On 7 November 2013 Eleni Maritime (plaintiff)’s ship the Eleni collided with Heung-A Shipping (first defendant)’s ship the Heung-A Dragon in the buoyed channel off Vung Tao, Vietnam. The Eleni sank, along with all its cargo on board. On 13 November 2013 the plaintiff served a writ of summons in rem against a sister ship of Heung-A Dragon, claiming losses arising from the collision (HCAJ 188/2013) and sought a declaration to limit liability according to the LLMC 1976 (present action). The first defendant counterclaimed against the plaintiff for its losses arising from the collision which included the wreck removal costs. A limitation decree was granted declaring that Eleni Maritime was entitled to limit its liability according to the LLMC 1976 (para 1), but art 2.1.d of the LLMC 1976 on wreck removal does not apply in Hong Kong (para 2), without prejudice to the parties’ future applications to determine questions (para 3).

Subsequently, the plaintiff constituted a limitation fund in the sum of approximately USD 6.3 million in accordance with the decree. Various claimants filed claims against the limitation fund. Among them was the first defendant who put forward a claim of approximately USD 17 million, of which USD 11 million was allocated to wreck removal costs.

The substantive issue was whether the wreck removal claims was subject to limitation (limitation issue). The parties took opposite positions, with the defendant arguing that even if the wreck removal claims fitted into the other sub-paras of art 2 of the LLMC 1976, the wreck removal claims were still not subject to limitation because they fell within art 2.1.d of the LLMC 1976, which does not apply in Hong Kong.

The case management issues were when and in which action the limitation issue should be raised. The plaintiff submitted that the defendant failed to demonstrate that it would be just and convenient to try the limitation issue separately as a preliminary issue and in any event, the issue should not be tried in this action but dealt with in HCAJ 188/2013, when the court assessed quantum.

Held: The limitation issue is to be determined in the present action.

There is a general rule that all issues arising in an action should be tried together, unless there were sufficiently exceptional circumstances or special grounds warranting departure, which the court did not find in the present action. It was sensible to decide the limitation issue in this action so that all the claimants are bound by the court’s ruling. The present action was after all a limitation action, and the other parties who would be affected by the ruling appeared in this action but not in HCAJ 188/2013. Furthermore, the determination on whether the wreck removal claims are subject to limitation will result in either a significant increase or decrease in the pro rata share of all other claimants against the limitation fund. This is because a limitation fund constituted with the court would only be available for the payment of claims ‘in respect of which limitation of liability can be invoked’ (art 11.1 of the LLMC 1976).

The court decided that the way forward was to take its natural course in the present action, rather than order the limitation issue to be tried as a preliminary issue based on assumed facts. The first defendant should set the case down for trial of the limitation issue, not as a preliminary issue, but together with all other issues, if any, of the entire action. While it is highly undesirable to determine a difficult point of law on assumed facts, the determination of the limitation issue did not have to await the determination of liability for the collision in HCAJ 188/2013. Moreover, even though the determination of preliminary issues was meant to avoid expensive trials by the resolution of key issues of law or construction at an early stage, the first defendant’s plea of supposed economy may eventually increase the parties’ costs and time and increase strain on the court’s time and resources.