Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound No 1)

Facts

In 1951, the Wagon Mound, a ship chartered by Overseas Tankship, was taking on oil in Sydney Harbour. Through the crew's carelessness, a large quantity of furnace oil spilled into the harbour. The oil spread to Morts Dock's wharf, where workers were welding.

The wharf manager stopped the welding and asked for advice. He was told, and believed, that furnace oil wouldn't ignite when spread on water. Welding resumed. Two days later, molten metal from the welding fell onto cotton waste floating in the oil, which caught fire. The fire badly damaged the wharf and two ships being repaired there.

Issue

Were the charterers liable for the fire damage? The oil spill was negligent, and fouling of the wharf's slipways was foreseeable. But was damage by fire too remote?

Decision

The Privy Council (Viscount Simonds giving its advice) held that the charterers were not liable for the fire damage, because damage by fire wasn't reasonably foreseeable on the evidence. They were liable only for the minor, foreseeable damage caused by the oil fouling the slipways.

Reasoning

Rejecting Re Polemis. In Re Polemis and Furness, Withy & Co [1921] 3 KB 560, the Court of Appeal held that a negligent defendant was liable for all the direct consequences of their negligence, whether foreseeable or not. Viscount Simonds said that rule was unjust: it could make a defendant liable for vast, unforeseeable consequences of a trivial act of carelessness.

Foreseeability as the test. It is foreseeability of damage that makes the conduct negligent in the first place. It's consistent, therefore, that the same test should limit the damages. A defendant is liable for damage of the kind that a reasonable person would have foreseen, and not otherwise.

Applying it. The trial judge found that the defendants didn't know, and couldn't reasonably have been expected to know, that the oil was capable of being set alight when spread on water. Fire damage was a different kind of harm from the foreseeable fouling of the wharf, so it was too remote.

Why it matters

The Wagon Mound (No 1) is a Privy Council decision, so it isn't strictly binding in England. But English courts have consistently followed it, and it states the test for remoteness of damage in negligence: reasonable foreseeability of the type of harm.

Later cases explain how broadly "type of harm" is drawn:

• In Hughes v Lord Advocate [1963] AC 837, a boy was burned when a paraffin lamp left by workmen exploded. Burns were foreseeable even though the explosion wasn't, so he recovered.
• In Jolley v Sutton LBC [2000] 1 WLR 1082, the House of Lords took a broad view of what children might foreseeably do with an abandoned boat.
• The eggshell skull rule survives: once some injury of a foreseeable type occurs, the defendant is liable for its full extent, even if the claimant is unusually vulnerable (Smith v Leech Brain & Co Ltd [1962] 2 QB 405).

How it comes up in exams

In a negligence answer, deal with remoteness after causation in fact:

1. Identify the type of harm the claimant suffered.
2. Ask whether that type was reasonably foreseeable at the time of the breach (The Wagon Mound (No 1)).
3. Remember that the exact manner and extent needn't be foreseeable (Hughes; Smith v Leech Brain).

Then contrast it with the stricter contract test in Hadley v Baxendale, which asks what was within the parties' reasonable contemplation when they made the contract.

Frequently asked questions