The case of the sugar in the concrete: contaminated cargo

In brief - An old war story in which key legal principles were applied to a shipping mystery

A "bizarre discovery" at a concrete processing plant showed that a batch of aggregate had been contaminated with water and sugar during its shipping. This led to an interesting case in 1979 where the cargo owners sued the carrier for breach of their contract of affreightment (COA) and negligence. The carrier in turn cross-claimed against the ship owner from which they had chartered the ship.

Water and sugar left over in ship's hold contaminate aggregate

In the case of South Coast Basalt P/L and Pioneer Concrete (NSW) P/L v RW Miller and Co P/L (NSWSC, Yeldham J, 22/04/1977, unreported), the two plaintiffs, South Coast Basalt and Pioneer Concrete (SCB and PC), were wholly owned subsidiaries of Pioneer Concrete Services Pty Ltd. SCB was the lessee of a basalt quarry at Bass Point, six hours by sea south of Sydney. From about 1973, basalt, which had been extracted from the quarry, crushed and graded into aggregates of various sizes, was shipped to Blackwattle Bay in Sydney, where PC used it in the manufacture of ready mixed concrete.

Miller entered into a long-term COA to carry the basalt for SCB on 22 June 1973. Initially it used its own vessel, the "Lisa Miller", for that purpose but it had grounded and the "Hexham Bank" had been used for one voyage while "Lisa Miller" was undergoing repairs. Miller time chartered the "Cobargo" from Hethking under a Baltime 1939 Uniform Time Charter dated 3 October 1974 to perform the COA. The "Cobargo" was managed by Hetherington Kingsbury Pty Ltd. It had been acquired by Hethking in about July 1973 and had carried sugar from the northern rivers of NSW to Sydney. The first two voyages under that charter involved the carriage of coal. On 15 November 1974, basalt was carried from Bass Point to Blackwattle Bay.

It was alleged by the plaintiffs that during that voyage a quantity of water in the No. 2 hold could not be removed by reason of a defective bilge pumping system. The water had derived from an excessively wet cargo of coal. It was further alleged that quantities of sugar which also remained in the hold became dissolved and approximately 400 tons of 10mm aggregate, which was stowed in the hold, became contaminated. As a result it was alleged much of the concrete made from that basalt failed to set properly, causing substantial damage to the plaintiffs.

The judgment of the Privy Council, to which reference is made later, contains the following description of the detection of the problem: "The mode of its discovery was bizarre. As a result of the evaporation by the summer heat of the water in which the sucrose was dissolved clouds of bees were attracted to the deposited sugar in a batch of aggregate passing along the conveyor belt to the Blackwattle Bay plant".

Plaintiffs allege negligence, breach of contract and implied warranty

SCB's claim against Miller alleged breaches of the COA, including clause 21(c) which provided that:

Miller shall ensure that there is no contamination of aggregate by coal or other materials (excluding sea water) or by different sizes of aggregate from the time of loading at Bass Point until discharge onto Basalt's Conveyors. It was also asserted that Miller was in breach of an implied warranty of seaworthiness. Allegations of negligence were also made by the plaintiffs (PC only suing in tort).

Force majeure/exception clause relied on by defendant

By its defence, Miller denied that clause 21(c) had the effect contended for or that there was any implied warranty of seaworthiness; and that it was not in breach of either allegation. It also denied any causal connection between the damage suffered by SCB and any such breaches, and relied upon clause 17, the force majeure/exception clause in the COA which, inter alia, protected Miller from acts or neglects of the Master in the navigation or management of the ship. In answer to the negligence claims, Miller also denied any negligence or that any negligence was causally related to the damage claimed, and asserted contributory negligence. Clause 17 was also raised in response to the claim in tort by SCB.

In response to the reliance on clause 17, SCB relied on section 5 of the Sea Carriage of Goods (State) Act 1921, which made certain provisions in "any bill of lading or document" null and void.

Defendant cross-claims against Hethking Steamships P/L for breaches of time charter clauses

The claim against Hethking by Miller relied on breaches of clauses 1 and 3 of the time charter. Clause 1 described the vessel as "being in every way fitted for bulk cargo service with all...