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Re Willmott Forests Limited

Re Willmott Forests Limited

Case [2012] VSCA 202 29 August 2012

Liquidation

Disclaimer of Property

Leasehold Interest

Corporate Rights

Implied Covenants

Corporate Law & Governance

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SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2012 0026
In the Matter of Willmott Forests Limited (Receivers and Managers appointed) (in liquidation) (ACN 063 263 650)
WILLMOTT FORESTS LTD (Receivers and Managers appointed) (in liquidation) in its capacity as manager of the unregistered managed investment schemes listed in Schedule 2 and others (according to Schedule 1).	Appellants
WILLMOTT GROWERS GROUP INC	First Intervener
WILLMOTT ACTION GROUP INC	Second Intervener

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JUDGES	WARREN CJ, REDLICH JA and SIFRIS AJA
WHERE HELD	MELBOURNE
DATE OF HEARING	23 May 2012
DATE OF JUDGMENT	29 August 2012
MEDIUM NEUTRAL CITATION	[2012] VSCA 202
JUDGMENT APPEALED FROM	Re Willmott Forests Ltd [2012] VSC 29

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CORPORATIONS – Liquidation – Liquidator of lessor disclaims lease agreement under s 568(1) of Corporations Act 2001 (Cth) – Whether disclaimer extinguishes leasehold interest – Whether leasehold interest survives termination of the lease agreement – Progressive Mailing House Proprietary Limited v Tabali Proprietary Limited (1985) 157 CLR 17 – Apriaden Pty Ltd v Seacrest Pty Ltd (2005) 12 VR 319.

CORPORATIONS – Liquidation – Consequence and extent of disclaimer on ‘other person’s rights’ – Necessary to extinguish lessees’ tenure to release the company and its property from liability – Whether implied covenant for quiet enjoyment constitutes a liability – Corporations Act 2001 (Cth) ss 477, 511, 568, 568D – Appeal allowed.

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Appearances:	Counsel	Solicitors
For the Appellants	Mr P Crutchfield SC with Mr R Craig	Arnold Bloch Leibler
For the first intervener	Mr G Bigmore QC with Mr M Kennedy	Mills Oakley

WARREN CJ

SIFRIS AJA:

Introduction

The critical question in this appeal is whether a leasehold interest in land is extinguished by the disclaimer of the lease agreement by the liquidator of the lessor, pursuant to s 568(1) of the Corporations Act 2001 (Cth) (‘the Act’).

Willmott Forests Limited (‘WFL’) owns, or leases from third parties, certain freehold properties that it has leased to lessees pursuant to lease agreements. The term of the relevant leases is 25 years. WFL is now in liquidation and its liquidators wish to sell its interest in the properties, unencumbered by the leases. As part of any sale, WFL’s liquidators propose to disclaim the lease agreements and apply to the court for the approval of such disclaimers.

The lessees assert that disclaimer of the lease agreements does not extinguish the lessees’ proprietary or leasehold interest in the land. The trial judge agreed with the lessees and rejected the submissions of the liquidator to the effect that the leasehold interests were extinguished upon the lease agreements being disclaimed. Her Honour held further that the leasehold interests could not be characterised as liabilities or encumbrances upon the property of the lessor, and it was consequently not necessary to extinguish such interests.[1]
[1]Re Willmott Forests Ltd [2012] VSC 29, [1], [3]–[4].

The liquidators appeal the decision of the trial judge. In light of the urgency of the matter, this court granted an expedited hearing of the appeal. By the time of…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Re Willmott Forests Limited

Details

AGLC: Re Willmott Forests Limited [2012] VSCA 202
Case: [2012] VSCA 202
Decision Date: 29 August 2012

CaseChat Overview and Summary

Willmott Forests Limited (the company) was placed into liquidation, and the liquidator disclaimed a lease agreement under s 568(1) of the Corporations Act 2001 (Cth). The dispute involved whether the disclaimer extinguished the leasehold interest and whether the leasehold interest survived the termination of the lease agreement. The Court of Appeal had to determine the consequences and extent of the disclaimer on the rights of other parties, specifically if the lessees' tenure must be extinguished to release the company and its property from liability. The appeal was made by the liquidators, and the respondents were the lessees.

The key legal issue was whether the disclaimer under s 568(1) of the Corporations Act 2001 (Cth) extinguished the leasehold interest. The Court of Appeal considered whether the disclaimer could be exercised to extinguish the leasehold interest and whether the lessees' tenure could survive the termination of the lease agreement. The Court referred to the decision in Progressive Mailing House Proprietary Limited v Tabali Proprietary Limited and Apriaden Pty Ltd v Seacrest Pty Ltd to determine whether the implied covenant for quiet enjoyment constituted a liability that would need to be extinguished by the disclaimer. The Court found that the disclaimer did not extinguish the leasehold interest, and the lessees' tenure survived the termination of the lease agreement.

The Court of Appeal held that the disclaimer under s 568(1) of the Corporations Act 2001 (Cth) did not extinguish the leasehold interest. The Court held that the lessees' tenure survived the termination of the lease agreement. The Court found that the implied covenant for quiet enjoyment did not constitute a liability that needed to be extinguished by the disclaimer. The Court held that the disclaimer did not release the company and its property from liability, and the appeal was allowed. The Court of Appeal's decision provided clarity on the consequences and extent of a disclaimer on the rights of other parties and the implications for the lessees' tenure.

Orders