Teekay Tankers Chartering Pte. Ltd. v SeaRiver Maritime LLC. (The “ZENITH SPIRIT”) – SMA No. 4467, 22 September 2023

A voyage charterparty, written on the ExxonMobil VOY2012 form, involved Teekay Tankers Chartering Pte. Ltd. (Owner) as the Disponent Owner of the vessel ZENITH SPIRIT, which was chartered to SeaRiver Maritime, Ltd. (Charterer). The dispute centered on the interpretation of Exxon/Mobil Special Clause 15—Storage, with Owner claiming a guaranteed minimum of 90 days of storage, while Charterer contended that storage was at Charterer’s option.

Background

The negotiations for the fixture ran from March 30 – April 1, 2020, between representatives of Teekay, ExxonMobil, and the intermediary Gulfstream Tanker Chartering, SeaRiver’s broker.  Communications between the parties during this time revealed conflicting understandings of Exxon/Mobil Special Clause 15 — Storage. SeaRiver, initially resisted a mandatory 90-day storage commitment, while Teekay insisted on this provision. 

The Fixture Recap dated March 31, 2020, presented the terms agreed upon by the parties, including the insertion of Special Clause 15. Storage provision were as follows:

STORAGE RATE: USD 70,000 PER DAY

STORAGE DURATION FOR A MINIMUM OF 90 DAYS WITH AN ADDITIONAL 90 DAYS AT CHARTERER’S OPTION.

However, the critical dispute arose on April 1, 2020, when Teekay sent another Fixture Recap, specifying storage as 

USD 70,000 PER DAY AS PER STORAGE CLAUSE 15 FOR A MINIMUM OF 90 DAYS STORAGE CONFIRMED.” 

This insertion formed the basis of the disagreement.

As the dispute unfolded, Teekay proposed commercial solutions to mitigate the impact of the storage obligation, including alternative voyages and storage options with adjusted rates. SeaRiver rejected these proposals and on April 16, 2020, SeaRiver sent an email attempting to backtrack on the agreement, claiming a misunderstanding and proposing a Charterer’s option for storage.

The subsequent exchanges on April 17 and April 20-23, 2020, involved unsuccessful settlement offers and reaffirmations of each party’s stance. The charter was concluded around June 12, 2020, with a final voyage for the transport of crude oil from Nigeria to Norway.  

The Claims

Teekay initially claimed damages of $3,696,880.24, later adjusted to $3,866,670.00. The parties agreed that, if Teekay prevailed, the recoverable damages would be $3,480,003.00. Teekay sought this amount plus interest, attorneys’ fees amounting to $115,495.25, and arbitration costs. SeaRiver, on the other hand, sought an award denying Teekay’s claim and requested attorneys’ fees and costs of $72,790.76 incurred in defending the arbitration.

The Arguments

Teekay’s main argument was that the contract’s unambiguous language supported its position on the 90 days of confirmed storage. Teekay asserted that Gulfstream acted as an agent on behalf of both ExxonMobil and SeaRiver during negotiations. Charterer’s discomfort with certain conversations between Gulfstream and Teekay did not negate their occurrence, according to Teekay.

Charterer disputed Teekay’s interpretation, arguing that there is no proof of a meeting of the minds on the storage issue. Charterer asserted that Teekay failed to meet its burden of proof and attempted to use hearsay to support its claims. Charterer maintained that Gulfstream acted in a dual capacity and had no apparent authority to bind SeaRiver to a mandatory three-month storage commitment.

The detailed discussion and decision section provided a timeline of the fixture negotiations, outlining the communications between SeaRiver and Gulfstream, Teekay and Gulfstream, and SeaRiver and Teekay between March 30 – April 1, 2020. It highlighted the discussions related to Exxon/Mobil Special Clause 15—Storage, including proposed rates and storage duration.

Decision

The Panel had to decide whether the contract’s language and extrinsic evidence supported Teekay’s position or if Charterer’s interpretation aligned with applicable rules of contract interpretation. Further, the Panel needed to determine if there was a meeting of the minds regarding the storage commitment and whether Gulfstream acted within its authority.

The Panel’s majority decision, with Stoltz dissenting, concluded that a “meeting of the minds” had occurred between Brown of Teekay and Katz of SeaRiver regarding the mandatory 90-day storage provision.  Regardless of Katz’s protests, by failing to reject the Final Recap of April 1, 2020 when presented by Dawson, he thereby accepted that storage agreement. The Panel noted that as late as three business days later, Katz could have timely rejected the April 1 Final Recap without recourse but failed to do so.  Although SeaRiver argued that more recent fixtures with optional storage supported its interpretation of the storage clause, the Panel dismissed these arguments.

Stoltz’s dissenting opinion questioned Dawson’s role as SeaRiver’s broker, asserting that Gulfstream acted in a dual capacity for either party. Stoltz disagreed with the majority’s interpretation and insisted that there was no meeting of the minds on the storage option, suggesting that Teekay’s claim should be denied.

 Award

The Panel’s Final Award directed SeaRiver to pay Teekay $4,141,548.87 for stipulated recoverable damages, interest, and Teekay’s attorneys’ fees.