FONG YAU HEI v. GAMMON CONSTRUCTION LTD AND OTHERS

HCPI 1222/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 1222 OF 2003

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J U D G M E N T

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Introduction

1.  The plaintiff suffered serious injuries as a result of being hit by the recoil of a tow rope which suddenly broke.  This accident happened on a Sunday morning on 12 November 2000 on board a tug boat called “Shun King 6” (“the tug boat”) which was engaged in the towing of a hopper barge called “Sing Kong 19” (“SK19”).  Sadly, the injuries were so serious that the Plaintiff is now unable to look after his own affairs.  He sues by his wife as his next friend.

2.  This is the judgment on liability.  Quantum has previously been order to be tried separately.  But as shall be seen, there is an issue on limitation of liability under the Merchant Shipping (Limitation of Shipowners Liability) Ordinance, Cap. 434 which impacts on quantum and which the parties agree, and I direct, should be heard and determined at the trial.

The Parties

3.  1.    The plaintiff was, at the time of the accident, employed by a company called Tung Shun Transportation and Engineering Ltd. (“Tung Shun”).  Mr. Leung Siu Wing (“Leung”) is a major shareholder and director of Tung Shun.  Tung Shun and Leung are sued as the 2nd and 4th defendants in this action.  The Master of the tug boat (“Cheng”) was also employed by Tung Shun.  On the day of the accident he was standing in for the regular Master of the tug boat.  He is sued as the 3rd defendant.

4.  Some time in July 2000, Gammon Construction Limited (“Gammon”), was engaged by the Highways Department to carry out works for the widening of the Eastern Corridor.  Tung Shun contracted with Gammon to supply vessels and crew for the works.  Gammon is sued as the 1st defendant.

The Facts

5.  By the time when all the evidence has been given, there is a relatively large area of common ground.

6.  It is not disputed Gammon was the main contractor on the site and had the right to give instructions with regard to the deployment of vessels within the works area.

7.  On the day of the accident, Gammon issued an order to Cheng to use the tug boat to tow SK19 away from its original position.  At the time, SK19 was anchored at a short distance to the north of the column designated as A2.  Columns with progressively larger numbers are located towards the East at the space of 30 metres each.

8.  A tow rope was used for the operation.  The total length of the rope measured about 50 metres but only part of the rope was actually used.  One end of the rope was formed into an eye splice and placed on a bollard at the starboard side of SK19.  The other end with the excess length of the rope was coiled around the bollard at the stern of the tug boat.  The rope was formed by two ropes with a knot.  One end was an 8-strand rope.  The other end of the rope was a 3-strand rope.  I should mention that both the pleadings and the evidence exchanged before the trial disclosed various issues concerning the use of the rope.  When the trial commenced, the plaintiff no longer contended that the rope did not have sufficient strength.  By the stage of the final submissions, the plaintiff withdrew all allegations of negligence or breach of duty arising from the use of the rope.

9.  There were two crew members on SK19, Mr Lam Chin (“Lam”) and Mr Ho Fu-shing (“Ho”).  Cheng and the plaintiff were the only persons on the tug boat.  Cheng was the Master and the plaintiff was the engineer.

10.  A yellow steel tank measuring 7.15m (in length) x 2.36m (width) x 2.4m (height) was placed at an angle at the bow of SK19 at some time before the towing operation started.  The evidence shows that such tanks are normally used to hold water and stone debris from drilling operations.  There was, however, no evidence as to why this tank was placed on SK19 or indeed when it was so placed.  Wong Chi Fai, who was the regular Master of SK19, gave evidence that it was quite common to find such steel tanks on barges.  Mr Lee Chi Leung, who is Gammon’s project manager, frankly admitted that the tank belonged to Gammon.

11.  One corner of the tank protruded beyond the bow of the barge.  Cheng said he noticed the protrusion before he started towing.  The evidence, which is undisputed, is that because of the physical constraints on the deck of SK19, there is no way of placing the yellow steel tank on the barge without its corner protruding beyond the bow.

12.  There is also no dispute that the operation ended with SK19 colliding with another barge called Sing Hing 201 “SH201”.  This barge was anchored at a short distance due north of column A7.

13.  There is no dispute that the tow rope broke and that it hit the plaintiff resulting in personal injuries.  The fact that the rope recoiled and hit the plaintiff with such force as to cause serious injuries can only be consistent with the rope being under tension at the time it broke.  The more or less even edges on both sides of the broken rope suggests it was either cut by a relatively sharp edge or pinced when under tension.

14.  There was some initial suggestion that the steel bracket for the anchor located at or near the tip of the bow could have accounted for the breakage of the rope.  But the length of the part of the rope remaining on the starboard bollard of the tank, measuring 3.7 to 3.8m, was substantially less than the distance between the starboard bollard and the steel bracket.  Hence, the rope could not have been cut by the steel bracket.  In the end, there was no real dispute that the tow rope must have been pressed against the corner of the yellow steel tank.  The only question was whether the rope broke when SK19 collided with SH201 such that the rope was caught between two surfaces and was effectively chopped apart or whether the breakage occurred either shortly before or after the collision.

Issues in the pleadings

15.  By the time of the final submissions, the plaintiff dropped all allegations against Leung.  Allegations of breach of statutory obligations under the Shipping and Port Control Ordinance, Cap. 313 pleaded in respect of the use of the rope were also withdrawn.

16.  The remaining allegations against Gammon, Tung Shun and Cheng can be summarised as follows:

(1)	that Gammon was negligent in putting the yellow steel tank on board SK19 resulting in obstruction of sight of the Master of the tug boat in the towing operation and which might cut the towing rope passing over its edge under tension (see paragraph 9A of the Re-amended Statement of Claim);
(2)	that Tung Shun acted in breach of the implied term of the employment contract with the plaintiff and in breach of its duty of care in allowing the yellow steel tank to be put on board SK19 resulting in the obstruction of the sight of the Master of the tug boat in the towing operation and which might cut the towing rope passing over its edge under tension (see paragraph 10 of the Re-amended Statement of Claim);
(3)	that Cheng was negligent in various respects in the navigation and in the towing operations as particularised in paragraph 11 of the Re-amended Statement of Claim, and that Tung Shun was vicariously liable for Cheng’s acts or omissions.

17.  The defendants have raised the issue of contributory negligence.  It is said as against the plaintiff that he had failed to take reasonable care for his safety by standing or remaining in a position which was liable to be struck by the towing rope, thereby exposing himself to a risk of injury which he knew or ought to have known.  There is also an allegation that the plaintiff was responsible for managing and co-ordinating the towing operation and that he had failed to ensure that SK19 was towed in a safe manner.

18.  Tung Shun and Cheng have further raised a defence of limitation of liability.  They rely on the Convention on Limitation of Liability for Maritime Claims 1976 which have been made part of our domestic law by the provisions of the Merchant Shipping (Limitation of Shipowners’ Liability) Ordinance, Cap. 434.  Although this defence would appear to go more to quantum than liability (it not being contended that there is an exclusion of liability), all parties before me were content to have this issue dealt with at this trial, and I so directed.

Witnesses

19.  The only witness present at the accident who gave viva voce evidence before me is Cheng.  The two members of crew of SK19, Lam and Ho were not called.  Mr Lam informed the Court that they could not be located.  The parties agreed that the various statements made by each of them are admissible as hearsay evidence for me to determine the proper weight to be put on them.

20.  The plaintiff called Mr Chu Chi Tung as an expert to give opinion evidence on the probable cause of the accident and related matters.  The 2nd-4th defendants called Captain Quentin Antony Robin Lloyd (“Captain Lloyd”) as expert to give opinion evidence on the same issues.

21.  I have also heard evidence from the following: Mr Kwan Kan Fat, a vessel examiner with the Marine Department and Mr Chan Fu, a shipping safety officer with the Marine Department.  Mr Kwan has previously conducted a detailed examination of the rope.  Mr Chan was the officer of the Marine Department who was tasked to investigate the accident.  It was agreed among the parties that Mr Kwan and Mr Chan should be treated as factual witnesses.  No reliance was placed by any party on the expression of any opinion from either Mr Kwan or Mr Chan, whether in the course of their oral testimony in Court or contained in the reports they produced.

22.  Mr Lim for Gammon called Mr Lee Chi Leung, a project manager in the employ of Gammon, mainly to give evidence of Gammon’s system of inspection of the marine plants including tug boats and barges, to ensure that the marine plants were safe and fit for the purpose they were used.

23.  In addition, I have also heard from Leung and from the regular Master of the tug boat, Wong Chi Fai.

Evidence on how the accident happened

24.  Cheng gave evidence that on the day of the accident he received an order from Gammon over the walkie-talkie to use the tug boat to tow SK19 to an appropriate position so that SK19 would not be in the way of the construction route used by work vessels.  Before he started the towing operation, he saw the yellow steel tank on SK19 and noticed that a small part of the tank protruded beyond the bow of the barge.  He did not ask for the tank to be removed.

25.  He said that after the crewmen on SK19 tied the tow line on the bollard on the starboard side of SK19, he steered the tug boat to the right and moved to somewhere outside column A5.  He said there was 30 metres between each column and he was doing less than 1 knot.  He said he travelled for less than 5 minutes.  When he reached what he regarded as the destination he used the loud hailer in the tug boat to instruct the crew on SK19 to drop the anchor and release the rope.  He found, however, that the rope had not been released.  He said he had cut the power of the tug boat by then.  He said he found that the rope had not been released, and the anchor had not been dropped.  He therefore used the loud hailer to repeat his orders.

26.  According to Cheng, the direction of the current was from Lei Yu Mun towards the west.  The tug boat was originally moving at an easterly direction.  His evidence is that after he disengaged the gear, the current pushed the tug boat sideways and she ended up with her bow pointing to north and her stern pressing against SK19.  He later clarified that the reason why the tug boat came to face north was because he steered her a little bit to avoid collision with two barges moored at a position outside A7 and A8.  When giving that evidence, Cheng pointed to sketch 3 in Annex B to the report of Mr Chan Fu.  One of the barges was SH201.

27.  When the 2 vessels were in the position thus described, the tug boat was no longer in control of her tow.  The evidence is that SK19’s residual momentum carried her forward, dragging the tug boat along.  In other words, the tow was towing the tug.  This continued for some time until SK19 eventually hit SH201.  He heard the sound of the rope breaking and saw the rope hit on to the cabin.  He started to look for the plaintiff and found him lying under the ladder.  He then summoned help and took him to the hospital.

28.  Lam had made a number of statements.  The earliest in time appears to be a statement he made to Gammon on 13 November 2000, just one day after the accident.  In that statement, he said that when the Master of the tug boat shouted the order of dropping anchor, Ho Fu Shing went to cast the anchor.  Next, the Master of the tug boat ordered the release of the tow rope, but when he tried to do so, it was very tight and could not be released.  About a minute later, he heard the sound of the rope breaking.

29.  The second statement Lam Chin made was to the Marine Department.  It was dated 30 November 2000.  The additional information he provided in that statement was that the anchor was smoothly cast.  He repeated in this statement that the Master ordered the release of the rope right after ordering to anchor, and he reiterated that the rope was very tight then and could not be released from the bollard.  He further said that even before the Master ordered the anchor to be dropped, he saw that the tug boat had drifted to the left.  SK19 continued to move ahead until she hit the starboard rear of SH201.

30.  His third statement was made to the Marine Department in August 2001.  In this statement he repeated that by the time he was ordered to release the rope, he could not do so because it was very tightly looped on the bollard, and he saw the tug moving to the port side.  It appears from that statement that he recalled hearing the sound of the breakage of the rope before the collision with SH201.

31.  Ho Fu Shing made a statement to Gammon on 13 November 2000.  The version of events he gave in that statement is the same as that contained in Lam’s statement made on the same day.

Findings as to how the accident happened

32.  Having considered his evidence against the rest of the evidence, especially evidence which is not in dispute, I find that Cheng left it too late before he stopped the engine of the tug boat and asked Lam and Ho to drop the anchor and release the tow rope.  But for the fact that he left it too late, it is not reasonably explicable why SK19 ended up colliding with SH 201 and why he lost control of the towing operation.  I note that at one stage of his evidence, Cheng indicated that his intended destination of SK19 was off A5.  But later in his evidence, when he was asked to mark the position where he started to switch to off gear, he marked a position off A6.  More significantly, when he was asked why the tug boat faced north after he engaged the off gear, he said it was because he steered the vessel a little bit to avoid the two vessels, one of them being SH201.  This suggests that he allowed the tug boat to have proceeded way beyond his intended destination position and approaching too close to SH201 before taking avoidance action.  This resulted in the unusual and fairly dangerous situation that the tow, SK19, was towing the tug, and the Master of the tug boat losing control over the operation.

33.  I further find that when Cheng called out to Lam and Ho to release the tow rope, the same was under tension and could not be released.  I reject Cheng’s evidence to the contrary.  Whilst I bear in mind that the defendants have had no opportunity to cross-examine either Lam and Ho, I find, having considered their evidence against the facts which have been proven, that their evidence is likely to be true.  I do not accept Cheng’s evidence to the effect that SK19 travelled over 60m after he had given instructions to the crew of SK19 before it collided with SH201 or his evidence that there was a lengthy period of time (almost 2 to 3 minutes) over which the tow rope was slack.  If that evidence were true, one would have expected Cheng to issue his order more than twice, and there would have been some evidence of Cheng pointing an accusing finger at the crew members of SK19 long before he stepped into the witness box.  It is perhaps not without significance that in Cheng’s witness statement, he never once suggested that he saw the tow rope to be slack at the time when he gave his orders to release the rope.

34.  I find that during all material times after the towing operation commenced, the tow rope was under tension.  After Cheng steered the tug boat towards a northerly direction, the rope remained taut because SK19 continued on its inertia towards the East, whilst the tug boat was propelled sideways by the current until her aft was either touching or was very close to the port side of SK19.  In my view, Sketch 4 of Annex B to Mr Chu’s report is likely to be a more or less accurate depiction of the positions of the tug boat and of SK19 just before the accident.

35.  During the time when the two vessels were aligned in such a position, the tow rope was stretched under tension across the edge of the yellow steel tank.  There was some debate as to whether the rope broke at the moment of collision between SK19 and SH201 or whether its breakage occurred either shortly before or after the collision.  I do not think the precise point in time matters.  I have no doubt that one reason why the rope broke was because of the position of the yellow steel tank protruding as it did beyond the bow of SK19 and forming an edge on which the tow rope had to cross once the tug boat was positioned on SK19’s port side.  The tank provided an edge which either on its own, or together with another surface from SH201, caused the breakage of the tow rope under great tension.

Negligence of the Master

36.  No one suggests that Cheng did not owe a duty of care to the plaintiff.  As the person who had overall control of the towing operation, it was plainly his duty to take reasonable care for the safety of the plaintiff.  In my judgment, he failed in that duty in two ways.  First, his conduct in the overall control of the towing operation and in his navigation of the tug boat was negligent.  He had left it far too late to cut the engine and order the release of the tow rope.  Secondly, he was negligent in starting the towing operation without first requiring the steel tank to be removed from the deck of SK19.  I accept the evidence of Mr Chu and of Captain Lloyd, the two experts called, that the protrusion of the tank was a hazard.  I do not overlook the fact that when Mr Chu gave evidence, he was not sure whether the edge was sharp enough to break and cut the tow line, whereas Captain Lloyd was of the view that the edge of the tank was not sharp. Nevertheless, Captain Lloyd said that any projection outside the fender or bow could be a problem and agreed it was undesirable to have the tank on board in this operation.  I do not accept the suggestion that because the Master was planning on a simple journey which only involved one right turn, the position of the yellow steel tank in this instance was not a concern.  In my view, prudence would dictate that one should foresee different contingencies.  In navigating in a busy harbour (albeit on a Sunday and within the works area), a prudent Master would have allowed for the contingency of sudden emergencies and would not have blithely assumed that the tow rope would not come into contact with the edge of the tank as all that was required was a right turn operation.  In my judgment, Cheng was negligent in proceeding with the towing operation without having first ensured that SK19 (which was the tow) was free from obstacles which may endanger the operation.

Vicarious liability of Tung Shun

37.  There is no dispute that Tung Shun was the direct employer of Cheng and must be vicariously liable for any negligence on his part found by the Court.

Negligence of Gammon

38.  I have recorded that Gammon’s project manager Lee Chi Leung frankly admitted that the yellow steel tank belonged to Gammon.  He further admitted that it was Gammon who made arrangement for the tank to be loaded on SK19.

39.  Mr Lim for the 1st defendant did not submit that Gammon did not owe a duty of care to the plaintiff to take reasonable care for his safety.  Rather, he concentrated on the question of standard of care. He invited my attention to two speeches of Lord Reid. The first is his judgment in The Wagon Mound No. 2 [1967] 1 AC 617 at p. 642

“... the general principle (is) that a person must be regarded as negligent if he does not take steps to eliminate a risk which he knows or ought to know is a real risk and not a mere possibility which would never influence the mind of a reasonable man. ... it is justifiable not to take steps to eliminate a real risk if it is small and the circumstances are such that a reasonable man, careful of the safety of his neighbours, would think it right to neglect it.”

The second speech is that of Lord Reid in Morris v West Hartlepool Steam Navigation Co Ltd. [1956] AC 552 at p. 574:

“It is the duty of an employer, in considering whether some precaution should be taken against a foreseeable risk, to weigh on one hand the magnitude of the risks, the likelihood of an accident happening and the possible seriousness of the consequences if an accident does happen, and on the other hand the difficulty and expense and any other disadvantage of taking the precaution.”

40.  As observed by the editors of Charlesworth & Percy on Negligence 10th ed. para. 6-08, although the four considerations identified in this dictum concern the liability of an employer, they do have a wider application.  Mr Lim urged upon the Court the following considerations:

(1)	the operation in question was a simple one of towing SK19 some 150 metres and making a right turn;
(2)	hopper barges with tank on deck were towed habitually and was not thought to be dangerous;
(3)	this was a most unfortunate accident involving a series of events, namely the presence of the tank on board with a protruding corner and Cheng’s error in navigation leading to the rope not being released and SK19 colliding with SH201.

41.  His primary submission is that the risk was small and Gammon was justified in not taking any precaution by reason of the small risk against the inconvenience of having to remove the tank for what was a very short journey.

42.  Having given this submission anxious consideration, I have come to the view that I am unable to accept it.  The risk of a rope breaking during a tow operation is plainly a serious and common risk in a towing operation.  The placing of such a large object as one finds here on SK19 must, in my judgment, involve a substantial and not slight risk that the tow rope could be fouled.  On the opinion evidence of maritime experts called before me, there appears consensus on this point.  (I should add that I attach no weight to the evidence of the opinion of Wong Chi Fai to the contrary.  That witness was called as a witness of fact and no one sought to qualify him as an expert such that his opinion evidence can be admissible.) I have also earlier indicated that I do not accept the argument that because the Master was planning on a simple journey which only involved one right turn, the position of the yellow steel tank in this instance was not a concern.  Such an argument tantamounts to saying that if all a person intends to do is to proceed on a straight line from point A to B, he is not negligent in driving a car on a road  with a defective steering mechanism.

43.  It may be true that in the present case, the accident happened as a consequence of a combination of factors.  But many accidents do.  The fact that it was the Master’s negligent navigation which led to a situation where the tow rope could not be released in time was no doubt a contributing cause of the accident.  But this does not mean that it is not foreseeable that the tank could not have fouled the tow rope and caused its breakage.  If an accident is foreseeable, it matters not that the precise way in which the accident occurred was not foreseen.

44.  Further, there is no suggestion here that removal of the tank would have involved disproportionate expense.

45.  Being of the view that Gammon failed to measure up to the standard of care required of it, I find Gammon to be liable for the accident along with Tung Shun and Cheng.

Contributory Negligence?

46.  Contributory negligence is asserted as against the plaintiff.  It was alleged that the plaintiff should not have gone on deck as he could be hit if the rope broke.  I have no hesitation in rejecting that argument.  I accept the evidence of the experts that it was reasonable for the plaintiff to take the order of the Master as an implicit order to him to retrieve the rope (as otherwise the loose rope could foul the propeller), such that it was reasonable for him to have proceeded on to the deck.  Indeed, Captain Lloyd’s evidence is that the plaintiff was actually not in what he called the “snap back area”.  He did not think that where the plaintiff was would pose a direct hazard.

47.  There is also an allegation that the plaintiff was responsible for managing and co-ordinating the towing operation and that he had failed to ensure that SK19 was towed in a safe manner.  There was however no evidence as to any act or omission on the part of the plaintiff which could be said to amount to a failure to take reasonable care for his own safety.

48.  In my judgment, the defendants wholly failed to establish contributory negligence.

Apportionment of Liability as among defendants

49.  Gammon has served a notice of contribution against the 2nd -4th defendants; and vice versa.  Section 4(1) of the Civil Liability (Contribution) Ordinance provides that the amount of the contribution recoverable from any person shall be such as may be found by the court to be “just and equitable having regard to the extent of that person’s responsibility for the damage in question”.

50.  The court is thus required to apportion contribution to liability as between Gammon on the one hand and Tung Shun and Cheng on the other, the latter two parties being joint tortfeasors.  In doing so, I have to have regard both to causation and to the relative blameworthiness of the parties, see Miraflores (Owners) v George Livanos [1967] AC 1 826 at 845 and Baker v Willoughby [1970] AC 467 at 490.

51.  In my judgment, a fair apportionment as between Gammon on the one hand and Tung Shun and Cheng on the other would be in the proportion of 25:75, having regard to causation and to relative blameworthiness.  This proportion reflects my view that the primary cause of the accident was Cheng’s negligence in the respects identified in this judgment, as well as the fact that being the Master in charge of a towing operation, he should bear heavier responsibility (compared with Gammon) in ensuring the safety of that operation.

Merchant Shipping (Limitation of Shipowners Liability) Ordinance

52.  After the close of the evidence, this case was adjourned to enable the parties to prepare their written submissions.  On the resumed hearing, Mr Coleman (who had not earlier appeared in this case) argued before me that Tung Shun as owner of the tug boat and Cheng as the Master are entitled to rely on a limitation of liability under Part III of the Merchant Shipping (Limitation of Shipowners Liability) Ordinance, Cap. 434.  Counsel informed the Court that this was the first time that this defence is being invoked in a claim by an employee for damages for personal injuries in Hong Kong.  What he sought was not an order actually quantifying the amount of liability, but a ruling from the Court that Tung Shun and Cheng are entitled to the limitation.  If limitation of liability applies, the amount recoverable would be limited by reference to the tonnage of the vessel.  For present purposes, it is unnecessary for me to go into the calculations.  It suffices to mention that the 2nd-4th defendants’ submissions indicate that if the defence is upheld, they would seek to limit quantum to a sum in the region of HK$2.2 million, before deduction for employees’ compensation already paid.

53.  This Ordinance came into effect in October 1993.  Section 12 of the Ordinance makes the Convention on Limitation of Liability for Maritime Claims, 1976 part of our domestic law.  Schedule 2 sets out the Convention.  Article 2 sets out what claims are subject to limitation.  Article 2(1)(a) reads:

“	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 ... occurring on board or in direct connection with the operation of the ship or with salvage operations, and consequential loss resulting therefrom ...”

54.  It seems to me that the claim in question does fall within Article 2(1)(a) and is prima facie subject to limitation under the Convention.

55.  Article 1(4) provides that

“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.”

56.  Since I have found the shipowner, Tung Shun, to be responsible on account of the act neglect or default of Cheng, Cheng would prima facie be entitled to avail himself of the limitation of liability under the Convention.

57.  The remaining question is whether Article 3 or 4 (to which Article 2 is subject) applies.

58.  Article 3 is entitled “Claims excepted from limitation” and Article 4 is entitled “Conduct barring limitation”.  There is no suggestion that Article 4 applies in this case.  That relates to loss resulting from act or omission committed ith intent to cause such loss or recklessly with knowledge that such loss would probably result.

59.  One turns then to Article 3.  This provides:

“	The rules of this Convention shall not apply to -
	(a)	claims for salvage or contribution in general average;
	(b)	claims for oil pollution damage within the meaning of the International Convention on Civil Liability for Oil Pollution Damage...;
	(c)	claims subject to any international convention or national legislation governing or prohibiting limitation of liability for nuclear damage;
	(d)	claims against the shipwoner of a nuclear ship for nuclear damage;
	(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.”

60.  Mr Lam for the plaintiff made essentially two submissions.  He contended firstly that the limitation does not apply to Tung Shun as employer of the plaintiff.  Secondly, he relied on Article 3(e) and contended that the Employees Compensation Ordinance is legislation governing the contract of service between the shipowern and the servant under which the shipwoner is not entitled to limit his liability.

61.  I reject the first argument.  It is plain that the fact that the plaintiff was an employee or servant of the shipowner is not by itself sufficient to exclude the operation of the limitation of liability under the Convention.  For Article 3(e) to apply, there has to be a law governing the contract of service between the shipowner and such servants that the shipowner is not entitled to limit his liability in respect of such claims, or is permitted to limit his liability to an amount greater than that provided for in Article 6.  Mr Coleman pointed out that section 185(4) of the Merchant Shipping Act 1995^[1] is such a provision but submitted that it has no equivalence in Hong Kong.

62.  I reject the second argument.  In his further written submissions served with retrospective leave of the Court, Mr Lam appeared to concede that there was no direct prohibition against limitation of liability under the Employees’ Compensation Ordinance.  (He appeared to accept, rightly in my view, that provisions in the Ordinance which prescribed the amount of compensation under the Ordinance did not really assist, as Article 3(e) only applies if there is a law restricting the limitation of liability in respect of “such” claims.) He nevertheless argued that such prohibition can be inferred from sections 40 and 43(1) of that Ordinance.  I fail to see how such an inference could be drawn.  Section 40 is concerned with compulsory insurance.  It provides that no employer shall employ any employee in any employment unless there is in force in relation to such employee a policy of insurance covering a sum of not less than $100 million in any single event.  Section 43 is concerned with conditions under which liability for payment by insurer arises.  Subsection (1) provides that

“Subject to this section, where in relation to an employee there is in force a policy of insurance issued for the purposes of this Part and the employer of the employee becomes liable to pay any sum under this Ordinance or independently of this Ordinance in respect of an injury to the employee arising out of and in the course of his employment, such sum shall forthwith become due and payable by the insurer....” (The words italicised above are emphasized by Mr Lam in his submissions.)

63.  There is nothing in these provisions which can, in my view, be regarded as law disentitling the shipowner from limiting his liability to the employee.

64.  When the trial resumed before me for oral submissions, Mr Lim was content to make no submissions on this question.  In the course of exchange between bench and Bar, it became apparent to Mr Lim that the outcome on this issue may well have a significant effect on his client’s ultimate exposure on any judgment against it.  He sought leave to file further written submissions.  There having been no objection, leave was granted.  The Court has subsequently been furnished with Mr Lim’s submissions on limitation of liability.  His primary submission is a refutation of the contention made on behalf of Tung Shun and Cheng that there was no law in Hong Kong prohibiting employers from limiting their liability.  He drew attention to the Control of Exemption Clauses Ordinance, Cap. 71.  Section 7(1) of that Ordinance reads:

“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.”

65.  Mr Lim also drew attention to Schedule 1 of that Ordinance.  Paragraph 4 of Schedule 1 reads:

“Section 7(1) and (2) does not apply to a contract of employment, except in favour of the employee.”

66.  Mr Lim argued that section 7(1) of Cap. 71, when read with paragraph 4 of Schedule 1, is a statutory provision which governs the contract of service between a shipowner and its employee which prohibits the shipowner from limiting his liability of a claim from the employee in respect of death or personal injury.

67.  Mr Coleman’s response is that Cap. 71 is concerned only with control of contractual limitation of liability, and not with limitations of liability imposed by legislation.

68.  Whilst I accept Mr Coleman’s submissions that section 7 of Cap. 71 is concerned with prohibition of a contractual limitation of liability which, as the section envisages, is by way either of a contract term or a notice, this does not, in my view, determine the issue.  Article 3(e) excepts any claim by a servant against the shipowner from the operation of the Convention if “under the law governing the contract of service between the shipowner ... and such servants the shipowner ... is not entitled to limit his liability in respect of such claims ...”.  The questions which I have to consider are (i) what is the “law governing the contract of service” between the shipowner and the servant, and (ii) whether under that law, the shipowner is not entitled to limit his liability in respect of such claims. On the evidence before me, the “law” that governs the contract of service is Hong Kong law, being that body of law with which the contract has the most substantial connection.  Under Hong Kong law and in particular section 7 of the Control of Exemption Clauses Ordinance, an employer is not allowed to “restrict his liability for death or personal injury resulting from negligence”.  It seems to me that this conclusion also accords with a purposive construction of the Convention.  The rationale for Article 3(e) is the recognition by the Convention that a party State or jurisdiction under the Convention should be allowed the freedom to opt out of limitation of liability in the case of employees’ claims.  There is no reason why this must take the form of a specific legislation such as that found in the Merchant Shipping Act 1995.  If, as we have in Hong Kong, a general policy as enshrined in section 7(1) of the Control of Exemption Clauses Ordinance that an employer is not allowed to limit his liability to an employee for damages for personal injuries arising out of or in the course of employment, that would, in my view, suffice for the purpose of manifesting the requisite intention of opting out, thereby excluding the operation of the Convention.

69.  Accordingly, I find that Article 3(e) is applicable with the result that the limitation of liability provided for in the Convention does not apply to this claim.

Order

70.  For the reasons I have endeavoured to state, I would enter judgment for the plaintiff against the 1st, 2nd and 3rd defendants for damages to be assessed.  I order that as between the 1st defendant and the 2nd and 3rd defendants, they shall contribute to the damages to be assessed in the ratio of 25:75.  I declare that the limitation of liability under the Merchant Shipping (Limitation of Shipowners Liability) Ordinance does not apply.  I dismiss the plaintiff’s claim as against the 4th defendant.  I make an order nisi that the plaintiff shall have his costs against the 1st, 2nd and 3rd defendants to be taxed if not agreed, and that the 4th defendant shall have his costs against the plaintiff, to be taxed if not agreed.  Any application to vary the costs order nisi must be made within 14 days from the date of this judgment.  Lastly, I would indicate, insofar as such indication is required to be of assistance to the Taxing Master, that this is a proper case for instructing two counsel.