Disclaimer of a lease by a landlord’s liquidator – Growers granted special leave to appeal

1. the Court of Appeal’s decision is subject to a High Court appeal. However, while the appeal is pending, the decision remains good law. For the implications of the decision for tenants, have a look at the discussion here;
2. in the unlikely event that tenants receive a notice of disclaimer of their lease from their landlord’s liquidator, they should consider immediately making an application to set aside the disclaimer under s 568B of the Corporations Act. That application ordinarily needs to be made within 14 days of the liquidator’s notice of disclaimer. They should also consider challenging in the same proceeding whether a landlord’s Liquidator has power to disclaim the lease; and
3. if the High Court overturns the Court of Appeal’s decision, the risk of their lease being unilaterally extinguished by a liquidator using the disclaimer power should be removed. However, if the High Court affirms that decision, the risk remains permanently.

Also, tenants are unlikely to understand the significance of a notice of disclaimer in these circumstances. It is not hard to imagine a tenant approaching a practitioner for advice close to the expiry of the 14 day limit (see text in bold above). Consequently, practitioners should pay particular attention to the 14 day time limit to avoid a claim being made against them for missing the deadline.

Practitioners acting for liquidators should consider advising their clients of the grant of special leave and, if they are liquidators of landlord companies, to consider the risk of a successful appeal before disclaiming any leases.

Trustees in bankruptcy have a similar disclaimer power under the Bankruptcy Act, so practitioners acting for trustees in bankruptcy of landlords should consider giving them the same advice.