In the matter of Glenfyne Farms International AU Pty Ltd (in liquidation); In the matter of GI Commercial Pty Ltd [2019] NSWSC 161 the New South Wales Supreme Court (NSWSC) considered a chairperson’s ability to exercise their casting vote along with the Court’s ability to make orders under section 75-43 Insolvency Practice Schedule (Corporations) (IPS) where a proposed creditor resolution is not passed due to the exercise of a chairperson’s casting vote.
In September 2018 Mr Gladman was appointed as administrator of Glenfyne Farms.
At the second creditors’ meeting it was resolved that Glenfyne Farms would be wound up and Mr Gladman became liquidator of Glenfyne Farms. Immediately following the resolution to windup, Mr Tai (a creditor of Glenfyne Farms) proposed a resolution to replace Mr Gladman as liquidator.
The failed resolution
Mr Tai’s resolution to remove and replace Mr Gladman was the subject of a poll. The result of the poll was:
Mr Gladman, in his capacity as chairperson, advised that as no result was reached, he may use his power as chairperson to exercise his casting vote. He did so and voted against the resolution which resulted in the resolution not being passed.
Mr Tai commenced proceedings to (amongst other things) obtain an order under section 75-43 of the IPS in respect of Mr Gladman’s casting vote.
Section 75-43 of the IPS provides the Court with the power to make orders in circumstances where a resolution is not passed1 because the person presiding at the meeting exercises a casting vote or refuses or fails to exercise a casting vote.2
An issue arises in satisfying subsection 75-43(1) of the IPS in these circumstances as an administrator’s ability to exercise a casting vote is limited by section 75-115 of the Insolvency Practice Rules (Corporations) 2016 (IPR) which sets out (amongst other things) that:
(5) If no result is reached…and the resolution relates to the removal of the external administrator of the company:
(a) the external administrator may exercise a casting vote in favour of the resolution, in which case the resolution is passed; or
(b) if paragraph (a) does not apply—the resolution is not passed.
As a result of the operation of 75-115(5) of the IPR, Mr Gladman was never entitled to exercise his casting vote against Mr Tai’s resolution.
Accordingly, Mr Tai’s application for the Court failed to satisfy section 75-43(1)(b) of the IPS as the failure of the resolution was not a result of Mr Gladman exercising his casting vote, but rather by operation of section 75-115(5) of the IPR. As such, the Court refused to make the orders sought by Mr Tai.
Insolvency practitioners should keep this matter in mind when exercising their casting vote to resolve a resolution which is in deadlock. The IPS provides for specific circumstances where a casting vote can or cannot be exercised and includes (among other things) restrictions on administrators in exercising their casting vote in favour of their appointment or their remuneration.
[1] Insolvency Practice Schedule (Corporations) ss75-43(1)(a).
[2] Insolvency Practice Schedule (Corporations) ss75-43(1)(b).
