FONG YAU HEI v. GAMMON CONSTRUCTION LTD AND OTHERS

FACV No. 13 of 2007

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 13 OF 2007 (CIVIL)

(ON APPEAL FROM CACV NO. 154 OF 2006)

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J U D G M E N T

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Chief Justice Li :

1.  I agree with the judgment of Mr Justice Gault NPJ. 

Mr Justice Bokhary PJ :

2.  I agree with the judgment of Mr Justice Gault NPJ. 

Mr Justice Chan PJ :

3.  I agree with the judgment of Mr Justice Gault NPJ. 

Mr Justice Ribeiro PJ :

4.  I agree with the judgment of Mr Justice Gault NPJ. 

Mr Justice Gault NPJ :

Introduction

5.  This appeal requires interpretation of provisions limiting the liability of shipowners and those for whom they are responsible for negligence.  It is necessary to determine the application of these provisions to a claim for personal injuries suffered in the course of employment.

The background

6.  Gammon Construction Limited (“Gammon”) was contracted to carry out work for the widening of the Eastern Corridor.  At the material time, in July 2000, Cheng Kan Ho (“Cheng”) was acting as master of a tugboat chartered by Tung Shun Transportation and Engineering Limited (“Tung Shun”), a company contracted to provide vessels as required by Gammon.  The 1^st respondent, Fong Yau Hei (“Fong”), was employed by Tung Shun and was seriously injured while working on the deck of the tugboat.  At the time, Cheng was acting on instructions from Gammon.  The rope to a hopper barge under tow broke suddenly and Fong was struck by the recoil.

7.  After hearing the evidence, Mr Recorder B Yu, SC found that the injuries were caused by the negligence of Gammon for not having removed from the barge a large steel tank which protruded over the bow of the barge and fouled the tow rope, and by Cheng in failing to require that the tank be removed and in not adequately controlling the tug.  Liability was assessed as between Cheng and Tung Shun on the one hand and Gammon on the other in the proportions of 75:25.

8.  Mr Leung Siu Wing, a major shareholder of Tung Shun, was joined as the 4^th defendant but allegations against him were not pursued.

9.  The issue with which the present appeal is concerned arose in the course of submissions to the Recorder.  For Tung Shun and Cheng, it was contended that they were entitled to rely on the limitation of liability provided for in Part III of the Merchant Shipping (Limitation of Shipowners Liability) Ordinance, Cap. 434 (“the Shipowners Limitation Ordinance”).  Section 12 of that Ordinance made the Convention on Limitation of Liability for Maritime Claims 1976 (“the Convention”) part of the law of Hong Kong.  The material provisions will need to be considered in detail but at this point it is sufficient to recount that the Recorder held that the limitation of liability generally available to shipowners (defined in the Convention to include charterers) and employees was excluded in this case by s.7(1) of the Control of Exemption Clauses Ordinance, Cap. 71 (“the CECO”), an exclusion contemplated by art.3(e) of the Convention.

10.  On appeal to the Court of Appeal, all three members of the court (Hon Le Pichon, Cheung JJA and Reyes J) upheld the view of the Recorder that s.7(1) of the CECO excluded the limitation of liability.  They were presented with a new argument, however, to the effect that s.7(1) was in turn excluded by s.18(1) of that Ordinance.  On this point, the Court was divided.  Le Pichon JA and Reyes J, though for different reasons, ruled that s.18(1) was not relevant.  Cheung JA on the other hand took the view that s.18(1) negated the exclusion in s.7(1) so that the convention limitation could be invoked.

11.  By order dated 28 May 2007, leave was granted by the Court of Appeal for the appellants to appeal to this Court.  Mr Russell Coleman, SC appeared for the appellants, Tung Shun and Cheng, arguing in favour of the limitation of liability.  Ms Gladys Li, SC appearing with Mr Patrick Lim, for Gammon presented the argument against the appellants’ entitlement to invoke the limitation under the Convention.  Mr Simon Lam who appeared with Mr Stephen Fong, for the 1^st respondent, essentially adopted that argument.

The Provisions of the Convention

12.  The Convention became part of the law of Hong Kong in October 1993 upon the enactment of the Shipowners Limitation Ordinance.  The relevant parts of art.1 of the scheduled Convention read:

“1.    Shipowners and salvors, as hereinafter defined, may limit their liability in accordance with the rules of this Convention for claims set out in Article 2.

…

4.    If any claims set out in Article 2 are made against any person for whose act, neglect or default the shipowner or salvor is responsible, such person shall be entitled to avail himself of the limitation of liability provided for in this Convention.”

13.  In art.2.1(a), it provides:

“1.    Subject to Articles 3 and 4 the following claims, whatever the basis of liability may be, shall be subject to limitation of liability –

(a) claims in respect of loss of life or personal injury or loss of or damage to property (including damage to harbour works, basins and waterways and aids to navigation), occurring on board or in direct connection with the operation of the ship or with salvage operations, and consequential loss resulting therefrom;

…”

14.  Article 4 has no relevance.  Article 3(e) is material and states:

“The rules of this Convention shall not apply to –

…

(e) claims by servants of the shipowner or salvor whose duties are connected with the ship or the salvage operations, including claims of their heirs, dependants or other persons entitled to make such claims, if under the law governing the contract of service between the shipowner or salvor and such servants the shipowner or salvor is not entitled to limit his liability in respect of such claims, or if he is by such law only permitted to limit his liability to an amount greater than that provided for in Article 6.”

15.  Under art.6, the Convention, where it applies, limits liability by reference to the tonnage of the vessel concerned – in this case the tugboat.

16.  It is common ground that unless excepted by art.3(e), the limitation is available to Cheng and his employer, Tung Shun.

Is Article 3(e) applicable?

17.  The respondents rely on s.7(1) of the CECO as a law governing Cheng’s contract of service prohibiting Tung Shun as “shipowner” from limiting its liability.  That section states:  

“    (1)    A person cannot by reference to any contract term or to a notice given to persons generally or to particular persons exclude or restrict his liability for death or personal injury resulting from negligence.”

Clause 4 of Schedule 1 states that this sub-section does not apply to a contract of employment except in favour of the employee.

18.  On its plain words, as held in the courts below, s.7(1) meets the terms of art.3(e).  It is not in dispute that the law governing Cheng’s contract of service is Hong Kong law.  Under s.7(1), Fong cannot have imposed upon him by his employer a limitation of liability for personal injury resulting from negligence.  His claim therefore is outside the Convention and the limitation of liability it provides.

19.  It was argued by Mr Coleman, SC that:

“The ordinary meaning of the words of Article 3(e) contemplates that there might sometime exist a provision of Hong Kong law that states that a shipowner or salvor does not have the right to limit liability under the Convention in respect of claims of crew members or their servants on board ship.  This is not at all the same thing as a law that controls or restricts any Hong Kong employer’s freedom to contract with a servant in relation to an injury caused by negligence.”

20.  I do not accept the distinction counsel advocates.  Article 3(e) contemplates in its terms a law by which a shipowner is not entitled to limit his liability in respect of claims by servants, whose duties are connected with the ship.  Section 7(1) prohibits any person from restricting his liability for personal injury.  That must prevent a shipowner restricting his liability to his servants in negligence.  I do not consider a shipowner could seek to do that other than by contract or notice.

21.  Mr Coleman, SC submitted that Tung Shun and Cheng are not seeking to limit their liability by contract or notice in terms of s.7(1), but by relying on the limitation provided for by law, that is by the Convention itself.  But this is a circular argument.  The very issue is whether the Convention Limitation can be relied upon.  It cannot be relied upon if (in terms of art.3(e)), there is a law under which the shipowner is not entitled to limit his liability in respect of such claims.

22.  Counsel relied heavily on an argument that the legislative history in the United Kingdom points away from s.7(1) being construed as a provision triggering operation of the exclusion in art.3(e).

23.  In England there have been statutory limits by reference to tonnage on claims against shipowners at least since the enactment of the Merchant Shipping Act 1894.  Those limits were not available, however, in respect of claims by persons carried on a ship who suffered personal injuries arising from negligence (“actual fault or privity”)[1].

24.  In 1957, there was concluded a convention setting certain uniform rules relating to the limitation of liability of owners of sea-going ships[2].  Article 1(4)(b) of that Convention was, so far as is presently relevant, in the same terms as art.3(e) of the 1976 Convention.  This gave rise to some consequential amendments to s.503 of the 1894 Act by s.2 of the Merchant Shipping (Liability of Shipowners and Others) Act 1958, including a provision invoking the exclusion available under art.1(4)(b) in the case of persons employed on board under a contract of service governed by the law of any country outside the United Kingdom.  The position regarding employees whose contracts of employment were governed by United Kingdom law remained unchanged.

25.  After the 1976 Convention was acceded to a different legislative approach was adopted in the United Kingdom.  In the Merchant Shipping Act 1979, s.17(1) gave the revised Convention the force of law in the United Kingdom.  But by s.35(2) of that Act, the provisions of the Convention, having the force of law, were stated not to apply to:

“… any liability in respect of loss of life or personal injury caused to, or loss of or damage to any property of, a person who is on board the ship in question or employed in connection with that ship or with the salvage operations in question if –

(a) he is so on board or employed under a contract of service governed by the law of any part of the United Kingdom …”

This is a statutory exclusion of the operation of the Convention in respect of the stated liability.  It is not a provision contemplated by art.3(e) of the Convention by prohibiting shipowners from limiting their liability.

26.  Section 35 of the 1979 Act, also removed the limitation available under s.503 of the 1894 Act in respect of claims for personal injury to persons on board ships under contracts of service governed by United Kingdom law.

27.  At the time s.35(2) was enacted there was in force s.2(1) of the Unfair Contract Terms Act 1977 upon which s.7(1) of the CECO was based.  Whether or not that provision was considered to give effect to the exclusion in art.3(e) of the Convention, the legislature chose to enact a broader express provision by which the Convention as it applies in specified circumstances did not become part of the law of the United Kingdom.

28.  It does not follow that because by the Shipowners Limitation Ordinance the 1976 Convention was made part of the law of Hong Kong without there being enacted a specific exclusion corresponding to s.185(4) of the United Kingdom Act, that s.7(1) should be construed as not triggering the operation of art.3(e) of the Convention.  Nor is that affected by whether or not s.2(1) of the Unfair Contract Terms Act 1977 of the United Kingdom would bring art.3(e) into effect if there was a part of the law in that country on which it could impact.

29.  I do not accept that the United Kingdom legislation provides any imperative to give to the words of s.7(1) a narrower meaning than they plainly bear.

30.  I conclude, as did the courts below, that s.7(1) on its face reads on to art.3(e) of the Convention so as to render the Convention limitation inapplicable. 

The relevance of s.18(1)

31.  There remains to consider the further argument that the effect of s.7(1) of the CECO is negated by s.18(1) of the same Ordinance.  Section 18(1) reads:

“(1)    Nothing in this Ordinance removes or restricts the effect of, or prevents reliance upon, any contractual provision which –

(a)	is authorized or required by the express terms or necessary implication of an enactment; or
(b)	being made with a view to compliance with an international agreement which applies to Hong Kong, does not operate more restrictively than is contemplated by the agreement.”

 In the same section, “enactment” is defined as meaning any ordinance and any instrument having effect by virtue in the Ordinance so that it would include the 1976 Convention.

32.  Mr Coleman, SC’s argument was that each of the two limbs of s.18(1) over-rides the operation of s.7(1) in the circumstances of this case.  This is said to be because a contractual provision limiting a shipowner’s liability either would be authorized by the Convention or would be made with a view to compliance with the Convention.  The argument is that this provision, where it applies (as here), saves any contract that s.7(1) otherwise would prohibit so that the art.3(e) exclusion does not operate.

33.  This argument, if accepted, would create an anomalous situation.  If, as contended, s.18(1) saves any contractual provision limiting a shipowner’s liability, it would mean that s.7(1) would not operate to exclude the convention as it relates to a contractual limitation but would do so as it applies to a limitation imposed by notice.  However, I am satisfied s.18(1) does not over-ride s.7(1) in these circumstances.

34.  While the Convention constitutes an enactment, it does not expressly authorize any contractual provision limiting a shipowner’s liability.  Nor do I find any implication, let alone a “necessary implication”[3] in the sub-section.  The Convention does not compellingly imply authorization merely by providing for limitation of liability while recognizing that such contracts can be prohibited under domestic law.  The same applies in respect of s.18(1)(b).  “Compliance” connotes a requirement to be satisfied.  There is no requirement in the Convention for contracts limiting liability.  On the contrary, the Convention recognizes that such contracts may be prohibited.

35.  Accordingly, I am satisfied that s.18 does not detract from the operation of s.7(1) which excludes the entitlement to limitation under the Convention in this case.

36.  The matter does not turn on the legislative landscape at the date the Convention became part of the law of Hong Kong.  The legislative provisions are “always speaking”[4] and take effect from time to time as they fall to be applied.

37.  I would dismiss the appeal and direct the appellants to pay the costs of the 1^st and 2^nd respondents.

Chief Justice Li :

38.  The Court unanimously dismisses the appeal with costs.

[1]  Section 503.

[2]  International Convention relating to the limitation of the liability of owners of sea-going ships, Brussels, 10 October 1957.

[3]  B (A Minor) and Director of Public Prosecutions [2000] 2 AC 428, 464, per Lord Nicholls of Birkenhead.

[4]  Bennion, Statutory Interpretation 4^th Edition at s.288 (p.762).