Facts
- In Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound) [1961] AC 388, furnace oil was negligently discharged into Sydney Harbour by the defendants.
- The oil drifted to Morts Dock, where welding operations were underway.
- Minor damage to the wharf was foreseeable, but it was not reasonably foreseen at the time that oil on water could ignite and cause a fire.
- Fire sparked at the dock due to the oil, causing extensive damage.
- The Privy Council considered the scope of recoverable damages relating to both negligence and nuisance claims arising from the same facts.
- In a related case, The Wagon Mound (No. 2) [1967] 1 AC 617, similar facts were considered specifically regarding a nuisance claim and the foreseeability of fire damage to the claimant's vessels.
- Further analysis within the area of tort involved subsequent cases such as Jolley v Sutton LBC [2000] 1 WLR 1082, Doughty v Turner Manufacturing Co. Ltd [1964] 1 QB 518, Smith v Leech Brain & Co Ltd [1962] 2 QB 405, and Lagden v O’Connor [2004] 1 AC 1067 focusing on extensions and boundaries of foreseeability claims.
Issues
- Whether the defendants were liable for all the direct consequences of their negligence, regardless of foreseeability, as under the direct consequence test.
- Whether liability should instead be limited to damages that were reasonably foreseeable at the time of the negligent act.
- Whether foreseeability constitutes an essential element in determining the remoteness of damage in negligence and nuisance claims.
- Whether the defendant’s liability extends to tort claimants with aggravated pre-existing vulnerabilities (the “eggshell skull” and “thin skull” rules).
Decision
- The Privy Council in The Wagon Mound (No. 1) rejected the direct consequence test from Re Polemis [1921] 3 KB 560.
- It was held that a defendant is only liable for consequences of their negligence that are reasonably foreseeable.
- The fire damage was deemed too remote because it was not a foreseeable consequence of the oil spill, and the defendants were not liable for the fire damage.
- In The Wagon Mound (No. 2), it was found that a reasonable person should have foreseen even a small risk of fire, particularly since eliminating the risk was neither difficult nor costly, imposing liability in nuisance as well.
- The court clarified that some harm of a foreseeable kind must occur before liability can be established; precise manner or extent of damage need not be foreseeable (as seen in Jolley v Sutton LBC).
- The “eggshell skull” rule was confirmed (Smith v Leech Brain), establishing that a tortfeasor takes their victim as found; if the harm itself is foreseeable, liability exists for its full extent, even if aggravated by pre-existing conditions.
- The “thin skull” rule was extended to cover financial vulnerability (Lagden v O’Connor), requiring defendants to account for claimants’ financial circumstances.
Legal Principles
- Liability in negligence and nuisance for damages is limited to those consequences that are reasonably foreseeable.
- The “direct consequence” test is replaced by a “reasonable foreseeability” test for remoteness of damage.
- Reasonable foreseeability is central at all stages of negligence: duty of care, breach, and causation.
- The standard of care entails considering the severity and probability of harm, as well as the cost of avoiding risk.
- Defendants are responsible for full harm where the kind of injury is foreseeable (eggshell skull rule) and must also account for claimants’ financial vulnerabilities (thin skull rule).
- The precise manner or full extent of harm need not be foreseen if the type of harm is foreseeable.
- Application of foreseeability in specific contexts may vary, e.g., claims involving children (Jolley v Sutton LBC) or unforeseeable specific events (Doughty v Turner Manufacturing Co. Ltd).
Conclusion
The Wagon Mound cases shifted the benchmark for remoteness in tort from direct consequence to reasonable foreseeability, clarifying that liability in negligence and nuisance is limited to reasonably predictable types of harm, with the “eggshell skull” and “thin skull” rules ensuring full compensation where the harm itself is foreseeable.
