Areas of applicable law: Tort law – Negligence – foreseeability

Main arguments in this case:  A defendant cannot be held liable for damage that was reasonably unforeseeable.

The fact of the case: “Wagon Mound” actually is the popular name of the case of Overseas Tankship (UK) Ltd v Morts Dock and Engineering Co Ltd (1961). It is a key case which established the rule of remoteness in negligence. The court in this case held that a party can only be held liable for damage if it was reasonably foreseeable that such damage would be caused.

The defendants were the owner of an oil tanker which was loading oil at Sydney harbour in Australia when due to the negligence of the defendants’ employees, some oil leaked into the water and spread. The claimants were welding at the nearby wharf about 200 meters away. They were told to continue with the welding as it was believed that oil on water would not burn. The sparks from the welding however ignited some cotton rag soaked in oil and started fire causing damage to the wharf. 

In the first instance the defendants were held liable for the damage however the Privy Council disagreed. It was held that the damage from fire in the given condition was not something that was reasonably foreseeable. It was reasonably foreseeable that the leaked oil would cause damage, but that it would ignite and catch fire was not. Hence the defendants were not liable.

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