Plaintiff v Defendant

2 In support of its application, ASIC relies on two affidavits of Brendan Francis Caridi (senior manager in ASIC's Corporations & Corporate Governance Enforcement team) sworn on 17 April 2015 and 26 May 2015. ASIC also relies upon the report of John Lindholm, who was appointed provisional liquidator of Planet Platinum on 12 June 2015.

3 The application is opposed by Cameron Lane Pty Ltd ('Cameron Lane'), Daily Planet Australia Pty Ltd ('Daily Planet'), and Metropolis City Promotions Pty Ltd ('Metropolis') ('the Interested Parties').

4 The Interested Parties rely upon the affidavits of John Dennis Trimble sworn 16 September 2015, 23 October 2015 and 6 November 2015.

5 Cameron Lane was incorporated on 4 October 1983. It is the owner of a property at 7-12 Horne Street, Elsternwick ('Horne Street property'). It holds approximately 80 per cent of the shares in Planet Platinum. John Dennis Trimble was the sole director and shareholder of Cameron Lane.

6 Metropolis was incorporated on 18 October 1978. As at 14 April 2015, its sole director was Mr Trimble and he held 50 per cent of the company shares. His mother, Jean Trimble, held the remaining 50 per cent. Mr Caridi deposes that Mrs Trimble had no involvement in the affairs or management of Metropolis.

7 Daily Planet was incorporated on 30 June 1994. Its sole director and shareholder is Mr Trimble. It is the operator of a brothel from the Horne Street property. Daily Planet is the lessee of the Horne Street property pursuant to a 30 year lease from Planet Platinum. Metropolis, as trustee for the John Trimble Family Trust, owns the Daily Planet business, receives all business revenue and reimburses Daily Planet for all business expenses pursuant to a formal agreement between it and Metropolis.

8 Mr Trimble is a director of Planet Platinum and he is the sole director and shareholder of Cameron Lane.

9 Mr Trimble deposes that on 29 November 2002, Planet Platinum issued a prospectus. It was the intention of Planet Platinum to raise a total of $8.9 million through a share offer. Of this total amount, $3.519 million was to be loaned by Planet Platinum to Metropolis to enable a debt facility with the ANZ to be repaid and security held over the property to be discharged.

10 The prospectus stated that Planet Platinum and Daily Planet entered into a deed which provided that:

- Planet Platinum would lend Metropolis the sum of $3.519 million;

- Cameron Lane, which was the owner of the property at Horne Street, would transfer the property to Planet Platinum free of encumbrances; and

- Planet Platinum would issue Cameron Lane with 26,283,334 B-class shares in Planet Platinum.

11 Planet Platinum failed to receive the minimum amount of applications pursuant to the prospectus. A supplementary prospectus was issued with the minimum subscription amount reduced to $3,500,000. On 30 April 2003, Planet Platinum was admitted to the official list of the Australian Stock Exchange ('ASX') with 7,542,500 ordinary fully paid up shares at 50 cents each. The facility agreement was then entered into on 13 June 2013. The amount drawn down was not the original $3.519 million, but a sum of $2.110 million. According to Mr Trimble, it was his understanding that he was expressly told by his solicitor, Shane Maguire, and Mr Andrew Harris (who was managing Planet Platinum), that the Metropolis loan should have been completely paid out at the public listing in 2003 by way of Cameron Lane receiving less shares in Planet Platinum than it actually received. Cameron Lane became the owner of 79.7 per cent of the total shares in Planet Platinum instead of 59.6 per cent.

12 For a period of two years after the float, Cameron Lane's shares in Planet Platinum were held in escrow and the company was unable to sell any of those shares to reduce or extinguish the purported Metropolis loan. After the escrow period expired, shares were not sold because a significant sale of shares would have resulted in a large negative impact to the overall share price of Planet Platinum. According to Mr Trimble, for the sake of fairness to the other shareholders, he did not want this to happen, and so Cameron Lane did not sell those shares.

13 After the float and the Metropolis loan, Cameron Lane transferred the freehold interest in the Horne Street property to Planet Platinum and in return:

(a) Cameron Lane received 79.7 per cent of the shares in Planet Platinum which were held in escrow for two years;

(b) the $2.110 million loan facility was discharged by the monies that were raised;

(c) Metropolis then owed $2.110 million to Planet Platinum under the Metropolis loan, plus interest; and

(d) Daily Planet rented the premises from Planet Platinum and so had a rental liability of about $500,000 per annum.

14 Section 461(1)(k) of the Act provides:

(1) The Court may order the winding up of a company if:

...

(k) the Court is of opinion that it is just and equitable that the company be wound up.

15 ASIC has standing to apply for an order to wind up a company where it is investigating or has investigated the affairs of a company. Section 462(2)(e) of the Act provides:

(2) Subject to this section, any one or more of the following may apply for an order to wind up a company:

...

(e) ASIC pursuant to section 464.

(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.

17 In Australian Securities and Investments Commission v ABC Fund Managers ('ABC Fund Managers'),[1] Warren J (as her Honour was then) identified three general fundamental principles applied by the courts with respect to winding up applications on just and equitable grounds. Her Honour said:

There are general fundamental principles applied by the courts with respect to a winding-up application on the just and equitable ground. First, there needs to be a lack of confidence in the conduct and management of the affairs of the company: see Loch v John Blackwood Ltd [1924] AC 783 at 788 ; [1924] All ER 200. Second, in these types of circumstances it needs to be demonstrated that there is a risk to the public interest that warrants protection. Third, there is a reluctance on the part of the courts to wind up a solvent company.[2]

18 A lack of confidence appears to be a foundation for applications for winding up on the just and equitable ground. It relates to the directors' conduct in regard to the company's business.[3] Where there has been a lack of competence in the management and conduct of the affairs of a company, a lack of confidence may arise.[4]

19 The protection of the public interest may relate to the prevention or condemnation of repeated breaches of law and protecting the interests of investors.[5] Winding up in the public interest may be based on ASIC's justifiable lack of confidence in the control and management of a company.[6]

20 In relation to winding up a solvent company, in ABC Fund Managers, Warren J (as her Honour was then) said:[7]

Of course, while insolvency is not a pre-condition to the making of an order for the winding up of a company, to make such an order with respect to a prosperous or at least solvent company is an extreme step requiring a strong case.

21 ASIC relies on the following matters to demonstrate mismanagement and misconduct in the affairs of Planet Platinum:

- failure by Planet Platinum to collect the loan it made to Metropolis;

- discharge of the mortgage by Cameron Lane of 13 Horne Street;

- purported sale of fittings and fixtures at the Horne Street property by Metropolis to Planet Platinum;

- failure to collect rent from Daily Planet for the lease of the Horne Street property;

- failure by Mr Trimble to discharge his role as Chief Executive Officer;

22 Metropolis is the corporate trustee of the John Trimble Family Trust. Planet Platinum and Metropolis entered into a facility agreement dated 13 June 2003, pursuant to which Metropolis was entitled to a facility limit of $2,110,000. According to a market announcement made by Planet Platinum on 30 August 2013, the amount owing under the Metropolis loan was $2,712,930.

23 ASIC investigated this loan and reviewed the documents received and the answers given to ASIC by Mr Trimble during examinations conducted under s 19 of the Australian Securities and Investments Commission Act 2001 (Cth). Mr Caridi deposed that he is concerned that:

- there may have been a failure to document variations to the facility agreement at all in some instances, or not until some years after the variations were approved by Planet Platinum;

- there is no evidence that Planet Platinum member approval was sought in relation to any decision to defer recovery of the Metropolis loan or in relation to Planet Platinum granting extensions to the due date for repayment;

- there appears to have been a failure to take any steps to enforce repayment of the Metropolis loan; and

- Metropolis appears to have no present capacity to repay the loan.

24 There were five extensions to the repayment date of the loan on the following dates:

25 Other than through annual reports, Planet Platinum made no other announcements to the ASX to the effect that the repayment date for the Metropolis loan had been extended.

26 Mr Trimble deposed in his second affidavit that personally he was never aware that any variations to the Metropolis loan had to be reported, other than through resolutions made by Planet Platinum. He always understood that renewals of the Metropolis loan were at the discretion of the company. If he had been told that shareholder approval was needed for the variations to the purported Metropolis loan, he would have acted. He did not believe approval was required and no person advised him that such approval was required. In fact, he believed that the loan could be rolled over at the discretion of the company because this was referred to in the prospectus. He knew that KR Corporate Compliance ('KRCC') was in charge of those matters and if Mr Trimble had been told that Planet Platinum had to disclose those matters through a public statement, he would have arranged for that to have been done.

27 The provisional liquidator has reviewed the facility agreement. He has identified the following key details:[8]

- Planet Platinum's bank statement confirms that, on 14 April 2003, an amount of $2.6 million was transferred from Planet Platinum to Metropolis. I understand the payment comprised the $2.11 million loan facility provided to Metropolis and repayment of capital raising costs incurred on behalf of Planet Platinum totalling $490,000.

- A copy of Metropolis' bank statement for the same period, attached to Ms Howard's statement to ASIC dated 1 March 2011, confirms receipt by Metropolis of the $2.6 million.

- The Facility Agreement was executed by Planet Platinum and Metropolis on 13 June 2003, despite funds being advanced prior to this date.

- The Facility Agreement stipulates that the commencement date is the first day that funds are advanced to Metropolis, therefore being 14 April 2003.

- The loan is repayable monthly in arrears on an interest only basis at an interest rate of 6.55%.

- In the event of default, the interest rate increases to 9.05% per annum.

- Overdue interest would be capitalised at the option of Planet Platinum, resulting in a compounding interest rate.

- The Facility Agreement stipulates that all amounts owing under the agreement (principal plus outstanding interest) are to be repaid five years from the commencement date.

- The termination date has most recently been extended by directors of Planet Platinum to 30 June 2014.

- The Facility Agreement notes that it was to be secured by a mortgage debenture over the assets of Metropolis, a real property mortgage over 13 Horne Street, Elsternwick (owned by Cameron Lane) and unlimited guarantees and indemnities from a number of related parties...

28 The provisional liquidator has also concluded that the loan was most recently extended to 30 June 2014. As at 31 August 2015, an amount of $3,070,600 remains outstanding by Metropolis under the facility agreement. In his view, the manner in which the term of the facility agreement has been continually extended has been without due regard to the interests of shareholders. He also states that the directors have failed to provide sufficient explanation to shareholders as to why extending and not calling up the loan is in the best interests of Planet Platinum.

29 In response to the liquidator's report, Mr Trimble deposes that his intention was to privatise Planet Platinum and that process would extinguish the purported loan. He understood that the purported loan would be taken into account as an asset of Planet Platinum which would go into the value of the share that would be paid to the minority shareholders. He has been trying to privatise Planet Platinum for quite a while since 2005. In relation to the requirement to make public announcements, he states that at various times he relied on Mourice Garbutt (from KRCC) and later Sandy Constantine (accountant with Bryantcraft Pty Ltd, trading as Bryant and Bryant) to advise him that there was a requirement to disclose that information further. He says he would have arranged for announcements to be prepared if he had known that they were required. It is for that reason that he engaged KRCC and Bryant and Bryant. He is not sure what more he could have done to that point.

30 I find that there has been a failure to collect the loan from Metropolis which contravenes s 208(1) of the Act, because there has been a financial benefit to a related party (Metropolis) of a public company (Planet Platinum) without the approval of Planet Platinum's members. There has also been a contravention of s 209(2) of the Act by Mr Trimble, because he was involved in a contravention of s 208 by Planet Platinum.

31 Section 674(2) of the Act has been breached because Planet Platinum has not notified the market of the extensions to the loan. There has been a breach of s 674(2A) of the Act because Mr Trimble has also not made a disclosure to the market as is required by that provision.

32 Mr Trimble has also breached s 180(1) of the Act as he has not acted with proper care and diligence as a director of Planet Platinum in relation to this loan. He has not acted in good faith in the best interests of Planet Platinum and has breached s 181 of the Act and has therefore breached s 181(2) of the Act.

Discharge of mortgage by Cameron Lane at 13 Horne Street

33 When the loan was given to Metropolis, a mortgage was given by Cameron Lane over a property at 13 Horne Street, Elsternwick. Mr Trimble asserts that he personally guaranteed the loan.

34 Mr Caridi has deposed that on 8 March 2010, documentation was executed to discharge the mortgage over that property. Planet Platinum made no announcement to the ASX to the effect that the Metropolis loan was no longer secured by a mortgage over 13 Horne Street. Notwithstanding the discharge of mortgage, the Planet Platinum 2012 Annual Report stated that the Metropolis loan continued to be secured by mortgages over real property and by guarantees from Daily Planet, Cameron Lane and Mr Trimble.

35 ASIC submits that there has been misconduct and mismanagement in the affairs of Planet Platinum by virtue of this discharge of mortgage. It asserts that prior to the discharge of mortgage, there was no legal advice obtained, nor did the directors ensure that replacement security was provided.

36 The discharge of mortgage was signed by Ms Gayle Howard and Mr Dragan Micovski, the directors at the time, on behalf of Planet Platinum. The provisional liquidator reviewed a statement made by Ms Howard to ASIC dated 1 March 2011 and noted the following:

- Ms Howard reports that in or about March 2010, Mr Trimble approached her advising that he wanted to borrow $350,000 from NAB and that he wanted to use 13 Horne Street, Elsternwick as security for this purpose;

- Mr Trimble advised that the funds were required to continue funding a project in Indonesia;

- Mr Trimble further advised that he had obtained legal advice from Harris Carlson who indicated that it would be all right for this to occur; and

- On the basis of the Harris Carlson advice and Mr Trimble's advice that he would use part of the loan proceeds to repay a loan provided by Planet Platinum to Metropolis, Ms Howard agreed to execute the discharge.

37 On 18 February 2010, Harris Carlson wrote a letter to the secretary of Cameron Lane which provided:

...

While we appreciate that this is a matter for Planet Platinum to consider, we suggest you obtain some assurances that Planet Platinum has satisfied itself in relation to the following issues:

1. That it will continue to hold adequate security for the loan which it has made;
2. That it has complied with all regulatory requirements, particularly the Corporations Act 2001 (Act), in relation to director's duties;

1. That it has complied with all regulatory requirements, particularly the Act, in relation to related party transactions;

1. That it has addressed any conflicts (real or perceived) that arise as a result of John Trimble's various roles with Cameron Lane Pty Ltd, Metropolis City Promotions Pty Ltd, Daily Planet Australia Pty Ltd and Planet Platinum Ltd;
2. That it has complied with the Australian Securities Exchange (ASX) Listing Rules and resolved the issues previously raised in the letter from ASX dated 25 June 2009.

We expect that the solicitor for Planet Platinum will be able to confirm whether or not these concerns have been addressed.

38 Mr Trimble, in his second affidavit, endeavours to explain why the discharge of mortgage occurred. He remembers that the property was bought in 2000 for approximately $600,000, and its value had increased conservatively to around $1.2 million by 2009. Cameron Lane sought to refinance and borrowed against the equity in that property in relation to the property development in Indonesia. That development was originally an investment of Planet Platinum, but for legal reasons it became too difficult for an Australian publicly listed company to complete the development. The development was moved to Metropolis and in that process the mortgage of 13 Horne Street was discharged. He does not concede that the Board of Planet Platinum did not seek approval for the discharge of mortgage, refers to the letter of Harris Carlson and deposes that Ms Howard would have received the letter and would have known of the discharge of mortgage.

39 He believed that there was sufficient equity in 13 Horne Street so that Planet Platinum's position regarding the purported Metropolis loan was not undermined. He is a personal guarantor for the purported Metropolis loan and personally indemnified Planet Platinum in respect of its charge and all of its facilities with the NAB.

40 The provisional liquidator has not been provided with any evidence that Cameron Lane sought the assurances from Planet Platinum referred to in the letter or that Planet Platinum's director sought to obtain independent legal advice on this matter.

41 I agree with the provisional liquidator that Planet Platinum should have obtained advice regarding the proposed release of security, rather than Cameron Lane, which was the owner of the property and stood to benefit from the release of the security. Mr Trimble has not provided a copy of any guarantee documents to ASIC.

42 The provisional liquidator has been advised by Mr Constantine that he had not been able to obtain any guarantee documents and Mr Rathner also stated that he has not been provided with any guarantee documents. Mr Trimble, however, in meetings with the provisional liquidator has not disputed the existence of the guarantees or that the loan would not be repayable under the guarantees, and stated that he has given personal guarantees and indemnities.[9]

43 Mr Trimble was crossexamined in relation to the letter written to Cameron Lane by Harris Carlson. He agreed that he did not obtain legal advice of the kind that Harris Carlson suggested should be obtained by Planet Platinum.[10] Mr Trimble did not accept that the discharge of the mortgage was to the disadvantage of Planet Platinum.[11] He gave the following evidence:[12]

So you accept that the - - -?---I do.

- - - the discharge of the mortgage at 13 Horne Street was to the disadvantage of Planet Platinum?---No. What I'm saying is I didn't do what I should have done, put another - put another charge on it.

What's the point of taking the mortgage off if you are just going to put it straight back on, why not just leave it there?---Because we needed to obtain some funds, which we did.

Once you had obtained those funds are you saying it would have been possible to put that mortgage back on as a first ranking mortgage?---No, second.

It would have ranked second?---That's correct. I believe.

But you never did that?---No, an oversight.

And you accept that that was the transaction that was to the disadvantage of Planet Platinum?---No.

How could that not have been to the disadvantage of Planet Platinum? It's gone from having a first ranking mortgage securing $2.11m to having no security at all in respect of that property?---Had a charge gone on, it still would've had - it still would've had, because the values had more than doubled, and plus it still has my personal guarantee and indemnity.

No, let's just focus on the mortgage of 13 Horne Street?---You're talking about the disadvantage - you're talking about the disadvantage to Planet Platinum?

Yes, by the discharge of that mortgage?---Yeah, well I don't believe there was a disadvantage to Planet Platinum.

Is it your serious evidence to this court that by discharging a first-ranking mortgage securing $2.11m you are not disadvantaging that company Planet Platinum?---No.

Sorry, your answer is that your evidence is that that did not disadvantage Planet Platinum?---I don't believe so, no.

44 I find that the discharge of the mortgage has led to breaches of the Act. Mr Trimble could not explain why no legal advice was obtained by the directors regarding a discharge of the mortgage. The letter from Harris Carlson made it clear what was required on behalf of Planet Platinum, but no advice was sought. The security was removed and no security was put in its place. There was also no shareholder approval regarding the removal of the security. Section 208(1) of the Act has been breached because there has been a financial benefit to Cameron Lane which is related to Planet Platinum, and Planet Platinum has failed to obtain the approval of its members. Section 209(2) of the Act has been breached because Mr Trimble was involved in the breach.

45 Section 297 of the Act has been breached because the 2010 and 2011 accounts contained false statements that there were real estate mortgages. The contravention of s 297 resulted in a contravention of s 344(1) of the Act because Mr Trimble failed to take all reasonable steps to comply with s 297 of the Act.

46 Sections 674(2) and 674(2A) of the Act have been contravened because this transaction, which in my view was significant, should have been notified to the ASX. There has also been a breach of the director's duties referred to in ss 180(1), 181(1) and 182(1) of the Act because there has been inadequate care and diligence by the directors and they have not acted in good faith in discharging this mortgage.

Purported sale of fittings and fixtures at 7-12 Horne Street, Elsternwick

47 A Part Satisfaction of Debt Agreement was entered into by Planet Platinum and Metropolis, by which fixtures and fittings located at 7-12 Horne Street, which were owned by Metropolis, would be transferred to Planet Platinum. The sum of $546,850 would be offset against the Metropolis loan facility in consideration for the transfer. On 10 September 2014, that agreement was ratified at a meeting of directors attended by Mr Trimble and Mr John Callanan, who was not present but on the telephone. ASIC has since been advised by Mr Callanan that he was not present at nor was he aware of the board meeting held on 10 September 2014.

48 ASIC submits that there was mismanagement and misconduct in the affairs of Planet Platinum with regard to entering the Part Satisfaction of Debt Agreement on 10 September 2014.

49 A valuation of the fixtures and fittings dated 13 August 2014 was prepared by Slattery Valuations. Included in the property valued were shower bases, architraves, skirting, toilets, tiles and hand basins. Pursuant to clause 6.3 of the lease between Planet Platinum and Daily Planet, any structural improvements to the property would be the property of Planet Platinum. Slattery's valuation of the fixtures and fittings was in the sum of $546,850.

50 The provisional liquidator is of the view that the assets defined in this valuation, if removed, would cause substantial damage and have been fixed to the property with the intention that they shall remain in position permanently. On the basis of his investigations, he was not satisfied that Metropolis owned the fixtures and fittings. On balance, according to the provisional liquidator, it appears that the transaction was orchestrated to reduce the debt owed by Metropolis to Planet Platinum with no benefit to Planet Platinum shareholders. In his view, a liquidator (if appointed), would seek to have this transaction declared void.

Page 20 of the Report refers to the Part Satisfaction of Debt Agreement. That agreement was absolutely the idea of Sandy Constantine from Bryant and Bryant. I remember a conversation we had about it, when he first raised the issue. He rang me and told me that a valuation had to be done on chattels at the Premises. I asked why. He said that ASIC required it and that they are going to transfer chattels to Planet Platinum. I then said we were going to privatise, so there was no point. I said that it would just involve more unnecessary work, effort and costs.

52 According to Mr Trimble, Mr Constantine orchestrated and prepared the Deed of Part Satisfaction for Mr Trimble to sign because Mr Constantine told him that it was something that ASIC required. Mr Constantine had organised the valuation without Mr Trimble's involvement or comprehension.

53 When crossexamined, Mr Trimble could not explain some of the items that had been valued. For instance, one item, 'contingency for internal lightweight timber frame partitions, $115,000', could not be explained.[13] Mr Trimble stated that the transaction made no sense to him at all.[14] In crossexamination, Mr Trimble gave the following evidence:[15]

As a director of Planet Platinum considering this transaction, did you give any thought to whether this transaction made any sense? Not now sitting in the witness box but back in September 2014, did you give any thought to whether this transaction made any sense?---I - I queried it at the time. I said, "It doesn't make any sense."

How did you query it?---I said this to Sandy Constantine, "I don't know why we're doing this" and he said, "We've got to, it's a requirement" and I said, "It doesn't make any sense because we're about to privatise. What's all this about?" It didn't make any sense to me at all. I mean, let's face it, if we're going to privatise, of which we've got 80 per cent of the shares, why would he much around with this? He was told it was a requirement. That's all I can say to you. It doesn't make any - a lot of things didn't make any sense. This is one of them.

But you accepted that it was appropriate for Planet Platinum to enter into this transaction because Mr Constantine said so?---Well, when we - if we have a - if we go for advice, we go to professionals. If we have legal advice, we go to a lawyer. If we have accountancy advice, you go to an accountant, and he said, "We've got to do this" and I said "Okay."

54 I find that there have been contraventions of ss 208(1) and 209(2) of the Act because Metropolis, a related company of Planet Platinum, obtained a benefit not approved by the shareholders. There have also been breaches of ss 674(2) and 674(2A) of the Act, because the transaction should have been notified to the ASX. There is a breach of director's duties pursuant to ss 180(1), 181(1) and 182(1) of the Act because Mr Trimble did not exercise care and diligence that a reasonable person would exercise in relation to this transaction. He has not acted in good faith in the interests of Planet Platinum and has gained an advantage for himself to the detriment of Planet Platinum.

55 I am not satisfied that s 286 of the Act has been breached. Pursuant to s 286 of the Act, a company must keep financial records that correctly record and explain its transactions and financial position and performance. ASIC asserts that s 286 has been breached because there is a false minute purporting to authorise the company to include the transaction. I note that according to the provisional liquidator, Mr Callanan advised ASIC on 26 November 2014 that he was not present at, nor was he aware of the board meeting held on 10 September 2014. Mr Trimble produced to the Court telephone records relating to September. Evidence was given that there was a phone call to Mr Callanan with a duration of nine seconds on that date at 9.24am. I have not heard evidence from Mr Callanan and I am not satisfied that that breach has been made out. I note that Mr Trimble denies that the record is a false record.

56 The provisional liquidator reviewed Planet Platinum's financial records which indicated that Daily Planet paid rent for the Horne Street property to Planet Platinum. He states that since September 2014, Daily Planet has failed to pay rent to Planet Platinum and is therefore in breach of the terms of the lease.

57 ASIC submits that the failure by Planet Platinum to collect the full amount of rent payable to it by Daily Planet under the lease of the premises at the Horne Street property resulted in arrears of $1,254,593 as at 28 August 2015 and that failure demonstrates misconduct and mismanagement in the affairs of Planet Platinum.

58 In his report, the provisional liquidator states that upon Mr Rathner's appointment, Daily Planet commenced paying rent at an amount of $9,935 per week. Since the appointment of the provisional liquidator, Daily Planet has been invoiced for rent totalling $138,479 for the period 12 June 2015, the date of commencement of the provisional liquidation, to 31 August 2015. He has calculated arrears of rent owed from the commencement of the lease until 11 June 2015 to be $1,070,559.

59 Upon Mr Rathner's appointment until the time of the provisional liquidator's appointment, Daily Planet had been paying rent in the sum of $516,610 per annum. The provisional liquidator reconstructed the annual application of the CPI increases in accordance with the terms of the lease and has used the commencing rent at 28 April 2004 at $483,000. His calculations indicated the rent currently should be $631,045 per annum, being $114,435 above the current recorded rent payments.

60 Mr Trimble deposes that he had no involvement in calculating what rent was or ought to have been paid. This was left to the accountants and auditors of Planet Platinum. Planet Platinum's accounts are audited each year and should be accurate. The bookkeeper actually handled the payment of the rent. In particular, Mr Trimble relied on Maurice Garbutt at KRCC, who was the company secretary, as well as other professionals, including the accountants.

61 When crossexamined, Mr Trimble gave the following evidence:[16]

You, until 2007, as chairman of the directors of Planet Platinum, and from 2007 onwards as CEO of Planet Platinum, took no steps to ensure that the correct amount of rent was being charged, did you, personally?---No, personally, I'd asked the accountants to work out - to ascertain what our rent should be and then we would make sure it's paid.

From September 2014 onwards, as chairman of directors and CEO of Planet Platinum, you have taken no steps personally to ensure that Planet Platinum collects the rent, have you?---Again, we had a book-keeper who's supposed to pay the rent to Planet Platinum and pay the management fees to Metropolis, of which neither were paid.

62 In my view, there has been no proper explanation why rent was not properly calculated. I accept there has been a failure to collect the rent and it is the responsibility of Mr Trimble to ensure that the rent has been paid.

63 I find there have been breaches of ss 208(1) and 209(2) of the Act because the members have not approved the nonpayment of rent and Mr Trimble has been involved in the contravention of s 208 of the Act. I find that ss 674(2) and 674(2A) of the Act have been breached because the nonpayment of rent has not been disclosed to ASIC. There has also been breach of directors' duties pursuant to ss 180(1), 181(1) and 182(1) of the Act because Mr Trimble has not exercised his powers and discharged his duties with a degree of care and diligence, nor has he acted in good faith. He has gained an advantage for himself by the nonpayment of the rent in that Daily Planet, in which he is the sole shareholder, has benefitted.

64 ASIC submits that the failure to ensure the appointment of a minimum of three directors as required by s 201A(2) of the Act and clause 3.1 of the constitution of Planet Platinum, during 8 March 2013 to present, 30 November 2010 to 12 August 2011, and 31 August 2007 to 29 August 2008 demonstrates misconduct and mismanagement in the affairs of Planet Platinum. In oral submissions, this was referred to as a minor matter in the context of the breaches of the Act that have occurred.

65 Under crossexamination, Mr Trimble did not dispute that Planet Platinum presently does not have three directors and that there were not three directors during the other periods alleged by ASIC.[17]

66 In his second affidavit, Mr Trimble refers to timing and difficulties in getting approval for directors to take the appointment. The Interested Parties submit that there would be difficulties in finding persons who would be prepared to be a director of Planet Platinum and that an honest attempt was made at various times to cure the deficiency. It is further submitted that if there was a contravention of s 201A(2) of the Act, it would not be sufficient to justify a winding up order.

67 I find that there has been a contravention of s 201A(2) of the Act and I agree that this is not a matter which is sufficient to justify a winding up order on its own. There has also been a breach of ss 180(1) and 181(1) of the Act, as it was the duty of Mr Trimble to ensure that there were three directors.

68 ASIC submits that there has been improper use by the directors of Planet Platinum's funds, including a loan to Mr Trimble in 2009, and payment of Mr Trimble's personal credit card by Planet Platinum. It relies on that conduct as demonstrating misconduct and mismanagement in the affairs of Planet Platinum.

69 The provisional liquidator reports that in or about August 2008, payments totalling approximately $540,000 were made by Planet Platinum in respect of an investment in Indonesia on behalf of Metropolis. The funds were repaid in March 2009.

70 In November 2009, Planet Platinum provided a loan of $224,623 to Mr Trimble which was repaid in the 2011 financial year. Mr Trimble advised that Showgirls Bar 20 (a strip club owned by Planet Platinum) experienced significant cash flow difficulties following the cancellation of its liquor licence in May 2011 and the associated legal costs in appealing the decision of the Victorian Civil and Administrative Tribunal.

71 According to the provisional liquidator, the payments on behalf of Metropolis and Mr Trimble's personal loan by Planet Platinum may have resulted in unnecessary cash flow difficulties to Planet Platinum until such time as the funds were repaid.

72 As to the personal loan, the provisional liquidator in his report states that Planet Platinum's management accounts indicate that Mr Trimble's personal credit card was being paid by Planet Platinum and charged to the Metropolis loan account.[18] As at the date of the provisional liquidator's appointment, an amount of approximately $68,000.00 had not been repaid by Mr Trimble to Planet Platinum.

73 When crossexamined, Mr Trimble gave the following evidence:

The provisional liquidator, in his report, said that over a number of years, your personal credit card debt was paid by Planet Platinum and the amount was added to the MCP loan. Do you dispute that?---Strongly.

What is your evidence for saying the provisional liquidator was wrong?---I haven't seen any evidence to indicate what you're saying.

But the provisional liquidator has said he has looked at the management accounts of the company and the audited accounts and the ledgers and this is what he has found. Are you saying that those records are false?---I haven't seen the records.

You have seen this conclusion, this finding by the provisional liquidator. When did you first become aware of it?---Some weeks ago, but it hasn't shown me anything.

Have you requested the ledgers and books of account from the provisional liquidator?---Our - our - I'm sure our legal people have.

All right, but sitting there in the box now you are not in a position to point to any evidence that contests that finding by the provisional liquidator?---Or agrees with it.[19]

...

MR PEARCE: Thank you. (To witness) You have heard that debate. I take it you are not in a position now to contest what Mr Lindholm says, what the provisional liquidator says about your credit card debt?---I'm not in a position to contest or agree.[20]

...

He [the provisional liquidator] also says that about $540,000 was paid by Planet Platinum for an investment by MCP in Indonesia in August 2008. He says that that amount was repaid in March 2009. Do you contest his finding about the initial payment of the $540,000?---It's in our - it's in our - you'll see that's in our annual reports where there was an investment, real estate development, hotel development in Indonesia, was taken up by Planet Platinum, and I think that was started at about July '08, and then at about March '09 I and other members of the board said this looks about - I wasn't happy with it, I wasn't happy with doing it, and so to get Planet Platinum out of it instead of going on the open market and trying to sell that investment to someone else I took it on with my own private company, and I paid 107 cents in the dollar.

Do you contest the finding made by the provisional liquidator that $540,000 was paid out of Planet Platinum funds for the investment by MCP in Indonesia?---No.

You don't contest that?---No, I do contest it, yeah.

But you don't have any material that you can put before the court now that does contest that?---The - the investment was made by Planet Platinum. The initial investment was made by Planet Platinum.

So let me understand. You say that it was initially intended to be an investment by Planet Platinum?---It's in our returns.

And MCP then took over that investment?---That's correct.

How is it then that you say that Planet Platinum owes MCP over $200,000 for that investment?---No, because when the accountants, William Buck - I said I'm going to - I gave them my - discussed my misgivings with our accountants, and I asked them to work out the amount of funds that had been paid by Planet Platinum, and then Metropolis City would take over that investment dollar for dollar, and what - what they did I had been paying all the - all the costs of travel, accommodation, consultants, et cetera, et cetera, et cetera, legal fees, et cetera, to the figure of $229,000, which our accountants didn't pick up.[21]

74 There is no evidence before the Court on behalf of Mr Trimble to challenge the allegations put by ASIC regarding the use of company funds for the payment of his credit card. It is also clear in the evidence that funds have been used for the project in Indonesia which should not have been used.

75 I find that there has been a breach of ss 208(1) and 209(2) of the Act because Mr Trimble did not obtain the approval of Planet Platinum's members for the use of the funds. He has also breached his duties as a director under ss 180(1), 181(1) and 182(1) of the Act as he has not exercised his powers as a director with proper care and diligence and has not acted in good faith. I note that ASIC submitted that this was a relatively minor use of company funds that has been disclosed regarding the payment of the credit card.

Failure by Mr Trimble to discharge his role as Chief Executive Officer

76 ASIC submits that Mr Trimble's failure to properly discharge his functions as Chief Executive Officer of Planet Platinum, notwithstanding his receipt of remuneration at the rate of $450,000 per annum and the high level of fees incurred for outside consultants, demonstrates misconduct and mismanagement in the affairs of Planet Platinum.

77 According to the provisional liquidator, on 1 September 2006, Planet Platinum entered into an executive service agreement with Metropolis to engage the services of Metropolis to provide Mr Trimble as Chief Executive Officer for $450,000 per annum. The terms of the agreement included numerous duties such as ensuring compliance with ASX Corporate Governance Principles; reporting to and being accountable to the Board of Directors; serving the company faithfully, diligently and to exercise all due care; and acting in the best interests of Planet Platinum.

78 From his discussions with Mr Trimble, the provisional liquidator states that it appears that Mr Trimble has often relied on third parties to assist with performing his function by outsourcing management of many of the administrative, secretarial, corporate governance and accounting functions of the business to professional service providers. He also noted that:[22]

- minimal controls were in place in relation to financial procedures such as delegating authority for payments to third parties;

- in April 2014, Mr Constantine of Bryant and Bryant was engaged to manage Planet Platinum's financial affairs and to commence privatisation of the company. Mr Constantine could approve payments, meet with statutory authorities, make decisions on behalf of the company and was provided with full access to bank accounts; and

- given Mr Trimble's interests in the related entities, there was no doubt that conflicts of interest would arise. Of particular note, Mr Trimble:

- arranged for Cameron Lane to obtain legal advice regarding the release of the security over 13 Horne Street, Elsternwick but did not arrange for Planet Platinum to obtain its own legal advice;

- voted on the resolution to sell fixtures and fittings attached to the Elsternwick property, purportedly owed by Metropolis to Planet Platinum;

- failed to ensure the Metropolis loan was repaid when due; and

- invested funds in a property development in Indonesia that occurred without the consent of other directors and therefore without ratification of the board.

79 The provisional liquidator states that there are numerous examples of failing reporting requirements required by the ASX.

80 Mr Trimble presented to the Court a table demonstrating that since his appointment to the board, the profitability of Planet Platinum increased. The Interested Parties submitted that his management of the company provided a significant benefit to the shareholders. That may be so, but Mr Trimble failed to accept his responsibility to attend to the matters raised by the liquidator. There is no doubt in my mind that he has not properly discharged his role as Chief Executive Officer. I find that Mr Trimble has breached his duties as a director pursuant to ss 180(1) and 181(1) of the Act.

81 ASIC submits that Planet Platinum's failure to comply with various taxation obligations demonstrates misconduct and mismanagement in the affairs of Planet Platinum.

82 The provisional liquidator has reported that there has been a failure to comply with statutory obligations, as the Australian Taxation Office and the State Revenue Office have advised that the amounts of $3,957 and $79,246 remain outstanding as at 7 August 2015 and 18 June 2015 respectively. Again, ASIC says that this is not a major contravention.

83 Mr Trimble was crossexamined about the failure to pay tax and gave the following evidence:

The provisional liquidator makes a number of findings about failures by the company to pay various taxes, income tax, superannuation surcharge, land tax and payroll tax. Do you contest any of those findings?---I've never known for us to be late ever. I can certainly tell you now emphatically that our previous bookkeeper was (indistinct), so I don't know where it's - where it's late or what's late, I don't. So I can't - that doesn't make sense to me. We've never had an issue, ever, until recently.

Let me try to understand - - -?---And I don't know what's outstanding. What I saw yesterday didn't make any sense to me.

Let me try to understand your answer, Mr Trimble. Are you contesting the findings - - -?---Yes, I am.

- - - that there was unpaid tax?---M'mm.

But you don't have any evidence you are putting before the court now to support that?---No.[23]

84 Mr Trimble cannot put any evidence before the Court that the tax was paid. It appears that he relied on Bryant and Bryant to make sure that payments were made, but they have not been made. It is the responsibility of the Chief Executive Officer to ensure taxes have been paid and this has not been done. There has therefore been a breach of ss 180(1) and 181(1) of the Act regarding director's duties.

85 ASIC submits that the failure to hold general meetings demonstrates misconduct and mismanagement in the affairs of Planet Platinum.

86 Mr Caridi, in his first affidavit, deposes that Planet Platinum failed to hold an annual general meeting for the 2013 and 2014 financial years. That was put to Mr Trimble in crossexamination and he did not contest that Planet Platinum failed to hold annual general meetings as required.[24]

87 It is submitted by the Interested Parties that general meetings could not be held because there were not the requisite number of directors and that Mr Trimble relied firstly on KRCC and on Bryant and Bryant to advise him about the statutory requirements.

88 Even though Mr Trimble relied on other external consultants to help him, the fact remains that the meetings were not held as were required by law. There has therefore been a breach of s 250N(2) of the Act, which provides that a public company must hold an annual general meeting at least once in every calendar year and within five months after the end of its financial year. Again, there have been breaches of ss 180(1) and 181(1) of the Act because those meetings have not been held.

89 ASIC submits that the failure to lodge an Annual Financial Report with ASIC for the financial years ending 30 June 2011, 30 June 2012, 30 June 2013, and 30 June 2014 within the statutory time frame is in contravention of s 319(1) of the Act, which constitutes a breach of s 344(1) of the Act by the directors of the defendant, which is evidence of the misconduct and mismanagement of the affairs of Planet Platinum.

90 ASIC relies on the first affidavit of Mr Caridi who deposes that Planet Platinum failed to lodge with ASIC its annual reports for the years ending 30 June 2013 and 30 June 2014.

91 The provisional liquidator has concluded that the directors failed to finalise and lodge Planet Platinum's statutory accounts for the financial years ending 30 June 2011 and 30 June 2012 by the due dates, resulting in the company being suspended from the ASX official listing between 3 October 2011 to 30 July 2012, and 1 October 2012 to 11 February 2013. He also concluded that the directors failed to finalise and lodge Planet Platinum's financial reports for the financial years ending 30 June 2013 and 30 June 2014 by the due dates. Again, this has been referred to by ASIC as a minor matter.

92 When cross-examined, Mr Trimble stated that he does not contest for one minute that in 2013 and 2014 Planet Platinum failed to lodge its statutory accounts. In his second affidavit, he deposes that this was because of the various problems associated with getting the correct number of directors. However, he deposes that in 2014 there were enough directors, it was just that Mr Constantine was responsible for filing the financials and it was not done.

93 Here the responsibility lay with Mr Trimble to make sure that the accounts were filed and that was not done. Therefore there has been a breach of s 319(1) of the Act because the annual reports were not lodged with ASIC, a breach of s 320(1) of the Act because Planet Platinum did not prepare a report under the Act, and a breach of s 344(1) of the Act. There has therefore been a breach of director's duties pursuant to ss 180(1) and 181(1) of the Act.

94 There are some matters before the Court which are extremely important. For instance, the nonpayment of rent, the discharge of the mortgage, the extensions for payment of the Metropolis loan, and the purported sale of fittings and fixtures at the Horne Street property. Some of the other matters referred to are not as important, but when all put together, they demonstrate that there has been a lack of competence in the management and conduct of the affairs of the company. In my view, there is also a demonstrated risk to the public interest that warrants protection.

95 The Interested Parties submit that a winding up order should not be made because Planet Platinum is solvent. If a company is solvent, then there must be an extreme case or strong case to satisfy the Court that an order for winding up ought to be made.[25] I have found that there have been numerous contraventions of the Act and this is precisely the situation where a solvent company should be wound up. In my view, this is an extreme case.

96 I note that in ABC Fund Managers, an insolvent company was wound up. There had been regular and repeated breaches of the Act which were not tolerated.

97 The Interested Parties submit that insofar as there has been criticism levelled against Mr Trimble and his entities, of which he is the director, the relevant facts mitigate an order for winding up. It is submitted that Cameron Lane could have sold its shares to reduce or extinguish the Metropolis loan, but did not because it perceived that it would have a detrimental impact on the share price. I note that the shares were in escrow for two years and if the shares had been sold, not only would the shareholders have been prejudiced, but so would Cameron Lane, because they held the majority of the shares. The fact that Mr Trimble did not sell the shares in Cameron Lane does not excuse the way in which Planet Platinum has been managed.

98 The Interested Parties submit that the business was impacted in a very positive fashion when Mr Trimble came out of retirement and moved from the Gold Coast to Melbourne to run the business in approximately 2007. I have dealt with that submission previously, but will repeat that Mr Trimble has failed to accept his responsibility to attend to various matters to ensure that the company was properly run. If the company was properly run, it may have done better. This is a publicly listed company and there are duties on the directors to act appropriately and this has not occurred here. The Act has not been complied with. Directors have obligations under the Act and should fulfil them.

99 The Interested Parties submit that a highly relevant factor is that if Planet Platinum is wound up, it will affect the livelihood of many people. There are at least 100 employees and sub-contractors for Planet Platinum and if Planet Platinum is closed down and the lease terminated, those employees would be out of work.

100 I am not convinced that all these employees will become unemployed. It will be a matter for the liquidator as to what he does with the assets. On reading the provisional liquidator's report, it is possible that the business will continue at the Horne Street property. With regards to the other business run by the company, Showgirls Bar 20 in King Street, it appears likely that it will be sold and will involve the closure of that business. There may well be some loss of employment but I cannot ascertain whether there will be significant losses.

101 The Interested Parties submit that it is critical that there is no evidence adduced by ASIC of any financial loss and that no person gave any evidence that they have suffered loss. I do note that the shares in Planet Platinum were floated at 50 cents so that any of the subscribers who got their shares in the float will have paid 50 cents. The provisional liquidator states that in conclusion of the liquidation the shareholders on a high case scenario may receive 38 cents per share. There is therefore a financial loss to the shareholders. Even if there was no financial loss, it would still be in the public interest to ensure that a publicly listed corporation is managed properly and complies with the law.

102 Many of the allegations put to Mr Trimble of mismanagement were met by claims that Mr Trimble was entitled to rely on third party consultants and accountants, particularly Mr Constantine of Bryant and Bryant.

103 In Australian Securities and Investments Commission (ASIC) v Healey,[26] Middleton J held that although directors are entitled to rely upon others, they are required to place themselves in a position to guide and monitor the management of the company. Here, Mr Trimble has not done that, particularly with regard to reporting and the disclosure of information to ASIC and the ASX. I accept ASIC's submission that Mr Trimble has demonstrated a deplorable lack of knowledge of the obligations of Planet Platinum and that he has appeared to have relied entirely on external advisers engaged by Planet Platinum to manage the corporate governance of Planet Platinum.

104 There is no evidence before me by which external advisers such as Mr Constantine were provided with information which might have enabled them to properly advise Planet Platinum as to its corporate governance obligations. I agree with ASIC that Mr Trimble appears to have relied passively on others to advise him as to Planet Platinum's obligations.

105 I also accept that directors cannot substitute reliance upon the advice of management for their own attention and examination of the important matters that fall specifically within the board's responsibility as with reporting obligations, as was said by Middleton J in ASIC v Healey.[27] Mr Trimble cannot abrogate his responsibility to manage the company by asserting that someone else has been requested to do so on behalf of the company.

106 The manner in which Planet Platinum has been managed justifies the winding up of Planet Platinum, even though it is solvent. I will wind up the company and appoint Mr Lindholm as the liquidator.

[1] [2001] VSC 383; (2001) 39 ACSR 443.

[3] See Loch v John Blackwood Ltd [1924] AC 783.

[4] See Australian Securities Commission v AS Nominees Ltd [1995] FCA 1663; (1995) 62 FCR 504.

[5] See ASIC v Kingsley Brown Properties Pty Ltd [2005] VSC 506.

[6] See ASIC v AS Nominees Ltd [1995] FCA 1663; (1995) 133 ALR 1.

[7] [2001] VSC 383; (2001) 39 ACSR 443 at [124].

[8] Lindholm, John, 'Report to the Supreme Court of Victoria, S CI 2015 01790' (Planet Platinum Limited (Provisional Liquidator Appointed), 7 September 2015) 26.

[18] Lindholm, John, 'Report to the Supreme Court of Victoria, S CI 2015 01790' (Planet Platinum Limited (Provisional Liquidator Appointed), 7 September 2015) 32.

[22] Lindholm, John, 'Report to the Supreme Court of Victoria, S CI 2015 01790' (Planet Platinum Limited (Provisional Liquidator Appointed), 7 September 2015) 50.

[25] See Australian Securities and Investment Commission v ABC Fund Managers [2001] VSC 383; (2001) 39 ACSR 443 at [124].

[26] [2011] FCA 717; (2011) 278 ALR 618 [167].