Australia: A legal oxymoron: when an agent's irrevocable appointment is revocable

Last Updated: 14 November 2016
Article by Kenneth Stanton and Lachlan Roots

The law of agency: when are you likely to want the appointment of an agent to be irrevocable?

Anyone running or managing a business is aware that agency relationships play an important role in commercial life. After all, there are numerous situations in the commercial world of one party (the principal) authorising another party (the agent) to create legal relations with a third party.

In most cases, the appointment of an agent will be revocable. However, there are certain circumstances where it may make commercial sense for the appointment to be irrevocable. In fact, an irrevocable appointment could arise in many such relationships. These include (but are not limited to):

  • Estate agents
  • Auctioneers
  • Attorneys (appointed under power of attorney)
  • Distribution agents
  • Finance brokers
  • Insurance brokers
  • Insurance agents
  • Solicitors
  • Receivers
  • Liquidators
  • Travel agents.

When might an irrevocable appointment be revocable?

The recent decision of the Supreme Court of the United Kingdom in Bailey and Another (Respondents) v Angove's Pty Ltd (Appellants) [2016] UKSC 47 (Angove's Case) considered the rather oxymoronic legal world of the revocability of irrevocable appointments of agents. This article reviews this decision and the salutary lessons which it teaches.

According to Lord Sumption (with whom Lords Neuberger, Clarke, Carnwath and Hodge agreed):

The general rule is that the authority of an agent may be revoked by the principal, even if it is agreed by their contract to be irrevocable.[1]

But any good lawyer knows that every good general rule typically has at least one exception.

For instance, there are circumstances in which the irrevocable appointment of an agent cannot be revoked by the principal, such as when the agent has a relevant interest of his or her own in the exercise of his or her authority as agent.[2] That is, the power is irrevocably granted on the basis that it secures to the attorney an entitlement to recover against the principal some benefit granted by the principal to the agent. As Lord Sumption noted, two conditions must be satisfied in order for irrevocability of the appointment to apply:

  1. There must be an agreement that the agent's authority is to be irrevocable.[3]
  2. The authority must be given to secure an interest of the agent, being either a proprietary interest or a liability owed to the agent personally.[4]

It follows from these conditions, however, that upon the proprietary interest or liability owed to the agent being satisfied, the principal can revoke the agent's appointment.

When is an irrevocable appointment NOT revocable?

Under the general law, the following principles must apply if you want to prevent a principal from revoking an irrevocable appointment of an agent:

  • The agreement between the principal and agent appointing the agent must expressly stipulate that the agent's authority is to be irrevocable.[5]
  • The irrevocable appointment must be coupled with an interest.[6]
  • The appointment must secure an interest of the agent, being either a proprietary interest of the agent or a liability owed to the agent personally.[7]
  • The interest must be for the benefit of the agent so as to 'protect some title or right in the subject of the [agency] or secure some performance to [the agent]'[8]. As Lord Atkinson stated in Frith v Frith [1906] AC 254:
  • ...where an agreement is entered into for sufficient consideration, whereby an authority is given for the purpose of securing some benefit to the donee of the authority: Story on Agency, sect 476.[9]
  • The irrevocability of the agent's authority may be inferred from the relevant agreement, but not from the mere co-existence of the agency and the interest. It is necessary that the one should be intended to support the other.[10]
  • The irrevocability of the agent's authority can be found in the following situations:
  • where the authority exists solely in order to secure the agent's financial interest;[11]
  • where the relationship of principal and agent is broader than the mere collection of money to satisfy the agent's debt, so that the agent may be said to act both for [itself] and [its] principal.[12]

The murky issue of irrevocability: attorneys (appointed under a power of attorney) and distribution agents

The remainder of this article will focus on two of the following types of agency – attorneys (appointed under a power of attorney) and distribution agents. Why? Because attorneys (appointed under a power of attorney) are very commonly used in a diverse range of situations from family and other arrangements to specific transactions, and therefore this type of agency relationship regularly arises in daily private and commercial life; and distribution agents, because it was this type of agency relationship which was the context for this article and the subject of the decision in Angove's Case.

Attorneys appointed under a power of attorney

In New South Wales,[13] the position at common law has been replaced with specialist legislation – the Powers of Attorney Act 2003 (NSW). Sections 15 and 16 of the Act deal with irrevocable powers of attorney and provide as follows:

15 Irrevocable powers of attorney

An instrument that creates a power of attorney creates an "irrevocable power of attorney" for the purposes of this Act if:

  1. the instrument is expressed to be irrevocable, and
  2. the instrument is given for valuable consideration or is expressed to be given for valuable consideration.
16 Effect of irrevocable powers of attorney
(1) The power conferred by an irrevocable power of attorney is not revoked or otherwise terminated by, and remains effective despite, the occurrence of any of the following:
  1. anything done by the principal without the concurrence of the attorney,
  2. the bankruptcy of the principal,
  3. the mental incapacity of the principal,
  4. the principal becoming a mentally incapacitated person,
    (d1)the principal becoming a person who is a managed missing person within the meaning of the NSW trustee and Guardian Act 2009,
  1. the death of the principal,
  2. if the principal is a corporation, the dissolution of the corporation.
(2)Subsection (1) has effect except to the extent that the instrument creating the irrevocable power of attorney provides otherwise.

The Act defines an 'instrument' to include a deed and 'valuable consideration' to include marriage but does not include a nominal consideration, even if it has some value.

The important point to note here is that in New South Wales there is a statutory regime regulating irrevocable powers of attorney that must be followed in order for them to be properly created and effective, which will not be undone if any of the circumstances set out in section 16(1) of the Act arise. Significantly, however, the regime includes an 'opt out' mechanism in section 16(2) of the Act. As Ward J noted in Quest Rose Hill Pty Ltd v White [2010] NSWSC 939, if the power of attorney meets the statutory requirements, then, for the purposes of the statute it is irrevocable, whether or not it meets the common law requirement of being coupled with an interest.[14]

The distribution agency in Angove's Case

The essential facts in the case were as follows:

  • Angove's Pty Ltd (an Australian winemaker) engaged D&D Wines International Ltd (a UK company) (D&D) as its agent and distributor in the United Kingdom under an Agency and Distribution Agreement dated December 2011 (ADA).
  • D&D went into administration on 21 April 2012 at which time there were outstanding invoices totalling $874,928.81 representing the price of wine sold by D&D to UK retailers.
  • On 23 April 2012 Angove's gave D&D written notice terminating the ADA and D&D's authority to collect on the outstanding invoices totalling $874,928.81. The written notice stipulated that Angove's would collect on the outstanding invoices and account separately to D&D for its commission arising on these sales referable to these invoices.
  • On 10 July 2012 D&D moved into voluntary liquidation. The liquidators (Bailey) claimed that Angove's was not entitled to do what it had done and contended that D&D was entitled to collect on the outstanding invoices, deduct its commission arising on these sales referable to these invoices, and leave Angove's to prove in the winding up of D&D for the balance of the price of the invoices.
  • As part of its claim D&D argued that the arrangements under the ADA created an irrevocable agency because the ADA created rights allowing D&D as agent to collect its commission out of the proceeds of wine sold by it to customers of Angove's.

Their Lordships found against Bailey and D&D for the following reasons:

  1. While D&D had express authority to collect from customers, the authority wasn't expressed to be irrevocable. Nor was it is expressed as surviving the termination of the ADA. It would have been easy to have expressed these conditions in the ADA but they weren't.
  2. While D&D assumed responsibility for collecting payment from customers, there was nothing in the ADA to stop Angove's assuming responsibility for that task or the customer paying Angove's directly.
  3. The fact that the ADA allowed D&D to recover its commission by deducting it from the proceeds of invoices upon payment by the customer didn't infer that the agency was irrevocable.
  4. It was inherently improbable that either D&D or Angove's intended the arrangement to be irrevocable as the parties had envisaged the possibility of insolvency and had provided for a mutual right of termination in that event.

What can be learned from Angove's Case?

The lessons are twofold:

  1. If you WANT your agency relationship to be irrevocable it requires express language to record this, and it must found a proprietary or other right in the agent that is personal to the agent.
  2. If you DO NOT WANT your agency relationship to be irrevocable, it is critical that there is express language which records this, and that the terms and conditions of the relationship must have the substantive effect of making it revocable.

Footnotes

[1] Bailey and Another (Respondents) v Angove's Pty Ltd (Appellants) [2016] UKSC 47 at Paragraph [6].
[2] Ibid at Paragraph [7].
[3] Ibid. See also Esteban de Comas v Prost and Kohler (1865) Moo PC NS 158; Frith v Frith [1906] AC 254; Griffin v Clark (1940) 40 SR (NSW) 409; Cordiant Communications (Australia) Pty Ltd v Communications Group Holdings Pty Ltd (2005) 55 ACSR 185.
[4] Ibid at Paragraph [7]. See also the cases referred to in footnote 3.
[5] Ibid at Paragraph [7].
[6] Ibid.
[7] Ibid.
[8] Ibid.
[9] Frith v Frith [1906] AC 254 at 259-260. See also Clerk v Laurie (1857) 157 ER 83 at 83 per Williams J; Smart v Sanders (1848) 2 CB 895 at 917-918 per Wilde CJ.
[10] Bailey and Another (Respondents) v Angove's Pty Ltd (Appellants) [2016] UKSC 47 at Paragraph [8].
[11] Ibid at Paragraph [9]. See also Walsh v Whitcomb (1797) 2 Esp 565 and Gaussen v Morton (1830) 10 B&C 731.
[12] Bailey and Another (Respondents) v Angove's Pty Ltd (Appellants) [2016] UKSC 47 at Paragraph [9].
[13] There is similar legislation in all States and Territories, however the South Australian and Australian Capital Territory legislation does not contain provisions addressing irrevocable powers of attorney.
[14] See D.E. Dal Pont, Powers of Attorney, 2nd Edition, LexisNexis Butterworths, 2015 at p 21.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Kenneth Stanton
Lachlan Roots
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions