Shogun Finance Ltd v Hudson
House of Lords 19 November 2003
 
The innocent purchaser of a motor vehicle from a rogue, who had obtained it fraudulently by signing a hire-purchase agreement with a forged signature, did not obtain good title to it. The Law Lords confirmed the findings of the Court of Appeal, which had held similarly in its judgment of the 28 June 2001.

They dismissed the appeal of Norman Hudson, against the decision of Mr Assistant Recorder D. E. B. Grant on January 13, 2000, in Leicester County Court giving judgment for the plaintiff creditor, Shogun Finance Ltd, for £18,374.52 in its claim for damages for conversion of a Mitsubishi Shogun SWB, which Mr Hudson had purchased from a rogue in June 1996.

The rogue obtained the car from a dealer in Leicester, producing a genuine but stolen or unlawfully obtained licence in the name of Durlabh Patel. After the plaintiff made a credit search, which was acceptable, and having accepted the forged signature on an unregulated hire-purchase agreement, the dealer accepted a 10% deposit for the agreed price of £22,250 from the rogue, who subsequently sold the car to the Mr Hudson, who purchased in good faith for £17,000.

The effect of section 27 of the Hire Purchase Act 1964, as repeated in paragraph 22 of Schedule 4 to the Consumer Credit Act 1974, was that a person, who in good faith bought a car from someone who turned out to have it on hire purchase, obtained a good title. Mr Hudson relied on this law to claim that he had good title to the vehicle. Shogun Finance maintained that they were misled into believing that there was a contract between Mr Patel and themselves. In fact he was not a party to the contract, therefore there was no contract. The Law Lords supported the finance company, and stated that Mr Hudson could not win, because the debtor (supposedly Mr Patel) had not disposed of the vehicle to him (as required by the 1964 Act).

For full report of this case click here. It is a downloadable MS Word 2000 document.