Phillips v Brooks Ltd  2 KB 243
Contract - Sale of Goods - Passing of Property - Fraud
Phillips was a jeweler. The fraudster purchased a ring from the jeweler with a cheque and signed his name “Sir George Bullough” and provided this person’s address. Phillips knew of Bullough and knew he lived at the address, so allowed him to take the ring before the cheque cleared. The cheque dishonored. The fraudster then pledged the ring to Brooks Ltd who paid for it with a bona fide intent. Phillips brought action against Brooks Ltd to recover the ring or its value.
Whether Brooks Ltd was a bona fide owner of the goods purchased from the fraudster.
The claim by Phillips was allowed. The case of Cundy v Lindsay (1877) App Cas 459 was applied in that when the owner of the goods voluntarily parts with the possession of goods to a person who he believes is someone else because of fraud, then there is no contract. Therefore, there was found to be no contract between Phillips and the fraudster, as Phillips believed he was making a contract with Sir George Bullough. If he had known he was not, he would have had no intention to pass the ring onto him. This was considered to be a material part of the contract. The property of the ring did not pass to the fraudster so he never had a possessory title he could pass to Brooks Ltd on consideration. Brooks Ltd were liable to Phillips and were required to return the ring.