Creditor voting in scheme of arrangement must be confined to true creditors, excluding ineligible proxy holders.

In a scheme of arrangement, only persons who are creditors within the relevant class may be treated as entitled to participate and vote, and proxy holders who are not themselves creditors cannot validly be counted. Persons not shown in the company's books must establish at least a prima facie claim before being treated as creditors. Votes cast by ineligible proxy holders were excluded, so the scheme lacked the requisite support. The Court also declined to make substantial alterations to the scheme without further creditor consideration, and directed a fresh meeting of creditors and shareholders.

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Issues: Whether the scheme of arrangement, as passed at the creditors' and shareholders' meetings, ought to be sanctioned; and whether votes of disputed creditors and proxy holders who were not creditors could be counted for determining the requisite majority.

Analysis: The Court held that creditors whose names appear in the company's books may be treated as creditors for the purpose of the application, but persons whose names do not appear in the books cannot be treated as creditors unless they establish a prima facie claim to that status. It further held that at a meeting of creditors, only persons belonging to that class are entitled to be present or vote, and proxy holders who are not themselves creditors cannot be treated as valid participants. On that basis, votes cast by such proxy holders were excluded, and the scheme as carried at the meeting could not be treated as having obtained the requisite support. The Court also considered it inappropriate to make extensive alterations to the scheme without further consideration by the creditors.

Conclusion: The scheme was not sanctioned, and a fresh meeting of creditors and shareholders was directed.

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