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Shogun Finance Ltd v Hudson

[2003] 3 WLR 1371

Case summary last updated at 02/01/2020 16:52 by the Oxbridge Notes in-house law team.

Judgement for the case Shogun Finance Ltd v Hudson

X, a fraudster, bought a car from M, whom he gave a fake driving licence as evidence of his identity. M passed X’s (fake) details on to P (a finance company) who approved them and agreed to part finance the car (pay 90% of the price which X would repay) so that X could drive it away. X then sold on the car to D (BF TP) and absconded. HL held that P was entitled to claim the vehicle from D.

Lord Hobhouse (NB with majority): P only wished to deal with the party that was named to them and they knew of no other party than the name that was sent to them. Therefore they wished to deal with that customer specifically and not anyone whose details were sent to them. The identity was of crucial importance to P and therefore the contract was void. There is a strong, rebuttable presumption in face-to-face dealings that the party physically present is the one with whom P intended to contract. The justification for the distinction is the parole evidence rule (that where a document purports to contain the entire agreement) a party is estopped from bringing evidence to the contrary. This applies as much to the identity of the parties to the contract as it does to terms and, as here, only the party named (the fake name used by X) was a party to the contract. Therefore, since X was never a party to the contract, and nor was the person whom he purported to be, the contract was void.

This relies on the dodgy distinction between face-to-face and other methods of communication, such as a video-link up, for which there is no good reason. Lord Millett’s suggestion that the contract should be considered as relating to the party with whom P was physically dealing, whether face-to-face or by correspondence.

 Lord Nicholls (dissenting, together with Lord Millett his reasoning was in the minority): The distinction between misrepresentations as to identity and as to assets is a non-distinction: Nobody is ever really interested in the buyer themselves but in their ability to pay, while its also unfair that where the loss should be placed should depend on what type of misrepresentation (identity or attributes) was engaged. An agreement exists where there is a meeting of the minds: The seller intends or “appears to intend” to sell the goods and the buyer to buy them. Fraud does NOT negative intention and hence it cannot negative the agreement. Therefore contracts made on the basis of fraud as to X’s identity/assets/attributes etc has effect by P may decline to follow its requirements. It is voidable but not void. Fraud doesn’t vitiate consent either. Intention, consent etc are facts which fraud doesn’t vitiate. Legal rights and obligations alone can be vitiated by fraud. Hence if A fraudulently induces B to buy goods that A knows are not the same goods as B intends or are of a different quality, the contract itself is still valid, but can be voided on account of fraud. Same where A sells to B when B makes fraudulent statements as to his ability to pay, the contract is valid, but can be voided if A discovers the truth. The “voidable, not void” rule operates clearly in face-to-face cases. In face-to-face dealings, as Devlin LJ suggested, there should be a rebuttable presumption that P intended to contract with the party before him which cannot be overturned by evidence that P would not have contracted had she known that X was not who he claimed to be (then how can it possibly be overturned: this is really a conclusive presumption- Lord Nicholls concedes this). The same reasoning, including the presumption that P “intends to contract with the person with whom he is actually dealing, whatever be the mode of communication” applies. It therefore applies where X is not physically present since, although correspondence may be addressed to X’s fake name, it is really being sent to X with the intention that X should contract. Therefore a voidable, not void, contract exists where P has been fraudulently induced by X by correspondence. There is no reason to have a distinction between face-to-face and correspondence deals. Cundy is overruled. The person who gives up his property to a fraudster is more blameworthy than BF purchaser and should bear the risk. 

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