Overseas Tankship (UK) Ltd v Morts Dock And Engineering Co (The Wagon Mound) PDF

Preview

Summary

Case on Foreseeability and the test of remoteness in UK Law - How the Privy Council considered Re Polemis to no longer be good law....

Description

Overseas Tankship (UK) Ltd v Morts Dock & Engineering..., [1961] A.C. 388 (1961)

For educational use only

*388 Overseas Tankship (U.K.) Ltd. Appellants; v Morts Dock & Engineering Co. Ltd. Respondents. (the Wagon Mound.) Positive/Neutral Judicial Consideration

Court Privy Council (Australia) Judgment Date 18 January 1961 Report Citation [1961] 2 W.L.R. 126 [1961] A.C. 388

Judicial Committee Viscount Simonds , Lord Reid , Lord Radcliffe , Lord Tucker and Lord Morris of Borth-Y-Gest 1961 Jan. 18. On Appeal from the Supreme Court of New South Wales.

Damages—Negligence—Remoteness—Damage directly caused by negligent act—Dangerous thing—Furnace oil—Spilled on harbour waters—Fire—Causation—Damage to wharf—Foreseeability of consequences the effective test of liability—One criterion for determining liability and compensation. Australia New South Wales—Negligence—Furnace oil spilled on harbour waters—Fire—Foreseeability of consequences the test of liability—Remission of claim founded on nuisance. Ship's Names—Wagon Mound. The decision in In re Polemis and Furness Withy & Co. [1921] 3 K.B. 560; 37 T.L.R. 940, C.A. , that the defendant was responsible for all the consequences of his negligent act - held in that case to have been the direct result of the act - whether reasonably foreseeable or not, is not good law (post, p. 422).

The essential factor in determining liability for the consequences of a tortious act of negligence is whether the damage is of such a kind as the reasonable man should have foreseen. Liability does not depend solely on the damage being the "direct" or "natural" consequence of the precedent act; but if a man should not be held liable for damage unpredictable by a reasonable man because it was "direct" or "natural," equally he should not escape liability, however "indirect" the damage, if he foresaw or could reasonably have foreseen the intervening events which led to its being done. Foreseeability is thus the effective test the "direct" consequence test leads to nowhere but the never-ending and insoluble problems of causation (post, pp. 423, 426).

© 2021 Thomson Reuters.

1

Overseas Tankship (UK) Ltd v Morts Dock & Engineering..., [1961] A.C. 388 (1961)

There is not one criterion for determining culpability (or liability) and another for determining compensation; unforeseeability of damage is relevant to liability or compensation - there can be no liability until the damage has been done; it is not the act but the consequences on which tortious liability is founded (post, pp. 424, 425).

Dicta of Lord Russell of Killowen in Bourhill v. Young [1943] A.C. 92, 101; [1942] 2 All E.R. 396, H.L.(Sc. ), and of Denning L.J. in King v. Phillips [1953] 1 Q.B. 429, 441; [1953] 2 W.L.R. 526; [1953] 1 All E.R. 617, C.A. applied .

Dictum of Lord Sumner in Weld-Blundell v. Stephens [1920] A.C. 956, 983; 36 T.L.R. 640, H.L. disapproved . *389

Sharp v. Powell (1872) L.R. 7 C.P. 253 considered .

Per curiam: It does not seem consonant with current ideas of justice or morality that for an act of negligence, however slight or venial, which results in some trivial foreseeable damage the actor should be liable for all consequences however unforeseeable and however grave, so long as they can be said to be "direct" (post, p. 422).

While an oil-burning vessel, of which the appellants were the charterers, was taking in bunkering oil in Sydney Harbour a large quantity of the oil was, through the carelessness of the appellants' servants, allowed to spill into the harbour. During that and the following day the escaped furnace oil was carried by wind and tide beneath a wharf owned by the respondents, shipbuilders and ship repairers, at which was lying a vessel which they were refitting, and for which purpose their employees were using electric and oxyacetylene welding equipment. Some cotton waste or rag on a piece of débris floating on the oil underneath the wharf was set on fire by molten metal falling from the wharf, and the flames from the cotton waste or rag set the floating oil afire either directly or by first setting fire to a wooden pile coated with oil and thereafter a conflagration developed which seriously damaged the wharf and equipment on it.

In an action by the respondents to recover from the appellants compensation for the damage it was found by the trial judge on the evidence that the appellants "did not know and could not reasonably be expected to have known that it [the furnace oil] was capable of being set afire when spread on water"; and that apart from the damage by fire the respondents had suffered some damage in that oil had congealed upon and interfered with the use of their slipways, which was "damage which beyond question was a direct result of the escape of the oil":-

Held, on the footing that the damage was the direct result of the escape of the oil, that, applying the test of foreseeability, the appellants who, as found by the trial judge, could not reasonably be expected to have known that the oil would catch fire, were not liable for the damage. In re Polemis and Furness Withy & Co. Ltd. (supra) not followed . Smith v. London and South Western Railway Co. (1870) L.R. 6 C.P. 14 ; H.M.S. London [1914] P. 72; 30 T.L.R. 196 ; WeldBlundell v. Stephens (supra); Rigby v. Hewitt (1854) 5 Exch. 240 ; Greenland v. Chaplin (1850) 5 Exch. 243 ; Hadley v. Baxendale (1854) 9 Exch. 341 ; Cory & Son Ltd. v. France, Fenwick & Co. Ltd. [1911] 1 K.B. 114; 27 T.L.R. 18, C.A. ; Glasgow Corporation v. Muir [1943] A.C. 448; 59 T.L.R. 266; [1943] 2 All E.R. 44, H.L.(Sc. ); Hay or Bourhill v. Young (supra) and Woods v. Duncan [1946] A.C. 401; 62 T.L.R. 283; [1946] 1 All E.R. 420, H.L. considered .

© 2021 Thomson Reuters.

2

Overseas Tankship (UK) Ltd v Morts Dock & Engineering..., [1961] A.C. 388 (1961)

The "strict liability" rule in Rylands v. Fletcher (1868) L.R. 3 H.L. 330; (1866) L.R. 1 Exch. 265 , H.L. not considered (post, p. 427). *390

Order of the Supreme Court of New South Wales, so far as it related to damage caused by negligence, reversed, but action remitted for that court to deal with it so far as it relates to damage caused by nuisance.

APPEAL (No. 23 of 1960) from an order of the Full Court of the Supreme Court of New South Wales (Owen, Maguire and Manning JJ.) (December 3, 1959) dismissing an appeal by the appellants, overseas Tankship (U.K.) Ltd., from a judgment of Kinsella J. exercising the Admiralty Jurisdiction of that court (April 23, 1959) in an action in which the appellants were defendants and the respondents, Morts Dock & Engineering Co. Ltd., were plaintiffs. The following facts are taken from the judgment of the Judicial Committee: In the action the respondents sought to recover from the appellants compensation for the damage which its property known as the Sheerlegs Wharf, in Sydney Harbour, and the equipment thereon had suffered by reason of fire which broke out on November 1, 1951. For that damage they claimed that the appellants were in law responsible. The relevant facts can be comparatively shortly stated inasmuch as not one of the findings of fact in the exhaustive judgment of the trial judge had been challenged. The respondents at the relevant time carried on the business of ship-building, ship-repairing and general engineering at Morts Bay, Balmain, in the Port of Sydney. They owned and used for their business the Sheerlegs Wharf, a timber wharf about 400 feet in length and 40 feet wide, where there was a quantity of tools and equipment. In October and November, 1951, a vessel known as the Corrimel was moored alongside the wharf and was being refitted by the respondents. Her mast was lying on the wharf and a number of the respondents' employees were working both upon it and upon the vessel itself, using for that purpose electric and oxy-acetylene welding equipment. At the same time the appellants were charterers by demise of the s.s. Wagon Mound, an oil-burning vessel, which was moored at the Caltex Wharf on the northern shore of the harbour at a distance of about 600 feet from the Sheerlegs Wharf. She was there from about 9 a.m. on October 29 until 11 a.m. on October 30, 1951, for the purpose of discharging gasolene products and taking in bunkering oil. During the early hours of October 30, 1951, a large quantity of bunkering oil was, through the carelessness of the appellants' *391 servants, allowed to spill into the bay, and by 10.30 on the morning of that day it had spread over a considerable part of the bay, being thickly concentrated in some places and particularly along the foreshore near the respondents' property. The appellants made no attempt to disperse the oil. The Wagon Mound unberthed and set sail very shortly after. When the respondents' works manager became aware of the condition of things in the vicinity of the wharf he instructed their workmen that no welding or burning was to be carried on until further orders. He inquired of the manager of the Caltex Oil Company, at whose wharf the Wagon Mound was then still berthed, whether they could safely continue their operations on the wharf or upon the Corrimal. The results of the inquiry coupled with his own belief as to the inflammability of furnace oil in the open led him to think that the respondents could safely carry on their operations. He gave instructions accordingly, but directed that all safety precautions should be taken to prevent inflammable material falling off the wharf into the oil. For the remainder of October 30 and until about 2 p.m. on November 1 work was carried on as usual, the condition and congestion of the oil remaining substantially unaltered. But at about that time the oil under or near the wharf was ignited and a fire, fed initially by the oil, spread rapidly and burned with great intensity. The wharf and the Corrimal caught fire and considerable damage was done to the wharf and the equipment upon it. The outbreak of fire was due, as the judge found, to the fact that there was floating in the oil underneath the wharf a piece of débris on which lay some smouldering cotton waste or rag which had been set on fire by molten metal falling from the wharf: that the cotton waste or rag burst into flames. that the flames from the cotton waste set the floating oil afire either directly or by

© 2021 Thomson Reuters.

3

Overseas Tankship (UK) Ltd v Morts Dock & Engineering..., [1961] A.C. 388 (1961)

first setting fire to a wooden pile coated with oil, and that after the floating oil became ignited the flames spread rapidly over the surface of the oil and quickly developed into a conflagration which severely damaged the wharf. 1960. Oct. 26, 27, 31; Nov. 1, 2, 3, 7, 8, 9. Ashton Roskill Q.C., C. L. D. Meares Q.C. (Australia) and Michael Kerr for the appellants. The flash point of furnace oil is about 170øF., and the oil floating on sea water cannot reach that temperature. The trial judge found that the appellants did not know and could not reasonably be expected to have known that the oil on the water was capable of being set on fire. That is a very important finding, *392 and it was not challenged on appeal. The only other finding to which reference should be made was that some of this oil had congealed on the respondents' slipways and interfered with their use. It is the appellants' contention that this fact is irrelevant. It is further to be observed that no claim against the appellants was raised in respect of it, and there was no proof of the respondents having thereby suffered any damage. The judge concluded that on the basis of the decision in In re Polemis and Furness Withy & Co. 1 (hereafter called "Polemis") the appellants were on the facts guilty of negligence. What constitutes negligence is the first major point in the case. On the appellants' appeal to the Full Court of the Supreme Court of New South Wales the main heads of appeal were, first, that Polemis was wrongly decided, and, secondly, that if it was right, the damage by fire was not the direct consequence of the appellants spilling the oil. The second point calls for independent consideration before this Board. The judgment of the Full Court contains a critical analysis of the decision in Polemis, and the conclusion was reached that it would not be proper to regard that decision otherwise than as binding on them. Manning J., however, giving the judgment of the court, said that it would be a gross understatement to say that he was able to apply that decision with any degree of confidence, and he expressed the hope that the House of Lords or Judicial Committee of the Privy Council would pronounce on it in the near future. Reliance is placed on that part of the Full Court's judgment which analyses this admittedly difficult decision - Polemis. The present case is of some general importance and interest since it raises directly, and for the first time, the question whether Polemis was rightly decided. On the second point there are two heads; namely, if Polemis is right: (1) Was the damage by fire the direct consequence of the spilling of the oil? (2) Was it due to independent causes? The argument is put on five grounds - the first two run together and must be argued together. (1) The damage by fire to the respondents' wharf was not a reasonably foreseeable consequence of the appellants' act in spilling the furnace oil into Morts Bay. Therefore the appellants' act in spilling the oil did not constitute actionable negligence at the suit of the respondents. The fact that the spilled oil polluted the respondents' slipways *393 is irrelevant. (2) The basis of the decision in Polemis is misconceived, i.e., the authorities relied on in Polemis do not provide the foundation for that decision which it is claimed that they do. (3) The rule in Polemis, namely, that the damage is recoverable if direct but not foreseeable is not correct. (4) If, contrary to the above submissions, the appellants' act in spilling the oil afforded a cause of action in negligence to the respondents, and if the rule in Polemis is sound, the damage by fire to the respondents' wharf was not directly caused by the appellants' negligence; therefore Polemis does not apply. (5) The remarkable and unforeseeable combination of circumstances here constituted novus actus interveniens; therefore Polemis does not apply. Negligence involves breach of duty causing the damage. There is no actionable breach of duty unless it can be shown that at the time of the act the consequences of the act were reasonably foreseeable. The test is objective, the requisite foresight being that of the reasonable man. [The judgments of Sankey J. 2 and of the Court of Appeal 3 in Polemis were then read.] The first submission on Polemis is that the issue was one of contract, namely, the construction of the exceptions clause in a time charterparty. If that be so, it is difficult to regard the case as a satisfactory authority on the tort of negligence or on what constitutes a cause of action in negligence. That submission may be elaborated under three heads. First, negligence is read by implication into the exceptions clause: it does not, in the context of the exceptions clause, mean the same as the tort of negligence. The exceptions clause means that the charterers were not responsible for the fire unless caused by their carelessness. It is doubtfully correct to say, as Warrington L.J. said, 4 that the claim was based on the tort of negligence. Secondly, and still on the exceptions clause, it would seem that the decision in Polemis can be sustained only if the charterers were careless in relation to the fire through failing to provide against what was unforeseeable, namely, the fire, because the damage by fire, though unforeseeable, was the "direct" consequence of their carelessness. Thirdly, the Court of Appeal held, in effect, that the exception of fire was not foreseeable because the charterers had been careless not in relation to the fire, which was not foreseeable, but in relation to some other peril, namely, the carelessness of the Arab stevedores engaged by the charterers, *394 which was not excepted. Polemis is therefore not a satisfactory authority for the reasons so far advanced on what constitutes the tort of negligence. If Polemis can be considered purely as a tortious matter without regard to the contractual basis of the relationship of the parties, it is difficult to see how (apart from the supplementary finding of fact by the arbitration tribunal) the charterers could have been held liable in tort for the action of the stevedores, who clearly could not have been their servants. The stevedores were merely engaged by the charterers' agents. No principle of vicarious responsibility would result in the charterers being held

© 2021 Thomson Reuters.

4

Overseas Tankship (UK) Ltd v Morts Dock & Engineering..., [1961] A.C. 388 (1961)

liable for the carelessness of the stevedores. Hence, no doubt, the supplementary finding of fact that the stevedores were the charterers' servants. There are three cases on which Polemis is based. First, Smith v. London and South Western Railway Co. 5 The statement in that case by Kelly C.B. that "there was negligence in the defendants in not removing these trimmings, and that they thus became responsible for all the consequences of their conduct," 6 involves (i) the view that one can have negligence in the air, and (ii) that if X by an act which is negligent in relation to Y, because it is foreseeable that X's act will injure Y, injures Z, then X is liable to Z for injury which Z suffers as a direct consequence of X's act. Those two conclusions, (i) and (ii), are not the law, and there appears to be no case which supports them. In Haynes v. Harwood 7 it is expressly said that "negligence in the air will not do," 8 and that "it is not necessary to show that this particular accident and this particular damage were probable; it is sufficient if the accident is of a class that might well be anticipated as one of the reasonable and probable results of the wrongful act." 9

That accurately states the position, and it is not reconcilable with what, it is submitted, necessarily follows from the dictum

of Kelly C.B. in Smith's case. 10 As a dictum it is wrong; if a mere dictum it can be disregarded; if it means what it appears to mean, it is irreconcilable with later authorities, viz., Bourhill v. Young 11 ; Woods v. Duncan. 12 *395 Another aspect of Smith's case 13 must be mentioned. When that case was decided it had not previously been suggested that there was any difference between the measure of damages in contract and in tort. In that regard reference may be made to Horne v. Midland Railway Co., 14 which was decided three years after Smith's case 15 and by a court consisting of very much the same judges. Smith's case was not, however, referred to. From this it may be inferred that Smith's case was not intended to depart from well-recognised lines with regard to damages in contract and in tort. Further, the view of the Chief Baron in Smith's case does not correspond with the position in the law of the United States of America as enunciated in Palsgraf v. Long Island Railway Co. 16 The second case which was said to support the view in Polemis is H.M.S. London. 17 In that case, however, the judge regarded the consequence, i.e., the strike, as foreseeable. It was "not unexpected." So regarded, the case affords insufficient foundation and support for the decision in Polemis. The third case on which Polemis is based is Weld-Blundell v. Stephens. 18 A short passage in a long speech of Lord Sumner's is here relied on: "What are the 'natural, probable and necessary' consequences? Everything that happens, happens in the order of nature and is therefore natural. ... What a defendant ought to have anticipated as a reasonable man is material when the question is whether or not he was guilty of negligence, that is, of want of due care according to the circumstances. This, however, goes to culpability, not to compensation." 19 Those words of Lord Sumne...