High Court Update - Liquidators justified in disclaiming leases in Willmott Growers Group Inc v Willmott Forests Limited (Receivers and Managers Appointed) (In Liquidation) [2013] HCA 51

This week the High Court dismissed the appeal bought by Willmott Growers Group Inc (the Growers) in relation to the Court of Appeal of Victoria decision in Re: Willmott Forests Ltd (Receivers and Managers Appointed) (in liquidation) (in its capacity as manager of the unregistered managed investment schemes listed in Sch 2 and Others (according to Sch 1)) - (2012) 91 ACSR 182 (Court of Appeal Decision).


Originally, Willmott Forests Ltd (Receivers and Managers Appointed) (in liquidation) (WFL) bought proceedings against the Growers seeking, amongst other things, directions from the Court that the liquidators were justified in disclaiming the interests of certain members of multiple forestry investment schemes who had been granted leases of land owned by WFL.  For more information on the background to the proceedings and the Court of Appeal Decision, please click here.

There were a number of issues before the Court for consideration.  These included, whether section 568(1) of the Corporations Act 2001 (Cth) contemplates the disclaimer of a lease by a liquidator of the lessor and, whether the effect of the disclaimer is to divest the lessee of its leasehold interest in the land leaving the lessee to prove as an unsecured creditor in the winding up of the lessor.

Issues the court did not consider

The High Court did not consider the effect of being left to proof as an unsecured creditor in circumstances where a tenant’s lease has been disclaimed by the liquidator of a landlord.

It also did not consider whether the liquidators require the leave of the court before disclaiming the investors’ leases or, if leave were to be granted, what would be taken into consideration when deciding whether to grant or refuse leave.


The Court held that the leases were contracts between the Growers and WFL, under which WFL has “ongoing obligations to give the Growers exclusive possession of land owned or leased by WFL…[thus] the liquidators of WFL have power to disclaim them”.¹  The Growers’ proprietary interests are derived from those contracts and as such, a disclaimer would have the effect of terminating the Growers’ leasehold estates or interests in the land.

Lavan Legal comment

The decision has a number of implications for tenants, liquidators and the finance market.  Tenants will now assume significant risk in relation to the solvency of their landlord.  Financiers may become less willing to advance finance on a lease given the reduced security of tenure.  Successful reconstruction of agricultural or forestry managed investments schemes based on leasehold structures may be reduced - the decision may mean that it will be more difficult to appoint replacement responsible entities which have, or may, become insolvent.

On the other hand, the decision is good news for liquidators of landlord entities who find they are unable to sell or dispose of land that is burdened by leasehold interests.

Disclaimer – the information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.