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 »

In ACN 079 638 501 Pty Ltd (in liq) (recs & mgrs apptd) v Pattison & Anor [2012] VSC 445 Justice Ferguson considered whether work in progress was covered by a charge given by company.

FACTS

Mr Paul Pattison (“Pattison”),  a qualified chartered accountant and registered liquidator and trustee in bankruptcy established and was sole director and secretary of the Plaintiff. Until April 2010 he conducted his insolvency practice through the Plaintiff [1]. In November 2006 the Plaintiff charged its assets in favour of bank of Western Australia Ltd (“BankWest”). In 2010 BankWest appointed receivers and managers over the assets of the Plaintiff under the charge [2] & [10] – [11].

The issue in the proceeding was whether the work in progress recorded in the books of the Plaintiff, being time spent by Pattison working on insolvency administrations was an asset caught by the charge [3]. Pattison contended that his appointments were personal to him and the Plaintiff provided services to him in connection with those appointments [4]. The receivers contended that all work performed by him pursuant to his appointments as liquidator, deed administrator or trustee in bankruptcy was performed as an employee of the Plaintiff and his work in progress was an asset of the Plaintiff.

DECISION

Her Honour found:

1. the Plaintiff would raise invoices  for fees and disbursements payable [7]. The time spent by Pattison was included in the Plaintiff”s invoice on a separate charge made by him personally;
2. cheques would be paid to Pattison and he would endorse them as payable to the Plaintiff. Payment was made into the company’s bank account [7]; and
3. the Plaintiff’s payslips evidence fortnightly wages payable to Pattison as an employee although this was disputed in part [8].

Ferguson J framed the question as, at [15]:

..the real question is as to the relationship between Mr Pattison and the Company and the effect (if any) that that had on ownership of the work in progress.

The fact that Pattison had certain obligations arising Read the rest of this entry »