Application for leave to appeal to Supreme Court by administrator dismissed

2011 case note - application for leave to appeal to Supreme Court by administrator dismissed - voluntary administration, insolvency, casting vote.

Case

Damien Grant & Steven Khov v Commissioner of Inland Revenue

Legislative References

Companies Act 1993

Summary

The Supreme Court confirmed that a casting vote in voluntary administrations can only be used to break a deadlock in number.

Impact of decision

The ruling confirms the Commissioner's interpretation of when a casting vote can be used in a watershed meeting.

Facts

On 5 December 2008, the appellants were appointed voluntary administrators for three publishing companies. There was common ownership and directorship of the three companies (with a minor exception). The one of particular relevance to this matter is Jones Publishing.

Jones Publishing went into voluntary administration. At the watershed meeting, a Deed of Company Arrangement (DOCA) was proposed. The Commissioner voted against and the seven other creditors voted for the resolution. The Commissioner was owed roughly 30% of the total debt and therefore the seven other creditors did not get the required 75% super-majority. The appellants argued at the watershed meeting, and continued to argue in the Courts, that they were entitled to exercise a casting vote in this situation.

The Commissioner argued at the watershed meeting, and subsequently through the Courts, that the casting vote can only be exercised when there is a requirement to break a deadlock in number (for example, five creditors for and five votes against) but not use the casting vote to break a deadlock between the number of creditors and the required super-majority of 75% of the total debt.

The High Court agreed with the Commissioner's view and this was confirmed by the Court of Appeal.

Decision

The application for leave to appeal was dismissed with costs. The Supreme Court found that the Commissioner's interpretation of the casting vote issue is correct:

While the second issue may be arguable, we are not persuaded that the applicant has any prospect of succeeding on the casting vote issue. We are in full agreement with the Court of Appeal's reasoning that the chairman was not empowered to exercise a casting vote in the circumstances.