Bailey & Anor (The Joint Liquidators of D & D Wines International Ltd) v Angove's Pty Ltd

Termination of an agency does not, by itself, extinguish the agent’s accrued contractual rights or authority to collect debts arising from sales completed before termination. The agreement must be read as a whole, including provisions preserving accrued rights and providing for payment of sums owing on termination.

Supervening insolvency does not alone make receipt of contractually due payments unconscionable or justify imposing a constructive trust. More is required than the fact that the principal will suffer loss in the liquidation.

D&D Wines International Ltd acted as Angove’s sole UK agent and distributor. After D&D entered administration, Angove terminated the agency agreement and expressly terminated D&D’s authority to collect further payments from customers. Payments for wine supplied before termination were subsequently made by two customers and held in escrow.

On Angove’s application under Insolvency Act 1986 s.112, HH Judge Pelling QC ordered the escrowed Fund to be paid to Angove, while deciding that a separate pre-termination sum was part of D&D’s insolvent estate. The appeal concerned whether the liquidators retained contractual rights to collect the post-termination payments and whether equity required a constructive trust.

1. Appeal allowed. The order directing payment of the Fund to Angove was set aside. The Fund was directed to be paid to the liquidators.
2. The agency agreement had to be construed as a whole. Its termination provisions required payment of money owing up to termination and separately preserved accrued rights. Those provisions were inconsistent with treating termination as extinguishing D&D’s right to collect payment for wine already sold and delivered. The escrow arrangement meant that, once D&D’s contractual entitlement was established, Angove could not object to payment to the liquidators.
3. Under the invoicing machinery, D&D remained liable to Angove for the invoiced price less commission, even if it had not yet recovered the purchase money from the customers. That obligation placed the recovery risk on D&D and was commercially linked to its continuing right to collect the customers’ payments. The right to commission on completed sales would otherwise be lost on termination without contractual justification.
4. The decision in Triffit Nurseries & Others v Salads Etcetera Ltd [2000] 1 AER (Comm) 737 supported the conclusion that termination of an agency does not necessarily terminate rights to collect outstanding customer debts. The general rule that an authority is revocable yielded to the specific bargain made in the agreement.
5. Angove’s constructive-trust argument failed. Neste Oy v Lloyds Bank plc [1983] 2 Lloyd’s Rep 658 was materially different because the relevant payment was essentially gratuitous and its use in the insolvency would have been a windfall. Here, the payments were contractually due to D&D, which was entitled to collect them to recover earned commission. Insolvency and its adverse consequences for Angove did not, without more, make receipt unconscionable.
6. The reasoning in Re Japan Leasing Europe plc [2000] WTLR 301 supporting a constructive trust, and its alternative reliance on an expenses principle, was doubted. The expenses-principle reasoning had also been rejected by the House of Lords in Re Toshoku Finance Ltd [2002] UKHL 6; [2012] 1 WLR 671.

• Court of Appeal (Civil Division): Appeal allowed. The order of HH Judge Pelling QC was set aside and the Fund was directed to be paid to the liquidators.
• High Court of Justice, Chancery Division: On an application for directions under Insolvency Act 1986 s.112, HH Judge Pelling QC ordered the escrowed Fund to be paid to Angove, while deciding that the separate pre-termination sum was part of D&D’s insolvent estate.