When Authority Blurs, Risk Explodes: The Lesson of Pacific Carriers v BNP Paribas
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Published: 10 November 2025 | Reviewed: 4 December 2025
(3-minute read)
A company’s internal confusion left millions exposed, showing why clear authority and visible boundaries protect everyone.
What Happened
This case began with a troubled grain shipment from Australia to India. Pacific Carriers chartered a vessel carrying chickpeas and dun peas. When delays occurred and the bills of lading had not yet arrived, the traders involved asked Pacific Carriers to release the cargo early. Pacific agreed only if the traders and their bank, BNP Paribas, provided a written indemnity.
BNP’s trade finance manager signed the indemnities using her title and the bank’s stamp. Everyone involved treated the documents as urgent and assumed they were binding. Relying on them, Pacific released the cargo.
But when the buyer overseas defaulted and Pacific suffered heavy losses, BNP said it was not bound. The bank argued that its officer had no authority to commit it to an indemnity and that her signature meant only that she was verifying someone else’s signature.
The High Court held that the bank was bound. To the outside world, BNP had equipped its officer with the role, title, stamp and appearance of authority. Pacific was entitled to rely on those appearances.
The message is simple and human: when an organisation blurs its own lines, someone else ends up paying for the confusion.
Clarity of authority protects everyone; unclear authority harms the people who rely on it.
The Legal Principle
The Court applied the principle of apparent authority: when a company represents, through its conduct, structure or systems, that an officer has authority to act, and an outsider reasonably relies on that appearance, the company may be bound even if the officer lacked actual authority.
The Court emphasised that:
meaning is determined objectively, not by what an officer intended privately
signatures and stamps create real-world consequences
organisational behaviour can unintentionally mislead third parties
companies must bear responsibility for the appearances they create
Plain-language translation: if your structures make it look authorised, the law may treat it as authorised.
The Structural Problem This Judgment Reveals
The real issue was not dishonesty; it was structural drift. BNP had no consistent system for controlling who could sign what. In that gap, an officer acted beyond her intended role, using the title and tools the bank had given her.
Pacific saw a document that looked official, carried a bank stamp, and arrived through the right channels. Nothing suggested caution. The harm came from invisibility: the gap between what the bank thought its officer could do and what the world reasonably believed she could do.
Many Australians face the same risk in everyday legal matters. When authority is unclear, decisions rest on assumptions. When boundaries are not visible, people rely on appearances instead of structure.
When authority is invisible, risk becomes inevitable.
For a broader look at how invisible structural drift harms clients,
see Hidden Risks in the Traditional Model
Escrow: Money, Timing & Authority
The problem in Pacific Carriers arose because no one knew who truly had authority. One person acted, another relied, and the organisation behind it failed to prevent the confusion.
This is precisely the risk that escrow protects clients from in modern legal practice. Escrow places all funds and approvals under the client’s direct authority, not the firm’s internal systems. Nothing moves, no step begins, and no commitment is made unless the client approves it in writing.
Escrow turns authority into something visible, structured and safe. It ensures:
only the client can authorise payments or progress
no internal mistake or assumption can bind the client
every step is deliberate, not accidental
appearance cannot override actual authority
In the lesson of Pacific Carriers, escrow is the structural safeguard that prevents reliance on the wrong person’s action.
Learn more at: Escrow
What Australians Can Take Away
Pacific Carriers Limited v BNP Paribas [2004] HCA 35 is a reminder that risk often arises not from misconduct, but from unclear structure. Companies, firms and systems communicate authority through the tools they give people. When those signals are inconsistent, someone else bears the fallout.
For ordinary Australians, the principle is practical: authority must be visible, not assumed. Decisions must rest on clear structures, not appearances.
When structure makes authority visible, trust becomes safe.
By Nicky Wang
Principal Solicitor
Legal Liaison Ltd (trading as Clean Law)
Prepared in accordance with public-interest governance,
annual Law Society trust-account audits, and ACNC-reported standards.
Disclaimer: This page is intended to provide general information only and is not legal advice. The contents may not reflect the most current legal developments and do not take into account your individual circumstances. You should not act or refrain from acting on the basis of this information without obtaining legal advice tailored to your situation.
