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

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    147.  All three members of the court adopted the approach of identifying the intention of Miss Ingram. The difference between them was as to the manner of application of that approach where an agreement was negotiated face to face. The majority considered that a sensible answer could be given to the question 'with whom did Miss Ingram intend to contract?' as a question of fact. Devlin LJ considered that this question could only be answered by the application of a legal presumption, which would not be rebutted where the only reason for interest in the identity of the contracting party was concern that the contracting party should be creditworthy.

    148.  Ten years later a case of very similar facts was before the Court of Appeal. In Lewis v Averay [1972] 1 QB 198 the plaintiff advertised his car for sale in a newspaper. A rogue telephoned and asked to see it. He arrived and told the plaintiff and his fiancée that he was Richard Green and led them to believe that he was a well-known film actor of that name, who was playing the role of Robin Hood in a television series. A sale was agreed and the rogue wrote out a cheque for the purchase price. The plaintiff demurred at letting the rogue take the car before his cheque was cleared, whereupon the rogue produced a pass of admission to Pinewood Studios, with an official stamp on it, the name Richard A Green and the rogue's photograph. On sight of this, the plaintiff permitted the rogue to take the car and the documents that related to it. The cheque bounced and the rogue sold the car to the defendant, pretending at this point that he had the plaintiff's name. The Court of Appeal held that a valid contract had been concluded between the plaintiff and the rogue and that good title had passed to the defendant.

    149.  Giving the leading judgment, Lord Denning MR commented that it was impossible to distinguish between Phillips v Brooks and Ingram v Little on the facts. He held that Phillips v Brooks was to be preferred. He said, at p.207:

    "When two parties have come to a contract - or rather what appears, on the face of it, to be a contract - the fact that one party is mistaken as to the identity of the other does not mean that there is no contract, or that the contract is a nullity and void from the beginning. It only means that the contract is voidable, that is, 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.

….

    In this case Mr Lewis made a contract of sale with the very man, the rogue, who came to the flat. I say that he 'made a contract' because in this regard we do not look into his intentions, or into his mind to know what he was thinking or into the mind of the rogue. We look to the outward appearances. On the face of the dealing, Mr Lewis made a contract under which he sold the car to the rogue, delivered the car and the logbook to him, and took a cheque in return. The contract is evidenced by the receipts which were signed. It was, of course, induced by fraud. The rogue made false representations as to his identity. But it was still a contract, though voidable for fraud. It was a contract under which this property passed to the rogue, and in due course passed from the rogue to Mr Averay, before the contract was avoided"

    150.  Phillimore LJ agreed, though in a manner which paid due respect to the doctrine of precedent. He referred to the fact that Ingram v Little was a case of 'very special and unusual facts' and held that there was nothing that could displace the prima facie presumption that the plaintiff was dealing with the rogue. The case was on all fours with Phillips v Brooks, which had been good law for fifty years.

    151.  Megaw LJ concurred, observing that he found it difficult to understand the basis, either in logic or in practical considerations, of the test laid down in Ingram v Little.

    152.  Lord Denning MR did not apply the approach of attempting to identify the intention of the plaintiff. He proceeded on the simple basis that, to all outward appearances, the plaintiff entered into an agreement with the rogue, with whom he was dealing. Both he and Phillimore LJ considered that the case was on all fours with Phillips v Brooks, which had been rightly decided.

    153.  The difficulty in applying a test of intention to the identification of the parties to a contract arises, so it seems to me, only where the parties conduct their dealings in some form of inter-personal contact, and where one purports to have the identity of a third party. There the innocent party will have in mind, when considering with whom he is contracting, both the person with whom he is in contact and the third party whom he imagines that person to be.

    154.  The same problem will not normally arise where the dealings are carried out exclusively in writing. The process of construction of the written instruments, making appropriate use of extrinsic evidence, will normally enable the court to reach a firm conclusion as to the person with whom a party intends to contract. This was the position in Boulton v Jones, Cundy v Lindsay and King's Norton Metal Company v Edridge, Merrett & Company Ltd. There is a substantial body of authority that demonstrates that the identity of a party to a contract in writing falls to be determined by a process of construction of the putative contract itself. I shall refer to some examples.

    155.  In Young v Schuler (1883) 11 QBD 651 the issue was whether Schuler had signed an agreement simply under a power of attorney on behalf of one of the named parties or, additionally, on his own behalf as a guarantor. As to this, Sir William Brett MR observed at pp.654 - 655:

    "But the questions whether a person has signed his name at the foot of a document, and if so, for what purpose, are questions of evidence, and any evidence on the subject which does not contradict the document is admissible…. This evidence does not contradict anything on the face of the document, and is, in my opinion, plainly admissible." (The emphasis is mine.)

    Cotton LJ gave a judgment to like effect and Bowen LJ agreed.

    156.  In Newborne v Sensolid (Great Britain) Ltd [1954] 1 QB 45 an apparent contract in writing provided for the sale of goods by a company described as Leopold Newborne (London) Ltd. The document was subscribed by the name of the company with Mr Leopold Newborne's signature under it. At the time in question Leopold Newborne (London) Ltd did not exist, for it had not then been incorporated. Mr Newborne attempted to enforce the contract as one to which he was party. He failed on the ground that this was inconsistent with the description of the party in the contract. Lord Goddard CJ observed at p.51:

    "In my opinion, unfortunate though it may be, as the company was not in existence when the contract was signed there never was a contract, and Mr Newborne cannot come forward and say: 'Well, it was my contract.' The fact is, he made a contract for a company which did not exist."

    157.  Morris LJ agreed, observing that the contract purported to be a contract with the company and that it was not relevant that, as was the case, it was a matter of indifference to the purchasers whether they contracted with the company, or with Mr Newborne personally.

    158.  Where contracts were subject to the Statute of Frauds the required memorandum in writing had to identify the parties to the contract and a person could not intervene to claim that he was the true party to the contract when this was not consistent with the terms of the memorandum: Lovesy v Palmer [1916] 2 Ch 233; Basma v Weekes [1950] AC 441.

    159.  In the field of agency, an undisclosed principal will not be permitted to claim to be party to a contract if this is contrary to the terms of the contract itself. Thus the provision in the standard form B contract of the London Metal Exchange "this contract is made between ourselves and yourselves as principals, we alone being liable to you for its performance" is effective to preclude any contention that the parties named in the contract are contracting as agents for others - JH Rayner Ltd v Dept of Trade [1990] 2 AC 418 at p. 516.

    160.  In the field of shipping law a question sometimes arises as to who is the party to a contract of carriage and this is determined as a question of construction - see Homburg Houtimport BV v Agrosin Ltd [2003] UKHL 12; [2003] 2 WLR 711 and Internaut Shipping GMBH v Fercometal SARL [2003] EWCA Civ 812 for recent examples.

    161.  The effect of these authorities is that a person carrying on negotiations in writing can, by describing as one of the parties to the putative agreement an individual who is unequivocally identifiable from that description, preclude any finding that the party to the putative agreement is other than the person so described. The process of construction will lead inexorably to the conclusion that the person with whom the other party intended to contract was the person thus described.

    162.  That the identification of the parties to a written contract involves construing the contract was the basis of the decision in Hector v Lyons (1988) 58 P & CR 156. The majority of the Court of Appeal in the present case considered that this decision weighed conclusively in favour of Shogun. Hector v Lyons involved a claim for specific performance of a contract to buy a house. The appellant rejoiced in the name Martin Aloysius Handel Hector. He had a son, aged less than 18, more modestly christened Martin Aloysius Hector. The father negotiated the purchase of the house face-to-face with the Respondent, who at all times understood that she was contracting with the father. The father instructed solicitors to draw up the formal contract for exchange. For reasons not apparent he led them to understand that the purchaser was to be his son, and they described the purchaser in the contract as 'Martin Aloysius Hector', understanding that they were thereby identifying the son. The father signed the purchaser's copy of the contract with a signature that differed from his normal signature. What was behind all of this is not clear to me nor was it, I suspect, to the trial judge, who found that the father gave a lot of false evidence.

    163.  The father sought to enforce the contract on the footing that he was the purchaser. The respondent argued that he was not a party to the written contract; the purchaser under that contract was the son. The trial judge found in her favour. The basis upon which he did so was that the solicitors handed over the purchaser's part of the contract as being the document of the son and the signature that it bore purported to be that of the son.

    164.  In the Court of Appeal counsel for the appellant argued that the contract had been concluded between the appellant and the respondent, relying on the line of cases ending with Lewis v Averay. The Vice-Chancellor dismissed this argument at pp.158-9:

    "In the case of a face to face sale, where the sale is over a counter or between two individuals, the law is well established that the mere fact that the vendor V is under the misapprehension as to the identity of the person in front of him does not operate so as to render the contract void for mistake, it being a mere unilateral mistake as to a quality of the purchaser; only in cases where the identity of the purchaser is of direct and important materiality in inducing the vendor to enter into the contract is a mistake of the kind capable of avoiding the contract.

    With one exception those cases are entirely concerned with transactions between two individuals face to face entering into oral agreement. In my judgement the principle there enunciated has no application to a case such as the present where there is a contract wholly in writing. There the identity of the vendor and the purchaser is established by the names of the parties included in the written contract. Once those names are there in the contract, the only question for the court is to identify who they are.

    In the present case the deputy judge has found as a fact that the party named in the written contract was Mr Hector junior. It follows, in my judgement, that in the absence of rectification, which has not been claimed, or Mr Cogley's alternative argument based on agency the only person who can enforce that contract is the party to it, namely Mr Hector junior. He has never at any stage sought to do so. It is for these purposes in my judgement irrelevant whom Mrs Lyons thought she was contracting with: she is entitled to say "I entered into a contract with the person named in the contract, and nobody else." As the learned deputy judge pointed out, if Mrs Lyons had sought to enforce the contract against Mr Hector senior, the position might have been different, in that Mr Hector senior might have estopped himself by his conduct from denying that he was the person named in the contract. But that is quite a different case."

    165.  In concurring with the Vice-Chancellor, Woolf LJ said this:

    "Parties to the contract are normally to be ascertained from the document or documents containing the contract. There can be limited circumstances where it is possible to allow oral evidence to be given in relation to a written contract, but those circumstances are recognised as being exceptional and should, in my view, be strictly confined.

    In this case there is no dispute as to who, according to the written contract, are the parties. The son was described in the contract as one of the parties. He does exist and, insofar as there was a contract at all, it was between him and the other party identified in the contract, Mrs Pamela Doris Lyons"

    166.  Given the premise that, as a matter of construction, the purchaser described in the contract was the son, the conclusion of the Court of Appeal is readily understandable. I do, however, have difficulty in understanding the basis on which the trial judge concluded that the purchaser described in the contract was the son rather than the father. The father had carried out the negotiations, he had signed the agreement, albeit not with his customary signature, and he bore the forenames and the surname of the purchaser, as described in the contract. The trial judge's finding does not, however, appear to have been challenged in the Court of Appeal. While the facts of this decision are not easy to follow, it supports the proposition that the identity of the parties to a contract in writing fall to be determined by a process of construction of the contract.

    The result in the present case

    167.  I have had the advantage of reading in draft the opinions of my noble and learned friends who have sat with me on this appeal. Lord Hobhouse of Woodborough and Lord Walker of Gestingthorpe have concluded that, as the contract was a written document, the identity of the hirer falls to be ascertained by construing that document. Adopting that approach, the hirer was, or more accurately purported to be, Mr Patel. As he had not authorised the conclusion of the contract, it was void.

    168.  Lord Nicholls of Birkenhead and Lord Millett have adopted a different approach. They point out the illogicality of applying a special approach to face-to-face dealings. What of dealings on the telephone, or by videolink? There also it could be said that each of the parties to the dealings is seeking to make a contract with the other party to the dealings. And this can even be said when the dealings are conducted by correspondence. If A writes to B making an offer and B writes back responding to that offer, B is intending to contract with the person who made that offer. If a contract is concluded in face-to-face dealings, notwithstanding that one party is masquerading as a third party, why should the result be different when the dealings are by letter?

    169.  Lord Nicholls of Birkenhead and Lord Millett propose an elegant solution to this illogicality. Where two individuals deal with each other, by whatever medium, and agree terms of a contract, then a contract will be concluded between them, notwithstanding that one has deceived the other into thinking that he has the identity of a third party. In such a situation the contract will be voidable but not void. While they accept that this approach cannot be reconciled with Cundy v Lindsay, they conclude that Cundy v Lindsay was wrongly decided and should no longer be followed.

    170.  While I was strongly attracted to this solution, I have found myself unable to adopt it. Cundy v Lindsay exemplifies the application by English law of the same approach to identifying the parties as is applied to identifying the terms of the contract. In essence this focuses on deducing the intention of the parties from their words and conduct. Where there is some form of personal contact between individuals who are conducting negotiations, this approach gives rise to problems. In such a situation I would favour the application of a strong presumption that each intends to contract with the other, with whom he is dealing. Where, however, the dealings are exclusively conducted in writing, there is no scope or need for such a presumption. This can be illustrated by a slight adaption of the facts of the present case. Assume that the rogue had himself filled in the application form and sent it and a photocopy of Mr Patel's driving licence to Shogun. Assume further that he had been authorised to do so by Mr Patel. There can be no doubt that a contract would have been concluded between Shogun and Mr Patel. Mr Patel would have intended to contract with Shogun; Shogun would have intended to contract with Mr Patel; and this would have been demonstrated by the application form.

    171.  Assume now that the rogue had wrongly understood that he had been requested by Mr Patel to fill in and submit the application form on his behalf, but in fact had no authority to do so. In this situation, according to established principles of the law of agency, an apparent contract would have been concluded between Shogun and Mr Patel but, being concluded without the latter's authority, it would be a nullity. Shogun might have a claim against the rogue for breach of warranty of authority, but could not have demonstrated that a contract had been concluded with the rogue.

    172.  Turning to the true position - that the rogue knew he had no authority to conclude a contract in the name of Mr Patel, but fraudulently wished to induce Shogun to believe that they were entering into such a contract - I do not see by what legal principle this change in the mental attitude of the rogue could result in a binding contract being concluded with him.

    173.  The position is not, of course, as simple as that. Negotiations between the rogue and Shogun were not conducted exclusively by written correspondence. They were conducted with the aid of the dealer and the use of fax and telephone communications. Acceptance of the offer was conveyed by telephone via the dealer - and this might have been capable of concluding a contract, notwithstanding that Clause 1 of the standard terms provided for acceptance by signature - see the discussion in Chitty on Contracts 28th Ed. Vol 1 at paragraph 2-062. Sedley LJ considered that the dealings were analogous to face-to-face dealings and that the dealer was, in effect, the face of Shogun Finance Ltd. He considered that the face-to-face presumption should be applied.

    174.  The majority of the Court of Appeal considered that Hector v Lyons required them to determine the identity of the parties to the putative contract as a simple question of construction. On that basis they concluded that the putative hirer was Mr Patel and that, as the apparent contract was concluded without his authority, it was a nullity.

    175.  Dyson LJ considered what the result would have been had the negotiations been treated as face-to-face. He concluded that the presumption would have been displaced by the importance that Shogun attached to the identity of the person with whom they were contracting.

    176.  My Lords, I started this opinion by quoting Gresson P's remark that the difficulty in a case such as this is a proper assessment of the facts rather than an assessment of the law. I have not found the assessment of the law easy, but nor is the application of the law to the facts. Shogun's representatives were aware of the presence of the prospective hirer in the dealer's showrooms in Leicester. To an extent the dealings were inter-personal through the medium of the dealer. Should one treat them as comparable to face-to-face dealings and conclude that there was a presumption that Shogun intended to contract with the man with whom they were dealing? Should one treat the written agreement as no more than peripheral to the dealings and conclude that it does not override that presumption? I have concluded that the answer to these questions is 'no'.

    177.  Shogun had, on the evidence, set up a formal system under which contracts would be concluded in writing on a standard form. This form was designed to cater for both regulated and non-regulated hire purchase agreements. In order to be suitable for the former it had to comply with the requirements of the Consumer Credit (Agreements) Regulations 1983. Schedule 1 to these regulations, under the heading 'Parties to the agreement', requires the agreement to set out 'The name and a postal address of the creditor' and 'The name and a postal address of the debtor'. The agreement with which this appeal is concerned was not a regulated agreement, for the purchase price of the vehicle exceeded what was, at the time, the maximum to which the relevant provisions of the Consumer Credit Act 1974 applied. I do not see, however, that the approach to the identification of the parties to the putative agreement can turn on whether or not the agreement was subject to the regulations. Shogun put in place a system for concluding contracts that required both regulated and unregulated agreements to be entered into in writing in a form which provided essential information, including the identity of the parties to the agreement.

    178.  These considerations lead me to conclude that the correct approach in the present case is to treat the agreement as one concluded in writing and to approach the identification of the parties to that agreement as turning upon its construction. The particulars given in the agreement are only capable of applying to Mr Patel. It was the intention of the rogue that they should identify Mr Patel as the hirer. The hirer was so identified by Shogun. Before deciding to enter into the agreement they checked that Mr Patel existed and that he was worthy of credit. On that basis they decided to contract with him and with no-one else. Mr Patel was the hirer under the agreement. As the agreement was concluded without his authority, it was a nullity. The rogue took no title under it and was in no position to convey any title to Mr Hudson.

    179.  For these reasons I would dismiss this appeal.

LORD WALKER OF GESTINGTHORPE

My Lords,

    180.  I have had the advantage of reading in draft the opinion of my noble and learned friend Lord Hobhouse of Woodborough. I agree with him that this appeal should be dismissed for the reasons given in his opinion. But because of the interest of this appeal, and the differing views among your Lordships, I wish to add some observations of my own. I begin with two general points.

    181.  A recurring theme in the authorities, starting with the very first sentence of the speech of Lord Cairns LC in Cundy v Lindsay (1878) 3 App Cas 459, 463, is the Court's difficulty in deciding which of two innocent parties should bear the loss caused by the fraud of a third person (who may be beyond the reach of the law). Typically one innocent party is a seller who has parted with goods to a rogue, without obtaining payment in cash, and the other innocent party has bought the same goods from the rogue for cash. But although the Court recognises both as innocent there is sometimes an inclination to regard the eventual buyer from the rogue as the more deserving of sympathy. Thus Lord Denning MR said in Lewis v Averay [1972] 1 QB 198, 207,

    "As I listened to the argument in this case, I felt it wrong that an innocent purchaser (who knew nothing of what passed between the seller and the rogue) should have his title depend on such refinements. After all, he has acted with complete circumspection and in entire good faith: whereas it was the seller who let the rogue have the goods and thus enabled him to commit the fraud".

    182.  In that case both of the innocent parties were young men and both might be thought to have been over-trusting. By contrast in Phillips v Brooks Ltd [1919] 2 KB 243, the seller was an Oxford Street jeweller, and the ultimate holder was a pawnbroker, both of whom were presumably experienced in their trades. In other cases one or other of the innocent parties may appear to have a stronger claim on the Court's sympathy. But your Lordships have to lay down a general rule to cover the generality of cases, and it would not be right to make any general assumption as to one innocent party being more deserving than the other. That is especially true in this case which is concerned, not with a sale but with a hire-purchase transaction, and in which the issue to be decided is (as Lord Hobhouse has pointed out) ultimately a question of statutory construction.

    183.  The other general point is that (in agreement, I think, with all your Lordships) I regard the issue in this appeal as essentially a problem about offer and acceptance; and in determining whether or not a contract has been formed by offer and acceptance, the Court adopts an objective approach, and does not enquire into what either party actually intended, but into the effect, objectively assessed, of what they said or wrote. As it has been put in a much-cited passage from Gloag on Contract,

    "The judicial task is not to discover the actual intentions of each party; it is to decide what each was reasonably entitled to conclude from the attitude of the other".

    (For one of the most recent citations see OT Africa Line Ltd v Vickers Plc [1996] 1 LLR 700, 702). This point is neither original nor controversial but it is worth making because in the leading case of Cundy v Lindsay (which had at first instance been tried with a jury) their Lordships' speeches placed little or no weight on the need for an objective approach. There was no need for them to do so, since (as the Lord Chancellor said at p 464) "The whole history of the whole transaction lies upon paper".

    184.  The objective nature of the enquiry tends to narrow, perhaps close to vanishing-point, the difference (mentioned in the speeches of my noble and learned friends Lord Millett and Lord Phillips of Worth Matravers) between the person for whom the offer or acceptance is intended and the person to whom it is directed. I venture to suggest that the right question to ask, whether the parties to an alleged contract have been negotiating face to face or at a distance, is to whom the offer is made (or to whom acceptance of an offer is made; but I shall for the sake of simplicity assume that, as in this case, the rogue is the offeror). Posed in that way, the question may be no easier to answer, but it does avoid the sort of pointless speculation which Devlin LJ exposed in Ingram v Little [1961] 1 QB 31, 65:

    "If Miss Ingram had been asked whether she intended to contract with the man in the room or with P G M Hutchinson, the question could have no meaning for her, since she believed them both to be one and the same. The reasonable man of the law—if he stood in Miss Ingram's shoes—could not give any better answer".

 
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