I would suggest warning the Paladin first, as his intentions were good, but the acts, not so.
Moral issues are sometimes ambigious. Sometimes it's not intentional, as many people view Paladin's as the "Kill all evil" type of character, and in a black and white run world, that may work. But in the real world, or a game modeled in some fasion, the correct moral ground isn't always obvious.
In comment to RA's post above, as a player (and LG character) in that game, my character viewed the actions of that group of Hobgoblins as evil (for a variety of reasons, including demanding spoils for creatures they didn't kill, and trying to take the high road after they attacked us first. Also, my character never did the sleeping CDGs, though he did take part in the ambush on the awake guards.)
Also, in defense of our group, the entire adventure has been moraly ambigious, and though some members of the party have made it worse, it's realy been so murky that I know I hardly know which way's up at this point as a player, let alone a character.