Fong Yau Hei (the plaintiff) suffered severe injuries due to being hit by the recoil of a tow rope that suddenly broke. At the time of the accident, the plaintiff was employed by Tung Shun Transportation & Engineering Ltd (the second defendant), which contracted with Gammon Construction Ltd (the first defendant) to supply vessels and crew for construction works. Cheng Kan Ho (the third defendant) and the plaintiff were the only persons on the tugboat. The fact that the rope recoiled and hit the plaintiff with such force to cause serious injuries could only be consistent with the rope being under tension when it broke. The plaintiff claimed against the three defendants for breach of obligations. The second and third defendants raised a defence of limitation of liability. They relied on the Convention on Limitation of Liability for Maritime Claims of 1976 (LLMC 1976) which had been made part of Hong Kong law by the provisions of the Merchant Shipping (Limitation of Shipowners' Liability) Ordinance, Cap 434. The second and third defendants sought to limit the quantum of their liability to HKD 2.2 million.

Held: Judgment for the plaintiff.

There is no dispute that the second defendant was the third defendant's direct employer and must be vicariously liable for any negligence on his part. Being of the view that the first defendant failed to measure up to the standard of care required of it, the Court finds the first defendant to be liable for the accident along with the second and third defendants.

A fair apportionment between the first defendant on the one hand and the second and third defendants on the other would be in the proportion of 25:75, having regard to causation and relative blameworthiness. This proportion reflects that the primary cause of the accident was the third defendant’s negligence, as well as the fact that being the master in charge of a towing operation, the third defendant should bear heavier responsibility (compared with the first defendant) in ensuring the safety of that operation.

Since the shipowner (the second defendant) is responsible for the negligence of the third defendant, the third defendant would prima facie be entitled to avail himself of the limitation of liability under the LLMC 1976. The remaining question is whether arts 3 or 4 (to which art 2 is subject) of the LLMC 1976 apply. Article 3 of the LLMC 1976 is entitled 'Claims excepted from limitation', and art 4 is entitled 'Conduct barring limitation'. There is no suggestion that art 4 applies in this case. Article 4 relates to loss resulting from act or omission committed with the intent to cause such loss or recklessly with the knowledge that such loss would probably result.

The plaintiff makes two submissions. First, the limitation does not apply to the second defendant as the employer of the plaintiff. Second, the plaintiff relies on art 3.e of the LLMC 1976 and contends that the Employees' Compensation Ordinance, Cap 282 (the Ordinance) is the legislation governing the service contract between the shipowner and the servant, in terms of which the shipowner is not entitled to limit its liability.

The first submission should be rejected. 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 LLMC 1976. For art 3.e to apply, there has to be a law governing the contract of service between the shipowner and its servants such that the shipowner is not entitled to limit its liability in respect of such claims, or is permitted to limit its liability to an amount higher than that provided for in art 6 of the LLMC 1976. The second submission should also be rejected since there is nothing in the provisions of the Ordinance that can be regarded as law disentitling the shipowner from limiting its liability to the employee.

However, the rationale for art 3.e is the recognition by the LLMC 1976 that a State Party or jurisdiction under the LLMC 1976 should be allowed the freedom to opt out of limitation of liability in the case of employees' claims. In Hong Kong, the general policy as enshrined in s 7(1) of the Control of Exemption Clauses Ordinance, Cap 71, is that an employer is not allowed to limit its liability to an employee for damages or for personal injuries arising out of or in the course of employment. In the Court's view, this section is sufficient for the purpose of manifesting the requisite intention of opting out and thereby excluding the operation of the LLMC 1976.

Therefore, art 3.e of the LLMC 1976 is applicable, with the result that the limitation of liability provided for in the LLMC 1976 does not apply to the plaintiff's claim.

[For the unsuccessful appeal to the Hong Kong Court of Appeal, see Fong Yau Hei v Gammon Construction Ltd [2007] HKCA 52 (CMI1162).]