Morts owned and operated a dock in Sydney Harbour. Overseas Tankship were charterers of the Wagon Mound, which was docked across the harbour unloading oil. A large quantity of oil was spilled into the harbour. Morts asked the manager of the dock that the Wagon Mound had been berthed at if the oil could catch fire on the water, and was informed that it could not. As a result Morts continued to work, taking caution not to ignite the oil. Eventually the oil did ignite when a piece of molten metal fell into the water and ignited a rag that in turn ignited the oil. Considerable damage was sustained both by the wharf and the ship docked there. Morts was successful in obtaining damages at trial, which Overseas Tankship appealed.
- Is the Polemis test accurate, or should reasonable outcomes be used to determine liability?
- Does the type of injury need to be foreseeable?
In a lengthy judgment Viscount Simonds, writing for the court, holds that the test created in Polemis is bad law, and that it should be overturned. He states that liability is in respect of the damage caused by the action alone. If the liability for injuries depends on the foreseeability of the plaintiff as an injured party, then the liability for damages should depend on the foreseeability of the resulting damages. Thus, the Polemis test is overturned. The court finds that it was not reasonable that Overseas Tankship would expect their spilling of oil to result in the large fire that happened, and therefore they are not liable for the damages sustained by Morts.
Liability for damages is based upon the reasonable foreseeability of the outcome.
Overseas Tankship were found liable for the damage to the ship berthed at the dock in The Wagon Mound, No. 2.