ABSTRACT

Case law: Overseas Tankship (UK) Ltd. v. Morts Dock & Engineering Co Ltd.

Overseas Tankship (UK) Ltd v Morts Dock and Engineering Co Ltd, commonly known
as "Wagon Mound (No.1)", is landmark tort law case, which imposed a remoteness rule for
causation in negligence. The Privy Counsil held that a party can only be held liable for damage
that was reasonably foreseeable. Contributory negligence on the part of the dock owners was
also relevant in the decision, and was essential to the outcome, although not central to this case's
legal significance.

The Wagon Mound (No 1) should not be confused with the successor case of the
Overseas Tankship v Miller Steamship or "Wagon Mound (No 2)", which concerned the
standard of the reasonable man in breach of the duty of care.

In a lengthy judgment Viscount Simnds, writing for the court, holds that the test created
in Polemis is bad law and that it should be overtuned. He states that liability is in respect of the
damage caused by the action alone. If the liability for injuries depends on the foreseeability of
the plaintiff as an injured party, then the liability for damages should depend on the forseeabiity
of the resulting damages. Thus, the Polemis test is overturned. The court finds that it was not
reasonable that Overseas Tankship would expect their spilling of oil to result in the large fire that
happened and therefore they are not liable for the damages sustained by Morts.

The Lords gave Morts the opportunity to sue in nuisance but there is no record of them
testing this action in that tort. The common law rules of causation have had their importance
lessened by the promulgation of statute law in Australia. Contributory negligence is now
essential for many determinations and are covered by statutes such as the Civil Liability Act
(1936) South Australia which has more recent counterparts in a number of jurisdictions including
New South Wales.
 SYNOPSIS

TITLE OF RESEARCH: Overseas Tankship (UK) Ltd. v. Morts Dock & Engineering Co Ltd.

INTRODUCTION:

Overseas Tankship (UK) Ltd v Morts Dock and Engineering Co Ltd,[1]commonly known
as "Wagon Mound (No. 1)", is a landmark tort law case, which imposed a remoteness rule for
causation in negligence. The Privy Councilheld that a party can only be held liable for damage
that was reasonably foreseeable. Contributory negligence on the part of the dock owners was
also relevant in the decision, and was essential to the outcome, although not central to this case's
legal significance. Defendants carelessly discharged oil from their ship. Oil was carried by the
wind and tide to Plaintiff’s wharf, which was destroyed by fire. Such damage could not have
been foreseen.

OBJECTIVE OF STUDY:

The objective of study is that to discuss the facts, principal and issues raised and these will be
discussed in detailed so that the principle is known properly.

LITERATURE REVIEW:

Ratanlal and Dirajlal

R.K Bangia

NATURE OF STUDY: Explanatory

SCOPE OF STUDY: The scope of study is restricted to the case of Wagon Mound.

SIGNIFICANCE: Significance of study is that this case clearly explains the case of wagon
mound which is the best example for remoteness rule for causation in negligence.
REMOTNESS OF DAMAGE

EVOLUTION

WAGON MOUND

 FACTS
 JUDGEMENT

Wagon Mound followed in subsequent cases:

CASES
 REMOTNESS OF DAMAGE

INTRODUCTION:

In English law, distance is a set of rules on torture and contract, which limits the amount
of compensatory damages for an error. In negligence, proof of causality requires not only that the
accused is the cause, but also that the loss or damage of the applicant is not too remote. As
regards the political issues to establish the existence of a duty of care and the prohibition of such
non-compliance, the distance is aimed at an additional limit to a cause of action to ensure that
liability for damages is properly attributed to the defendant.

The term "remote" refers to the legal proof of causality that is used to determine the types
of loss caused by a breach of contract or duty that can be compensated for by a claim for
damages. Legal causality is different from causality that raises the question of whether the
damage is the result of a breach of contract or duty. Consequently, once factual causality has
been established, it is necessary to ask whether the law is willing to attribute the damage to the
particular offense, despite the factual connection. Excessive damage can not be recovered,
although there is a factual link between breach of contract or duty and loss.
 EVOLUTION

DIRECTNESS:

The traditional approach is that once they had established a breach of diligence, the
defendant was responsible for all the consequential damages, no matter how unusual or
unpredictable they give. Re Polemis while they were anchored, the workers employed to unload
the negligent boat released a newsletter in the cellar, which struck something, causing a spark
that lit gas vapors in the cellar. The fire has destroyed the whole ship. The Lords said that
although the fire was not a reasonably foreseeable consequence of the fall of the table, it had
violated the obligation of diligence and damage which posed a direct consequence of negligence
was recoverable. It was established that once the damage was foreseeable, the defendant would
be responsible for the magnitude of the damage. Those particular consequences are possible do
not make them reasonably foreseeable. This will be especially the case when a significant
number of links constituting the chain.

Foreseeability:
The Wagon Mound (No 1) test is less generous for plausible testing of direct
consequences because it may impose an artificial limit on the extent of damage that can be
claimed. To mitigate some of the potential injustice of the rule, courts tend to have a relatively
liberal vision if the damage is predictable rate. In Lamb v. London Borough of Camden a water
pipe retained by the broken board, causing considerable damage to the applicant's home. Due to
the damage, the actor moved and squatters moved in, causing more damage to the home. The
judge found that the secondary damage caused by the squatters was too remote. The Council was
responsible for the damage caused by the broken water pipe, but the landlord is responsible for
keeping the intruders at bay. Lord Denning said that the remoteness of damage is just a matter of
politics with the prediction element determined by what is perceived as instinctively right. This
means that the reasonable predictability test is not always appropriate for cases where the
applicant's acts prove some sort of failure. However, tribunals can afford predictable damages
when required by public policy in eggshell skull cases such as Smith v Leech Cervello & Co.
 Although some courts have sometimes adopted a more restrictive approach, Lord's
decision in Jolley and Sutton London Borough Council suggests that the liberal approach should
be preferred. The council allowed an abandoned boat to stay on their land and, for a period of
time, two children began to paint and repair. Unfortunately, the boat fell on one of the children,
seriously injuring him. The applicant's case was that the ship was a trap or an attraction. The
Council agreed that it had been negligent in not removing the boat, but it was not foreseeable that
two boys tried to lift the boat and move it from the cradle on which it was located. Lord Steyn
and Hoffman stated that it is not necessary to provide the exact bias that has been verified, but
the wound of a certain description. "Predictability is not about the details, but the kind. And the
description is made with reference to the nature of the risk that should have been anticipated."
(Paragraph 37) Then, in Hughes it was foreseeable that a child could be injured falling into the
hole or being burned by a lamp or a combination of both. Although injuries were not anticipated,
the injuries actually materialized fell within the predictable range. Therefore, Wagon Mound
No.2 and Hughes are compatible. The former claimed that the damage caused by the combustion
was not given a description that could reasonably be expected, while the latter claimed that the
injury was not reasonably foreseeable.

There would be manifest injustice if a person were held responsible for all consequences
of his act which in theory may be endless. A person is, therefore, help responsible in law only for
consequences which are not remote. A damage or injury though caused by a tortious act of the
defendant will not qualify for award Oi damages if it is too remote. Towards the middle of the
19th Century, two competing views were advanced as laying down the test of remoteness.
According to one View foreseeability is the test of remoteness. In other words, on this view
consequences am too remote if a reasonable man would not have foreseen them.28 According to
thg other View, directness is the correct test, that is to say, the defendant is liable for all direct
consequences of the tortious acts suffered by the plaintiff whether or nota reasonable man would
have foreseen them.29 It is the test of foreseeability that now holds the field but to properly
understand the difference between the two views, it is more convenient to first notice the
implication of the test of directness.
 The leading authority of the test of directness is the decision of the Court of Appeal in In
Re an Arbitration between Polemis and Fumess, Withy & Co.1 In this case, the defendants
chartered the plaintiff’s ship, the Polemis, to carry a cargo which contained a quantity of Benzine
or petrol. Some of the petrol cases leaked on the voyage and there was petrol vapour in the hold.
While shifting some cargo at a port, the stevedorcs employed by the charterers negligently
knocked a plank out of a temporary staging erected in the hold, so that the plank fell into the hold
and in its fall by striking something caused a spark which ignited the petrol vapour and the vessel
was completely destroyed. It was held that as the fall of the board was due to the negligence of
the charterers’ servant, the charterers were liable for all the direct consequences of the negligent
act including destruction of the ship even though those consequences could not have been
reasonably anticipated. According to this case, once the tortious act is established, the defendant
is to be held liable for all the damage which “is in fact directly traceable to the negligent act, and
not due to independent causes having no connection with the negligent act?“ On this View, if the
tort concerned is negligence. foreseeability of some damage is relevant to decide whether the act
complained of was negligent or not but the liability for damages is not restricted to foreseeable
daunage but extends to all the damage directly traceable to the negligent act.

The test of foreseeability in preference to the test of directness canoe to be established 9y the
decision of the Privy Council in Overseas Tankship Ltd. v. Morts Dock and Engineering Co.
popularly known as Wagon Mound No I2: “ In this case. during bunkering operations in Sydney
harbour, a large quantity of oil was negligently allowed to spill from the Wagon Mound, a ship
under the defendant‘s control as chambers, 1hc oil spread to the plaintiff’s wharf where another
ship was being repaired. Dining welding operations in the course of repairs, a drop of molten
metal fell on a heating: waste setting it on tire and this ignited the floating oil resulting in the
destruction of the wharf by fire as also the vessel that was being repaired.

In this suit, which was restricted to damage to the wharf (there was another suit by me owner of
the ship that was being repaired which is discussed later), the trial Judge’s finding was that the
defendant did not know and could not reasonably be expected to have known that the oil was

1
(1921) 3 KB 560.
2
(1961) 1 ALL ER 404: (1961) 2 WLR 126: 105 SJ 85 (PC).
capable of being set a fire when spread on water. He, however, found that the destruction of the
wharf by fire was a direct though unforseeable consequence of the negligence of the defendant
and gave judgment for the plaintiff. The Supreme Court of New South Wales affirmed the
decision of the trial Judge. In further appeal by the defendant the Privy Council allowed the
appeal. In holding foreseeability to be the correct test, the Judicial Committee observed that the
Polemis case should not be regarded as good law “for it does not seem consonant with current
ideas of justice or morality that for an act of negligence, however slight or vernal. which results
in some trivial foreseeable damage, the actor should be liable for all consequences however
unforeseeable and however grave, so long as they can be said to be direct”.33 After pointing out
that the test of directness looked at the happenings.
 WAGON MOUND’S CASE

Facts:

Overseas Tankship had a ship, the Wagon Mound, docked in Sydney Harbour in October 1951.
The crew had carelessly allowed furnace oil (also referred to as Bunker oil) to leak from their
ship. The oil drifted under a wharf thickly coating the water and the shore where other ships were
being repaired. Hot metal produced by welders using oxyacetylene torches on the respondent's
timber wharf (Mort's Dock) at Sheerlegs Wharf fell on floating cotton waste which ignited the oil
on the water. The wharf and ships moored there sustained substantial fire damage. In an action
by Mort's Dock for damages for negligence it was found as a fact that the defendants did not
know and could not reasonably have been expected to know that the oil was capable of being set
alight when spread on water. The dock owners knew the oil was there, and continued to use
welders.

The leading case on proximate cause was Re Polemis, which required that the harm be the direct
result of the conduct regardless of how remote. As this case was binding in Australia, its rule was
followed by the New South Wales Court of Appeal. The defendant appealed to the Privy
Council.

Wagon Mound No. 23 which was a suit against the same defendant by the owner of the
vessel which was being repaired and which was damaged by lire, the evidence was different and
the finding reached by the Privy Council was that the risk of the oil on the water catching tire
was foreseeable; so the defendant was held liable. The Privy Council refuted the argument that if
a real risk can properly be described as remote it must be held to be not reasonably foreseeable
and observed: “If a real risk is one which would occur to the mind of a reasonable. mam-and
which he would not brush aside as far fetched, and if the criterion is to be what that reasonable
man would have done in the circumstances, then surely he would not neglect such a risk if action
to eliminate it presented no difficulty, involved no disadvantage and required In chastise.”34 The
finding that the damage by fire was foreseeable was reached on the. following considerations: (1)
There was a real risk of fire although remote; (2) The risk was great in the sense that if the oil
caught tire serious damage to ships and property was very likely; (3) A qualified Chief Engineer

3
(1966) 2 AIR ER 709: (1967) 1 AC 617 (PC).
of the defendant would have been the gravity of the risk; (4) Action to eliminate the risk
presented no difficulty, disadvantage or risk; (5) From the very beginning the discharge of oil
was an offences and was causing loss to the defendant financially; and (6) A reasonable man in
the position of a Chief Engineer would have realised and foreseen and prevented the risk.

The effect of the decision in Wagon Mound No. 2 is to affirm and explain the let of
foreseeability. A tort-feasor is liable according to the explanation given ;foreseeability in this
case, “for any damage which he can reasonably foresee ma happen as a result of the breach (of
duty) however unlikely it may be, unless it can be brushed aside as far fetched.” This case
(Wagon Mound No. 2) also establishes that the test of foreseeability is not limited to the tort of
negligence but applies also to the tort of nuisance. In Wagon Mound No. 1.the Privy Council
reserved its opinion on the question whether the test of foreseeability could be applied to a tort of
strict liability. It has now been authoritatively decided by the House of Lords in Cambridge Warn
Co. Ltd. v. Eastern Countries Leather Plc.38 that even in cases of strict liability governed by the
rule in Rylands v. Fletcher, foreseeability of damage of the relevant type, if there be escape from
the land of things likely to do mischief, prerequisite of liability. However, it has been said that in
action for deceit, damages are not restricted to foreseeable damage.
Judgment:

The Privy Council found in favour of the defendant, agreeing with the expert witness who
provided evidence that the defendant, in spite of the furnace oil being innately flammable, could
not reasonably expect it to burn on water. The Board indicated Morts would probably have been
successful if they had claimed damages for direct damage by the oil to the slipway but this was
minor and not part of the damages claimed (although success on this count may have saved
Morts Dock and Engineering the costs of all the litigation for both parties across all three levels
of court). Viscount Simonds, in his delivery for the Privy Council, said that the Counsel for
Morts had discredited their own position by arguing that it couldn't have been bunkering oil
because it wouldn't burn on water. The Privy Council's advice soundly disapproved the rule
established in Re Polemis, as being "out of the current of contemporary thought" and held that to
find a party liable for negligence the damage must be reasonably foreseeable. The council found
that even though the crew were careless and breached their duty of care, the resulting extensive
damage by fire was not foreseeable by a reasonable person, although the minor damage of oil on
metal on the slipway would have been foreseeable.

Viscount Simonds delivered the judgment of the Board and said:

It is, no doubt, proper when considering tortious liability for negligence to analyse its elements
and to say that the plaintiff must prove a duty owed to him by the defendant, a breach of that
duty by the defendant, and consequent damage. But there can be no liability until the damage has
been done. It is not the act but the consequences on which tortious liability is founded. ... Who
knows or can be assumed to know all the processes of nature? But if it would be wrong that a
man should be held liable for damage unpredictable by a reasonable man because it was "direct"
or "natural," equally it would be wrong that he should escape liability, however "indirect" the
damage, if he foresaw or could reasonably foresee the intervening events which led to its being
done.

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.
Wagon Mound followed in subsequent cases:

In Hughes v. Lord Advocate,5 the post office employees opened a manhole for the purpose of
maintaining underground telephone equipment. The manhole was covered with a tent. One
evening, it was left surrounded by paraffin lamps but otherwise unguarded. A child of eight years
entered the tent and started playing with one of the lamps. The lamp fell into the manhole and
caused a violent explosion resulting in the fall of the boy also in the hole and severe injuries to
him from burns. It was foreseeable that a child could get burnt by tampering with “the lamp, but
the explosion could not be foreseen. The House of Lords held that since the kind of damage was
foreseeable although the extent was not, the defendants were liable. Lord Reid said‘ : appellant s
injuries were mainly caused by burns and it cannot be said that injuries from burns were
unforeseeable As a warning to traffic, the workmen had set lighted red lamps round the tent
which covered the manhole and if boys did enter the dark tent it was very likely that they would
take one of these lamps with them. If the lamp fell and broke, it was not at all unlikely that the
boy would be burnt and the bums might well be serious. No doubt, it was not to be expected that
the injuries would be as serious as these which the appellant in fact sustained. But the defendant
is liable, although the damage may be a good deal greater in extent than was foreseeable."

The test of reasonable foresight as stated in the Wagon Mound case was also applied in Doughty
v. Turner Manufacturing Co. Ltd.2 The plaintiff was employed by the defendants. Some other
workmen of the defendants let an asbestos cement cover slip into a cauldron of hot molten liquid.
It resulted in an explosion and the liquid thereby erupted, causing injuries to the plaintiff, who
was standing nearby. The cover had been purchased from reputed manufacturers and nobody
could foresee that any serious consequences could follow by the falling of the cover into the
cauldron.

Held, that the damage resulting from the explosion was not of the kind as could reasonably have
been foreseen, and, therefore, the defendants were not liable. The test of reasonable foresight was
also applied by the Court of Appeal in S.C.M. (United Kingdom) Ltd. v. WJ. Whittall 8: 50:13.3
In that case, due to the negligence of the defendants’ workmen, an electric cable alongside the
road was damaged. As a result of the same, there was a seven hour power failure in the plaintiff’s
typewriter factory. The plaintiff alleged that as a consequence of power failure, there was
damage to materials and machines and consequent loss of production, and the same could have
been foreseen by the defendants. It was held that as the defendants knew that the said electric
cables supplied electric current to the factories in the neighbourhood, they could foresee that if
the current was cut off, there would be consequent loss of production, and, therefore, they were
liable for the damage caused to the plaintiff.

In suits in which damages are claimed, the onus is on the plaintiff to prove all items! of the
damages. In such a case, it is held that any fact which enables the Court to determine the amount
of damages, which ought id be awarded, is relevant. The duty to assess the damages, however, IS
entirely upon the Court and more or less resorting to rules, which regulate the practice of the
Courts. A judge, it is held,1 has to decide and determine every question which would ultimately
enable the parties to obtain the final judgment in case in question, such as, the proper measure of
damages to be applied, remoteness of damages and the amount which the plaintiff is actually
entitled to as damages.

It is further said that no Court can assess the damages with anything like mathematical precision
and accuracy in all cases. In cases admitting of proof, the amount, it is held, must be worked out
with reasonable certainty. The difficulty in assessing damages, it is said, is no ground for
refusing to fix or for giving nominal damages, based on the material brought on record by the
plaintiff, that the Court cannot refuse the assessment of damages simply because the plaintiff has
failed to adduce the best evidence available. In Shaikh Gafoor v. State of Maharashtra, the
plaintiff could not cultivate his land due to accumulation of water, released from excavation and
construction of canal by the State in the vicinity of agricultural land of the plaintiff, The water
percolating to the suit land, caused damage to the crops. The plaintiff produced 7X12 extract,
showing that crops like bajra, sunflower and cotton were grown on the said land.

Taking judicial notice of the fact that in the region in question, ordinarily two crops were raised
by the agriculturists, La, autumnal crop and vernal crop and considering all the facts as also
giving some discount for estimation of yield per acre, the Bombay High Court held the plaintiff
entitled to damages at the rate of Rs. 40,000/per year in respect of 5 acres of land found to have
remained uncultivated, at the, rate of Rs. 8000/ ~ per acre.
SIGNIFICANCE:

Up until this time the leading case had been Re Polemis, where the central question was that of
the directness of the chain of events between the triggering act being examined for negligence
and the result. The Council decided that rather than go with precedent (authority) they would
determine a principle from a range of cases, in a similar way as Lord Atkin did in Donoghue v
Stevenson, and their principle was primarily a single test for foreseeability which they argued
was a logical link between the damage and the liability (culpability). Stated
differently, foreseeability was the logical link between, and the test for, breach of the duty of
care and the damages. This is the supreme test, and may be rephrased as "the liability of a
consequence ... was natural or necessary or probable." The Lords made reference to hindsight,
indicating it is nothing like foresight and should play no role in assessing negligence. There is
authority to challenge this view of hindsight; in Page v Smith, Lord Lloyd stated: "In the case of
secondary victims, i.e. persons who were not participants in an accident, the defendant will not
be liable unless psychiatric injury is foreseeable in a person of normal fortitude and it may be
legitimate to use hindsight in order to be able to apply the test of reasonable foreseeability."[4]

The Lords gave Morts the opportunity to sue in nuisance but there is no record of them testing
this action in that tort. The common law rules of causation have had their importance lessened by
the promulgation of statute law in Australia. Contributory negligence is now essential for many
determinations and are covered by statutes such as the Civil Liability Act (1936) South Australia
which has more recent counterparts in a number of jurisdictions including New South Wales.