If allowed, this would mean that almost any restriction on the use of an item
could be enforced against a subsequent owner who is not a party to the
original contract. The idea arose in the following Privy Council case.
It was probably important in the Strathcona case that the new owners
were well aware of the charter to Dominion. Even so, the case has been
criticised, especially by Lord Wright MR in the case of Clore v Theatrical
Properties Ltd (1936), where the Court of Appeal said that the decision in
Strathcona should be confined to the circumstances of that charterparty. In
the later case of Port Line Ltd v Ben Line Steamers Ltd (1958) Diplock J
stated bluntly that the decision in Strathcona was wrong. No further
development took place in this area for a number of years, leading Davies
to suggest that ‘the Strathcona case has now descended into the limbo of
lost causes’. However, the idea did raise its head again briefly in the case
of Swiss Bank Corporation v Lloyds Bank Ltd (1979) concerning the sale
of shares, but that appears to be an isolated case.
Implying a trust
Another attempt to evade the strict application of privity is to show that one
of the parties to a contract holds contractual rights on trust for a third party.
Privity of contract 139Taddy v Sterious (1904)
The plaintiff tobacco manufacturers sold a quantity of tobacco to
wholesalers, with a term included to prevent them from reselling it
below a stipulated price. The wholesalers resold the tobacco to the
defendant retailers with the same restriction. The defendant
nevertheless sold the tobacco at a lower price, and the plaintiff sued,
claiming that the term concerning price ‘ran with’ the tobacco, in the
same way as a covenant ‘ran with’ the land in Tulk v Moxhay. The court
would not allow this, holding that the original seller had no claim
against the eventual retailer.Lord Strathcona Steamship Co v Dominion Coal Co (1926)
Dominion had chartered a ship to use for a number of years on the St
Lawrence river. The ship was later sold to the Lord Strathcona
Steamship Co, who knew of the charter to Dominion, but refused to
honour it. Applying the rule in Tulk v Moxhay, Dominion argued that
rights ‘ran with’ the ship, and succeeded in obtaining an injunction
against the new owner, despite not having a contract with the company,
to prevent them from acting inconsistently with the contract between
Dominion and the original owners.