This was an appeal from a judgment given in the admiralty jurisdiction in an action in rem. The subject of the action in rem, the vessel Betty Ott, was sold through the New Zealand Registrar for NZD 225,000. The issue here was whether the money should be paid to the appellants (Westpac Finance, Westpac Securities Ltd, and Westpac Merchant Finance Ltd: collectively Westpac) or to the respondent (General Bills). General Bills had obtained judgment against the vessel in 1986 for NZD 1,020,000 plus interest, and Westpac had obtained judgment against the vessel in 1990 for NZD 337,524.53.

The Betty Ott was registered in Australia, and General Bills had registered a mortgage over Betty Ott on the Australian ship registry. Westpac had a prior equitable security over the Betty Ott before General Bills registered its mortgage. At first instance, the trial Judge held that General Bills' Australian registered mortgage should be treated as if it was registered in New Zealand, thus ranking higher in priority than Westpac's earlier equitable security.

Westpac appealed.

Held: Appeal allowed.

Although it is desirable to achieve mutual recognition between Australia and New Zealand, to do so would be in conflict with the principles expressed in The Halcyon Isle [1980] UKPC 20 (CMI2221). There has been an attempt to address the question of international recognition of systems of registration. The International Convention for the Unification of Certain Rules Relating to Maritime Liens and Mortgages 1967 (the MLM 1967) sought to define those maritime liens that should have priority over mortgages and hypothèques. Any others that are created by local law would rank thereafter. Mortgages and hypothèques would only be recognised if registered according to the law of the country where the vessel is registered. At the time of judgment, it appeared that no countries have ratified the Convention, and it thus has not become operative.

Mutual recognition between Australia and New Zealand cannot be achieved consistently with the wording of the present statutes, or the law as it has been stated either by the minority or the majority in The Halcyon Isle. An Australian court would be unlikely to treat a New Zealand registered mortgage has having priority over a prior unregistered Australian mortgage. An Australian court would give priority to the registered mortgage notwithstanding the notice of a prior equity. This is similar to the position in New Zealand.

In this case, there was no registered New Zealand mortgage to be given priority, and both the Westpac debenture and General Bills' Australian-registered mortgage fall into the category of 'all other mortgages'. They accordingly rank in order of their creation, with priority being accorded to the Westpac security. There is no basis for recognising the priority accorded by Australian law based on the registration of one of these securities in Australia.