Citation.  A.C. 388 (Privy Council)
Morts Dock & Engineering Co. (Plaintiff) sued Overseas Tankship (Defendant), owner of the Wagon Mound, for a fire that started in oil that leaked from the Wagon Mound.
One can only be held liable for results the reasonable person could have foreseen.
Overseas Tankship (Defendant) owned the Wagon Mound, a ship that was being fueled in the harbor. During the fueling, some oil spilled into the bay, and the Wagon Mound left without cleaning it up. The oil reached a wharf owned by Morts Dock & Engineering Co. (Plaintiff). Two days later, Plaintiff was working on the wharf when a piece of hot metal fell onto a rag floating in the water and set the oil on fire. The fire damaged the wharf and other boats in the harbor.
Can Defendant be held liable for damages that it could not reasonably foresee?
No, the Court held that Defendant cannot be liable for damages it could not reasonably foresee.
The Court evaluated the history of cases before and after In re Polemis. The Court overturns Polemis with this decision. It is necessary to judge the extent of damage for which an actor can be liable by what a reasonable person could have foreseen.
Furthermore, if the Court were to judge by whether the damage was the direct result of Defendant’s actions, the answer would come out the same. The Court discussed how an average person would not have seen Defendant’s failure to clean up the oil as the direct cause of the fire, but rather would see Plaintiff’s actions in dropping hot metal as the cause. The Court believes that it would be too difficult for anyone to figure out what damages were the direct result of Defendant’s actions, so they create the reasonable foreseeability standard.