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Australian Wine Exports Contract Dispute

An Australian wine exporter that terminated its relationship with its English agent and distributor following the latter entering administration is beneficially entitled to sums paid by customers for wine supplies since the date of termination, the High Court has ruled. The decision means that the company is entitled to almost Australian dollars 875,000 which had stood in an escrow account pending determination of the dispute.

In terminating the agency and distribution agreement with immediate effect, the company had stipulated that the agent’s authority to collect payments from wine buyers was also terminated forthwith. The agent subsequently entered creditors voluntary liquidation and its joint liquidators argued that money received from customers post-termination and paid into the escrow account should be available for distribution to creditors generally.

The liquidators’ argued, inter alia, that the true relationship between the wine exporter and its agent was that of seller and buyer, not principal and agent, and that the former should have to take its place in line with other creditors. However, the court accepted the wine exporter’s plea that, on a true construction of the agency and distribution contract, it had a proprietary interest in the money in the escrow account which was held on constructive trust for its benefit.