Judgments - Shogun Finance Limited (Respondents) v Hudson (FC) Appellant

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    87.  Where does this leave the authorities? Most of those which are concerned with face to face transactions can stand with the exception of the decision of the majority of the Court of Appeal in Ingram v Little (supra), which is inconsistent with Lewis v Averay (supra) and should be overruled. I would confirm the decision in Phillips v Brooks [1919] 2 KB 243, where Horridge J held that the shopkeeper had

    "contracted to sell and deliver [the ring] to the person who came into his shop…………who obtained the sale and delivery by means of the false pretence that he was Sir George Bullough………..[The shopkeeper's] intention was to sell to the person present, and identified by sight and hearing."

    In my opinion the Judge's reasoning cannot be faulted. He distinguished between the two questions, and treated the identity of the purchaser as a question of fact to be determined objectively and without regard to the evidence that the shopkeeper had no intention of selling the goods to anyone other than Sir George Bullough.

    88.  In Gordon v Street [1899] 2 QB 641 and Said v Butt [1920] 3 KB 497 the dispute was between A and B; no third party was involved. In each case it was sufficient to hold that any contract which resulted was voidable. Said v Butt is a celebrated case which merits further attention. The plaintiff wished to attend the first night of a play. He had had serious differences of opinion with the management of the theatre, and he knew that an application for a ticket in his own name would be refused. He therefore arranged for a friend to go to the theatre and buy a ticket for him without disclosing the fact. When he turned up for the performance he was refused admission. His claim for damages was dismissed. The evidence showed that a first night is a special event with characteristics of its own, and that first night tickets are only given or sold to persons whom the management selects and wishes to favour. McCardie J found that the purchaser's identity was a material element in the formation of the contract and that the failure to disclose the fact that the ticket was bought on his behalf prevented the plaintiff from asserting that he was the undisclosed principal. In my opinion that conclusion was inescapable. The case has usually been taken to be an example of a contract which is void for mistake. I do not think that it is. There can be little doubt that the friend who bought the ticket could have made use of it to gain admission himself. In my opinion the case is an example of the rule that an undisclosed principal cannot intervene where the nature of the contract shows that the contract was intended to be with the agent personally: see Collins v Associated Greyhound Racecourses Ltd. [1930] 1 Ch. 1 CA. The evidence showed that tickets for a first night are not transferable, from which it follows that they are incapable of being bought for an undisclosed principal; so that even on its own terms the contract could not be enforced by the plaintiff. Admittedly McCardie J.'s judgment did not proceed on this basis; but he did not hold there to be no contract at all even with the person who bought the ticket.

    89.  Hardman v Booth (1863) 1 H & C 803 is an important case because it formed the foundation of the reasoning of the House in Cundy v Lindsay (supra). It has been taken to be an example of the same category of case and inconsistent with Phillips v Brooks (supra): see (1941) 57 LQR 228 at 241. But I do not think it is either. B called at the premises of C & Co., where he met A, whom he was fraudulently led to believe to be a partner in the firm of C & Co. A ordered goods from B and, after taking delivery, pledged them to D before becoming bankrupt. B sued D in trover. The action succeeded. The Court of Exchequer held that there was no sale to A because B did not deal with him personally. In my opinion the situation was quite different from that in the other cases under discussion. B dealt with A face to face, but he did not deal with him as principal. Even objectively he did not contract with him at all. He was not mistaken as to A's identity, but as to his authority. But there was certainly a contract of some sort between A and B, for A would be liable to B for breach of warranty of authority. Whether the case was rightly decided depends on whether there is an analogy with the case where a person contracts as agent for a non-existent principal. There the agent is held to have contracted on his own account and to be personally liable on the contract. I would leave the point open, but it makes little sense to make D's title depend on whether A falsely held himself out to be acting as agent for a principal who did not exist or for a principal who did exist but had not authorised him to contract on his behalf.

    90.  The principal obstacle which has prevented the Courts from rationalising this branch of the law has been Cundy v Lindsay (supra), a decision of this House. It was concerned with a contract entered into by correspondence. A rogue named Blenkarn, posing as Blenkiron & Co, ordered goods by letter from the Respondents. They replied to the letter, accepted the order and despatched the goods to the name and address they had been given. Blenkarn then sold them to the defendants. The House held that the defendants obtained no title. The case is treated in the textbooks as an example of a contract which is void for unilateral mistake, but this was not the basis of the decision. The word "mistake" appears only once in the speeches, and then only in reference to the address of the premises to which the Respondents despatched the goods. Lord Cairns LC (at p. 456) observed that it was not a case in which a contract could be impeached for fraud, but where a contract never came into existence. There was no contract between the Respondents and the cheat Blenkarn because

    "of him they knew nothing, and of him they never thought. With him they never intended to deal. Their minds never, even for an instant of time, rested upon him, and as between him and them there was no consensus of minds which could lead to any agreement or any contract whatever. As between him and them there was merely the one side to a contract, where, in order to produce a contract, two sides would be required"

Per Lord Cairns LC at p. 465-6. Lord Hatherley spoke to the same effect at p. 467:

    "….if there could be said to have been any sale at all, it failed for want of a purchaser."

Per Lord Hatherley at p. 467. It was not a sale to Blenkarn

    "with whom the Respondents had not, and with whom they did not wish to have, any dealings whatever."

    91.  As an authority on the formation of contract the decision is, with respect, unconvincing. That the Respondents did not wish or intend to have any dealings with Blenkarn is beyond dispute; but it is far from obvious that they did not actually have such a dealing even though it was only as a result of the deception practised on them. Lord Hatherley and Lord Penzance felt unable to distinguish the case from Hardman v Booth, although in my view the two cases are not comparable. Lord Cairns dwelt on the plaintiffs' subjective state of mind, which was of course affected by the fraud, and gave no attention to the question whether, approaching the case objectively, the plaintiffs had accepted Blenkarn's offer. Lord Penzance (at pp. 471-2) initiated the unfortunate distinction between cases of persons dealing in the presence of each other and other cases, without explaining why this was material, let alone decisive.

    92.  The plaintiffs, indeed, "knew nothing" of the individual named "Blenkarn" and they addressed their letter of acceptance to "Blenkiron & Co". but that was because they had been deceived into believing that the offer came from Blenkiron & Co. Throughout the speeches in this House it was assumed that the plaintiffs' letter of acceptance was directed and sent, as the goods were later directed and sent, to the intended recipient (Blenkiron & Co.) but at the wrong address. If the facts of that case are viewed objectively, however, with a view to ascertaining whether there was the necessary correlation between offer and acceptance and without reference to the deception, the matter wears a very different aspect. The order was placed by Blenkarn (posing as Blenkiron & Co.) writing from his own address (which was not the address of Blenkiron & Co.) and was duly accepted by the plaintiffs in the belief that the order came from Blenkiron & Co. They replied to Blenkarn (in his assumed name as Blenkiron & Co.) at the address he had given (being his own address and not that of Blenkiron & Co.) by a letter which referred to and accepted his order; and in due course they fulfilled it.

    93.  In my view the proper conclusion on these facts is that the plaintiffs contracted with Blenkarn in the mistaken belief, induced by his fraud, that they were dealing with Blenkiron & Co., and that the resulting contract was voidable for fraud. If the plaintiffs' subjective state of mind, induced by the fraud, is put on one side, there is no justification for the question-begging assumption that the plaintiffs' letter of acceptance was directed to Blenkiron & Co. and that it was the name which was right and the address which was wrong. Nor is there any justification for the suggestion that the signature was a forgery. Blenkarn, who signed the letter, did not claim that it was someone else's signature; he acknowledged and asserted that it was his own. Even those who consider that the case was rightly decided concede that the rogue could have been sued for the price of the goods (see Treitel (loc cit p. 284). But that presupposes that there was sufficient correlation between offer and acceptance to bring a contract into existence, albeit one which was void (or voidable) at the instance of the party deceived. Yet this was the very proposition which the House rejected.

    94.  The case can usefully be contrasted with Boulton v Jones (1857) 2 H.& N. 564, which falls on the other side of the line and was in my opinion rightly decided. The defendant sent to the shop of one Brocklehurst a written order for goods. The order was addressed to Brocklehurst by name. Unknown to the defendant, Brocklehurst had earlier that day sold and transferred his business to Boulton. Boulton fulfilled the order and delivered the goods to the defendant without notifying him that he had taken over the business. The defendant accepted the goods and consumed them in the belief that they had been supplied by Brocklehurst. When he received Boulton's invoice he refused to pay it, claiming that he had intended to deal with Brocklehurst personally, since he had dealt with him previously and had a set-off on which he had intended to rely. The Court of Exchequer held that the defendant was not liable for the price.

    95.  There was, of course, a preliminary question of construction, whether the defendant's order could be interpreted as addressed, not to Brocklehurst personally, but to the proprietor of the shop for the time being. The Court held that it could not. This point need not detain us further. Three of the four Judges decided the case on the straightforward ground that the offer was addressed to Brocklehurst and could not be accepted by Boulton. (I put on one side the judgment of Bramwell B. which, though the most frequently cited, was condemned by Professor Goodhart (op. cit. at p 233) as the least satisfactory).

    96.  On this analysis, Boulton made a counter-offer which the defendant accepted in the mistaken belief that it was made by Brocklehurst. The mistake was material because of the existence of a set-off against Brocklehurst but not against Boulton; so that the contract which resulted from the counter-offer was voidable. The question then arose whether the defendant, who had received and consumed the goods, was liable on a quantum valebat. It was held that he was not, since he consumed them in the belief that he could discharge his liability to pay by set-off. We would classify the case today as an example of a claim in unjust enrichment being defeated by a change of position defence.

    97.  The contractual claim arising from the defendant's order failed because, objectively speaking, there was no correlation between offer and acceptance. This is the same ground as that which was later to form the basis of the decision in Cundy v Lindsay, but the facts of the two cases are very different. In Boulton v Jones the goods were ordered from Brocklehurst but supplied and invoiced by Boulton; the acceptance did not correspond with the offer. In Cundy v Lindsay the goods were ordered by Blenkarn posing as Blenkiron & Co. and supplied and invoiced to him in that name. Outwardly the acceptance did correspond with the offer. Objectively speaking there was consensus ad idem, though this was vitiated by the fraud which produced it.

    98.  The last case to which I need to refer is Hector v Lyons (1989) 58 P & CR 156. This was a very curious case. It concerned a contract for the sale and purchase of land. Mr. Hector Senior negotiated with Mrs. Lyons for the purchase of her property. They negotiated personally, at first over the telephone and then face to face. Throughout the negotiations, for a reason which was never explained, Mr. Hector acted in the name of his son, Mr. Hector Junior, who was under age. It is not clear whether the parties entered into an agreement subject to contract, but if they did it would have been signed by Mr. Hector Senior in his son's name. He instructed solicitors to act for him, again in his son's name, and in due course contracts were signed and exchanged, the two parts being in identical terms and giving Mr. Hector Junior's name as the name of the purchaser. Mr. Hector Senior signed his part of the contract in his son's name. Mrs. Lyons refused to complete and Mr. Hector Senior brought an action for specific performance. He did so in his own name. Sir Nicolas Browne-Wilkinson V.-C. dismissed the appeal.

    99.  It has been suggested that the action rightly failed because there was no identity between the name of the plaintiff in the writ and that in the contract which he was claiming to enforce. But this was not the ground of decision and is without substance. The objection could readily be met if necessary by amending the writ to add after the name of the plaintiff the words "also known as…..".

    100.  It might have been an understandable ground for refusing equitable relief that it was not at all clear to the Court what was going on, particularly as Mr. Hector Senior's testimony was thoroughly unsatisfactory. But that was not the basis of the decision either. The Vice-Chancellor held that there was no contract with Mr Hector Senior. The identity of the parties to a written contract was established by the names stated in the contract. The only question for the Court was to identify who they were, and this was a question of fact.

    101.  So far I respectfully agree with the Vice-Chancellor. Where I part company with him is at the next step, when he affirmed the deputy judge's finding of fact that the purchaser was Mr. Hector Junior. That the name of the purchaser stated in the contract was the name of Mr. Hector Junior and not that of Mr. Hector Senior was established as a fact. But it does not at all follow that the party who contracted as purchaser in that name was Mr. Hector Junior. The evidence plainly showed that it was not. He knew nothing of the transaction, and the vendor did not deal or intend to deal with him. To adapt Lord Cairns' words (but in the converse case, for we are now talking of C, not of A) "of him she knew nothing, and of him she never thought. With him she never intended to deal."

    102.  In my opinion the evidence demonstrated beyond doubt that the purchaser was in fact Mr. Hector Senior, who for some reason of his own had adopted his son's name for the purpose of entering into the contract. He was identified as the person who in fact negotiated the purchase with the vendor and agreed to pay the purchase price, who signed any agreement subject to contract which there may have been, who instructed solicitors to act on his behalf as purchaser, and who signed the purchaser's part of the contract. The vendor was neither deceived nor mistaken. She not only intended to deal but actually dealt with Mr. Hector Senior. The only fact in respect of which she was mistaken was that the name in which he contracted was not his real name but that of his son, and that was not material.

    103.  My Lords, the identification of the parties to a written instrument is, as the Vice-Chancellor held, only partly a question of construction. That is the first step in the process, and it will often be enough. It would have been enough in Boulton v Jones if the Court had accepted the submission that the order was addressed to the proprietor of the shop for the time being and not to Mr. Brocklehurst personally. But once it is established that the person whose name and other personal details are stated in the contract and the person who stated them and signed the contract are not the same, the question immediately arises: which of them should be treated as the counterparty? Do the name and other details included in the contract refer to the person to whom they belong or to the impostor who included them in order to identify himself? This is not simply a question of construction. It is partly a question of fact and partly a question of law. To say, as my noble and learned friend Lord Hobhouse of Woodborough does, that it is a question of construction which admits of only one answer, with respect simply begs the question.

    104.  How should the question be answered in the present case? The case is not unlike Hector v Lyons, with the important difference that in the present case the deception was material and induced the making of the contract. If there was a contract with the rogue, it was voidable for fraud.

    105.  But was there such a contact at all? The contact came into being when the Respondent executed its part of the agreement. The two parts corresponded in every material particular. They made it clear that the hirer was the person named on the front of the document and who had signed the document. This appeared to be a Mr. Durlabh Patel, with an address in Leicester, whose personal details were given. But in fact it was not Mr. Durlabh Patel at all. He knew nothing of the transaction and his driving licence had been stolen. The person who identified himself as Mr. Durlabh Patel, provided Mr. Durlabh Patel's personal details, and signed the document in Mr. Durlabh Patel's name was not Mr. Durlabh Patel but an impostor.

    106.  The object of the deception was to misdirect the Respondent's credit enquiries. In this it succeeded. Having satisfied itself that Mr. Durlabh Patel, whom it believed to be its customer, was worthy of credit, it accepted the offer which the impostor had made, signed its part of the agreement, and authorised the dealer to deliver possession of the car to his customer as hirer under the agreement.

    107.  But who was his customer? It was not Mr. Durlabh Patel. In my opinion it was plainly the impostor. Any other conclusion would mean that the dealer parted with the vehicle to the impostor without authority and would, presumably, be liable in conversion if the vehicle proved to be irrecoverable. This is far removed from reality. The Respondent and the dealer both believed that the customer who was hiring the car and Mr. Durlabh Patel were one and the same; but the Respondent did not make that a condition of the dealer's authority to part with the car. From first to last it believed that the impostor who attended the dealer's showroom, gave his name as Mr. Durlabh Patel, and signed the agreement in that name, was indeed Mr. Durlabh Patel; in that belief it entered into a hiring agreement and authorised the dealer to deliver possession of the car to the customer who had so identified himself. In my opinion, the Respondent not only took a credit risk, but also took the risk that the customer who was hiring the car was not Mr. Durlabh Patel and that its credit enquiries had been fraudulently misdirected. I would hold that there was a hiring, and the impostor was the hirer.

    108.  This conclusion involves a departure from Cundy v Lindsay, a decision of this House which has stood for more than 120 years. But its reasoning is unsound. It is vitiated by its subjective approach to the formation of contract and the necessary correlation between offer and acceptance; which may be why textbook writers treat it as an example of unilateral mistake even though this was not the basis on which it was decided. For the same reason it cannot be regarded as authoritative on the question whether a contract otherwise properly entered into is void for mistake rather than voidable. It has had an unfortunate influence on the development of the law, leading to an unprincipled distinction between face to face transactions and others and the indefensible conclusion that an innocent purchaser's position depends on the nature of the mistake of a third party or the precise mechanics of the fraud which had been perpetrated on him. In my view it should now be discarded and the law put on a simpler and more principled and defensible basis.

    109.  In my opinion only the decision in Cundy v Lindsay stands in the way of a rational and coherent restatement of the law. My noble and learned friend Lord Phillips of Worth Matravers has expressed the view that the conclusion to which Lord Nicholls and I have come conflicts not only with that case but with the approach in almost all the numerous cases which he has cited. If they had preceded Cundy v Lindsay, that would be a strong reason for not adopting it. But they were merely following a decision of this House by which they were bound. Far from applying it generally, they attempted to distinguish it by carving out an unprincipled exception from it which Lord Nicholls has shown cannot be supported. While departing from Cundy v Lindsay would make obsolete the reasoning in those cases, dictated as it was by that decision, it would undermine the actual decision in very few cases. There is no long line of authority to be overruled. Indeed, only two cases need to be overruled; and neither of them can be supported even on the view that Cundy v Lindsay was rightly decided.

    110.  In my opinion Cundy v Lindsay should no longer be followed and Ingram v Little and Hector v Lyons should be overruled. I would allow the appeal.


My Lords,

    111.  This appeal is a variation on a theme that has bemused courts and commentators alike for over 150 years. Two individuals conduct negotiations in which all the terms necessary to constitute a binding contract are agreed. One of those individuals has, however, been masquerading as a third party. Does a binding contract result? Grappling with this problem in Fawcett v Star Car Sales Ltd [1960] NZLR 406 at 413, Gresson P remarked that 'the difficulty in deciding whether a mistake of identity prevents the formation of a concluded contract is a proper assessment of the facts rather than the ascertainment of the law'. The issues that arise in this case require the facts to be set out with some particularity.

    The facts

    112.  A rogue acquired, by dishonest means, the driving licence of a Mr Durlabh Patel, who lived at 45 Mayflower Road in Leicester. Armed with this he went to the showrooms of motor dealers in Leicester called Chris Varieva Limited. There he introduced himself to the sales manager, Mr Bailey, as Mr Durlabh Patel of 45 Mayflower Road. He said that he wished to purchase a Mitsubishi Shogun motor car registration number N319 NFP, which was on display in the showroom. Mr Bailey and the rogue agreed a price of £22,250, subject to obtaining hire-purchase finance.

    113.  Mr Bailey produced a copy of the claimant ('Shogun')'s standard form of hire-purchase agreement. That form was designed to cater both for hire-purchase agreements regulated by the Consumer Credit Act 1974 and non-regulated hire-purchase agreements. The proposed agreement in relation to the Shogun car fell into the latter category. The terms on the back of the form were introduced by Clause 1, which provided:

    "In these terms the customer(s) named overleaf are called 'you' and the creditor 'we' or 'us'. Our address is 116 Cockfosters Road, Barnet EN4 0DY.

    You are offering to make a legal agreement by signing this document. We can reject your offer, or accept it by signing it ourselves.

    We may choose not to sign if there has been a change in your circumstances since you gave us or the supplier details, or for any other reason in our discretion. There will then be no agreement. We will tell the supplier if this is the case. You must then return to the supplier any goods he let you have in the expectation that we would accept your offer. You will have to compensate the supplier if you do not return the goods immediately or if you have not taken proper care of them. You should recover from the supplier any deposit or goods given in part-exchange (or their value).

    If we sign this document it will become legally binding at once (even before we send you a signed copy), and you will then be regarded as having been entitled to the provision and use of the goods, and bound by the terms of this agreement, as from the date you signed. This is what you are offering by signing.

    Once we have both signed, this will be a hire-purchase agreement. In it we agree to lease and (if you comply with the terms of this agreement) permit you to buy, and you agree to hire, the goods on the terms on this page and overleaf."

    The form had a box for insertion of 'Customer Details'. Into this was entered the name and address of Mr Durlabh Patel together with the number of his driving licence. The rogue signed the form 'D.J. Patel' with a signature which matched that on the stolen driving licence, which he produced.

    114.  Mr Bailey telephoned Shogun's sales support centre and relayed to one of the clerks there the details which the rogue had provided, and then faxed to them a copy of Mr Patel's driving licence and the draft agreement. Shogun made a computer search to check Mr Patel's name and address against the electoral register, then to check whether any county court judgments or bankruptcy orders were registered against him, then to check his credit rating with one or more credit reference agencies. In the space of about five minutes they learned how long Mr Patel had lived at his address, where he worked and how long he had worked there, his bank account number and how long he had held the account, his date of birth and his driving licence number. They also learned that he had no adverse credit references.

    115.  Shogun compared the signatures on the driving licence and the draft agreement and concluded that they matched. They then phoned the dealer and told him that the proposal was accepted. The form was signed on behalf of Shogun, but it is not clear precisely when this was done. The rogue paid the dealer a deposit of 10% of the purchase price, partly in cash and partly by cheque. It is not recorded whether this purported to be Mr Patel's cheque, but it seems likely that this was the case. In any event the cheque was in due course dishonoured. The dealer handed over the vehicle to the rogue, with complete documentation.

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