CORPORATIONS — winding up — conduct of liquidation — disclaimer of onerous property — whether royalty deed an unprofitable contract — meaning of “unprofitable contract” in Corporations Act, s 568(1A) — whether leave should be granted to disclaim royalty deed as a contract
STATUTORY INTERPRETATION — legislative purpose — liquidator’s power to disclaim onerous property — meaning of “unprofitable contract” — legislative purpose of Division 7A of the Corporations Act
Quick Take
1An 'unprofitable contract' within s 568(1A) of the Corporations Act is one which cannot satisfactorily be carried out because it imposes continuing financial or otherwise onerous obligations on the company without reciprocal benefits or impedes the efficient conduct of the liquidation; a contract is not 'unprofitable' merely because the company in liquidation would be in a better financial position if it were disclaimed or because a better commercial bargain could have been struck.
2The predominant purpose of Division 7A of the Corporations Act is to relieve a liquidator from onerous obligations that might otherwise need to be complied with as an incident of an insolvent estate's property, while managing conflicting interests such as those of counterparties to contracts; it is not simply to increase the financial return to unsecured creditors.
3When exercising the discretion to grant leave to disclaim a contract under s 568(1A), the court may have regard to the nature and commercial context of the counterparty's rights, the propriety of the transaction in which the contract was entered into, the impact of disclaimer on commercial certainty, and the comparative prejudice to all affected parties including that disclaimer would effect a wealth transfer from the counterparty to unsecured creditors.
