On 3 April 1996, the Cornelis Verolme was arrested while in New Zealand waters. The trustees in bankruptcy of the owner of the ship, ABC Containerlines (ABC), applied for its release. This application was supported by the mortgagee of ABC and the ship, National Maatschappij voor Krediet aan de Nijverheid Bank. The application was opposed by the master and crew of the ship.

On 5 April 1996, the Eleventh Divisional Court of the Commercial Court of Antwerp entered judgment declaring ABC to be bankrupt. Article 23 of Belgium's Code of Commerce gives priority to: 'The debt claims resulting from the labour agreement of the captain, the seamen and other persons serving on board the vessel.' Ship mortgages rank after the claims of the master and crew.

The trustees wished to obtain the release of the ship from arrest in New Zealand in order to relocate it to Singapore, Taiwan, the Philippines, or Japan, for sale and improving access to buyers.

The master and crew's objection to the release of the ship was that they had security in New Zealand for their claims pursuant to the Admiralty Act 1973 and the Admiralty Rules 1975. If the Court were to release the ship, their security would be lost and replaced by a claim under Belgian bankruptcy and labour law, with resulting uncertainties as to time and amount of payment.

The trustees, at the conclusion of the hearing, offered to be bound by conditions requiring them to set up a fund of NZD 250,000 in Belgium, appropriated to the claims of the master and crew, with those sums to be paid out by order of the Commercial Court.

At 31 August 1996, the Registrar of the High Court at Auckland's expenses for the supply of water and the servicing of the ship, insurance up to the point that it was allowed to lapse, and legal fees, amounted to NZD 102,470.16. The Registrar sought payment for costs and disbursements prior to release.

Held: Application allowed. The ship is to be released from arrest on condition of appropriate arrangements made to preserve the long-standing priorities of the master and crew, and the Registrar.

For decades, the masters and crews of ships have had the protection and the security of direct recourse to their ship as an immediate source of payment for money due to them. That priority and privilege is so deeply embedded both in the common law and in New Zealand law that only legislation could uproot it. Further, that priority and privilege is well recognised internationally and is approved by numerous legal systems around the world, including Belgian bankruptcy law and Belgian sea law. It guarantees the masters and crew a claim in priority to almost all other claims on the vessel.

However, the provision of security against the release of the vessel will have virtually no effect on the liquidation, given the trustees' offer to set aside a fund to satisfy the claims of the master and crew. The release of the ship against security is sanctioned by art 5 of the Arrest Convention 1952.

That said, given that the ship is under the control of the Registrar of this Court and that it is by order of this Court that the ship is being released, given the stance of the master and crew and their long-standing entitlement to priority, and given all the circumstances, this Court takes the view that the fund to be set aside to satisfy the claims of master and crew should be set aside in New Zealand rather than in Belgium.