Facts

Angove’s PTY Ltd (‘Angove’s’) is an Australian winemaker which for many years had employed D&D Wines International Ltd (‘D&D’) to distribute its products to retailers. In addition, D&D also purchased wine for itself direct from Angove’s. Their business relationship was governed by an Agency and Distribution Agreement (‘ADA’) entered in December 2011. Amongst its provisions, the ADA entitled the parties to terminate the agreement with immediate effect upon either becoming insolvent.

On 21 April 2012, D&D went into administration, at which point it owed Angove’s almost A$875,000 representing the value of wine sold on to retailers yet for which they had not paid. Two days later, Angove’s terminated the ADA and revoked D&D’s authority to collect any monies due to it from the retailers, instead proposing to collect from them directly. Angove’s agreed that it would pay any outstanding commissions owed to D&D separately. D&D rejected this approach, insisting it should recover payments from the retailers and that Angove's should prove its debts alongside D&D's other creditors. Angove objected, arguing that D&D's authority to recover such sums as its agent had ended upon termination of the ADA and that any money recovered by D&D should be held under a constructive trust.

Held

The High Court, Court of Appeal and Supreme Court all accepted that D&D was acting as Angove's agent, rather than merely as a buyer. Therefore, whether or not its authority survived termination of the ADA was crucial to determining its entitlement to recover payments from retailers. Furthermore, all three courts rejected Angove’s contention that any sums recovered by D&D should be held under a constructive trust, thereby overruling the two earlier decisions of Neste Oy v Lloyd’s Bank [1983] 2 Lloyds Rep 658 and In re Japan Leasing Europe [1999] BPIR 911.

Giving the unanimous judgment, Lord Sumption confirmed that a principal can always revoke the authority of its agent, save where the parties agree that: (a) such authority is irrevocable; and (b) is necessary to secure some financial interest on the part of the agent. Neither condition was satisfied on these facts.