The Wagon Mound (No 2)

Facts

The Wagon Mound, a ship chartered by Overseas Tankship, negligently discharged a large quantity of furnace oil into Sydney Harbour. The oil spread to a wharf where the owners of two ships were having them repaired, and welding work was being done. Molten metal from the welding fell on cotton waste floating on the oil, which smouldered and ignited the oil. A fire spread and caused damage to the wharf and to the ships. The owners of the ships sued the charterers in negligence and nuisance.

History

The trial judge, Walsh J, found for the ship owners, and the Privy Council upheld their entitlement to recover. An earlier claim by the wharf owners arising from the same events, The Wagon Mound (No 1), had failed in negligence because the fire damage was held to be not reasonably foreseeable on the evidence in that case.

Issue

Whether the fire damage to the ships was reasonably foreseeable, so as to satisfy the test of remoteness settled in the first Wagon Mound case; and whether, if the risk of fire was foreseeable but very unlikely, the defendants had acted unreasonably in failing to prevent the spillage.

Held

Appeal dismissed. On the evidence in this case, it was found that the engineers of the Wagon Mound would have realised that there was a real, although small, risk that the oil would catch fire, and the defendants were liable in negligence. Foreseeability of damage of the type that occurred was also required in nuisance.

Ratio

• A defendant is in breach of duty if it fails to remove a risk which a reasonable person would have foreseen as real, even if the chance of the damage occurring is small, where there is no valid reason for taking the risk and the cost of removing it is slight.
• The test of remoteness set in the first Wagon Mound case, that the type of damage must be reasonably foreseeable, applies in nuisance as well as in negligence.

The judgments

Key reasoning

• The question of breach is distinct from the question of remoteness: remoteness asks whether the type of damage was foreseeable, while breach asks what a reasonable person would have done in light of the size of the risk and the cost of avoiding it.
• The chief engineer of the Wagon Mound would have known that oil is flammable, and the evidence suggested that the possibility of ignition on water could not be ruled out, so the risk was one that a reasonable person would have thought real though improbable.
• The defendants gained nothing by discharging the oil, and avoiding it cost nothing, so there was no reason to run even a small risk.

Where it fits in the module

For the Social Action, Responsibility and Heroism Act 2015 topic in Tort (FHS), the case is the point from which the standard of care is considered. Section 2 of the 2015 Act requires courts to take into account that a person acted for the benefit of society, section 3 requires them to consider whether the person demonstrated a predominantly responsible approach to protecting the safety of others, and section 4 requires them to consider whether the person acted heroically by intervening in an emergency to assist an individual in danger. Candidates should set out the structure of breach in Bolton v Stone [1951] AC 850 and Paris v Stepney BC [1951] AC 367, Latimer v AEC Ltd [1953] AC 643 and Watt v Hertfordshire CC [1954] 1 WLR 835, and ask whether the 2015 Act changed the common law or only restated it.

Criticisms

• The two Wagon Mound decisions reached different results about the same spill because of different evidence on the foreseeability of fire, which shows how much turns on contested expert evidence and makes the outcome of such claims hard to predict.
• The Board balanced the risk against the cost of precautions and gave no place to the social value of the defendant activity, which the 2015 Act now directs courts to consider.
• Requiring foreseeability in nuisance narrows the difference between nuisance and negligence, yet the Board did not explain how the rule applies to nuisances that arise from the ordinary use of land.
• The reasoning leaves unclear how far the social value of an activity can be weighed against the probability of harm, a point the 2015 Act addresses only in general terms.