Newsflash – High Court grants special leave to appeal in Willmott Forests – disclaimer of leases

Yesterday 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 [2012] VSCA 202.

The transcript of the special leave application is not yet up on Austlii. However my friend and colleague Sam Hopper has posted a very useful update on his blog here. Also the parties’ summaries of argument are available online here (scroll down to the table for proceeding M99 of 2012).

I wrote on the Victorian Court of Appeal’s decision last year here. In short, the Court of Appeal held that a tenant’s leasehold interest could be extinguished by disclaimer of the lease agreement by the liquidator of the lessor, pursuant to s 568(1) of the Corporations Act 2001 (Cth).

In their summary of argument for special leave, Willmott Growers Group Inc noted that disclaimer of a lease by a liquidator of a corporate tenant is common (at [42]). However, they argued that disclaimer of a lease by a liquidator of a corporate lessor is a novel use of the liquidator’s disclaimer power, and that the implications of the Court of Appeal’s decision are far reaching. Tenants, particularly retail shop tenants, typically invest substantial sums into the goodwill and fit-out of their leased premises. Much of this expenditure is lost of the tenant is forced to relocate. Also, as the Court of Appeal’s decision erodes the security of tenure under a lease, it may impact upon the willingness of banks and financiers to grant finance on the security of a lease. They noted that the consequences for lessees, in particular retail tenants, are significant. The Court of Appeal had indicated at [51] that the implications of its decision extended to “shopping centre leases”. (See [36]-[41] of the applicant’s summary of argument.)

We await the High Court’s decision with interest. It is expected the appeal hearing will take place later this year, potentially August 2013, with the judgment to follow sometime thereafter.

One thought on “Newsflash – High Court grants special leave to appeal in Willmott Forests – disclaimer of leases

  1. Pingback: Heads Up – Willmott Forests High Court Appeal – Judgment imminent | Carrie Rome-Sievers, Barrister

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