Overseas Tankship v. Miller Steamship

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Overseas Tankship (UK) Ltd v. Miller Steamship Co Pty (1966), [1966] 2 All ER 709; [1967] 1 AC 617; [1966] 3 WLR 498 (PC) - also known as Wagon Mound No. 2 - is a famous decision by the Judicial Committee of the Privy Council which helps to define remoteness of damages in a nuisance tort action following decision in Wagon Mound no 1 which defined remoteness in negligence. The court ruled that loss will be recoverable where the extent of possible harm is so great that a reasonable man would guard against it (even if the chance of the loss occurring was very small).

It should not be confused with the earlier case The Wagon Mound Overseas Tankship (U.K.) Ltd. v. Morts Dock and Engineering Co. Ltd. [1961] 1 All ER 404. Wagon Mound No. 1 is the leading authority on remoteness of damage in negligence.

1 Background
2 Opinion of the Council
3 Implications and analysis
4 See also
5 External links

[edit] Background

The defendant owned a freighter ship named the Wagon Mound which was moored at a dock. The plaintiff owned two ships that were moored nearby. At some point during this period the Wagon Mound leaked furnace oil into the harbour while some welders were working on a ship. The sparks from the welders caused the leaked oil to ignite destroying all three ships.

The appeal to the Privy Council was on the basis of whether the defendant should be liable.

[edit] Opinion of the Council

The Council found that a reasonable person in the position of the ship's engineer would have been aware of the risk of fire. Since the gravity of the potential damage from fire was so great there was no excuse for allowing the oil to be discharged even if the probability or risk of fire was low. A reasonable person, the Council held, would only neglect a risk of such a potentially great magnitude if he or she had a reason to do so, e.g. if it were cost prohibitive.

[edit] Implications and analysis

This idea of a balance between magnitude and seriousness of risk is similar to that proposed by Learned Hand in United States v. Carroll Towing Co. 159 F.2d 169 (2d Cir. 1947) on the subject of legal causation. Such a formulation of the issue has struck some in the field as an argument along the lines typically made in the Law & Economics camp usually seen to be represented by the American Judge Richard Posner.^{[citation needed]}