Lord Strathcona Steamship Co v Dominion Coal Co [1926] AC 108

Key points

  • This case seemed to suggest a negative contractual obligation in relation to property can be binding on a third party purchaser with notice
  • Later overruled in Port Line v Ben Line

Facts

  • D purchased a ship subject to a charterparty which it had knowledge of but refused to honour
  • The charterer C sought an injunction against D to prevent D from using the ship in a manner inconsistent to the charterparty

Held (Privy Council)

  • An injunction was granted

Lord Shaw

  • The court can grant an injunction based on negative covenant expressed or implied in the charterparty, although specific performance cannot be granted
  • ‘If a man acquires from another rights in a ship which is already under charter, with notice of rights which required the ship to be used for a particular purpose and not inconsistently with it, then he appears to be plainly in the position of a constructive trustee with obligations which a court of equity will not permit him to violate’