In the Primary RE case, the Court held that relief from forfeiture would not have been granted in any event.
The Court (see para [196]):
- did not accept that the financial prospects of a restructured scheme is a significant factor in the exercise of the Court’s discretion; and
- accepted that the interests of the investors is a relevant consideration.
However, the Court found that the most persuasive considerations against the grant of relief were:
- the conduct of the former RE, including its failure to seek relief an other factors relied on by the landlords to support their estoppel claim;
- the potential for reduced rent paid to the landlords (the rent was a percentage of yield and the failure to maintain may affect that yield);
- Primary RE’s proposal to restructure the schemes with only the viable plantations being maintained, which would also impact on the rent;
- that more plantations may be abandoned;
- that the landlord is shackled with a tenant not of its own choosing and a very different scheme structure; and
- that there may now be less investors and less land under management.
The relatively limited weight attached by Judd J to the interests of investors may present an obstacle in any future attempts to seek relief from forfeiture of leases terminated in MIS insolvencies. However, the Court’s comments at [196] suggest that the particular conduct of this tenant weighed heaviest on the court’s mind and that the interests of investors may be the dominant consideration in another case.
Also, it is important to note that Judd J considered the evidence of the financial return for investors to be irrelevant, but that the risk of a reduced yield (through damage to trees and reduction to the leased area) and, as a result, a reduced rent for the landlord, to be relevant and weighty considerations. This is consistent with the notion that a tenant seeking relief from forfeiture needs to secure the benefit of the bargain for the landlord. In my view, this does not mean that the viability of the plantations is not a relevant consideration to the grant of relief. To the contrary, it is probably the most important consideration as the scheme must be viable to see out the end of the term and to secure the payment of rent for the landlord.
The weight attached to the tenant’s prior conduct also reinforces the need for those acting for members of distressed MISs to attempt to appoint a replacement responsible entity at the earliest stage.
The relevant discussion is located at paragraphs [182] to [198] of the judgment.
Sam Hopper Barrister 
July 20, 2011
Insolvency / managed investments schemes, Property / leasing