Overseas Tankship Ltd. v. Miller Steamship Co. (Wagon Mound 2)
[1967] 1 A.C. 617 (1966)
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Rule of Law:
A defendant is liable for negligence if a reasonable person in their position would have foreseen a real, albeit remote, risk of the kind of damage that occurred, and would not have disregarded that risk because there was no valid reason (such as prohibitive cost or difficulty) for doing so.
Facts:
- The defendant's ship, the Wagon Mound, negligently discharged a large quantity of furnace oil into Sydney Harbour while taking on fuel.
- The oil spread across the water to a wharf where the plaintiffs' two ships were moored for repairs.
- Sparks from welding operations on the wharf ignited cotton waste floating on the oil, which in turn ignited the oil itself.
- The resulting fire caused significant damage to the plaintiffs' ships.
Procedural Posture:
- The owners of two ships damaged by the fire sued the owner of the Wagon Mound for negligence.
- The trial judge found that the spillage was negligent but that the resulting fire damage was not reasonably foreseeable by the ship's officers.
- Based on the lack of foreseeability, the trial court and the Supreme Court of New South Wales ruled in favor of the defendant.
- The plaintiffs (the ship owners) appealed to the Privy Council, which allowed the appeal and found the defendant liable.
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Issue:
Is a defendant liable for damages from a fire caused by their negligence if the risk of fire was foreseeable as a possibility, though remote, and could have been easily prevented at no cost?
Opinions:
Majority - Lord Reid
The defendant is liable. The trial judge found that the ship's officers would have regarded the risk of fire as a remote possibility. However, a risk's remoteness does not justify ignoring it if it is a 'real risk' and not a 'fantastic or far-fetched' possibility. Citing Bolton v. Stone, the court reasoned that a reasonable person is only justified in disregarding a small risk if there is a valid reason, such as the significant expense required to eliminate it. In this case, preventing the oil spill was not only easy but also in the defendant's financial and legal interest. A reasonable chief engineer would have known that there was a real risk of the oil catching fire. Since the risk was real and easily preventable, the defendant had a duty to prevent it. The failure to do so constitutes negligence for which the defendant is liable for the resulting fire damage.
Analysis:
This case, Wagon Mound No. 2, refines the foreseeability standard established in Wagon Mound No. 1. While Wagon Mound No. 1 held that liability only extends to damage of a foreseeable kind, this case clarifies the standard for foreseeability itself. It establishes that even a remote or small risk can be considered 'reasonably foreseeable' and give rise to liability if it is a 'real risk' that a reasonable person would not ignore. The court introduces a balancing test, weighing the magnitude of the risk against the utility and cost of the defendant's conduct. Where a risk, however small, can be eliminated at no cost or inconvenience, a reasonable person would do so, and failure to do so is negligence.
