Shogun Finance v Hudson [2003] UKHL 62; [2004] 1 AC 919

Key point

  • In relation to unilateral mistake as to identity, the distinction in approach between face-to-face oral contracts and contracts in writing is affirmed

Facts

Background

  • A third-party rogue pretended to be a Mr Durlabh Patel by showing his driver’s license to a motor dealer
  • The rogue entered into a hire-purchase agreement as ‘Durlabh Patel’ with Shogun Finance (C), under which C purchased the car from the motor dealer and hired it to ‘Durlabh Patel’
  • The rogue sold the car to Hudson (D), who purchased it in good faith

Dispute

  • C brought action for tort of conversion against D
  • Pursuant s27 Hire Purchase Act 1964, where a car is hired under a hire-purchase agreement and the car is sold by the ‘debtor’ (hirer), a purchaser good faith purchaser obtains good title to the car
  • Counsel for C argued that the hire purchase-agreement was conclusive, the rogue was not the ‘debtor under s27 and thus D did not obtain good title to the car
  • Counsel for D argued that:
    • The written hire-purchase agreement is not conclusive and oral evidence of the face-to-face contract between the motor dealer (as dealer for C) and the rogue shows that the debtor was the rogue
    • Cundy v Lindsay, which suggests the contrary, should be overruled

Held (House of Lords by 3-2)

  • C’s claim succeeded, D is liable for conversion
  • The debtor under the hire-purchase agreement was Mr Patel and not the rogue

Lord Hobhouse for the Majority

Cundy v Lindsay affirmed

  • The presumption in face-to-face contracts does not apply where there is a written contract: [55]
  • ‘Inevitably over the course of time there have been decisions on the facts of individual ‘mistaken identity’ cases which seem now to be inconsistent; the further learned, but ultimately unproductive, discussion of them will warm academic hearts. But what matters is the principles of law. They are clear and sound and need no revision.’: [55]

Addressing other proposals

  • Rejected Devlin LJ’s suggestion in Ingram v Little that loss should be apportioned between the seller and bona fide purchaser based on relative fault: [48]
  • Rejected Lord Denning MR’s suggestion in Lewis v Averay that mistake as to identity makes the contract voidable not void: [48]

Current case

  • Since there was only mention of Mr Patel in the hire-purchase agreement and not anyone else, it is clear that the agreement was with Mr Patel and not the rogue: [44] – [47]
  • Under the parol evidence rule, written contracts are conclusively presumed that parties intend it to be a full and final statement of their intentions, only where the agreement is ambiguous can extrinsic evidence be admitted for interpretation: [49]
  • Here, C is specifically identified as the hirer, thus oral evidence is not admissible: [49]
  • Even if the contract was not with Mr. Patel, there would be no consensus ad idem as there was no intent to contract with the rogue and the rogue had no intent to properly contract: [50]
  • Furthermore, the motor dealer was not the agent of C: [55]

Lord Nicholls Dissenting

Proposed approach

  • Cundy v Lindsay should be overruled: [35]
  • A person is presumed to intend to contract with the person with whom he is actually dealing, whatever be the mode of communication: [36]

Consistency argument

Fairness argument: [35]

  • As between two innocent persons the loss is more appropriately borne by the person who takes the risks inherent in parting with his goods without receiving payment
  • This fits with intention of parliament in enacting limited statutory exceptions to the principle of nemo datquod non habet to protect bona fide purchasers such as s23 Sales of Goods Act
  • It is also consistent with approach of other common law countries such as the US

Certainty argument

  • “It is little short of absurd that a subsequent purchaser’s rights depend on the precise manner in which the crook seeks to persuade the owner of his creditworthiness and permit him to take the goods away with him. This ought not to be so. The purchaser’s rights should not depend upon the precise form the crook’s misrepresentation takes.”: [35]

Current case

  • D obtained good title to the car under hire-purchase agreement
  • Though the document indicated Mr Patel’s details, evidence shows that C intended to contract with the person in the showroom

Commentary

  • Lord Walker and Lord Phillips agreed with Lord Hobhouse, while Lord Millett dissented
  • The majority’s approach entrenched the distinction in approach between face to face contracts and contracts by correspondence
  • Ingram v Little is out of line with other face-to-face vases, Lord Walker and Lord Millett expressly said that it was incorrect