In August 1999, the plaintiff's barge (the tow) sank while being towed by the defendant's vessel (the tug). In April 2005, the plaintiff filed a claim against the defendant for the loss of the tow. The plaintiff alleged the 'breach of contract on the part of the defendant and/or negligent navigation and/or management of the tug'.

The defendant contended that the plaintiff's claim was time-barred according to s 7(1) of the Merchant Shipping (Collision Damage Liability and Salvage) Ordinance Cap 508 (the Ordinance). Section 7(1) states that 'no action shall be maintainable to enforce any claim or lien against a ship or its owners in respect of any damage or loss to another vessel, its cargo or freight, or any property on board the vessel, or damages for loss of life or personal injuries suffered by any person on board the vessel, caused by the fault of the former vessel, whether such vessel is wholly or partly in fault, unless proceedings in the action are commenced within two years from the date when the damage, loss or injury was caused'.

The Court of First Instance held that there was no good reason to extend the two-year limitation period imposed by s 7(1) of the Ordinance to the plaintiff's claim. Therefore, the plaintiff's claim was time-barred: see CMI1149. The plaintiff appealed.

On appeal, the plaintiff raised three arguments. First, the words used in s 7(1) were reserved for claims in tort and not in contract. The plaintiff, in particular, focused on the word 'fault'. The plaintiff relied on The Towerfield [1949] P 10, which held that the Convention for the Unification of Certain Rules of Law with respect to Collisions between Vessels​ 1910 (Collision Convention 1910) was concerned only with what English common law calls tort and English admiralty law calls fault. In addition, the case also held that the Collision Convention 1910 had nothing whatsoever to do with contract claims.

Second, the Ordinance should be interpreted in the context of the Collision Convention 1910, which was brought into effect by the Ordinance. In particular, the plaintiff argued that s 7(1) of the Ordinance should be read in light of the premise that the Collision Convention 1910 had always been concerned with the law of tort only. The two years limitation in s 7(1) should be construed as only applicable to tort claims, rather than contract claims. To support this contention, the plaintiff submitted that art 10 of the Collision Convention 1910 suggested that the Convention did not affect a shipowner's liability in contract.

Third, the plaintiff argued that the present case was caught by art 10 of the Collision Convention 1910 on the basis that it was an implied term of the contract that the parties would be subject to all applicable legislation (notably the Limitation Ordinance Cap 347, which provided for a six-year limitation period).

Held: Appeal dismissed.

First, there was nothing in the Ordinance indicating that it should be construed as applying only to tort claims and not to contract claims. The word 'fault' which had been used in s 7(1) of the Ordinance and the Collision Convention 1910 did not connote a tortious act. In admiralty law, one often referred to the 'fault' of a vessel without distinguishing whether such 'fault' constituted a tort or breach of contract. The word 'fault' simply meant 'blameworthiness'.

Second, the Collision Convention 1910 could be applied to breaches of contract. For instance, art 4 of the Collision Convention 1910 gave a right of contribution. The last sentence of art 4 stated that the right of contribution was subject to 'the meaning and effect of any contract ... which limits the liability of the owners of a vessel towards persons on board'. Therefore, if the plaintiff's contention was right, there would be no need to add this qualification to the last sentence of art 4.

Third, s 8 of the Maritime Conventions Act 1911 (UK), upon which s 7(1) of the Ordinance was based, did not refer only to tortious wrongs. It also contained a reference to salvage claims which normally arise from salvage contracts. Although s 7(1) did not contain a reference to salvage claims, this was merely because salvage claims were governed by the Salvage Convention 1989, contained in sch 1 of the Ordinance. Otherwise, it was not envisaged that s 7(1) would alter the treatment of collision cases under the law of Hong Kong.

Fourth, the Collision Convention 1910 imposed its two-year limitation period from the date of a 'casualty'. Section 7(1) mirrored this by reckoning time from 'the date when the damage, loss or injury was caused'. The plaintiff contended that these words could not refer to a breach of contract because a cause of action for breach of contract arose when a breach was committed. In contrast, an action in the tort of negligence arose when loss or damage was actually incurred. However, the wording did not mean that the two-year limitation period could only be applied to tortious claims. This was because the legislature was entitled to impose whatever limitation it deemed appropriate.

Fifth, art 7 of the Collision Convention 1910 corresponded with s 7(1) of the Ordinance. There was nothing in art 7 to suggest that the 'actions for the recovery of damages' mentioned in this article were confined to tortious actions. On the contrary, the words were general, which indicated that all actions for recovery of damages in collision cases were barred after an interval of two years from a casualty. Although arts 3 and 4 of the Collision Convention 1910 referred to liability where vessels were at 'fault', there was nothing to suggest that the word 'fault' only meant 'tortious fault'. Nothing in the text of the Collision Convention 1910 indicated that one must read 'fault' in arts 3 and 4 as excluding such 'fault' of negligent navigation in breach of contract.

Sixth, art 10 of the Collision Convention 1910 was of no assistance here. The purpose of this article was to preserve whatever contractual liabilities or limitations that relevant parties may have agreed among themselves. According to art 10, any such agreement among relevant parties was entitled to override the provisions of the Collision Convention 1910. However, there was no contract between the plaintiff and the defendant to extend the two-year time bar in art 7 of the Collision Convention 1910 or s 7(1) of the Ordinance.

Finally, parties to a contract were subject to legislation not by reason of any implied term but by reason of the natural consequence of applicable legislation. The Collision Convention 1910 was only part of Hong Kong law to the extent that it was enacted by statute. Even where the Court construed an Ordinance in light of a Convention, it must be the text of the Ordinance that ultimately governed, not that of the Convention. This was because the legislature may not have enacted a Convention in its entirety. A statute may modify the terms of a Convention. Therefore, no matter how wide art 10 of the Collision Convention 1910 might be, the Court could only enforce that part of it which had been brought into effect by the Ordinance.