Archive for December, 2013

Landlord’s liquidator can disclaim tenant’s lease

The High Court today held 4:1 that the liquidator of a landlord company could disclaim both the landlord’s interest and the tenant’s interest in a lease.  See: Willmott Growers Group Inc v Willmott Forests Limited [2013] HCA 51. The decision will have significant implications for tenants and their financiers. Section 568(1) of the Corporations Act permits a liquidator to disclaim certain property of a company, including property that consists of a contract. French CJ, Hayne and Kiefel JJ held that a lease was a species of contract and that the leases which were the subject of the appeal were “property of the [landlord] company”  within the meaning of s.568. Their Honours rejected the contention that the disclaimer power applied only to leases to the company in liquidation and held that the rights of the landlord and tenant ceased from the date the disclaimer took effect. Gaegler J, who was in the majority, delivered a separate judgment. Keane J, in a powerful dissent,  held that a disclaimer could not divest rights that had already accrued such as the interest of a tenant. I will be writing further about this decision.


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VCAT applies general law principles in property partition under Part IV

There is a dearth of authority in Victoria concerning the principles that apply in determining claims for the partition of property under Part IV of the Property Law Act 1958.  In broad terms Part IV permits a co-owner of land or goods to apply for orders in respect of that land or those goods. VCAT has the power to “make any order that it things fit to ensure that a just and fair sale or division of land or goods occurs” (s.228). The Tribunal must order the sale of the land or goods unless it considers it would be more just and fair to order the division of the land or goods (s.229(1)). In Sherwood v Sherwood [2013] VCAT 1746 the Tribunal considered and applied general law principles in determining how property should be partitioned.  The dispute was between siblings who were registered as joint proprietors of the land. The brother applied to VCAT seeking an order that he retain the land and also claimed that he had paid 92% of the loan costs and other expenses relating to the land. He and his sister were jointly liable to repay the loan with which they had purchased the land. The sister claimed that her interest in the land fixed at the date of purchase at 50% because she was jointly liable to pay the home loan and was a joint tenant.  The Tribunal held that while the Act did not say that the Tribunal’s discretion was to be applied in accordance with the general law, it would not be just and fair to disregard the general law ([27]). At [34]  Senior Member Riegler said that   “I approach the task at hand having regard to and being informed of the general law, rather than simply imposing some form of instinctive justice”.

Apart from the deposit, the parties contributed equally to the purchase price because repayments of a home loan are not counted as contributions to the purchase price. See: Calverley v Green (1984) 155 CLR 242. The applicant contended that if regard were had to the general law it would be just and fair that the Tribunal impose a remedial constructive trust in his favour of the type found in Baumgartner v Baumgartner (1985) 160 CLR 583 reflecting the unequal contributions made by him that conferred a benefit on his sister or alternatively that he was entitled to contribution from his sister and entitled to an equitable charge to secure the making of the contribution.  The Tribunal held that the parties had not purchased the property as a joint venture or joint endeavor and therefore rejected the applicant’s claim for the imposition of a remedial constructive trust. The Tribunal also held that when they purchased the land the parties had not reached an agreement as to how much of the home loan they were each to pay or what proportion of beneficial interest they each were to hold and for that reason rejected the imposition of a common intention type constructive trust in favour of the applicant.

However, because the applicant paid most of the deposit the Tribunal ordered a resulting trust in favour of the applicant that varied the legal interests of the parties to reflect the fact that they each held the land as tenants in common, with the applicant holding a 54.33% share and the respondent the balance.

The Senior Member also ordered contribution from the respondent to the applicant to the extent that he had paid more than 54.33% of the home loan payments and other outgoings.  The respondent was ordered to pay $78,000 in contribution plus interest of more than $5000.

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