Australian Securities and Investments Commission v Planet Platinum Limited

[2015] VSC 273

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE
COMMERCIAL COURT

S CI 2015 01790

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION	Plaintiff
v
PLANET PLATINUM LIMITED (ACN 101 217 252)	Defendant

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JUDGE:	Efthim AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	29 May 2015, 1 and 5 June 2015
DATE OF JUDGMENT:	12 June 2015
CASE MAY BE CITED AS:	ASIC v Planet Platinum Limited
MEDIUM NEUTRAL CITATION:	[2015] VSC 273

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M Pearce SC and Ms Z Maud	Australian Securities and Investments Commission
For the Defendant	Mr S Marks QC and Mr R Harris	Pointon Partners

HIS HONOUR:

1. The plaintiff, the Australian Securities and Investments Commission (‘ASIC’) applies under sections 461(1)(k), 464 and 472(2) of the Corporations Act 2001 (Cth) (‘the Act’) that the defendant, Planet Platinum Limited, be wound up under the ground that it is just and equitable that it be wound up and also applies for the appointment of a provisional liquidator.

1. Gideon Isaac Rathner, in his capacity as voluntary administrator of Planet Platinum Limited, has also filed an originating motion and applies under sections 477C and 447A(1) of the Act to declare his appointment as administrator valid and under sections 439(6) and 447A(1) of the Act to extend the period of time for an administrator appointed under Part 5.3A of the Act to convene a meeting under s 439A of the Act.

1. The only application before the Court at present is whether a provisional liquidator should be appointed pursuant to s 472(2) of the Act. Mr Rathner opposes that application.

1. The application for the appointment of a provisional liquidator was filed on 21 April 2015 and supported by the affidavits of Brendan Francis Caridi (Senior Manager in the Corporations and Corporate Governance Enforcement team of ASIC) sworn 17 April 2015 and 26 May 2015.  An interlocutory process was filed on 20 May 2015 seeking the following:

1.A declaration that the appointment on 4 May 2015 of Gideon Isaac Rathner as Administrator of the First Respondent was invalid, void and of no effect.

2.        Alternatively to 1:

(a)an order pursuant to s 440D(1)(b) of the Act that the Applicant have leave to continue this proceeding; and

(b)an order pursuant to section 447A(2)(b) and/or (c) of the Act that the administration of the First Respondent end forthwith.

3.An order pursuant to s 472(2) of the Act that John Lindholm (‘Lindholm’), an Official Liquidator of Level 43, 600 Bourke Street, Melbourne, Victoria be appointed as the provisional liquidator to the First Respondent (‘the provisional liquidator’).

…

1. On 4 May 2015, Mr Rathner was appointed as administrator of Planet Platinum Limited by resolution at a directors’ meeting held at 12.30pm at Mr Rathner’s office. The appointment was made by two directors, and not three, as required by the company’s constitution. Planet Platinum Limited is a public company and pursuant to s 201A(2) of the Act, it must have at least three directors.

1. A provisional liquidator may be appointed pursuant to s 472(2) of the Act which provides:

The Court may appoint an official liquidator provisionally at any time after the filing of a winding up application and for the making of a winding up order or, if there is an appeal against a winding up order, before the decision in the appeal is made. 

1. The application to wind up has been made by ASIC pursuant to s 464 of the Act which provides:

(1)Where ASIC is investigating, or has investigated, under Division 1 of Part 3 of the ASIC Act:

(a)matters being, or connected with, affairs of a company; or

(b)       matters including such matters;

ASIC may apply to the Court for the winding up of the company.

(2)For the purposes of an application under subsection (1), this Act applies, with such modifications as the circumstances require, as if a winding up application had been made by the company.

(3)ASIC must give a copy of an application made under subsection (1) to the company.

1. A prerequisite for the appointment of a provisional liquidator is that the applicant must establish that there is a reasonable prospect that a winding up order will be made on the application.[1] 

   [1]See Australian Securities and Investments Commission v ActiveSuper Pty Ltd (No 2) (2013) 93 ACSR 189 at [15] per Gordon J.

1. The affidavit of Mr Caridi, sworn on 17 April 2015, has not been contradicted. It provides ample evidence of mismanagement of the company by the directors and numerous examples of contraventions of the Act. On the basis of the evidence presented in that affidavit, there is definitely a reasonable prospect that the winding up order will be made. The affairs of Planet Platinum Limited have been carried out casually and without due regard to legal requirement. On the uncontradicted evidence, I have no confidence that the company’s affairs have been conducted properly and with due regard for the interests of its shareholders.

1. ASIC seeks that the company be wound up on the grounds that it is just and equitable that the company be wound up.  Improper and unlawful conduct, as described by Mr Caridi, is clearly sufficient for a company to be wound up under the just and equitable ground.[2]  There is therefore a reasonable prospect that Planet Platinum Limited will be wound up.

   [2]See Australian Securities and Investments Commission v A.S. Nominees Ltd (1995) 62 FCR 504 and Australian Securities and Investments Commission v ABC Fund Managers (2001) 39 ACSR 443.

1. The Court has a wide discretion to appoint a provisional liquidator.[3] That discretion is fettered by the operation of s 440A. If the administrator has been appointed and the Court is satisfied that it is in the creditors’ interests for the administration to continue, then the Court will be precluded from appointing a provisional liquidator.

   [3]See Australian Securities and Investments Commission v ActiveSuper Pty Ltd (No 2) (2013) 93 ACSR 189 at [11]-[12].

1. Section 440A of the Act provides:

(1)A company under administration cannot be wound up voluntarily, except as provided by section 446A.

(2)The Court is to adjourn the hearing of an application for an order to wind up a company if the company is under administration and the Court is satisfied that it is in the interests of the company’s creditors for the company to continue under administration rather than be wound up.

(3)The Court is not to appoint a provisional liquidator of a company if the company is under administration and the Court is satisfied that it is in the interests of the company’s creditors for the company to continue under administration rather than have a provisional liquidator appointed.

1. In Lubavitch Mazal v Yeshiva Properties No 1 & Ors,[4] where companies were in administration and an application was made for the appointment of a provisional liquidator, Austin J considered the requirements under s 440A(2) and s 440A(3) of the Act. His Honour said:

[78]These cases deal with the question of adjournment under s 440A(2). Section 440A(3) requires the court, when confronted with an application for the appointment of a provisional liquidator of a company in administration, to consider whether it is in the interests of the company’s creditors for it to continue under administration rather than to have a provisional liquidator appointed. The choice is between administration and the appointment of a provisional liquidator, rather than (under s 440A(2)) between administration and winding up. Subject to that difference, however, it appears to me that the investigation is essentially the same, and the principles governing it are those stated in the cases to which I have referred. Under subs (3), as under subs (2), the person resisting winding up or the appointment of a provisional liquidator has the onus of satisfying the court that the interests of the company’s creditors are better served by administration. The question (or at any rate, the main question) will be whether there is on the evidence any real, practical prospect, as opposed to mere optimistic speculation, that the creditors will receive a better or quicker dividend if administration is permitted to continue, than they would eventually hope to receive if a provisional liquidator were appointed.

[4][2003] NSWSC 535.

1. The parties made submissions regarding whether the correct approach had been taken by their legal representatives in presenting what was required pursuant to s 440A(2). ASIC submitted that Senior Counsel for Mr Rathner had run the case on the wrong basis, in that he invited the Court to assume Planet Platinum Limited would be immediately wound up. In my view, this would make no difference to the test to be applied. I am required to answer the question whether on the evidence there is a real prospect, as opposed to more optimistic speculation, that creditors will be better off.

1. Mr Rathner has sworn three affidavits.  The first affidavit was sworn on 27 May 2015.  The hearing commenced on 29 May 2015.  The second affidavit was sworn on Sunday 31 May 2015, the day prior to the second day of the hearing and the third affidavit was sworn on 4 June 2015, the day prior to the third day of the hearing.  The second and third affidavits were sworn after issues had been raised at the hearings.  A submission was made by Senior Counsel that the third affidavit was responsive to issues raised by me.  Clearly the purpose of these affidavits was to ensure that the Court would agree that a Deed of Company Arrangement (‘DOCA’) was appropriate so that the company could stay in administration. 

1. Annexed to his first affidavit is a preliminary asset and liability statement in relation to the company prepared from books and records of the company available to Mr Rathner.  The document sets out the assets and liabilities as follows:

PLANET PLATINUM LIMITED (ADMINISTRATOR APPOINTED)

Description Assets Freehold Building – 46 King Street, Melbourne Freehold Building – 7–12 Horne Street, Melbourne Business – “Showgirls Bar 20” Plant & Equipment – Showgirls Bar 20 Fit out of Horne Street, Melbourne Debtor – Daily Planet Australia Pty Ltd Loan – Metropolis City Promotions Pty Ltd	$ 4,450,000 3,950,000 1,400,000 64,000 546,850 374,432 2,691,074	$ 13,476,356
Less Liabilities Secured creditors National Australia Bank Limited Outstanding Superannuation Trade creditors Australian Taxation Office – GST/PAYG Australian Taxation Office – Income Tax	291,000 4,740,200 64,771 597,162 87,117 ?	5,780,250
Less Costs	500,000
Estimate equity available to shareholders	7,196,106

1. Mr Rathner was cross-examined in relation to the asset and liability statement.  No cash at bank is referred to in that statement.  Mr Rathner gave evidence that there was $30,000 in cash which he had recovered.  He could not comment whether that was a remarkably small amount for this type of business.  He agreed that there was a strong possibility that someone may be diverting cash.[5]

   [5]Transcript 145.

1. In relation to the asset of $1.4 million for the Showgirls Bar 20 business which is run by Planet Platinum Limited, referred to in the asset and liability statement, he stated that it was based upon his discussion with the directors.  He further stated it was an estimate based on a discussion.  He agreed that the valuers that he instructed to inspect that property were of the view that the current use of the property may not be the highest and best use of the land.  He also agreed that estimate of the business could be reduced to zero if he assumed the highest and best use of the property was not the current business.[6] 

   [6]Transcript 112.

1. In relation to the fit out in the sum of $546,850 which is contained in the asset and liability statement, Mr Rathner stated that that amount may be a vastly inflated amount.[7]

   [7]Transcript 114.

1. In relation to the sum of outstanding rent of $374,432 owed to Planet Platinum Limited by Daily Planet Pty Ltd, Mr Rathner agreed that the rent was paid until September 2014 and then ceased.  He could not comment on the circumstances of Daily Planet Pty Ltd which made it unable to pay its rent, nor did he ask the directors if there was a change of circumstances preventing it from paying its rent.[8] 

   [8]Transcript 117.

1. In relation to the loan to Metropolis City Promotions Pty Ltd (a company controlled by John Dennis Trimble) in the sum of $2,691,074 which has been outstanding for 12 years, Mr Rathner stated that he was of the opinion that the loan was recoverable because it was guaranteed by Cameron Lane Pty Ltd (a company controlled by John Trimble and the owner of 79.7% of the shares in Planet Platinum Limited).  Mr Rathner during cross-examination gave the following evidence:

If we go back to your GR1, there’s an item there for a loan from Metropolis City Promotions of 2.691 million dollars, do you see that item there? --- I do.

And that’s an amount that was written down by the amount of 546,000 - I say, written down or reduced, by that amount , wasn’t it, so if the 546,000 is added back in you’ve got an amount of over three million dollars there? --- Correct.

Have you formed an opinion about the recoverability of that loan? --- The two point nine six ---

Two point six --- ? ---  Point six nine million?

Yes - - - ? --- Yes, I think it is recoverable.

It is recoverable? --- I am of the opinion it is recoverable.

Though it’s been outstanding for twelve years? --- I’m of the opinion it is recoverable.

It’s a current loan that’s been outstanding for twelve years.  What’s the basis for your opinion? --- That the net asset position of this company appears to be in the vicinity of 7.2 million and 80 per cent of that 7.2 million is owed to Cameron Lane, and Cameron Lane has guaranteed the debt of Metropolis.

Now have you seen the guarantee? --- I can’t recall at the moment.

I’ll put to you that you probably haven’t because ASIC has called for a copy of that guarantee and none has been provided to them? --- Okay.  Then it is unlikely I may have seen that.

Right, well the basis of your opinion that this loan is recoverable is a guarantee that you haven’t seen? --- It would appear so.

Now I’m telling you now that ASIC has an outstanding, a long outstanding, request for a copy of that guarantee and it’s not been provided.  Now does that affect your opinion about recoverability of this loan? --- No.

HIS HONOUR:         Why not? --- Because it’s not – the director has not disputed the existence of the guarantee or that the loan would be repayable under the guarantee.

MR PEARCE: The director being Mr Tremble Snr? --- Correct.

And you, from your dealings with him, consider him to be a man of his word? --- I have yet to find any instance where what he’s told me has not been correct.

You’ve read Mr Caridi’s affidavit? --- I have.

And you’ve read the many items there that were detailed about the conduct of this company? --- I have.

That’s not caused you to form any doubt about the reliability about the word of Mr Tremble? --- I take sceptically what he said to me until such time as my scepticism is proved correct, so as I said, what he’s told me so far has not been proved to be incorrect.

So say you take sceptically what he tells you? --- Correct.

He tells you his company has given a guarantee, I’m telling you no guarantee has been produced.  Now that’s something that ought to reinforce your scepticism, isn’t it? --- As I said, I have my discussion with him and he has confirmed to me that the amount is guaranteed by Cameron Lane and I accept that.

HIS HONOUR:        I’m sorry, Mr Rathner, you’re not answering the question? --- Sorry.

Repeat the question.

MR PEARCE:           You say you take sceptically what he says, no? --- I hold scepticism, yes.

He’s told you his company has guaranteed this loan? --- Yes.

That’s something you’ve taken sceptically? --- Just general – yes, well, amongst everything else, yes.

But you’ve taken sceptically his statement that he’s guaranteed the loan, right? --- Yes.

And he’s not produced a guarantee to ASIC despite ASIC’s request for it.  That must reinforce your scepticism about what he says? --- I can only answer  I’m of the opinion that it’s recoverable and under the DOCA proposal it is recovered.

But the reason why you say it’s recoverable, is because he tells you he’s guaranteed it? --- Correct.

Which is the statement you’ve taken sceptically? --- Until proven wrong.  I accept what he says until proven wrong.  In other words, I don’t accept – I accept on face value until circumstances prove that’s incorrect.

Well, you’re changing your evidence.  You don’t accept that (indistinct) sceptical? --- Then I’m clarifying what I meant.

You accept at face value what he says? --- (No audible reply).

Is it your evidence that you accept sceptically what he says or that you accept at face value what he says? --- I accept on face value what he said to me until I can prove that what he said to me is incorrect.

So you take Mr Tremble’s word at face value and even though I’m telling you ASIC is not able to produce a guarantee, you are willing to believe that this loan is recoverable because it’s guaranteed by Mr Tremble, that’s your evidence? --- By Cameron Lane.

By Cameron Lane which is controlled by Mr Tremble? --- And under the deed proposal the arrangement is that it will be recovered by way of set off.

Yes, all right, so on that basis, on the basis that the 2.69 is recoverable you think this net asset value of about 7.196 is reliable, do you? --- Subject to valuations.[9]

[9]Cross-examination of Mr Rathner at Transcript 117– 121 (2 June 2015).

1. His evidence in this regard is concerning.  He appears to change his position from being sceptical to accepting at face value the word of Mr Trimble. 

1. There are two alternative DOCAs proposed by Mr Rathner.  The first DOCA is contained in exhibit 97 to the second affidavit of Mr Caridi and was before the Court when the matter was first heard on 28 May 2015 and the alternative proposal was put to the Court on 1 June 2015.  A copy of the draft DOCA is attached to these reasons.  It provides:

1.        The Fund (“Fund”)

The Deed Proponents shall procure a contribution to create the Fund for distribution as hereinafter provided.  The Fund is to be provided within xx days of the conditions in clause 2 being satisfied.

The Fund is to provide sufficient funds to meet the following:

1.1All creditor claims in full, excluding the National Australia Bank Limited and related parties to the directors and Deed Proponents claims. (estimated $560,000)

1.2The payment to each minority shareholder representing the market valuation of their shareholding.

1.3The costs and expenses of the Administrator and Deed Administrator. (estimated $500,000)

The calculation of the Fund is subject to obtaining valuations of the assets of the Company, including freehold land and the business operating as Showgirls Bar 20.

1. In his first affidavit, Mr Rathner deposes that the DOCA provides for:

(a)creation of a Fund by contribution from the Deed Proponents sufficient to pay:

·     all creditor claims in full (save for the National Australia Bank as secured creditor and debts owing to the directors or Deed Proponents and related entities);

·     the market value of their shares to all minority shareholders; and

·     the costs and expenses of the Administration and Deed Administration;

(b)transfer of the shares of minority shareholders to the Deed Proponents or nominees by the Administrator upon Court approval pursuant to s.444GA of the act;

(c)provision of the Fund and transfer of shares to be subject to any necessary dispensation of the Deed Proponents from the requirements of Chapter 6 of the Act by ASIC pursuant to s.655A of the Act; and

(d)control of the Company reverting to the directors upon execution of the Deed.

It is intended that the amount of the Fund will be determined upon completion of valuations of the land and business of the Company.

1. Ric Tenuta and Peter Plevritis are the Deed Proponents and according to the DOCA they have agreed to procure a contribution to create a fund for distribution.  There is no affidavit from either Mr Plevritis or Mr Tenuta regarding their financial position or their willingness to pay.  Mr Rathner agreed that he did not know them personally, nor has he had any dealings with them, nor has he investigated them.  He agreed that he knew nothing about their creditworthiness nor their ability to pay.[10]  That evidence was given prior to Mr Rathner filing his third affidavit.

   [10]Transcript 128.

1. Mr Rathner was cross‑examined in regard to the terms of the DOCA. He agreed that the creditors and shareholders would be better off under the DOCA. He believes that he can achieve a DOCA by August 2015. He agreed that the first DOCA is conditional on granting dispensation under s 655 of the Act and on obtaining approval under s 444GA of the Act.[11]  ASIC has made it clear no approval will be given and they will oppose any application for dispensation.

   [11]Transcript 130.

1. Mr Rathner also gave evidence that if the first DOCA was accepted:

-          there would be no investigations of the directors;[12]

-          he had not communicated with minority shareholders at this time;[13] and

-          he accepted there was unrest from minority shareholders.[14]

[12]Transcript 131.

[13]Transcript 132.

[14]Transcript 133.

1. In his second affidavit, Mr Rathner refers to paragraph 24(d) of his first affidavit where he deposes that:

(d)if the DOCA proposal cannot be implemented for any reason then the prospects of continuation of the business of the Company (including the jobs of the employees) and the return to members would be maximised by an orderly sale of the assets of the Company, including the Showgirls Bar 20 business with an attached lease.  Such orderly realisation could occur under an alternative DOCA proposal and which may provide for the Company going into liquidation or being deregistered (as appropriate) upon completion of the sale process and distribution.

1. In his second affidavit Mr Rathner deposed:

7.One of the advantages of a DOCA as compared to provisional liquidation and a winding up in this case is that it enables adjustments between the majority shareholder, Cameron Lane Pty Ltd, and the minority shareholders in a way that cannot occur in liquidation.  A DOCA can provide that:

(a)under any acquisition of the minority shareholdings the Metropolis City Promotions Loan ($2,691,074), pre-appointment arrears of rent payable by Daily Planet Australia Pty Ltd ($374,342) and Horne St. fitout transaction ($546,840) can be included as recoveries of the Company for full face value when calculating the fair value of the shares of the Company; and

(b)under any alternative realisation of assets under a DOCA (as set out in paragraph 24(d) of my First Affidavit) the amount payable to the majority shareholder of 80% of the surplus can be adjusted so as to allow the full value of the above items in favour of minority shareholders without first recovering 100% of those items from director related parties.

Arrangements as set out above would be of value to both the minority and majority shareholders, and avoids the costs, delay and risk of non-recovery in litigation.  On 31 May 2015 I met with the Deed Proponents and the directors and their advisers and they advised me that they support the above proposals. 

1. When cross-examined, Mr Rathner agreed that if the second DOCA was implemented, it involves an orderly realisation of assets and that is what a liquidator would do, but the outcome would be different because under the proposal the issues of the related party loans, the fit out and the rent are all resolved without the need for litigation.[15] 

   [15]Transcript 135.

1. Mr Rathner gave the following evidence regarding whether the second agreement was referred to in the first agreement: 

But you say that you reached this agreement before you saw your first affidavit? --- That is correct.

But you made no particular reference to it in your first affidavit? --- It may not be – no, it does not appear to be explicitly set out.

When was the last conversation that you had with Mr Tremble, Senior, in which this specific matter was discussed? --- Yesterday.

What time yesterday? --- Between three and 5pm.

Before you swore your second affidavit? --- Correct.

It is not even referred to in your second affidavit, this agreement.  Tell us where it’s referred to in your second affidavit? --- Clause 7.

What you say in clause 7 is, “A DOCO can provide that these amounts be included as recoveries”, and that’s just the statement of the bleeding obvious, isn’t it? --- In which case, I apologise for my affidavit not being sufficiently clear.

You don’t there, or anywhere, that you reached this agreement with Mr Tremble, do you? --- Not in the terms you use, no.

Not in any terms, not in any terms, do you refer explicitly to an agreement of a kind that you allege you made with Mr Tremble, anywhere? --- Okay.

The only reference to that was in your oral evidence in answer to a question of mine shortly before lunch.  It is the only place that’s ever come up, isn’t it? --- It would appear so.

The reason for that is, you’ve ---

MR MARKS:  Your Honour, I’m not going to let this witness be asked questions which are wrong and unfair.

Ultimately - - -

HIS HONOUR:        I think that is a fair point you make.

MR MARKS:            The last sentence of paragraph 7 makes clear – it’s at the bottom of four and top of five – “That arrangements, as set out above would do X, and on 31 May [that’s yesterday] I met with the deed proponents and the directors and their advisors and they advised me that they supported the above proposals”.  How much clearer do you want him to put a completely wrong proposition, and then want to later rely on it, it seems to me to be palpably unfair. (Indistinct.)

MR PEARCE:           (To witness) Why don’t you say anywhere you had a conversation with Mr Tremble in which you reached a particular agreement?  Why don’t you say that anywhere? (No audible response.)

What does it mean to say - - -

MR MARKS:  Sorry, again, your Honour, but I have to interrupt.  He says he had, “A meeting with the proponents and they advised that they supported the proposals.  The proposals are set out, and under the proposal, the fact that they would be able to be included for full face value” – it’s there.  My friend may want to ask a different question.

HIS HONOUR:        Does that mean there’s an agreement?

MR PEARCE:           What that says, Mr Rathner – it’s your affidavit, you can explain it to us – they agreed with the statement of the bleeding obvious, didn’t they?  That a DOCA can provide something? ---All I can say is the basis of my discussion with them was that they agreed that the proposal wouldn’t provide for the set-off.

Let us get – keep going? ---No, that’s my answer.

Let us get specific.  Who said what? --- I specifically asked Mr Tremble whether he was in agreement with the proposal that provided for the treatment of the three items, and he concurred that the was in agreement with it to be treated that way.

Did he agree that a DOCA can make a provision of the kind set out in paragraph A of your affidavit, is that what he agreed with? --- He agreed with a proposal for a deed of company arrangement incorporating the setoff of Cameron Lane’s entitlement as a shareholder against the three amounts in the Metropolis loan, the arrears of rent with (indistinct) Planet and the fit-out transaction to be recovered in full for the benefit of the company.[16]

[16]Transcript 149–51.

1. In re-examination, Mr Rathner stated that:

-          the source of information for the asset and liability statement was from audited accounts that he had obtained.  It was from the MYOB accounts that was received from the accountant and from information gleaned from the affidavit of Mr Caridi;[17]

[17]Transcript 153.

-          in relation to the loan to Metropolis City Promotions Pty Ltd, if there was no guarantee, he has significant doubt that it would be recoverable because Metropolis City Promotions Pty Ltd was merely a management company and did not in itself own assets.[18]  The Deed proposal includes the recovery of the amount in full by the shareholder Cameron Lane Pty Ltd agreeing to a set off of its entitlement as a net equity, to be offset so as to recover the loan in full;[19]

[18]Transcript 154.

[19]Ibid.

-          in relation to the fit out,[20] it would not be recoverable in a liquidation but would be under the DOCA.  If a liquidator brought action to recover this sum then it would not be recoverable if Metropolis City Promotions Pty Ltd was not able to repay it.  In his opinion, Metropolis City Promotions Pty Ltd is unlikely to have funds to pay;[21]

[20]Transcript 155.

[21]Transcript 157.

-          around the middle of July 2012 he would know what would be required in the fund;[22]

[22]Transcript 159.

-          the rent would not be recovered in a liquidation[23] but would be in an administration.  In the first and second DOCA’s it would be set off against  the entitlements of Cameron Lane Pty Ltd;[24]

-          he was not proposing to commence an investigation at the moment because the potential courses of recovery are outside the actual realisation of the physical assets.  He is seeking to recover the full value of the related party loans and transactions under the DOCA;[25] and

-          he has made preliminary findings that the matters referred to by ASIC are correct.[26]

[23]Transcript 162.

[24]Ibid.

[25]Transcript 165.

[26]Transcript 169.

1. Mr Rathner, in his second affidavit, deposed that he has all the powers of a provisional liquidator. He intends to prepare a s 439A report and any exploratory memorandum to members will include:

(a)   whether the company has suffered any loss by the act or omission of any person and the existence and value of any right to compensation on the part of the company;

(b)   identifying any transaction, acts or omissions which would result in a liquidator having a right to recover property or compensation on behalf of the company. 

1. Mr Rathner also deposes that the DOCA will not affect ASIC’s powers to prosecute any person for an offence, or commence any civil penalty proceeding.

1. The third affidavit of Mr Rathner sworn 4 June 2015 refers to:

-          A circular to creditors which refers to the first meeting of creditors where Mr Michael Trimble made an inaccurate statement that the appointment of an administrator was due to ongoing issues Planet Platinum Limited had with the Australian Securities and Investments Commission; the company was solvent; and the administration was only necessary due to compliance issues and not due to the fact that the company could not pay its bills.  The purpose of the circular was to inform creditors that that was an incorrect statement;

-          A letter dated 4 June 2015 received from MDB Taxation and Business Advisers stating that the Deed Proponents had the financial capacity to provide $3,400,000.000 towards the fund contemplated in the DOCA proposal;

-          A meeting with the directors and their solicitors where John Trimble executed and provided Mr Rathner with the following documents:

-A resignation by John Trimble as a director of the company to take effect if the company were to revert to the control of directors after the administration;

-A Deed by Cameron Lane Pty Ltd authorising the Deed Administrator under a DOCA approved by creditors to make adjustments and apply any amount payable to Cameron Lane Pty Ltd as a shareholder under such DOCA proportionally to minority shareholders with the effect that the amount received by minority shareholders under the DOCA will include their full proportional interest in:

a) the loan to Metropolis City Promotions Pty Ltd adjusted as if the part satisfaction of debt agreement dated 10 September 2014 had not been entered into; and

b)any arrears of rent owing to the Company by Daily Planet Australia Pty Ltd. 

1. What is interesting is the Deed would only apply if the company remained in administration but would not apply if the company went into liquidation. 

1. The first issue before me to determine is whether it is in the interests of creditors that the company remain in administration.  If the assets and liabilities are as described by Mr Rathner, Senior Counsel submits that the creditors will be paid in full regardless of whether the company remains in administration or is put into liquidation.  At present, I do not know what creditors are owed nor can I be sure about the correct value of the assets. 

1. Senior Counsel for Mr Rathner submits that the creditors will be better off because they will be paid earlier.  I am not convinced that is correct.  The onus is on the administrator to prove that and he does not meet that onus.  I am not sure when they will be paid nor do I know whether they will be paid.  I am also concerned whether the Deed Proponents will make the payment.  There is no evidence about their willingness to pay.  They have not sworn an affidavit in this matter and they should have.  At the hearing,  questions were raised including questions regarding the Deed Proponents.  Affidavits were sworn by Mr Rathner in response to queries but there was no affidavit from either of the Deed Proponents.  All I have is a letter from an accountant that they have funds.  That is not enough. 

1. In summary, in my view, there is no real prospect as opposed to optimistic speculation that the creditors will be better off with the first DOCA because:

-          there is no specified amount that will make up the fund;

-          the Deed Proponents have provided no sworn evidence as to whether they are willing and have the means to pay the amount required;

-          there is not an amount specified that is due to creditors;

-          the minority shareholders’ shares have not been valued; and

-          the valuation of the assets have not been completed and the values relied upon by Mr Rathner were in part due to discussions with the directors.

1. Section 440A(3) of the Act does not apply and therefore the question of whether the company should remain in administration is a matter which is within my discretion.

1. The issue whether there should be a provisional liquidator becomes more difficult when considering the second DOCA as:

(a)   the second DOCA does not require a payment from the Deed Proponents; and

(b)   the minority shareholders will, if the DOCA is accepted, be better off because the loans will not be taken into account in the valuation of their shares.

1. Section 440A of the Act again does not apply because the creditors will not be better off for the same reasons given for the first DOCA.

1. In Australian Securities Commission v Solomon,[27] Tamberlin J referred to the principles regarding the appointment of a provisional liquidator.  His Honour stated:[28]

   [27](1996) 19 ACSR 73 (‘Solomon’).

   [28]Ibid 80.

The relevant principles relating to the appointment of a provisional liquidator which require consideration include the following:

(a)The court should only appoint a provisional liquidator where it is satisfied that there is a valid and duly authorised winding up application and that there is a reasonable prospect that a winding up order will be made: see Debelle J in Re J N Taylor Holdings Ltd; Zempilas v J N Taylor Holdings Ltd (1991) 3 ACSR 516; 9 ACLC 1 at 12–13.

(b)The fact that the assets of the corporation may be at risk is a relevant consideration.

(c)The provisional liquidator’s primary duty is to preserve the status quo to ensure the least possible harm to all concerned and to enable the court to decide, after a further examination, whether the company should be wound up: Re Carapark Industries Pty Ltd (in liq) (1966) 9 FLR 297; 86 WN (Pt 1) (NSW) 165 at 171.

(d)The court should consider the degree of urgency, the need established by the applicant creditor and the balance of convenience: Re Club Mediterranean Pty Ltd (1975) 11 SASR 481 at 484 per Bright J. The power is a broad one and circumstances will vary greatly. Commercial affairs are infinitely complex and various and it is inappropriate to limit the power by restricting its exercise to fixed categories or classes of circumstances or fact.

(e)It may be appropriate to appoint a provisional liquidator in the public interest where there is a need for an independent examination of the state of accounts of the corporation by someone other than the directors: Tickle v Crest Insurance Co of Australia Ltd (1984) 2 ACLC 493.

(f)Where the affairs of the company have been carried on casually and without due regard to legal requirements so as to leave the court with no confidence that the company’s affairs would be properly conducted with due regard for the interests of shareholders, it may be appropriate to appoint a provisional liquidator: see Montgomery Windsor (NSW) Pty Ltd v Ilopa Pty Ltd (1984) 2 ACLC 224.

1. I have a wide discretion whether to appoint a provisional liquidator taking into account the principles referred to by Tamberlin J in Solomon and I make the following findings:

(a)   there is a valid and duly authorised winding up application and there is a reasonable prospect that there will be a winding up order;

(b)   I do not accept that the assets of the corporation may be at risk;

(c)    the administrator at present is preserving the status quo;

(d)  there is no degree of urgency because an administrator has all the powers that a liquidator has.  There would be urgency if the administrator is acting improperly or is not competent;

(e)   it is the public interest to appoint a provisional liquidator; and

(f)     the affairs of the company have been carried out casually and without due regard to legal requirement so that there is no confidence in the prior administration of the company.  However, the administrator is now in control of the company.

1. Factors (a), (e) and (f) are in support of the provisional liquidator whereas (b) and (c) support the administration remain.  Factor (d) is a neutral factor and I do not propose to consider whether the administrator is not acting properly at present because I would be required to make a finding pursuant to s 447A(2).  That application is not before the Court.  Mr Rathner would be given an opportunity to file materials in reply.  I do note that submissions have been made by ASIC that Mr Rathner was a most unsatisfactory witness in this Court, that his answers in many respects were unresponsive, at times dissembling, that he refused to give the Court the assistance which it was his duty to give and he appeared primarily concerned not to assist the Court rather than to cling to his appointment. 

1. ASIC has indicated that if a provisional liquidator is not appointed it will bring an application pursuant to s 449B of the Act to remove Mr Rathner from office as the administrator. The submissions made regarding the evidence of Mr Rathner are more relevant to an application under s 449B of the Act. I do not have to decide Mr Rathner’s competence nor his integrity because I have decided to appoint a provisional liquidator.

1. In Solomon, Tamberlin J referred to the public interest when there is a need for an independent examination of the state of accounts.  Here, I would expect Mr Rathner to examine the state of accounts, however, Mr Rathner made it clear that if the DOCA was accepted there would be no need to investigate a related loan and the directors. 

1. In relation to public interest, I also note the decision of Logan J in Deputy Commissioner of Taxation v WPS Motorsport Pty Ltd,[29] a case involving an application by the Deputy Commissioner to wind up a company where an administrator was appointed prior to the hearing of the application for wind up.  His Honour stated:

[19]It was, at one stage, submitted on behalf of WPS Motorsports that I should take into account the public interest in deciding the question posed by s 440A(2). I do not consider that the public interest is a relevant consideration under that subsection. The relevant consideration under that subsection is, as the subsection states, is it in the interests of the company’s creditors for the company to continue under administration rather than be wound up? Nonetheless, the public interest is a relevant consideration in the event that I were not satisfied that it was in the interests of the company’s creditors for the company to continue under administration rather than be wound up. To that extent, and to the extent only, I consider I shall have regard to public interest considerations.

[29](2009) FCA 476 at [19].

1. While his Honour did not have to decide whether a provisional liquidator should be appointed when the company was in administration, it is clear that he was of the view that the public interest is a factor to take into account as to whether a company should remain in administration. In my view, the public interest should be taken into account as to whether a provisional liquidator should be appointed. I note that the public interest is a very important factor in relation to many other applications under the Act. For example, the public interest is an important consideration if a court is satisfied that an administration should end pursuant to s 447A(2),[30] and pursuant to s 482 which relates to a stay or the termination of a winding up.[31]  More importantly, ASIC has the power under s 445D to apply to have a DOCA terminated and again public interest concerns are an important factor which a court will take into account.[32] 

   [30]See Cawthorn v Keira Constructions Pty Ltd (1994) 13 ACSR 337.

   [31]See Re Mascot Home Furnishers Pty Ltd (In Liquidation) [1970] VR 593 and Re McAusland v Deputy Federal Commissioner of Taxation (1993) 47 FCR 369.

   [32]See Emanuele v Australian Securities Commission (1996) 14 ACLC 244.

1. In my view, I must take into account the public interest before deciding whether to appoint a provisional liquidator.  There is no doubt that this company has not been managed properly by its directors, to the detriment of the shareholders, when one considers the sworn evidence of Mr Caridi.  

1. Planet Platinum Limited has been involved in:

-          the mismanagement or misconduct in relation to the loan to Metropolis City Promotions Pty Ltd;

- the contravention of s 208 of the Act in connection with that loan to Metropolis City Promotions Pty Ltd, as Planet Platinum Limited has failed to seek member approval for the financial benefit of Metropolis Pty Ltd through extensions to loan repayment dates; omitting to call up or enforce repayment of the loan; and the discharge of a mortgage previously registered in favour of Planet Platinum over Cameron Lane Pty Ltd’s property at 13 Horne Street Elsternwick;

- recurring ongoing contraventions of the Act arising from Planet Platinum failing to have sufficient directors as required under the s 201A(2) of the Act;

- failing to convene annual general meetings for 2013 and 2014 pursuant to s 250N(2) of the Act;

- failing to lodge annual reports with ASIC for each of the years ending 30 June 2013 and 30 June 2014 pursuant to s 319(1) and failing to lodge a half yearly report with ASIC for the period ending 31 December 2013 pursuant to s 320(1) of the Act;

- suspected contraventions of s 674 and/or 1308(2) of the Act arising from Planet Platinum Limited entering into a purported part satisfaction of debt agreement which has not been announced to the market under which Metropolis City Promotions Pty Ltd transferred to Planet Platinum Limited assets allegedly owed by Metropolis City Promotions Pty Ltd with an estimated value of $546,850 to reduce the loan by that amount, and the failure by Planet Platinum Limited to disclose to the market Metropolis City Promotions Pty Ltd ownership of assets that were transferred to Planet Platinum Limited; and

- contraventions of ss 180, 181, 182 and/or 184 of the Act in relation to the purported transfer of assets from Metropolis City Promotions to Planet Platinum Limited in circumstances where it was clear that Metropolis was in fact the owner of the assets.

1. At the first meeting of creditors on 13 May 2015, there were two shareholders of the company at the meeting present as observers.  Creditors were asked whether there was any objection to the shareholders remaining in attendance and after an objection from a creditor who is not named in the minutes, the shareholders were asked to leave.  Michael Trimble (the son of John Trimble and also a director) was asked to explain the meeting the circumstances leading to the appointment of the administrator.  The statement presented to the creditors is as follows:

Thank you all for coming today.  I know a lot of you are unsure as to what is happening or why it is happening so hopefully I can clear it up for you.  As creditors of Planet Platinum you all have the right to be involved and have a say as to what happens going forward in the administration process.  As you now know, on 4^th of May 2015 we appointed Giddeon Rathner of Lowe Lippmann to take over the operations of the business as an administrator.  The reasons we have done this are due to ongoing issues the company has had with the Australian Securities and Investments Commission (ASIC) with the manner in which the company was run as a publicly listed company.  The good news for you as creditors is that the company is still solvent and the administration is only necessary due to compliance issues

and not due to the fact that we can’t pay our bills.  Our goal from the administration process is to privatize the company, removing it from the ASX and addressing the issues raised by ASIC.  In the mean time, the business of Showgirls Bar 20 will continue to trade as normal.

We will be working closely with Giddeon and his team over the next few weeks to assist in this process and make it as seamless as possible.  It is important that you all understand that the business is not in financial crisis and all outstanding monies will be dealt with in due course.  We look forward to continuing the business relationships we have established and bringing the business forward into the next level.

I can not stress enough however, the importance of the administration staying with Giddeon and his team, rather than another party.  With Giddeon, we have a solid plan in motion to get the company through this and come out on the other side stronger than ever.

1. That statement also endorses the appointment of Mr Rathner.  When cross-examined by Senior Counsel for ASIC, Mr Rathner admitted that that statement was not accurate and also admitted that he did not challenge that statement as he ‘just didn’t see it as necessary’.[33]  Further, he said that he did not think that the raising of that issue in the meeting is the right forum for it.  He said, ‘it forms part of my investigation and my subsequent report to directors’.[34]  It was only after I referred to Mr Rathner as an officer of the Court and asked whether he had a duty to make sure that the persons present at the meeting were honestly informed that Mr Rathner agreed with hindsight he probably should have raised it.  He has endeavoured to rectify the situation with a notice to creditors after giving that evidence and prior to the return of the matter before the Court. 

   [33]Transcript 140.

   [34]Transcript 140.

1. It is concerning to me that Michael Trimble will continue to be a director of Planet Platinum Limited if Planet Platinum Limited stays in administration and if the first DOCA is accepted. It is not in the public interest that this company continue with the same director that has allowed the company to be mismanaged and contravene the Act. Michael Trimble has not acted appropriately or has made a false statement either to the administrator or to the members of the company. To me it is quite clear that every attempt is being made to thwart the application of ASIC to wind up this company which is clearly not in the public interest. I am also concerned that Michael Trimble stated that he could not stress enough the importance of the administration staying with Mr Rathner and his team rather than with any other party.

1. A resolution was put to the creditors that Mr Rathner be removed and that Glen Crisp and Malcolm Howell be appointed as administrators.  Eleven creditors voted in favour of that resolution and 41 creditors voted against.  Michael Trimble was proxy for 33 creditors including his father John Trimble and the Deed Proponents Peter Plevritis and Ric Tenuta.  Peter Plevritis, one of the Deed Proponents, was proxy for the other eight members.  That also concerns me and from a public interest point of view, I am not satisfied that Mr Rathner will not be perceived as independent.  A provisional liquidator will be seen to be independent. 

1. In my view, the public interest in this case demands that a provisional liquidator be appointed.  The first and second DOCA are not in the interests of creditors.  The second DOCA, whilst of benefit to the minority shareholders when contrasted to the public interest if passed, is not sufficient to outweigh the need for an appointment of a provisional liquidator.

1. A provisional liquidator will be appointed for the reasons set out above.