## Facts

- The freighter *Wagon Mound*, operated by Overseas Tankship (U.K.) Ltd. (Overseas), was taking on furnace (bunker) oil in Sydney Harbour.
- Through the carelessness of the ship’s engineers, a large quantity of oil spilled onto the harbour surface.
- The crew left without adequately dealing with the spill or limiting its spread.
- The oil drifted to Sheerlegs Wharf, used by Mort’s Dock & Engineering Co. (Morts).
- Morts was repairing two vessels owned by Miller Steamship Co. (Miller).
- Repair work included welding and burning operations on or near the wharf.
- During the work, hot metal fell into the water and ignited flammable debris (such as cotton waste) floating on the oil-covered surface; the burning material then set the oil alight.
- The resulting fire caused major damage to the wharf and to Miller’s two vessels.
- This action followed *Wagon Mound (No. 1)*, where on different evidence the Privy Council held the fire damage was not reasonably foreseeable; in this case, the trial judge found competent engineers knew furnace oil on water could ignite in exceptional circumstances, though the chance was remote.
- The trial judge rejected Miller’s negligence claim (treating the fire as not a reasonably foreseeable result because ignition was unlikely) but allowed recovery in public nuisance; the Supreme Court of New South Wales affirmed, and both sides appealed to the Privy Council.

## Issues

1. In negligence, where ignition of furnace oil on water was unlikely but known to be possible, did Overseas breach the duty of care by allowing the oil to be discharged and remain on the harbour?
2. In public nuisance, is it enough that the fire damage was a direct result of the oil pollution, or must the kind of damage (fire loss) also be reasonably foreseeable?

## Decision

- The Privy Council allowed Miller’s cross-appeal on negligence and held Overseas liable: a reasonable person would not run even a small, real risk of a disastrous fire where the cost and difficulty of prevention were slight.
- The Privy Council allowed Overseas’ appeal on nuisance and set aside nuisance liability: direct causation from the nuisance was not enough where the kind of damage claimed was not reasonably foreseeable as a result of the nuisance.

## Legal Principles

- Foreseeability of some risk of the relevant kind of harm is required, but breach turns on what reasonable care demanded in light of the risk.
- In assessing breach, the court weighs (a) the likelihood of harm, (b) the seriousness of the possible harm, and (c) the burden of taking precautions.
- A low probability of harm does not excuse inaction when the potential harm is very serious and reasonable precautions would be simple or inexpensive.
- Once there is a real (even small) foreseeable risk of the kind of harm that occurred, liability may follow if reasonable precautions were not taken, even though the event was unlikely.
- Public nuisance does not impose liability for all direct consequences; like negligence, it requires reasonable foreseeability of the kind of damage claimed, not merely proof that the damage flowed directly from the interference.
- *Wagon Mound (No. 2)* is consistent with *Wagon Mound (No. 1)*: No. 1 addressed remoteness where the kind of damage was not foreseeable on the evidence there; No. 2 addressed breach on different evidence showing a real, known risk of fire.

## Conclusion

In *Wagon Mound (No. 2)*, the Privy Council held Overseas liable in negligence because its engineers should have guarded against a small but real risk of catastrophic fire that could be avoided at minimal cost, and it also held that public nuisance did not permit recovery for fire loss based only on direct causation without foreseeability of that kind of damage.


Overseas Tankship (U.K.) Ltd. v. Miller Steamship Co. [Wagon Mound No. 2], [1967] 1 A.C. 617 (1967)