Shogun Finance Limited (Respondents) v Hudson (FC) Appellant
32. In Cundy v Lindsay (1878) 3 App Cas 459 the House reached the contrary conclusion. The reasoning of all their Lordships was to the same effect. Lord Cairns LC encapsulated this reasoning, at p 465:
Lord Hatherley and Lord Penzance left open what the position would be had the crook come into personal contact with Lindsay.
33. In my view this decision is not reconcilable with Phillips v Brooks Ltd  2 KB 243 or with Lewis v Averay  1 QB 198 or with the starting point 'presumption' formulated by Devlin LJ in Ingram v Little  1 QB 31. The legal principle applicable in these cases cannot sensibly differ according to whether the transaction is negotiated face to face, or by letter, or by fax, or by e-mail, or over the telephone or by video link or video telephone. Typically today a purchaser pays for goods with a credit or debit card. He produces the card in person in a shop or provides details of the card over the telephone or by e-mail or by fax. When a credit or debit card is fraudulently misused in this way the essence of the transaction is the same in each case. It does not differ from one means of communication to the next. The essence of the transaction in each case is that the owner of the goods agrees to part with his goods on the basis of a fraudulent misrepresentation made by the other regarding his identity. Since the essence of the transaction is the same in each case, the law in its response should apply the same principle in each case, irrespective of the precise mode of communication of offer and acceptance.
34. Accordingly, if the law of contract is to be coherent and rescued from its present unsatisfactory and unprincipled state, the House has to make a choice: either to uphold the approach adopted in Cundy v Lindsay and overrule the decisions in Phillips v Brooks Ltd and Lewis v Averay, or to prefer these later decisions to Cundy v Lindsay.
35. I consider the latter course is the right one, for a combination of reasons. It is in line with the direction in which, under the more recent decisions, the law has now been moving for some time. It accords better with basic principle regarding the effect of fraud on the formation of a contract. It seems preferable as a matter of legal policy. As between two innocent persons the loss is more appropriately borne by the person who takes the risks inherent in parting with his goods without receiving payment. This approach fits comfortably with the intention of Parliament in enacting the limited statutory exceptions to the proprietary principle of nemo dat non quod habet. Thus, by section 23 of the Sale of Goods Act 1979 Parliament protected an innocent buyer from a seller with a voidable title. The classic instance of a person with a voidable title is a person who acquired the goods by fraud: see Bramwell LJ in Babcock v Lawson (1880) 5 QBD 284, 286. Further, this course is supported by writers of the distinction of Sir Jack Beatson: see Anson's Law of Contract, 28th edition, p 332. It is consistent with the approach adopted elsewhere in the common law world, notably in the United States of America in the Uniform Commercial Code, 14th edition, section 2-403. And this course makes practical sense. In a case such as the present the owner of goods has no interest in the identity of the buyer. He is interested only in creditworthiness. It is little short of absurd that a subsequent purchaser's rights depend on the precise manner in which the crook seeks to persuade the owner of his creditworthiness and permit him to take the goods away with him. This ought not to be so. The purchaser's rights should not depend upon the precise form the crook's misrepresentation takes.
36. Cundy v Lindsay has stood for a long time. But I see no reason to fear that adopting this conclusion will unsettle the law of contract. In practice the problems surrounding Cundy v Lindsay arise only when third parties' rights are in issue. To bring the law here into line with the law already existing in 'face to face' cases will rid the law of an anomaly. Devlin LJ's starting point presumption is a workable foundation which should apply in all cases. A person is presumed to intend to contract with the person with whom he is actually dealing, whatever be the mode of communication.
37. Although expressed by Devlin LJ as a presumption, it is not easy to think of practical circumstances where, once in point, the presumption will be displaced. The factual postulate necessary to bring the presumption into operation is that a person (O) believes that the person with whom he is dealing is the person the latter has represented himself to be. Evidence that the other's identity was of importance to O, and evidence of the steps taken to check the other's identity, will lead nowhere if the transaction proceeds on the basis of the underlying factual postulate.
The present case
38. It follows that I would allow this appeal. The principles applicable to the formation of a contract of sale are equally applicable to the formation of a hire-purchase agreement. The document submitted to Shogun Finance, and signed by the crook in the name of Mr Patel, does of course refer unequivocally to Mr Patel. The document identifies him with some particularity: his full name and address, his date of birth, his driving licence number, and his employer's name and address. These details were of prime importance to Shogun Finance because they identified the person whose credit rating it had checked and approved. The company intended to contract with this person. But it is clear from the evidence that Shogun Finance, as much as the dealer in the car showroom, thought this was one and the same person as the individual in the showroom. Shogun Finance proceeded in this (fraud-induced) belief.
39. This is manifest because Shogun Finance authorised the dealer to hand over the car to the person in the showroom, he being (as the finance company knew) the person who had signed the agreement and he being (so the finance company believed) the person whose credit rating it had checked. Shogun Finance believed he was Mr Patel, in the same way as the jeweller in Phillips v Brooks believed the customer in his shop was Sir George Bullough. In the belief that the person in the dealer's showroom was Mr Patel, Shogun Finance intended to hire the car to that person. That is what the finance company intended to do by the written hire-purchase agreement, and that is what it thought it had done. Had this not been so it would not have released the car to him. Shogun Finance was mistaken in its belief about the identity of the person in the showroom, in the same way as the jeweller was mistaken in his belief about the identity of the person in his shop. But that mistaken belief, induced by the crook's fraudulent misrepresentation, did not negative the finance company's intention to let the car on hire to the person in the showroom on the terms set out in the hire-purchase agreement. Nor could the crook assert he had no contractual intention: he signed the hire-purchase agreement, albeit using a false name and address. The alternative conclusion involves the proposition that when the dealer released the car to the crook, the dealer was guilty of converting the car and was liable to the finance company accordingly. That would be a distorted appraisal of the facts.
40. The finance company sought to gain assistance from Hector v Lyons 58 P & CR 156, a decision binding upon the Court of Appeal. Suffice to say, that decision should not be taken as authority for the proposition that if O intends to contract with C in the belief he is X, there can be a contract between O and C if the contract is oral but not if it is reduced into writing and expressed to be made between O and X. Evidence of the fraudulent misrepresentation and of O's belief is admissible to identify who are the parties to the written contract.
41. One further point may be noted. Some time was taken up in this case with arguments on whether the dealer was an agent for the finance company and for what purposes. This was in an endeavour to bring the case within the 'face to face' principle. The need for such singularly sterile arguments underlines the practical absurdity of a principle bounded in this way. The practical reality is that in the instant case the presence or absence of a representative of the finance company in the dealer's showroom made no difference to the course of events. Had an authorised representative of the finance company been present no doubt he would have inspected the driving licence himself and himself obtained the information needed by his company. As it was, a copy of the licence, together with the necessary information, were faxed to the finance company. I can see no sensible basis on which these different modes of communication should affect the outcome of this case. I would set aside the orders of the assistant recorder and the Court of Appeal, and dismiss this action. Mr Hudson acquired a good title to the car under section 27 of the Hire-Purchase Act 1964.
LORD HOBHOUSE OF WOODBOROUGH
42. The question at issue on this appeal is: Did Mr Hudson acquire a good title to the car when he bought the car from the rogue ('R') who himself had no title? The basic principle is nemo dat quod non habet: see the Sale of Goods Act 1979 s.21(1) and Helby v Matthews  AC 471 where it was held that the same rule applied to a sale by a hire-purchaser. The hire-purchaser has no title to the goods and no power to convey any title to a third party. The title to the goods and the power to transfer that title to any third party remains with the hire purchase company and with it alone. Clause 8 of the hire-purchase 'agreement' and the printed words in the form immediately below the space for the customer's signature also expressly say the same. There are common law and statutory exceptions to this rule (eg, sales in market overt or by a mercantile agent in possession of the goods with the consent of the owner).
43. In the present case, the statutory exception relied on by Mr Hudson is that in Part III of the Hire-Purchase Act 1964 as re-enacted in the Consumer Credit Act 1974:
Section 29(4) adds:
44. The relevant question is therefore one of the application of this statutory provision to the facts of this case (no more, no less). Thus the question becomes:
Mr Hudson contends that R was; the Finance Company contends that he was not. The judge and the majority of the Court of Appeal found that he was not; Sedley LJ would have held that he was.
45. What was the 'hire-purchase' 'agreement' relied on? It was a written agreement on a standard hire-purchase printed form purporting to be signed as the "customer" by one Durlabh Patel, the person who lived at 45 Mayflower Rd, Leicester, to whom driving licence No.'PATEL506018DJ9FM' had been issued and with a date of birth 01/06/58. This was an accurate identification of the real Mr Durlabh Patel, but in no respect of R who was not the person who lived at that address, not the person to whom the driving licence had been issued and (one suspects) not a twin in age of the real Mr Patel. R forged Mr Patel's signature so as to make the signature on the hire-purchase 'agreement' appear to be the same as that on the driving licence. The parties to the written 'agreement' are Mr Patel (the "customer"), and Shogun Finance Ltd (the creditor). There is also an offer and acceptance clause:
46. The effect of this is that -
I will take these points in turn but the second and fifth are fundamental to them all and to the giving of the correct answer to this case.
47. The first point is a matter of the construction of the written document. It admits of only one conclusion. There is no mention in the document of anyone other than Mr Durlabh Patel. The language used is clear and specific, both in the substance of the identification - name and address and driving licence number and age - and in the express words of the offer and acceptance clause - "the customer named overleaf". The 'agreement' is a consumer credit agreement. It is unlike a mere retail sale where, although title may, indeed, will normally have already passed to the buyer, the seller is not obliged to part with the goods until he has been paid or is satisfied that he will be paid. Credit is only relevant to the release of the seller's lien and to his obligation to deliver, not to the basic transaction; the basic transaction is unaffected and will stand. Under a contract for the sale of goods, the contract has been made and, normally, the title to the goods has vested in the buyer before the time for payment has arrived. (Retention of title clauses are a modern development.) By contrast, in a consumer credit transaction, the identity of the customer is fundamental to the whole transaction because it is essential to the checking of the credit rating of the applicant borrower. All this precedes the making of any contract at all. No title to the goods is obtained by the hirer at any stage. If the finance company does not accept the proposer's offer, the proposer has acquired nothing. Unlike in the sale of goods, there is nothing - no status quo - which has to be undone. The observations of Devlin LJ in Ingram v Little  1 QB at p.69 are not pertinent; the approach and dicta of Denning MR in Lewis v Averay  1 QB 198 are misplaced and wrong.
48. It has been suggested that the finance company was willing to do business with anyone, whatever their name. But this is not correct: it was only willing to do business with a person who had identified himself in the way required by the written document so as to enable it to check before it enters into any contractual or other relationship that he meets its credit requirements. Mr Durlabh Patel was such an identified person and met its credit requirements so it was willing to do business with him. If the applicant had been, say, Mr B Patel of Ealing or Mr G Patel of Edgbaston, it would not have been willing to deal with them if they could not be identified or did not meet with its credit requirements. Correctly identifying the customer making the offer is an essential precondition of the willingness of the finance company to deal with that person. The Rogue knew, or at least confidently expected, that the finance company would be prepared to deal with Mr Durlabh Patel but probably not with him, the Rogue; and he was, in any event, not willing himself to enter into any contract with the finance company. This is not a case such as that categorised by Sedley LJ ( QB at 846) as the use of a "simple alias" to disguise the purchaser rather than to deceive the vendor - the situation which resembles that in King's Norton Metal v Edridge Merrett & Co (14 TLR 98). But, even then, in a credit agreement it would be useless to use a pseudonym as no actual verifiable person against whom a credit check could be run would have been disclosed and the offer would never be accepted. Mr Durlabh Patel is the sole hirer under this written agreement. No one else acquires any rights under it; no one else can become the bailee of the motor car or the 'debtor' "under the agreement". It is not in dispute that R was not Mr Durlabh Patel nor that R had no authority from Mr Patel to enter into the agreement or take possession of the motor car.
49. Mr Hudson seeks to escape from this conclusion by saying: 'but the Rogue was the person who came into the dealer's office and negotiated a price with the dealer and signed the form in the presence of the dealer who then witnessed it.' The third and fourth points address this argument. The gist of the argument is that oral evidence may be adduced to contradict the agreement contained in a written document which is the only contract to which the finance company was a party. The agreement is a written agreement with Mr Durlabh Patel. The argument seeks to contradict this and make it an agreement with the Rogue. It is argued that other evidence is always admissible to show who the parties to an agreement are. Thus, if the contents of the document are, without more, insufficient unequivocally to identify the actual individual referred to or if the identification of the party is non-specific, evidence can be given to fill any gap. Where the person signing is also acting as the agent of another, evidence can be adduced of that fact. None of this involves the contradiction of the document: Young v Schuler 11 QBD 651, which was a case of an equivocal agency signature and it was held that evidence was admissible that the signature was also a personal signature - "evidence that he intended to sign in both capacities .... does not contradict the document and is admissible". (per Cotton LJ at p.655) But it is different where the party is, as here, specifically identified in the document: oral or other extrinsic evidence is not admissible. Further, the Rogue was no one's agent (nor did he ever purport to be). The rule that other evidence may not be adduced to contradict the provisions of a contract contained in a written document is fundamental to the mercantile law of this country; the bargain is the document; the certainty of the contract depends on it. The relevant principle is well summarised in Phipson on Evidence, paragraphs 42-11 and 42-12: "When the parties have deliberately put their agreement into writing, it is conclusively presumed between themselves and their privies that they intend the writing to form a full and final statement of their intentions, and one which should be placed beyond the reach of future controversy, bad faith or treacherous memory." (See also Bank of Australasia v Palmer  AC 540, per Lord Morris at p.545.) This rule is one of the great strengths of English commercial law and is one of the main reasons for the international success of English law in preference to laxer systems which do not provide the same certainty. The case of Hector v Lyons 58 P&CR 156 is simply an application of this basic and long established principle. The father was claiming to be able to enforce a contract of sale of land. The father had conducted the negotiations. Woolf LJ said, at pp. 160-161:
Browne-Wilkinson V-C delivered to a judgment to the same effect. On p.159 he referred to the cases "entirely concerned with transactions between two individuals face to face entering into oral agreement", saying:
Mr Hudson submitted, as he had to, that this decision was wrong and should be overruled. In my opinion the Court of Appeal's decision was clearly correct and correctly reasoned in accordance with well established principles.
50. The argument also fails on another ground. There was no consensus ad idem between the finance company and the Rogue. Leaving on one side the fact that the Rogue never had any intention himself to contract with the finance company, the hire-purchase 'agreement' to which Mr Hudson pins his argument was one purportedly made by the acceptance by the finance company, by signing the creditor's box in the form, of a written offer by Mr Durlabh Patel to enter into the hire-purchase agreement. This faces Mr Hudson with a dilemma: either the contract created by that acceptance was a contract with Mr Durlabh Patel or there was no consensus ad idem, the Rogue having no honest belief or contractual intent whatsoever and the finance company believing that it was accepting an offer by Mr Durlabh Patel. On neither alternative was there a hire-purchase agreement with the Rogue.
51. It is as well to digress at this stage to consider the chain of contracts or alleged contracts relied upon by Mr Hudson. First, Mr Hudson relies upon a contract of sale he made with the Rogue when he agreed to buy the motor car from the Rogue. He says he got a good title to it from the Rogue under this contract notwithstanding that R had no title. In support of this statute-based contention he argues that there was another contract which he has to say was a contract of hire-purchase between the Rogue and the finance company, the supposed contract contained in the written hire-purchase agreement. There is no dispute that the finance company had bought the motor car from the dealer and was or had become the owner of the car at the time when the finance company signed the document and thereby accepted the offer (if any) in the written hire-purchase document. (That contract of purchase was never put in evidence.) The title to the car was in the finance company. The hirer/debtor under the 'agreement' was Mr Durlabh Patel not the Rogue. The Rogue only comes into the picture because he was the unidentified individual who came into the dealer's office and caused the dealer to sell the motor car to the finance company and the dealer, thereafter, to deliver it to him although he was not in fact Mr Durlabh Patel. (He, of course, came into the story again later as the person who purported to sell the car to Mr Hudson.) The dealer (as his witness signature testifies) apparently believed the Rogue when the Rogue said his name was Mr Patel and negotiated with him, face to face, the price at which the dealer would be willing to sell the car. That negotiation enabled the dealer to fill in the appropriate finance details which the 'customer' should ask for. But the Rogue never had any face to face dealings with the finance company; he dealt with it solely by submitting a written document containing an offer and acceptance clause. There is no room for the application of the 'face to face' principle between the Rogue and the finance company. Nor was the dealer the agent of the finance company to enter into any contract on behalf of the finance company. The dealer is a mere facilitator serving primarily his own interests. If there could have been any doubt or room for argument about this point, it is put beyond argument or doubt by the terms of the offer and acceptance clause in the governing document. R and the dealer are not two individuals conducting negotiations in which all the terms necessary to constitute a binding contract are agreed.
52. As regards the delivery of the motor car by the dealer to the Rogue, it is not in dispute that, in making that delivery, the dealer was acting as the agent of the finance company. But he was acting without authority. The dealer's authority was to deliver the car to Mr Durlabh Patel, not to anyone else. That delivery did not create any bailment of the car by the finance company to the Rogue. The Rogue was a thief. Albeit by an elaborate but effective course of action, he stole the car from the possession of the dealer just as surely as if he was a thief stealing it from the forecourt. The dealer may have acted under an innocent mistake induced by the fraud the Rogue had practised on him; but it will, nevertheless, have been a tortious disposal of the motor car by the dealer. But the matter does not stop there. It would not be a delivery "under a hire-purchase agreement". This follows from the fact that there was no hire-purchase agreement (or any agreement or contract) between the finance company and the Rogue. It further follows from the fact that the only 'debtor' under the supposed agreement was Mr Durlabh Patel. It was never the Rogue and neither the finance company nor the Rogue ever intended that it should be.
53. The final point was the fact that the purported customer's signature was not in truth that of Mr Durlabh Patel. The supposed hire-purchase agreement therefore from the outset lacked an essential ingredient and within the terms of the document was never an offer eligible for acceptance. A forged signature is neither the signature of the purported signatory nor of the forger. There may be an exception where the 'forger' had the authority of the actual party to sign on his behalf and in his name, in which case it probably would not be a forgery unless there was some dishonest intent to deceive. The same applies to using a 'mere pseudonym' or a trading name. But that is not this case.
54. It follows that the appeal must be dismissed and the majority judgment of the Court of Appeal affirmed.
55. But, before I leave this case, I should shortly summarise why the argument of the appellant's counsel was so mistaken. The first reason was that they approached the question as if it was simply a matter of sorting out the common law authorities relating to the sale of goods. They did not treat it as a matter of applying a statutory exception to the basic common law rule, nemo dat quod non habet. Further, they did not analyse the structure of the overall transaction and the consumer credit agreement within it. Accordingly, they misrepresented the role of the dealer, wrongly treating him as the contracting agent of the finance company which he was not. They never analysed the terms of the written document and had no regard at all to the offer and acceptance clause it contained which, if there was any contract between a 'debtor' and the finance company, governed their relationship and which expressly set out the only way in which such a contract could come into existence. They made submissions which contradicted the express written contract and were therefore contrary to principle and long established English mercantile law. They submitted that Cundy v Lindsay (1878) 3 App Cas 459 was wrongly decided and should be overruled, substituting for it a general rule which, in disregard of the document or documents which constitute the agreement (if any), makes everything depend upon a factual enquiry into extraneous facts not known to both of the parties thus depriving documentary contracts of their certainty. They sought to convert a direct documentary contract with the finance company into a face to face oral contract made through the dealer as the contracting agent of the finance company, notwithstanding that the dealer was never such an agent of the finance company. Finally they sought, having by-passed the written contract, to rely upon authorities on oral contracts for the sale of goods, made face to face and where the title to the goods had passed to the 'buyer', notwithstanding that this was a documentary consumer credit transaction not a sale and, on any view, no title had ever passed to R. In the result they have invited a review of those authorities by reference to the particular facts of each of them. They have sought to draw your Lordships into a discussion of the evidential tools, eg rebuttable presumptions of fact and the so-called face-to-face 'principle', used by judges in those cases to assist them in making factual decisions (see also the dictum of Gresson P in Fawcett v Star Car Sales  NZLR at 413), notwithstanding that the present case concerns the construction of a written contract. They forget that the, presently relevant, fundamental principles of law to be applied - consensus ad idem, the correspondence of the contractual offer and the contractual acceptance, the legal significance of the use of a written contract - are clear and are not in dispute. Inevitably over the course of time there have been decisions on the facts of individual 'mistaken identity' cases which seem now to be inconsistent; the further learned, but ultimately unproductive, discussion of them will warm academic hearts. But what matters is the principles of law. They are clear and sound and need no revision. To cast doubt upon them can only be a disservice to English law. Similarly, to attempt to use this appeal to advocate, on the basis of continental legal systems which are open to cogent criticism, the abandonment of the soundly based nemo dat quod non habet rule (statutorily adopted) would be not only improper but even more damaging.