Trident v McNiece Brothers - 3 members allowed claim under contract even though privity rule was breached (narrow exception). 2 members allowed the claim for reasons that are unconnected to the law of contract. 2 dissent (privity applies). Disagreement in reasoning within majority.
England
Clear statement by HoL in Scruttons v Midland Silicone (1962) - Bound by Dunlop.
However, even after 1966, still affirmed doctrine of privity. Lord Reid- it sucks that we’re bound by Dunlop. Denning LJ dissented.
Lord Denning again tried to overturn doctrine in Beswick v Beswick in the CA, but the HoL held their ground. Didn’t matter; an exception applied anyway.
Long-standing exceptions
Deane J in Trident - not exceptions because not based on contract- really bringing claim under other areas of law (agency, trust).
Collateral contract
Shanklin Pier v Detel- Pier painting case. P (owner) instructed contracter to use D’s paint. Defective. No contract between owner and manufacturer. Collateral contract between owner and maker of paint.
Negotiable instrument
A (drawer) writes a cheque in favour of B - order to her bank (the drawee) to pay B. Contract between A (drawer) and bank (drawee). Nevertheless, B can demand payment from the bank. B has no contract with bank.
Agency agreements
A (principal) employs B (agent) to negotiate on their behalf with C. Contract is between B and C, and not between A and C. If B is an agent, B stands in the shoes of A, and the contract takes effect between A and C.
The Trust
A promises B that she will confer a benefit on C; the promise to confer a benefit has been treated as trust property - the so called trust of a promise. B (trustee) holds trust property on trust for C (beneficiary).
Where B brings a claim for damages against A, the damages Bill recovers are not his own (having suffered no loss) but C’s. He holds these on trust for C (Leopold Walford).
Courts traditionally unwilling to impose a trust (especially where commercial) - there must be an intention to create a trust.
After 1950s HC, said that Court shouldn’t be shy in imposing a trust. See Wilson v Darling Island Stevedore per Fullagar J and Trident per Mason and Wilson JJ- not uncertain; trust should be recognised where it appears from the language of the parties construed in its context including the matrix of circumstances that the parties so intended.
Assignment
A promisee can assign his or her contractual rights to a third party. Common amongst commercial parties.
Tort law
Hill v Van Erp - A solicitor prepared a will for a client. They were to make a testamentary disposition to a friend (third party). Disposition null and void under legislation.
English case called White v Jones on same facts. Both of the supreme courts say there is a claim in negligence. Even though no beneficiary-solicitor contract, can bring claim in negligence. Clearly courts willing to find DOC here but torts cannot be used in all third party circumstances.
The Himalaya Clause
Designed to allow a third party to rely on a defence or limitation in a contract to which they were not a party.
A enters into a contract with B for the benefit of C and the contract states that B is the agent of C (as principle) and therefore C acquires rights and liabilities under the contract between A and B. Utilises agency reasoning.
The Eurymedon - Owner-carrier contract. Third party (stevedores) damaged goods. Limitation clause in contract if carrier damaged the goods. “ No servant or agent, including independent contractor, of the carrier was to be liable for other act or default in the course of his employment. Every limitation available to the carrier should be available to such persons. The carrier is an agent and trustee of such a person. Such persons to this extent were parties to the contract. “
Said that third party could rely on that limitation because the Himalaya rules created an agency agreement.
Lord Wilberforce- became a full contract with carrier as agent when the stevedore performs. 2 conditions:
1. Carrier needed to be an agent
2. Stevedore needed to unload the ship
Flaw- carrier needed to be an agent of the stevedore. Made clear that not simply enough for carrier to declare that they are an agent of the stevedore. In order to be an agent you have to have the authority of the principal. Had authority because carrier and stevedore were within same group of companies.
Same in New York Star. Wilberforce: Although the court should not look to fine distinctions, must be authority of third party.
At mercy of judicial construction.
The Starsin - If the Himalaya clause included exemptions or limitations which conflicted with international sea transport rules, then the clause was not enforceable (The Hague, Rotterdam Rules etc).
Statutory exceptions
Property Law Act 1974 (Qld) s 55.
Note: If the Act does not apply (fail to comply with requirements), then the common law will still apply (s 55(7)).
Basic premise
s 55(1): A promisor who, for a valuable consideration moving from the promisee, promises to do or to refrain from doing an act or acts for the benefit of a beneficiary shall, upon acceptance by the beneficiary, be subject to a duty enforceable by the beneficiary to perform that promise.
Promises
Promise defined in s 55(6)(c): promise means a promise—
(a) which is or appears to be intended to be legally binding; and
(b) which creates or appears to be intended to create a duty enforceable by a beneficiary;
Must create or be intended to create a duty enforceable by the beneficiary: Sorbello v Sorbello - Wife entered life insurance policy; husband sole beneficiary. H and W had discussions about where life insurance money would go when she died (including children). Children argued legislation applied- no intention to create legal relations.
The Act only applies to benefits and not burdens: Rural View Developments v Fastfort.
Third party = beneficiary- s 55(6)(b). Need not be identified at the time of the promise; must be identified at time of acceptance: Portland Downs Pastoral v. Bexalaw.
Beneficiary’s obligations
Need not provide consideration (that is provided by promisee). Beneficiary must accept the promise made for his or her benefit.
Acceptance defined in s 55(6)(a). Time runs from point when beneficiary knows that promise has been made for their benefit.
Re Davies- beneficiary purported to accept a year after they had notice. Too late.
Another example- Portland Downs.
Consequences of accepting
s 55(3)(a)- the beneficiary may sue in their own name and recover damages for loss and get specific performance/injunction.
Can’t impose burdens, but can be used to impose conditions which beneficiary is bound by when accept: s 55(3)(b)-(c).
Variation
Prior to acceptance promisor & promisee can vary contract: s 55(2). Once accepted, need beneficiary’s consent: s 55 (3)(d).
Defences
Defences which promisor had against promisee, those defences are preserved against the third party: s 55(4).
Burdens
General rule: burdens cannot be imposed on a third party to a contract.
Common law says freehold covenant is only binding between the original parties.
Equity allows restrictive covenant to bind subsequent owners of land: Tulk v Moxhay.
Lord Stathcona Steamship Co Ltd v. Dominion Coal Co Ltd - tried to extend Tulk rule outside real property (to personal property). New owner of ship bound by existing time charter.
Shell Oil Co of Australia Ltd v. Mcllwraith McEacharn Ltd - NSWSC distinguished it. Jordan CJ- it’s exception for charter parties.
Howie v. NSW Lawn Tennis Ground Ltd - HC (Dixon CJ, McTiernan and Fullagar JJ) doubted outcome.
Has also been doubted in England, by Diplock LJ in Port Line Ltd v Ben Line Steamers.
Damages
A – B contract for benefit of C. A has contract but no loss (nominal damages only), C has loss but no contract.
General rule is person can only recover for own loss, and can’t recover for another. Two exceptions:
1. Jackson v Horizon Holidays-
Lord Denning- father could recover for his own mental distress as well as that of his wife and children. Other judges less happy. Goes totally against precedent.
Wilberforce in Woodar v Wimpy- says it is an exception, but is limited to holidays.
Bagot per Windeyer J- A – B contract to pay C. A might not be able to recover if breach, but they might be able to get some damages on other grounds - A relying on the payment to reduce/discharge his indebtedness to C, or if it was for a joint venture.
HC in Trident- Mason CJ and Wilson J- called Jackson highly dubious. Haven’t got a firm Australian decision.
2. (not law in Australia, impliedly) The St Martins Property Exception. Goes back as far as Dunlop v Lambert.
Revived in The Albazero per Lord Diplock: original party treated as having entered into the contract for the benefit of all persons who may have or may acquire an interest in the goods before they are lost or damaged, and is entitled to recover by way of damages for breach of contract the actual loss sustained by those for whose benefit the contract is entered into.
Narrow exception
Parties must be commercial parties (buyer and seller).
Contract must concern sale of goods.
Third party must have acquired property interest before the loss was suffered.
They mustn’t have a claim on their own behalf against the carrier.
Some English HoL cases have sought to extend it beyond narrow exception- Linden Gardens Trust v Lenesta Sludge (sale of land which was subject of a building contract), Darlington B.C. v Wiltshier.
However has been some rowing back from that position- Alfred McAlpine Construction Ltd v. Panatown Ltd- said that you need to be careful in applying this kind of exception. It’s very narrow.
Australian cases- no discussion of doctrine. Arguably the Dunlop v Lambert exception could be used in an Australian case. English cases extended doctrine to cases in which land had been transferred.
