Neutral Citation Number: [20131 EWHC 215 (Ch)
MANCHESTER DISTRICT REGISTRY
IN THE MATTER OF D & D WINES INTERNATIONAL LIMITED (IN CREDITORS VOLUNTARY LIQUIDATION)
The Rolls Building
7 Rolls Buildings
London EC4A 1NL
Before:
HIS HONOUR JUDGE FELLING QC
SITTING AS A JUDGE OF THE HIGH COURT
Between:
ANGOVE PTY LIMITED | Applicant |
- and - | |
(1) KERRY BAILEY (2) TREVOR BIRCH | Respondents |
(In their capacity as Joint Liquidators of D & D Wines International Limited) |
Mr Nicholas Craig (instructed by DTM Legal LLP) for the Applicant
Mr Jamie Riley (instructed by Shoosmiths) for the Respondent
Hearing dates: 4th February 2013
Draft Circulation Date 13/02/2013
Approved Judgment
HH Judge Pelling QC:
Introduction
Background
The Applicant (“Angove”) is a long established, family-owned, wine production company based in Renmark, South Australia. D & D Wines International Limited (In Creditors Voluntary Liquidation) (“the Company”) was its agent and distributor in the UK from 1990. Between 18th November 2011 and the 23rd April 2012 the relationship between the parties was governed by the terms of an agency and distribution agreement, dated 1st December 2011 (“ADA”).
On 21st April 2012, the Company was placed in administration and on 23rd April 2012 the ADA was terminated with immediate effect by written notice from Angove to the Company, given pursuant to Clause 36 of the ADA. It is not disputed that this notice was a valid notice of termination, or that its effect was to terminate the ADA as and from the date of that notice. Although it was probably not necessary for it to do so, the notice of termination expressly stated that “... By terminating the Agreement, we also hereby terminate [the Company’s] authority to collect any further payment...” from the two third party customers relevant to these proceedings, being Direct Wines Limited (“DWL”) and PLB Group Limited (“PLB”). On 10th July 2012, the Respondents (“the Liquidators”) were appointed liquidators of the Company.
At the date when the Company was placed in administration, there were sums due and owing to Angove in relation to wine sold to DWL and PLB to which the ADA applied that totalled Australian Dollars (“A$”) 874,928.81. It is common ground that all the sums the subject of these proceedings were in fact collected after termination of the agreement and are held in escrow pending determination of these proceedings pursuant to an agreement reached by the solicitors acting for Angove and first the administrators of the Company and then the Liquidators (“the Fund”). The issues between the parties principally concern the status of the Fund.
There is a sum of A$ 14,430 that was paid by DWL to the Company prior to notice of termination. The Company is entitled to commission on the transactions that are the subject of this claim. Angove seeks to set off the A$ 14,430 against the commission otherwise due to the Company. This pre-supposes that the sum so collected by the Company was collected as agent for Angove and is held on trust for Angove.
The Issues
Angove’s case is that on true construction of the ADA:
the Company acted in relation to ail the relevant transactions as agent for Angove;
all sums received by it pursuant to the ADA are and were sums that it was obliged to account for by reason of the Company being its agent; and
all sums so received were held on constructive trust by the Company for the benefit of Angove:
on a true construction of the ADA; and / or
because of the Company’s status as Angove’s agent.
Whilst Angove contend that (ii) and (iii) above are material to its entitlement to set off the A$ 14,430 payment against commission otherwise due to the Company, it is entirely immaterial in relation to the Fund because in fact the ADA was terminated before any part of the fund was paid by either DWL or PLB, the Fund is held in escrow by agreement, and thus the Fund was either not received by the Company at all (because it was agreed that the fund would be held in escrow), or, it is to be treated as having been received by the Company, it can be deemed to have been received by the Company only at a time when it had no entitlement to the sums so received and thus the sum is held on resulting trust for the payers - that is DWL and PLB. On that basis Angove submit that the Fund is payable to Angove or DWL and PLB but is not to be treated as part of the Company’s estate to be available for its creditors pari passu.
The Liquidators contend that on a true construction of the ADA the true relationship between Angove and the Company was that of seller and buyer, not principal and agent, but if that is wrong the duty to account for any sums collected by it for Angove pursuant to the ADA was a mere personal duty which gave rise to a personal, debtor and creditor, relationship, not a proprietary, constructive trustee and beneficiary, relationship and thus that both the Fund and the $ 14,430 should be paid over to the Liquidators to be made available to the general body of the Company’s creditors; and Angove is limited to proving as an unsecured creditor for the sums due to it from the Company.
The Hearing
Neither party has sought to cross examine any of the witnesses on whose behalf witness statements have been filed and served. The hearing took place over the course of one day and consisted or oral submissions based primarily on the contemporaneous documentation that was attached to the various witness statements.
The ADA
In so far as is material for present purposes, the ADA provided as follows:
"…
Background
D&D has represented Angove in the United Kingdom since 1990 under an agreement dated 21 December 1990, which was amended with effect from 1 January 2006.
D&D and Angove have agreed to further amend the terms of D&D's agreement with effect from the 1st day of December 2011, and this Agreement sets out the terms on which D&D continues to represent Angove from that date.
The parties agree as follows Definitions
In this Agreement, unless the context otherwise requires:
Effective Date means the 1st of December 2011;
Net Selling Price means the FOB price payable by the customer for wine supplied less any retrospective pricing discount (including price deductions for promotional purposes but not any promotional or advertising expense) payable or allowable to that customer (whether off-invoice or otherwise). If D&D's practice or procedure for determining pricing discounts changes ... Angove and D&D will renegotiate the definition of the net selling price;
Appointment
Angove confirms that from the Effective Date D&D shall be its sole agent and distributor ...
Term
Subject to clause 9, this Agreement shall commence on the Effective Date and continue until terminated in accordance with clause 37, 38, 39 or 46.
Terms of Sale
Where sales of Products or Angove TBPs are made by D&D as agent for Angove, the Terms and Conditions of Sale set out as Annexure to this Agreement, and as amended by Angove from time to time, shall apply to such sales. Angove shall be responsible for communicating the Terms and Conditions of Sale to such customers, and for determining the timing of such notification. Failure by a customer to agree to the Terms and Conditions of Sale does not constitute a breach of this Agreement by D&D, provided that Angove shall be entitled to decline to deal with any such customer without liability to D&D.
Where sales ... are made by Angove to D&D on its own account, the said Terms and Conditions of Sale, as amended by Angove from time to time, shall apply to such sales.
Bulk wine
... If Angove is approached by a third party other than by [D & D], to supply bulk wine in the UK or Ireland and can meet customer requirements then Angove would inform [D & D] and pay a 1% commission on such sales to [D &D].
Prices and Payment
The prices to be paid by D&D's customers shall be agreed between Angove, D&D and the customer on an individual customer and/or deal basis and shall be expressed in Australian Dollars. D&D shall not commit Angove to any price, or offer discounts, rebates, credits or other reductions in pricing, without the prior consent of Angove, which may be provided on a general or case-by-case basis.
Unless otherwise agreed in writing all Products ... shall be sold and delivered F.O.B Adelaide,"
Payment for Products ordered by or on behalf of D&D must be made, whether by D&D or the customer, on or before 90 days from the date of bill of lading, or otherwise as may be agreed, by direct credit in Australian dollars into the bank account nominated from time to time by Angove.
Commission payable to D&D
Angove will pay to D&D commission:
in such amounts as shall be agreed between Angove and D&D based on the Net Selling Price of every sale ... to a customer in D&D's allocated sectors within the Territory arranged by D&D during the term of this Agreement (other than on its own account);
Commission due under clause 21(a) shall be paid to D&D as follows:
Angove will issue an invoice addressed to D&D (identifying the customer as consignee) for the relevant goods, together with a credit note for the amount of D&D's commission on that sale;
D&D will be responsible for collecting payment of the amount of Angove's invoice from the customer;
D&D will pay the amount of Angove's invoice, less the amount of the credit note, on or before the due date in accordance with clause [20].
Termination
Either party may also terminate this Agreement at any time by written notice to the other party if the other party-
....;
suffers or permits the appointment of an administrator, receiver, receiver and manager trustee in bankruptcy, liquidator (other than for the purposes of solvent reorganisation), provisional liquidator or other like person of the whole or any part of its assets or business, is unable to pay its debts as and when they fall due and payable, or otherwise compromises its debts, ceases to trade, or becomes incapable of performing its obligations under thus Agreement to a material extent and for a material time (whether because of insolvency or otherwise);
Upon termination of this Agreement for any reason whatsoever:
each party must pay to the other all money owing up to and including the date of termination in respect of the sale of Products ... and/or commission thereon, without any deduction withholding or set-off for any reason whatsoever;
Termination of this Agreement does not affect the accrued rights or remedies of either party. Obligations expressed to arise or continue on or after termination of this Agreement survive its termination.
…"
The Transactions Giving Rise To This Claim.
The primary facts surrounding the relevant transactions are not in dispute.
Transactions With DWL
Angove has and had a commercial relationship with DWL that goes back some years. The commercial negotiations that led to the sales of the wines produced by Angove to DWL that are the subject of these proceedings resulted from negotiations that took place between DWL and Angove. The Company played no part in them - see Paragraphs 16 to 18 of the witness statement of Mr John Angove (“Mr Angove”). The first time that the Company became aware of what had been agreed was when Angove informed it - see Paragraph 18 of the witness statement of Mr Angove. It was agreed by Angove with the Company that the Company would be paid commission in relation to the sales at 5% of Net Selling Price as defined in the ADA - see Paragraph 18 of the witness statement of Mr Angove. The ADA was silent as to the commission rate that would be payable for anything but the sale of bulk wines sold by Angove direct to a third party customer based in the Company’s territory, but 5% of Net Selling Price had been the rate of commission payable under Clause 19 of the agreement that had governed the relationship between the Company and Angove prior to the coming into effect of the ADA in respect of sales to third parties arranged by the Company within its allotted territory and there is no evidence, and it is not suggested by the Liquidators that any other rate was ever agreed. It is in this context that Mr Angove describes this rate in Paragraph 18 of his witness statement as being the “default rate’’. It was the rate applicable at the time the relevant transactions were agreed between DWL and Angove as that which applied to all sales arranged by the Company within its territory other than bulk wine sales to which Clauses 17 and 21(1) of the ADA applied.
The circumstances in which the transactions came to be negotiated are potentially significant. As is apparent from those parts of the ADA set out above, it contemplates that the Company would either be entitled to commission on products sold to customers within the Company’s territory or to purchase wine for its own account. In the event that it purchased wine for its own account then the Company would have no entitlement to commission and as far as I can see the only express obligations imposed in respect of purchases by the Company for its own account are those imposed by Clause 11 (which requires that any purchases by the Company for its own account would be subject to Angove’s standard terms and conditions as set out in Annexure A to the ADA), Clause 15 (any ordering by the Company of products for its own account were to be ordered from Angove’s trading premises as identified from time to time and otherwise in accordance with ordering procedures that were to be agreed) and Clause 16(b)-(g) (Angove’s quality and supply continuity obligations in relation to the products to be supplied). The provisions concerning commission are confined to transactions other than sales to the Company for its own account as is expressly stated in Clause 21(a) of the ADA.
It follows in my judgment that the agreement of Angove to pay and the Company to receive a commission as I have described is consistent with the mutual understanding of Angove and the Company at the time commercial agreement was reached between Angove and DWL being that the transactions concerned were either transactions that fell within the scope of Clause 21(a) of the ADA or were transactions that fell outside the scope of the ADA altogether. There is nothing about this agreement that is consistent with the mutual understanding of the Company and Angove being that the sales were sales to the Company for its own account. The subsequent conduct of the parties does nothing to alter that analysis aside from the fact that it would appear that (unknown to Angove until after the Company went into administration - see Paragraph 60 of Mr Angove’s witness statement) the Company raised its own invoices in relation to the sales and sent them, respectively, to DWL and PLB. This is entirely self serving however, as is the treatment of the transactions in the books of the Company. More significant in my judgment is the agreement between the parties concerning the payment of commission already referred to, and the documentation relevant to the transactions, copies of which were sent to the Company and not objected to by the Company at any stage. I refer in more detail to the content of this documentation below.
It is necessary that I now mention the salient details of the relevant transactions concerning DWL. It is not necessary that I set out the detail in relation to each of the transactions because it is agreed between the parties that each followed an entirely similar pattern. The documentation is only relevant because of the light it throws on the true nature of the relevant transactions and then is only relevant because (as is common ground) the documentation was all sent to or copied to the Company who were thus aware of its contents almost at the time that it was issued. It is also to be borne in mind that the Company had been trading as an agent and distributor of foreign based wine producers for many years and thus was familiar with the fundamental principles that apply to the international sale of goods. The contrary is not asserted by the Liquidators.
The process began with a purchase order sent by DWL to the Company. This was then sent by email by the Company to Angove. The email by which Purchase Order 45100663 was forwarded to Angove referred to a “... new order from Direct Wines...” and identified DWL’s freight forwarder as being Kuehne & Nagel Ltd (“K&N”). This was replaced by a further Purchase Order dated 10th November 2011 which to the extent material for present purposes was in essentially similar terms. This chain is not consistent with the purchase being by the Company for its own account. Had that been the case, Purchase Orders would have been raised by the Company and addressed by it to Angove. For a purchase to be for the account of the Company, it would be necessary to establish privity of contract between the Company and Angove, not between DWL and Angove and it would have specified a price payable by the Company that was 5% less than the price payable by DWL, if (as is alleged by the Liquidators) the 5% figure represented the Company’s fixed margin. This chain does not obviously do that.
The next document in the chain raised by Angove was an Acknowledgement of Order. DWL and the Company are identified as the consignee. The buyer is identified by a reference number that appears on DWL’s Purchase Order and the date of the Purchase Order. This is significant because a consignee may be, but is not necessarily, the buyer of the goods being despatched. That DWL is the buyer is put beyond doubt by the text that appears next to the name of DWL in the Acknowledgement, which acknowledges "... your order ...” The Acknowledgement refers in terms to 5% commission being payable to the Company. The Acknowledgement was copied to the Company by email from Angove on 11th November 2011. The terms of the email show that the detail concerning the Order is being handled by Angove with DWL. The email promises to keep the Company informed "... as more information comes to light”. The Company did not suggest that anything material to the issue I am concerned with as set out in the Acknowledgement is incorrect or requires correcting.
Following correspondence by email and fax concerning packaging and labelling details that are not centrally material, on 10th January 2012, the wine was despatched by Angove to Adelaide Docks pursuant to instructions received from K&N who were as I have said DWL’s freight forwarder. Acknowledgements of Despatch were raised by Angove. The buyer’s reference was that of DWL, and the consignee was identified as being both the Company and DWL. Next by the name of DWL there appears the following text: “WE ACKNOWLEDGE WITH THANKS RECEIPT OF YOUR ORDER AS DETAILED HEREON.” The Acknowledgement reflected shipping instructions given by K&N. The Acknowledgements of Despatch were copied to the Company by email on 10th January 2012, 5 days before the departure of the nominated vessel. The vessel was expected to arrive in Tilbury on 25th February 2012. On 16th February Angove despatched the original shipping documents to K&N (that is the agents for DWL) and at the same time a copy set were sent by email to the Company. The shipping documentation included a commercial invoice that identified the consignee as being both the Company and DWL but included as the buyer’s reference that of DWL. The commercial invoice required payment by 14th May 2012.
The documents sent to the Company included a Credit Note. It is a feature of this document that it does not identify who the beneficiary of the credit note is. Aside from identifying the freight forwarders as being K&N, the only other parties identified are the exporter (Angove) and the consignee, who is described as being both DWL and the Company. However, the text of the Credit Note is to the following effect:
“BEING 5% COMMISSION PAYABLE ON INVOICE NO.SI 365921
INVOICE VALUE A$43,836.00
CREDIT NOTE VALUE A$2191.80”
The credit note is not in all respects satisfactory. In particular the failure to identify clearly who the beneficiary is does not assist. However on the evidence available to me the only entity entitled to a commission in relation to the transaction was the Company and thus I conclude on balance that the Credit Note was intended to be for the benefit of the Company and was understood as such by the Company. There is no correspondence that suggests that the purpose of the document was unclear to the Company at the time it was sent and received.
Transactions With PLB
These transactions concerned the sale of wine in bulk for bottling in the UK. This transaction was one that came to Angove from the Company - see Paragraph 32 of the statement of Mr Angove. The commercial negotiations were conducted between the purchaser and Angove in part at least via the Company - see Paragraph 36 of the statement of Mr Angove. Ultimately the relevant contract was to be made with the purchaser’s bottling contractor, which by mid 2011 was PLB. The agreement between the Company and Angove was that the Company would be paid a 3% commission on the wine sold - see Paragraphs 36 and 40 of the statement of Mr Angove.
The documentation trail was in many respects similar to that which applied to the DWL transactions. A bulk wine order was raised by PLB addressed to the Company. This was forwarded by the Company to Angove by email. An Acknowledgement of Order was raised by Angove that identified the buyer as being PLB by (a) use of its order number and date and (b) by a statement next to PLB’s name which acknowledged “... WITH THANKS RECEIPT OF YOUR ORDER AS DETAILED HEREON ... ”. The Acknowledgement of Order recorded that commission was due to the Company at the agreed rate of 3%. Shipping instructions were received by Angove from PLB’s nominated forwarder, following which an Acknowledgement of Despatch was raised by Angove which was sent to the Company. It recorded that the goods were being sold FOB Adelaide in accordance with Clause 19 of the ADA.
An original set of shipping documents were sent by Angove to Trans Ocean, the UK affiliate of PLB’s nominated forwarder. The documents sent included the original and fully negotiable Bill of Lading. This is significant because the possession of the original negotiable Bill of Lading enabled PLB to deal with the goods sold as they chose including selling or charging the goods while they were in transit. Copies of the documentation were sent by email by Angove to the Company together with a credit note in similar form to that raised in relation to the DWL transaction save that the commission rate was said to be 3%. No objection was raised at the time to any of this by the Company.
Whilst not of itself determinative, it is a significant factor in my judgment that a company that was as experienced as the Company in relation to the international sale of goods and was aware at all times of what documents were being raised by Angove did not at any stage object to any of this. It is to be expected that if the relationship between Angove and the Company was one of seller and purchaser rather than principal and agent then the Company would have been the sole consignee and the original shipping documentation would have been sent to either the Company or its forwarder so that it would then have had control of the goods pending completion of the transaction. The delivery of such documents to PLB’s agents is not consistent with either Angove or the Company considering that the transaction was one by which Angove was selling to the Company and the Company was selling to PLB. Had that been so, the Company would have expected that the original shipping documents would be delivered to it, not its customer, and would have insisted upon that course being adopted.
Analysis
DWL Transactions
The issue that arises in the first instance is whether, in relation to the relevant transactions, the Company was acting as agent for Angove or was simply a purchaser that matched purchases from it by DWL with purchases by it from Angove.
When this issue first arose, the point made by the Liquidator’s solicitors was that the ADA did not create an agency relationship because (i) the ADA made no attempt to impose fiduciary duties on the Company and (ii) because Clause 22(c) of the ADA requires the Company to pay the price whether or not the purchaser of the goods (in this case DWL) has paid. Two other points were made, both of which in my judgment are entirely immaterial - one concerned the treatment of the transactions in the books of the Company, which is immaterial for the reasons I have already given and the second was that a claim had been made by Angove against its credit insurers. This last point is immaterial because it is obvious, as was submitted by counsel for Angove, that it would want to take advantage of its insurance if it was wrong in the submissions that it made in these proceedings. If it is right then there will be no claim to be made. If it is wrong there will be a claim to be made depending on the outcome of the liquidation of the Company. The question whether Angove is right depends on the true construction of the ADA and the agreement reached concerning the particular transactions, not on whether it has made a protective insurance claim.
I accept the point made on behalf of the Liquidator that it is necessary to look to the substance of the relationship between the parties in order to decide whether the relationship is one of principal and agent and thus the fact that the agreement refers to commission or describes the relationship as being one of principal and agent is not of itself determinative. Notwithstanding this point however, for the reasons that follow I am not satisfied that the Liquidators are correct when they submit that the DWL transactions with which I am concerned are transactions in which the Company was a Purchaser and Angove a seller.
The first and critical point is that there was an agreement reached between the Company and Angove whereby it was agreed that Angove would pay a commission to the Company of 5% in relation to the sale that had been negotiated between DWL and Angove. As I have already said, the evidence of Mr Angove has not been challenged. The Liquidators have filed a statement from Mr Garlick, who was chairman of the Company. He does not challenge Mr Angove’s evidence. All that he says is that the commission represented the Company’s fixed margin. He does not explain however, why, if that was so, the transaction was not simply structured as a sale by Angove to the Company at a fixed price of 5% less than the price at which the Company was (notionally) to sell the products to DWL. He does not explain why, if the true nature of the arrangement was as he describes, the commercial negotiations were not commenced by DWL with the Company and by the Company with Angove. He does not explain either why the shipping and commercial documentation generated by Angove consistently describe or identify the buyer from Angove as being DWL rather than the Company, or why the Company did not object when this course was adopted. It also fails to explain why the Company was content for the original (or an original set of) shipping documentation to be sent to DWL rather than a single set of original shipping documentation being sent to the Company. Finally it does not explain why the credit note mechanism was adopted when, if the true arrangement was one of sale, all that would be required would be a commercial invoice addressed to the Company that identified the consignee and purchaser as being the Company and the price as being the price notionally payable by DWL to the Company less 5%.
I do not accept the overarching submission made on behalf of the Liquidators that on true construction of the ADA, the relationship between the Company and Angove was that of buyer and seller. As I have explained already, the agreement contemplates that in relation to any particular transaction the Company might purchase for its own account (which might involve either purchasing to match orders that it had received or purchasing on a speculative basis) or act as Angove’s agent for commission. Had the true relationship between the Company been and been intended to be solely one of buyer and seller then there would have been no need to differentiate between sales to the Company for its own account and transactions in respect of which it was entitled to receive what is described in the ADA as being a commission.
The terms of the ADA, when taken as a whole, are more consistent with the relationship (other than in relation to sales for the Company’s own account) being and being intended to be one of principal and agent rather than seller and purchaser. None of the points that I am about to make are of themselves decisive but collectively in my judgment they lead to that conclusion.
Recital A refers to the Company having “... represented ...” Angove in the UK. This is language that is substantively more consistent with the relationship being one of principal and agent rather than seller and buyer. The 2011 agreement was not intended to change the fundamental nature of the relationship between the parties as is made clear by Recital B which describes the 2011 agreement as being "... the terms on which D&D continues to represent Angove from that date ...” Clause 2 expressly appointed the Company to be Angove’s “... agent and distributor... ”. Whilst I accept as I have said that the language used by the parties to describe their relationship is not determinative it is nonetheless a factor to be bone in mind when used by experienced commercial operators familiar with the conduct of international trade and whilst an agent may operate in that manner in a commercial context, the use of both words suggests that two alternatives structures were contemplated by the parties.
Clause 10 of the ADA contemplates sales by the Company as agent for Angove and Clause 11 contemplates sales by Angove to the Company for its own account. Clause 15 likewise distinguishes between the Company ordering products on behalf of customers and ordering “... on its own account... ”. Clause 18 provides for tripartite agreement as to the price to be paid by the customer, the Company and Angove. The Company is expressly forbidden from committing Angove to any particular price without prior consent. The reference to “... D&D’s customers ...” in that clause is ambiguous but in context must mean those customers for the products in relation to whom the Company is acting as agent for Angove. If the position was otherwise then there would be no point in distinguishing between sales by the Company as agent and sales to the Company for its own account. Thus Clause 18 is consistent with the relationship between the Company and Angove being at least in part that of principal and agent. A provision that requires that prices to be paid by the third party are to be agreed in this manner, in combination with a provision for the payment of commission, in my judgment makes it far more likely that in relation to the transactions to which those provisions apply the relationship between Angove and the Company is one of principal and agent.
Clause 21(a) of the ADA draws a very clear distinction between sales to the Company for its own account (when commission will not be payable) and sales to a specific customer in the Company’s territory. Since the ADA distinguishes between sales to the Company for its own account and transactions where the Company is acting as agent, it follows either that commission is payable to the Company only in respect of those transactions where the Company is acting as agent or, possibly, in respect of all transactions other than those in respect of which the Company is buying for its own account - which might include for example transactions negotiated directly by Angove with a third party purchaser within the territory of the Company. Thus the sole question is whether on a proper analysis of the particular transaction being considered it is one where the Company has purchased goods for its own account. If it has then it will not be an agent.
The methodology by which (in cases in respect of which commission would be payable) payment of commission is to be affected is that set out in Clause 22 of the ADA. Although Clause 22 does not say so in terms it can have no application to sales to the Company for its own account, because no commission is payable in respect of such transactions - see Clause 21(a) of the ADA.
It was submitted on behalf of the Liquidators that because the effect of Clause 22(c) was to impose on the Company the obligation to pay the whole invoice sum due for the goods sold less commission in respect of which a credit note was to be issued for the benefit of the Company that necessarily negatives the true relationship between the Company and Angove being one of principal and agent. I am not able to accept that submission.
First, as I have said, the contract clearly distinguishes between those transactions in respect of which the Company is described as acting as agent and those where it is buying for its own account. It is only in respect of those transactions in respect of which the Company is described as acting as agent that commission is payable and to which the Clause 22 mechanism applies. Clearly therefore the parties considered that the transactions to which this mechanism applied were different from sales to the Company for its own account, which were expressly excluded from its application by Clause 21(a).
Secondly, I do not accept the premise of the submission - namely that because the Company undertakes a direct obligation to pay, that necessarily negatives the relationship being one of principal and agent in relation to transactions to which the mechanism applies. In Teheran - Europe Co. Ltd v. S.T. Belton (Tractors) Ltd [1968] 2 WLR 523, Donaldson J as he then was recognised at 528F that there were three ways in which an agent could conclude a contract on behalf of his principal, the second of which was by creating privity of contract between the third party, the principal and the agent. The outcome of that case was varied on appeal but there was no any disagreement by the Court of Appeal with this part of Donaldson J’s analysis, in the result, it does not follow that because an agent undertakes direct obligations owed to the principal therefore the relationship cannot be one of principal and agent.
I do not accept either the more restricted submission that because the obligation undertaken is one that involves accepting an obligation to pay for the goods that are being sold to the third party that necessarily prevents the relationship from being one of principal and agent. English law has long recognised the concept of a del credere agent - that is an agent who in consideration of a commission guarantees to his principal that third parties with whom he contracts on behalf of the principal will duly pay the sums due under those contracts.
As I have said the ADA must be read as a whole. So read, it applies specifically to at least two types of transaction. It applies primarily to sales to customers identified and introduced by the Company as agent for Angove (in respect of which commission is payable and the Clause 22 mechanism applies) and excepts from this mechanism sales to the Company for its own account. In relation to transactions falling within the last mentioned category the ADA imposes only the limited obligations I mentioned earlier.
There remains a third category of transaction being those that do not fall within either of the two I have so far mentioned. This category may include transactions that have been negotiated by Angove directly with the third party customer who is based within the Company’s territory. It is probable that by necessary implication such transactions would come within the scope of the ADA as transactions in respect of which the Company is entitled to commission, particularly where it undertakes the activities the ADA contemplates it would undertake when acting as agent within the scope of that agreement. It is possible (though this was not argued by either party in this case) that such transactions are free standing and the obligations of Angove and the Company in relation to such a transaction depend on what has been agreed between them concerning that transaction. It is unlikely but not impossible that such transactions would involve the sale of product to the Company for onward sale to the third party with whom Angove had been negotiating. What emerges from this is that in order to decide whether in relation to a particular transaction the Company is to be treated as Angove’s agent is fact specific and can be resolved only by considering the facts surrounding the particular transaction in relation to which the dispute has arisen.
Against that background I return to the evidence that there is concerning the transactions with DWL with which these proceedings are concerned. The transactions were negotiated commercially at the outset between representatives of DWL and Angove. It was agreed between Angove and the Company that the Company would be paid a commission of 5% of the Net Selling Price payable by DWL. Once it is concluded that the commission arrangements set out in the ADA apply only to transactions in which the Company acts as agent it follows that if and to the extent that the ADA applies to such a transaction at all, then the transactions were ones which both parties considered that the Company was acting as Angove’s agent. There is nothing in the circumstances of the transaction that suggests that either party thought that the Company was buying for its own account. Whilst the documentation may not be consistent with the express terms of the ANA in every respect the documentation would appear to follow the pattern that had been consistently adopted by the parties for transactions to which the agency elements of the ADA applied and commission was payable. The contrary was not suggested by the Company at the time and there is no evidence that suggests the contrary. The Liquidator’s case depends on a conclusion that the effect of Clause 22 is in reality consistent only with the transactions to which it applies being sales. I am not able to agree with this analysis for the reasons that I have given
PLB Transactions
Most of what I have already said applies to the PLB Transactions as it does to the DWL Transactions. The difference is that Clause 17 applied to the transaction because the sale was of wine in bulk. PLB approached Angove via the Company, exactly as contemplated by the ADA and an agreement was reached between Angove and the Company concerning the rate of commission that was to be paid to the Company. Such an agreement was not consistent with the PLB Transactions being sales by Angove to the Company on its own account because commission was not payable by Angove to the Company in respect of such transactions. I have explained already why I am unable to accept the Liquidators’ analysis concerning the effect of Clause 22 of the ADA.
The status of sums collected by the Company.
The first point that is made on behalf of the Claimant is that this point is immaterial save in respect of the sum of A$ 14,430 that was paid by DWL to the Company prior to notice of termination sum. This is said to be so because none of the sums claimed in these proceedings were in fact paid by DWL or PLB until after termination of the ADA and thus after its authority to collect sums due from respectively DWL and PLB had been terminated. I accept that submission for the following reasons.
If and to the extent that the Company owed Angove an obligation to collect payment from DWL and PLB, it came to an end when the termination took effect. This is so as a matter of general law - see Bowstead on Agency, 19th Ed., Paragraphs 10-023 - 10- 024 and 10-029. This effect may be altered by express agreement but it was not in this case. The proviso to Clause 37 of the ADA makes clear that it is only obligations expressed to arise or continue after termination that survive termination. If and to the extent that Clause 22(b) imposes on the Company an obligation to collect, that obligation is not so expressed. If and to the extent that the transactions with DWL took effect outside the ADA (and as I have said neither party contends for that outcome) and if and to the extent the arrangements that applied to those transactions included any authority being given to the Company to collect the sums due from DWL, then that authority was expressly terminated by the statement in the Notice of termination that “... By terminating the Agreement, we also hereby terminate ... [the Company’s] ... authority to collect any further payment...” from DWL and PLB.
It follows that any sum actually received by the Company after the date of termination would be held on trust for the payer - in this case DWL and PLB. By the same token neither DWL nor PLB would obtain a discharge of their respective obligations to Angove by any payment made thereafter at any rate if the fact of termination was known to them at or before the time of payment.
The Liquidators contend that receipt of the money by them constitutes a receipt by the Company. Even if that was otherwise correct on the facts, it does not address the point I have so far considered. In fact I do not consider that receipt by the Liquidators of the Fund is a receipt by the Company essentially because I accept the submissions made on behalf of Angove in Paragraph 6 of the supplemental skeleton submissions filed by Mr Craig. Critically A$570,843.32 is held by the Liquidators but A$302,773.36 is held by Angove’s solicitors, in each case pending resolution of the issues between the parties. The fact that part of the Fund is held by the Liquidators pending resolution of the issues that arise in this litigation is no more significant than that fact that the other part is held by Angove’s solicitors. In each case the ultimate destination of the fund depends on the conclusions reached on the issues that I have to decide. In relation to each of those sums they are payable to Angove because those sums were never collectable by the Company other than as agent for Angove, and the Company’s authority to collect them was terminated before the sums in question were paid out by DWL and PLB.
The sum paid to the Company prior to the date of termination but not paid over to Angove is payable to (and thus is capable of being set off by) Angove only if it represents money belonging to Angove beneficially at the date of termination - see Clause 37(a).
The Company disputes that there was even a duty to account. On Angove’s case, whether there was a necessarily implied obligation on the Company to account for payments received depended on the effect of Clause 22(b). On balance I consider that submission ought to be accepted for the following reasons. First the commercial invoices raised by Angove do not identify the paying party as being exclusively the Company. Thus the invoices are either a claim for payment from both the third party customer and the Company or a claim for payment from the third party customer alone if the entry in the consignee box is construed as meaning either DWL or PLB care of the Company at the address given.
The language of Clause 18 is consistent with the price being payable by the third party purchaser to Angove and the fact that the clause provides for payment in Australian Dollars is also significant because it is plainly designed to eliminate any exchange control risk so far as Angove is concerned. The currency in which the third party obligation to pay is denominated would be immaterial to Angove if the sole obligation to pay was that of the Company. This approach also follows from the terms of Clause 20, which expressly contemplates payment by either the Company or third party purchaser. This provides the context within which Clause 22(b) is to be construed. In that context the effect of the clause is clear - it is to impose on the Company an obligation to collect the sums due to Angove from third party purchasers where the Company is acting as Angove’s agent as was the case in relation to the transactions relevant to these proceedings.
Clause 22(c) must be read together with Clause 22(b). Together they impose an obligation on the Company, during the currency of the ADA, to collect the price payable for goods sold to third party purchasers in transactions where the Company is acting as agent for Angove and either pay over the sum collected (less the amount of the credit note) or in default of successful collection itself pay the sum due less commission and to do so either by the date agreed for the particular transaction or if no such agreement has been reached on or before 90 days from the date of the relevant Bill of Lading - see Clause 20.
The primary obligation to pay rests on the third party purchaser. If the Company is successful in collecting the price payable then it must account for the sums collected to Angove. In the event that it is not successful in collecting what is due then an obligation to indemnify by paying by the due date arises. The obligation to indemnify may well be a debtor and creditor obligation but it does not follow that the obligation to account to Angove for any sums that it has in fact collected from third party purchasers is also a mere personal obligation.
The existence of a duty to account begs the question whether the obligation to account is a personal obligation or whether the money collected belongs beneficially to Angove. That is in reality the issue that arises in this case and in relation to the payment I am now considering.
In Pearson and others v. Lehman Brothers Finance SA [2010] EWHC 2914 (Ch), Briggs J summarised the applicable principles for determining whether, where A acquires property for the account of B, B thereby acquires a proprietary interest in the property so acquired. Subject to the issue of certainty, which cannot arise here because the sums to be collected are ascertained, Briggs J concluded that the question depends upon the mutual intention of the parties to be ascertained by an objective assessment of the terms of the agreement with reference to that property - see Paragraph 225 (v). It was emphasised that merely because there is a relationship of principal and agent does not lead to the conclusion that A is B’s trustee “... although it may be a pointer towards that conclusion”. In the commercial context, “... the law should not unthinkingly impose a trust where purely personal rights between A and B sufficiently achieve their commercial objective. The Judge expressly approved the statement of principle in Paragraph 6-041 in Bowstead on Agency (ante) and in particular the following passage:
"... the present trend seems to be to approach the matter more functionally and ask whether the trust relationship is appropriate to the commercial relationship in which the parties find themselves; whether it was appropriate that ... money ... should be and whether it was held separately, or whether it was contemplated that the agent should use the money ... as part of his normal cash flow in such a way that the relationship of debtor and creditor is more appropriate.
A relevant consideration also is whether money ... was received in pursuance of a single transaction for which the agent was appointed or part of a group of transactions in respect of which a general account was to be rendered later or periodically.
Although the issue does not arise in many of the cases, a central question ... is whether the rights of the principal are sufficiently strong and differentiatable from other claims, for him to be given priority in respect of them in the agents bankruptcy ...”
In my judgment the arguments relevant to the issue I am now considering are finely balanced.
It is to be noted that there is no express obligation to keep any money collected separate from the general funds of the Company. Of itself that does not have huge significance if on a proper analysis any sums collected ought to have been kept in a separate account.
The agreement between the parties contemplates that (a) the sums due from the third party purchaser will be collected and paid by an agreed future date and in default 90 days from the date of the Bill of Lading relevant to the particular sale. Thus there is not a general duty to account at some unspecified time in the future in relation to an unascertainable number of transactions. The money notionally to be collected is in relation to a specific transaction and must be collected within a fixed and agreed period of time.
The contract contemplates that the Company is entitled to deduct its commission from the price collected by it before accounting to Angove. However, it is not clear whether the entitlement to deduct arises as soon as sufficient money to meet the commission due has been collected and in reality whether it does has no practical significance because of the personal obligation of the Company to indemnify Angove in respect of such part of the price payable by the third party purchaser as has not been collected by the agreed payment date. All this make it unlikely that it was intended to create a beneficial interest in the sums collected by the Company.
The effects of any sum collected being treated as a sum to which Angove was entitled beneficially produces odd insolvency outcomes. If the third party purchaser becomes insolvent and does not pay the sum due to Angove then Angove would be left with a claim as an unsecured creditor in the liquidation of the purchaser and a personal claim against the Company. If both the third party purchaser and the Company were to become insolvent then Angove would be left with claims as an unsecured creditor in each liquidation. If the Company became insolvent before payment was collected from a solvent third party purchaser then (as here) Angove would be left with a claim for payment against the third party customer. However, if the Company had collected some or all of the price payable by the purchaser and each entered insolvent liquidation and there was a beneficial interest created in any sum collected then the odd result would follow that Angove’s fortunes in relation to the transaction would depend simply on whether a particular sum had been moved from one insolvent company to another before each went into liquidation. That is an unlikely outcome to have been intended. I acknowledge that in one situation a conclusion that any money collected by the Company belonged to Angove beneficially would protect Angove. The effect of an insolvency affecting the Company after money due from third party purchasers had been collected would be that the right to collect from the purchasers would be lost to Angove but the funds collected on behalf of Angove would as a result of such insolvency become available for the general body of the Company’s creditors.
In the end I consider that the balance of these factors leads to the conclusion that Angove does not have a beneficial interest in any sum collected by the Company prior to the termination of its authority to collect. The context in which the issue arises is entirely commercial. It would have been open to Angove to structure their relationship with the Company so as to create an express obligation to credit any sums collected to a dedicated interest bearing bank account and subject any sum so collected to a trust in favour of Angove. The effect of concluding that a beneficial interest had been created when there was no express agreement to that effect creates the possibility of different potential outcomes on insolvency that are illogical. The ability to deduct commission, without defining when and in what circumstances, imply that the duty to account is personal not proprietary. The mechanism of a credit note is more consistent with the duty being a personal one rather than proprietary. The commercial invoice rendered by Angove is in relation to personal obligations on the part of the purchaser to pay the price and on the part of the Company to indemnify Angove in the event that the Purchaser does not pay by the fixed date. The credit note is the grant of credit against the Company’s obligation to pay the sums identified in the relevant commercial invoice. There is no distinction drawn between the application of the credit granted to the obligation to pay over sums collected and the obligation of the Company to indemnify. This suggests that there was no distinction drawn in the minds of the parties between those obligations. Overall therefore I conclude that the obligation to account for any sums in fact collected was personal rather than proprietary.
Finally, if I am wrong to conclude that there is a duty to account albeit that Angove has no proprietary interest in any sums collected but not paid over, and that the correct analysis is that there is only a single obligation on the part of the Company to pay, then the outcome will be the same because on any view the Company’s obligation to pay in the event that the third party customer does not by the agreed date is a personal obligation.
Conclusions
The Fund is payable to Angove in its entirety because it is not money that was in fact collected by the Company prior to the termination of its authority to collect and because it represents the sums due to Angove by its customers for wine sold to those customers in transactions where the Company’s role was that of agent. Angove however has no beneficial entitlement to any part of the sum of A$ 14,430 that was paid by DWL to the Company prior to the termination of the Company’s authority to collect because the duty to account for any sums collected was personal not proprietary. This does not affect the applicability of Rule 4.90(3) of the Insolvency Rules, which has not been the subject of argument before me.