ING Bank NV v. The Demise Charterer of the Ship or Vessel Navig8 Ametrine

Aeturnum Energy International (AEI) sold naphtha, an oil product, to Total Trading Asia (Totsa) and Hin Leong Trading (HLT) under separate contracts, with AEI arranging shipping transport to the buyers. To finance its purchase from AEI, HLT sought a letter of credit in AEI’s favor from ING Bank NV (ING) (plaintiff), the bank with which HLT had a credit arrangement. ING issued the letter, guaranteeing payment to AEI conditioned on ING’s receipt of the bills of lading for the shipments. Alternatively, payment could be issued based on a letter of indemnity from AEI in which AEI agreed to make all reasonable efforts to provide the necessary bills to ING once they were available. AEI hired the demise charterer (defendant) of the vessel Navig8 Ametrine to transport naphtha to HLT. The demise charterer issued signed bills of lading to the order of AEI’s financing bank, Sumitomo Mitsui Banking Corp. (Sumitomo). When Navig8 Ametrine arrived in Singapore, the demise charterer delivered the naphtha to HLT without HLT presenting the bills of lading, as the charterer was permitted to do under its contract with AEI. ING was not a party to that contract. AEI sent an invoice to ING, seeking payment for the delivered naphtha, and provided a letter of indemnity. ING paid the invoice, and Sumitomo then sent the relevant bills of lading to ING. ING mistakenly endorsed the bills of lading to Totsa instead of HLT, which Totsa knew was a mistake. When ING realized the error, it canceled the bills’ endorsement to Totsa with Totsa’s consent. The naphtha delivered to HLT subsequently disappeared amidst allegations of fraud. After HLT was declared insolvent, ING sued the demise charterer, seeking damages for misdelivery of naphtha to HLT without HLT’s presentation of the bills of lading.