Court orders winding up of failed land banking company Midland Hwy
The Federal Court of Australia has set aside a resolution made by creditors of land banking developer Midland Hwy Pty Ltd to enter into a deed of company arrangement (DOCA) and for Midland Hwy to be wound up.
The DOCA had been proposed by Bilkurra Investments Pty Ltd.
ASIC had sought wind-up orders in public interest for a proper investigation into the affairs of Midland Hwy by independent liquidators.
Nicholas Martin and Craig Crosbie of PPB Advisory have been appointed as the liquidators of Midland Hwy.
In his judgment, his Honour Justice Beach found that the public interest required the winding up of Midland Highway, "particularly where there is no intention for any part of the business of Midland to be salvaged".
"There is nothing concerning Bilkurra's financial position or status that would give me or the option holders any confidence that the project will proceed to completion. Moreover, the project appears to now be in the hands of entities and persons implicated in the very transactions under which $24 million of option holders' funds have been siphoned off in shadowy circumstances and through the use of phantom like corporate structures," the judge said.
Midland Hwy was the developer of a land banking scheme known as 'Hermitage Bendigo' (formerly 'Acacia Banks'), located just outside of Bendigo, Victoria and was put into administration on 2 July 2015. At the second creditors' meeting of Midland Hwy held on 21 October 2015, creditors voted in favour of the DOCA despite the Administrators recommending the company be put into liquidation.
"This outcome demonstrates ASIC's commitment to ensuring that DOCA arrangements proposed to be entered into under the Act are not used as a means to avoid proper investigation and scrutiny by independent persons" said ASIC Commissioner Greg Tanzer.
The move is part of ASIC's wider investigation into land banking schemes.
ASIC previously resolved proceedings against Midland Hwy to remove David Anthony Ross and Richard Albarran of Hall Chadwick as the administrators.
Land banking is a real estate investment scheme involving the acquisition of large blocks of land by a promoter or developer of the scheme, often in undeveloped rural areas, who then offer portions of the land to investors.
Land banking companies typically promote the investment with representations of high potential returns if the land is redeveloped, or if plans for rezoning and development are finalised.
Investors either purchase a lot in the land, or acquire an option to purchase a lot of land in an unregistered plan of subdivision. The option agreement is triggered at a time that the necessary development is approved by the local council.
While ASIC does not regulate direct property investment, ASIC considers that land banking schemes, depending on the particular scheme, may be a managed investment scheme and/or a financial product and that the promoters of these schemes should therefore hold an Australian financial services licence and register these schemes with ASIC.
