Re Willmott Forests Limited [2012] VSCA 202 is a very important decision in insolvency jurisprudence. The Victorian Court of Appeal upheld an appeal from a finding of a trial judge that the disclaimer of a lease agreement by the liquidator did not have the effect of extinguishing the leasehold interests in land [19]. In doing so the court undertook a detailed analysis of section 568 of the Corporations Act.

FACTS

The majority defined the question as, at [1]:

whether a leasehold interest in land is extinguished by the disclaimer of the lease agreement by the liquidator of the lessor, pursuant to s 568(1) of the Corporations Act 2001 (Cth) (‘the Act’)

Willmott Forests Ltd (“WFL”) owned leases from third parties freehold properties. It entered into 25 year leases. The liquidators of WFL sought to sell the interest in the properties unencumbered by the leases and seek to disclaim the lease agreement.  They applied to the court for approval of such disclaimers [2]. Sale contracts for the sale of the land contained conditions precedent to their completion of the liquidators obtaining orders and directions from a court authorising the liquidators, at [9]:

a) to exercise the powers to terminate, relinquish or surrender the project documents of the registered MIS and Professional Investor MIS; and

(b) to disclaim the project documents of the contractual and partnership MIS as onerous pursuant to s 568(1) of the Act.

The liquidators made application under section 511 of the Act and 477 (2B) for approval of their entry into contracts.

 DECISION

Warren CJ and Sifris AJA

Regarding the operation of section 568 their honours stated:

1. liquidators have the power to disclaim property of a company in liquidation or contracts entered into by the company [15]
2. it is to enable a liquidator to Read the rest of this entry »

The Personal Liability for Corporate Fault Bill passed the Houe of Representatives today. The bills web page is found here.

The Bill arose from the Council of Australian Governments’ National Partnership Agreement to Deliver a Seamless National Economy whose aim is to remove regulatory burdens on directors and corporate officers that cannot be justified on public policy grounds, and to minimise inconsistency between Australian jurisdictions in the application of personal liability for corporate fault in government laws.

The relevant COAG Principles are

• Where a corporation contravenes a statutory requirement, the corporation should be held liable in the first instance.
• Directors should not be liable for corporate fault as a matter of course or by blanket imposition of liability across an entire Act.
• A ‘designated officer’ approach to liability is not suitable for general application.
• The imposition of personal criminal liability on a director for the misconduct of a corporation should be confined to situations where: Read the rest of this entry »