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Friday 28 July 2017

17-252MR ASIC acts to wind up a land banking scheme

ASIC has started legal action in the Federal Court in Melbourne to wind up a land banking scheme known as the Realestate Equity Investment Trust (REIT) and an associated company, Timeline Project Management Pty Ltd (Timeline).

The REIT scheme owns land located at Flinders Avenue in Lara, Victoria.

ASIC understands that at least 82 investors have invested a total of at least $800,000 into the REIT scheme and that, since 2013, investors have been making payments in respect of their investment to Timeline.

Lotus Pty Ltd (in liquidation) was the responsible entity which managed the REIT scheme until 21 September 2016 at which time its Australian financial services licence was cancelled by ASIC for various compliance breaches (refer: 16-337MR). It was placed into liquidation on 14 December 2016, on the application of a creditor.

ASIC alleges that REIT is operating as a managed investment scheme in circumstances where it has no responsible entity and no reasonable prospects of obtaining one.

The matter is listed for hearing at the Federal Court in Melbourne on 4 August, 2017 at 9.30am.

More information about these proceedings can be found in the attachment to this media release.

These proceedings are part of ASIC's wider and ongoing investigation into land banking schemes. 

Further information on land banking is located on ASIC's MoneySmart website.

Attachment to 17-252MR: ASIC acts to wind up a land banking scheme

Frequently Asked Questions (FAQs)

1. What steps has ASIC taken?

Following an investigation, ASIC started proceedings on 25 July, 2017 in the Federal Court of Australia to wind up:

  • Realestate Equity Investment Trust (ARSN 094 623 515) (REIT), and
  • Timeline Project Management Pty Ltd (ACN 145 830 851) (Timeline).

If ASIC's application is successful then liquidators will be appointed to REIT and Timeline.

2. Why did ASIC issue the proceedings?

REIT is a land banking scheme which owns land at 490 Flinders Avenue, Lara, Victoria, which was intended to be rezoned and developed. ASIC understands that at least 82 investors have invested at least $800,000 in the REIT scheme. 

Lotus Securities Pty Ltd (Lotus) was the former responsible entity of REIT. On 21 September 2016, ASIC cancelled the Australian financial services license (AFSL) of Lotus due to a number of compliance concerns including failure to lodge financial statements for Lotus (for the years 2014 onwards) and REIT (for the years 2012 onwards).  Lotus was not permitted to act as a responsible entity following the cancellation of its AFSL and no new responsible entity has been appointed.

Lotus is now in liquidation, having been wound up by the Court on 14 December 2016, on application by a creditor.  

ASIC understands that, since June 2013, investors have been making payments in respect of their investment to a bank account in the name of Timeline. Timeline is not (and has never been) the responsible entity of REIT. 

ASIC commenced these current proceedings to protect the interests of investors in the REIT scheme given ASIC’s allegations in the proceedings that, amongst other matters:

  • REIT has been operating despite it not having a validly appointed responsible entity as required under the Corporations Act 2001 (Cth) (the Act)
  • the REIT scheme appears to be unviable given that there has been no progress in developing the real estate investments of the fund since the initial fundraising
  • financial statements for REIT have not been prepared or lodged with ASIC since 2012, and
  • the interests of investors appear to be prejudiced due to the fact that they are still paying monies apparently into the scheme via a bank account held by Timeline.

3. What orders does ASIC want the Court to make?

ASIC is seeking orders from the Court to wind up, and to appoint liquidators to, each of REIT and Timeline. The application is listed before the Court on 4 August, 2017. 

4. Will investors get a refund?

ASIC is not seeking compensation or refunds for investors in these proceedings.  However, if the Court orders the winding up of REIT and Timeline there may be a return to creditors as part of the liquidation process. The realisation of assets and any distribution to investors will be undertaken by the liquidators appointed by the Court. 

5. What rights do investors have?

ASIC is unable to advise investors as to any rights that they may have in relation to ASIC's application. If investors wish to be represented at the hearing of ASIC's application, then they should seek legal advice. Investors may also wish to seek independent legal and/or financial advice in relation to their investment in the REIT scheme.

ASIC's guide on the process of liquidation may also assist investors and is accessible at: Information Sheet 45 Liquidation: a guide for creditors.

Further information for investors 

ASIC is writing to investors to ensure they are aware of ASIC's action and can access relevant, publicly available information. 

Our letter of 4 August 2017 provides a copy of this media release, some FAQs and a copy of the sealed Originating Process. 

Our letter of 4 September 2017 covers further FAQs and the Court orders dated 21 August 2017 in English, Arabic and Somali. It also includes a copy of our submissions to the Court.  

Future court hearing dates and court orders made in the proceeding can be viewed via Federal Law Search by searching File Number “VID820/2017” at 

Editor's note 1:

The hearing listed for 4 August 2017 in the Federal Court in Melbourne has been adjourned by the Court to 9:30am on 18 August 2017.

Editor's Note: 2

A case management hearing was held on 18 August 2017.  Here is a link to the orders made by the Court following on from that hearing.  A final hearing date has yet to be set by the Court.

If investors wish to be heard before the Court at the final hearing, then, in accordance with paragraph 6 of the Court Orders dated 21 August 2017, they need to inform the Court and the parties, in writing, by 22 September 2017. Investors may also want to seek their own legal advice if they wish to be heard.

Editor's Note 3

On 10 October 2017, by consent, the Federal Court of Australia varied the orders dated 21 August 2017.

Here is a link to the Orders dated 10 October 2017.

The matter is listed for a final hearing on 28 November 2017.

Editor's Note 4 

The hearing in this matter was heard before the Federal Court on 28 November 2017 at which time the Court made various orders and adjourned the hearing to 9:30am on 19 December 2017.   

A link to the Orders made on 28 November 2017 is here.

The Orders have also been translated into Somali and Arabic.

Editor's note 5:

On 19 December 2017, the Federal Court in Melbourne ordered that Realestate Equity Investment Trust (REIT) and an associated company, Timeline Project Management Pty Ltd (Timeline), be wound up. Refer 17-450MR for more information.