A collapsed Victorian landbanking firm will be wound-up after successful legal action by the Australian Securities & Investment Commission (ASIC).

Victorian based Midland Hwy Pty Ltd was behind the Hermitage Bendigo landbanking scheme before being placed into administration on 2 July after only $1.7 million of the $24 million received from option holders in the project had been put towards the development.

At a meeting following the company being placed into administration, creditors voted to enter a deed of company arrangement (DOCA) with Bilkurra Investments Pty Ltd, owners of the land associated with the Hermitage Bendigo project.

Under the DOCA, Bilkurra Investments Pty Ltd would take over the project and its development, despite recommendations from the administrators appointed to Midland Hwy Pty Ltd that it be placed in liquidation.

ASIC appealed that decision in October to The Federal Court of Australia, claiming the DOCA should be set aside as it was in the public interest for Midland Hwy Pty Ltd to be wound-up.

The court last week made orders agreeing with ASIC, finding there is little chance investors would be likely to see the projected completed.

"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,” Justice Jonathan Beach said.

“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,” Justice Beach said.

In launching their legal action, ASIC claimed there was $22.3 million of payments that should be investigated by liquidators to see if they can be recovered, including substantial amounts paid to companies associated with Bilkurra Investments Pty Ltd for which there is no proper documentation.

ASIC commissioner Greg Tanzer said the Federal Court orders showed the regulator would not allow companies to hide behind DOCA agreements.

“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,” Tanzer said.