House of Lords in Shogun v Hudson

The facts of Shogun Finance Ltd v Hudson concerned a hire-purchase agreement fraudulently taken out by a rogue claiming to be Mr Patel, who subsequently sold the car he obtained by this deception to a third party, Mr Hudson. The seller then sued Mr Hudson, either for possession of the car, or equivalent damages to the value. The case turned on whether the defendant could rely on title in the goods having passed to the rogue under section 27 of the Hire Purchase Act 1964. At first instance the assistant recorder found that no contract had been made and so the defendant could not use the statutory protection afforded by the Hire Purchase Act 1964. This decision was upheld on appeal by both the Court of Appeal and, subsequently, by the House of Lords in a majority decision, three to two

The majority of the House of Lords - Lords Phillips, Hobhouse and Walker - explain their decision in terms of offer and acceptance, which all the judges agreed was at the heart of the case. Lord Hobhouse contends that the case depends on whether the rogue had become a 'debtor' under the hire-purchase agreement. Further, he argues that it is the construction of the hire-purchase document which is most important for the settling of this case, as it is this document, and this document only, that contains the agreement (or otherwise) between the two parties. Lord Hobhouse goes on to say that the seller intended to contract only with Mr Durlabh Patel and not with the rogue who was pretending to be Mr Patel. It was the identity of the purchaser that was of paramount importance to the seller, and it was this on which the hire-purchase agreement was based. Lord Hobhouse dismisses the idea that there was an alternative oral agreement made between the seller and the rogue and relies on the maxim nemo dat quod non habet . The most important document, for Lord Hobhouse, is the written one, and it should not be superseded by any supposed oral agreement - the certainty provided by this being the strength of English law. This document created a contract between the seller and Mr Patel, who was, of course, not aware and had not authorised it, and so the contract was void and no title had passed to the seller which meant that Mr Hudson's case failed on this ground.

Lord Walker generally agreed with Lord Hobhouse's reasons for dismissing the appeal and elaborated a few points of his own. He points out that Shogun Finance had actually intended to accept an offer by the real Mr Patel and had confirmed this person's existence and creditworthiness separately. Although Lord Walker goes on to assert that the court should not inquire into the intention of the parties, but should make an objective assessment of what they wrote in the contract. Lord Phillips agrees with Lords Walker and Hobhouse on the decision and goes on to state that the contract itself made it clear who Shogun Finance intended to contract with, and that was not the rogue. For this reason the contract was void, title did not pass and the appeal should be dismissed.

Lord Nicholls dissented with the majority decision by analysing the case in terms of fraudulent misrepresentation or, as it is alternatively known 'mistaken identity'. Lord Nicholls takes a different line, saying that the contract between the parties was voidable, but not void. He relies on what the parties intended by their actions. He argues that Shogun Finance actually intended to hire the car to the person in front of them who they thought was Mr Patel, but who was in fact a rogue. In addition, the rogue intended to enter into a hire-purchase agreement, as evidenced by his signing of the relevant document. To come to this conclusion Lord Nicholls relies on a line of cases including Phillips v Brooks Ltd  in which a mistake about the identity of the person to whom a ring was being sold did not void the contract. Similarly in Lewis v Averay  it was decided by the Court of Appeal that a mistaken identity did not void the contract, and, moreover, that it was the seller's responsibility to ensure he was contracting with the party he thought he was contracting with. These decision are not compatible, according to Lord Nicholls, with the decision in Cundy v Lindsay  and so it is argued that this case should be overruled. For these reasons Lord Nicholls allowed the appeal.

Lord Millet, like Lord Nicholls, dissenting with the majority decision, also draws on Lord Denning's decision in Lewis v Averay. Lord Denning in this case rejected the idea that in a case of mistaken identity, title in the property cannot pass. Lord Millet sees the case resting on choosing whether the law should give preference to the person who makes an offer, or to the person who accepts it. He decides that it should be the person who accepts the offer to whom preference should be given. But rather than relying on Cundy v Lindsay, Lord Millet sees the present case as similar to Hector v Lyons . Lord Millet argues that the car dealership intended to contract with, and believed the imposter to be, Mr Durlabh Patel, but they did not make it a condition of their contract that he actually was Mr Patel. It was for this reason that Lord Millet held that the dealership were taking the risk that the person they thought they were contracting with was not in fact Mr Patel, and so should accept the responsibility for taking this risk. This would mean that title would have passed to the rogue, and therefore to Mr Hudson, and so Lord Millet allowed the appeal.

By a majority of three to two, the House of Lords dismissed the appeal.

Source: Essay UK - http://lecloschateldon.com/free-essays/law/shogun-finance-ltd-v-hudson.php


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