Citation.  A.C. 388 (P.C. Austl.)
The defendant’s ship negligently spilled oil into the water at Sydney Harbor, and the wind spread that oil to the plaintiff’s wharf. The plaintiff determined the oil to not be flammable, and allowed his men to continue working. Unbeknownst to anyone, there was a piece of debris and a smoldering rag floating under the oil. Molten material from the dock work caused the rag to ignite, and the fire spread across the oil, ultimately destroying the wharf.
The essential factor in determining proximate cause and thus liability is foreseeability of the harm, not direct consequences of the negligent action.
The defendant’s ship, the Wagon Mound, was docked in Sydney Harbor, and, while docked, the defendants carelessly discharged oil into the water. When the ship set sail, the wind spread the discharged oil to the plaintiff’s wharf, which was used for repair work on other ships in Sydney Harbor. Plaintiff noticed the oil and, having become concerned about the risk of fire, ordered his workmen to stop all welding or burning until further notice. Plaintiff asked around and was told that the oil from the Wagon Mound was not flammable. Plaintiff then instructed his men to resume work with caution. A couple days later, the oil caught fire and destroyed the plaintiff’s wharf. The cause of the fire was determined to be a piece of debris floating under the oil holding a smoldering rag set on fire by molten material from the welding. The fire then spread quickly over the surface of the oil, destroying the wharf.
Is the defendant liable for the fire started on the oil slick?
No. The defendant is not liable for the damage because it was not a foreseeable consequence of spilling the oil at Sydney Harbor.
The Privy Council here believes that the logic in In re Polemis is incorrect. The defendant had absolutely no way of knowing that the oil could catch fire, especially when it spread in water. The Council believes it to be unreasonable to hold even negligent actors liable for all unforeseen consequences of their actions, even when those outcomes are technically direct. The Council strongly emphasizes the need for foreseeability that a certain consequence will occur to impose liability for that consequence.