Bailey v Angove’s Pty Ltd, Court of Appeal
The Court of Appeal has concluded that an agent’s authority to accept payments on behalf of its principal was not ended by termination of the agency contract. On interpretation of the wording of the agency contract, the Court decided that the contract allowed for the agent to receive payments from customers for goods supplied and that the termination notice served by the principal was ineffective to end that authority.
The facts of the case were as follows. D&D entered into a contract with Angove to act as agent. D&D would sell wines to customers on behalf of Angove. D&D charged the customer the full price of the wine, Angove charged this to D&D, and D&D received commission for its services by deducting commission from payments received from customers to Angove. The Court described this as a “del credere agency” situation. D&D later went into administration. Angove gave it written notice to terminate and end D&D’s right to collect payments from two named customers. After receipt of the notice, D&D received a large payment of A$800,000 from the two customers for wine delivered before the agency contract was terminated. The court was asked if D&D had authority to accept the payment.
The Court of Appeal concluded that termination of an agency contract does not necessarily or automatically bring to an end the agent’s right to collect money already due to the principal. The terms of the agency contract did not contain any other provisions to expressly end the agent’s right to collect payments for wine already supplied either. It was therefore a breach of contract for the principal to tell the agent not to collect this money.
The Court of Appeal recognised the general rule that a principal may end an agent’s authority, even in breach of contract; however, the Court clarified that this general rule must yield to what the parties have agreed should be their respective rights on termination in the contract. The agency contract in this case made specific references to what was to happen on termination and the Court could see no reason not to hold the parties to those references. The Court therefore concluded that D&D had the authority to accept the payments. This meant that D&D would absorb the funds sent by the two named customers. These funds would be distributed among its creditors as usual in insolvency. Angove would receive a dividend as unsecured creditor only in line with the usual rules of insolvency, which meant that Angove might receive little of the money from the two names customers, or none at all – in fact, even less after the parties had fought to the Court of Appeal over this matter.
Angove has since appealed to the Supreme Court for permission to challenge the Court of Appeal’s decision, so more money could be spent on fighting this.
