is in the position where they have cash-in-hand to pay for the goods with making no prior arrangements with banks. That means that banks will want to see, for example, bills of lading, to identify the fact that the cargo has been loaded and things of that kind and so there is a possibility that the bills of lading will not be there before the ship, or that they will be there but not able to be given physically. Those are the kinds of circumstances in which one sees documents of this kind coming into being.

GLEESON CJ: Also if the consignee of the cargo is a trader and is on selling the goods.

MR JACKSON: Yes, and getting money from the people to whom they are on sold, usually one would expect at a profit, but perhaps sometimes to avoid loss. But what would often happen, one would think, your Honours, if I could just say one more thing about it, is that the unloading of cargo does not always finish in one day. Even with a more enthusiastic waterfront, perhaps, than may have been the case in the past, unloading of cargo does not always finish quickly. A very likely thing is that bills of lading will arrive during the course of discharge, and that is a situation to which clause 4 would have an obvious operation.

GLEESON CJ: And does splitting and switching of bills of lading always involve cancelling the original?

MR JACKSON: Well, it depends, your Honour, I suppose, on how many bills of lading, but on the one hand, in the ordinary course of events, your Honour, one would expect that where there would be some alteration of the parties to it that at least there would have to be some change, whether it be cancellation de facto, your Honour, or perhaps de jure you could say. I suspect it always would, your Honour, as a practical matter. But the situation, of course, in relation to them is that the course of trade will vary from place to place. Your Honours saw the evidence I referred to yesterday about the situation in Asia.

Your Honours, could I move then to a number of matters arising from our learned friend’s submissions. The first matter I wanted to deal to with was the question of the pleading of estoppel. It does not only appear in the reply. If I could go to volume 1, and to page 10, paragraph 24 – this is the initiating document – your Honours will see the parties on page 1 and where the plaintiff, the respondent, is the first defendant and paragraph 24 on page 10 alleges the various representations that were made.

Your Honours, in relation to – your Honours, I am sorry, I thought I had the reference but I have not. I was going to say, your Honours, that one sees then at page 21, paragraph 3 there is an answer to paragraphs 4 and 14 and then at page 30 one sees paragraphs 6 and 7 and 8 being - I think I misled your Honours before. I think, in fact, the actual word “estoppel” first appears in the reply, paragraphs 6, 7 and 8 and paragraphs 2 to 4. Then one sees also the references at the rest of page 30 to which I referred and also paragraphs 11 and 12 on page 31. That seems to be the way in which the issue arose.

Your Honours, as to the affixation of the stamp, could I take your Honours for a moment to volume 2, page 270. Now, your Honours, will see Mr Ryan, the State manager, being asked at about line 20:

I think you are aware that on the original version that was kept within the bank file there was a chop that appeared beside Miss Dhiri’s name on that letter of indemnity, do you recall that or not?
A. Yes, I recall.

Your Honours will see the passage going through to about line 30 and the reference to “Banker’s signature” where he agreed that it:

would ordinarily convey to a commercial person that the bank is signing the document in its capacity as a bank, correct?
A. Yes.

Q. So far as the chop is concerned that was used by Miss Dhiri, is that one which is kept in the letters of credit – is “LC” letters of credit, is that what it stands for?

Your Honours will see the passage goes through to about line 42, where it was agreed:

it was one which was kept available for employees of BNP to use on documents to identify the bank as being the one which that person was acting on behalf of, correct?

Hardly surprisingly, your Honour, that is where some evidence is about it.

Your Honours, concerning the fact that the document was faxed, there is no doubt about the fact that it was intended to be the document to be operated on. That was what was asked to be given, of course, the faxed copy. Your Honours will see that referred to in the letter which is at volume 14, page 3160 and it is also the same document referred to in the Court of Appeal’s reasons, volume 21, page 4750, paragraph 32. Your Honours will see that the document that is asked for is:

If possible would like to get LOI fax signed and returned to shipowners agents by this afternoon/tomorrow morning.

So, whatever might be the situation that most commonly happens, the short fact was that was being sought were these documents in quickly and faxed copies were being sought. Now, your Honours - - -

GLEESON CJ: Just remind me what the facts were about the line of communication between NEAT and the bank in relation to this transaction? NEAT communicated with whom?

MR JACKSON: NEAT communicated with Ms Dhiri. It communicated, if I could say so, your Honour, with the bank. The person to whom its faxes of the bank were addressed were Ms Dhiri. The person who had responsibility for customer relations, as it were, with them was Mr Kavanagh.

GLEESON CJ: But Ms Dhiri was the addressee of the letters?

MR JACKSON: Yes, may I just say one qualification. I am not certain that every letter had her name on it but she was the person to whom they came.

GLEESON CJ: Now, what was Ms Dhiri’s position with the bank?

MR JACKSON: May I take your Honour to that now. Could I take your Honours very briefly to some passages in the evidence which show her position, not only itself but in relation to the other two people. Now, our learned friend suggested yesterday at the start of their argument that she was a rather lowly person, really almost fortunate to be allowed to do something like verifying signatures. Your Honours, she was actually the manager of what was the documentary credit department. She had become manager of that in about June 1997 and you can see that from volume 2, page 313, about line 43. It is the last question and answer on the page.

I say about June 1997, because you will see the date – evidence being given on the bottom of the page was June 2000, that is, as of that date, saying about three years. Now, she had been working, as you will see at the top of the next page, for the bank for about eight and a half years, in the Sydney office. The department, as you will see at page 314, about line 10, whilst not large, had five people including herself. Not large, perhaps, but hardly miniscule. She was, for example, the supervisor of Mr Arndell, who was the other signatory to the earlier letter of indemnity. You will see Mr Arndell’s evidence – I do not need to take your Honours to it – at volume 5, page 1040.

Ms Dhiri’s description of her duties appears in volume 5 at page 1022. You will see in paragraphs 1 and 2 the evidence of her description and the things that her duties included, supervising those three subject matters. Mr Kavanagh, your Honours, was her superior. That appears in volume 2 at page 372, in a passage which commences at about line 34 and goes through to page 373, about line 9. In that passage he says that he was her superior, he was in a position to give instructions relating to the customer, and, as you will see from the bottom of the page, that was the position at the relevant time.

GLEESON CJ: What was his title?

MR JACKSON: Accounts manager in the corporate department, your Honour. The passage goes through to the top of page 373, and at about line 9 he said:

I was the relationship manager, yes.

and what that meant, what he is acceding to, appears a little from the question as well. Now, the fact that he was the account manager for NEAT is stated by him also at volume 10, page 2126, where in his affidavit your Honours will see in paragraphs 1 and 2 that he refers to his experience and to the position which he held in the bank vis-à-vis NEAT at the relevant time.

Now, could I say that both those persons were subordinates, again, of Mr Ryan, the State manager. May I indicate to your Honours where your Honours will find Mr Ryan’s understanding of the relativities as between Mr Kavanagh and Ms Dhiri. That can be see in volume 2 at page 273, in the passage which commences about line 12 and goes through to about line 38 on the page.

Now, if I could pause while your Honours have volume 2 and say just this, that Mr Kavanagh’s evidence on this issue appears in volume 2 at page 361. At about line 37 on page 361 going through to the top of the next page, one sees his statement of what he was doing and then at page 369 at about line 50 he referred to the fact that he had overall responsibility for Ms Dhiri’s area.

HAYNE J: Sorry, which line?

MR JACKSON: I am sorry, your Honour, I think I may have said line 50. I should have said line 35 to 40.

HAYNE J: Thank you.

MR JACKSON: I took your Honours yesterday to pages 382 to 383 which reflected the fact that she had obvious status in the fact that he said she was manager of that section, how she did it was a matter for her to choose – and she was head of that section and how she did it was a matter for her to choose.

GLEESON CJ: What was the evidence as to what the documentary credit department did?

MR JACKSON: Your Honour, the closest are really two passages. One is a passage I think I took your Honours to a moment ago at volume 5, page 1022, which is paragraph 2, I think, of Ms Dhiri’s affidavit in which she describes her duties. It is where she said that her duties included supervising three things:

(a) the day-to-day handling of import/export letters of credit;

(b) the day-to-day handling of import/export collections;

(c) the staff of the Documentary Credits Department.

Your Honours, I was going to say in relation to that also that if one goes, remaining with volume 2 for the moment, to page 267, to Mr Ryan’s evidence, at about line 35, he added to that a little by agreeing at line 40 to the question that that department was:

a department that holds itself out as being experienced and expert in trade and the provision of finance and execution of documents relevant to international trade - - -

CALLINAN J: It is entirely a matter for the bank how it chooses to allocate the duties. How can an outsider know?

MR JACKSON: Indeed, your Honour, and one does have a situation, of course – and this happened to Mr Kavanagh, that, as his oral evidence demonstrated, he had been in another section of the bank, then he is moved over. Now, it is hardly very surprising if, when you have circumstances such as the fact that, if one looks at it first of all from a point of view of NEAT, that you have NEAT dealing with Ms Dhiri in the letters of credit department. They then speak to her about and deal with her in relation to something intimately connected with it, in the sense of getting letters of indemnity in respect of the cargo, the sale of which is going to get some money out of the letters of credit, and in relation to that they are saying, “What is happening to the money coming through from the Bangkok Bank?” They are dealing with her and she says, “We can’t give you these until we have the money”.

CALLINAN J: Why? Is documentary letter of credit a term of art?

MR JACKSON: Your Honour, I think the answer is yes and no. I put it that way because within some areas of trade, and maybe even things like the sale and leasing of aircraft and matters of that kind, there are documents which appear to be in common use and one would expect to be understood as letters of credit. Once one gets into other areas, construction and matters of that kind, perhaps not quite so.

GLEESON CJ: But the usual function of a letter of credit is that it produces payment according to its terms, that is, the terms of the letter of credit, as distinct from the terms of some complicated contract that will never be known to the third party.

MR JACKSON: Yes, that is so, your Honour. The letter of credit is one which allows the money to be drawn if certain events occur, or do not occur sometimes.

GUMMOW J: Justice Callinan points out to me that Mr Ryan agreed that it was not best practice for the bank to put out this instrument with its stamp on without some specification of the verification; in other words, that this is all that it was.

MR JACKSON: Yes, that is so, your Honour.

GUMMOW J: That is at the top of page 260.

CALLINAN J: Mr Jackson, at page 259, Mr Ryan said, at about line 34, in answer to a question:

Q. Assuming that the bank knew that it was a document going to a third party; would you agree that the execution of the document by the bank without any qualifying endorsement offered some form of assurance to that third party?

The answer was:

THE WITNESS: I would say, my answer would be yes for an original document, signed original.

Then he tried to take refuge in the fact that it was faxed. It seems to me that unless his point, that the fact that it was faxed makes a difference, is a good one, unless that is good point, then that is a very, very damaging answer for the respondent.

MR JACKSON: Indeed, your Honour. I was going to mention that passage to your Honours a little later, but that is the circumstance. I was taking your Honours for a moment to the passage that I was just at before to indicate the position as between NEAT and – but when one comes to the situation as between us and the bank, what you do have is the answer to which your Honour has just referred. One has the fact also that it is said the bank held out this department as being a body of that kind and then you had the fact that the bank was asked to send these things in as faxes. They sent them as faxes knowing the circumstances and, your Honours, there is no suggestion that they are not genuine, whatever they may mean.

CALLINAN J: The answer to the qualification to the answer is then that the bank was expressly asked to send these by fax?

MR JACKSON: Yes, they did. That is what they were for, and whatever their consequence, they are genuine. Your Honours, could I - - -

GLEESON CJ: Is there anything in the corporations legislation that has any bearing on this question of ostensible authority?

MR JACKSON: Your Honour, I think the answer is no, but may I respond to that in our response to our learned friend’s submissions?

GLEESON CJ: Yes.

HAYNE J: It is Part 2B.2, sections 128 and following. It would seem to me that if anything has anything to do with this subject – and it may not – it would be 129(3):

A person may assume that anyone who is held out by the company –

there is that question of “held out by the company” again –

to be an officer or agent of the company:

(a) has been duly appointed; and
(b) has authority –

et cetera.

MR JACKSON: Yes. Your Honour, that carries within itself the questions, of course.

HAYNE J: Just so.

MR JACKSON: Of course, those provisions of the Corporations Act at relevant times would not have been in force as the Act. I would just like to check that they are the same as the Corporations Law.

HAYNE J: Back into the law?

MR JACKSON: Yes, provisions that were in force at relevant times. Your Honours, I was about to take your Honours to one further reference in relation to the relativities of the bank, and if I could take your Honour to what Mr Ryan said about his responsibilities, that was in volume 8, at page 1561, and your Honours will see that set out in paragraphs 2 and 3 and he deals with the position of the operations department in paragraph 3, which includes the documentary credit/trade finance department and the guarantee/loans administration department, both part of the overseas department.

Your Honours, could I say in relation to verification, it was obviously something that did not happen, as a regular event, but the evidence was there was no accepted practice about it at the bank. You will see that, your Honours, in volume 2 again, Mr Ryan’s evidence, and if I can give your Honours three references – page 254, commencing at about line 36 and it is a passage that goes through to page 255, about line 29, you will see that at the bottom of page 254 he said there was:

no written instruction . . . identifying that difference in departments for the purpose of authority to sign letters of indemnity -

Your Honours, that is dealt with through the early part of page 255 and then, about line 28 on page 255:

In January/February 1999 –

he agreed there was no –

accepted practice within BNP as to the manner in which verification of a document for external use was to be carried out -

At page 256, your Honours, lines 15 to 25, a new practice was entered into and he agreed – sorry, to go back to what Your Honour Justice Callinan was putting to me a moment ago at about line 22, that:

in relation to the verification of external documents it was imprudent of BNP not to have in place such a practice prior to March 1999 -

Finally, your Honours, at page 262, a passage I think I took your Honours to yesterday, commencing at about line 20 going through to about line 10 on page 263. Your Honours, it was not only Mr Ryan who recognised the possibility that the signature, without some qualification, might be misleading. Mr Kavanagh’s evidence was to the same effect – at page 401 in volume 2, lines 5 to about 21, and in particular, your Honours, the answer which your Honours will see about line 13:

it may have if the circumstances under which it was signed were not conveyed to the person receiving it.

HAYNE J: What may be thought to lie behind answers of the kind given is an unstated premise that people in commerce would expect banks to regulate the way in which instruments are to be signed, stamped, put into the market, and that the regulation that they might ordinarily expect would extend to making plain beyond doubt if the bank’s role is limited, but is that to read too much into these answers?

MR JACKSON: No it is not, your Honour. Really, one sees effectively two things, in our submission, two underlying notions that are contained in that: one to the effect that your Honour was saying, but the other is that documents of this kind are not only documents that one would recognise as being from banks, but documents that are to be acted on as having some effect; beyond them being merely administrative matters.

Your Honours, one of the things, again, to the point your Honour just put to me, was this. There is today, of course, a proliferation of schemes which come through on the Internet, people endeavouring to pretend to be banks, and one of the reasons why you might think they do so, apart from the desire to augment their funds at the expense of others, is because banks are treated as people who do not likely lend their names to things that are likely to induce people to deal with money. I am not talking about advertisements, but matters of the kind to which I have referred.

Your Honours, could I come to the contention - again, part of the contention made by our learned friends at a relatively early part of their argument yesterday, that Ms Dhiri really, in effect, did nothing, there was not the proper verification even. Your Honours, that does seem inconsistent with the letter of 8 April 1999, which the bank sent – in volume 8, page 1585, in particular, paragraphs 2 and 4, where it is said in the second line of paragraph 2:

BNP has verified the signatures on these LOI’s via fax copy received from our client and returned to them by fax.

So no worry about being a fax there, and then paragraph 4:

It would appear that your client has misconstrued the role of BNP in verifying signatures.

The other thing, your Honours, is the pleading in volume 1, page 21, paragraph 5, about line 24, where you have the bank admitting that:

by her counter-signature the bank verified the signatures of Mr Sniekers and Mr Howard –

Now, your Honours, it is a trivial point really, but our learned friend’s argument at the start seems to diminish (a) the role of Ms Dhiri, and (b) what she did. Neither of those is, in our submission, correct.

Your Honours, could I come then to an aspect of our learned friend’s argument which said that Mr Tan did not even know who to contact at the bank, and that was said to indicate precisely what, with respect, is not entirely clear. It is correct to say that in response to a question on a different topic that Mr Tan, volume 1 at page 207, about line 15, and your Honours will see he was asked – in relation to his having told the bank that the bills of lading were to be switched, he said:

Well, we don’t even know who to contact if we wanted to but in any case we have arranged the replacement only against the production of the first original bills of lading in return.

Your Honours, the question arises about why was there any need to contact the bank. It seems clear that in fact Mr Tan and Mr Chua – Mr Tan being the more superior – did satisfy themselves as to the letters of indemnity. You will see that from Mr Tan’s evidence in volume 7 at page 1526. Could I just say, both Mr Tan and Mr Chua were people of considerable experience in the trade, and I will take your Honours to their experience in just a moment. If one looks at paragraph 5 on page 1526, you will see that he said:

I received a copy of the first letter of indemnity . . . I examined the endorsement by BNP and I was satisfied that BNP had accepted liability as a party to the letter of indemnity. I formed this view based on the words –

he sets out there. I will not read that out, but your Honours will see what he said about that, and then he says the same thing about the second letter of indemnity, at the top of the next page and also in paragraph 6.

GUMMOW J: Any cross-examination on this?

MR JACKSON: I think the answer is no, your Honour. If I am in error about that we will put it in the note, but I think the answer I have given is correct. Mr Chua’s evidence is in the same volume at page 1517. Could I just say, his experience is set out at page 1515. He had been the chartering manager for the Australian Wheat Board for 12 years before that and he had worked with London brokers, ship operators and managers. He had been an apprentice and himself had a first officer’s qualifications. So he is an experienced man. He said, your Honours, in paragraph 4:

With a ship on voyage charter it is quite normal for there to be problems with the bills of lading.

He spoke of his experience at the Wheat Board and then said:

It is not uncommon for the bills of lading to be caught up in the banking system and for letters of indemnity to be used for release of cargo to a particular entity without surrender of the original bills of lading.

He spoke of that, spoke of his experience, and said:

I use the standard form recommended and used by the P&I Club for PCL. I am also familiar from my experience at the Australian Wheat Board and PCL with bills of lading being surrendered and substituted as well as being split.

Then, your Honours, one goes to paragraph 10 at page 1517. I will not read it out, but your Honours will see that he took the view – it is also in paragraph 11 – that he accepted the letters as being duly endorsed by the bank; he would not have accepted them if they had deleted the name. And it is otherwise self-explanatory.

One bears in mind, each letter of indemnity does not just have a stamp on it, it does not just have Ms Dhiri’s inscription. It has also above that the bank’s printed name, the bank’s address is there, and below that one sees the signature and the stamp.

HAYNE J: He said that he would not have acted without the stamp; see 1518, line 6 and following. Was that challenged?

MR JACKSON: I think not, again, your Honour.

GLEESON CJ: Mr Jackson, the critical part of the reasoning of the Court of Appeal is from paragraph 83 onwards and essentially it was that the only relevant holding up of Ms Dhiri in this case was by herself, and according to orthodox principles, that is not sufficient. Do any of the cases on ostensible authority deal with the sort of problem that arises where what has occurred to give rise to the problem is an honest mistake on the part of the company officer who signed the document about the meaning of the document?

To get slightly away from the facts of the present case, suppose the Western Australian branch manager of a company signs a contract in the mistaken belief that because it only commits the company to a certain kind of liability it is within his authority, whereas the document on its true construction commits the company to a much more extensive form of liability which is only within the authority of the general manager, but the person dealing with the company deals with the Western Australian branch manager and for his part assumes that the document means what it really means and therefore assumes that the Western Australian branch manager had the authority to enter into that contract.

MR JACKSON: Well, your Honour, if we had been able to find a case to that effect, we would have given it to your Honours.

GLEESON CJ: That is the essence of the problem that arises in the present case, is it not?

MR JACKSON: That is it, your Honour, and that is why one is not really in the class of cases where one can describe what was done as wholly unauthorised. That takes it out of that class of case in a sense, in our submission. But, your Honour, could I just a couple of things about what your Honour has put to me. One is the circumstance that most often, of course, the reason why one does not see cases along those lines is that most companies wear it. The difficult question is whether the manager who did it will be, if there is to be litigation of the other side, obliged to pursue other interests, as it were, before or after the trial.

One of the reasons why, your Honours, one does not see that kind of thing is because, if one goes to, for example – it very frequently will happen that if that has occurred it is because of some negligence on the part of the company in not giving proper directions or on the part perhaps of the manager in acting.

One sees, your Honours, in the statement of circumstances in which there may be an estoppel referred to in Thompson v Palmer [1933] HCA 61; 49 CLR 507 – if I can just give your Honours a reference to page 547, in Sir Owen Dixon’s statement of the applicable principles – one of the circumstances in which the party in the case your Honour is positing to me, the employer, would be bound is set out in this way. If one goes to point 4 on the page, it is said:

He may be required to abide by the assumption because it formed the conventional basis . . . or because he has exercised against the other party rights . . . or because knowing the mistake the other laboured under, he refrained from correcting him . . . or because his imprudence, where care was required of him, was a proximate cause of the other party’s adopting and acting upon the faith of the assumption –

Now, frequently the cases of the class your Honour has referred me to are the ones where there is imprudence and that is a class of cases which would very often - - -

GLEESON CJ: As I mentioned to you yesterday, I have at the moment a large problem if the only holding out came from Ms Dhiri herself. But Mr Kavanagh evidently knew that she was going to sign that document before she signed it and that it was going to be communicated to your client.

MR JACKSON: Your Honour, the - - -

GLEESON CJ: He, evidently, made an honest mistake about what the document meant, if you are right on the construction argument.

MR JACKSON: Yes, your Honour, he made a mistake about it. He did not devote too much attention to it, but he made a mistake about it, and assumedly so did Ms Dhiri. But one is dealing in a situation where one has correspondence and a request addressed to the bank. Now, the bank, your Honour, does not just consist of Ms Dhiri. Ms Dhiri is the person who deals with persons outside, but what she does is then take this to a superior officer who says, “Yes, sign it” and leaves it to her to choose the way in which she is going to sign it, and it is known that this document will go out and he is the person who within the bank is superior to her and dealing with the person seeking it.

Now, your Honour, so far as we are concerned, we have requested that there be a document from a bank given to us. The document comes in the ordinary way. It is authorised to be given within the bank. Of course it is not authority if it has a particular operation, but it comes to us in that way. Your Honour, it does not really require much holding out apart from the nature of the transaction.

GLEESON CJ: Now, the point on which you came to grief in the Court of Appeal on this issue, as I understand the reasoning, is that they said here there is no conduct, or no relevant conduct, on the part of anybody else except Ms Dhiri, and that is just not good enough.

MR JACKSON: Your Honour, what that does suffer from, in our submission, is that, apart from the possible participation of Mr Kavanagh, it leaves out of account entirely, in my submission – and this is where, we would submit, if it be necessary to do so, that the categories described in Freeman v Lockyer do not perhaps go quite far enough – I will come back to that in a moment if I may – because what the judgment in the Court of Appeal really does not give sufficient weight to is that whilst it may be that it is Ms Dhiri – and one assumes alone for the moment – signing the document and giving it out, you cannot leave out of account the fact that what Ms Dhiri does have authority to do is to do that very thing.

What the absence of authority relates to is not the act of doing those things. She has perfect authority to do it; specific authority in the case of the first one. But what it is said she does not have authority to do is to give the document in that way, if the true consequence of it is that it amounts to an indemnity. Now, your Honours, one can say that is putting it from our point of view, but it is a document which it is known will go out. It is a document which it is known will be acted on. In circumstances of that kind, where there is actual authority to send out the document, there is not any reason, in our submission, why sending it out in the ordinary way of commerce should not be treated as conveying apparent authority to execute the document on behalf of the bank, with the document having the construction that, to put it shortly, is its true construction.

GUMMOW J: What is the significance – can you look at 1516, which is in volume 7, about lines 30 to 40. There seems to have been an earlier transaction in which there was a provision of a letter, which appears at 1520 and 1521. That seems to have gone through without any problem, but Mr Chua, he is saying, “Well, that is how I thought they did business. That is what I thought it was, and it happened before”.

MR JACKSON: Yes, the only difference, your Honour, is that - - -

GUMMOW J: It has two signatures.

MR JACKSON: Two signatures rather than one.

GUMMOW J: Yes, but it is the stamp and the words signed “For and on Behalf of”.

CALLINAN J: Which is the same formula as the relevant LOIs. It occurs to me that verification is not done normally by a corporation, it is done by natural persons, and if you look at the form of the LOI it has “For and on Behalf of” the bank, and then it has “Banker’s signature” underneath that, and she has signed next to “Banker’s Signature”.

MR JACKSON: Yes. Your Honour, there is no doubt she was signing on behalf of the bank. There is no doubt about it.

CALLINAN J: But the appearance of the document - - -

MR JACKSON: Yes. Your Honour, it does not just say that. It says “Banque”, the address in Sydney, it has “Banker’s Signature”, it has “For and on Behalf of”, it has a signature which she had authority to put there, for whatever purpose, and it has this bank stamp which she had authority to put there.

CALLINAN J: Mr Jackson, what do you say about Mr Rayment’s last point, assuming the Court had to get to it, that vicarious liability was not part of the case? You have a pleading that the bank did things by its servants or agents, but that was never decided, was it, at either level? Is that right, Mr Jackson?

MR JACKSON: I am sorry, your Honour, I just did not catch what your Honour last put to me.

CALLINAN J: I beg your pardon. The issue of vicarious liability was not decided at first instance or on appeal, is that right?

MR JACKSON: I think that is so, your Honour, yes.

CALLINAN J: But it seems to me the pleading which we went to yesterday raised it. It said the bank by its servants or agents, and then pleaded some negligence. It seems to me to be probably sufficient to raise - - -

MR JACKSON: The nature of the case, your Honour, was in that regard that Ms - - -

CALLINAN J: I understand the nature of the case. I am just really concerned to know whether it was pleaded, and assume for present purposes that it is, is it a question of law, or is it a question of fact? What is our capacity to decide that, the matter not having being dealt with at either level before?

MR JACKSON: Well, your Honour, there is no dispute really about basic fact. It is a question of the legal complexion that we put upon them.

GLEESON CJ: There would have been a lot of ink wasted on the law about ostensible authority if you could get around it all simply by saying the company will be vicariously liable for the negligence of the agent who misrepresented his authority.

MR JACKSON: Well, your Honour, the position, of course, is if I can go back to the coherence of the law - if I can put it that way - and Sullivan v Moody observations about that in, for example, Sullivan v Moody. Your Honours, undoubtedly there has to be, but the law of negligence should not be treated, with respect, as being the poor relation who is lucky to have what may fall off the table of the other established causes of action - - -

GLEESON CJ: No, nobody thinks of it as that anymore.

MR JACKSON: Your Honour, it is, if I may say so, with respect, as established a cause of action on which a plaintiff is entitled to sit as any other. Indeed, if one goes to, for example, the Trade Practices Act provisions, of course, one has statute supervening and in relation to that, one really should not look at section 52 by reading it in, as it were, by other causes of action. Undoubtedly, they are - - -

GLEESON CJ: The great concern of all this law going back to Turquand’s Case has been to prevent the office boy being able to sell the head office. That is why the cases have insisted that the holding out cannot come from the employee himself. You have to have the employee being held out by the company as having authority to do what he has done. Now, if the employee’s holding out of himself is insufficient to bind the company contractually, if vicarious liability could end up producing the same practical consequence through the law of negligence, you can forget about the rest of it.

MR JACKSON: Your Honour, if one goes back to, say, the observations of Mr Justice Willes that were picked up in Kooragang and cases following that, they are not anything new and they reflect really a notion that in cases of negligence or, perhaps, some other torts, one will find that the employer is liable for the tortious conduct of the servant which takes place in circumstances within the course of employment, the obverse of that being not some wide area of exception, but really, and this is what picks up the office boy case, the cases where it is variously expressed, of course, usually in euphemisms, “frolic of his own”, or one sees Lord Millett, I think, had a different version of it, moonlighting, in the Dubai Case.

In relation to that, there is not a very large area that would not be the subject of liability on the part of an employer and that has been the case, your Honours, for a very long time, indeed, from a time before the time at which Lord Justice Diplock, as he then was, in the Freeman v Lockyer Case endeavoured to set out the various categories - - -

HAYNE J: Some of these issues – by no means all, of course – were looked at, I think, in the reasons of Justice Gummow and me in Lepore, the teachers case, and I think you will find there that there is reference to vicarious liability in cases where there is a holding out of authority. Now, as I understand it, if this is a path that is open and to be followed in this case, it would be necessary to qualify, perhaps do away with, any consideration of holding out. What would one substitute for it in understanding “course of employment” in this sort of context?

MR JACKSON: Your Honour, one has to look at it from a number of points of view, but a point of view that gives, in effect, focus to the case is that one is dealing with obligations undertaken in relation to third parties who are not likely to have any knowledge of the way in which the institution with which they are dealing is constituted and how authority is distributed amongst the persons who are employees. One starts from those circumstances.

The next thing, I suppose, is then to ask: is the person who has purported to act on the bank a person who, in fact, has some relationship with the bank? Now, the relationship may be one of employee in the strict sense; it may be one of agent and, in days when more people work through their own companies or part-time and so on, there may be other differences. But fundamentally it would come down to the question whether the person has a relationship, the consequence of which is that they have some authority to act on behalf of the employer.

Now, one looks then – and this, we would submit, would be the next stage – at the nature of what is done. If what is done is something that appears to be entirely for the employee’s own benefit, then the question which would arise would be whether the employer would be bound to the third party. The conventional view, both in relation to negligence and it may well be in relation to some aspects of apparent authority, would be that that would not be something for which the employer would be liable and would not be liable really because it was outside the scope of any authority which one would expect might be conferred upon the employee. There may be some difficulty in the application of that in particular cases, of course.

Your Honours, one would then look, again looking at it from the point of view of the person who has relied on the assertion by the employee, to see whether the employee had authority to deal or communicate with the person whose reliance on it has been made. Now, at that point, when there is authority to deal, there would no doubt be some question of degree, but, prima facie at least, the employer should be bound, we would submit, by the dealings of the employee with the third party, leaving aside – I mean chopped off if one could – the bizarre cases as it were.

Your Honours, in relation to that, whilst one might need to refine it a little, they would in the ordinary course of events be the circumstances in which, if one takes two sides of the coin, the employer would be liable for the negligence of the employee on the one hand and on the other hand would be bound by the engagements into which the employee had entered on behalf of the employer.

CALLINAN J: Mr Jackson, in that passage I read out yesterday from Vabu [2001] HCA 44; 207 CLR 21 in the joint judgment, paragraph 42, page 40, there is a North American notion which seems to have been introduced into the Australian law, both Canadian and United States, of enterprise liability?

MR JACKSON: Your Honour, that passage which does appear in the reasons for judgment of five members of the Court says that:

In general, under contemporary Australian conditions, the conduct by the defendant of an enterprise in which persons are identified as representing that enterprise should carry an obligation to third persons to bear the costs of injury or damage to them which may fairly be said to be characteristic of the conduct of that enterprise.

CALLINAN J: Can you say that the “accident” as it were, of Ms Dhiri’s signing that document, looking at the last sentence, is an accident which may fairly be said to be characteristic of this bank’s banking activity?

MR JACKSON: The activity in which she was engaged, in executing a document, assuming it was a letter of indemnity in form, was one that was characteristic of activities into which the bank entered and your Honours can - - -

CALLINAN J: The question is whether the activity or the accident is what is supposed to be characteristic, but normally even people in the delivery business - you could not say that regular accidents are necessarily characteristic of the courier business? There may be a few, they may have some accidents, but it may not be characteristic of them.

MR JACKSON: One needs to keep one’s wits about one walking in the principal streets of the principal cities.

CALLINAN J: Whereas riding bicycles in a lot of traffic is characteristic of that activity.

MR JACKSON: Yes. Well, your Honour, could I say that this is a case, of course, where to issue these documents - this class of documents – was characteristic of the business of the bank, and the evidence of Mr Ryan demonstrated that he had been a banker for a long time. He spoke of, I think, 10 occasions on which he was aware, personally aware, indemnities had been given by the bank in circumstances of this kind. So, doing the thing is characteristic of the bank. Your Honours have seen from the various documents that it is a characteristic activity of banks to give these letters of indemnity, give them or refuse them.

HAYNE J: Can I just attempt to summarise what I understand to be your case about holding out. You fasten upon, one, the fact the bank sent the document to PCL?

MR JACKSON: Yes.

HAYNE J: Two, it being marked “For and on Behalf of” in the signature section; three, the stamp; four, the earlier dealing to which reference was made in the evidence. Is there any other aspect in the holding out?

MR JACKSON: There is, your Honour, and it is this. The document that is given is not a document which is not the bank’s document. I am putting that a little badly, but it is - - -

HAYNE J: No. It is to revert to this point that Ms Dhiri had the conversation with Kavanagh, in consequence of which she did what she did.

MR JACKSON: Yes. Your Honour, also she did have actual authority to execute the piece of paper, if I can - - -

GUMMOW J: There is also the question that in a way the bank by its admitted failure to set up a system to alleviate what it understood could well be a reasonable perception by the third party itself enabled her to hold herself out, if you like.

MR JACKSON: Yes.

GUMMOW J: The ordinary rule is, of course, the office boy cannot hold himself out, but here, as Sir Owen Dixon would say, there is an encouragement of an assumption by their own lack of, and understood lack of, internal structure.

MR JACKSON: Yes, your Honour. Could I just say in relation - - -

HAYNE J: In circumstances where signature, stamp “For and on Behalf of” were understood by persons experienced in the trade as conveying particular messages.

MR JACKSON: Yes. Could I just respond to one thing your Honour Justice Gummow just said, and it is in Tobin v Broadbent in the page to which your Honour referred, that is, 75 CLR 378 at 407. Now, your Honours will see that at about the third new paragraph on the page Justice Dixon said in paragraph (4):

Broad general grounds of estoppel are sometimes invoked such, for instance, as the rule of policy so often repeated, to the effect that, where one of two innocent parties may suffer, the loss should fall on him by whose indiscretion it has been occasioned.

He referred to his reasons in Thompson v Palmer and then posed two paragraphs further down that the question, which he answered by reference to the facts of the particular case:

Is it possible by adding further facts or combining all the circumstances of the case to place upon the plaintiffs the responsibility of having contributed to or assisted towards the adoption by the defendant of any such assumption?

That is a very short way of expressing a relevant test. Could I just give your Honours a reference in volume 2 at page 239, in the evidence of Mr Ryan as to these documents, the letters of indemnity. Your Honours will see at page 239, line 10, he was referred to one document. He said at about line 12:

that document as I understand it, is a standard format letter of indemnity required for a shipping company for an absent – as a guarantee for an absent bill of lading.

He was looking at their own formal document, I think. At about line 25, he said:

the format of this document has been in use for as long as I have been involved in documentary operations.

He referred to it, at about line 30, as being “one of the approved formats that the guarantee department can issue”. Your Honours will then see at about page 240, in a passage particularly at about lines 12 to 25, he refers to the fact that the documents count as:

security for the release of goods without the production of the - - -

GUMMOW J: Where does he say 10 times? He mentioned 10 times, 10 occasions, I think you mentioned a few minutes ago.

MR JACKSON: Yes, it is page 241, particularly about line 35, your Honour. The passage really goes over to about line 30 on the next page.

GUMMOW J: Thank you.

MR JACKSON: Your Honours, could I come then to the question of the construction of the - - -

HAYNE J: I am sorry, he had been involved in it 10 times, but the bank more widely would have issued a great number more, is that right?

MR JACKSON: Yes. Could I come then, your Honours, to the question of construction of the letters of indemnity and may I take your Honours to one at the back of volume 21. The strongest point, in a sense, of the respondent’s argument on this issue is that the letters of indemnity at the start of their operative text refer to NEAT as making the request, but, in our submission, the argument rises no higher. It does not really confront its weakest point, and its weakest point is that the bank in fact executes the document and it is difficult to see a very credible reason for doing so other than to be liable with the other party.

Our learned friends, in our submission, have not identified any very credible – if I could use the expression again – reason why the formal document might be executed by the bank if the bank was not to undertake an obligation under it similar to that of the other person executing it. Your Honours, one sees the nature of the obligation undertaken by indemnifiers under it and their very nature is such – and I have submitted this in passing yesterday – their very nature is such that one would expect the persons who have the benefit of the indemnity to want to be able to obtain, in effect, guaranteed money quickly.

GLEESON CJ: What is the operative provision of the document by which it imposes liability on the bank?

MR JACKSON: Well, your Honour, it imposes liability on the bank by reason of a combination of things. One aspect, if one looks at page 4809, is that you will see the signatories to it. If one goes backwards in the document, you will see at clause 5, “The liability of each and every person under this indemnity - - -

GLEESON CJ: But that all follows what appears at line 15:

In consideration . . . we hereby agree as follows –

and everything in 1, 2, 3, 4, 5, 6 and 7 is agreed by whoever “we” means.

MR JACKSON: Yes. Your Honour, “we” is a term that is capable of an ambulatory meaning, and what I mean by that is, if one goes to page 4807, you will see that at the bottom of page 4807 it says:

we [NEAT] hereby request you to give delivery of the said cargo to:

RECEIVERS –

and then it says:

In consideration of your complying with our above request –

presumably that refers to that earlier request - - -

GLEESON CJ: I am not saying this is impossible, but on your argument, “we” on page 4808, line 15 must mean something different from “we” on page 4807, line 43.

MR JACKSON: Well, it has a different operation. Yes, it does, your Honour, and has different operation because it is saying, you are complying with our request that – the request being one that NEAT makes, the request being one to deliver the cargo without the bills of lading and then it says “we hereby agree as follows”.

GLEESON CJ: Is there an alternative possibility which is that when it is a banker that signs, let us forget the question of authority for the moment, a mercantile instrument of this kind, the fact of the signature, if it has no other evident explanation or operation, imports liability as a party on the bank?

MR JACKSON: In our submission, your Honour, the answer is yes. Of course, one has to look to see what the document is, but if one looks at the document, looks at the substance of it and sees that it is to be a form of indemnity, one sees then that it is given in a particular case, two people, one of whom is the consignor, it is seeking that the goods be released without the bills of lading. One sees the bank too has signed the document. One asks the question, why has the bank signed the document?

The immediate answer and, indeed, in our submission, the most appropriate answer would be that the bank has signed because it too will be liable for the consequences of doing so. Your Honours, one is speaking here in terms of this document of liability – liability for losses for us, liabilities for our obligations to other people. It is in relation to that and the expectation one would have from looking at the document is that it applies in respect of that liability.

HAYNE J: Thus giving content to this expression “bank endorsed absent bill of lading guarantee”.

MR JACKSON: Yes, your Honour. Now, I promised I would give your Honours a document which endeavoured to summarise the relationship between NEAT and the bank. May I give your Honours a copy of the document. I do so, with respect, my liability for it being vicarious, but I understand it has been agreed.

GLEESON CJ: Thank you.

CALLINAN J: No doubt about authority.

MR JACKSON: Also if I may give your Honours a document which contains in a handwritten form some references to the passages in volume 2 in Mr Ryan’s evidence. Your Honours will recall that Mr Ryan said these documents, if guarantees, only execute in the particular way. That evidence, which apparently seemed to be all-embracing, as it were, was dealt with a little in his evidence in cross-examination as well, and I can give your Honours the references to that.

GUMMOW J: There is some discussion of this notion of a banker lending the bank’s name for accommodation, and that is in relation to bills of exchange, specifically, but the idea is there, I think, in Coles Myer [1993] HCA 29; 176 CLR 640 at 656 through to 659.

MR JACKSON: Your Honour, may we deal with that in a note - - -

GUMMOW J: Yes.

GLEESON CJ: I think it was suggested earlier this morning that if the bank had understood this to be an indemnity they would have charged a fee of something between $60,000 and $70,000. Is that agreed?

MR JACKSON: That appears to be the effect of the evidence, yes, your Honour.

GLEESON CJ: That, presumably, would be quite outside the knowledge of your client?

MR JACKSON: Yes, your Honour. So far as we were concerned, what arrangements NEAT might have with their bank was something that we did not know and ordinarily would not inquire about. That was actually dealt with in the evidence, in fact. Can I give your Honours a reference to that, to where Mr Tan, I think it was – yes, your Honours, one sees in volume 1, at pages 197 and 198 that Mr Tan said “we are not privy to the financing arrangements” they have with their bankers. It is page 197 about line 36, and also at page 198.

GUMMOW J: I am sorry, whereabouts in 197?

MR JACKSON: It is at 197, your Honour, about line 36:

At that point in time I would say we are not privy to the financing arrangements of the charterers. I mean we normally do not inquire about this because this probably is something which is confidential to them.

Q. Did you not say that you assumed that the documents, the bills of lading –

Then, your Honours, at page 198 – I do not think there is anything particularly - - -

GLEESON CJ: No. It may not, in the end, touch the points that have occupied most of our attention but it is powerful consideration in favour of the finding that there was no actual authority.

MR JACKSON: That may well be, your Honour , yes. Your Honour, the number of matters with which we have said we might supply the Court with submission has grown a little and my learned friend - - -

GLEESON CJ: Mr Rayment can have seven days from today and you can have a further seven days from that, if that is sufficient.

MR JACKSON: Those are our submissions, your Honours.

GLEESON CJ: Do you have a reply on the notice of contention?

MR RAYMENT: No, if it please, your Honour.

GLEESON CJ: Very well, then subject to that extra material that is going to come in from the parties, we will reserve our decision in this matter and we will adjourn until 10.15 next Tuesday.

AT 12.37 PM THE MATTER WAS ADJOURNED