Pursuant to section 600A of the Corporations Act 2001 (Cth) (the Act) the court may on application of a creditor make an order setting aside a resolution passed by the creditors of a company at a meeting held in relation to the winding up or administration of a company. This will only be done in circumstances where it is believed that a group of related creditors substantially effected the determination and the resolution ultimately made was not in the best interests of the creditors as a whole or would not have been passed had the related creditors votes been disregarded.

A related creditor is defined in section 600A(3) and refers to a person who, when the vote was cast, was a related entity, and a creditor, of the company or body.

Section 600A(1)(c)(ii) provides that where there has been unreasonable prejudice the court may set aside a resolution. The court’s interpretation of unreasonable prejudice is constantly evolving however in Ravenswood Resort Pty Ltd (in liq) v Kammal [2006] WASCA 217 (Ravenswood) it was held that mere prejudice to those voting against the resolution is not sufficient. The way in which the court is to assess unreasonable prejudice was examined in Ravenswood at [28];

The first is that the evaluation of prejudice, to be undertaken by the court, is a qualitative process in which the nature, degree and extent of the prejudice is to be weighed and its significance assessed by the court. The second conclusion and which is related to the first, is that the process of qualitative evaluation which I have described, will also require the court to take into account any other matter that is relevant to the qualitative evaluation of whether or not the prejudice is unreasonable. This will require the court to identify the consequences which the passage of the resolution would have on parties or interests other than those of the related creditor or creditors…and then to qualitatively weigh and evaluate those interests and to assess the extent to which consideration of those other interests might ameliorate or negate the conclusion that the prejudice which has been or is likely to be suffered by the opposing creditor is properly characterised as unreasonable.

This test was upheld in the recent case of Promnitz v Indochine Mining Limited (Subject to a Deed of Company Arrangement); In the Matter of Indochine Mining Limited (Subject to a Deed of Company Arrangement) [2015] FCA 857 (Promnitz). However in Promitz, the plaintiffs were unable to satisfy the test as they were unable to prove that there was an extra benefit resulting to the related creditors.

Whilst it is possible for a creditor to challenge a resolution made at the meeting of the creditors, the onus lies on the applicant to make out the elements of s600A. The threshold requirements as outlined in Promnitz and Ravenswood are of a high standard reflecting the large implication of setting aside a resolution made at a meeting of the creditors.