Shogun Finance Ltd v Hudson [2003] UKHL 62

Facts

• A fraudster presented a stolen driving license as identification to a car dealer and entered into a hire-purchase agreement for a vehicle, using the identity on the license.
• The hire-purchase contract was drafted in the name appearing on the stolen license, not the fraudster’s true identity.
• The fraudster subsequently sold the car to Hudson, an innocent third party, who purchased the car without knowledge of prior fraud.
• Shogun Finance Ltd, the finance company, discovered the fraud and dishonoured payment, then sought to recover the car from Hudson, claiming conversion.
• Hudson argued that he acquired good title to the vehicle, as an innocent purchaser.
• The case concerned whether a contract existed between Shogun Finance and the fraudster, and whether the fraudster could transfer possessory or good title to Hudson.

Issues

1. Whether a hire-purchase contract formed in the name of a false identity is valid, or void for mistake as to identity.
2. Whether the fraudster could pass good title to an innocent third party buyer, Hudson, under the Sale of Goods Act 1979.
3. To what extent the principles from Cundy v Lindsay regarding mistake of identity apply in the context of written contracts and affect property and contractual rights.

Decision

• The House of Lords held that there was no valid contract between Shogun Finance and the fraudster, as the agreement was drafted in a false name and identity was fundamental to the contract.
• As no contract existed with the fraudster, the fraudster could not pass good or possessory title to Hudson.
• The contract was considered void ab initio; the fraudster therefore never acquired title to the vehicle.
• Hudson, having purchased from one without title, was required to return the car to Shogun Finance Ltd.
• The decision emphasized the distinction between face-to-face and written contract formation, highlighting the primacy of stated identity in written agreements.

Legal Principles

• A contract may be void ab initio for fundamental mistake as to the identity of a contracting party (as outlined in Cundy v Lindsay).
• In written contracts, the named identity in the contract is controlling and central to the existence of agreement.
• Under section 21(1) Sale of Goods Act 1979, a buyer cannot acquire good title from a seller who had none, reaffirming the nemo dat principle.
• The law draws a distinction between mistakes as to identity (which void contracts) and mistakes as to attributes or creditworthiness (which do not), as seen in subsequent cases such as King's Norton Metal Co Ltd v Edridge, Merrett & Co Ltd and Lewis v Averay.
• Courts are more likely to find a void contract for mistake as to identity in written rather than face-to-face dealings.

Conclusion

Shogun Finance Ltd v Hudson confirmed that in written agreements, the identity stated in the contract is essential, and a fundamental mistake as to identity renders the contract void, preventing a fraudster from passing title to innocent purchasers. This decision illustrates the limits of Cundy v Lindsay and highlights the continuing importance of the nemo dat principle in cases involving fraud and mistaken identity.