Vol 11 (2014) - Issue 5

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The Law of Disclaimer: Would Willmott be Followed in England?

In Willmott Growers Group Inc v Willmott Forests Limited, the High Court of Australia held that, under s568 Corporations Act 2001, the liquidator of a landlord could disclaim leases granted by the landlord prior to its liquidation, thereby ending its tenants’ rights to possession of the demised property and accelerating its own reversion, without disclaiming its freehold estate. The decision has attracted controversy in both Australia and England.
In her recent article in this journal, ‘The Law of Disclaimer’, Giselle McGowan drew attention to the decision. In doing so, she noted that the applicable legislation in England and Australia is not the same and commented that it remains to be seen whether Willmott will be followed in England. Whilst that does indeed remain to be seen, this article argues that Willmott should not be followed.
As a decision of the High Court of Australia, Willmott must be regarded as settled law in that jurisdiction. It follows that, if the argument advanced in this article is correct and the decision would not be followed in England, it highlights an important divergence in the modern form of the disclaimer laws of England and Australia despite their shared heritage.

Summary
In summary, it is submitted that an English court would not follow Willmott because:

1) From an English law perspective, Willmott is wrong in principle.
2) An English court is not bound by the decision in Willmott.
3) The differences in the language of the applicable legislation in England are material differences.
4) English law does not regard a leasehold estate as merely a species of contract but rather as a proprietary right.
5) English insolvency law does not permit the adventitious disaggregation of interests for the purposes of disclaimer.
6) Disclaimer under English insolvency law cannot deprive counterparties (tenants) of their vested proprietary rights.
7) Willmott, if applied in England, would lead to injustice to tenants who would not have the benefit of certain protections available to tenants under the analogous Australian legislation.

Before amplifying each of these propositions, it is appropriate to offer a brief analysis of Willmott.

Willmott
The case was decided by five judges in the High Court. Three (French CJ, and Hayne and Kieffel JJ) delivered a single judgment, the fourth (Gageler J) delivered a separate judgment concurring in the result and Keane J dissented.
The reasoning of the majority proceeded as follows:

a) Australian law identifies categories of property which are capable of being disclaimed;
b) those categories are not mutually exclusive;
c) the categories include ‘a contract’;
d) a lease is a species of contract (executory in so far as the unexpired portion of the term is concerned) and can be disclaimed as such;
e) disclaimer of a contract is possible even though the counterparty acquired a vested interest in property thereunder (Re Bastable ex parte The Trustee distinguished);