The UK Supreme Court has confirmed that an irrevocable agency will only be created in exceptional circumstances.
In this case, D&D Wines International Limited (the agent) contracted to sell wines for Angove's PTY Limited (the principal). It was agreed that customers would make payment to D&D Wines, who would then pay this on to Angove's, minus its commission. D&D Wines went into insolvent liquidation and Angove's terminated the contract. Post termination, D&D Wines received more than A$800,000 in customer payments. The question arose as to whether the agent retained authority to receive payments from customers after termination of the contract. If so, then the monies would fall to be distributed to D&D Wines' creditors as part of the insolvency proceedings. Angove's would be nothing more than an unsecured creditor and would have to prove for the monies due to it. If, however, D&D Wines did not retain authority to receive customer payments posttermination, then the A$800,000 should be paid directly to Angove's and would form no part of the insolvency process.
The Supreme Court found for Angove's and held that D&D Wines' authority to receive payments from customers ended when Angove's terminated the contract. The result was that the A$800,000 should go straight to Angove's. An irrevocable agency had not been created. The Supreme Court confirmed that an agent's authority can always be terminated, even where the parties have agreed that the authority is irrevocable (although, in this case, the principal may have to pay damages to the agent). The agent's authority could not be preserved by a clause which merely referred to `accrued rights or remedies'. The only exception to this rule is where the parties have agreed that an agent's authority will be irrevocable and the authority is given to secure an interest of the agent, being either a proprietary interest (for example, a power of attorney given to enable the holder of the equitable interest to perfect it) or a liability (generally in debt) owed to him personally. In either case, the agent's authority will be irrevocable while the interest subsists.
The ruling will be of some comfort to principals, confirming as it does that, absent a secured interest, an agent's authority can usually always be terminated, regardless of what the contract says.