Overseas Tankship v Morts Dock Case established the test for remoteness of damages and overruled the Re Polemis case.
Facts:
- Morts Dock & Engineering Co. sued Overseas Tankship Ltd (defendant) for negligence in not closing the oil tap, which resulted in burning of the plaintiff’s ship.
- The crew members of the Overseas Tankship (UK) Ltd were working on a ship when they failed to turn off one of the furnace taps. This caused oil to leak from the ship into the Sydney Harbour.
- Morts Dock & Engineering Co (The Wagon Mound No 1 1961) owned the wharf, which they used to perform repairs on other ships. The leaking oil on the water surface drifted to the site where morts were welding metal.
- A supervisor enquired to find out whether the oil was flammable, which he was assured that it was not. However, a spark from welding and mixed with debris caught fire from the spilt oil and this caused a fire to spread rapidly. This caused significant damage to Mort’s wharf.
Contention & Issue:
The issue, in this case, was whether the crew could be liable for the damage to the wharf that was caused by the fire.
In addition, would this also be the case even if it was unforeseeable, but a result of a negligent act?
Ratio & Decision:
1. The court held that Overseas Tankship (UK) Ltd could not be held liable to pay compensation for the damage to the wharf.
2. This case disapproved of the direct consequence test in Re Polemis and established the test of remoteness of damage. This asks whether the damage would be reasonably foreseeable.
Here, the damage caused to the wharf by the fire and the furnace oil being set alight could not be foreseen by a reasonable person. Therefore, no compensation was to be paid by the Overseas Tankship.
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