By Jonathan Nathan -
Snapshot
- Liquidators appointed to a landlord company can now disclaim a registered lease
- This could result in tenants being treated unfairly, and precludes tenants from protecting themselves sufficiently against the risks of a landlord becoming insolvent
- Tenants may be able to protect themselves by including a clause in their lease that states title in any property, fixtures or fittings brought onto the land by the tenant are property of the landlord but will not pass until the landlord company has paid the market value for those properties, fixtures or fittings
Tenants beware: a liquidator appointed to a landlord company can now disclaim your registered lease, so says the High Court’s decision in Willmott Growers Group Inc v Willmott Forests Limited (Receivers and Managers Appointed) (In Liquidation) [2013] HCA 51. This is despite the tenants investing significant amounts of money in developing the land and/or paying rent in advance, even for the entire term of the lease.
The decision in Willmott gives liquidators the right to disclaim even registered leases entered into by landlord companies, which could result in tenants being treated unfairly and precludes tenants from protecting themselves sufficiently against the risks of a landlord becoming insolvent.
Section 568 of the Corporations Act 2001 (Cth) (Act) grants power to liquidators to relieve a company from onerous financial obligations and to thereby enable a prompt, orderly and beneficial administration of the liquidation of the company. Given the commercial reality discussed below, it is even arguable that the decision in Willmott would give powers to a liquidator beyond those envisaged at the time s568 was enacted.
The decision in Willmott also seems to contravene the principle that in disclaiming property, any effect on another person’s rights or liabilities should go no further than what is necessary to release the company or its property from liability.
