Federal Court calls out James Mawhinney’s ‘apparently complete lack of introspection’ over Mayfair failings

A Federal Court judge has called out high-profile businessman James Mawhinney over failings by property development companies in his Mayfair 101 group that “devastated” many investors. Justice Catherine Button cited Mr Mawhinney’s “relentless heaping of blame on others, coupled with his apparently complete lack of introspection” in a complex judgement that found the businessman was associated with or involved in contraventions of the law by Mayfair 101 group companies. “While Mr Mawhinney has vociferously blamed a combination of COVID-19, ASIC and (Grant Thornton liquidator) Mr Jahani for the outcome, he has to date . . . not grappled with the vulnerabilities borne of the structures he established and the frenetic pace of property purchasing, coupled with a lack of hard analysis of cashflow and funding capacity,” Justice Button said. “Mr Mawhinney’s relentless heaping of blame on others, coupled with his apparently complete lack of introspection, does not stand to his credit when consideration turns to final relief.” Mr Mawhinney has denied any wrongdoing. Justice Button found that Mayfair 101 group companies broke the law when they made multiple false or misleading representations in the marketing of its M+ Fixed Income Notes, M Core Fixed Income Notes and Australian Property Bonds between July 2019 and May 2020. Group companies were also found to have engaged in misleading or deceptive conduct from March 2020 to April 2020 by failing to disclose in marketing material that investor redemptions had been suspended. Also, the court determined that Mayfair 101 company IPO Capital carried on a financial services business from 2016 to December 2017 without an Australian financial services licence. Mr Mawhinney was associated or involved with the contraventions, Justice Button determined. However, she rejected some of the claims pursued by the Australian Securities and Investments Commission, which has been embroiled in a series of legal actions against Mr Mawhinney over the past five years. The court found that while Mayfair 101 companies made certain representations relating to the use of funds invested in the Core Notes, and the security to be granted to an investor in the Australian Property Bonds, they were not misleading or deceptive. It also rejected that family trusts associated with Mr Mawhinney received amounts traceable to funds invested in the Core Notes. ASIC is seeking injunctions restraining Mr Mawhinney from advertising and fundraising through financial products, and from removing from Australia any assets acquired with funds raised from investors. Mr Mawhinney rose to national prominence with Mayfair’s bid to develop Mission Beach and nearby Dunk Island in northern Queensland into a tourism mecca, backed by high-interest debentures and property bonds. Purchase contracts were signed, but never finalised over more than $120m of property to support the redevelopment. However, the scheme came crashing down in early 2020 after Grant Thornton liquidators were put into parts of the Mayfair 101 empire. The Federal Court later ordered four companies in the group to pay a combined fine of $30m for misleading and deceptive conduct. “The venture that Mr Mawhinney established had the potential to, and did, cause great harm to a high numbers of investors, at least a material proportion of which could scarcely afford to lose what they have lost,” Justice Button said. “I reject Mr Mawhinney’s contention that any losses investors may suffer . . . are ASIC’s fault as value has been eroded by the costs of receivership of the properties, the liquidation of M101 Nominees and the $30 million penalty to be paid following the Mayfair proceeding,” she said. Commenting on IPO Capital, Justice Button said “Mr Mawhinney did not set out to create and run a venture that was wholly indifferent to compliance”. “However, the advice received regarding the need for an AFSL for IPO Capital’s operations was superficial in the extreme, not based on any thorough set of instructions or documentation.”