Court to decide on Mayfair 101’s tourist mecca hopes

Much will hang on a crucial report by provisional liquidators Grant Thornton that is set to be provided to the court by Thursday.

Much will hang on a crucial report by provisional liquidators Grant Thornton that is set to be provided to the court by Thursday. Picture: TTNQ

The future of fund manager Mayfair 101’s controversial plans to transform Dunk Island and Mission Beach into a $1.5bn tourism mecca could be decided at a court hearing at the end of the month, with James Mawhinney, the entrepreneur behind the project, insisting it will go ahead.

The prospects of the island being developed by the under-pressure firm appear to be fading in the wake of the assets of another Mayfair unit, the $80m IPO Wealth Holdings vehicle, being wound up.

At a Federal Court hearing on Wednesday, judge Stewart Anderson adjourned an interlocutory application by Mr Ma­whinney until next Wednesday.

Much will hang on a crucial report by provisional liquidators Grant Thornton that is set to be provided to the court by Thursday. It will give a view on Mayfair’s M101 Nominees unit, which raised $67m, including providing an opinion on the group’s solvency and the likely return to creditors if the company is wound up.

Court documents filed by the corporate regulator show numerous issues have already arisen with how the money raised via Mayfair’s debentures have been used.

An independent expert ASIC retained, Deloitte partner Jason Tracy, expressed doubts about the validity of M101 Nominees applying a uniform 4 per cent uplift to the value of the properties on March 20 and a significant increase to the value of the Dunk ­Island asset.

Mr Tracy said on March 20 the island was valued at $11m, but it rocketed in value to $49.725m by June 12 “with no accompanying explanation for this increase”.

The Bond family has since resumed control of the island even though Mr Mawhinney has said the scheme will go ahead, with new finance in the wings.

ASIC also raised concerns about loans made by related entities to trusts affiliated with the founder's partner, Brigette Panetta, and his sister, Inga Tamminga.

M101 Nominees, the issuer of M Core Fixed Income notes promoted by Mayfair, loaned money to the trustee for Jarrah Lodge Unit Trust No 1, which in turn lent $288,225 to Panetta Investment Trust and $20,250 to Tamminga Family Trust.

“Nowhere has Mr Mawhinney explained why almost half a million dollars raised for investors was ‘invested’ in a trust which then lent money to a trust apparently established for the benefit of Mr Mawhinney’s partner, and … his sister’s family trust,” ASIC said in the court filings.

Brigette Panetta was employed as Mayfair 101’s finance director while Inga Tamminga was employed as an executive assistant for the company.

ASIC said the serviceability of these loans, along with an unsecured loan made to a related entity called Eleuthera Group, which has been dubbed the group’s treasury operation, had not been proved by Mr Mawhinney.

But Mr Mawhinney responded in an affidavit saying there was “no requirement to hold security over entity(s) that monies are advanced to, providing the dollar-for-dollar security requirement is met” and “there is no requirement to secure any loans made to related parties”.

ASIC also noted unaddressed concerns identified by Mr Tracy over a lack of mortgage securities for properties owned by Mayfair 101. As of March 20, the security trustee for the core notes did not have mortgage security for all but one of 119 properties with a reported value in excess of $54m.

Instead, the security trustee has security over units in various trusts, the trustees of which owned those properties, with third-party mortgages registered on all titles except one of them. Mr Tracy said the interest of those mortgages were “likely to have priority to the interests of core note investors”.

McGrathNicol has since been appointed receiver over more than 100 Mission Beach properties.

ASIC also noted that Mr Mawhinney was continuing to raise funds from investors through a product called “Australian Property Bonds”, which “appear” to be secured by properties at Mission Beach that are also owned by various trusts that the security trustee holds security over for the benefit of core note investors.

Those same assets at Mission Beach were at risk of being overvalued, Mr Tracy said, as Mayfair acquired a number of the properties between last October and April this year, establishing a market price “in an otherwise illiquid and small property market”.

“Consequently, there is a risk that the contract price in each sale contract is above market price in today’s terms, negatively impacting asset security values and recovery of funds to core note investors,” he said.

In an affidavit filed on September 8, Mr Mawhinney said ASIC’s case and Mr Tracy’s analysis “failed to accurately and fairly depict the true structure of the Product issued by M101 Nominees Pty Ltd”.