Mayfair 101 group headed by James Mawhinney fined $30m by court after ASIC action

A court has savaged a Queensland tropical island investment scheme, hitting Mayfair 101 with $30m in penalties for misleading conduct.

James Mawhinney on Dunk Island, in Queensland.

Mayfair 101 has been slapped with a $30m fine, in a major step up from the corporate regulator’s proposed penalty, with a judge hammering the business for engaging in false and misleading representations.

The Australian Securities and Investments Commission was seeking to slap the three Mayfair group companies with $8m in fines in the Federal Court.

But Justice Stewart Anderson elected to impose a heavier penalty, noting the size of the penalty reflected the seriousness of the conduct.

“Having considered the matter I’m not satisfied those pecuniary penalties sufficient reflect the serious of the contravening conduct and the harm caused to the individual investors,” he said.

“I have therefore determined the pecuniary penalties need to be increased.”

The fines come after Justice Anderson found Mayfair 101 and its head James Mawhinney had made false and misleading statements with M+ and M Core Fixed Income Notes that had been sold to investors.

Justice Anderson, who also hit Mr Mawhinney with a 20-year ban, has previously branded his conduct as showing a “total disregard for the Corporations Act and the ASIC act”.

“I have no confidence that Mr Mawhinney properly understands or appreciates the protective purposes of Australian financial services laws, or the importance of properly disclosing relevant and material matters to prospective investors,” he said at the time.

Justice Anderson took aim at Mr Mawhinney, noting he found him not “to be a credible witness” and that the evidence he presented “was not honest and truthful”.

“Mr Mawhinney refused to make even the most obvious concessions to the failures of the Mayfair Group of companies to make disclosure to investors of the risks faced by them in investing in the Mayfair Products,” he said.

“The impression I obtained from Mr Mawhinney’s demeanour in giving evidence was that Mr Mawhinney was determined to allocate blame for the substantial losses incurred by investors to ASIC for taking enforcement action against Mr Mawhinney and the Mayfair Group of companies.”

ASIC had sought penalties of $8m against James Mawhinney’s group but the Federal Court said the conduct was more serious. Picture: Ally Lombardo

The Mayfair 101 empire burst on to the business scene on the back of a high-profile pitch to turn Dunk Island and the Far North Queensland town of Mission Beach into a tourism mecca.

This saw Mayfair 101 snap up more than 100 residential properties in the area, as well as buy a cyclone-ravaged resort on Dunk Island, before collapsing soon after owing investors $211m.

Justice Anderson had found the notes, which purported to be bank deposit-like, actually exposed investors to significantly higher risks than savings accounts.
The court also found Mayfair 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 said.

“Mr Mawhinney was determined to inform the Court why he and the Mayfair Group of companies were not at fault.

“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 welcomed the $30m hit on Mayfair and Mr Mawhinney, with deputy chair Sarah Court noting the penalty “makes clear that firms must do the right thing by their investors, irrespective of whether they are wholesale or retail investors”.

“Failing to accurately advertise financial products can result in significant penalties for firms,” she said.

The Mayfair 101 head had argued no penalty should be imposed on his company, with his lawyers arguing ASIC and Grant Thornton, which prepared the report for the regulator on the company, erred in their assessment of the business as insolvent.

But Justice Anderson struck out Mr Mawhinney’s attempts, approving ASIC’s orders to bar advertising of Mayfair 101 products using terms such as term deposit, confidence, and certainty in future.

Mayfair 101 will also be forced to publish notices of Justice Anderson’s findings.

Mr Mawhinney said Mayfair 101 would appeal the $30m penalty, adding to the growing legal fights before the courts.

Mayfair 101’s head said the decision of the court “strengthened the Group’s grounds for appeal”.

“It is another questionable court decision which we intend on having overturned,” Mr Mawhinney said.

“It is no surprise the court has stood by its original findings. The case on whether we made misleading representations in our advertising was undefended as ASIC had frozen our business activities, making it unfeasible to defend.”

The head of Mayfair 101 has launched appeals on bans on him and the company advertising financial products.

ASIC for its part is alleging he has committed contempt of orders from the Federal Court that he stop touting financial products.

The regulator is also targeting the Eleuthera Group Pty Ltd, run by Mr Mawhinney, which it argues carried on a financial services business in Australia without holding an Australian financial services license.

This case is set to be heard on February 18, 2022.