Following an application by ASIC in the Federal Court in Melbourne, the Court has appointed liquidators to two companies, Bilkurra Investments Pty Ltd (Bilkurra) and Foscari Holdings Pty Ltd (Foscari), who have each operated a land banking scheme in Victoria.
The two land banking schemes are known as Hermitage Bendigo (formerly Acacia Banks) located at Midland Highway, Bagshot, Victoria 3551 and Foscari, located at 99 Palmers Road, Truganina, Victoria 3029.
Promoters of the land banking schemes used Bilkurra and Foscari to raise approximately $24 million from investors. These schemes were operated in similar ways to other land banking schemes associated with Jamie McIntyre and the 21st Century Group, which ASIC has also successfully applied to have placed into liquidation.
Nicholas Martin and Craig Crosbie of PPB have been appointed as joint liquidators to Bilkurra and Foscari. Their role will be to take over the day to day operations of the companies and to realise any assets for the benefit of creditors. ASIC's investigation into the circumstances of the fundraising from investors will continue.
ASIC's application was based on concerns that both companies were insolvent (refer: 15-401MR). The Court agreed and also found that it was just and equitable that the companies be wound up so that liquidators could be appointed.
The Court further found that:
- Bilkurra and Foscari were knowing participants in schemes that have facilitated misappropriation of investors' funds,
- Michael Grochowski, who was banned by ASIC from providing financial services, had the day to day control of the companies, including by controlling the companies' bank accounts which contained investor funds, and
- the winding up orders were necessary to protect investors and so that there was some prospect of recovery of the monies lost after a full investigation by a liquidator.
ASIC Commissioner Greg Tanzer said, 'This is another important outcome for ASIC's wider and ongoing investigation into land banking. We will continue to crack down on these investment schemes to deter further misconduct.'
If investors have queries about the liquidations of Bilkurra and Foscari they can contact the Liquidators via email at midland@ppbadvisory.com. The liquidators will also publish updates on their website at www.ppbadvisory.com.au/
Background
In February 2016, the proceedings were adjourned to enable a proposed purchase of the land banking schemes to be considered, but the Court found that this proposal promised much, but delivered little and has now fallen over.
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.
In August 2015, following an investigation, ASIC commenced proceedings against companies associated with Jamie McIntyre and the 21st Century Group in relation their promotion and sale of interests to investors in five land banking schemes. On 7 October 2015 the Federal Court made orders appointing provisional liquidators to the companies which operated the schemes.
On 7 December 2015, the Federal Court of Australia made wind-up orders for failed land banking company Midland Hwy, following ASIC action. ASIC sought the orders as it considered it in the public interest for a proper investigation into the affairs of Midland Hwy to be conducted by independent liquidators.
Investors should be vigilant when investing in such schemes and seek independent legal and financial advice. Investors should also assess their risk tolerance to this type of scheme and fully understand tax implications of investing through a self-managed superannuation fund. ASIC notes that many of the promotors of land banking schemes offer access to lawyers and financial advice, but is concerned that they are not independent enough to provide the best advice.
These types of investments may constitute a managed investment scheme and/or a financial product. Developers and promoters should therefore hold an Australian financial service (AFS) licence and register these schemes with ASIC.
Further information on land banking is located on ASIC's MoneySmart website.