Here is what I found:
Hilary Mead, an Royal Navy Commander, referred to courtesy flags in an article in the October 4th 1951 issue of Shipbuilding and Shipping Record. He was generally critical of the section on flags in the then recently republished Admiralty Manual of Seamanship, and in particular of the assertion that the Red Ensign was the correct flag for a foreign merchant ship to fly as the courtesy flag in British waters. "What person in a position of authority is responsible for this dictum? The 'courtesy flag' is at best only a convention that has crept into its present rather pretentious position within the last few decades, and there is nothing to show that it is supported by any kind of authority." He went on to write that foreign ship-owners and masters could be excused for thinking that the Union Flag was the national colours of Great Britain and for using the emblem as a compliment to the country visited. "Questions have already arisen as to what steps are to be taken if a foreign vessel hoists the British Union Flag by way of compliment, and who is going to take such steps. And by what compulsion can the master of the foreign ship be made to haul down the flag?"
David Prothero, 22 October 2000
I would fly the red duster if I had one or the Union Jack if I didn't.
There is a tide in the affairs of men,
Which, taken at the flood, leads on to fortune;
Omitted, all the voyage of their life
Is bound in shallows and in miseries.
Shakespeare, Julius Caesar IV, iii, 217