The disclaiming of leasehold interests by
On 10 May 2013, the High Court granted special leave to appeal
the Victorian Court of Appeal's decision in Willmott
Forests Ltd (Receivers and Managers appointed) (in liquidation) v
Willmott Growers Group Inc and Willmott Action Group Inc
 VSCA 202.
The Court of Appeal unanimously reversed the decision of Judge
Davis at first instance, and found that a tenant's leasehold
interest in land is extinguished by the disclaimer of a lease
agreement by a liquidator of a landlord.
This is an unusual scenario that may have significant
consequences for tenants, given that it is rare for liquidators of
land to disclaim lease agreements. Tenants need to be aware that if
they receive a notice of disclaimer of their lease from their
landlord's liquidator, they should consider making an
application to have the disclaimer set aside.
The application has to satisfy the court that the disclaimer
will cause prejudice to the tenant out of proportion to the
prejudice that setting aside the disclaimer will cause to the
It is especially important for tenants to realise that they have
to make the application under section 568B of the Corporations
Act 2001 (Cth) ("The Act") within
14 days of receiving the notice of disclaimer by the
Our advice and assistance in the making of the application
should be sought immediately upon receipt of a notice of this
Disclaimer by a liquidator
Liquidators are given the power to disclaim the property of a
company under section 568(1) of the Act, which has the effect of
terminating a company's rights, interests and liabilities for
So a third party's rights about that property are only
affected so far as necessary to release the company from
The facts of the Willmott decision
Willmott Forests Ltd ("WFL") leased
its land to various parties ("the
Growers") to be used for forestry plantations. The
lease agreements entitled the Growers to grow and harvest trees on
the land for a term of 25 years.
WFL went into liquidation. The liquidators wanted to sell
WFL's interests in the land unencumbered by the lease
agreements. The liquidators sought directions from the court as to
whether they could disclaim the leases, and extinguish the
tenants' interests in the land.
At first instance, Judge Davies found that the disclaimer of the
lease contracts did not extinguish the lessees' proprietary
interests in the land.
The Victorian Supreme Court of Appeal reversed the decision and
unanimously found that the disclaimer of a lease agreement by a
liquidator extinguishes a tenant's leasehold interest in
The Court decided that the landlord's obligation to provide
possession and quiet enjoyment is a continuing obligation, as
opposed to an accrued one that a disclaimer cannot terminate. The
Court also considered that leases are contractual, as opposed to
proprietary in nature.
The High Court appeal
The appeal to the High Court of Australia was heard in August of
this year but no decision has been handed down at the time of
writing. We will provide commentary on the High Court decision as
soon as it is available.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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