Repos on the Rise: What Are Your Rights?

18 March 2009 By Benjamin Maltby

“You Can Stay, But You Get No Pay,” a recent forum, opens an issue that seems to be preying on the minds of more than a few superyacht crew: What are your rights should a bailiff turn up at the dockside – official papers in hand – to repossess the superyacht, right there and then, on behalf of a court or a lender? Or what if funds for the yacht and your salary simply dry up? Where do crewmembers stand should this dark day dawn – which is happening more often in these hard economic times?

Don’t panic. Let’s calmly look at this situation two ways:
1. What are your rights?
2. How can you make the best of a bad situation?

Well, sadly, your rights are minimal. The basic position under UK law and all other Red Ensign states is that if there’s no more yacht to be employed on, then the employment contract will have become what lawyers call “frustrated” by “supervening impossibility of performance.” The position is understood to be similar in the U.S.

Which, in the long term, makes sense. No boat means no boat to be employed on hence no employment. Fair enough. But in the short term, you’ll have no right to claim compensation for unfair dismissal, or redundancy pay. Tough – and that’s the way it is. Which leaves only claims for work undertaken, but not paid and leave owed but not taken.

The party that your contract was made with is crucial. This is because the law in most countries, and certainly in the U.S., UK and all other Red Ensign states, recognises what is called “privity of contract.” This means that if the yacht is owned by an owning company, rather than the “beneficial owner” (usually known as “the Boss”), then it’s no use – in law – trying to leapfrog the owning company to bring an action against the beneficial owner. If they want to pay you when your employer can’t, then they will be doing so out of the kindness of their own warm hearts and not out of any form of legal compulsion. The owning company, as its name suggests, normally only exists to own one asset: the yacht. So if that’s just been taken away, there’ll be nothing left in the pot to pay unpaid crewmembers.

All’s not lost, however, as nearly all countries’ laws allow crewmembers to have a lien on the yacht in respect of unpaid salary. This means that the crew can have the yacht arrested and sold, and the proceeds given to the finance company that just took repossession. The cost of this procedure various enormously, and having to put up financial security to the court can still make it prohibitively expensive.

This is also the last resort when the owner has simply run out of money (well, not entirely, as he still owns the yacht – so it’s potentially a big stick to beat him with). If an owner tries to sack crew for spurious reasons, whereas actually he is just short of cash, then the normal legal avenues following dismissal should be explored first.

In my experience of assisting crew in this situation, finance companies normally do everything possible to make sure the crew have been paid everything owed to them. After all, they understand that:
(a.) the industry is a small one
(b.) a crewmember’s next boss may one day be casting for a finance company to increase his own liquidity. It may even be possible to gain employment with or through the finance company.

Further, the insurance policy may require the yacht have at least some crew stay on board. And if the yacht needs moving, it makes no sense to engage a new crew. It may well be you who has the upper hand.