Shogun Finance Ltd v Hudson
Encyclopedia
Shogun Finance Ltd v Hudson [2003] UKHL 62 is an English contract law
decided in the House of Lords
, on the subject of mistaken identity as a basis for rescission of a contract. The case has been the subject of much criticism in failing to effectively clarify the area of mistake to identity.
. The rogue told Shogun Finance Ltd that his name was Mr Patel and produced Mr Patel’s driving licence. The finance company did a credit check on Mr Patel, finding no problems, and the rogue drove away. Then, the rogue sold the car to Mr Norman Hudson. Under s.27 Hire Purchase Act 1964 a non-trade buyer of a car who buys in good faith from a hirer under a hire purchase agreement becomes the owner, so Mr Hudson would have been the owner if the hire purchase agreement were valid. Shogun Finance argued that it was not on the basis that there was a mistake as to identity. They therefore claimed against Mr Hudson for conversion.
(Lord Hobhouse
, Lord Phillips
and Lord Walker
) held there was no contract (rescission
) of hire purchase between Shogun Finance and the rogue, so that the car was not Mr Hudson's. This followed the principle established in Cundy v Lindsay
, that written agreements do not infer a presumption to sell to the immediate purchaser, where identity is of key importance to contracting. Lord Nicholls
and Lord Millett
dissented.
The judgments of Lord Nicholls and of Lord Millett are of interest, in their arguments to overrule Cundy v Lindsay
, in effect protecting the third party purchaser:
Such an idea was proposed by the Law Reform Committee in 1966, in their twelfth report. This would mean that in all cases of mistake to identity, contracts would be voidable
, rather than immediately void
. Therefore, should the original seller not repudiate the contract before the goods have been sold on, the third party would be protected.
English contract law
English contract law is a body of law regulating contracts in England and Wales. With its roots in the lex mercatoria and the activism of the judiciary during the industrial revolution, it shares a heritage with countries across the Commonwealth , and the United States...
decided in the House of Lords
House of Lords
The House of Lords is the upper house of the Parliament of the United Kingdom. Like the House of Commons, it meets in the Palace of Westminster....
, on the subject of mistaken identity as a basis for rescission of a contract. The case has been the subject of much criticism in failing to effectively clarify the area of mistake to identity.
Facts
A rogue went to buy a Mitsubishi Shogun on hire purchaseHire purchase
Hire purchase is the legal term for a contract, in this persons usually agree to pay for goods in parts or a percentage at a time. It was developed in the United Kingdom and can now be found in China, Japan, Malaysia, India, South Africa, Australia, Jamaica and New Zealand. It is also called...
. The rogue told Shogun Finance Ltd that his name was Mr Patel and produced Mr Patel’s driving licence. The finance company did a credit check on Mr Patel, finding no problems, and the rogue drove away. Then, the rogue sold the car to Mr Norman Hudson. Under s.27 Hire Purchase Act 1964 a non-trade buyer of a car who buys in good faith from a hirer under a hire purchase agreement becomes the owner, so Mr Hudson would have been the owner if the hire purchase agreement were valid. Shogun Finance argued that it was not on the basis that there was a mistake as to identity. They therefore claimed against Mr Hudson for conversion.
Judgment
The majority of the House of LordsHouse of Lords
The House of Lords is the upper house of the Parliament of the United Kingdom. Like the House of Commons, it meets in the Palace of Westminster....
(Lord Hobhouse
John Hobhouse, Baron Hobhouse of Woodborough
John Stewart Hobhouse, Baron Hobhouse of Woodborough, PC , was a British judge and Law Lord.He was born in Mossley Hill, Liverpool. He was educated at St Andrew's, Pangbourne, and Eton. After working abroad in Australia and New Zealand on a sheep farm, Hobhouse returned to Christ Church, Oxford in...
, Lord Phillips
Nicholas Phillips, Baron Phillips of Worth Matravers
Nicholas Addison Phillips, Baron Phillips of Worth Matravers, KG PC is the President of the Supreme Court of the United Kingdom. Before 1 October 2009 his title was Senior Lord of Appeal in Ordinary. He was Master of the Rolls from 2000 to 2005 and Lord Chief Justice of England and Wales from 2005...
and Lord Walker
Robert Walker, Baron Walker of Gestingthorpe
Robert Walker, Baron Walker of Gestingthorpe, PC, QC is an English barrister and Justice of the Supreme Court of the United Kingdom...
) held there was no contract (rescission
Rescission
In contract law, rescission has been defined as the unmaking of a contract between parties. Rescission is the unwinding of a transaction. This is done to bring the parties, as far as possible, back to the position in which they were before they entered into a contract .-In court:Rescission is an...
) of hire purchase between Shogun Finance and the rogue, so that the car was not Mr Hudson's. This followed the principle established in Cundy v Lindsay
Cundy v Lindsay
Cundy v Lindsay LR 3 App Cas 459 is an English contract law case on the subject of mistake, introducing the concept that contracts could be automatically void for mistake to identity, where it is of crucial importance...
, that written agreements do not infer a presumption to sell to the immediate purchaser, where identity is of key importance to contracting. Lord Nicholls
Donald Nicholls, Baron Nicholls of Birkenhead
Donald James Nicholls, Baron Nicholls of Birkenhead, PC , is a British lawyer and retired Law Lord .-Biography:...
and Lord Millett
Peter Millett, Baron Millett
Peter Julian Millett, Baron Millett, PC, QC is a British former judge and barrister.The son of Denis and Adele Millett was educated at Harrow School, London and Trinity Hall, Cambridge, where he received a Master of Arts in classics and law in 1954. From 1955 to 1957, he served as Flying Officer...
dissented.
The judgments of Lord Nicholls and of Lord Millett are of interest, in their arguments to overrule Cundy v Lindsay
Cundy v Lindsay
Cundy v Lindsay LR 3 App Cas 459 is an English contract law case on the subject of mistake, introducing the concept that contracts could be automatically void for mistake to identity, where it is of crucial importance...
, in effect protecting the third party purchaser:
Such an idea was proposed by the Law Reform Committee in 1966, in their twelfth report. This would mean that in all cases of mistake to identity, contracts would be voidable
Voidable
In law, a transaction or action which is voidable is valid, but may be annulled by one of the parties to the transaction. Voidable is usually used in distinction to void ab initio and unenforceable....
, rather than immediately void
Void (law)
In law, void means of no legal effect. An action, document or transaction which is void is of no legal effect whatsoever: an absolute nullity - the law treats it as if it had never existed or happened....
. Therefore, should the original seller not repudiate the contract before the goods have been sold on, the third party would be protected.
Reception
The result of Shogun Finance Ltd v Hudson is that the area of mistake to identity retains the 'face to face' distinction. This is that contracts of immediate vicinity differ from contracts made over distance. Such a distinction has been labelled "artificial and unfair" to third parties, who bear the entire loss, where - at least in the instant case - it is argued that Shogun Finance Ltd had far better means to uncover the rogue's fraud, than the independent purchaser; in any case, the original seller is usually in the better position to protect and insure against such risks.See also
- Cundy v LindsayCundy v LindsayCundy v Lindsay LR 3 App Cas 459 is an English contract law case on the subject of mistake, introducing the concept that contracts could be automatically void for mistake to identity, where it is of crucial importance...
- Morrisson v RobertsonMorrisson v RobertsonMorrison v Robertson is a case establishing the common law principles that govern unilateral error in Scots law.-Facts:A man claiming to be the son of Wilson of Bonnyrigg approached Morrisson and offered to buy two cows from him. Although Morrison did not know the man, he knew of Wilson, who was a...
- Misrepresentation in English lawMisrepresentation in English lawMisrepresentation in English law is an area of English contract law, which allows a person to escape a contractual obligation or claim compensation for losses. If one person can show that she entered an agreement because of another person's false assurances, then the other person will be unable to...
- Mistake in English lawMistake in English law-Contract law:Mistakes are a group of rules in English contract law, which happen to share the same name. If the law deems a mistake to be sufficiently grave, then a contract entered into on the grounds of the mistake may be void. A mistake is an incorrect understanding by one or more parties to a...