Rely on the most comprehensive, up-to-date legal content designed and curated by lawyers for lawyers
Work faster and smarter to improve your drafting productivity without increasing risk
Accelerate the creation and use of high quality and trusted legal documents and forms
Streamline how you manage your legal business with proven tools and processes
Manage risk and compliance in your organisation to reduce your risk profile
Stay up to date and informed with insights from our trusted experts, news and information sources
Access the best content in the industry, effortlessly — confident that your news is trustworthy and up to date.
With over 30 practice areas, we have all bases covered. Find out how we can help
Our trusted tax intelligence solutions, highly-regarded exam training and education materials help guide and tutor Tax professionals
Regulatory, business information and analytics solutions that help professionals make better decisions
A leading provider of software platforms for professional services firms
In-depth analysis, commentary and practical information to help you protect your business
LexisNexis Blogs shed light on topics affecting the legal profession and the issues you're facing
Legal professionals trust us to help navigate change. Find out how we help ensure they exceed expectations
Lex Chat is a LexisNexis current affairs podcast sharing insights on topics for the legal profession
Printer Friendly Version
The construction of an agency and distribution agreement (ADA) can be crucial when deciding whether the termination of such agreement precludes the agent from collecting money due to the principal. Peter Head, barrister at 11 Stone buildings, considers the decision in Bailey v Angove.
Bailey and another v Angove’s Pty Ltd  EWCA Civ 215,  All ER (D) 82 (Mar)
D&D company acted as the sole agent and distributor of the respondent company, Angove. D&D went into administration and Angove terminated its ADA with D&D. After the ADA had been terminated, third party customers paid D&D the purchase price of goods sold and delivered during D&D’s agency and distributorship (the sum). The judge ordered that the sum should be paid to Angove in its entirety and the appellant liquidators of D&D appealed. Allowing the appeal, the Court of Appeal, Civil Division, decided that, under the terms of the ADA, D&D had remained entitled to collect what had been due from customers in respect of goods ordered and delivered prior to termination and the money had therefore been payable under the ADA to the liquidators.
The Court of Appeal’s decision was concerned with two key issues:
The judgment is largely concerned with the first issue—the court decided that D&D was not precluded from collecting in the monies for Angove such that there was no trust. However this issue was concerned with the proper construction of the ADA, and its wider significance is therefore limited.
In relation to the second issue the Court of Appeal doubted the case of Re Japan Leasing Europe plc  WTLR 301. This is likely to be of greater wider significance as it represents a narrowing of the scope for arguments by creditors in insolvencies in favour of constructive trusts on the basis of unconscionability.
The sums in issue were placed in escrow pending the determination by the court of whether or not they were held on trust for the applicant creditor. The key principles to be derived from the case in terms of whether or not those sums should be paid to the creditor are as follows:
It construed them in the light of the admissible surrounding factual matrix (ie in the usual way).
The key effect of termination was not to preclude D&D from collecting what was due to Angove from customers in respect of goods ordered and delivered prior to the termination of the ADA.
Firstly, the court doubted whether Japan Leasing had been correctly decided. Secondly, it decided that D&D had been entitled to collect in sums due from customers post-termination of the ADA in order to recover the commission which it had earned on those sales. Although the insolvency of D&D had unfortunate consequences for Angove (as for all of D&D’s creditors), that fact alone was insufficient to make it unconscionable for D&D to receive payment of the monies due from the customers. It was simply the product of the contractual arrangements which both parties had agreed to.
See directly above. Whereas the insolvency of D&D had had unfortunate consequences for Angove, that was true for all of its creditors. There was no reason to put Angove in a better position than the other creditors by means of a constructive trust.
When seeking to allege that payments are held on trust in insolvencies (or to resist such arguments):
If you are a LexisPSL subscriber, click on the link below for further reading:
Not a subscriber? Find out more about how LexisPSL can help you.
Peter Head is a barrister at 11 Stone Buildings. He has a strong commercial practice which sees him regularly instructed in complex, high-value litigation in the Commercial Court and Chancery Division as well as in international commercial arbitrations.
Interviewed by Lucy Karsten.
The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
0330 161 1234