Shogun vs. Hudson
This case deliberates on the situation where an impostor dupes a party then passes on the goods thus acquired to a third party.
A rogue presents himself to a motor dealer and identifies himself as Mr Patel residing at 45 Mayflower Road in Leicester, producing a false driving licence. The Rogue negotiates a price and enters into a hire purchase agreement with the finance company shogun signing as Mr Patel. The showroom contacts the finance company and passes on the available information to the finance company for verification. The finance company based on the information provided does a credit check on Mr Patel and finds him to be credit worthy. They also compare the signature on the driving licence and the agreement form and found them matching and thus approve the loan. Rogue pays the company 10 % advance part cash and part as a bogus check and parts with the car along with complete documentation. The rogue subsequently sold the car to Mr Hudson who bought the car in good faith. The question is if the title passed on to Mr Hudson good?
Lord Nichollis of Birkenhead discusses the importance of creditworthiness of a buyer and emphasises that a seller will only sell the goods if the buyer is creditworthy. In this case the rogue had cheated the seller by making him believe that he was indeed Mr Patel by producing false identification and thus inducing the seller into a fraud. The Lord emphasises that as per the common law contract induced by fraud is voidable but not void. It was also discussed whether this shall be treated as a written contract or a face-to-face dealing. Since there is no difference between the face to face or in written correspondence, irrespective of mode of communication the transaction was fraudulent. The Lord Opines that in such fraudulent transactions the risk should be inherent with the seller who parts with the goods without receiving the payment and thus declare a clear title to Mr Hudson under section 27 of hire purchase act.
Lord Hobhouse of Wood borough raises the question whether Mr Hudson really acquired a good title of the car since he was duped by the rogue who himself did not have a valid title of the car. He also enquires if according to the hire purchase agreement the rogue was the debtor. He raises the fact that the rogue has impersonated as Mr Patel providing forged documents to prove his identity. He questions the validity of the agreement made between the company and the rogue who signed as Mr Patel but indeed was not Mr Patel. He goes on to highlight that the written document bore the name of Mr Patel; it was Mr Patel who met the credit worthiness of the finance company and therefore the agreement was made between Mr Patel and the company. There was no agreement between the company and the rogue therefore the actual title of car lies with the finance company and Mr Patel was the hirer/debtor. He further suggests that rogue had face-to-face dealing with the dealer and not with the finance company. He dismisses the suggestion of MR Hudson that since there was a face to face dealing between the dealer and rogue who had signed the document making an agreement between the finance company and the rogue. Fact that the signature used were that of the rogue and not Mr Patel further substantiates that the agreement was lacking an essential ingredient. Lord suggested dismissing the appeal
Lord Millett enquires whether in such fraudulent transactions identity is fundamental in which case the contract is void or is material rendering the contract voidable. He goes onto cite various such cases of misrepresentation and fraud. The honorable Lord suggests that in such cases law must give preference to the person to whom the offer of acceptance is intended. In this case the offer was intended for MR Patel and not the rogue. He queries if indeed there was a contract and if yes then was it induced by fraud or by mistake. He also cites German laws where the innocent third party acting in good faith obtains a good title. The Lord allows the appeal.
Lord Phillips of Worth Matravers initiates with dwelling on the importance of name and formation of contract. He cites many cases emphasising that in such cases of fraud the contract is not void but voidable. He mentions that negotiations between the seller and the rogue occurred face to face, in writing and also through telephone and fax. Lord is of the opinion that the agreement made was in writing between the hire purchase company and Mr Patel and not between the company and the rogue. Further the agreement did not have the authority of Mr pastel it was null and void. The never had a right title and therefore was not in any condition to pass that right title to Mr Hudson therefore the title passed on to MR Hudson is no good and thus appeal be dismissed.
Lord Walker of Gesting Thorpe re-emphasised that the finance company had made the contract with Mr Patel and no one else. There is no substance in appellant’s argument that there was a face-to-face agreement between the seller and the rogue and thus the title was right. He also goes on to dismiss the appeal.
In this case we are dealing with an impostor who commits a fraud with the finance company. He produces a wrong identity enters into a hire purchase contract, acquires the car along with all the relevant papers and then sells the car to a third party Mr Hudson who buys this car in good faith. The Law here is governed under the section 27 of Hire purchase act (1964) amended.
Various questions that we need to address are:
1. Did the rogue have the vehicle on hire purchase?
2. Whether the transaction he had induced the claimants to enter into was null and void legally?
3. Whether the person, other then the dealer, in this case Mr Hudson in good faith buys a car from someone who turns out only to have it on hire purchase, obtains a good title?
The opinion of various courts is divided on this issue. In one instance, a dealer who is duped by an impersonator was able to recover the goods he was duped with from the innocent third party such as what happened in the case of Cundy vs. Lindsay (1878). And in case of Ingram v. Little (1961) where the original seller was given the title of the car. In case of Phillips v. Brooks (1919) a good title was passed to an honest purchaser after a face-to-face transaction took place between the rogue and the seller. In all these cases we witness different decisions from the honourable courts.
It has been argued that in case of a mistaken identity there is not contract, or, if there is a contract, it is null and void and therefore under such circumstances no title can pass under it. The common sense doesn’t seem to agree with this argument it is only reasonable to assume that an innocent purchaser should not have his title depend on various legalities. After all he has acted in good faith. Decision of court in King’s Norton Metal Co. Ltd. v. Edridge Merrett ; Co. Ltd. (1897) in this respect still stands out as “case of a mistaken identity does not mean that there is no contract but it simply means that the contract is voidable and liable to be set aside at the instance of the mistaken person, so long as he does so before third parties have in good faith acquired rights under it.
For the sake justice it is not important whether the contract was void or voidable, but which of the two innocent parties shall suffer for the fraud of a third. A logical answer may be to divide the loss between the two parties however such a suggestion has been rejected by the reform committee in the past. In my personal belief time has come when reforms are made in the judicial system to deal with this anomaly. Till then I will go by the facts and the precedents present before me.
Now coming to the first question whether the rogue was the “debtor” under a “hire purchase agreement” within the meaning of the Hire Purchase Act. It is reasonable to assume that only if the rogue was the debtor he could have purported the sale of the car to M. Hudson with a good title. To examine these following facts need to be examined:
a) Since Mr Patel’s signature was forged the agreement was a nullity.
b) The agreement was valid and enforceable, by and against Mr Patel.
c) The agreement was void because the finance company intended to contract only with Mr Patel, and the identity of Mr Patel was a matter of vital importance to it
I would like your kind attention to the words of Lord Denning MR (Gallie v. Lee 1969) “If the deed was not his deed at all (non est factum), he is not bound by his signature any more than he is bound by a forgery. The document is a nullity just as if a rogue had forged his signature. No one can claim title under it, not even an innocent purchaser who bought on the faith of it, nor an innocent lender who lent his money on the faith of it. No matter that this innocent person acted in the utmost good faith, without notice of anything wrong, yet he takes nothing by the document.”
It is agreeable that the finance company could not hold Mr. Patel liable under the hire purchase agreement since his signature was forged, and he would be able to say that the agreement was not his contract. I am of the opinion that the rogue was not the hirer named in the written hire purchase agreement, and was therefore not the debtor under that agreement.
Now coming to the next question whether the agreement was void or merely voidable for fraudulent misrepresentation. We also need to assess whether the agreement made between the company and the rogue be regarded as having been made face to face? And to whom should the offer made by the finance company be interpreted as having been made? The fact that the contract was made between the company and Mr Patel alone under no circumstances the contract was made between the company and the rogue even if he was present in the showroom and had identified himself as Mr Patel. In MY opinion the contract was voidable because of misrepresentation.
Finally coming to the question whether the rogue passes a clear title to Mr Hudson. It is very clear that all the time the finance company intended to hire the vehicle to Mr Patel and no one else. There is no doubt whatsoever that in case of a hire purchase agreement the identity of the client is fundamental. Mr Patel will deny that he ever was the party of the agreement since his signatures were forged. In effect there was no contract and therefore the title never lay with the rogue and thus could not be passed on to Mr. Hudson.