Tanks and Vessels Industries Ltd v Devon Cider Company Ltd

Where goods are supplied on hire with a possible later purchase, the court must determine the parties’ objective intention as to title and price. An agreement dependent on later agreement of the purchase price may be no more than an agreement to agree and may fail for uncertainty. Subsequent conduct may be considered when determining the parties’ intention under the Sale of Goods Act 1979.

For conversion, damages are ordinarily assessed by reference to market value when the goods were appropriated. Under section 3(2)(b) of the Torts (Interference with Goods) Act 1977, the claimant may obtain delivery up with an alternative payment of the goods’ value. Consequential user damages may be awarded with delivery up, but should not ordinarily be combined with market-value damages assessed at the conversion date.

Tanks and Vessels Industries Ltd claimed delivery up of a robotic palletiser and six stainless-steel fermenting vessels, alternatively damages for conversion, against Devon Cider Company Ltd. The goods had been supplied to Devon Cider’s predecessor, The Devon Cider Company Ltd, before that company entered administration. Devon Cider acquired the predecessor’s business and assets under a pre-pack sale.

The central issues were whether title to either item had passed, whether the palletiser arrangement was a hire-purchase agreement or merely an agreement to agree, and what relief and damages were appropriate under the Torts (Interference with Goods) Act 1977.

1. Conversion and title. The palletiser was supplied under a hire agreement. The parties contemplated later discussions about continued hire, purchase at a residual value, or return of the equipment. No residual price was agreed, and no enforceable purchase option arose. Devon Cider therefore had to return the palletiser when the three-year period expired. Its continued retention constituted conversion within section 1(a) of the Torts (Interference with Goods) Act 1977.
2. The vessels were supplied on the common intention that title would pass only on payment. It was unnecessary for the parties to use technical reservation-of-title language. Their discussions, the financial context, and the parties’ conduct established that intention. If the arrangement was a sale within the Sale of Goods Act 1979, section 17(2) required regard to the contract, conduct and circumstances. The section 18 presumptions applied only if a different intention did not appear. Devon Cider’s retention of the vessels after demand also constituted conversion.
3. Relief. The vessels and palletiser were ordinary articles of commerce, so the court declined to order unconditional delivery under section 3(2)(a). TVI was entitled to choose the remedy under section 3(2)(b), namely delivery up with Devon Cider’s alternative liability to pay the goods’ value.
4. Damages. Applying the principles stated in Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) [2002] UKHL 19, market value at the date of appropriation was the appropriate measure. The palletiser was valued at £12,000 and the vessels at £72,000. The hire-purchase measure rejected in Wickham Holdings Ltd v Brooke House Motors Ltd [1967] 1 WLR 295 did not apply.
5. User damages were available in principle where Devon Cider delivered up the palletiser, reflecting its benefit from use. They were not awarded together with market-value damages assessed at the conversion date where Devon Cider elected to pay value. Interest at 5.5 per cent was awarded instead. Payment of assessed damages would extinguish TVI’s title under section 5 of the 1977 Act.

Orders were made for delivery up by 14 July 2009, subject to alternative payment of £12,000 for the palletiser and £72,000 for the vessels, with interest.