In the matter of Free Wesleyan Church of Tonga in Australia Inc... [2012] NSWSC 214 | Case summary

Judgment 1The Plaintiff, Phoenix Lacquers & Paints Pty Limited ("Phoenix"), applies under s 54 of the Associations Incorporation Act 2009 (NSW), ss 449B and 600C of the Corporations Act 2001 (Cth), reg 5.6.26(3) of the Corporations Regulations 2001 (Cth) and under the Court's inherent power for declarations as to the validity of a resolution of creditors to remove and replace the joint and several administrators appointed to the First Defendant, Free Wesleyan Church of Tonga in Australia Inc (Administrators Appointed) ("the Church"). The Second and Third Defendants to the proceeding are those administrators, Messrs Parbery and Robinson ("Administrators"). 2Before turning to the basis of Phoenix's application, I should first set out the factual background. The Church is an association established under the Associations Incorporation Act 2009 (NSW). Part 5.3A of the Corporations Act is applicable to it by s 54 of the Associations Incorporation Act and the Corporations (Ancillary Provisions) Act 2001 (NSW). 3The Church entered a facility loan agreement with Phoenix on 29 August 2008 ("Loan") in the amount of $550,000 and subsequent variations of that loan agreement to increase the loan by a further $400,000 were made on 26 September 2008 and 19 November 2008. Those loans were supported by second ranking securities over property and by guarantees given by several persons associated with the Church. The loan agreement provided for interest at between 5% and 7% per month , compounding monthly. Between August 2008 and January 2012, the balance of the loan and interest increased to $8,845,217.27. It appears that interest rate is equivalent to a simple interest rate of 22% per month. 4On 10 October 2009, the Church commenced proceedings in this Court seeking, inter alia, relief under the Contracts Review Act 1980 (NSW) and under ss 12CA, 12CB and 12GM of the Australian Securities and Investments Commission Act 2001 (Cth) ("2009 Proceedings") in respect of the terms of the Loan, including declarations that the rates of interest in respect of each of the transactions was excessive, harsh and unconscionable and an order that the transaction be voided or varied to provide for a reasonable commercial rate of interest. A little over two weeks later, Phoenix brought proceedings to wind up the Church on the basis of insolvency and for the appointment of Mr Riad Tayeh as liquidator. 5On 12 January 2012, Westpac Banking Corporation ("Westpac") appointed the Administrators as administrators to the Church under s 436C of the Corporations Act and s 54 of the Associations Incorporation Act . The Administrators were also appointed as administrators of the Association of Tongan Arts and Culture Incorporated on the same date. Notice was given on that date of the first meeting of creditors of the Church to be held on 20 January 2012. 6At 5.01pm on 18 January 2012, Phoenix provided a proof of debt in the amount of $9,795,217.27 to the Administrators, made up of the principal of $950,000 and interest of $8,845,217.27. Following a request by the Administrators, Phoenix provided further particulars of the interest calculation at 5.03pm on 19 January 2012. Also on that date, Phoenix appointed a proxy for the creditors meeting for 20 January 2012 and Mr de Vries and Mr Tayeh provided their consent to appointment as administrators if the Administrators were removed and replaced at that meeting. 7On 19 January 2012, the Administrators received legal advice from their solicitors, Norton Rose, in respect of Phoenix's proof of debt lodged for voting purposes at the creditors' meeting. That advice recommended that Phoenix's debt be admitted for voting purposes at that meeting in the amount of $1,234,601.37, made up of the principal of $950,000 and interest of $284,601.37 calculated at Supreme Court interest rates, rather than the amount of $9,795,217.27 for which Phoenix had lodged its proof of debt. The solicitors expressed the view that " the interest rate charged is clearly far in excess of any rate that could be considered a reasonable commercial rate and is oppressive " and drew attention to case law as to the level of interest which has been permitted in cases brought under the Contracts Review Act . 8Mr Parbery then consulted with one of his staff, Mr Manwaring, who had prior experience in the banking sector, to determine a commercial rate of interest which would be charged by a second ranking mortgagee and, following discussion of that issue, recalculated the interest component of Phoenix's claim on the basis of a simple interest rate of 15% per annum. His evidence is that he made that decision on the basis of Phoenix's proof of debt, the legal advice obtained from Norton Rose, the Statement of Claim in the 2009 Proceedings and the schedule of payments and interest provided by Phoenix's solicitors. 9A motion to remove the Administrators and appoint Mr de Vries and Mr Tayeh as administrators was moved at the first meeting of creditors of the Church on 20 January 2012. Mr Parbery admitted Phoenix's proof of debt on the basis of a just estimate of $1.48 million, which was higher than the amount recommended by the Administrator's solicitors but short of the amount stated in Phoenix's proof of debt. 10A majority in number of the creditors voted for the resolution to remove and replace the Administrators and a majority in value, calculated on the basis of the lower amount for which Phoenix's proof of debt had been admitted, voted against it. The resolution would therefore not have carried if Mr Parbery had not exercised his casting vote against it, by reason of reg 5.6.21(4)(c) of the Corporations Regulations. Mr Parbery, who was the chairperson of the meeting, exercised his casting vote against the motion and it also failed for that reason. He gave short reasons for his decision to exercise his casting vote against the resolution, noting that it was based on legal advice and that he believes it to be in the best interests of creditors as the administrators have already been appointed for a short period of time. Phoenix's claim for declaratory relief that the resolution to remove and replace the Administrator's was carried 11Phoenix seeks a declaration that the motion which it moved at the first meeting of creditors for the removal of the Administrators and for their replacement with new administrators was carried; that the Administrators were thereby removed from office and thereby ceased to be the administrators of the Church; that Messrs Tayeh and de Vires were thereby appointed as, and became, the joint and several administrators of the Church; and that the Administrators are not entitled to remuneration for acting as administrators of the Church since the conclusion of the first meeting of creditors. 12It appears that the Court has jurisdiction to grant such a declaration in an appropriate case. It is well-established, in the context of voting under the Bankruptcy Act 1966 (Cth), that the Court has power to grant declaratory relief where a creditor entitled to vote is improperly excluded from voting and the vote, if cast, would have led to a different result: Re Segal; Lensworth Finance Ltd v Segal (1975) 45 FLR 85 at 91, 93; Re Levy; Ex parte Scholefield Goodman & Sons Ltd (1980) 50 FLR 99 at 115; Re Moloney; Ex parte Field (1981) 51 FLR 31; Re Tregonning; Ex parte Friends' Provident Life Office (1983) 74 FLR 327 at 331. 13Mr Parbery treated Phoenix's debt as "a debt the value of which is not established" for the purposes of reg 5.6.23(2)(d) of the Corporations Regulations; made a "just estimate of its value" for the purposes of that subregulation; and admitted that debt or claim at the level of that just estimate. Phoenix's primary position was that, contrary to Mr Parbery's approach, the value of its debt was established by the terms of the Loan and Mr Parbery was not entitled, as he did, to admit Phoenix to vote on the basis of a just estimate of the value of that debt under reg 5.6.23 of the Corporations Regulations. Phoenix also contended that the prospects of any legal challenge to its debt were not such that it could be admitted other than in full. Phoenix did not advance any case before me that it was entitled to vote at a just estimate of that debt which was lower than the amount claimed in its proof of debt but higher than that adopted by Mr Parbery. 14Regulation 5.6.23 relevantly provides that: (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 of a deed of company arrangement; 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. 15Regulation 5.6.26 in turn provides that: (1) The chairperson of a meeting has power to admit or reject a proof of debt or claim for the purposes of voting. (2) If the chairperson is in doubt whether a proof of debt or claim should be admitted or rejected, he or she must mark that proof as objected to and allow the creditor to vote, subject to the vote being declared invalid if the objection is sustained. ( 3) A decision by the chairperson to admit or reject a proof of debt or claim for the purposes of voting may be appealed against to the Court within 10 business days after the decision. 16The interaction between regs 5.6.23 and 5.6.26(2) of the Corporations Regulations is not clear "and has exercised judicial minds": Kirwan v Cresvale Far East Pty Ltd (in liq) [2002] NSWCA 395; (2002) 44 ACSR 21 at [244]; Selim v McGrath [2003] NSWSC 927; (2003) 47 ACSR 537 per Barrett J at [88]. That interaction was considered by Hodgson CJ in Eq in Vincent, White & Associates Pty Ltd v Vouris (1998) 28 ACSR 93 and by Austin J in Bovis Lend Lease Pty Ltd v Wily [2003] NSWSC 467; (2003) 45 ACSR 612. The decided cases on regs 5.6.23 and 5.6.26 were carefully reviewed by Barrett J in Selim v McGrath at [82]-[90], where Barrett J distinguished between the administrator's role under reg 5.6.23(1)(a) and the chairperson's role under reg 5.6.26. His Honour observed that an entitlement to vote may arise from the administrator's action in admitting a debt or claim in part, and the administrator's taking that action allows that person to vote without the need for any action of the chairperson under reg 5.6.26(1) (at [97]). In this case, as in Selim v McGrath , it is unnecessary to determine whether the "just estimate" required by reg 5.6.23(2) was to be made by the administrator or by the chairperson, because Mr Parbery exercised both roles. Nonetheless, the majority of cases indicate that such an estimate was to be made by the chairperson of the meeting and the legal advice provided to Mr Parbery proceeded on that basis. The making of a just estimate under reg 5.6.23(2), for the purposes of the relevant meeting, would necessarily be of a "somewhat summary nature" and the regulation does not require that the chairperson or administrator undertake "any detailed inquiry, but does the best which he can on the basis of the information available: Selim v McGrath at [103], Bacnet Pty Ltd v Lift Capital Partners Pty Ltd (in liq) [2010] FCAFC 36; (2010) 183 FCR 384; 78 ACSR 57 at [76]-[77]. It is open to the chairperson to rely upon legal advice and upon his or her own knowledge of the background to the particular claims: Bacnet v Lift Capital at [85]. Whether Phoenix's debt was established 17Phoenix contended that its debt was not one the value of which was not established for the purposes of reg 5.6.23(2)(d), since it was established under the terms of the loan agreements and not impeached by the proceedings brought by the Church or, implicitly, the size of the interest rate payable under the loan. Phoenix relied on several decisions relating to similar provisions formerly contained in the Bankruptcy Act 1966 (Cth) (and since repealed) in order to establish that its debt was not one the value of which was not established. In particular, s 198(2) of the Bankruptcy Act 1966 (Cth) formerly read as follows: "(2) A creditor is not entitled to vote in respect of an unliquidated or contingent debt or a debt the value of which is not ascertained." 18There are some cases which suggest that a debt is not ascertained, for the purposes of that provision where a future event is necessary for its quantification. In Re Dummelow; Ex parte Ruffle (1873) LR 8 Ch App 997 at 1001, Mellish LJ observed in respect of s 16(3) of the Bankruptcy Act 1869 that the words "a debt, the value of which is not ascertained" means "a debt the amount of which cannot be estimated until the happening of some future event". In Re Levy; Ex parte Scholefield Goodman & Sons Ltd (1980) 50 FLR 99 at 112, Bowen CJ observed that the fact that a debt is ascertained if capable of being made certain and the fact that it is not agreed upon does not mean that it is "unascertained" within the meaning of the section. In Farrow Mortgage Services Pty Ltd (in liq) v Abeyratne (1993) 47 FCR 208 at 219 (which was not referred to in submissions), a unanimous Full Court of the Federal Court treated the amount of a debt as not able to be ascertained for the purposes of s 198 of the Bankruptcy Act where, inter alia, defences raised by the debtor were not considered by the trial judge or argued before the Full Court: see also A Keay, "Creditors' meetings under Part X: The Entitlement to Vote" (1996) 4 Insolvency LJ 85 at 91. 19The language of s 198(2) of the Bankruptcy Act 1966 (Cth) differs from the language of reg 5.6.23(2) of the Corporations Regulations which adopts the concept "not established" rather than the concept "not ascertained". The Administrators drew my attention to dictionary definitions of the term "establish" which include "validate; place beyond dispute in fact" or "generally recognised as being true or valid" or "proved". By contrast with the reasoning in Re Levy; Ex parte Scholefield Goodman & Sons Ltd , it seems to me that reg 5.6.23(2) requires a focus on whether the value of a debt is presently established. While it may be a rare or very rare case where the "value of a debt" which is capable of being calculated from the terms of a loan facility can be said to be not ascertainable or not established because of doubt as to the enforceability of those terms, the recognition of the relevance of defences in Abeyratne indicates that such a case may exist. 20Phoenix has not persuaded me of its primary position that the value of its debt is established by reference only to the terms of the loan agreements. In my view, once the characteristics of the loan and the fact that the Church has brought proceedings to challenge it are taken into account, this was one of the rare cases where the value of the loan could not be ascertained merely by reference to its terms and substantial further factual inquiries would be required. 21As I noted above, Phoenix's alternate position was that the Church's challenge to the terms of the loan was bound to fail or at least had not been diligently pursued and would not be pursued. Phoenix complains that the advice provided by Norton Rose and Mr Parbery did not take into account the terms of the Defence filed by Phoenix in the proceedings brought by the Church, the evidence filed for the Church in those proceedings, that there was an order for security for costs in place in those proceedings, that the Church had not been prosecuting the proceedings and that no-one was proposing to fund it to prosecute them. Phoenix contends that the Church's claim "is weak and its prospect of ever being brought to trial even slimmer". 22I do not think that Phoenix established that the Church's challenge to the terms of the loan was bound to fail. In particular, I am not satisfied that the Church's attack on the interest payable under the loan under at least s 12CB of the Australian Securities and Investments Commission Act does not have real prospects of success. (I should note, however, that neither party sought to lead the evidence before me which would be led in such an application, although I was informed that the Church had filed evidence in the 2009 proceedings). 23Prior to amendments which took effect from 1 January 2012, s 12CB of the Australian Securities and Investments Commission Act prohibited a person, in trade or commerce, in connection with the supply or possible supply of financial services to a person, engaging in conduct that is, in all the circumstances, unconscionable. The concept of unconscionability in this section involved "serious misconduct or something clearly unfair or unreasonable" and contemplates actions which show "no regard for conscience, or that are irreconcilable with what is right or reasonable" or involve "a high degree of moral obloquy": Hurley v McDonald's Australia Pty Ltd [1999] FCA 1728; (2000) ATPR 41-741; Australian Competition and Consumer Commission v 4WD Systems Pty Ltd [2003] FCA 850; (2003) 200 ALR 491 at [184]; Attorney-General (NSW) v World Best Holdings Ltd [2005] NSWCA 261; (2005) 63 NSWLR 557 at [121]. Section 12CB(2) set out a list of factors to which the court must have regard in determining whether s 12CB(1) was contravened and these factors are indicative of the width of the concept of unconscionability in this section: Australian Securities and Investments Commission v Skeers [2007] FCA 1551. 24This section is capable of applying to conduct in respect of loans: Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389. Allsop P (with whom Bathurst CJ and Campbell JA agreed) there noted that conduct could contravene the section where it demonstrated a high degree of moral obloquy on the part of the person said to have acted unconscionably; where it was irreconcilable with what is right or reasonable; that factors similar to those arising under the Contracts Review Act were relevant; and that conduct involving "taking advantage of vulnerability or lack of understanding, trickery or misleading conduct" could contravene the section (at [291]). The President observed that the conduct requires at least "some degree of moral tainting in the transaction of a kind that permits the opprobrium of unconscionability to characterise the conduct of the party" (at [293]). 25An amended section was introduced by the Competition and Consumer Legislation Amendment Act 2011 (Cth) and specifically permits the Court to have regard to conduct and circumstances before its commencement, as follows: (1) A person must not, in trade or commerce, in connection with: (a) the supply or possible supply of financial services to a person (other than a listed public company); or (b) the acquisition or possible acquisition of financial services from a person (other than a listed public company); engage in conduct that is, in all the circumstances, unconscionable. (2) This section does not apply to conduct that is engaged in only because the person engaging in the conduct: (a) institutes legal proceedings in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition; or (b) refers to arbitration a dispute or claim in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition. (3) For the purpose of determining whether a person has contravened subsection (1): (a) the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and (b) the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section. (4) It is the intention of the Parliament that: (a) this section is not limited by the unwritten law of the States and Territories relating to unconscionable conduct; and (b) this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and (c) in considering whether conduct to which a contract relates is unconscionable, a court's consideration of the contract may include consideration of: (i) the terms of the contract; and (ii) the manner in which and the extent to which the contract is carried out; and is not limited to consideration of the circumstances relating to formation of the contract. (5) In this section: listed public company has the same meaning as it has in the Income Tax Assessment Act 1997. 26The concept of unconscionability adopted in the amended section is not limited to general law unconscionability and the Court may have regard to the terms of the contract and not only the circumstances relating to its formation. On the present facts, the interest rate specified in the loan facility is extraordinarily high and, it seems to me, raises a question as to whether the Loan has the characteristics that trigger the application of that section. Mr Parbery's affidavit evidence was that, when he first received Phoenix's proof of debt, he considered that the interest rate purportedly charged to be "exorbitant" and that "[i]n all my prior commercial dealings I do not recall ever having dealt directly with a loan with an interest rate which was so high". Mr Parbery gave convincing evidence under cross-examination to the effect that the interest rate specified in the loan facility was far outside the course of his usual experience, as follows: Q. You're aware from your experience that interest rates in the short-term lending market can be very high indeed, aren't you? A. I've never ever, in my entire business life, seen anything at this rate. ... Q. What is the amount of the rate that you understand to have been involved in it being converted to a-- A. My staff have done the calculation and they believe it's at the rate of 142 per cent per annum. Q. And you've seen rates of 120 per cent beforehand, haven't you? A. Never in my business life. Q. What's the highest rate you've ever seen in your business life? A. The highest rates I've ever seen is in relation to factoring arrangements whereby 2 per cent per month, which is the equivalent of about 24 per cent, is the absolute highest that I've ever seen. 27Nor would I regard past delays or difficulties by the Church in pursuing an attack on the interest payable under the Loan as excluding the possibility that such proceedings would be diligently pursued in the future. Mr Parbery properly had regard to a letter on which Phoenix relied, by which an officer of the Church had indicated an intention not to pursue the Contract Review Act proceedings in determining whether to alter his decision regarding voting entitlements. I do not consider that he was required to treat that letter as determinative of the outcome of the proceedings when it was written after the administration had commenced and it was then a matter for the Administrators to determine what further steps would be taken in the proceedings. Mr Parbery pointed out in cross-examination that it was open to the Administrators to fund and pursue such proceedings, that the Administrators were presently funded by their appointor and could negotiate funding for such proceedings with their appointor. 28There was no evidence before me that would permit an assessment whether the Australian Securities & Investments Commission would be likely to exercise its statutory powers to intervene in the 2009 Proceedings under s 12GO of the Australian Securities and Investments Commission Act or itself bring such proceedings under s 50 of the Australian Securities and Investments Commission Act , although it appears it has not yet done so. 29My attention was also drawn to case law indicating that a debt was not contingent merely because it was disputed in legal proceedings. I did not consider that case law to be of particular assistance, since the Administrators did not treat Phoenix's debt as contingent for the purposes of reg 5.6.23(2)(b) of the Corporations Regulations, but as not established for the purposes of reg 5.6.23(2)(d) of the Corporations Regulations, and had regard to the terms of the loan and not merely the fact of legal proceedings in forming that view. Phoenix's claim for declaratory relief that Mr Parbery was not entitled to make a just estimate of its debt 30Phoenix also seeks, in the alternative, a declaration: "that the decision made by [Mr Parbery] (in his capacity as chairperson) at the first meeting of creditors of [the Church], that [Phoenix's] debt fell to be justly estimated under regulation 5.6.23(2)(d) of the Regulation [sic] on the basis that it was "a debt the value of which was not established" was in error." 31As noted above, Mr Parbery treated the debt of Phoenix as "a debt the value of which is not established" for the purposes of reg 5.6.23(2)(d) of the Corporations Regulations; made a "just estimate of its value" for the purposes of that subregulation; and admitted that debt or claim at the level of that just estimate. Phoenix contends that Mr Parbery was incorrect in taking that approach because the value of Phoenix's debt had been established and it was not open to him to admit that debt at a just estimate. For the reasons I have set out above, I am not satisfied that Mr Parbery's decision that the value of Phoenix's debt was not established was in error. In my view, it was correct in the unusual circumstances of the Loan. Accordingly, I would not make this declaration. Phoenix's appeal under reg 5.6.26(3) 32Phoenix also seeks an order under reg 5.6.26(3) of the Corporations Regulations that the decision made by Mr Parbery (in his capacity as chairperson) at the first meeting of creditors to admit Phoenix's proof of debt in the amount of $1,480,504.11 be set aside and in lieu thereof it be determined that the Plaintiff's vote at the same meeting was to a value of $9,795,217.27, and that it be ordered that the same motion to remove and replace the Administrators as administrators be declared to be carried. 33A chairperson's decision made under reg 5.6.26 will not be interfered with on appeal unless it can be shown that the chairperson was in error and, where the dispute concerns a matter of professional judgment, that will ordinarily require demonstrating the decision was effected by bad faith, a mistake as to the facts, an erroneous approach to the law or an error of principle: Bacnet Pty Ltd v Lift Capital Partners Pty Ltd (in liq) [2010] FCAFC 36; (2010) 183 FCR 384; 78 ACSR 57 at [72]. 34As noted above, it is clear that the operative decision to admit Phoenix's proof of debt in the amount of $1,480,504.11 was made pursuant to regulation 5.6.23(2)(d). For the reasons I have set out above, I am not satisfied that Mr Parbery's decision that the value of Phoenix's debt was not established was in error. In my view, it was correct in the unusual circumstances of the Loan. It is therefore not necessary for me to determine whether the decision made by Mr Parbery under reg 5.6.23(2) was open to appeal under reg 5.6.26(3) or whether he made a separate decision under reg 5.6.26 that was open to appeal under reg 5.6.26(3), since that appeal would fail even if it were open. Phoenix conceded that the statutory jurisdiction to appeal from the decision of an administrator of a company under s 1321 of the Corporations Act is not available to it, because that section is not applied to the Church by s 54 of the Associations Incorporation Act 2009 (NSW). 35Phoenix also contended that Mr Parbery failed to consider various matters that would have led him to the conclusion that the Church's claim is weak, including personally reviewing the Defence filed by Phoenix in the proceedings brought by the Church and the evidence filed by the Church in those proceedings or confirming that his solicitors had done so. I do not consider that Mr Parbery was obliged to take those steps, where he had taken advice from an experienced firm of solicitors and there was nothing to suggest that the concerns which they had raised as to the rate of interest specified in the Loan were not well-founded or that the approach which they had suggested was not a reasonable one. 36Phoenix also criticises the interest rate of 15% applied by Mr Parbery in making his just estimate of the amount of its debt as being an "unusually low interest rate" for a second ranking unregistered mortgage securing short term lending. It should first be noted that Phoenix's loan was secured by second ranking securities and Phoenix also had the benefit of several personal guarantees in respect of the loan. Phoenix led no evidence as to what would be an appropriate interest rate for a loan in those circumstances and its attempt to establish that a high rate of interest was appropriate through cross-examination of Mr Parbery was unsuccessful. I do not consider that Phoenix made good this criticism of Mr Parbery's decision. 37Phoenix contends, and it appears, that the chairperson's power under reg 5.6.26(1) to admit or reject a proof for the purpose of voting is an "all or nothing" power: Selim v McGrath at [94]-[95]. However, where a just estimate has been made for the purposes of reg 5.6.23, the admission of the proof is necessarily for the amount of that just estimate. Phoenix also contends that, where there was a dispute about the debt, Mr Parbery as chairperson of the first creditors meeting should have marked the proof as objected to and allowed Phoenix to vote under reg 5.6.26(2) of the Corporations Regulations. The authorities do not suggest that Mr Parbery was obliged to take that course where, as here, the making of the just estimate of the value of Phoenix's debt was undertaken under reg 5.6.23 of the Corporations Regulations, which expressly contemplates that a debt may be admitted wholly or in part. On the view which I have expressed above, Phoenix's claim was properly characterised as "not established" for the purposes of reg 5.6.23(2)(d) of the Corporations Regulations and Phoenix was not permitted to vote other than in the amount of the just estimate which had been made by Mr Parbery. Mr Parbery was bound to give effect to that limitation in his capacity as chairperson of the meeting: Selim v McGrath at [98]. Phoenix's claim for an order under s 600C of the Corporations Act 38Phoenix also seeks an order under s 600C of the Corporations Act that the Plaintiff's motion for the removal and replacement of the Administrators as administrators and for their replacement by Messrs Tayeh and de Vries be taken to have been passed at the first meeting of creditors. This issue was canvassed in Phoenix's opening submissions but not addressed at any length in its oral submissions. 39If the person presiding at a meeting of creditors held under Pt 5.3A exercises a casting vote and a proposed resolution is not passed at that meeting, a person who voted for the resolution may apply to the Court for an order under s 600C(3) of the Corporations Act . On that application, the Court may order that the proposed resolution is taken to have been passed at the meeting and, if it does so, make such further orders and give such further directions as it thinks necessary. The jurisdiction to make an order under s 600C of the Corporations Act is available in the present circumstances, because Mr Parbery exercised his casting vote and the resolution to replace and remove the Administrators was not passed at that meeting. The section does not in terms require a causative relationship between those two matters. A causative relationship is not established in the present case, because the resolution would have failed where it had not secured a majority of creditors by value, even if Mr Parbery had not exercised his casting vote against it. 40The case law has indicated that a chairperson should exercise his or her casting vote in the case of a deadlock on a vote of creditors unless there is good reason to refrain from doing so: Ausino International Pty Ltd v Apex Sports Pty Ltd [2007] NSWSC 289; 61 ACSR 532; Plumbers Supplies Co-operative Ltd v Firedam Civil Engineering Pty Ltd [2011] NSWSC 325 at [33]-[36]. That casting vote should be exercised having regard to what the administrator believes to be in the interests of those affected by the vote and the objectives of Pt 5.3A: Young v Sherman [2002] NSWCA 281; (2002) 170 FLR 86; Kirwan v Cresvale Far East Ltd (in liq) [2002] NSWCA 395; (2002) 44 ACSR 21; Global Realty Development Corp v Dominion Wines Ltd (in liq) [2005] NSWSC 1221; (2005) 56 ACSR 474. The Court's review of the administrator's exercise of his or her casting vote is directed to whether that decision was made honestly and in accordance with what he or she believed to be in the best interests of those affected by the vote and whether it was made conscientiously by reference to relevant considerations: Commonwealth Bank of Australia v Fernandez [2010] FCA 1487; (2010) 81 ACSR 262 at [100]; Plumbers Supplies Co-Operative Ltd v Firedam Civil Engineering Pty Ltd . 41The only matter that Phoenix has identified as impeaching Mr Parbery's exercise of his casting vote is that he had an interest in the outcome, where the resolution concerned the removal of the Administrators. However, an administrator is entitled to exercise his or her casting vote in respect of a removal resolution: Commonwealth Bank of Australia v Fernandez at [38]. 42Mr Parbery's evidence is that he was conscious that the exercise of his casting vote may be perceived as acting in self-interest, but received advice from Norton Rose who, consistent with the case law, advised that the casting vote should be exercised unless there was good reason for not doing so. Mr Parbery gives affidavit evidence, which I accept, as to his reasons for exercising that casting vote. The evidence before me indicates that Mr Parbery could properly have formed the view that it was in the interests of the creditors generally and consistent with the objectives of Pt 5.3A for the Administrators to remain in office, since the Administrators had begun consultations with interested parties prior to the first meeting and the majority in value of creditors had voted against the resolution, after a proper just estimate had been made of Phoenix's claim. These matters would support the exercise of his casting vote in the manner he exercised it. As I have noted above, Mr Parbery's exercise of the casting vote had no effect on the outcome since the resolution would have failed in any event. 43Accordingly, I do not consider that I should make an order under s 600C of the Corporations Act that the proposed resolution is taken to have been passed at the meeting and no question of consequential orders arises. Phoenix's application under s 449B of the Corporations Act 44In the further alternative, Phoenix claims an order under s 449B of the Corporations Act that the Administrators be removed as administrators of the Church and that Messrs Tayeh and de Vires be appointed as the joint and several administrators of the Church in their place. Phoenix made no written submissions in support of this claim although Hammerschlag J had directed that it serve and deliver an outline of its submissions. 45Section 449B of the Corporations Act relevantly provides that, on the application of a creditor of a company, the Court may remove an administrator of a company under administration from office and appoint another administrator. The authorities make clear that an administrator should only be replaced if that would be "for the better conduct of the administration": Network Exchange Pty Ltd v MIG International Communications Pty Ltd (1994) 13 ACSR 544 at 549-541; Re Central Spring Works Australia Pty Ltd (admin apptd); Tubemakers of Australia Ltd v McLennan [2000] VSC 145; (2000) 34 ACSR 169. It appears that Phoenix supports its application for removal of the Administrators on the basis of an allegation that they have an apparent or actual conflict of interest. Similar principles apply to an application on that basis as those which apply to an application for the removal of an administrator under s 473 of the Corporations Act , which contemplates the removal of a liquidator if his or her conduct is such that a reasonable observer would perceive a lack of impartiality or lack of objectivity. 46Phoenix sought to establish a lack of objectivity on the part of the Administrators by suggesting that, for a short period of time after their appointment as Administrators, they retained Westpac's legal advisers, Henry Davis York, to represent them in the administration, or alternatively those legal advisers in fact represented them in the administration without being retained to do so. In Re Smarter Way (Aust) Pty Ltd; Smarter Way (Aust) Pty Ltd v D'Aloia (as admin of) Smarter Way (Aust) Pty Ltd [2000] VSC 408; (2000) 35 ACSR 595 at [26], Byrne J observed that it was undesirable for an administrator to engage solicitors who act for a secured creditor. In Commonwealth Bank v Fernandez at [89], Finkelstein J went a step further to express the view that an administrator should not appoint a solicitor who was on the secured creditor's panel of solicitors. It is not necessary for me to express a view as to the correctness of that approach, since it has not been established that Henry Davis York were retained to act, or did in fact act, for the Administrators in this matter. 47Mr Parbery's evidence, which I accept, was that he advised Westpac when he was first approached for appointment that he would need to appoint independent legal representatives to act for him. Norton Rose were engaged to act as the administrator's legal advisers by no later than 18 January 2012. The evidence establishes, and the Administrators have frankly accepted, that they have sought to draw on the knowledge of Westpac's solicitors given their familiarity with issues before their appointment. 48Phoenix relies on an email sent on 17 January 2012 by an employee of the Administrators which, apparently incorrectly, referred to Henry Davis York as being solicitors for the Administrators. On 17 January 2012, Phoenix by its solicitors complained that the Administrator should not be engaging a secured creditor's solicitor. There is also a dispute as to whether there was reference to the Administrators "using" Henry Davis York at a meeting with Phoenix on 18 January 2012. It is not necessary for me to resolve that dispute for the purposes of these proceedings. Even if (which was not established) the Administrators had in fact "used" Henry Davis York for a short period, they made clear from at least 18 January 2012 that they would be represented by independent solicitors, Norton Rose and were and are so represented. 49I do not consider that cause for the removal of the Administrators has been established. It was also not established that it was in the interests of creditors generally or consistent with the purposes of Pt 5.3A of the Corporations Act that the Administrators be removed, when Mr Parbery has been involved in considering two DOCA proposals, including one put by Phoenix, and other work undertaken in connection with the administration; the administration has now advanced to the point of preparation of their report; and the second meeting of creditors will be held shortly. Accordingly, I am not prepared to make orders for the removal of the Administrators under s 449B of the Corporations Act . 50Phoenix also seeks orders that the Administrators be restrained from acting or holding themselves out to be the Administrators of the Church and from receiving or retaining costs and disbursements for work performed and expenses incurred by them since the conclusion of the first meeting of creditors. No basis for those orders has been established, given the conclusions which I have reached above. Orders and Costs 51Accordingly I order that:

The proceedings be dismissed.
The Plaintiff pay the Defendants' costs of the proceedings.

In the matter of Free Wesleyan Church of Tonga in Australia Inc (administrators appointed) Phoenix Lacquers & Paints Pty Limited v Free Wesleyan Church of Tonga in Australia Inc

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