Case: Selim v McGrath [2003] NSWSC 927 ; (2003) 47 ACSR 537
Outcome: referred to
The 'creditors' who may pass a resolution of one of the types mentioned above at the decision meeting are not defined in the Act. The traditional approach has been to treat as creditors for the purposes of s 439C those persons who would be entitled to prove in a winding up of the company in accordance with s 553 of the Act (see Brash Holdings Limited (Administrator Appointed) v Katile Pty Limited (1994) 13 ACSR 504 per Brooking, J D Phillips and Hansen JJ at 513; see also Selim v McGrath ('Selim') [2003] NSWSC 927 ; (2003) 47 ACSR 537 per Barrett J at 554-5 and in particular [67]-[68]). Section 553(1) provides as follows: '553(1) Subject to this Division, in every winding up, all debts payable by, and all claims against, the company (present or future, certain or contingent, ascertained or sounding only in damages), being debts or claims the circumstances giving rise to which occurred before the relevant date, are admissible to proof against the company.' 54 In Selim Barrett J observed at 548 [39]: '... there are significant differences between proof of debts and claims for voting purposes in relation to Pt 5.3A meetings and proof of debts and claims for the purposes of entitlement upon a distribution in a winding up.' 55 His Honour proceeded to deal extensively with the issue of 'Proof of debts in voluntary administration', 'Decided cases on regs 5.6.23 and 5.6.26' and 'Analysis of regs 5.6.23 and 5.6.26' in his reasons for judgment at 557-566 (see [78]-[106]). 56 The regulation making power contained in the Act is to be found in s 1364. That section relevantly provides as follows: '1364(1) The Governor-General may make regulations prescribing matters: ... (b) necessary or convenient to be prescribed by such regulations for carrying out or giving effect to this Act. (2) Without limiting subsection (1), the regulations may make provision: ... (f) for or in relation to the convening of, conduct of, and procedure and voting at, meetings of creditors, ... and generally regulating the conduct of, and procedure at, any such meeting; and ...' 57 In accordance with the regulation making power, regulations have, relevantly, been made which are to be found in Part 5.6 of the Corporations Regulations 2001 ('the Regulations'). 58 In relation to meetings of creditors convened under Part 5.3A of the Act regulations 5.6.12 to 5.6.36A are to apply to the convening and conduct of and voting at such meetings by virtue of subregulation 5.6.11(2). Subregulation 5.6.11(2) is expressed to be 'Subject to subregulation (3)'. By virtue of subregulation 5.6.11(3) the relevant regulations do not apply to meetings of creditors convened under Part 5.3A if the regulations are inconsistent with a particular requirement of the Act, the regulations or the rules [in this case the Federal Court Rules ]. 59 Whilst regulation 5.6.17(1)(c) of the Regulations provides for meetings convened by administrators to be chaired by the relevant administrator 'or a person nominated by [the administrator]' it is clear that by virtue of regulation 5.6.11(3)(c) of the Regulations an administrator may not nominate another person to chair a meeting of creditors under s 439C of the Act. Section 439B(1) of the Act makes it clear that decision meetings, convened under s 439A, at which resolutions may be passed under s 439C, must be presided over by the relevant administrator. 60 Plainly, the Regulations cannot be used to determine what is meant by the expression 'the creditors' in s 439C of the Act. However under the Regulations the rights of creditors to vote at decision meetings may be restricted. Hence the relevance, in particular, of regulations 5.6.23 and 5.6.26. 61 In relation to the taking of polls at meetings of creditors, regulation 5.6.21(2) provides: '5.6.21(2) A resolution is carried if: (a) a majority of the creditors voting ... vote in favour of the resolution; and (b) the value of the debts owed by the corporation to those voting in favour of the resolution is more than half the total debts owed to all the creditors voting ... .' 62 In relation to creditors who may vote, regulation 5.6.23 of the Regulations relevantly provides as follows: '5.6.23(1) A person is not entitled to vote as a creditor at a meeting of creditors unless: (a) his or her debt or claim has been admitted wholly or in part by the liquidator or administrator of a company under administration ...; or (b) he or she has lodged, with the chairperson of the meeting or with the person named in the notice convening the meeting as the person who may receive particulars of the debt or claim: (i) those particulars; or (ii) if required a formal proof of the debt or claim. (2) A creditor must not vote in respect of: (a) an unliquidated debt; or (b) a contingent debt; or (c) an unliquidated or a contingent claim; or (d) a debt the value of which is not established; unless a just estimate of its value has been made. ...' 64 As Barrett J observed in Selim at 558 [81]: 'It is clear, despite these unqualified references to proofs being admitted or rejected [references to proofs in regulation 5.6.26], that a concept of partial admission of a debt exists.' 65 Subject to the foregoing observations the analysis of Barrett J in respect of proofs of debt for voting purposes in voluntary administrations as recorded in Selim and referred to above should, in general terms, be followed. Given their length they have not been repeated in these reasons.