You may have all read by now about the about the case involving the Liquidator of Willmott Forests (Willmott Growers Group Inc v Willmott Forests Limited (Receivers and Managers Appointed)(In Liquidation) [2013] HCA 51), where the court decided that a liquidator may disclaim a lease that a company has granted to a tenant. In this instance, the tenants were growers who had financed the planting of trees on land owned by the company over which the liquidator was appointed and some of these tenants had paid rental in advance.
Commentary regarding this case can be found at any number of legal websites. For example here
Previously, it had only been common for a liquidator who was the tenant or lessee of goods to use this power of disclaiming to relieve him/herself from the onerous obligation associated with this lease agreement. eg a liquidator would disclaim a motor vehicle lease and thereby enable it to be recovered by the financier or give notice to a landlord that they would be vacating from a rented premises and no longer be liable for the ongoing lease costs.
This case is the first that I am aware of where a landlord can give notice to a tenant to vacate. Previously, it had been the position that where a liquidator was appointed over a property which had an existing tenant, the property could only be sold with the lease remaining in place. Depending on the tenant and nature of the lease, this may have had a positive or negative impact upon the value of the property being sold. The Willmott case has now opened up the ability for a landlord that goes into liquidation to effectively evict a sitting tenant.
Letting ones mind run with possibilities, this could give rise to a situation where a landlord in liquidation with a profitable tenant could evict that tenant, retain the fixtures and fittings installed at the premises, and sell the freehold and now ceased but ‘turn key’ business assets to a potential purchaser. Whilst I’m not a lawyer and there may be other areas of the law that would come into play, this would appear to be an area open to abuse.
Similarly, this situation will cause issues to financiers who provide funds to lessees (eg pretty much every retailer and SME in the country). If the Willmott case is applied and the landlord of the leased property goes into liquidation, the liquidator could terminate the existing lease leaving both the financier and tenant out in the street…
I’m sure you, the reader, could think of a variety of situations where this case will case issues for sitting tenants…
Adrian Hunter 