In Bernhard Schulte Shipmanagement (Bermuda) Ltd Partnership v BP Shipping Ltd – Lawtel 9.2.09 the Claimant ship manager claimed termination fees said to be payable under crew management agreements.
The relevant crew management agreements were lump sum contracts. For each vessel, 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, covering the cost of providing the crew and all ancillary services, together with the Claimant’s administration costs, overheads and profit. If the Defendant gave notice to terminate, clause 5.9(c) provided that compensation equal to one half of the applicable monthly lump sum payment prevailing at the date of termination was payable in relation to the vessel or vessels concerned.
By a side letter the crew management arrangements were moved from a lump sum to a costs plus fee basis: there was still a monthly lump sum, but it was in effect an estimate, being subject to adjustment upwards or downwards depending on the costs incurred by Claimant, and it excluded Claimant's fixed management fees set at US$1,500,000 per year and £1,067,000 per year in para.4.1 of the side letter which were payable by instalments with the monthly lump sums.
The relevant side letter further provided that the reference to "monthly lumpsum payment" in clause 5.9(c) of the manning agreements was to be deemed to be a reference to the fees in para.4.1 of the side letter.
When the Defendants terminated the agreements, the issue was whether the fee payable on termination was only half of a monthly instalment of the annual fee or half the annual fee.
The Commercial Court preferred the Claimant’s construction that, although the fees were to be paid with the monthly lump sums in instalments, that was simply a matter of mechanics, and it followed that the obligation in clause 5.9(c) of the manning agreements to pay compensation equal to one half of the applicable "monthly lumpsum payment" prevailing at the date of termination was deemed to be an obligation to pay one half of the applicable fees in para.4.1 of the side letter, namely US$1,500,000 and £1,067,000. It held that that was a commercial, and preferable, construction.