Wilmot Growers Group Inc v Willmott Forests Limited (Receivers And Managers Appointed) (In Liquidation) [2013] HCA 51

Today (4 December 2013), the High Court, by majority in the case of Wilmot Growers Group Inc v Willmott Forests Limited (Receivers And Managers Appointed) (In Liquidation) [2013] HCA 51, held that the liquidators of a company had power under Div 7A of Pt 5.6 of the Corporations Act 2001 (Cth) to disclaim leases granted by the company to investors. It also held that disclaimer terminated the landlord's
obligations and the tenants' correlative rights arising under the leases.

Facts

Willmott Forests Limited (the first respondent) was the manager of forestry investment schemes associated with a group of companies known as the Willmott group.   Willmott Forests (or its predecessor) leased
to participants in those schemes portions of land which Willmott Forests owned or leased.

In September 2010, Willmott Forests (and other companies in the Willmott group) went into voluntary administration. Receivers and managers
were also appointed to property which companies in the group had charged.

In March 2011, the creditors of Willmott Forests resolved that the company should be wound up. They appointed the second and third respondents as liquidators of the company. The liquidators concluded that the schemes could not continue to operate and, in conjunction with the receivers and managers, sought to sell the assets of Willmott Forests. No one expressed
interest in purchasing any of the assets encumbered by the schemes or in
becoming the responsible entity or manager of any of the schemes. When sale contracts were concluded, each contract provided that title to the assets the subject of the contract was to pass to the purchaser free from the encumbrances arising out of the schemes. 

Case at Trial

The liquidators applied to the Supreme Court of Victoria for directions and orders about the sales that had been negotiated and the Supreme Court held that those provisions in the Corporations Act 2001 did not empower the liquidators to disclaim the leases with the effect of extinguishing the tenants' estates or interests in the land. The Court of Appeal reversed this decision, finding that it was necessary to extinguish the tenants' rights under the leases in order to release Willmott Forests from liability.

The High Court Decision

A majority of the Court held that s 568(1) of the Corporations Act gave the liquidator of a company power to disclaim a lease granted by the company to a tenant. A lease granted by the company to a tenant was "a contract" within the meaning of that provision. The effect of s 568D(1) was that, from the effective date of the disclaimer, the tenant's rights arising under the lease were terminated and the tenant's estate or interest in the land was brought to an end. As such, the liquidators had the power to disclaim the leases to investors with the effect of terminating the tenants' estates or interests in the land.

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