Sun Wai (the plaintiff) owned the barge Wang Fat No 3. The plaintiff chartered the barge to Cheung Kee Marine Services Co Ltd (the defendant) under a hire agreement dated 18 April 2009. On the same date, the plaintiff entered into an indemnity agreement with the defendant. According to this agreement, the plaintiff contracted to indemnify the defendant against 'all action, liability, loss suits, claims, demands, proceedings, costs, charges, or expenses whatsoever' and '[t]o pay [Cheung Kee] on demand the full amount of any loss or damage whatsoever which [Cheung Kee] may incur as a result of, in connection with or in any way related to the performance of the services'.

On 26 April 2009, as the barge was being towed outside Basalt Island, it rolled violently to about 45 degrees for about 2 minutes. Some containers fell off the barge into the sea and some containers remaining on the barge sustained loss and damage.

The plaintiff sought a limitation decree under the LLMC 1976. The LLMC 1976 had the force of law in Hong Kong by s 12 of the Merchant Shipping (Limitation of Shipowners' Liability) Ordinance (Cap 343). The defendant objected to this.

The defendant argued that, under the indemnity agreement, the plaintiff was obliged to indemnify the defendant against the full amount of claims for which the defendant might be held liable to third party cargo interests. Accordingly, the defendant contended that the plaintiff should not be allowed to limit that full liability by being granted a limitation decree under the LLMC 1976. The defendant further submitted that, by entering into the indemnity agreement, the plaintiff waived any benefit to which it might be entitled under the LLMC 1976. Article 1 of the LLMC 1976 only said that shipowners 'may' limit their liability for claims. Nothing prevented a shipowner from accepting a fuller liability than that provided for in the LLMC 1976.

The plaintiff argued that by art 2.2 of the LLMC 1976, except for certain specific types of claims identified in arts 2.1.d, 2.1.e and 2.1.f, claims 'shall be subject to limitation of liability even if brought ... for indemnity under a contract'.

Held: Judgment for the plaintiff.

The Court should construe the indemnity agreement in the context of art 2.2 of the LLMC 1976.

When the parties entered into the indemnity agreement, they must be taken to have done so in the context of a shipowner (such as the plaintiff) being able to apply for limitation under the LLMC 1976 even in respect of a liability to indemnify. In the absence of clear words to the contrary, it is hard to construe the references to full indemnification in the indemnity agreement as meaning other than a full indemnity within the terms of what the LLMC 1976 permits.

As charterer, the defendant is itself entitled to apply for a limitation decree. Its liability (if any) to third parties would thereby be limited to the extent allowed by the LLMC 1976. Such limitation under the LLMC 1976 will not exceed the plaintiff's liability under a limitation decree. There can then be no possibility of the quantum of the defendant's liability to third parties being greater than the amount of the plaintiff's limited liability.