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Why Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (Wagon Mound) is important

In Overseas Tankship (UK) Ltd v Morts Dock (Wagon Mound), the Privy Council held that a defendant should only be liable for damage which was reasonably foreseeable. In doing so, they held that In Re Polemis should no longer be regarded as good law.

Facts

Overseas Tankship chartered the ‘Wagon Mound’ vessel, which was to be used to transport oil. The ship was being loaded at a port in Australia. Due to the carelessness of the workers, oil overflowed and sat on the water’s surface. This oil drifted across the dock, eventually surrounding two other ships being repaired. Sparks from the welders ignited the oil, destroying the Wagon Mound and the two ships being repaired.

As a matter of fact, it was found that it was not reasonable to expect anyone to know that oil is capable of burning when spread across water.

Claim

The dock brought a claim in the tort of negligence against the charterers for the damage to the ships. The main issue for the Privy Council was whether the damage was too remote.

The claimant relied on the CA case In Re Polemis, arguing the defendant’s are liable as their loss was a direct consequence of their negligence. The defendants argued In Re Polemis was wrongly decided, and instead the remoteness test should be based on foreseeability.

Held

The Privy Council upheld the defendant’s appeal, concluding that the damage was too remote.

Reasoning

Viscount Simonds, giving the judgement of the Privy Council, concluded that In Re Polemis should no longer be regarded as good law. He explained that the Court of Appeal only relied on a small number of authorities in that case. Furthermore, he noted that

  1. The CA cited no authority to support their conclusion that defendants are liable for all direct consequences of their negligence;
  2. Hadley v Baxendale (a contractual damages case) was not cited by the Court, even though at that time it was accepted that the law on damages was the same in contract and tort.

Whilst this would not result in many cases being overturned, VIscount Simonds concluded this simplified the law and at least ensured “palpable injustice will be avoided”. This might be where the claimant suffers direct, but totally unforeseeable, harm was a direct result of the defendant’s negligence. Viscount Simonds said:

It is a principle of civil liability, subject only to qualifications which have no present relevance, that a man must be considered to be responsible for the probable consequences of his act. To demand more of him is too harsh a rule, to demand less is to ignore that civilised order requires the observance of a minimum standard of behaviour.

His Lordship considered that this rule was grounded within the concept of the reasonable man. The defendant can therefore only be expected to have foreseen things which the reasonable man ought to have foreseen.

Applying this to the facts, the Privy Council concluded that it was unreasonable to expect the defendant to know that oil on water could be set alight, and therefore that the damage was too remote.

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