Australia & New Zealand Bank Ltd v Ateliers de Constructions Electriques de Charleroi [1966] 1 NSWR 19
Agency; grant of authority; implied authority; duties of an agent; duty to keep principal's funds separate.
Facts: Ateliers de Constructions Electriques de Charleroi (ACEC) was a Belgian manufacturer of electrical equipment. ACEC appointed an Australian company called Helios as its agent in Australia, giving Helios certain express powers to sell equipment on its behalf. Helios sold electrical equipment to various Australian companies, including seven transformers sold to the Snowy Mountains Hydro-electric Authority. Helios, as agent, had to obtain import licences, receive the goods, pay customs duty, arrange insurance and transport, supervise installation and make financial arrangements for payment. After delivery of the transformers, the Snowy Mountains Hydro-electric Authority sent a cheque to Helios, made payable to ACEC. Because ACEC had no bank account in Australia, Helios paid the cheque into its own Australian bank account. Helios then forwarded payment to ACEC, who received it without objection. Further cheques received by Helios were similarly paid into Helios' own account. Unfortunately, not all of the money received was forwarded to ACEC before Helios fell into financial difficulty and went into liquidation.
Issue: Did Helios have authority to pay ACEC cheques into Helios' bank account? If not, was the bank liable to refund the amounts that had not yet been forwarded to ACEC?
Decision: The court held that although Helios had no express authority to pay the cheques into its own account, in the circumstances the authority to do so could be implied from the necessity to make the contract commercially workable.
Reason: From a business point of view, it was a practical necessity for Helios to endorse the cheques it received and pay them into the Helios account. In fact, this was the only possible plan when the total amount of the cheques received exceeded the sum which exchange control regulations permitted to be exported, or when it was proper for Helios to retain a portion of a sum received by cheque to pay local expenses. Put another way, implied authority was necessary to give ‘business efficacy’ to the transaction.