In October 1997, the defendant’s ship, the Ruta, collided with the claimants' yachts, Carbonnade, Shamal II and Lutra II. The claimants' yachts suffered damage and the claimants made successive arrests of the Ruta, culminating in the Ruta being sold.

The claimants claimed damages against the proceeds of sale but because the defendant was insolvent, there was also a backlog of unpaid wages of the defendant’s crew. The crew therefore claimed wages against the sale proceeds as well. A question arose as to whether the claimants’ damage claim had priority over the crew’s claims for wages or vice versa.

Held: In this case, the crew’s wage claim has priority over the claimants’ damage claim.

The Court decided that the key factor in the present case was that the crew had no alternative form of redress because the defendant was insolvent. Therefore, the only remedy they had was to claim against the sale proceeds of the vessel. Any preference of priority for a claim in damages over a wage claim would be manifestly unfair and would discourage the crew from disembarking from their vessels. This would only serve to exacerbate the crew’s plight and would not be conducive for the efficient despatch of business when vessels were under arrest.

Further, the Court reviewed arts 2, 5 and 6 of the International Convention on the Unification of Certain Rules Relating to Maritime Liens and Mortgages 1926 (the MLM Convention 1926), art 5 of the International Convention on the Unification of Certain Rules Relating to Maritime Liens and Mortgages 1967 (the MLM Convention 1967) as well as arts 4 and 5 of the International Convention on Maritime Liens and Mortgages 1993 (the MLM Convention 1993), all of which indicated that priority should be given to wage claims over damage claims.

The Court therefore concluded that the wage claim should be given priority in these circumstances.