Overseas Tankship (U.K.) Ltd. v. Miller Steamship Co. [Wagon Mound No. 2]

A freighter called Wagon Mound, operated by Overseas Tankship (U.K.) Ltd. (Overseas) (defendant), was carrying furnace oil. The ship’s crew carelessly spilled oil into Australia’s Sydney Harbor. The crew did not remedy the spill or minimize its effects before setting sail. The oil spread and reached Sheerlegs Wharf, which was owned by Morts Dock Company (Morts). Morts was performing repairs on two ships owned by Miller Steamship Company (Miller) (plaintiff). While Morts was welding, a piece of hot metal fell onto something flammable floating on the water. Because of the oil, it started a fire that significantly damaged both the wharf and Miller’s ships. In a separate action, Overseas Tankship (U.K.) Ltd. v. Morts Dock & Engineering Co., Ltd. (Wagon Mound No. 1), Morts sued Overseas for negligence. In that case, the Privy Council held that imposing negligence liability for a careless act was improper as to consequences that were not reasonably foreseeable. Based on the available evidence, the Privy Council determined that the Wagon Mound’s crew would not have known the oil could ignite, meaning the damage to the wharf was not foreseeable and negligence liability was improper. Miller later brought the present action against Overseas, seeking compensation for the damage to Miller’s ships on negligence and nuisance theories. Here, different evidence was presented, and the trial court concluded that the Wagon Mound’s crew would have known that furnace oil on water could ignite in exceptional circumstances, but that because the possibility was remote, the damage to Miller’s ships was not a reasonably foreseeable consequence of negligently discharging the oil. The trial court therefore held in Overseas’ favor on the negligence claim. The Supreme Court of New South Wales affirmed. Miller appealed to the Privy Council.