Lewis v Averay [1971] EWCA Civ 4 (22 July 1971)

Lewis sold his car to a rogue impersonating a famous actor, accepting a fraudulent cheque. The rogue sold the car to Averay, an innocent purchaser. The court held the initial contract was voidable for fraud, not void for mistake, so Averay acquired good title.

Facts

The claimant, Mr Lewis, a postgraduate chemistry student, advertised his Austin Cooper S for sale. A man, who was in fact a rogue, arranged to see the car and offered the asking price of £450. When it came to payment, the rogue produced a chequebook. Mr Lewis was hesitant to accept a cheque. To allay these fears, the rogue claimed to be the well-known actor, Richard Greene, famous for playing Robin Hood. He produced a special pass of admission to Pinewood Film Studios which bore the name ‘R. A. Green’ and an official stamp. The pass also had a photograph which Mr Lewis believed was of the man before him. Satisfied by this, Mr Lewis accepted the cheque and allowed the rogue to take the car and the logbook. The cheque was later dishonoured as it was from a stolen chequebook. By this time, the rogue had sold the car for £200 to the defendant, Mr Averay, a music student who purchased it in good faith. Mr Lewis subsequently located the car with Mr Averay and sued him for its return, or its value, in an action for conversion.

Issues

The central legal issue for the Court of Appeal was to determine the status of the contract between Mr Lewis and the rogue. Specifically, was the contract void for unilateral mistake as to identity, or was it merely voidable for fraudulent misrepresentation? The outcome determined who had the better title to the car: the original owner (Mr Lewis) or the innocent third-party purchaser (Mr Averay). If the contract was void from the beginning, then no title passed to the rogue, and he could not pass any title to Mr Averay (the principle of nemo dat quod non habet). If the contract was voidable, title did pass to the rogue, and he could pass good title to an innocent purchaser for value before the original owner rescinded the contract.

Judgment

The Court of Appeal unanimously found in favour of the defendant, Mr Averay, holding that the contract between Mr Lewis and the rogue was voidable for fraudulent misrepresentation, not void for mistake. This meant that title had passed to the rogue and subsequently to Mr Averay, who, as a bona fide purchaser for value without notice, had acquired good title to the car.

Lord Denning M.R.

Lord Denning expressed dissatisfaction with the subtle distinctions in previous case law between mistake as to identity and mistake as to attributes. He established a clear presumption for face-to-face dealings:

When a deal is made face to face by a seller with a person who is actually present, then the presumption in law is that he is dealing with that person. The contract is concluded with him. If he has been induced to contract by a fraudulent misrepresentation as to his identity or his creditworthiness, then the contract is not void, but only voidable. It is liable to be set aside at the instance of the seller, but he must do so before an innocent third person has acquired an interest for value without notice.

He drew a direct comparison with Phillips v Brooks Ltd [1919] 2 K.B. 243, which he considered correctly decided, and stated that Ingram v Little [1961] 1 Q.B. 31, which reached an opposite conclusion on similar facts, was wrongly decided and should no longer be followed. He concluded that Mr Lewis’s contract was with the physical person present, and the mistake related to that person’s attributes (his creditworthiness), not his fundamental identity, thus making the contract voidable.

Phillimore L.J.

Phillimore L.J. concurred, finding it impossible to distinguish the facts of the present case from those in Phillips v Brooks Ltd. He reasoned that in a contract for the sale of goods, the seller is primarily concerned with the creditworthiness of the buyer, which is an attribute, rather than their identity in a fundamental sense unless the identity itself is of ‘vital’ importance. He agreed that the contract was voidable and that Mr Averay, the innocent purchaser, was protected.

Megaw L.J.

Megaw L.J. also agreed, emphasising the need for legal certainty and fairness between two innocent parties. He found the law as established in Phillips v Brooks to be preferable to the reasoning in Ingram v Little. He formulated the principle thus:

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 is a contract which is voidable.

He concluded that the contract was capable of passing title to the rogue, and since Mr Lewis had not rescinded it before the sale to Mr Averay, Mr Averay’s title was valid.

Implications

The decision in Lewis v Averay is of significant importance in English contract law. It strongly affirmed the principle that in face-to-face transactions, a contract induced by a mistake of identity is presumed to be voidable for fraudulent misrepresentation, not void for mistake. This has the practical effect of protecting bona fide third-party purchasers who acquire goods from a rogue. The case places the risk upon the original owner who was deceived, on the basis that they were in a better position to verify the identity and creditworthiness of the person they were dealing with. It substantially weakened the authority of Ingram v Little and brought greater clarity and certainty to this area of law, aligning it with the logical precedent set by Phillips v Brooks Ltd.

Verdict: The appeal was allowed. Judgment was entered for the defendant, Mr Averay, confirming he was the lawful owner of the car.

Source: Lewis v Averay [1971] EWCA Civ 4 (22 July 1971)