James Mawhinney had a big vision for the Mayfair Group. It was to develop property in the Mission Beach area and on Dunk Island off the coast in tropical north Queensland as a “tourism mecca”.
‘Wholesale’ investors subscribed to promissory notes to fund the development. But the business model was flawed. The investors were misled about the significant risks. And they lost their money when the development failed.
The Federal Court of Australia decision in Australian Securities and Investments Commission v M101 Nominees Pty Ltd (in liq) (No 8) [2025] FCA 741 (Button J) (9 July 2025), contains an analysis of the business model of the Mayfair Group (M101 Nominees) and why ASIC has sought a 20-year ban upon the promoter, James Mawhinney, for misrepresentations made to investors.
This is a case note.
The Mayfair Group Business Model
Using funds raised from investors, from August 2019 James Mawhinney went on a “shopping expedition”.
According to the Court: “In the space of 8 months from mid-2019, companies in the Mayfair Group signed contracts to buy nearly 300 properties at Mission Beach for an anticipated total purchase price of over $200 million. The pace was frantic.”
The acquisitions were funded by using the investor funds as unsecured equity and by loans secured by mortgage upon the properties.
“The freehold to most of Dunk Island was purchased in September 2019 for $31.5 million, of which $27.5 million was financed by a vendor loan” and secured by mortgage.
In the short term to medium term, the plan was to derive immediate revenue from leasing properties purchased in the Mission Beach area and from the redevelopment and re-opening of “The Spit” bar on Dunk Island.
The court found that the Mayfair business model was “fatally flawed from the outset” and put investors at significant risk for these reasons [judgment para 319]:
- The plans for the creation of a “tourism mecca were long term plans and would take years, and enormous sums of money, to realise”.
- The “rental income [would not] have delivered funds exceeding holding costs so as to generate free cash flow by which obligations to investors could be satisfied”.
- “Operations were heavily reliant on a steady flow of investor funds, [so that] the vast majority of investors could be satisfied [for interest payments]”.
- “M101 Nominees was financially exposed by having significant short and medium-term obligations to investors, but loaning virtually all the funds received from investors to Eleuthera [a related company] on unsecured, 10-year terms and with no absolute right to receive interest income.”
- “There was no evidence of any business plans having been developed that addressed how operations would be funded over the period in which properties were being acquired for development, and development was occurring, in order to meet obligations to investors, let alone a business plan that took account of the potential for adverse events, or a downturn in the economic climate that could affect operations and the flow of new investor funds.”
The investors lost their money. The Court found: “from the over $60 million invested in the M Core Notes as at April 2020, the total expected realisations for M Core Notes investors is between nil and $4.29 million or $6 million.”
The misleading representations
The investors were ‘wholesale’/ ‘sophisticated’ investors, that is, they had more than $500,000 to invest, gross annual income of more than $250,000 for the past two years and net assets of more than $2.5 million.
But sophisticated investors can be misled.
The Court found that the ASIC had proved that the Mayfair Group had engaged in false, misleading or deceptive conduct contrary to s 1041H(1) of the Corporations Act 2001 (Cth) and ss 12DA(1) and 12DB(1) of the ASIC Act (Australian Securities and Investments Commission Act 2001) (Cth) by making these representations:
- IPO Capital contravention: 2016 to December 2017
That no AFSL (Australian Financial Securities Licence) was required - Repayment Representation contraventions: 3 July 2019 to 2 April 2020
That on maturity of the M+ Fixed Income Notes and M Core Fixed Income Notes as the case may be, the principal would be repaid in full - No Risk of Default Representation contraventions: 28 October 2019 to 2 April 2020
That the investments were specifically designed for investors seeking certainty and confidence in their investments and carried no practical risk of default - Security Representation contraventions: 28 October 2019 to about 16 April 2020
That M Core Fixed Income Notes were protected, by first-ranking registered security, from being sold or otherwise dealt with in a manner that would prejudice the investors’ interest in the secured assets - Liquidity Prudency Policy contraventions: 11 March to just prior to 2 April 2020
That early redemption was available “subject to liquidity and other applicable terms”, and that investors’ returns were not tied to the issuer’s investment performance, but made no mention of the Liquidity Prudency Policy and/or the Liquidity Prudency Policy Decision taken by the Mayfair Group to restrict redemptions. - Property Bonds Security Representation contraventions: 22 April to 5 May 2020
That that their investment would be secured by a first-ranking registered mortgage over real property
The Representations were conveyed in a number of ways: by the Mayfair Platinum website; the Term Deposit Guide website; the M Core Notes brochure; the M+ Notes brochure; the Mayfair Group corporate brochure; various newspaper advertisements; various EDMs sent between 9 August and 20 December 2019; and Google and Bing sponsored advertisements.
Court found that James Mawhinney was an accessory under s 12BB(2) of the ASIC Act, by finding he knew that the representations had been made and that they were not correct.
The Court will consider submissions as the ban sought by ASIC.