HUI YAU CHUNG v. CITIZENS TRAVEL AGENCY LTD

HCPI 1234/1998
HCPI 876/2000
& HCPI 1051/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO.1234 OF 1998

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(Consolidated by Order of Master J. Wong dated 27 day of March 2004)

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J U D G M E N T

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Introduction

1. On 15 August 1997, a tour group of 45 persons under the banner of "Dragon Tour" set out from Kai Tak Airport in Hong Kong in the early morning, arriving at Ninoy Aquino International Airport in Manila some time before lunch. On the late afternoon of that same day, the tour party was taken on what in the itinerary was called "a Sunset Cruise of Manila Bay". With the exception of several of the group who chose to stay on the bus, the rest of the group boarded a boat, "the King Roger". The weather at the time of boarding was fine. There was a slight breeze and the sun was shining. The water was calm at the pier where the group boarded the boat. However a short while after it set sail from the pier, the King Roger encountered rough seas and was buffeted by waves. Soon afterwards, it capsized when it was hit by a big wave from the side. All the members of the tour group were thrown into the water. Within minutes, speedboats sped out to rescue them. Unfortunately, seven members of the tour group drowned in the incident.

2. A subsequent inquiry into this incident by the Philippines Coast Guard revealed that the King Roger was woefully overloaded at the time of the accident. It was only licensed to carry 17 passengers when it had on board some 42 passengers being the tour group members including tour guide and escort. The inquiry also revealed that the upper deck of the King Roger was a structure illegally added on and which it was not licensed to have. It was also the finding of the Philippines Coast Guard that the cause of the accident was due to the overloading and the illegal construction of the upper deck of the King Roger.

The claim

3. These three actions (HCPI 1234 of 1998, HCPI 876 of 2000 and HCPI 1051 of 2000) have been consolidated for the issue of liability. Shortly before the trial started, HCPI 876 of 2000 was settled between the parties therein on a without admission of liability basis. Thus the issue of liability to be determined now only relates to the remaining two actions.

4. In HCPI 1234 of 1998, the claim is brought on behalf of the estate of Chan Nga Moon, deceased and the estate of Vernan Yuk Lun Ho, deceased. Both deceased died as a result of that accident.

5. In HCPI 1051 of 2000, the claim is brought on behalf of the estate of Leung Po Wan, deceased, who was one of the seven who died from the accident.

6. In both actions, the claim is brought against the 1st defendant, Citizens Travel Agency Limited ("Citizens Travel"), as the operator and organizer of the fateful Dragon Tour and against the 2nd defendant, being the Hong Kong escort of that Dragon Tour, or as he is sometimes referred to as the group leader.

7. The claim against the 1st defendant is for breach of contract and also for negligence. The claim against the 2nd defendant is based only on negligence.

8. I am only concerned with the issue of liability in this trial.

Background

9. The 1st defendant, as its name suggests, conducts its business in the travel industry. It is the largest purchaser of air tickets from airlines such as Alitalia, Air France and British Airways. Quite apart from its ticketing business, it also puts together (to use a neutral phrase) package tours under the banner of "Dragon Tours". Package tours amounted to about one to two percent of the 1st defendant's business in the travel industry.

10. The package tours put together by the 1st defendant were all operated on the basis of a wholesaler as opposed to a retailer. What that means is that the 1st defendant did not have any retail outlet or counter where the public could directly apply to join in such package tours put together by the 1st defendant. Instead, these package tours were "sold" to the public through other travel agencies in Hong Kong. I shall refer to these other travel agencies as "selling agents" hereafter.

11. An arrangement existed between the 1st defendant and each of the selling agents through whom the tour packages were sold to the public.

12. Firstly, the 1st defendant would appoint the selling agents to sell its package tours. Having appointed them the 1st defendant would provide the necessary information as well as the advertising brochures for the package tours to the selling agents. The advertising brochures for the package tour were printed by the 1st defendant. As such the brochures contained the licence number of the 1st defendant as a travel agent with the Travel Industry Council ("TIC"). However, these brochures would only contain the words "Dragon Tour", being the trademark or emblem of the 1st defendant, but they will not have the name of the 1st defendant on them.

13. Secondly, there was a further arrangement between the 1st defendant and the selling agents concerning prices. Two prices were indicated by the 1st defendant in a pamphlet given to the selling agents in respect of a particular package tour. The higher of the two prices was the "suggested" price for which that particular package tour was to be sold to a member of the public. The lower of the two prices was the net price which the 1st defendant was to be paid if any member of the public wished to book a place on its package tour made through a selling agent. Effectively therefore, the difference between those two prices would be the fee or charge which the selling agent would be able to pocket for itself in the event that it successfully sold one place in such a package tour to a member of the public. The selling agent had a discretion whether to charge that member of the public the full "suggested" price or, if he should be a regular customer of the selling agent, to give a discount by charging a price somewhere in between the net price required by the 1st defendant and the suggested price. Such discretion as to what amount to charge the public rests entirely with each selling agent making the sale. The 1st defendant plays no part and is not concerned in the exercise of that discretion by the selling agent since it gets the net price required by it for a booking. So if a selling agent charges a customer only the net price asked for by the 1st defendant, all of that net price will go to the 1st defendant and the selling agent will make nothing out of that transaction.

14. Thirdly, once the selling agent has completed its part in the booking on behalf of the customer and which is accepted by the 1st defendant, it will also hand over to the customer items (tour badge, information sheet and luggage tags) contained in an envelope commonly called a "tea bag" which comes from the 1st defendant. Once the booking for that customer has been confirmed by the 1st defendant seven days before the scheduled date for departure of that particular tour, the selling agent drops out of the picture. Thereafter, it only remains for the customer to present himself at the airport at the scheduled time and physically take part to join the Dragon Tour by meeting up with the group leader who would be holding a banner with the words "Dragon Tour" on it.

Relationship between tour members and 1st defendant

15. Against this background, it is the plaintiff's case that there was a contractual relationship between the 1st defendant and each tour member such that the 1st defendant was under a duty to the tour members not only to provide the services and the itinerary promised under the brochure in respect of the package tour but also under a duty to ensure the reasonable safety of the tour members when providing such services.

16. On the other hand it was submitted by the 1st defendant that no contractual relationship existed between the 1st defendant and the various tour members. In this connection, it was submitted by the 1st defendant that the selling agents were acting as principals in selling the Dragon Tour to members of the public in their own right.

17. The evidence in the case showed that the selling agents had no rights, control or interests in the services to be rendered to the customer in respect of the Dragon Tour.

18. This is clearly demonstrated by the fact that the brochures and itineraries for the Dragon Tour were designed and finalized by the 1st defendant. Both the "suggested" fee and the net fee for the tour was set by the 1st defendant. The local land operator in the Philippines were chosen or appointed by the 1st defendant alone. Visa applications to enter the Philippines were processed by the 1st defendant for those who had booked on the tour and not by the selling agents.

19. The only role played by the selling agent is that it booked a place for the customer on the Dragon Tour and for doing so, it was able to earn its "commission", the amount of which it had a discretion to decide upon within the limits of the fees suggested by the 1st defendant.

20. Secondly, the evidence of Simon Tam from the Bank of China Travel Agency ("BOC") was that when customers came to BOC and wanted to book a Dragon Tour package, he would make clear to the customer that BOC was only acting as the agent of Dragon Tour in selling its package tours. Moreover, if BOC's name appeared on any pamphlets promoting Dragon Tour, it would be designated as an agent for the Dragon Tour.

21. There is also evidence from Norine Chan of TOWA that when Iris Wong booked the Dragon Tour through her, she told Iris Wong that the Dragon Tour was organized by Citizens Travel (i.e. the 1st defendant).

22. Tour members who testified in court gave evidence that the tour badges they wore bore the name of "Dragon Tour". All the members knew that they had joined Dragon Tour albeit that they may not know the actual identity of the organizer and operator of the tour itself. It was however common ground that the selling agents all knew that Dragon Tour was organized and operated by the 1st defendant.

23. When visa applications were processed by the 1st defendant for tour members who had booked on Dragon Tour, the 1st defendant had to sign a declaration guaranteeing that the tour members would return to Hong Kong upon expiry of the visa. On that document, the tour members were described as "clients" of the 1st defendant.

24. It should also be noted that during the course of the tour itself, the 1st defendant engaged the services of the 2nd defendant as the tour leader or group leader to accompany the tour group throughout the tour. The 2nd defendant had to look after the group from start to end of the tour, to liaise with the local land operator in the Philippines (also engaged by the 1st defendant) and to consult with the 1st defendant if circumstances required.

25. On the other hand, none of the selling agents had any role to play during the entire course of the tour.

26. After the accident, the 2nd defendant immediately reported to Danny Chow of the 1st defendant of the accident. Danny Chow and Martin Wong, both of the 1st defendant then enquired with Eddie So of Landmark, the local land operator in the Philippines, as to the cause of the accident. The 1st defendant facilitated the release of $100,000 compensation to each deceased's family as well as paying for the family members of the deceased to go to the Philippines and to arrange for the dead bodies to be returned to Hong Kong. Danny Chow himself personally attended the funerals of the deceased. Furthermore, the 1st defendant paid $45,000 to each deceased's family as funeral expenses and arranged for the refund of all the tour fees and visa fees to all the tour members of this Dragon Tour.

27. Once again none of the selling agents played any part in any of these arrangements.

28. From all this evidence, it is impossible to escape the conclusion that the 1st defendant had appointed and authorized the selling agents to accept bookings on the Dragon Tour for it from the general public. In so doing, the 1st defendant undoubtedly contracted by conduct with each of the tour members to provide the tour services promised and promoted under the name of Dragon Tour to them.

29. On the evidence, and against the background, I am unable to accept the 1st defendant's submission that the selling agents sold the Dragon Tour in their own right as principal and were themselves responsible to the customer to whom they sold for the services rendered in the tour.

30. It may be that each customer and the selling agent with whom he was dealing was dealing with each other as principal and likewise the selling agent and the 1st defendant was also dealing with each other as principal but only as regards the booking of the particular tour and the payment of same and no more. That does not relate to the services to be provided which is the subject matter of the Dragon Tour. In so far as the "contract" for services of the tour itself is concerned, that is a separate contract which comes about when there is a successful booking accepted by the 1st defendant. With a successful booking accepted by the 1st defendant, a contract is formed between the 1st defendant and the individual tour member who is thus booked on the tour. That contract binds the 1st defendant to provide the services promised as per the brochure and the rules contained in it to the tour member in respect of that particular tour on which he is booked.

31. Accordingly, I find that there was a contractual relationship arising between each tour member and the 1st defendant in so far as the Dragon Tour is concerned.

Plaintiff's case against 1st defendant

32. Having found that there was a contractual relationship between the 1st defendant and each of the tour member of this Dragon Tour, the plaintiff's case against the 1st defendant is premised upon the 1st defendant's implied duty of care arising from contract. Such duty co-existed in tort since the members of the tour relied upon the 1st defendant's expertise as the organizer and operator of the Dragon Tour.

33. The plaintiffs say that the services rendered by the 1st defendant as the tour operator shall be provided with reasonable skill and care.

34. On the other hand, it is the 1st defendant's case that the 1st defendant only owed a duty to the tour members to exercise reasonable care and skill in its choice and appointment of the overseas operator, Landmark Travels and Tours Inc. (Landmark). The 1st defendant says that its duty does not go as far as to ensure against all risks, but only those risks which is reasonably foreseeable or which it knows of or ought to have known of.

35. In this respect the 1st defendant relies on the general principle of law that a person cannot be held liable for any negligence of an independent contractor appointed by him if he himself has not been negligent.

36. Therefore, says the 1st defendant, it should not be held to be negligent in appointing Landmark, an independent contractor, as the operator for the Dragon Tour in the Philippines because the evidence in the case shows overwhelmingly that both Eddie So and Landmark enjoys a high and reliable reputation in the travel industry. Moreover there is evidence that Hong Thai, one of the biggest tour operators in Hong Kong, still uses Landmark as their overseas operator up to the present.

Duties and obligations of 1st defendant

37. From the evidence, there can be no question that the 1st defendant was the organizer and operator of Dragon Tour. Quite apart from the evidence already referred to above relating to the dealings between the 1st defendant and the selling agents in relation to Dragon Tour, there is also evidence which shows that the 1st defendant was in total control and had full say in the appointment of Landmark as its overseas operator after having terminated the services of Landmark's predecessor in about February of 1997.

38. The "net charge" of the tour fee was paid by the selling agent to the 1st defendant in respect of each tour member who made a booking through selling agent. That "net charge" of the tour fee included the air tickets, hotel accommodation, meals, the sight seeing provided for in the itinerary and transportation for same during the course of the five days. The visa applications were processed by the 1st defendant for tour members.

39. The 1st defendant had designed, published and promoted all advertising material in relation to the Dragon Tour including the Brochure Booklet which formed the basis of the contract with each tour member. Danny Chow, Martin Wong and Simon Tam all agreed in their evidence that words such as "our company" and "this company" appearing in the Brochure Booklet and other promotional documents of the Dragon Tour referred to the 1st defendant.

40. All the promotional material for the Dragon Tour were submitted by the 1st defendant to TIC for inspection and approval before it was made available to the selling agents and the public.

41. There is also evidence that the 1st defendant had the final say in what itinerary is to be included in the programmes for the Dragon Tour as for instance, the 1st defendant wanted Landmark to come up with a special programme for the summer vacation and as a result the Sunset Cruise of Manila Bay became an added feature for Dragon Tours over the summer holiday period. The 1st defendant had the final say in the inclusion of this added feature to its Dragon Tours.

42. The 1st defendant also had full say in the prices of the individual programmes of the tour since that affected the ultimate profit of the 1st defendant.

43. Landmark was appointed and engaged by the 1st defendant as the local land operator but the name of "Landmark" is not made known expressly to any of the tour members in any of the promotional document of Dragon Tour, albeit reference is made in clause 6 of the Travel Rules that some of the services were to be carried out by companies other than the company operating the Dragon Tour.

44. The name of "Dragon Tour" is generally applied to the entire five days of the whole tour. It appears on all the promotional document as well as on the tour badges supplied to each tour member and also on the front windscreen of the coach or coaches used in the Philippines to transport the group of tour members around.

45. From this evidence I find that the 1st defendant not merely co-ordinated or arranged for the services in the Dragon Tour to be provided, but they were the organizers and operators of the Dragon Tours and undertook to provide those services including the Sunset Cruise of Manila Bay to the tour group on this Dragon Tour. It follows therefrom that even if some of the activities on the programme were to be carried out by others, the law implies into the contract a term that the services rendered by the 1st defendant would be provided with reasonable care and skill. That was a primary obligation of the 1st defendant in contract. (see Privy Council decision in Wong Mee Wan v. Kwan Kin Travel Services Ltd [1995] 3 HKC 505).

46. The fact that the 1st defendant engages Landmark or others to perform some or all of the services to be performed in the Philippines in respect of the Dragon Tour does not absolve the 1st defendant from its primary obligation to the tour members.

47. In the present case, there can be no question but that Landmark was negligent. The evidence shows that Landmark was given the go-ahead by the 1st defendant to include the Sunset Cruise of Manila Bay into the Dragon Tour programme some time in June 1997. All the arrangements were then left by the 1st defendant to Landmark to handle, including the chartering or hiring of the boats for the cruise. No one from the 1st defendant went down to the Philippines to look into the safety aspect of the boats that would be used for such cruise in particular the carrying capacity. That duty presumably also fell upon Landmark.

48. There was no evidence that any steps were taken either by the 1st defendant or by Landmark to make any enquiries into the carrying capacity of the boats being used for the Sunset Cruise. That was a step one would expect to be reasonably taken when it was decided that the Sunset Cruise was to be included in the itinerary for the Dragon Tour. Therefore whether it was the failing of the 1st defendant or Landmark or both of them does not matter. The 1st defendant must be liable for such breach of duty.

Plaintiff's case against the 2nd defendant

49. The plaintiff's case against the 2nd defendant is brought only in negligence.

50. The evidence in the case shows that the 2nd defendant was what is called a "freelance" tour leader. He was not normally an employee of the 1st defendant, but August being a peak season for package tours because of the summer vacation, he was recruited to lead this Dragon Tour. As such, his remuneration comes mainly from the tips which was "suggested" for each tour member to pay to the tour leader at the end of this tour.

51. The duty expected of him as a tour leader was said to be firstly, to liaise with the local land operator if any difficulty in the itinerary is encountered in the course of the tour, secondly to liaise with the 1st defendant if such difficulty could not be resolved by liaising with the local land operator. Generally, the 2nd defendant is to see to the needs or complaint (within reason) of any of the tour members in respect of the set programmes and itinerary of the tour and to ensure that every item of the tour runs smoothly and properly. In short to take care of the members on tour. In this respect, it is accepted by the 2nd defendant that he has a general duty to take care of their reasonable safety while on tour. The 2nd defendant denies that he was in breach of that duty.

52. It is common grounds between the parties that at the time of this accident in August of 1997, there were no requirements imposed by the TIC as to the licensing qualifications of tour leaders. However, subsequent to this accident, regulations came into force whereby tour leaders had to qualify and obtain a licence from the TIC in order to be able to act as tour leaders. One of the requirements to be met in order to obtain a licence to be tour leader was to pass an exam including the aspect of safety as regards tour members on tour.

53. In so far as the plaintiffs' allegations that the 2nd defendant had breached his duty towards all the tour members including the deceased in this case and was therefore negligent in the discharge of his duties, the plaintiff rely on the following :

(a) The 2nd defendant was the agent or representative of the 1st defendant on the tour;

(b) The 2nd defendant had failed to check the licensed carrying capacity of the King Roger before allowing the tour members to board it; and

(c) Relying on the answers given by the 2nd defendant at the Death Inquest, (when the 2nd defendant said he thought the condition of the King Roger to be "very dangerous" after he had boarded the boat because the boat seemed to be worn out, it had only about 8 to 10 life jackets on board and it was only a wooden boat), the 2nd defendant failed to take any steps or to react properly to such perceived danger by him by stopping the cruise from going ahead thereby failing to reasonably ensure the safety of the tour members.

54. Moreover, the plaintiffs rely also on the evidence of Ho Yan that when he boarded the vessel, he had asked both Sally Yip (the local tour guide) as well as the 2nd defendant whether the boat was safe and the answer from the both of them was that there was no problem.

55. This evidence is disputed by the 2nd defendant whose evidence is that he was never asked that by Ho Yan or anyone else and he never gave such an answer to Ho Yan. This is one area of factual dispute in this case.

56. On this disputed issue, I have no reason to disbelieve the evidence of Ho Yan. While I do not think that the 2nd defendant was lying about this occurrence, it is well possible that this was not something sufficiently significant at the time to have been remembered by the 2nd defendant when he answered that query from Ho Yan. I accept the evidence of Ho Yan in this respect but I do not think that makes any difference as to the liability of the 2nd defendant.

57. I turn now to the question whether the 2nd defendant was negligent as alleged by the plaintiff.

58. The starting point must be the cause of the accident. That has been determined by the Philippines Coast Guard holding its inquiry into this accident as being the overloading of the King Roger and the illegal structure of the upper deck. That has been relied on in this case as the cause of the accident and has not been disputed by the defendants or any of them.

59. No other evidence has been adduced to show that the cause is other than or in addition to those two causes. There is certainly no evidence that the accident was caused by the unseaworthiness of the King Roger or that it was due to insufficient life jackets. There is not even evidence that any attempts had been made to distribute life jackets to those on board when the sea became rough. In fact the evidence showed that the wave which caused the King Roger to capsize came so quickly after the initial wave which rocked the boat, there was probably too little time to even think of life jacket. This was not a case where the boat slowly sank such that the occupants had time to put on life jackets as a safety precaution.

60. In the circumstances, if the 2nd defendant was negligent, that negligence of his can only be in relation to the commonly accepted causes of the accident, and not to matters outside of the causes of the accident.

61. I therefore do not accept the contention by the plaintiffs that the 2nd defendant was negligent in failing to take any proper steps to stop the cruise because he had said what he had said at the Death Inquest. Those matters did not relate to the overloading or the illegal structure of the upper deck.

62. In any event, when the party including the 2nd defendant boarded the King Roger, the sun was shining, there was a slight breeze and the water was calm. All this pointed to an ideal situation for a cruise. The situation only became dangerous after the boat had set sail and when it became windy and the seas became rough. By that time they were already out at sea with the boat being controlled by the captain of the King Roger. As such there was precious little the 2nd defendant could do, let alone stop the cruise.

63. Coming next to whether the 2nd defendant ought to have taken any steps to check the loading capacity of the King Roger before he allowed the tour party to board the boat and whether he was negligent in not doing so.

64. Firstly, there was no evidence that the 2nd defendant was ever instructed to carry out such a duty by the 1st defendant when he was engaged to be the tour leader.

65. The evidence was that the arrangement to hire boats for this cruise was put in the hands of Landmark, the local tour operator engaged by the 1st defendant to deal with all the tour services in the Philippines in respect of this tour. The evidence also shows that Landmark had forwarded to the 1st defendant some time in June 1997 the licensing and registration documents in relation to the type of boats similar to the King Roger which would be used for the Sunset Cruise when it was intended for such an item to be added to the itinerary of the Dragon Tour. Strangely however, the licensed carrying capacity of such boats was not apparent on any of the licensing or registration documents sent by Landmark to the 1st defendant and seemingly no queries had been raised either by Landmark or the 1st defendant relating to that aspect. That was a failing on the part of both of them.

66. As for the 2nd defendant, not only was he never instructed to check the carrying capacity of the boat to be used for the Sunset Cruise, in all the circumstances of the case, it is reasonable for him to expect that that was a matter which would have been dealt with either by the 1st defendant or Landmark who had been engaged by the 1st defendant to make all the necessary arrangements for the hiring of such boats for the Sunset Cruise.

67. The 2nd defendant may well be the agent of the 1st defendant, but he was not the agent tasked with arranging for the use of these boats in particular the King Roger for the Sunset Cruise. Instead Landmark was the agent of the 1st defendant who was given that duty. If Landmark failed in their discharge of that duty, the 2nd defendant cannot be held accountable simply because he was also the agent of the 1st defendant but in respect of other duties.

68. Finally, even though the 2nd defendant answered Ho Yan's query that it was safe, that is neither here nor there. At the time he said those words (before boarding the boat), there was nothing to indicate to the 2nd defendant that it was not safe. Moreover, the plaintiffs' case is not based on representation or warranty by the 2nd defendant. In all the circumstances, I do not see how the 2nd defendant could be negligent by saying those words.

69. For the reasons set out above, I have come to the conclusion that the 2nd defendant was not in breach of any duty towards the members of the tour including the deceased in respect of this accident.

Conclusion

70. Accordingly, there will be interlocutory judgment on liability in favour of the plaintiffs in HCPI 1234 of 1998 and HCPI 1501 of 2000 against the 1st defendant with damages to be assessed. The plaintiffs' claim in both cases against the 2nd defendant is dismissed.

Costs

71. There will be a costs order nisi as follows :

(a) Costs of the plaintiffs' action and trial on liability in both cases be paid by the 1st defendant; and

(b) The plaintiffs in both cases do pay the 2nd defendant his costs of defending their claims.