Ambrose J:

This was a claim on a policy of marine insurance. The policy insured 4,980 bags of white sugar shipped from Dairen to Singapore by the steamship Hild. The sugar was packed in gunny bags of 100 kilogrammes net each. The ship sailed on or about 2 December 1961, and arrived on 10 December 1961. During the voyage the contents of 3,849 bags became partly damaged by becoming wet.

The statement of claim alleged that the policy covered all risks including the risk of damage by rain or fresh water, sea water and sweating; and that the damage was caused by sweating.

The defence denied that the policy covered all risks, and alleged that the risks covered by the policy included the risk of damage by rain or fresh water, sea water and sweating but subject to the Institute Cargo Clauses (All Risks). And the defence denied that the cause of the damage to the goods was within the meaning of the word "sweating" as used in the policy.

There is an indorsement on the face of the policy in these words:

This policy is to have the same force and effect and to be subject to the same terms and conditions as the corporation's standard form of marine policy including the Institute Dangerous Drugs Clause plus any other extensions, restrictions or amendments as may be indicated hereunder. The Institute Clauses referred to herein are those current at the date of issue of this policy".

The policy states that the insurance is an insurance upon the 4,980 bags of sugar "Including the risk of damage by rain or fresh water, sea water and sweating". These words are immediately followed by the indorsement "Subject to the Institute Cargo Clauses (All Risks)". Clause 6 of the Institute Cargo Clauses (All Risks) provides as follows:

This insurance is against all risks of loss of or damage to the subject-matter insured but shall in no case be deemed to extend to cover loss damage or expense proximately caused by delay or inherent vice or nature of the subject-matter insured. Claims recoverable hereunder shall be payable irrespective of percentage".

The first question I was called upon to decide was what was the cause of the damage. LW Norman, a cargo surveyor, was employed by the plaintiffs to survey and report upon the 4,980 bags of sugar which were discharged out of the steamship Hild. He made his survey on 13 and 14 December 1961, at Alkaff Quay, where the bags were being discharged from lighters, at the plaintiffs' store at Havelock Road, and aboard an on-carrying vessel. His report, Ex AB 14, 15 and 16, bears the date 2 February 1962. The summary of damage set out in the report is as follows, the percentages being the extent of the loss which would be incurred in selling the sugar because of the wetness:

859 bags wet and stained on two sides,

internally wet and tending to block, 12'bd%

1261 bags wet and stained on one side,

internally wet and tending to block, 7'bd%

1729 bags externally unstained,

internally wet and tending to block 2'bd%

1041 bags undamaged.

Norman was called by the plaintiffs and gave the following evidence. The characteristics of the staining of the bags indicated that condensation had taken place. Condensation is the action of moisture in the atmosphere forming into water droplets on the cold surface of the bags of sugar. His reason for coming to the conclusion that condensation had taken place was that the wet patches on the bags were those areas which were exposed for condensation to form. In his opinion, the wetness of the sugar was the result of condensation forming on the bags of sugar in the hold of the carrying vessel, which often happens when cargoes are shipped in cold weather and transported to tropical waters, and the subsequent absorption of the condensation by the sugar, as sugar is hygroscopic, that is, will absorb water.

Norman's report gives the cause of the damage as "sweating; due to nature of sugar". And it states, "The fact that most bags were wet internally and some externally unstained