Phillips v Brooks [1919]

Court: Court of Appeal

Facts: On April 15, 1918, a person named North visited Phillips' jewellery shop, falsely claiming to be Sir George Bullough. North wrote a fraudulent cheque for £3,000 to buy pearls and a ring. Phillips, believing North was Sir George Bullough, allowed him to take the ring immediately, intending to leave the pearls once the cheque cleared. North then pawned the ring to Brooks Ltd for £350. When the cheque bounced, Phillips sought to recover the ring from Brooks Ltd, who had bought it in good faith.

Issue: Was Phillips entitled to recover the ring from Brooks Ltd despite the fraudulent nature of the transaction?

Held: Phillips' claim failed. The contract was voidable due to fraud, but not void for mistake. Therefore, title to the ring passed to North and subsequently to Brooks Ltd, a bona fide purchaser who had no notice of the fraud.

Key Judicial Statements: Horridge J: The contract was voidable due to the fraud perpetrated by North but not void for unilateral mistake. Phillips intended to contract with the person present in his shop, and the fraud did not alter this fact: [p. 248D]. As the contract was not void but voidable, North acquired the ring and could transfer valid title to a bona fide purchaser like Brooks Ltd. The fraud made the contract voidable, but it did not prevent title from passing to an innocent third party.

💡 Leveluplaw: This case underscores that in face-to-face transactions, a contract may be voidable due to fraud but not void for mistake. The fraudster’s misrepresentation rendered the contract voidable, allowing the fraudster to pass good title to a third-party purchaser who acted in good faith. Thus, Phillips could not reclaim the ring from Brooks Ltd, highlighting the importance of ensuring the identity of contracting parties in high-value transactions.