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01 Jun 2007

It's a question of value!


3 min

Administrators, liquidators and trustees are constantly faced with the question of whether to admit one or another proof of debt for voting purposes at meetings of creditors. Sometimes the answers are easy. In most cases the claimant will provide sufficient information to show the existence and quantum of a claim. Sometimes they attach nothing and the claim can easily be rejected.

Sometimes however the question is not so easy. In corporate matters, practitioners are guided by regulation 5.6.23 that says:

(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.

This places the onus of making two decisions on the practitioner, whether to admit the claim at all given the information attached, and - if it is to be admitted - for what value.

Keep in mind that these claims are often not received until the day before or the day of the meeting, and just as often relate to a dispute or legal action that is in some advanced stage. The practitioner then has to make a decision that could effect the voting at the meeting, a decision that is likely to be disputed by at least some parties at the meeting, and do so in a short amount of time and based solely on information that they have just been provided.

We recently asked Mark Martin, an experienced Brisbane barrister, to present a paper on this topic at our Queensland state conference. Mark's paper referred to Selim v McGrath [2004] 47 ACSR 537 and comments by Barret J.

"So too, it seems to me, reg 5.6.23, in requiring a just estimate of value to me made, does not contemplate that the chairperson or administrator will undertake any detailed inquiry. He or she will do the best that can be done by reference to the factual material the claimant furnishes, view in the total context with the decision-maker is dealing. If that material provides reasonable grounds, within that context, for ascribing a particular figure, the chairperson or administrator is no doubt expected to accept that position. If, on the other hand, there is little or no material from which a conclusion as to value can be drawn, a just estimate may be zero or perhaps the nominal amount or $1, assuming that admission is warranted at all."

These comments seem to confirm the ability to admit a debt for a nominal $1 amount. This policy has been adopted by many practitioners in the past, but others have doubted the right to do so under the regulation that says a just estimate must be made or the claim rejected.

Practitioners will still to have to make decisions on the admittance of proofs of debt based on information provided by claimants and under circumstances that are less than ideal. It is also inevitable that some of these decisions will be referred to the Courts.

Mark Martin's paper can be viewed on the Library page of our website.

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