Creditors' power to remove external administrators
Creditors also have new powers to remove and replace an external administrator by resolution at any creditors' meeting (section 90-35 of the IPSC). What if the external administrator has the casting vote? Which way should they go?
That was the issue explored in The Owners – Strata Plan 84,741 v Iris Diversified Property Pty Ltd (in Liq)  NSWSC 834, in which a creditor sought relief following the liquidator's failure to exercise his casting vote in favour of a resolution removing and replacing him as liquidator.
The Court held that the liquidator should have exercised his casting vote in favour of the resolution to remove him, when that was the preference of the creditor with a substantial majority in value.
The creditors' meeting
The Owners Corporation had directed the liquidator of Iris Diversified Property Pty Ltd to convene a meeting of creditors, and requested that a resolution be put to that meeting for the replacement of the liquidator.
At the meeting, the Owners Corporation voted in favour of the resolution but a related entity of the company voted against it. This meant that the resolution had been passed by a substantial majority of the creditors by value (as the Owners Corporation held around 90% value of admitted proofs), but not by number. The liquidator exercised his casting vote against the resolution. So the resolution was not passed. The Owners Corporation subsequently applied to the Court seeking removal of the liquidator on several bases under the IPSC.
The Court held, at the outset, that the liquidator did not have the power to vote against the resolution. Rule 75-115(5) of the IPRC permits an external administrator to exercise a casting vote in favour of a resolution for their removal (or to abstain), but not to vote against it.
The Court further ordered that the resolution ought to be taken to have been passed pursuant to section 75-41(3)(d) of the IPSC, which permits the Court to exclude related entity votes from resolutions in certain circumstances. Justice Black also indicated that it would have been appropriate to order that the resolution be passed (pursuant to section 75-43(4) of the IPSC), if that failure was caused by the refusal or failure by the meeting chair to exercise a casting vote in favour of it. He held that the casting vote should have been exercised in favour of the resolution in circumstances where the Owners Corporation had such an overwhelming monetary interest in the company, as opposed to the related entity who had a 10% monetary interest.
The Court ordered the liquidator pay the Owners Corporation's costs of the application personally, without recourse to the assets of the company.