Multi-scheme leases. Primary RE Ltd v Great Southern Property Holdings Ltd & Ors [2011] VSC 242

Another issue in the Primary RE case was whether a replacement RE can seek relief from forfeiture of part only of a terminated lease.

Primary RE was appointed as replacement RE for only the 2007 scheme. However, some of the leased land was used for other schemes as well. Consequently, Primary RE would be able to seek relief from forfeiture of part only of the terminated lease.

The Court found that:

• a right to seek relief from forfeiture of part only of a lease would not transfer under s 601FS; and
• even if it did transfer, the unfairness created by seeking relief of part only of a lease would be a good reason to deny the grant of relief.

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This finding may present a significant obstacle to responsible entities seeking to rescue distressed managed investment schemes where the lease has already been terminated.

However, the Court was willing to accept that part of a lease that had not been terminated could vest in a replacement RE. Justice Rares in Huntley Management Ltd v Timbercorp Securities Ltd [2010] FCA 576 stated that two REs could be tenants of the same lease under s 601FT. Justice Judd distinguished the Primary RE case on the basis that the right to seek relief against forfeiture is indivisible. With respect, it is not clear why a single estate in land should be viewed as divisible by statute but that a right to seek relief from forfeiture of the same estate(s) in land is not divisible by the same statute.

The relevant discussion takes place in paragraphs [199] to [207] of the judgment.