- On the facts, the agent’s authority to collect debts was not irrevocable
- The authority was therefore brought to an end by termination of the agency agreement
D&D Wines (the Agent) acted as agent for the sale of wine on behalf of Angove’s (the Principal) pursuant to an agency agreement. The Agent collected monies due from customers and accounted for those monies, less a commission, to the Principal. In 2012 the Agent went into administration. Two days after entering administration, the Principal terminated the agency agreement. The Agent subsequently received two substantial payments from customers.
The question was whether the Agent still had authority to collect the sums due (meaning they would form part of the Agent’s insolvent estate and the Principal would have to prove as an unsecured creditor) or whether authority was terminated (meaning the amounts should be paid to the Principal who would recover in full).
The Supreme Court held that the Agent’s authority was not irrevocable meaning that the Principal could recover the monies collected by the Agent following termination. The two requirements for an authority to be irrevocable, namely (1) agreement that the authority is irrevocable and (2) evidence that the authority is intended to secure an interest of the Agent, were not present. There was no express wording regarding irrevocability and the customer was entitled to pay either the Agent or the Principal such that collection of sums due and deduction of commission was procedural and not a form of security.
The judgment reiterates the general position that only in very specific circumstances will an irrevocable authority of an agent be granted. The Supreme Court did, however, possibly widen the scope for irrevocable authority by confirming that securing the agent’s financial interest does not have to be the sole reason for such authority.