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  • Levitt Robinson

The Australian Business Executive | Love’s labour’s lost: The part ASIC plays in investor despair


In March, there was an inquest in Perth into the drowning deaths, in 2018, of two (2) teenage Indigenous boys in the presence of police.


Police had been hotly pursuing them as suspects seen jumping the fences of private homes near the Swan Riverbank.

Police caught one of the boys and guarded him while watching the other four dive into the river – about 300 metres wide at that point.

An issue at the Inquest was whether police, detaining the straggler, gave too high a priority to keeping him in custody rather than to trying to reach two of the boys, crying for help. They appeared to be drowning and in fact, did drown, well before any police reached them.

Was saving lives more important than guard duty? Should law enforcement always come first or are there considerations of humanity or public interest that might override the imperative of law enforcement.

Compare the approach of WA Police to ASIC’s intervention in the Mayfair debt securities saga. On ASIC’s application, the Federal Court ordered the winding-up of M101 Nominees Pty Ltd, which had issued secured debentures promoted by Mayfair 101, known as M Core Fixed Income Notes, on 29 January 2021. Grant Thornton, through its directors, Said Jahani and Philip Campbell-Wilson, were appointed joint liquidators.

M101 Nominees had raised approximately $67 million dollars from “sophisticated” or “wholesale” investors during 2019/2020.

ASIC and its preferred insolvency practitioners have created the questionable impression that Mayfair was an investment fund. It was a debt fund. The Mayfair promoters borrowed money from the investors, who were actually lenders and issued M Core Notes, notionally secured to entitle Noteholders to a fixed return on their loan, in the nature of interest. Provided that return was recovered by the lender with agreed interest, as per the Notes, any profits generated by the investment of those funds accrued to the benefit of the promoters.

There is nothing sinister if the promoters were intending to make a profit, since it was never represented that the Noteholders would acquire an interest in assets but rather, good security and repayment with interest, in accordance with pre-agreed terms.

Mayfair’s promoters had made riskier deals than they had disclosed and had portrayed the debt-funding as more secure than it really was.

The promoters also relied upon the expectation or hope of new investment and the projected ability to make asset sales to cover liabilities and to leverage off the improved value of investments, made or yet to be made.

The promoters of the M Core Fixed Income Notes were involved in some risky trades. There was a lack of synergy in material dates, relating to Mayfair’s liability to repay the Noteholders and the repayment dates on loans to and from related third parties.

The fact that the Noteholders did not have the security that they were entitled to expect is partly a result of the law, which exempts such placements from regulation as Managed Investment Schemes requiring Project Disclosure Documents to be issued to prospective investors and lenders, who are deemed “sophisticated” under the Regulations to the Corporations Act. A “sophisticated” or “wholesale” investor does not have to be particularly wealthy and has to invest not less than $500,000.00.

The lack of protection afforded to sophisticated investors is a product of the slackening of the regulation of the financial system by the Federal Government for all except litigation funders which the Government hopes to stymie to protect the “big end of town” from being exposed to shareholder and consumer Class Actions, which the shareholders and consumers might not otherwise be able to afford.

The April 2020 ASIC intervention was justified by the facts.

In English, we have expressions which sum-up what next happened: ASIC “threw the baby out with the bath water” and “killed the goose that laid the golden egg”.

The promoters of Mayfair 101 had entered into a loan with Naplend with a four (4) month term with interest, accruing at 2% per month and a default rate rising to 48% per annum. Arguably, the nature of ASIC’s sudden intervention prevented the promoters from refinancing this loan or negotiating an extension and placed the loan fairly and squarely in default.

ASIC’s crackdown on Mayfair 101 prevented the promotion of its debenture products on any terms, cutting-off a potential income stream.

To invoke another English-language trope: The Noteholders were literally cast out of the frying pan and into the fire. At least in the frying pan, there was a prospect that something nourishing or at least, edible, might emerge.

ASIC’S chosen insolvency firm, Grant Thornton’s directors, Said Jahani and Philip Campbell-Wilson, were first appointed joint provisional liquidators and then liquidators. Inevitably, Naplend would then appoint Receivers.

Nobody could contest the Naplend loan without paying the money “reasonably demanded” by Naplend into Court or otherwise securing the full amount which would include interest accruing at the 48% default rate. Foreseeably, that would also include astronomical charges usually associated with receivers and the lawyers whom they appoint.

The usual outcome once receivers are appointed is, “You can give an inch and they will take a mile!

Receivers and their lawyers generally are able to get away with charging “like wounded bulls” under the mortgage instrument which applies the default interest rate to those charges, encumbering the security property until repayment is made. The course of conduct upon which

ASIC embarked in conjunction with the insolvency profession, would not only have facilitated a feeding frenzy but would have ensured that the debenture holders have about as much chance of recovering their money, as would a wounded mammal falling into the Amazon, of not being devoured by a school of piranhas.

In 11 March 2021, Said Jahani, the National Managing Partner, Financial Advisory of Grant Thornton wrote to creditors, advising of his firm’s current outstanding costs of $420,059.00 and that he anticipated future costs could bring that figure up to $859,059.00, to which should be added the legal fees incurred to Hall & Wilcox as Advisors to PAG, the Security Trustee, which by November 2020 totaled $578,000.00 and he continued: This is only in relation to M101 and does not include the fees charged by the receivers appointed by Naplend and their lawyers.

While the debenture holders drown in interest and the hair-raising fees of insolvency practitioners and their lawyers, all are consequential upon ASIC’s intervention. Was it meant to protect the interests of the Noteholders? The Noteholders could be forgiven for asking whether the so-called “cure” is far more agonizing and devastating than the disease.

This scenario is certainly not uncommon, and I have encountered it many times in my 42 years of legal practice.

Noteholder, Bruce Golightly crystalized a loss of more than $1 million dollars post-ASIC and Court intervention against the Mayfair companies. He received this email back from Grant Thornton:

Dear Bruce, As discussed over the phone it will cost approximately $25,000.00 plus GST to convene and hold a meeting of Noteholders and the liquidation is currently without funds. Therefore, it is not considered cost-effective or reasonable to hold a meeting of creditors at this time”.

The Federal Treasurer announced last year, a Reform Package of Insolvency Law Changes including a “Transition from a ‘creditor in possession’ model to more of a ‘debtor in possession’ model which will allow company directors to remain in control of their business and continue to trade while they restructure their existing business debts”. This was expressly intended to “draw on key features of the Chapter 11 Bankruptcy Model in the United States” but regrettably, was only applied to incorporated businesses with liabilities of less than $1 million dollars.

What if ASIC had sat down with the Mayfair promoters and told them, “Your marketing sucks. These are the changes which we insist you make. You can only continue to market debentures to wholesale investors if you revamp your advertising according to our prescription”?


ASIC should have told the directors what they had to do in order to restructure their assets and liabilities to be able to remain in business, all without prejudice to ASIC’s right to prosecute the directors for alleged contraventions, down the track.

The Noteholders have been impoverished by “the bull in a china shop” approach adapted by ASIC, ultimately sanctioned by the Court. The current Corporations and Insolvency Laws in Australia, sadly relegate the interests of investors to the very last priority.

In the 1990’s, I worked with Hawaiian insolvency lawyers on behalf of the “debtor’s directors -in-possession”, implementing a Plan of Reorganization under the supervision of the US Bankruptcy Court for the State of Hawaii. Chapter 11 works a hell of a lot better than our current Insolvency Laws and should be introduced without the Federal Government’s $1 million dollar debt ceiling.

Under Chapter 11, the Court tells secured creditors to “back-off” while their security is protected, and the directors depend on the support of the unsecured creditors to pull off the restructure.

Most of the investors who put their money into Mayfair “debt products” were, in truth, neither wholesale nor sophisticated but they are likely to become the victims of wholesale financial slaughter, through a combination of inadequate legal protection at the outset, misleading marketing, risky practices and then, mindless intervention by the regulators, opening the way for institutionalised bottom feeders.

The insolvency industry comprised of lenders, insolvency practitioners and ASIC, is a small orbit in which careers are made and broken. Unlike in other First World Countries, “practitioners” move freely between all three (3) branches, which afford career prospects and progression.

The association between ASIC operatives, lenders and the insolvency profession (for which ASIC has been vested with oversight and responsibility) is often so close that the term “regulatory capture” has been applied. This occurs “when a regulator e.g., ASIC, advances the commercial or political concerns of a regulated industry rather than advancing the social purpose of the regulation itself”.

Stewart Levitt is Senior Partner with Levitt Robinson Solicitors, specialising in corporate law, banking & finance, and class action law, www.levittrobinson.com.


  1. Inglis v. Commonwealth Trading Bank of Australia (1972) 126 CLR 161.

  2. Email, Grant Thornton to Bruce Golightly, 1 March 2021 at 15:55 pm.

  3. Announcement 10 December 2020 Insolvency Reform Passes Parliament, Joint Media Release, by the Hon. Josh Frydenberg MP, Treasurer, and the Hon. Michael Sukkar MP, Minister for Housing and Assistant Treasurer.

  4. Kellehers Australia, Barristers & Solicitors “Regulatory Capture-Scandals and Regulators, copyright at Kellehers Australia Pty Ltd 2018, Burnleigh, Victoria”.