This website uses cookies to ensure you get the best experience on our website. Learn more

Shogun Finance Ltd v Hudson [2003] 3 WLR 1371

By Oxbridge Law TeamUpdated 04/01/2024 06:59

Judgement for the case Shogun Finance Ltd v Hudson

KEY POINTS

  • If a purchaser provides false information about their identity in a contract where identity is crucial, the contract becomes void. In such a case, an innocent third party cannot rely on good faith.

FACTS

  • The appellant, Mr. Hudson, fell victim to a fraudulent scheme orchestrated by a fraudster who presented himself to be “Mr. Patel.” Said fraudster used stolen personal information to pose as a legitimate customer and applied for financing to purchase a car from the respondent, Shogun Finance.

  • Shogun Finance, unaware of the fraudulent scheme and believing the fraudster, carried out the transaction and provided financing for the car purchase. Later, when the true identity of the parties was revealed, it became evident that “Mr. Patel” had committed a fraud by impersonation to obtain the financing.

  • Mr. Hudson, as an innocent third party who purchased the car from the fraudster, sought protection under the innocent third party rule, arguing that he acquired the rights to the car in good faith and without any knowledge of the fraudulent scheme.

JUDGMENT

  • The House of Lords dismissed the appeal, holding that “section 27 of the Hire Purchase Act 1964 did not avail Mr Hudson because the crook was not the hirer named in the written hire-purchase agreement and therefore he was not the debtor under the agreement.” [17]

COMMENTARY

  • This case underscores that the mistake of identity must go to the root of the contract and be of such significance that it affects the identity of the contracting party with whom the innocent party intended to contract.

ORIGINAL ANALYSIS

  • 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 Plaintiff (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 Defendant (BF TP) and absconded.

  • HL held that Plaintiff was entitled to claim the vehicle from Defendant.

Lord Hobhouse (NB with majority)

  • Plaintiff 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 Plaintiff 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 Plaintiff 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 Plaintiff was physically dealing, whether face-to-face or by correspondence.

Lord Nicholls (Dissenting)

  • (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 Plaintiff 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 Plaintiff intended to contract with the party before him which cannot be overturned by evidence that Plaintiff 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 Plaintiff “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 Plaintiff 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. 

Any comments or edits about this case? Get in touch

For Further Study on Shogun Finance Ltd v Hudson

Contract Law Notes
1,511 total pages
744 purchased

Contract law notes fully updated for recent exams at Oxford and Cambrid...

Need instant answers? Our AI exam tutor is here to help.

Ask questions 🙋 Get answers 📔 It's simple 👁️👄👁️

Our AI is educated by the highest scoring students across all subjects and schools. Join hundreds of your peers today.

Get Started

Related Product Samples

These product samples contain the same concepts we cover in this case.

Contract LawContract Law Problem Question Summary Notes (157 pages)
Contract LawMistake Notes (19 pages)
Claim every advantage to get a first in law
Contract Law Notes
1,511 total pages
744 purchased

Contract law notes fully updated for recent exams at Oxford and Cambrid...