The Hongkong Macao Hydrofoil Co Ltd (the plaintiff) owned two hydrofoils which collided into each other in 1982.

The plaintiff commenced a limitation action against the defendants to limit its liability in damages for loss of life, injury, and damage under s 503 of the Merchant Shipping Act 1894 (MSA 1894).

The defendants were co-administrators of the estate of a crew member who died in or as a result of the collision. They contended that s 35(1) of the Merchant Shipping Act 1979 (MSA 1979) applied to Hong Kong to remove the Company’s statutory right to limit its liability.

Section 35(1) of the MSA 1979 was brought into force in the United Kingdom on 1 August 1979. It has the effect of modifying s 503 of the MSA 1894 so as to remove a shipowner’s statutory right to limit liability in relation to a person on board or employed in connection with a ship under a contract of service governed by UK law.

Thus the issue was whether s 35(1) of the MSA 1979 applied in Hong Kong. Deputy Judge Barnett heard the issue as a preliminary point of law and agreed with the defendants that s 35(1) of the MSA 1979 applied in Hong Kong. See [1985] HKCFI 128. The plaintiff appealed to the Court of Appeal.

Held: Appeal allowed.

Section 35(1) of the MSA 1979 does not apply in Hong Kong as, amongst other reasons, s 35(1) of the MSA 1979 is not 'applicable' to Hong Kong under s 117(1) of Hong Kong’s Merchant Shipping Ordinance (MSO).

To ascertain if s 35(1) of the MSA 1979 was 'applicable' under s 117(1) of the MSO, the Court of Appeal closely examined ss 17 and 35 of the MSA 1979. The Court of Appeal noted that: first, when s 17 of the MSA 1979 comes into force, the Convention on Limitation of Liability for Maritime Claims 1976 (LLMC 1976) will have the force of law in the UK with adjustments. Second, ss 35(1) and 35(2) of the MSA 1979 provide special exemptions in favour of 'British seamen'. Due to s 35(2) of the MSA 1979, some provisions of LLMC 1976 that allow limitation of liability will not apply in relation to, among other things, loss of life or personal injury of persons on board under a contract of service governed by UK law. Before the LLMC 1976 comes into force, s 503 of the MSA 1894 will be similarly modified due to s 35(1) of the MSA 1979.

The Court of Appeal did not know why these special exemptions were made in favour of 'British seamen' and found it impossible to decide if these special exemptions were also suitable for crew members in the local circumstances of Hong Kong. That decision was for the legislature to make.