Bernhard Schulte Shipmanagement (Bermuda) Ltd v BP Shipping Ltd – Court of Appeal (Laws, Thomas and Wilson LJJ – 21 December 2009

Contract – Crew management agreement – Agreement providing for shipowners to pay compensation to managers in event of termination – Agreement subsequently amended by side letter – Construction of side letter - Whether managers entitled to half of annual management fee or only to half of monthly payment in respect of such fee

The claimant had managed the defendant’s vessels over a 20 year period since 1987. On 1 July 1994, at a time when the defendant owned 17 vessels, the parties entered into a new agreement whereby the claimant provided crew management services on a lump sum basis. For each of the defendant’s vessels, a monthly lump sum was set out in two figures, pounds sterling for payments to officers, and US dollars for payments to ratings and all other expenses. The lump sums were all inclusive – they covered the cost of providing the crew and all ancillary services, together with the claimant’s administration costs, overheads and profit. The contract had an open ended period, subject to the defendant giving 6 months’ notice. In that event, clause 5.9(c) provided that the defendant was to “pay compensation to [the claimant] equal to one half of the applicable monthly lump sum payment prevailing at the date of termination” in relation to the vessel(s) concerned.