• In the case of Long Strathcona Steamship co v Dominion Coal Co 1926 AC 108, which was later overturned in Port Line v Ben Line, it was found that a negative contractual obligation in relation to property can be binding on a third-party purchaser with notice.

Facts of the Case

  • Dominion (D) purchased a ship subject to a charterparty which had knowledge of but actually refused to honour it.
  • The charterparty (C) then sought an injunction against D to prevent D from using the ship in a manner inconsistent with the charterparty.

Issues in Long Strathcona Steamship co v Dominion Coal Co 1926 AC 108

  • Could a court grant an injunction based on a negative covenant?

Held by Privy Council

  • Injunction granted.

Lord Shaw

  • Here it was held that the court could grant and impose an injunction based on a negative covenant which was expressed or implied in the charterparty.
  • Specific performance could not be granted.
  • “Their Lordships will, therefore, humbly advise His Majesty that the appeal be allowed for the purpose of variation of Mellish J.’s order (1) as follows: (1.) By omitting from (1) The order of Mellish J., so far the steamship Lord Strathcona dated as material, was as follows: — April 20, 1914, corrected to July 24, ” 1 . That the time charterparty of 1914, made between plaintiff and thereof all the words after the words ” valid and subsisting contract.” (2.) By omitting cl. 2. (3.) By omitting 1925 cl. 4. (4.) By omitting from cl. 6 the words ” the amounts LOBD certified by the referee under cl. 2 hereof, and the amount STEAMSHIP of the said damages under cl. 4 hereof when assessed, and.” ^° – Subject to these variations, the said order should be affirmed, DOMINION COAL The cause should be remitted to the Court below to deal Co. with the question of damages. There will be no costs of this appeal, the order as to costs in the Court below to stand” pg.126