REASONS FOR JUDGMENT
FINKELSTEIN J
153 I am indebted to the Chief Justice and Jacobson J for their detailed judgment, a judgment with which I am in full agreement.
154 I wish to make some observations regarding the nature of an appeal under reg 5.6.26(3) of the Corporations Regulations. It is unfortunate that this issue, which is an issue of considerable importance, was not fully argued. Still, it might be useful were I to express my view on the operation of the regulation.
155 The word 'appeal' has a chameleonic quality. Like many words its meaning depends on the context in which it is used. When a right of appeal is given from a particular decision, the appeal may bear one or other of the following characteristics: (1) it might be an appeal in the strict sense, requiring the finding of error based only on the material before the decision-maker; or (2) it might be an appeal in the nature of a rehearing, where it is necessary to show error but the appeal tribunal can try the case with new evidence; or (3) it might be a hearing de novo where all the issues are looked at afresh.
156 According to reg 5.6.26 the decision of a chairperson regarding voting entitlements may be 'appealed' to a court. While there have been many such appeals, the meaning of the word has not, at least directly, been considered. It is necessary to give that word its proper meaning. I propose to begin by looking at analogous cases.
157 It is convenient to look first at the position in England where the rules for voting by creditors are strikingly similar to those under the Corporations Regulations. Rule 4.70 of the Insolvency Rules 1986 (UK) provides that:
(1) At any creditors' meeting the chairman has power to admit or reject a creditor's proof for the purpose of his entitlement to vote; and the power is exercisable with respect to the whole or any part of the proof.
(2) The chairman's decision under this Rule, or in respect of any matter arising under Rule 4.67, is subject to appeal to the court by any creditor or contributory.
(3) If the chairman is in doubt whether a proof should be admitted or rejected, he shall mark it as objected to and allow the creditor to vote, subject to his vote being subsequently declared invalid if the objection to the proof is sustained.
(4) If on an appeal the chairman's decision is reversed or varied, or a creditor's vote is declared invalid, the court may order that another meeting be summoned, or make such other order as it thinks just.
158 The trend of modern authority in England is that an appeal under rule 4.70(2) is in the nature of a hearing de novo. The cases include Re a debtor (No 222 of 1990); ex parte Bank of Ireland [1992] BCLC 137; Re a Company (No 004539 of 1993) [1995] 1 BCLC 459; Re Philip Alexander Securities and Futures Ltd [1999] 1 BCLC 124; Re ASSICO Engineering Ltd [2002] BCC 481.
159 A recent case is Power v Petrus Estates Ltd [2008] EWHC 2607 (Ch); [2009] 1 BCLC 250. There Lewison J said (at BCLC 254-255) that the intention of rule 4.70 is to establish a simple procedure for dealing with proofs of debts for voting purposes, so as to facilitate a streamlined process for meetings to be held. In cases where the claim was neither plainly good nor bad, but there was a question or some doubt about the claim, the chairperson is required to admit the claim but mark it as objected. He observed (at 256) that the rule contemplates a quick decision by the chairman, with the possibility of a more leisurely examination of the objection to the proof by the court. For that reason, the court is not confined to considering material before the chairman.
160 Interestingly, Lewison J said that the creditor's claim is to be assessed as at the date of the meeting, so evidence regarding events subsequent to the meeting is irrelevant (at 256-257). It is not entirely clear why, in the case of an appeal which he held to be a rehearing, a court should limit itself to material that came into existence before a certain date. For my own part, I would not impose such a limitation. There seems to be nothing in the relevant regulation that requires that conclusion. And, to apply it could produce an unreasonable, if not unjust, result.
161 The second analogous context is meetings of creditors of a bankrupt estate. The Bankruptcy Act 1966 (Cth) provides that at such a meeting the trustee in bankruptcy is to determine questions relating to the entitlement of a person to vote: s 64ZA(8). There is no specific right to appeal a trustee's decision. It is, however, well-established that a court may review the decision under the general provisions that permit the supervision of bankruptcy proceedings: Forshaw v Thompson (1992) 35 FCR 329.
162 In Re Dingle; Westpac Banking Corporation v Worrell (1993) 119 ALR 265, the Full Federal Court considered the nature of such a review. It emphasised that the power of review is discretionary, and that the court is generally reluctant to interfere with the processes of holding a meeting and implementing its outcomes (at 272). Accordingly, when the complaint is that a person has been erroneously excluded from voting, the court should only intervene if two things are established. First, the excluded person is, in fact, a creditor - it is not enough to show that there is an arguable case for being a creditor (at 273). Second, it must be shown that the excluded creditor's vote would have affected the fate of the meeting proposal. Given its task of finally determining a creditor's status, the court is entitled to take into account all the material placed before it, and is not bound to limit itself to the material before the trustee (at 272).
163 Turning now to the cases which have considered appeals under reg 5.6.26, it is immediately apparent that they have adopted a variety of approaches as regards the nature of the proceeding.
164 One of the earliest cases is Re Oriel Homes Pty Ltd [1998] 1 Qd R 652. The company was in administration. At the first meeting of creditors a resolution was put that the administrator be removed. The respondent claimed to be a creditor and entitled to vote. Its proof of debt was entirely rejected. Thereafter the administrator brought action seeking a declaration that the respondent was not a creditor and not entitled to vote at the meeting. Thomas J found that the respondent was a creditor but in view of the uncertainty surrounding its claim, should have had the value of its claim assessed at $1.00. In the course of his reasons, Thomas J observed (at 654):
Under reg. 5.6.26(1) the power to admit includes the power to admit in part. If the position is clear, the chairperson should make a just estimate of the value of the debt. If, however, he or she is in genuine doubt, the claim must be allowed at the amount that the creditor has claimed and should thereupon be marked as "objected to". The creditor should then be allowed to vote at that value. Any error, and any effect that the error may have on the result, may be corrected in due course by an appeal to the Court under reg. 5.6.26(3).
It is unclear, and perhaps doubtful, whether Thomas J considered that on an appeal the court could only take into account material before the chairperson. Interesting, although Thomas J found the respondent to be a contingent creditor, he did not rule on the value of its claim for voting purposes. Perhaps this was because, even if allowed in full as claimed, it would not have affected the result of the vote.
165 Vincent, White & Associates Pty Ltd v Vouris (1998) 28 ACSR 93 also concerned a company in voluntary administration. A creditor claimed a debt of $1.4 m. At the second meeting of creditors, its claim for voting purposes was assessed at $422,577. This decision was challenged. It was not clear whether the challenge was brought by way of appeal, under s 1321 of the Corporations Act, by an action for a declaration or some other process. The judge, Hodgson CJ in Eq, said that the normal procedure to be followed by a person wishing to challenge a chairman's decision on voting rights would be to appeal the chairman's decision. He did not, however, rule out other grounds of attack.
166 Hodgson CJ in Eq said that when an appeal is brought from such a decision the approach taken in Re Mineral Securities Australia Ltd (in liq) [1973] 2 NSWLR 207 is the applicable approach. There Street CJ in Eq said that the ultimate question was whether the decision "has such importance, and can be seen to have such defects, as to justify the court exercising its supervisory power". Hodgson CJ in Eq then said that an appeal under both s 1321 and reg 5.6.26(3) focuses on the action of the decision-maker. Since the court is asked to reverse or modify that decision, the court should have regard to the material available to the decision-maker. However, Hodgson CJ in Eq, did not suggest that the court was restricted to that material. On the contrary he said (at 100) "there may be cases where the importance and defects of the [decision-maker's] action should be permitted to be demonstrated by material not available to the [decision-maker]."
167 In the case itself, Hodgson CJ in Eq did consider evidence not before the chairperson. While doing so his Honour emphasised that a finding on appeal under reg 5.6.26 did not require the final determination of the existence and value of a contested debt. In that regard (at 102) he distinguished decisions (some referred to above) made under analogous bankruptcy provisions.
168 A number of observations can be made about that approach. First, it is doubtful whether the decision in Re Mineral Securities Australia Ltd and, for that matter, Duffy v Super Center Development Corporation [1967] 1 NSWR 382, provide any assistance on the meaning of reg 5.6.26(3). Both involved a challenge to the exercise of a power of sale, in one case by a receiver and in the other by an official liquidator. No doubt, and quite correctly, a court will be reluctant to interfere with the exercise of a commercial decision in the absence of evidence of bad faith or the like. This seems to have little to do with assessing whether a person is a creditor and whether his claimed debt has been justly assessed. In Westpac Banking Corp v Totterdell (1998) 29 ACSR 448, 455, which was an appeal from the rejection of a proof of debt for distribution purposes, the Court of Appeal of Western Australia considered that there was no need for judicial reticence where the liquidator's decision was made in a quasi-judicial capacity, citing Tanning Research Laboratories Inc v O'Brien (1991) 169 CLR 332 at 338-339. I favour that approach to a decision of the chairperson of a meeting. There must ultimately be a single correct answer to the questions whether a person is a creditor and entitled to vote and for what amount - the fact that those questions are to be summarily determined in the first instance by the chairperson does not alter that.
169 The second observation about Vincent, White & Associates v Vouris concerns the proposition that the evidence which can be considered on an appeal can vary depending on whether the relevant decision has such importance or has such defects so as to warrant new evidence being considered. This approach seems to assume there are the different types of appeal under reg 5.6.26(3). This is not consistent with Coal and Allied Operations Pty Ltd v AIRC (2000) 203 CLR 194. There the legislation under consideration conferred a right of appeal to the Australian Industrial Relations Commission from a variety of different decisions. The Full Federal Court had held that the appeal provision was intended to create different types of appeal with differing characteristics dependent upon the nature of the decision appealed. This approach was rejected by the majority of the High Court (Gleeson CJ, Gaudron and Hayne JJ), who observed (at [18]) that the nature of the appeal under the relevant provision did not differ according to the nature of the decision under appeal.
170 Most of the cases since Vincent, White & Associates v Vouris have implicitly treated an appeal under reg 5.6.26(3) as an appeal in the strict sense. The leading case, which conveniently summarises most of the earlier authorities, is Selim v McGrath (2003) 47 ACSR 537. The inquiry that was undertaken by the judge, Barrett J, was to investigate whether the chair had made a correct decision. The material examined for that purpose was the material that the putative creditor had produced to the chairperson. The cases have also permitted reference to surrounding facts known to the chairperson. Spiteri v Lindholm [2003] VSC 42 is an example.
171 In other words, according to these cases, the question on appeal is whether the chairperson erred in his or her decision regarding the right to vote or the value of the creditor's claim for voting purposes. However, none of the cases has considered directly the nature of the appeal under reg 5.6.26(3). In fairness, many were concerned with the (potentially confusing) interaction between reg 5.6.23 and reg 5.6.26.
172 It is not, to my mind, immediately apparent why an appeal under reg 5.6.26(3) should be regarded as an appeal in the strict sense. One possible explanation is that courts are mindful of the speed with which voting disputes must be resolved: see, for example, the discussion by Barrett J in Selim at ACSR 557-558 regarding the application of regulations to the expedited nature of the Part 5.3A process. On this view, it might be reasoned that the objectives of Part 5.3A would be subverted if appeals under reg 5.6.26(3) were based on new material and required final resolution of rights which, if undertaken, would hold up the process. But, in the end, one can only speculate about the rationale for the assumption of a strict appeal in Selim and like cases.
173 As I noted at the outset, the nature of the appeal under reg 5.6.26(3) is ultimately a matter of construction. The starting point is, I think, that an appeal under reg 5.3.26(3) may be brought against different types of decisions. An appeal lies from a decision to accept, partially accept or reject a proof, or from a 'just estimate' of the value of a claim. The nature of the appeal (ie whether it is an appeal in the strict sense, a hearing de novo or something else) will not vary depending on the type of decision. By the same logic, the nature of the appeal - whatever it might be - must be the same regardless of the 'importance of or the nature of defects' in the chairperson's decision, or the provisions of the Corporations Act under which the relevant meeting is convened (for example, under s 439A or s 411).
174 In determining the nature of the appeal, reg 5.6.26(2) is of some importance. That regulation provides that if the chairperson is in doubt about whether to admit a proof, the chairperson should mark the proof as objected to and allow the putative creditor to vote, "subject to the vote being declared invalid if the objection is sustained" (emphasis added). The reference to the objection being sustained no doubt assumes a decision on an appeal under reg 5.6.26(3). The language "the objection is sustained" seems to speak of a fresh consideration of the issue.
175 This is not surprising. A chairperson's decision is only a temporary ruling, made in a summary manner, often based on limited evidence. Further evidence may come to light which was not available at the time of the meeting. While there are doubtless good practical reasons for streamlining the chairperson's assessments of voting entitlements, it must always be remembered that the decision potentially has important consequences for substantive rights. A good example is a scheme of arrangement (like the one in the present case) which provides for the release of creditor's claims against third parties. Given the limitations of the manner in which a chairperson assesses voting entitlements, and given the potential importance of this decision, this rather suggests that new evidence should be permitted on the appeal and that the matter should be considered afresh.
176 I consider that an appeal under reg 5.6.26(3) is a hearing de novo. I am, I must confess, influenced by the English authorities to which I have referred.
177 Finally I should say that, unlike the position adopted in the bankruptcy cases, in my view the appeal court need not always make a final determination of all issues. Appeals under reg 5.6.26(3) must be brought within 10 business days of the decision. The assumption here is that the appeal will be determined relatively quickly. Yet, it may take considerable time to resolve issues finally, which would delay the outcomes of meetings being implemented. In some cases, it will therefore be appropriate for the court to decline to finally rule on the status and quantum of a claim. These considerations are particularly important where there is an appeal in respect of the 'just estimate' of a claim. The evident intent of the 'just estimate' procedure is to establish a summary procedure which bypasses, for the purposes of allowing a vote to proceed, the need to finally quantify the value of debts whose value may be inherently uncertain. That process might be undermined if a putative creditor could, on appeal, insist on having his claim finally valued. An appeal court may be justified in only making a 'just estimate' without more.
I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.