An export cargo shipped by the Irrigation Equipment Division and insured by the respondent was transported on the appellant's ship, the Zim-Marseille, from Israel to the United States. Prior to being sent to the carrier, the shipper packed the cargo in a container made available to it by the appellant. During the voyage in the Atlantic in February 1986 the ship was caught in a storm which tore the sides of the container, and the cargo inside it was washed from the deck into the sea and lost. The respondent paid the shipper under the insurance policy, and by virtue of its right of subrogation, demanded from the appellant what had been paid for the lost cargo. Since the appellant refused to pay, the respondent filed its claim in the Haifa District Court. The Court accepted the respondent's claim. Hence the appeal.

The dispute between the parties in the appeal encompasses three main issues. First, did the respondent meet its initial burden to prove the nature and value of the cargo stuffed into the container by the shipper prior to its delivery to the appellant for dispatch? Second, what is the interpretive criterion for determining the meaning of 'perils of the sea'? In light of this, is the District Court right in holding that the storm in which the cargo was lost, in terms of its intensity and degree of visibility, does not provide the appellant with this protection? And third, what is the difference between the appellant's right of exemption in respect of perils of the sea and the question of the integrity of the container and its seaworthiness? And in this context, which of the parties has the burden of proving the adequacy (or inadequacy) of the container, and the causal connection between the condition of the container and the damage, and what has actually been proven in these matters?

Held: Appeal dismissed.

Article 3.3 of the Hague Rules sets out the duty of the carrier to prepare and deliver to the consignor a bill of lading. In subarts a-c, the article lists the details that must be included in the bill of lading, '[p]rovided that no carrier, master or agent of the carrier shall be bound to state or show in the bill of lading any marks, number, quantity, or weight which he has reasonable ground for suspecting not accurately to represent the goods actually received, or which he has had no reasonable means of checking'. Hereinafter, in art 3.4, it is stipulated that '[s]uch a bill of lading shall be prima facie evidence of the receipt by the carrier of the goods as therein described'.

The bill of lading prepared by the shipper, when it handed over the container in question, under the heading 'Description of Goods', included the following:

I cnt said to contain 920 carton irrigation equipment.
Weight - 7,072.
Cont. tare weight - 2,727.
Shipper's load stowage & count.

Relying on art 3.4 of the Hague Rules, the respondent argued that the description in the bill of lading constituted prima facie evidence that the goods described therein had indeed been delivered to the appellant, and that the burden of contradicting this rested with the appellant. The appellant argued that the bill of lading did not state what the container actually contained, but only what it was 'said to contain'. Such a reservation in a bill of lading meant that the carrier who issued the bill has no information of its own as to the contents of the container, and the description given in the bill is based on the report of the person who packed the goods and sealed the container. Such a reservation removed the bill of lading's evidential power. In rejecting this argument, the District Court ruled that only the addition of a 'special' reservation, next to the details mentioned in the bill of lading, denies the fact that the bill of lading is prima facie evidence in relation to that detail. The Court ruled that this general wording does not constitute a sufficient reservation that denies the presumptions created under arts 3.3.c and 3.4 of the Hague Rules which transfer the burden of proof to the carrier. The Court further added that the respondent had brought evidence to prove the contents of the container. Even if the burden of proving the contents of the container did rest with the respondent, the evidence adduced by it was sufficient to remove from it the burden of proof.

It is not clear that the trial Court was correct in its reasoning that the reservation contained in the bill of lading did not negate (or detract from) its value as prima facie evidence. Article 3.3.b of the Hague Rules provides that the carrier must specify in the bill of lading '[e]ither the number of packages or pieces, or the quantity, or weight, as the case may be, as furnished in writing by the shipper'. However, even if this assumption is indeed correct, it does not benefit the appellant. As stated, the respondent not only relied on the description of the goods included in the bill of lading, but also provided evidence to prove the container's contents and the value of the goods. The District Court held that the evidence adduced by the respondent provided sufficient proof as to the contents of the container. There is no basis to intervene in this factual decision. This will, in effect, obviate the need to decide the legal question whether the reservation contained in the bill of lading did in fact preclude the applicability of art 3.4 of the Hague Rules.

Article 4.2.c of the Hague Rules regulates the exemption from liability for damage caused by 'perils of the sea'. The appellant's main contention was that in view of the severe storm into which the ship was involved, and the circumstances in which the container was washed from the deck into the sea, it should not have been held liable for damage resulting from the loss of the container. The parties' dispute over this claim also involves questions as to the burden of proof in relation to the ship's seaworthiness and as to the causal link between the natural occurrence (the alleged 'perils of the sea') and the damage caused to the cargo.

In rejecting the appellant's contention that it is entitled to an exemption from liability due to the dangers of the sea, the District Court held that the appellant - who bore the burden of proof - did not prove 'a rare maritime risk due to a severe and unexpected storm that caused the container to be washed overboard to the sea'. This definition, the appellant's counsel argued, reflects a narrow and stringent test applied in United States maritime law. However, another approach is also known, the one accepted in England, Canada and other countries. This approach supports the application of a broad and lenient interpretive test, which does not limit the protection of sea hazards to cases where the activity of weather forces is proven to be rare in intensity and exceptional in the area or season in which they operated. On this approach, even if the severe weather, in itself, was not unpredictable, but the manner in which the weather caused the damage was 'accidental' and unpredictable, and did not constitute a probable result of a known process, the carrier would be exempt from liability for the damage.

The appellant's counsel argued that of the two approaches, it is the one more favourable to the carrier that reflects the law correctly. The purpose of the Hague Rules, he argued, is to balance the risks of the carrier and the holder of the cargo and the adoption of the test that makes it easier to fulfil this purpose. Among other things, the application of the stricter test, which in practical terms means the imposition of absolute or increased responsibility on the carrier, will increase the prices of maritime transport and may even harm international trade.

The respondent's counsel contended that the perils of the sea exemption has been similarly defined in Common Law countries, which differ from each other only in emphasis in relation to the intensity of the storm and the ability to predict it. The starting point is that the question of whether certain damage was caused due to the dangers of the sea must be decided according to the circumstances of the given case, although in implementing the basic concept it is indeed common to see the courts of the United States as having adopted a slightly stricter approach than that of courts in England or Canada.

This case does not require a decision on whether a carrier could never benefit from the perils of the sea exemption without proving that the storm in which the damage was caused reached at least a certain degree of intensity, the occurrence of which, given the sailing area and season in which the incident occurred, could not reasonably have been predicted. In exceptional circumstances a carrier could indeed argue this defence if it proved that although the storm and its intensity were foreseeable, the manner in which the damage was caused deviated from the normal range. But for the most part, where the unusual climatic occurrence can be predicted, it is also possible to assess the nature of the risks that need to be prepared for. Hence, as a general rule, and subject to exceptions, the extent of the protection of sea hazards must be deduced from the degree of unpredictability, both in terms of intensity and in terms of arena and timing, of the natural occurrence which caused the damage.

This approach seems to be more in line with the rationale behind the Hague Rules. Previously, carriers used to dictate terms in the contract of carriage, which completely absolved them of any responsibility for the fate of the cargo, whereas the Hague Rules are intended to impose on the carrier certain obligations regarding the storage and handling of cargo. A practical justification for applying the stricter approach lies in the technological development that has taken place in the last decades in the field of meteorology. The fact of the existence of sophisticated and reliable means of forecasting allows for an increased duty to be imposed on the carrier, which can receive advance warning of a storm whose intensity and dangers can be reasonably foreseen. Despite its traditional label of a 'mutual venture', the sea freight contract is no longer an equal-risk mutual adventure that the cargo owner and carrier undertake. Of the two, only the carrier is considered to have the knowledge, ability and means necessary to anticipate common maritime dangers, and is therefore able and obligated to protect the cargo entrusted to its hands. Granting an exemption to carriers for the consequences of risks they had knowledge of and the power to prepare for, may ultimately lead to harm to maritime trade. On the other hand, placing the responsibility on the carriers is consistent with considerations of economic efficiency, as it will encourage them to take the necessary measures to better safeguard the cargo.

The District Court held that the appellant had not proved that the storm into which the ship had fallen was severe and unpredictable, in terms of place and time, to the extent that it deprived the appellant of its ability to take the necessary measures to protect the cargo. Circumstantial evidence for this finding was found by the Court in the fact that, apart from damage to its antenna, the storm did not cause any damage to the ship itself, and also that only a few additional containers were washed into the sea, while most other containers were not damaged. In this context, the court referred to the testimony of the ship's master and the director of the Meteorological Service's forecasting centre, who testified on behalf of the appellant, and ruled that none of these testimonies were of any use to the appellant. There is no basis to intervene in the determination of the District Court.

Article 3.1 of the Hague Rules imposes various obligations on the carrier. Among other things, it provides that the 'carrier shall be bound before and at the beginning of the voyage to exercise due diligence to … [m]ake the ship seaworthy.' However, art 4.1 provides that '[n]either the carrier nor the ship shall be liable for loss or damage arising or resulting from unseaworthiness unless caused by want of due diligence on the part of the carrier to make the ship seaworthy'.

The relevant container was owned by the appellant, and there was no dispute between the parties that within its obligation to prepare the ship for sailing, as required by art 3.1 of the Hague Rules, the appellant was obliged to provide proper containers and seaworthy containers. The District Court held that 'the maritime risk and intensity of a storm are related to the seaworthiness of the ship and the container forming part thereof' and that the burden of proving the integrity of the container rested with the appellant.

From the evidence before it, the Court found that the container that was lost due to its disintegration, and a number of other containers among those that were on board and that were also damaged and destroyed, were from the same production series. It was found that defects in this series, which were made of aluminium, were found to have been repaired by the manufacturer during soldering. Such defects were also discovered in the container in question and their repair, which was carried out shortly before the voyage in question, included welds in the beams of the container. The beams strengthen the parts of the container: the floor, the walls and the roof. The rupture of the walls due to the storm, while the floor of the container remained on the deck, indicated that the beams did not properly strengthen these parts of the container. A marine engineer, who gave expert testimony on behalf of the respondent, explained that 'aluminium containers have many more problems than steel containers and that such containers are problematic once repairs are made to them'. The Court preferred this testimony over the testimony of a witness on behalf of the appellant.

On the basis of all these circumstances, including the fact that not all the containers that were on board were washed away in a storm, the Court ruled that the damage should be attributed to defects in the container and not to perils of the sea. The responsibility for this damage, the Court ruled, rested with the appellant. The Court did not disregard the appellant's contention that prior to the voyage the containers had been inspected. But the examination, as it turned out, was by sample and not individual, and such an examination, the Court ruled, was not sufficient to meet the appellant's duty, especially where in relation to this container it was known that defects were discovered and repairs were made.

The appellant's counsel argued that the District Court erred in imposing on the appellant the burden of proof as to the integrity of the container and its seaworthiness. According to him, the burden of proving a defect in the container rested with the respondent. In his view, the respondent was unable to prove the existence of a defect. However, even if it were proved that the container was unseaworthy, the Court would still have to examine due diligence under art 4.1 of the Hague Rules. In doing so, he argued, the Court refrained from ruling. In any event, he added, the Court erred in holding that the appellant's right to be exempted from liability due to perils of the sea is conditional on the integrity and fitness of the container. In his view, the Court should first have ruled on the perils of the sea exemption. Only then should the Court have examined the respondent's claim that the loss was caused due to the container being damaged, and the appellant's answer that even if the container was damaged, it exercised due diligence to prepare it for carriage.

The factual decision of the District Court is sufficient to override the decision in the legal dispute. If the Court rules that the container was not seaworthy and that its defects were the reason for its disintegration and the loss of the cargo, it is no longer necessary to address the question of whether it was the appellant's duty to prove that the container was normal and fit for purpose, or whether it was the respondent's duty to prove the container was defective. In any event, even the burden of persuasion as to the defects of the container rested on the respondent, what was proved in relation to the circumstances of its dissolution was sufficient to shift the burden of proof to the appellant.

A carrier seeking to be released from liability on the grounds that the damage was caused by sea hazards must prove that prior to the voyage the ship was seaworthy, or at least that it exercised due diligence. This means that the protection of sea hazards may arise for the carrier only if it has shown that the damage did occur as a result of the sea hazards. The carrier has the burden of proving the causal connection between the perils of the sea and the damage, including negation of the alternative cause of the damage, which is the carrier's failure to fulfil its duty to prepare the ship for voyage. The appellant's claim that the District Court refrained from ruling on its claim that it acted with due diligence to prepare the container must also be rejected. The Court ruled that the sample examination of the containers did not, in the circumstances of the case, avail the appellant, even though the Court did not expressly state that this determination referred to the appellant's contention.