The manner in which creditors’ meetings are conducted can often be as significant as the actual outcome of the meeting.  A good example of this can be seen from the recent High Court decision in In re Mountview Foods Ltd (In Voluntary Liquidation) IEHC 125.

A creditor of Mountview Foods Ltd brought an application before the High Court challenging the appointment of the liquidator at a meeting of the creditors of the company.  The creditor complained that the chairman had refused to allow its proxy to vote in favour of its nominee for liquidator.  The reason given by the chairman for excluding the proxy was that the creditor had returned both the general and special proxy forms and it was not possible to ascertain which form it intended to rely on. 

Laffoy J noted that the special proxy form provided by the company deviated from the form prescribed by the Rules of the Superior Courts.  In particular, the form did not make clear that the special proxy was to have authority to vote “for” or “against” the particular resolution.  It also purported to identify the resolution in question by reference to the notice convening the meeting, but there was no reference to any resolution in that notice.  The judge stated that it was the responsibility of the company to provide proxy forms in the prescribed format and it could not shift blame onto creditors who had mistakenly completed and returned both forms.  She found that the completed version of the special proxy form was so obviously defective that it should have been treated by the chairman as such. 

The liquidator’s appointment was also challenged on the basis that the chairman had permitted the proxies of three companies to vote despite the fact that the relevant proxy forms were not properly executed.  The chairman relied on his own personal knowledge of the officers in question, gleaned from business dealings over many years, to satisfy himself that they were authorised to sign the proxy forms.  The Court found that these proxies should not have been permitted to vote.

The chairman was also found to have wrongly excluded two proxies solely on that basis that the forms had been sent by fax.

The Court found that had the chairman treated the relevant proxies in the proper manner, the result of the voting would have been very different: the applicant’s nominee (and not the company’s nominee) would have been appointed the liquidator of the company.  Accordingly, Laffoy J made an order setting aside the decision of the chairman and substituting the nominee of the applicant in place of the liquidator appointed at the creditors’ meeting.

The judge also commented that the Oireachtas (Irish Parliament) should consider whether the law needs to be clarified so that all of the eventualities which may happen at creditors’ meetings, including the improper appointment of a liquidator, are expressly addressed in the legislation.

Contributed by: Delia McMahon