Re Hegarty, W.J. & Anor Ex Parte Geroff & Burns v M.V.O Industries Pty Ltd

[1990] FCA 666

JUDGMENT No. b.hh. . / .g~

IN THE FEDERAL COURT OF AUSTRALIA	)
GENERAL DIVISION	)
BANKRUPTCY DISTRICT OF THE	) NO. X1 of 1990
STATE OF OUEENSLAND	)

RE:  Warren John HEGARTY and Lorraine M a n HEGARTY

(Debtors )

EX PARTE:  Peter Ian GEROFF and Robert John BURNS

Applicants

M.V.O. INDUSTRIES PTY LTD

Respondent

CORRIGENDUM

Amendment to the judgment of his Honour Mr. Justice J.E. J. Spender dated 31 October 1990:

page 5, last paragraph:

the words "as from 14 September 1990" appearing in lines 4 and 5 should appear following the word "application" in line 2.

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WlNOPU

Associate to S~ender J.

26 November 1990

RECEIVED

FmERAl. COURT OF

MKmWA

IN THE FEDERAL COURT OF AUSTRRLIA	1
GENERAL DIVISION	1
BANKRUPTCY DISTRICT OF THE	1 NO. X1 of 1990
STATE OF OUEENSLAND	1

RE:  Warren John HEGARTY and Lorraine Marv HEGARTY

l Debtors )

EX PARTE:  peter Ian GEROFF and ~obert ~ohil BURNS

Applicants

M.V.O. INDUSTRIES PTY LTD

Respondent

SPENDER J.
BRISBANE

31 October. 1990

EX TEMPORE REASONS FOR JUDGMENT

This is an application made on behalf of Peter Ivan Felix Geroff and Robert John Fred Burns, who are the trustees of the debtors, Warren John Hegarty and Lorraine Mary Hegarty, under a Deed of Arrangement dated 14 December 1989 entered into in accordance with Part X of the Bankru~tcv Act (1966), ("the Act"). The trustees seek orders pursuant to S. 133(5) that they have leave to disclaim registered lease number

T397137D between Mr and Mrs [legarty as lessees and M.V.O.	Industries Pty Ltd as lessor.
Under the terms of the Deed of Arrangement, the debtors assigned all the property in the Schedule to that Deed to the joint trustees. That property may compendiously be referred to as the business assets and undertakings of the business known as "HT Sales". That business had operated from premises which are the subject of this application. That lease of which leave to disclaim is sought commenced on 14 September 1987, and was for a 15-year period, thus terminating on 13 September 2002. The rental currently payable under the lease is $3715.36 per calendar month.
After their appointment on 14 December 1989, the joint trustees entered into possession of the assets of the business located at those premises and continued to pay monthly rent. In July 1990 there was a dispute as to whether one month's rental was payable, but, in any event, after an inquiry, the amount demanded was paid. The trustees, in fact, paid rent to 14 September 1990.
After the trustees entered into possession, Mr Burns arranged for the advertising of the sale of the business, and a sale was eventually negotiated to Nor-Rail Pty Ltd. Settlement of that sale, which did not involve any transfer of the leased premises to Nor-Rail Pty Ltd, occurred on 6 August 1990.
There were considerable negotiations regarding the lease between the time of the initial negotiations for the sale of the business and the settlement in August. Part of those negotiations involved a request that M.V.O. Industries Pty Ltd accept a surrender of the lease and then grant a fresh lease to Nor-Rail Pty Ltd for an initial term of two years with a possible option of two years, but otherwise on the same terms and conditions as the lease to the debtors. That

proposal was rejected by the landlord, and a counter-proposal was made that Nor-Rail Pty Ltd accept a new lease and that a lump-sum payment of $40,000 be paid by the trustees in consideration of the landlord accepting the surrender of the lease. It was claimed that the $40,000 was the cost to return the premises, after the expiration of the lease to Nor-Rail Pty Ltd, to an appropriate state to be re-let. That counter-proposal by the landlord was not acceptable, but the trustees, acting on the advice of members of the Committee of Inspection made an offer to the landlord to pay $15,000 to procure the surrender of the lease. That offer was not accepted.

Subsequent to that time, settlement occurred on 6 August 1990, and after negotiations, Nor-Rail Pty Ltd occupied the premises to allow it to obtain control of the business and to arrange relocation of the assets it had just acquired. Nor-rail Pty Ltd vacated the premises on 5 September 1990. On the day in which the vacation of the leased premises occurred,

representative of the landlord, and one of the joint trustees	an agreement was reached between Nor-Rail Pty Ltd, a	of the debtors, Peter Geroff, that certain items in the premises would be the subject of rectification and certain other work, including painting, would be carried out at the coat of the trustees.
It is accepted by the parties that in the events that have happened, no right to determine the lease accrued to the landlord. On behalf of the trustees it was submitted that leave ought to be granted unconditionally to disclaim the lease as from 14 September 1990. On behalf of M.V.O. Industries Pty Ltd it was submitted that terms should be imposed as conditions of the disclaimer to give effect to the advantage accruing to the general body of creditors from the occupation of the premises from 14 December 1989 until 5 September 1990, which occupation permitted the business to be sold as a going concern, and, as a consequence, assisted the general body of creditors.
Notwithstanding that there was no right in the landlord to determine the lease, in my view the continued occupation by the trustees did have the effect of providing a benefit for the general body of creditors. Quantification of that benefit is difficult, but I take into account and place considerable reliance on the offer made to the landlord to pay $15,000.00 to procure the surrender of the lease, an offer made on the advice of members of the Committee of Inspection. I am conscious that that offer was made when negotiations for the sale of the business were fluid and that also subsequent
to the time of the offer, some $11,000 has in fact been paid
by the trustees for the occupation of the premises. It seems to me that the offer made on the advice of the Committee of Inspection reflected a recognition of the special features of the premises adapted for occupation by the business formerly owned by the debtors.

I t is impossible to ignore the events subsequent to the offer by the Committee of Inspection, but having regard to it, it seems to me that the landlord ought not simply be left to the remedy open to it under section 133(12) which relevantly provides:

" A person aggrieved by the operation of a disclaimer under this section shall be deemed to be a creditor of the bankrupt to the extent of any loss he has suffered by reason of the disclaimer and may prove the loss as a debt in the bankruptcy".

I propose to grant leave to disclam the lease the subject of this application, on terms that the joint trustees pay to M.V.O. Industries Pty Lta the sum of $10,000, and the costs of both the trustees and of M.V.O. Industries Pty Ltd as from 14 September 1990 to be taxed and to be paid as costs of the administration of the estate of the debtors.

I certify that this and the four (4) preceding pages are a true copy of the reasons for judgment

Spender. herein of his Honour M r . Justice

* Associate

%-W+-

Date:  31 October 1990