Case: Pacific Carriers Ltd v BNP Paribas (2004) (" Pacific Carriers ") [2004] HCA 35 ; 218 CLR 451
Outcome: cited
The applicant contends that Pacific Carriers Ltd v BNP Paribas (2004) (" Pacific Carriers ") [2004] HCA 35 ; 218 CLR 451 articulates the approach the Court should take in this case. In Pacific Carriers , letters of indemnity were provided by the seller of a cargo of lentils to facilitate the delivery of the cargo without the production of a bill of lading. The letters were executed by both the seller and its bank. The High Court held that, considering all the surrounding circumstances, a "reasonable reader in the position of [the buyer] would have understood the document as a bank endorsed absent bills of lading indemnity, and would have understood that the bank was undertaking liability as an indemnifying party to support the liability undertaken by [the seller]": Pacific Carriers at 463 per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ. 40 In reaching this conclusion, the High Court emphasised that what is important is not the subjective intention of the author of a commercial document such as a letter of indemnity. Rather, "construction ... is to be determined by what a reasonable person in the position of [the buyer] would have understood them to mean": Pacific Carriers at 462 per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ. This will require consideration of the surrounding circumstances of the transaction known to the parties and the purpose and object of the transaction, as well as the text of the relevant documents. 41 The applicant submitted that, when the text of AWB's fax of 3 August 1999 is considered in light of the surrounding circumstances, a reasonable reader would understand it to be an offer to compromise all the claims made by Soufflet USA. Moreover, under Pacific Carriers , the subjective intent of the author of the fax (Mr Welmillage) is irrelevant to its meaning and legal effect. 42 The applicant claims that a number of factors support its view. These allegedly include: (a) In letters dated 15 and 18 March 1999, Soufflet N&eacute;goce expressly informed AWB that Soufflet USA intended to hold AWB liable for costs incurred as result of the delay in loading the vessel. (b) Further notice of Soufflet USA claims was provided on 29 March 1999 when Soufflet USA deducted its delay related costs from its first payment to AWB. (c) Soufflet USA then acquiesced to AWB's request that delay related claims be treated as a "separate issue". (d) Thereafter, consistent with the course proposed by AWB, Soufflet USA submitted its claim for delay on 28 June 1999. The covering letter clearly referred to both the costs caused by delay and the freight balance. In particular, the applicant contended, "The evident purpose and object of the 28 June 1999 letter was to seek to finalise matters between AWB and Soufflet USA with respect to the charter of the Panamax Star ". (e) AWB said nothing, before the letter of 28 June 1999 and, indeed, prior to 16 September 1999, to indicate that it would dispute Soufflet USA's entitlement to recover from AWB the losses caused by the delay. (f) As AWB's response letter of 3 August 1999 addresses itself to the "Soufflet USA claim", a reasonable reader would assume that AWB was addressing the claim for USD394,296.22 in respect of the delay, and the freight balance. (g) AWB's letter then states "and [AWB] would only disagree with the load port despatch calculation", indicating that AWB disputed only the load port despatch calculation. (h) AWB's letter concludes with the request to Soufflet USA to "go through and confirm your concurrance [sic] for us to proceed with the balance settlements of this Vessel account", indicating to the reasonable reader that an agreement will be reached if Soufflet USA concurs with AWB's load port despatch calculation. 43 The applicant also claimed that there are important omissions from AWB's letter of 3 August 1999. In particular, the applicant noted that the letter does not say that AWB was only responding to part of the claim made in the 28 June 1999 letter. Similarly, it did not say that AWB disputed the claim for delay related costs and did not foreshadow any future correspondence from AWB regarding that matter.