Bailey v Angove’s Pty Ltd [2016] UKSC Civ 47

SUMMARY

The Supreme Court in this case had to consider whether an agent’s authority to accept payments had been ended by the principal’s termination of the agency agreement or if the agent’s authority was irrevocable in spite of the termination notice and permitted the agent to receive remaining payments due from customers for goods supplied during the term of the agreement.

BACKGROUND

D&D Wines International Ltd ("Agent") contracted to act as the agent and distributor for Angove’s PTY Ltd ("Principal"), an Australian wine producer, in the UK. Their relationship was governed by an agency and distributorship agreement ("Contract") which was terminable immediately on the appointment of an administrator or liquidator or alternatively on six months’ notice. The Contract also provided for a payment mechanism whereby the Agent charged the customer the full price for the wine, the Principal charged the Agent the same price and the Agent deducted commission from its payment to the Principal.

In April 2012, the Agent went into administration and then into creditors’ voluntary liquidation in July 2012. At this time, there were two outstanding invoices totalling over A$800,000 from two customers who had not yet paid for their wine.

The Principal immediately issued a termination notice, which purported to:

  • End the Contract with the Agent with immediate effect under its termination provisions; and
  • Expressly end the agent’s authority to collect any payments from the two named customers.

The liquidators of the Agent objected to this and claimed that the Agent’s authority to collect under the invoices was irrevocable. As such, they were entitled to collect the price from the two customers, deduct the commission due to the Agent and leave the remainder available for distribution to the creditors.

The judge in the first instance held that the Agent’s authority to collect the payment from the two customers ended on service of the termination notice but the liquidators appealed. 

COURT OF APPEAL DECISION

The Court of Appeal had to consider whether the Agent still had the Principal’s authority to receive the payments after the termination notice had been served.

The Court of Appeal found for the liquidators, holding that the Agent’s authority survived the termination of the Contract.

The Principal appealed to the Supreme Court. 

SUPREME COURT DECISION

The Supreme Court considered two issues:

  1. In what circumstances will the law treat the authority of an agent as irrevocable; and
  2. Whether the receipt of money when the recipient knew that imminent insolvency would prevent him from performing the corresponding obligation could give rise to a constructive trust.

This article only considers the first question (although the Supreme Court did consider the second question in obiter).

In determining its judgment, the Supreme Court considered the law on revocation of an agency appointment and the general rule that the authority of an agent may be revoked by a principal, notwithstanding that the parties may have contractually agreed that the authority was to be irrevocable. Lord Sumption noted in the judgment that the authority of an agent is inherently terminable, unless the authority given secures an interest of the agent, such as a proprietary interest or a liability owed to the agent.

On a review of the Contract, Lord Sumption held that there was no express statement that the authority to collect the payments was irrevocable. In addition, as there was no provision in the Contract which prohibited customers paying the Principal directly, the collection of commission could not be regarded as giving a right or security to the Agent.

The Supreme Court therefore held that the Principal’s termination of the Contract had the effect of ending the Agent’s authority to collect the outstanding payments. As a result, the payments should be paid directly to the Principal rather than distributed to the creditors in the agent’s insolvency.