Shogun Finance Limited v Hudson

The House considered whether a fraudulent impostor who signs a written hire-purchase agreement in another person's name can be treated as the contracting hirer so as to enable a subsequent innocent purchaser to take good title under section 27 of the Hire-Purchase Act 1964. The majority held that where the parties have concluded a written consumer/credit document which on its face identifies a particular named person, the identity of the contracting party is to be determined by construing the document and by the objective correlation of offer and acceptance; if the named person is not the signatory and has not authorised the transaction the document is void and the impostor acquires no title. The decision turned on construction of the written hire-purchase form, the statutory "nemo dat" framework (notably s.27 and s.29 of the Hire-Purchase Act 1964) and established rules on offer and acceptance, rather than on treating oral or face-to-face dealings as determinative.

This appeal arose from a transaction in which a fraudster used a stolen driving licence and the name of a real person (Mr Durlabh Patel) to obtain a Mitsubishi Shogun on a hire-purchase form from a motor dealer. Shogun Finance authorised delivery after running credit checks on the named Mr Patel. The fraudster then sold the vehicle to Mr Hudson, an innocent private buyer who purchased in good faith. Shogun sought recovery of the vehicle or its value, relying on the principle that a hirer without title cannot pass title, save in the limited statutory exception in section 27 of the Hire-Purchase Act 1964.

The procedural path: at first instance Assistant Recorder D. E. B. Grant (Leicester County Court) found for Shogun. The Court of Appeal ([2001] EWCA Civ 1000) by a majority (Brooke and Dyson LJJ) affirmed that decision; Sedley LJ dissented. The House of Lords heard the appeal.

• Nature of the claim: Shogun sought return of the vehicle (or its value) on the ground that the fraudster never acquired title and therefore Mr Hudson could not obtain good title under section 27 of the Hire-Purchase Act 1964.
• Issues framed: (i) whether the hire-purchase agreement was concluded with the person named in the document (Mr Patel) or with the physical signatory (the impostor); (ii) whether fraudulent misrepresentation as to identity renders a written contract void or merely voidable; (iii) whether the statutory exception in s.27 applied so that a later bona fide purchaser obtained good title.

The House was divided. Two Law Lords would have held that a contract exists with the person who in fact dealt with the finance company (the impostor) and so, as a consequence of the hire-purchase statutory provisions, the later innocent buyer acquired a good title. The majority (three Law Lords) rejected that analysis. The majority applied ordinary principles of construction to the written credit/hire-purchase document, emphasised the formal offer-and-acceptance wording which identified the named customer, and concluded that Shogun intended to contract with the named person whose credit they checked (Mr Patel). As he had not authorised the transaction the written agreement was a nullity so the impostor was not a debtor under the Act and Mr Hudson did not obtain good title. The majority therefore dismissed the appeal, affirming the Court of Appeal.

The Lords also commented on the wider context: some members considered the existing case-law on mistaken identity and "face-to-face" dealings unsatisfactory and favoured treating such contracts as voidable rather than void, but the majority preferred to resolve the present case by construction of the written consumer-credit document and established mercantile principles.

The appeal is dismissed. The majority held that the written hire-purchase agreement identified a specific named hirer (Mr Patel) and, as that person had not authorised the transaction, the document was not a contract with the impostor; accordingly the impostor was not a debtor under section 27 of the Hire-Purchase Act 1964 and the subsequent purchaser did not acquire good title. The House therefore affirmed the Court of Appeal and the county court judgment for Shogun Finance.

First instance: Leicester County Court, Assistant Recorder D E B Grant (judgment for Shogun Finance). Court of Appeal: [2001] EWCA Civ 1000 (Brooke and Dyson LJJ majority, Sedley LJ dissent). Appeal to the House of Lords: [2003] UKHL 62 (this judgment).