Judgments - Shogun Finance Limited (Respondents) v Hudson (FC) Appellant

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    116.  The rogue then sold the vehicle to the defendant, Mr Hudson, for £17,000. Mr Hudson bought the vehicle for himself, and not as a dealer. He bought it in good faith. The rogue has vanished without trace. Shogun contend that the vehicle has at all times been their property and claim its return, or its value in lieu. Mr Hudson claims that the rogue passed a good title to him, by reason of the provisions of the Hire- Purchase Act 1964.

    The Hire-Purchase Act 1964

    117.  It is a fundamental principle of the English law of sale of goods that a vendor cannot convey to a purchaser a better title to a chattel than that which he enjoys himself. There are however exceptions to this rule. One arises under section 27 of the Hire-Purchase Act 1964, as amended, which provides, so far as material:

    "(1)  This section applies where a motor vehicle has been bailed or (in Scotland) hired under a hire-purchase agreement, or has been agreed to be sold under a conditional sale agreement, and, before the property in the vehicle has become vested in the debtor, he disposes of the vehicle to another person.

    (2)  Where the disposition referred to in subsection (1) above is to a private purchaser, and he is a purchaser of the motor vehicle in good faith without notice of the hire-purchase or conditional sale agreement (the 'relevant agreement'), that disposition shall have effect as if the creditor's title to the vehicle has been vested in the debtor immediately before that disposition."

    118.  Section 29(4) defines the debtor as, for present purposes, the person to whom the vehicle is bailed.

    119.  The critical issue in this case is whether a hire-purchase agreement was ever concluded between Shogun and the rogue. If an agreement was concluded, then the rogue was the 'debtor' under section 27 of the 1964 Act and passed good title in the vehicle to Mr Hudson. If no agreement was concluded, then the rogue stole the vehicle by deception and passed no title to Mr Hudson.

    'What's in a name?'

    120.  This area of the law has developed because of confusion about names and it may be helpful at the outset to reflect on the nature of a name. Words in a language have one or more ordinary meaning, which will be known to anyone who speaks that language. Names are not those kind of words. A name is a word, or a series of words, that is used to identify a specific individual. It can be described as a label. Whenever a name is used, extrinsic evidence, or additional information, will be required in order to identify the specific individual that the user of the name intends to identify by the name - the person to whom he intends to attach the label. Almost all individuals have two or more names which they use to identify themselves and where a name is mentioned in a particular context, or a particular milieu, those who hear it may have the additional information that they need to identify to whom the speaker is referring.

    121.  Where a name appears in a written document, the document itself may contain additional information which will enable the reader to identify the individual to whom the writer intended to refer when he wrote the name.

    122.  Where a person introduces himself by name to someone, his intention will normally be to tell that person the name that he uses to identify himself. This may also assist that other person to identify him in the future. If a person introduces himself by a false name, that may be because he does not wish to be identified in the future. If a person introduces himself by the name of somebody else, that may be because he wishes the person to whom he introduces himself to believe that he is that other person.

    Formation of contract

    123.  A contract is normally concluded when an offer made by one party ('the offeror') is accepted by the party to whom the offer has been made ('the offeree'). Normally the contract is only concluded when the acceptance is communicated by the offeree to the offeror. A contract will not be concluded unless the parties are agreed as to its material terms. There must be 'consensus ad idem'. Whether the parties have reached agreement on the terms is not determined by evidence of the subjective intention of each party. It is, in large measure, determined by making an objective appraisal of the exchanges between the parties. If an offeree understands an offer in accordance with its natural meaning and accepts it, the offeror cannot be heard to say that he intended the words of his offer to have a different meaning. The contract stands according to the natural meaning of the words used. There is one important exception to this principle. If the offeree knows that the offeror does not intend the terms of the offer to be those that the natural meaning of the words would suggest, he cannot, by purporting to accept the offer, bind the offeror to a contract - Hartog v Colin and Shields [1939] 3 All ER 566; Smith v Hughes (1871) LR 6 QB 597. Thus the task of ascertaining whether the parties have reached agreement as to the terms of a contract can involve quite a complex amalgam of the objective and the subjective and involve the application of a principle that bears close comparison with the doctrine of estoppel. Normally, however, the task involves no more than an objective analysis of the words used by the parties. The object of the exercise is to determine what each party intended, or must be deemed to have intended.

    124.  The task of ascertaining whether the parties have reached agreement as to the terms of a contract largely overlaps with the task of ascertaining what it is that the parties have agreed. The approach is the same. It requires the construction of the words used by the parties in order to deduce the intention of the parties - see Chitty on Contracts , 28th Ed Volume 1, paragraphs 12-042,3 and the cases there cited. This is true, whether the contract is oral or in writing. The words used fall to be construed having regard to the relevant background facts and extrinsic evidence may be admitted to explain or interpret the words used. Equally, extrinsic evidence may be necessary to identify the subject matter of the contract to which the words refer.

    125.  Just as the parties must be shown to have agreed on the terms of the contract, so they must also be shown to have agreed the one with the other. If A makes an offer to B, but C purports to accept it, there will be no contract. Equally, if A makes an offer to B and B addresses his acceptance to C there will be no contract. Where there is an issue as to whether two persons have reached an agreement, the one with the other, the courts have tended to adopt the same approach to resolving that issue as they adopt when considering whether there has been agreement as to the terms of the contract. The court asks the question whether each intended, or must be deemed to have intended, to contract with the other. That approach gives rise to a problem where one person is mistaken as to the identity of the person with whom he is dealing, as the cases demonstrate. I propose at this point to consider those cases.

    The decided cases

    126.  In Boulton v Jones (1857) 27 LJ Ex 117 the owner of a shop named Brockenhurst sold his stock-in-trade and assigned his business to the plaintiff. The same day the plaintiff received an order in writing, addressed to Brockenhurst, from the defendant. The defendant had had previous dealings with Brockenhurst and proposed to set off against the price a debt owed by Brockenhurst. The plaintiff supplied the goods and the defendant consumed them. When the plaintiff sent an invoice the defendant denied that he had concluded any contract with him. The Court ruled that there was no contract. Pollock CB said:

    "Now the rule of law is clear, that if you propose to make a contract with A, then B cannot substitute himself for A without your consent and to your disadvantage, securing to himself all the benefit of the contract."

    Martin B agreed, without the qualification 'to your disadvantage':

    "Where the facts prove that the defendant never meant to contract with A alone, B can never force a contract upon him; he has dealt with A, and a contract with no one else can be set up against him."

    Bramwell B explained his reasons in this way:

    "I do not lay it down that because a contract was made in one person's name another person cannot sue upon it, except in cases of agency. But when any one makes a contract in which the personality, so to speak, of the particular party contracted with is important, for any reason, whether because it is to write a book or paint a picture, or do any work of personal skill, or whether because there is a set-off due from that party, no one else is at liberty to step in and maintain that he is the party contracted with, that he has written the book or painted the picture, or supplied the goods; and that he is entitled to sue, although, had the party really contracted with sued, the defendant would have had the benefit of his personal skill, or of a set-off due from him."

    Channell B also seemed to consider that it was material that the defendant had a set-off:

    "The plaintiff is clearly not in a situation to sustain this action, for there was no contract between himself and the defendant. The case is not one of principal and agent; it was a contract made with B, who had transactions with the defendant and owed him money, and upon which A seeks to sue."

    127.  This early case does not demonstrate the full application of the principles that I have set out in relation to formation of contract, although the result accords with them. The focus was, however, on the intention of the defendant.

    128.  In Hardman v Booth (1863) 1 H & C 803 a fraud was perpetrated by one Edward Gandell who, it seems, carried on business in two capacities: (1) as clerk of a well known firm, Gandell & Co, of which his father was sole proprietor. There he had neither authority to contract nor was held out as having such authority. (2) He had formed a partnership with a man called Todd, which carried on business as Gandell & Todd. He purported to conclude a contract to purchase cloth from the plaintiffs, holding himself out as a member of Gandell & Co. The first instalment of the cloth was delivered to the premises of Gandell & Co and the second instalment was collected by Edward Gandell in a cart owned by Gandell & Co. Edward Gandell took the cloth to the defendant and purported to pledge it to secure a loan to Gandell & Todd. The issue was whether in these circumstances any contract was concluded between the plaintiffs and Gandell & Todd, under which the property in the cloth passed to them. The court held that no contract had been concluded.

    129.  Once again the Court attached critical importance to the intention of the vendors. Pollock C.B. summarised the position as follows at p.806:

    "… in this case I think it clear that there was no contract. Mr Hawkins contended that there was a contract personally with Edward Gandell, the individual with whom the conversations took place. It is true that the words were uttered by and to him, but the plaintiffs supposed that they were dealing with Gandell & Co., the packers, to whom they sent the goods; the fact being that Edward Gandell was not a member of that firm and had no authority to act as their agent. Therefore at no period of time were there two consenting minds to the same agreement."

    130.  Martin B emphasised that he had no doubt that the plaintiffs believed 'that they were dealing with Gandell & Co'. Channell B remarked 'I do not think there was a sale to Gandell and Todd ….for it is evident that the plaintiffs believed that they were dealing with Gandell & Co'. Wilde B's judgment was to similar effect. Thus the Court proceeded on the simple premise that there could not be a contract between A and B if A did not intend to contract with B. The courts had not at this time begun to apply an objective test to the question of whether an agreement had been concluded between the parties.

    131.  In Cundy v Lindsay (1878) 3 App Cas 459 a dispute about title to goods reached the House of Lords. A rogue called Blenkarn had a room at 37 Wood Street, Cheapside. A well-known firm called W Blenkiron & Son carried on business at 123 Wood Street. Blenkarn placed written orders for goods from 37 Wood Street with the plaintiffs. He signed the orders in such a way that the signature appeared to be Blenkiron & Co. The plaintiffs, who knew of Blenkiron & Son, though not the number at which they carried on business in Wood Street, accepted the orders and despatched goods addressed to 'Messrs Blenkiron & Co, 37 Wood Street, Cheapside.' Blenkarn sold some of these goods to the defendants, against whom the plaintiffs claimed in conversion.

    132.  The House held that no contract had been concluded with Blenkarn and that, accordingly, the property in the goods had remained vested in the plaintiffs. Lord Cairns remarked at p.465 that the plaintiffs and Blenkarn never came into contact personally and that everything that was done was done by writing. The problem was the conclusion to be derived from the writing, as applied to the facts of the case. He held that Blenkarn had deliberately led the plaintiffs to believe that they were contracting with Blenkiron & Co, an existing firm. He asked:

    "… how is it possible to imagine that in that state of things any contract could have arisen between the Respondents and Blenkarn, the dishonest man? Of him they knew nothing, and of him they never thought. With him they never intended to deal. Their minds never, even for an instant of time, rested upon him, and as between him and them there was no consensus of mind which could lead to any agreement or any contract whatever."

    Lord Hatherly said at p.469:

    "…from beginning to end the Respondents believed they were dealing with Blenkiron & Co., they made out their invoices to Blenkiron & Co., they supposed they sold to Blenkiron & Co., they never sold in any way to Alfred Blenkarn; and therefore Alfred Blenkarn cannot, by so obtaining the goods, have by possibility made a good title to a purchaser, as against the owners of the goods, who had never in any shape or way parted with the property nor with anything more than the possession of it."

    Lord Penzance said at p.471:

    "In the present case Alfred Blenkarn pretended that he was, and acted as if he was, Blenkiron & Co. with whom alone the vendors meant to deal. No contract was ever intended with him, and the contract which was intended failed for want of another party to it."

    133.  Here, once again, the focus was on the intention of the offeree. In deciding that his intention was to contract with Blenkiron & Co, the House had regard to the fact that the order was apparently signed 'Blenkiron & Co' and to the fact that the plaintiffs knew of a firm of that name and intended to deal with that firm. Thus extrinsic evidence was admitted in addition to the wording of the order in order to ascertain the intention of the plaintiffs.

    134.  In King's Norton Metal Company Ltd v Edridge, Merrett & Company Ltd (1897) 14 TLR 98 a rogue named Wallis had notepaper printed in the name of Hallam & Co and, pretending to be carrying on business in that name, ordered a ton of brass rivet wire from the plaintiff manufacturers. The plaintiffs delivered the wire on credit and Wallis promptly sold it to the defendants. The Court of Appeal held that a contract had been concluded between the plaintiffs and Wallis, under which property in the goods had passed. The short report records the reasoning of A.L. Smith LJ as follows:

    "The question was, With whom, upon this evidence, which was all one way, did the plaintiffs contract to sell the goods? Clearly with the writer of the letters. If it could have been shown that there was a separate entity called Hallam and Co. and another entity called Wallis then the case might have come within the decision in Cundy v Lindsay. In his opinion there was a contract by the plaintiffs with the person who wrote the letters, by which the property passed to him. There was only one entity, trading it might be under an alias, and there was a contract by which the property passed to him."

    135.  This case demonstrates that, if a person describes himself by a false name in contractual dealings, this will not, of itself, prevent the conclusion of a contract by a person who deals with him in that name. A.L. Smith LJ did not refer to 'intention' in his reported judgment. The result is, however, consistent with the approach to which I have referred in relation to formation of contract. The plaintiffs intended to deal with whoever was using the name of Hallam & Co. Extrinsic evidence was needed to identify who that was but, once Wallis was identified as the user of that name, the party with whom the plaintiffs had contracted was established. They could not demonstrate that their acceptance of the offer was intended for anyone other than Wallis.

    136.  Phillips v Brooks Ltd [1919] 2 KB 243 is the first case that involved a face-to-face transaction. A rogue called North entered the plaintiff's jewellery shop. He selected some pearls and a ring and wrote out a cheque for the total price of £3,000. He stated that he was Sir George Bullough and gave an address in St James' Square. The plaintiff, who knew of the existence of Sir George Bullough, referred to a directory and found that Sir George did, indeed, live at that address. He then permitted North to take away the ring before the cheque was cleared. Horridge J held that a contract was concluded between the plaintiff and North. At the outset of his judgment he set out his conclusion:

    "I have carefully considered the evidence of the plaintiff, and have come to the conclusion that, although he believed the person to whom he was handing the ring was Sir George Bullough, he in fact contracted to sell and deliver it to the person who came into his shop, and who was not Sir George Bullough, but a man of the name of North, who obtained the sale and delivery by means of the false pretence that he was Sir George Bullough. It is quite true the plaintiff in re-examination said he had no intention of making any contract with any other person than Sir George Bullough; but I think I have myself to decide what is the proper inference to draw where a verbal contact is made and an article delivered to an individual describing himself as somebody else."

    137.  In reaching his conclusion, Horridge J applied the reasoning in an American decision - Edmunds v Merchants' Despatch Transportation Co (1883) 135 Mass. 283 at p.284:

    "The following expressions used in the judgment of Morton CJ seem to me to fit the facts in this case: 'The minds of the parties met and agreed upon all the terms of the sale, the thing sold, the price and time of payment, the person selling and the person buying. The fact that the seller was induced to sell by fraud of the buyer made the sale voidable, but not void. He could not have supposed that he was selling to any other person; his intention was to sell to the person present, and identified by sight and hearing; it does not defeat the sale because the buyer assumed a false name or practised any other deceit to induce the vendor to sell.'"

    138.  Phillips v Brooks well illustrates the conundrum that the application of the test of intention raises when terms are negotiated between two persons who are face to face. It arises where the two persons, A and B, are not known to each other and where A gives a name which is not his own. If B is unaware of the existence of a third person who bears that name, there will be no problem. B will clearly intend to contract with A, treating the name given by A simply as the label by which A identifies himself. Equally A will know that B intends to contract with him. The problem arises where B is aware of a third person, C, who bears the name falsely adopted by A. In that situation it is B's intention to contract both with A and with C, for he does not distinguish between the two. No sensible answer can be given to the question: does B intend to contract with A or C? Nor can any sensible answer be given to the question: does A believe that B intends to contract with him or with C?

    139.  Horridge J. solved the conundrum by drawing an 'inference' that the plaintiff intended to contract with the rogue, who was present, and not with the individual whose identity the rogue had assumed.

    140.  Lake v Simmons [1927] AC 487 involved a claim by a jeweller on a policy of insurance. A fraudulent woman named Ellison induced him, in face-to-face dealings, to part with possession of two necklaces by false pretences. She pretended that she was the wife of a local gentleman called Van der Borgh, with whom she was living, and that he wanted a necklace on approval as he was contemplating giving it to her. She further pretended that a Commander Digby, who was engaged to her sister, wanted the other necklace on approval. There was no such man. Miss Ellison disposed of the necklaces. The issue was whether the underwriters were exempted from liability under an exclusion in respect of "loss by theft or dishonesty committed by … any customer in respect of goods entrusted to" the customer. The House held that they were not. Viscount Haldane, when considering whether the goods were 'entrusted' to Miss Ellison, applied the test of whether the face-to-face dealings between her and the jeweller were capable of giving rise to a contract. He held that they were not because of the mistake as to her identity:

    "The latter was entirely deceived as to the identity of the person with whom he was transacting. It was only on the footing and in the belief that she was Mrs.Van der Borgh that he was willing to deal with her at all. In circumstances such as these, I think that there was no such consensus ad idem as, for example, Lord Cairns, in his judgment in Cundy v. Lindsay (1878) 3 App. Cas. 459, declared to be requisite for the constitution of a contract. No doubt physically the woman entered the shop and pretended to bargain in a particular capacity, but only on the footing of being a different person from what she really was. There was never any contract which could afterwards become voidable by reason of a false representation made in obtaining it, because there was no contract at all, nothing excepting the result of a trick practised on the jeweller."

    141.  Viscount Haldane was applying a test of intention, but in a manner which differs from that adopted by Horridge J. Although he purported to distinguish rather than overrule Phillips v Brooks, I find his approach to be inconsistent with that decision. Devlin LJ, in Ingram v Little [1961] 1 QB 31, carefully analysed the speeches in Lake v Simmons, and concluded that no other member of the House adopted Viscount Haldane's approach. I agree with that conclusion. The speeches of the other members of the House do not bear on the issue before us.

    142.  In Ingram v Little a rogue, in the course of negotiating to buy a car from three ladies, the plaintiffs, who were reluctant to take his cheque, stated that his name was P.G.M. Hutchinson and gave an address in Caterham. One of the vendors went to the local post office and ascertained from the telephone directory that there was indeed a Mr P.G.M. Hutchinson, who lived at that address. The ladies parted with possession of the car in exchange for a worthless cheque. The rogue sold the car to the defendant. The situation was similar to that in Phillips v Brooks, and all members of the Court of Appeal referred to that case. Sellers LJ doubted whether it was correctly decided. He said at p.51:

    "It is not an authority to establish that where an offer or acceptance is addressed to a person (although under a mistake as to his identity) who is present in person, then it must in all circumstances be treated as if actually addressed to him."

    143.  Earlier, at p.50, he said:

    "Where two parties are negotiating together and there is no question of one or the other purporting to act as agent for another, and an agreement is reached, the normal and obvious conclusion would no doubt be that they are the contracting parties. A contrary finding would not be justified unless very clear evidence demanded it."

    Relevant factors that might displace the presumption that the parties face to face were the contracting parties were whether the party impersonated was known to the other party and the importance attached to the identity of that person. The question in each case should be solved by asking the question "how ought the promisee to have interpreted the promise?" Sellers LJ accepted the judge's conclusion that, on the facts of the case, the rogue knew that the offer was not made to him as he was, but only to an existing person whom he represented himself to be. The offer was one which was capable of being accepted only by the honest P.G.M. Hutchinson and not by the rogue.

    144.  Pearce LJ gave a judgment to similar effect. At p.57 he said that it was clear that, though difficult, it was not impossible to rebut the prima facie presumption that the offer could be accepted by the person to whom it was physically addressed. Each case had to be decided on its own facts. He observed that:

    "the nature of the proposed contract must have a strong bearing on the question of whether the intention of the offeror (as understood by his offeree) was to make his offer to some other particular identity rather than to the physical person to whom it was orally offered".

    He concluded that the judge was entitled to find that the identity of Mr Hutchinson was significant and that it was with him that the vendors intended to deal.

    145.  Devlin LJ gave a powerful dissenting judgment. He held that there were two questions: (1) was a contract properly formed? If so, (2) was it void for mistake?

    146.  As to form, he said that there could be no doubt that this had to be settled by inquiring with whom Miss Ingram intended to contract. That was a mixed question of fact and law. There was a presumption that a person intended to contract with the person to whom he was addressing the words of the contract. That presumption was not conclusive, at least where the party addressed purported to be acting as an agent. The presumption could not, however, be rebutted simply by showing that Miss Ingram would not have contracted with the rogue unless she had thought that he was Mr Hutchinson. There was nothing to rebut the presumption that she was addressing her acceptance to the rogue, in law as well as in fact. There was offer and acceptance in form. Turning to the question of mistake, Devlin LJ held that there could be no question of the mistake as to identity rendering the contract void, for the identity of the purchaser was immaterial, although his creditworthiness was not.

 
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