The present paper and its companion present a solution and domain decomposition model for general two-phase, incompressible and turbulent flows encountered in naval hydrodynamics. The mathematical and numerical model are derived within the framework of polyhedral finite volume method. Interface capturing is obtained with implicitly redistanced level set method derived from the phase field equation. This approach removes the need to redistance the level set field, thus saving CPU time and increasing numerical stability. A modified, Spectral Wave Explicit Navier–Stokes Equations method is introduced and used for wave modelling, where the solution is decomposed into incident and perturbation fields. The incident field is readily available from potential flow theories, and only the perturbation component is solved within the non-linear equation set of the free surface flow model. The domain is decomposed with implicit relaxation zones used to prevent wave reflection by forcing the perturbation fields to vanish in the far-field. A second-order, collocated finite volume method is used to discretise the equations. All equations are solved implicitly, which enables the use of higher Courant–Friedrichs–Lewy numbers compared to explicit scheme. The algorithm is implemented in foam-extend-3.1, a community driven fork of the OpenFOAM CFD software. Verification and validation of the model is presented in the accompanying paper.