## Facts

- Furnace oil was discharged by the defendants into Sydney Harbour, drifting under nearby wharves and ships.
- The oil later ignited, causing significant fire damage to the property of the plaintiffs.
- In previous litigation (_Wagon Mound (No. 1)_), ignition of oil on water was held unforeseeable.
- In this case, evidence included expert testimony regarding the flammability of oil on water under certain conditions.
- The defendants could have prevented the oil discharge at minimal cost.
- The litigation focused on whether the risk of fire, though unlikely, was reasonably foreseeable and whether reasonable measures could have prevented it.

## Issues

1. Whether the type of damage (fire from oil on water) resulting from the defendants' actions was reasonably foreseeable.
2. Whether the defendants were negligent in failing to take preventative measures when those measures were minimal in cost.
3. Whether low-probability but foreseeable risks can give rise to liability in negligence if prevention is practical.

## Decision

- The Privy Council held that the risk of fire, while small, was not so improbable as to be disregarded as unforeseeable.
- The defendants were found liable, as reasonable foreseeability existed considering the expert evidence provided.
- Liability arose because the cost of taking precautions against the risk was low, and failing to do so constituted negligence.
- The judgment clarified that duty of care extends to low-probability risks if prevention is reasonable and practicable.

## Legal Principles

- A defendant is liable in negligence if the type of harm was reasonably foreseeable, regardless of its probability.
- The probability of harm and the cost of precautions must be balanced; even unlikely risks necessitate prevention if cost is minimal.
- The standard of reasonable conduct is measured by foreseeable risks and the practicality of preventative actions.
- Foreseeability is a fact-specific assessment, influenced by available evidence and expert testimony.
- _Wagon Mound (No. 2)_ distinguishes itself from _Wagon Mound (No. 1)_ by focusing on the evidence and the scope of the foreseeability inquiry.

## Conclusion

_Wagon Mound (No. 2)_ establishes that liability in negligence turns on the reasonable foreseeability of harm and the cost-effectiveness of precautions. Defendants are required to take preventative measures for foreseeable risks, even if the likelihood of harm is low, when such measures are reasonable and inexpensive. This approach clarified the scope of duty of care and remoteness in negligence law, shaping subsequent legal development.


Overseas Tankship (UK) Ltd v Miller Steamship Co Pty Ltd (Wagon Mound (No 2)) [1967] 1 AC 617 (PC)