• In the case of Shogun Finance Ltd v Hudson [2003] UKHL 62, a hire purchase agreement went wrong when an impersonator misled both C and D into fraudulent transactions.
  • This contract case concerned fraudulent misrepresentation and sale of goods.
  • This case questioned whether s 27 of the Hire Purchase Act 1964 applied to these circumstances.

Facts of the Case

  • C sold a Mitsubishi Shogun car to a third party fraudster. This third party showed a driving licence that he took from someone else.
  • Both parties contracted using this licence and a fake signature using the identity of the person in the stolen driving licence.
  • After selling the car to the third party, the third party sold the car to D. Later, C brought a claim against D under the tort of conversion. D contended that they had good title as they brought the car in good faith.

Issues

  • Is the impersonator the debtor under these circumstances?
  • Can the purchaser claim title?
  • Is the contract void?

Held by House of Lords

  • Appeal dismissed – only C has title to the car while the third party was not part of the contract thus the third party was not the debtor under s 27 of the Hire Purchase Act 1964.

Lord Phillips

Whether the contract is void

  • Contracts are formed through offer and acceptance “according to the natural meaning of the words used” [123] and what each party intended as well as the circumstances.
  • The contract is void as Lord Hobhouse and Lord Walker concluded because the actual hirer did not authorise the transaction.
  • “Lord Nicholls of Birkenhead and Lord Millett propose an elegant solution to this illogicality. Where two individuals deal with each other, by whatever medium, and agree terms of a contract, then a contract will be concluded between them, notwithstanding that one has deceived the other into thinking that he has the identity of a third party. In such a situation the contract will be voidable but not void.” [169]

Question of title

  • “Cundy v Lindsay [1878] 3 App Cas 459 exemplifies the application by English law of the same approach to identifying the parties as is applied to identifying the terms of the contract. In essence this focuses on deducing the intention of the parties from their words and conduct. Where there is some form of personal contact between individuals who are conducting negotiations, this approach gives rise to problems. In such a situation I would favour the application of a strong presumption that each intends to contract with the other, with whom he is dealing.” [170]
  • Fax and telephone communication was used rather than typical written correspondence. The third party did not have title nor gave title to D.

Lord Nicholls (dissenting)

Identity

  • The court should prefer later precedent such as Phillips v Brooks Ltd [1919] 2 KB 243 and Lewis v Averay [1972] 1 QB 198. The appeal should be allowed on the grounds that whether an expert from the finance company was present or not in the showroom does not impact the circumstances of the case.
  • “The factual postulate necessary to bring the presumption into operation is that a person (O) believes that the person with whom he is dealing is the person the latter has represented himself to be. Evidence that the other’s identity was of importance to O, and evidence of the steps taken to check the other’s identity, will lead nowhere if the transaction proceeds on the basis of the underlying factual postulate.” [37]

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