My opponent suffered a crit that gives the ship an additional damage card when it overlaps another ship or obstacle. Now, i immediately rammed him with a flotilla as he could now be damaged by these, however my opponent interpreted it as only when he moves the ship into an overlapping position, not when it ends up overlapped for other reasons. For others who have experienced this, how did you interpret/ resolve?

(apologies i dont have the card and exact wording with me, generally dont carry my Armada damage deck around at uni )

You have to read the actual text.

Does it say when you overlap or wherever you're overlapped?

It's the former.

Ergo only when the ship itself moves - and overlaps.

What GK said. Overlapping is transitive.

In a collision, there is one ship overlapping and one ship (or obstacle) being overlapped . The Damaged Controls card only affects the former.

Please note that the Flotilla rules makes this distinction clearly:

Flotillas follow the same rules as other ships with one exception - when a flotilla would overlap another ship (or be overlapped by another ship) , deal one face down damage card to the Flotilla . Do not deal a facedown damage card to the closest ship the flotilla overlapped (or that overlapped it) unless that ship is also a flotilla.

Having said that, if a ship with Damaged Controls overlaps a flotilla, it does receive one damage card. But not when overlapped by a Flotilla.