Mayfair 101 boss James Mawhinney blames ‘incompetent’ lawyers in appeal

Mayfair 101 scheme founder James Mawhinney has pointed fingers at his lawyers and ASIC in an appeal of a decision finding him liable for misleading investors.

Mayfair 101 director James Mawhinney. Picture: Ally Lombardo

Mayfair 101 director James Mawhinney has blamed the “incompetence” of his legal team for failing to prevent his collapsed investment group being hit with a $30m court-imposed fine.

This was one of more than 60 reasons given by Mr Mawhinney and Mayfair 101 as they seek to overturn the December penalty and an earlier ban from dealing in financial products.

Documents lodged by Mr Mawhinney’s lawyers with the Federal Court late last month claim regulatory action from the Australian Securities and Investments Commission was also to blame for the collapse of the Mayfair 101 endeavour because it prevented the company from recapitalising and maintaining the scheme through the Covid-19 pandemic.

Mayfair 101 and its associated brands attracted some $200m from hundreds of investors – including retirees – but failed to tell them that the products were significantly more risky than term deposits as had been held out. ASIC had alleged the products were being marketed to inexperienced investors, a claim that Mr Mawhinney denies.

The company – with its investments centred around property development projects in Queensland, including at the once-popular Dunk Island resort – halted redemptions to its unitholders in March 2020.

ASIC sought court orders to prevent it raising further funds one month later.

The appeal follows a decision by Federal Court judge Stewart Anderson in March, which found Mayfair 101 and Mr Mawhinney had made false and misleading statements about the M and M+ Core Fixed Income Notes that had been sold to investors.

In a separate matter, Justice Anderson also banned the Mayfair 101 founder from promoting financial services for 20 years, a decision which Mr Mawhinney has also appealed.

In his appeal, Mr Mawhinney claims his former barrister, William Newland, was incompetent because he did not cross-examine investors about whether they were “unsophisticated”.

He argues his former solicitors, Melbourne law firm Scanlan Carroll, did not provide evidence showing the “true nature” of the investment scheme.

Mr Mawhinney also claims the corporate regulator’s court action prevented the company from being able to recapitalise and maintain the investment scheme during the pandemic.

The appeal also contends Justice Anderson was wrong to find the Mayfair 101’s notes were “highly speculative” and had “negligible” value.

The pandemic’s impact on tourism was to blame for the decision to freeze redemptions for unitholders, documents lodged by Mr Mawhinney say.

Justice Anderson was wrong to find that advertising for the scheme was “grossly misleading”, they continue. Mr Mawhinney denies targeting “unsophisticated” investors who put their life savings or retirement funds into his tropical island investment scheme, saying they were “wealthy and experienced”.

Mr Mawhinney, in a statement late last month, said his focus remained on repaying Mayfair 101’s investors.

“Our appeals are focused on highlighting the mistakes made by ASIC and those of the insolvency practitioners chosen by ASIC to critique our business. These errors strike at the heart of ASIC’s cases,” Mr Mawhinney said.

“They have resulted in the court being led into error, and Mayfair’s noteholders being delivered a terrible injustice.

“Our noteholders have waited for nearly two years while we get this situation put right. I thank them for their continued patience and support.”

Mayfair 101, by late 2019, had contracted to purchase 230 properties and settled 130 with bridging finance through an arm of the Palan family office associated with Freedom Furniture.

When it collapsed, Mayfair 101 owed investors $211m. It had offered several fixed income products, including M and M+ Core Fixed Income Notes, raising more than $200m.

In December, the receivers of the collapsed investment group sold 36 houses in the Queensland town of Mission Beach at just below the original purchase price.

In March, Justice Anderson found Mayfair 101 represented to consumers they would be fully repaid on maturity, when in fact this was not guaranteed.

“Mr Mawhinney refused to accept any responsibility for the substantial losses sustained by investors as a consequence of his and the Mayfair Group of companies investment decisions,” Justice Anderson wrote in his decision. “Mr Mawhinney refused to accept that the investments made by the Mayfair Group of companies were highly speculative and that this fact had not been disclosed in the promotional and marketing material to investors.”

ASIC declined to comment.