Late payments lose ships – Commercial Court rejects bareboat sale obligation15 December 2025

Clarity of a contractual purchase obligation in a bareboat charterparty is key, a fact emphasised by the UK Commercial Court’s judgment of earlier this year in Ceto Shipping Corporation (“Ceto”) v Savory Shipping Inc (“Savory”) [2025] EWHC 2033 (Comm).

Background

Savory as owners chartered the Victor I to Ceto under a bareboat charterparty in February 2019, for a period of 36 months. The vessel was managed by Delfi S.A. (“Delfi”). A later addendum introduced a purchase obligation into the charter, which provided as follows:

“39.1. On expiration of this charter, and provided that the Charterers have paid all hire and any other sums due under this Charter and provided that the Charterers have also paid all management fees and any other sums due under the Management Agreement to Delfi, it is agreed that Owners will sell the Vessel to Charterers for no further consideration, that title to the Vessel will automatically transfer to Charterers and Charterers will automatically be required to purchase and will be deemed to have purchased the Vessel. The sale will be in accordance with the MOA appended to this contract.”

During the life of the charter the vessel undertook multiple voyages and owners terminated its management agreement with Delfi in May 2020. They eventually appointed Saint James Shipping Limited as new managers in November 2020.

On 25 March 2022, the Victor I was arrested in Singapore due to non-payment of crew wages. On 31 March 2022 (the expiry date of the charter), Ceto’s lawyers asserted that Ceto had fulfilled its obligations under the above Clause 39.1, such that Savory was obliged to transfer the Victor I. Savory refused to transfer title, on the basis that management fees remained due to Delfi, and because of the Victor I’s arrest. In addition to the crew’s claim for unpaid wages, claims were also afoot relating to unpaid bunkers invoices incurred by Ceto during the charter from Savory.

In October 2022, following a claim by Ceto brought under Part 8 of the Civil Procedure Rules, the Commercial Court held that under Clause 39.1, there was no duty on Savory to transfer title to Ceto if there were sums due to Delfi under the management agreement. Ceto commenced further proceedings in March 2023, bringing us to the current case.

The Issues

Mrs Justice Cockerill identified three key issues, namely:

1. do the claims for crew wages and unpaid bunkers invoices constitute sums due under the charter?;
2. did Ceto’s termination of its management agreement with Delfi mean there were sums due under the management agreement?; and
3. if there were sums due and owing at the time of the charterparty’s expiry, did this mean Ceto permanently lost its right to receive title to the Victor I from Savory?

Analysis and Decision

On Issue 1, Savory’s position was that there were sums due from Ceto given the crew and bunkers claims. Ceto argued otherwise, relying on their interpretation of Clauses 10(b) and Clause 37 to assert that there was no liability in the absence of a demand for payment.

Clause 10(b) provided:

“The Charterers shall at their own expenses and by their own procurement man, victual, navigate, operate, supply, fuel and whenever required repair the Vessel during the Charter Party and they shall pay all charges and expenses of every kind and nature whatsoever incidental to their use and operation of the Vessel under this Charter.”

Clause 37 included in material part that:

“[C]osts, charges, expenses which [Ceto has] agreed to pay under this Charter and which shall be claimed or assessed against or pay by [Savory]. . .” (37.1.1);

 “[L]iabilities. . . or other sanctions of a monetary nature (collectively, “Losses”) suffered or incurred by [Savory] and arising directly or indirectly during the tenure of this Charter or in relation to this Charter”, (37.1.3).

It was held that the clause required the sums in question to be due between Ceto and Savory, rather than merely being a liability to a third party. The Court held that the crew claim and one of the bunkers claims fell within Clause 37.1.1 and would therefore be a ‘sum due’, with the result that there was no obligation on Savory to transfer the Victor I to Ceto.

On Issue 2, the key point was whether Ceto’s termination of the management agreement was valid. Ceto purported to terminate the charter on the basis either of insurance-related defaults or refusal to perform a charter which might expose the Victor I to sanctions. The Court held that the termination was wrongful because the termination letter did not refer to the insurance defaults and Savory had made a reasonable assessment as to sanctions risk to justify refusal of the charter in question such that Delfi was not in breach in refusing to perform.