Shogun Finance Ltd v Hudson  UKHL 62
Contract - Hire-Purchase agreement - Title to goods
A car dealer sold a car to a fraudster, who produced a stolen license as his own. The dealer wrote out the hire-purchase contract in the name written on the license. The fraudster took physical possession of the car. The Defendant purchased the car from the fraudster in good faith. Upon discovery of the dishonoured payment by the fraudster and failure to make payments under the hire purchase agreement, Shogun Finance brought action against Hudson for conversion. Hudson counterclaimed, claiming to have obtained the right title of the vehicle.
Whether the vehicle was in the fraudster’s possession as a debtor. Whether possessory title passed to the innocent purchaser and whether the contract was void.
The court dismissed the Defendant’s appeal. Under section 21(1) of the Sale of Goods Act 1979, the title of the vehicle has been Shogun’s as there had been no consideration on Shogun’s part for the vehicle, as the vehicle was subject to the terms of the hire purchase agreement. Thus, Hudson could not have acquired a title from the fraudster as he never owned the vehicle. The hire purchase agreement was not between the fraudster and Shogun, as the name on the agreement was that of the stolen license which was a fraudulent identity. Therefore, as there was no agreement or hire purchase between Shogun and the fraudster, the fraudster could not have passed a possessive title to Hudson, as he never had one. Hudson was required to return the car to Shogun.