A new investment proposal promoted as “Do you know how to buy Australian property, no money down?” was always destined to attract attention from the Australian Securities & Investments Commission (ASIC).

Especially, if the person behind the investment proposal was Jamie McIntyre, a property spruiker from the Gold Coast, against whom ASIC had commenced proceedings in the Federal Court of Australia on 7 August 2015 in relation to the promotion and sale to investors of interests in five land banking schemes. Refer to ASIC media release 15-214MR for a summary of those proceedings.

Apparently undeterred by those proceedings, Jamie McIntyre’s company 21st Century marketed investment seminars to commence in September 2015, to present a new investment proposal.

Interim injunctions and orders were made in September 2015 in relation to that new investment proposal, which have now been made permanent, by Beach, J. His judgment has been reported as Australian Securities and Investments Commission v Macro Realty Developments Pty Ltd [2016] FCA 292, a decision of the Federal Court of Australia. Refer also ASIC media release 16-092MR.

What structure was used for the new investment proposal?

The structure used was more sophisticated than the structure that 21st Century had used for the land banking schemes, which was that the investors pool their funds in the promoter’s company which acquired the properties.

The structure used was an ingenious way of using as third parties to acquire and ‘warehouse’ properties. This is how the Court described the structure of the Investment Proposal, which consisted of a marketing Brochure circulated by 21st Century and a Memorandum of Understanding to be entered into between the investor and Macro Realty -

  1. An investor agreed to establish a company, of which he or she was the sole shareholder and director;
  2. Macro Realty was to be the sole decision maker for all activities of the company;
  3. The investor agreed to “do all things required by Macro to run the business of the company as Macro saw fit”;
  4. The company was to acquire or hold an option to acquire two properties in the Pilbara, Western Australia, the acquisition of which the company had to finance;
  5. The investor agreed to use the services of “[Macro] Realty Finance” for any finance relating to the company and to use their recommended lenders;
  6. Macro guaranteed to pay the investor between $100 and $400 per week;
  7. There would be a “transfer [of] the Directorship of the company to [Macro]” upon termination of the agreement (within three to seven years);
  8. Macro warranted to offer to purchase the property “within 3 years of settlement” at the same price paid by the investor; and
  9.  “Proxy Heads of Agreement [were] to be signed after incorporation of the company”.

How Macro Realty was to profit was not made clear. One way might have been that Macro Realty sold the option it held to purchase the properties to the investor’s company at a premium, the premium to be paid from the finance raised against the property. The ‘zombie company’ structure would facilitate this.

The three bases for the orders made in the proceedings

ASIC commenced the proceedings in September 2015 against Macro Realty, and two associated companies, 21st Century Property and 21st Century Education. ASIC obtained interim injunctions to restrain the investment proposal from continuing to be marketed. There was no indication that any investors had participated in the proposal at that stage.

On 23 March 2016, Beach J made the orders permanent: to restrain promotion and marketing, receipt and disposal of funds, in relation the investment proposal.

There were three bases upon which Beach J made his orders, as follows:

  1. Counselling and procuring contraventions of section 181(1) of the Corporations Act 2001

Section 181(1) of the Corporations Act 2001 states that a director or other officer of a corporation must exercise their powers and discharge their duties:

  1. in good faith in the best interests of the corporation; and
  2. for a proper purpose.

Beach J adopted the explanation of the fiduciary duty given by Lord Denning MR in the decision of Boulting v Association of Cinematograph, Television and Allied Technicians [1963] 2 QB 606 -

no one who has duties of a fiduciary nature to discharge, can be allowed to enter into an engagement by which he binds himself to disregard those duties … No stipulation is lawful by which he agrees to carry out his duties in accordance with the instructions of another rather than his own conscientious judgment … (at 626 and 627)

In this case, Beach J stated that relevant factors were:

  • the investor agreed to fetter themselves to act in accordance with Macro’s directions in advance of the establishment of the company; and
  • the fact that the MOU required the investor to be sole shareholder as well as sole director, meant that shareholder consent could not operate “to excuse a director from liability for a breach of their statutory duty in s 181”.
  • Macro Realty and 21st Century were involved in the promotion and marketing of the MOU.

The Court found that Macro Realty and 21st Century were liable in terms of counselling or procuring investors to contravene s 181(1), and therefore the Court could make restraining orders against them under s 1324 of the Corporations Act.

  1. Misleading or deceptive conduct

Describing the representations in the brochure as illusory promises, the court identified four kinds of representations as being false, misleading or deceptive, namely –

  1. The implied representation that the investor’s duties as a company director could be fulfilled by simply signing an annual return is false for the above reasons.
  2. The implied representation that the investment  was essentially risk free by using the statements “effectively capital guaranteed” and “guaranteed buy back” is false or misleading because there was “a risk that Macro may not be in a position to “buy back” the properties from all investors at the price” after three years.
  3. The statements “100% no money down” and “no capital or fees involved’ are misleading or deceptive because “There is evidence that the investors will be required to contribute some finance to the Investment Proposal”.
  4. The statements which promised “income of guaranteed $200 per week”, “guaranteed positive cash flow income of $20,800 annually” and the like are “inconsistent on their face and likely to lead investors into error”.

The court concluded that these representations and statements contravened s 1041H of the Corporations Act, and s 12DA of the ASIC Act.

  1. Unlicensed provision of financial services

The Court made these findings -

  • The Investment Proposal constituted a financial product pursuant to s 763A of the Corporations Act because “it is an arrangement (facility) through which investors may make a financial investment” to generate a financial return.
  • By marketing and promoting the Investment Proposal to persons attending seminars, and to the public via a website, 21st Century and Macro Realty “have made recommendations that could reasonably be regarded as being intended to influence investors to decide to enter into the Investment Proposal”.
  • “Accordingly, as the Investment Proposal constitutes a financial product, financial product advice has been provided. Accordingly, financial services have been provided.”

The Court concluded that “21st Century is carrying on an unlicensed financial services business in contravention of s 911A(1) of the Corporations Act”.


ASIC media release 16-092MR puts the decision into context – ASIC Commissioner Greg Tanzer said: “This is another significant outcome in ASIC’s ongoing campaign to promote trust and confidence amongst investors.”