Shogun Finance Limited (Respondents) v. Hudson (FC) (Appellant)

[2003] UKHL 62

Case details

Case citations
[2003] UKHL 62 · [2004] 1 AC 919 · [2003] 3 WLR 1371 · [2002] 1 WLR 2303
Court
House of Lords
Judgment date
19 November 2003
Source judgment

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Subjects
Contract law Mistake and identity Hire-purchase / consumer credit
Keywords
mistake as to identity fraudulent misrepresentation void v voidable contract hire-purchase agreement construction of written contract section 27 Hire-Purchase Act 1964 nemo dat quod non habet face-to-face presumption
Outcome
appeal dismissed
Judicial consideration

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Summary

It is not correct to treat every fraudulent misrepresentation about identity as negating formation of a contract; whether a contract is void or voidable depends on how the parties identified the counterparty. Where a written agreement unmistakably identifies a named individual as the contracting party, the document is to be construed as describing that named person. If that named person did not in fact authorise the transaction, the written agreement will be a nullity as against the purported named party rather than merely voidable. The face-to-face presumption that a vendor intends to contract with the person physically present is strong in oral dealings but does not displace the rule of construction applicable to documentary contracts.

Abstract

The appellant bought a motor vehicle from a rogue who had signed a hire-purchase form in the name of a real person (Mr Patel). The finance company (Shogun) had checked the named person's credit details before authorising delivery. The rogue sold the car on to Mr Hudson, a bona fide private purchaser. The principal question was whether a hire-purchase agreement was ever concluded between Shogun and the rogue so that section 27 of the Hire-Purchase Act 1964 could give the later purchaser a good title. The County Court and the Court of Appeal held for Shogun. The House of Lords considered conflicting authorities on "mistake as to identity", the effect of fraud on formation, and the role of written contracts. The central issue was whether identity in a written consumer credit agreement is resolved by construing the document or by applying the face-to-face presumption.

Held

(1) Overall disposition: Appeal dismissed. The majority concluded that the written hire-purchase agreement identified a specific named hirer and, as that named person had not authorised the transaction, the agreement was a nullity so the rogue never became a debtor under it; section 27 therefore did not vest title in the rogue and the later purchaser did not acquire good title (outcome affirmed). (2) Formation and fraud: The objective approach to offer and acceptance governs formation. Fraudulent inducement usually renders a contract voidable, not void; fraud affects enforceability rather than the basic factual existence of offer and acceptance. (3) Written contracts and identity: Where a contract is embodied in writing that unambiguously names the counterparty, identity is ordinarily resolved by construing the document. Extrinsic evidence cannot be used to contradict an unambiguous written identification of the contracting party. (4) Face-to-face principle limited: A strong presumption exists that persons dealing face to face intend to contract with the person physically present. That presumption is useful in oral dealings but does not override the rule that a written contract identifying a named person is to be construed as such. (5) Statutory application: Section 27 of the Hire-Purchase Act 1964 applies only if the person disposing of the vehicle was the debtor under a hire-purchase agreement; where the written agreement names and identifies a person who did not in fact contract, the statutory protection for subsequent bona fide purchasers does not apply. (6) Precedent: The House confirmed that Cundy v Lindsay remains good authority for documentary cases; Ingram v Little (Court of Appeal) was treated as unsound in principle and its reasoning cannot displace properly constructed written contracts. (7) Practical consequence and order: The appeal was dismissed; Shogun Finance's judgment for recovery was affirmed and Mr Hudson did not obtain title under section 27. (See paras [summary of reasons] in the opinions of Lord Hobhouse, Lord Phillips and Lord Walker and the contrasting reasoning of Lord Nicholls and Lord Millett.)

Appellate history

  • Court of Appeal: Majority judgment for Shogun Finance (reported at [2001] EWCA Civ 1000), Brooke and Dyson LJJ in the majority, Sedley LJ dissenting.
  • Leicester County Court: Trial judge (Assistant Recorder D E B Grant) found for Shogun Finance; judgment for £18,374 (first instance decision affirmed by Court of Appeal and by this House).

Lower court decision

Judgment appealed:
[2001] EWCA Civ 1000
Outcome:
appeal dismissed

Key cases cited

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