I recently came across this article from Corrs Chambers Westgarth here regarding the trouble a Liquidator recently got himself into when he exercised a casting vote in favour of his fees.
In this instance, the Judge found that he had breached his Liquidator’s fiduciary duty.
The facts of the case revolve around a meeting in which he put to the vote a resolution to approve his remuneration. Whilst the vote was split on the numbers 50/50, a two thirds majority in value voted against the resolution. The Liquidator then exercised his casting vote and voted in favour of the resolution.
In exercising his vote, the Liquidator reasoned that there was no legislative prohibition against him voting and that to do so would spare creditors the costs associated with him seeking the Court’s approval of his remuneration if the resolution was not passed.
The Liquidator later applied to the Court for orders under s 511 of the Corporations Act that the casting vote was appropriate in the circumstances following enquiries being made of him by ASIC. ASIC then went on to oppose the application.
The Court refused to grant the orders sought by the Liquidator and stated that in the circumstances Liquidator should have applied to Court for approval. Interesting to note was that the Court stated there was no hard and fast rule when exercising a casting vote in favour of remuneration.
Based upon commentary within the Corrs article regarding another case where it was held that a casting vote was ok when creditors representing 99.9% by value voted in favour of the resolution.
I tend to agree with the conclusion drawn by the author of the Corrs article that there is a need for liquidators to carefully consider their fiduciary duties in exercising their powers and never more so when dealing with their own remuneration. Whilst the Liquidator in this instance may have thought he was saving creditors money, he ended up making the wrong call.
Liquidators appear of often be criticised for having their ‘snouts in the trough’ and incurring costs unnecessarily, but the above is a cautionary tale where sometimes its just better to go to Court….