What happens to money held on trust when a company goes into liquidation?

What happens to money held on trust when a company goes into liquidation?

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.

Original news

Bailey and another v Angove’s Pty Ltd [2014] EWCA Civ 215, [2014] 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.

What is the significance of this decision?

The Court of Appeal’s decision was concerned with two key issues:

  1. whether the termination of an ADA precluded D&D (the agent)from collecting monies due to Angove (the principal), such that they were held by D&D (which was in liquidation) for Angove on trust
  2. whether, even if no trust arose as a result of the termination of the ADA, a constructive trust nevertheless arose because it would be unconscionable for the liquidators, as officers of the court, to accept payment of sums due to Angove from customers but not to account to Angove for them in full (less D&D’s commission)

Related Articles:
Latest Articles:

Access this article and thousands of others like it free by subscribing to our blog.

Read full article

Already a subscriber? Login