• In the case of Bailey v Angove’s Pty Ltd [2016] UKSC 47, it was held that an agent’s authority could be revoked by the principal, unless the agent had their own interest in the exercise of their authority and two conditions were satisfied.
  • First, the parties must have agreed that the agent’s agency would be irrevocable. Second, the authority had to secure a financial interest of the agent.

Facts of the Case

  • D acted as C’s agent and distributor in the UK. In April 2012 D went into administration, and in July moved into creditors’ voluntary liquidation. There were outstanding invoices from two UK retailers.
  • On 23rd April 2012 C gave written notice terminating the Agency and Distribution Agreement and D’s authority to collect the prices. The note declared C’s intention to collect these prices directly and account separately to C for their commission.
  • D objected that they were entitled to collect the prices, deduct commissions, and leave C to prove in the winding up process for the rest of the price. They claimed that their relationship (relating to the invoices) was that of buyer and seller, not agent and principal. D’s liability to C was debt for goods sold and delivered. C contested this and argued that any monies held by D for their account were held in trust.

Issues

  • Does D retain authority to claim the price from customers even if C gave written notice terminating the Agreement?
  • Was there a constructive trust for monies received by D while knowing that insolvency would prevent them from fulfilling their obligations?

Held by the Supreme Court

  • It was held that D’s authority to collect the unpaid invoices ended upon termination of the Agreement.
  • No constructive trust was created.

Lord Sumption

  • The general rule is that the principal can revoke an agent’s authority, even if their contract expresses it as irrevocable. The revocation terminates the agent’s authority but gives rise to damages. Lord Kenyon in Walsh v Whitcomb (1797) 2 Esp 565 stated that powers of attorney are ‘revocable from their nature.’
  • An agent is empowered to commit his principal within the limits of his authority as if the principal had agreed personally. This is a confidential relationship importing a duty of loyalty on the agent’s behalf. Allowing for continued authority after revocation would amount to the specific enforcement of a relationship which by nature is not specifically enforceable.
  • The main exception is where the agent has his own relevant interest in exercising their authority. This requires an agreement that the agent’s authority shall be irrevocable, and that authority must be given to secure the agent’s own interest, either a proprietary interest or a liability owed to them. In these cases, the agent’s authority is irrevocable while the interest subsists.
  • The wording and nature of the Agreement did not satisfy either of these two conditions; D’s authority was granted as a responsibility and not a right, and there was nothing within the Agreement preventing C from collecting the prices directly.
  • “When money was paid by the customers to D it was not impressed with any trust in favour of C. If, therefore, a constructive trust came into being, it did so for the first time upon it’s reaching the payee. The money would thereafter be traceable for as long as it remained identifiable in the hands of any third party other than a bona fide purchaser for value without notice. It would not form part of the insolvent estate, thereby conferring priority on C’s over other creditors, including many whose position would otherwise be no different from theirs. This is elementary, and fundamental” [26].