Mayfair advertising found to be misleading, deceptive
The Mayfair 101 empire headed by James Mawhinney has been hit by a Federal Court finding that advertising of its products made statements that were false, misleading or deceptive.
The group burst to prominence with a high-profile advertising campaign and built up holdings including Dunk Island Resort as its expansion was fuelled by the promise of high returns from its since crushed tourism projects.
The finding in a case brought by the corporate regulator came just weeks after the court ordered the winding up of the M101 Nominees unit, which issued secured debentures promoted by the company that were known as M Core Fixed Income Notes.
The move puts the property funds house under further pressure after it lost control of Dunk Island Resort and nearby properties at Mission Beach, where it had promoted a scheme to develop a $1.5bn tourism mecca that has been mired in the coronavirus crisis.
The case on misleading statements kicked off last April. That month the court made interim orders restraining Mayfair Wealth Partners, which trades as Mayfair Platinum, and Online Investments, which goes by Mayfair 101, from promoting their debenture products and prohibiting the use of specific words and phrases in their advertising.
Mr Mawhinney was not a party to the proceedings and the defendant companies were unrepresented at the hearing last month.
The Federal Court found that from July 2019 to mid-April last year Mayfair had represented to consumers that promissory notes called M+ Fixed Income Notes and M Core Fixed Income Notes were comparable to, and of similar risk profile to, bank term deposits. However, the Mayfair products actually exposed investors to significantly higher risk than bank deposits as they lacked prudential regulation.
The court found Mayfair had engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in relation to financial services, in breach of the Corporations Act and the Australian Securities and Investments Commission Act.
It found that when supplying financial services, Mayfair made a false or misleading representation that its products were of a particular quality and also represented they had certain performance characteristics or benefits, both contravening the ASIC Act.
It also found Mayfair represented to consumers they would be fully repaid on maturity, when in fact this was not guaranteed.
Payments were deferred and Mayfair was found to have engaged in misleading or deceptive conduct, or acts likely to do so, in relation to financial services, also breaching the laws.
Mayfair told investors that its products were specifically designed for investors seeking certainty and confidence and carried no risk of default, when there was a risk they could lose some or all of their principal. This was also found to be misleading and deceptive.
The company also portrayed the M Core Fixed Income Notes as fully secured financial products when funds were lent to the firm's treasury unit and Eleuthera Group and not properly secured.
Money was used to pay deposits on properties before any security interest being registered and to buy unsecured assets, which was found to be misleading and deceptive.
The judgment related to a first case filed by ASIC in April last year concerning Mayfair's misleading advertising, while a further judgment in ASIC's second case seeking permanent injunctions against Mr Mawhinney remains reserved.
Originally published as Advertising found to be misleading, deceptive