This claim concerned a Barecon 2001 bareboat charter of the product tanker MT Victor 1 (previously named MT Spirit). Pursuant to the charter, the vessel was leased by the defendant owner to the claimant demise charterer for 36 months. The charter period expired on 1 April 2022. The charter provided for the sale of the ship by the defendant to the claimant on the terms of an appended MoA on the Saleform 2012 form dated 28 February 2019. Technical and crew management was delegated by the claimant to Delfi SA (Delfi), a company associated with the defendant, under a management contract dated 28 February 2019. In the summer of 2020, the claimant replaced Delfi as technical and crew managers, placing technical and crew management instead with St James Shipping Ltd (St James Shipping) under a management agreement dated 17 August 2020.

The ship was arrested, and is due to be sold in Singapore. The claimant disputed liability in respect of the claims by Delfi and St James Shipping. The claimant sought a declaration that 'Clause 39.1 of the Charter (as amended by the Addendum), on its proper construction, means that the title of the Vessel automatically transfers from the Defendant to the Claimant upon the expiry of the Charter on 1 April 2022, notwithstanding any disputed sums allegedly claimed by ... Delfi in respect of the Original Management Agreement.' The defendant's position was that the claimant still owed around USD 2 million to Delfi under its management agreement with the claimant, and therefore the claimant had not, when the charter expired, 'paid all management fees and any other sums due under the Management Agreement to Delfi' within the meaning of cl 39.1 of the charter.

Held: Upon the proper construction of cl 39.1 of the charter, title to the ship did not pass to the claimant, and the defendant was under no obligation to transfer title, if the claimant still owed management fees or any other sum to Delfi under its management agreement.

Section 20(2)(h) of the Senior Courts Act 1981 (UK) (the Act) (reflecting art 1.1.d of the Arrest Convention 1952) provides that the admiralty jurisdiction of the High Court, and therefore the availability of an action in rem, extends to 'any claim arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship'. The equivalent provision in the Arrest Convention 1999 is to the same effect. The claimant's argument was that there was no difficulty for Delfi if the transfer of title in the ship to the claimant occurred while Delfi was still owed substantial sums under its management agreement, because if the claimant disputed the debt Delfi could pursue an action in rem for the debt so as to ensure it became secured while the dispute was resolved.

This argument proves too much: if Delfi could have the ship arrested, that would be true for unpaid debts under its management agreement, whether they were admitted by the claimant, or disputed in bad faith by the claimant, or disputed in good faith by the claimant (and in that case whether before or after the dispute had been resolved by arbitration award or court judgment). The posited availability to Delfi of an action in rem is therefore no reason to suppose that the parties might have been conveying to each other by their choice of language in cl 39.1 something other than 'due means due'.

The argument also proves too little because Delfi was the technical and crew manager. It was entitled to fees from the claimant (and an indemnity in respect of any debts or other liabilities arising out of its provision of management services under the agreement, eg if it had a liability for crew wages or ship's supplies) in respect of: i) technical management services as set out in cl 3 of the agreement, for example ensuring compliance with Flag State requirements and the requirements of the ISM Code, the ISPS Code and Class, arranging and supervising dry dockings, repairs, and maintenance, and arranging for the supply of spares, lubricating oils, and provisions; ii) crew management services as set out in cl 4 of the agreement, for example recruiting and engaging crew, ensuring that Flag State and medical fitness requirements were met, and arranging transportation for deployment to or repatriation from the ship; iii) insurance services as set out in cl 5 of the agreement, for example arranging hull and machinery, P&I and war risks cover, and handling and settling insurance, average, salvage and other claims and disputes.

That is not an agreement relating to the use or hire of the ship. Delfi were not the ship's commercial managers, and any debts owed to them do not concern the use or hire of the ship. In The Stella Nova [1981] Com LR 200, Sheen J upheld as a valid claim in rem a claim by a commercial manager with the exclusive right to conclude charters, for damages for breach of that right of exclusivity, the owner having chartered the ship to BP Oil Ltd without reference to the manager. In The Peppy [1997] 2 Lloyd’s Rep 722, David Steel QC (as he was then, sitting as a High Court judge), tried two conjoined actions, one of which was an action in rem commenced by a commercial manager relying on the predecessor to s 20(2)(h) of the Act. There is no indication from the report of that case that jurisdiction in rem was disputed, so the decision adds nothing and, with respect, Berlingieri on Arrest of Ships (5th edn) para 3.140 n 74, overstates matters by suggesting that The Peppy decides anything as to the scope of s 20(2)(h). On no view do those cases about commercial managers, or any questions there might be as to what types of claims arising out of the commercial management of a ship fall within s 20(2)(h), have anything to say in this case concerning debts due to Delfi under its technical and crew management agreement.

The claimant also referred to Harms Bergung Transport und Heavylift GmbH & Co KG v Harms Offshore AHT 'Uranus' GmbH & Co KG [2015] EWHC 1269 (Admlty), where claims were made by a technical and commercial manager of six anchor-handling tugs, but the point was not considered because it was common ground that the claims made were within s 20(2)(h), and the question was whether the claims should be stayed in favour of arbitration. Section 20(2)(p) of the Act, which applies to 'any claim by a master, shipper, charterer or agent in respect of disbursements made on account of a ship' does not cover Delfi's management fees - they are not a ship’s disbursement. Nothing in The Sea Friends [1991] 2 Lloyd's Rep 322 suggests otherwise. There, the Court of Appeal confirmed that s 20(2)(p) does not apply to a claim by insurance brokers in respect of hull insurance premium for which they had a liability to the hull underwriters at Lloyd’s.

Thus, contrary to the claimant's argument, Delfi had a strong and obvious commercial interest in the defendant, its associated company, continuing to own the vessel until Delfi had been paid in full whatever it was owed under its management agreement. That in turn meant that the defendant had a strong and obvious commercial interest in not being obliged to transfer title if Delfi, its associated company, had not been paid in full. That suggests strongly that when the claimant and defendant agreed that title would only be transferred if the claimant had paid 'all management fees and any other sums due under the Management Agreement to Delfi', they meant what that appears to say, which is that there should be no unpaid debt owed to Delfi under its management agreement.