A Dutch court has ruled that sailors’ claims for damages against their bankrupt employer, based on its failure to maintain adequate pension arrangements for them, take precedence over a bank’s first rights of mortgage on the employer’s ships.

As of 2008, the 11 claimants were employed by Avra Towage BV as masters and first officers on board various seagoing tugs registered in Curaçao.

Each ship was owned by a single-ship company belonging to a group that included Avra.

Dutch-based bank Rabobank had first rights of mortgage on each of the ships.

Under the claimants’ service contracts, they were to be entered into the Dutch merchant navy pension scheme, Bedrijfspensioenfonds voor de Koopvaardij (BpfK).

The pension scheme rules provided for each of the claimants to pay the employee’s share of the pension premium, with Avra adding the employer’s share, and paying both parts of the premium to BpfK.

Avra arranged for each of the claimants to be entered into the scheme, and withheld pension premiums from their monthly wages.

However, between 2010 and 2012, Avra did not pay any premiums to BpfK, making only a partial payment over the year 2013.

In July 2013, BpfK informed each of the claimants that, as of 1 January 2010 (i.e. retroactively), they were no longer members of the scheme.

The claimants held Avra responsible for their loss, but Avra did not settle their claim, and, on 20 May 2014, was declared bankrupt.

Rabobank foreclosed on four ships, with a fifth being sold.

The sailors brought an action against Rabobank in the District Court of Rotterdam to settle their claim.

The court found that Avra was in breach of its obligations under the service contracts, and that the proper remedy for such a breach was to bring the claimants into the same position as if the breach had not occurred.

The recoverable loss therefore amounts to a sum equalling the accrued pension over the full period, from 2010 to mid-2013, and not the amounts that had been withheld from their wages as premiums.

The court then had to decide whether the claim for damages should rank over the mortgage on the ships.

This issue entailed the interpretation of Article 8:211, in conjunction with Article 8:216, of the Dutch Civil Code.

The court considered that – following the guidelines set out by the Dutch Supreme Court in the “Pamina” case (ECLI:NL:HR:2009:BG3588; S&S 2009/49) – these articles purport to protect a seafarer’s interest in recovering the claims which they cover.

The Rotterdam court ruled that the term “claims arising out of service contracts with the master or other seafarers” in Article 8:211 is not limited to wages or other regular benefits, and includes claims for damages for breach of the service contract.

Furthermore, the court found that, because Avra had been in breach of contract for a long period of time, the claim for damages took priority over the mortgage, while the period during which the seafarer had served on each of the ships was not relevant, as long as the seafarer had served on the ship concerned.

The amount of damages has yet to be decided.

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