"Record" penalty over misleading claims

by Rebecca Pike15 Nov 2018

The Federal Court has imposed penalties totalling $18million against a company and its director for making false or misleading representations about how people could create wealth through buying and selling real estate.

The action against We Buy Houses Pty Ltd and its sole director Rick Otton follows ACCC action.

The decision was made up of $12million imposed against We Buy Houses and $6 million imposed against Otton personally.

The penalties are the highest ever imposed for contraventions of the Australian Consumer Law by a corporation and an individual, respectively.

The Federal Court also banned Otton from managing corporations for ten years in Australia and permanently restrained Otton and We Buy Houses from further involvement in the supply or promotion of services or advice concerning real property transactions or investment.

ACCC Chair Rod Sims said, “We Buy Houses and Mr Otton peddled false hope to people simply looking to get a foothold in the housing market or invest money in real estate for their future.

"The record penalties imposed against both We Buy Houses and Mr Otton reflect their egregious conduct.

“They have also effectively been permanently banned from any further involvement in real estate in order to protect consumers.

“These record penalties demonstrate the determination of the ACCC to take strong and effective enforcement action against businesses and individuals who prey on consumers using the false hope of creating financial success. The judgement signals the Court’s condemnation of false and misleading property spruiking and get rich quick schemes.

“This outcome also reflects a recent trend of higher penalties for Australian Consumer Law breaches. We can expect this to continue following recent law changes to increase maximum financial penalties under consumer law.”

We Buy Houses and Otton taught real estate investment strategies via free seminars, and paid ‘boot camps’ and mentoring programs that claimed people could:

  • buy a house for $1, without needing a deposit, bank loan or real estate experience, or using little or none of their own money
  • create passive income streams through property and quit their jobs
  • build a property portfolio without their own money invested, new bank loans or any real estate experience, and
  • start making profits immediately and create or generate wealth.

The ACCC originally began proceedings against We Buy Houses and Otton in March 2015 following a coordinated investigation with New South Wales Fair Trading.

In August 2017 the Federal Court found these claims were false or misleading, in contravention of the Australian Consumer Law.

Sims added, “In her judgement on liability, Justice Gleeson said the free seminars were a waste of time, and that the boot camps and the mentoring programs were an expensive waste of time.”

The Court also found that Otton made false or misleading representations that he had successfully implemented the wealth creation strategies he taught.

In addition, a book authored by Otton, and websites operated by We Buy Houses and Otton, included testimonials from ‘students’ claiming they were able to buy a house for $1, which the court found were false or misleading.

COMMENTS

  • by John 15/11/2018 2:47:01 PM

    Another Real Estate spruiker, when will the ASIC, APRA or the government realise, it is the real estate industry that needs a RC!!

  • by Drew 15/11/2018 9:10:41 PM

    100% John, issue with real estate is it's all state based legislation and falls in the too hard basket to fix.
    Just 3 days ago i had a client offer $1.3mil on a Melb property and put a $40k holding deposit down whilst signing up the COS.
    The agent went to another interested party showed them the offer and told them how to beat it.
    That's 100% illegal to disclose private offers that way.
    What can you do when you want to complain and you look up and find out that agent is the Officer in Effective control.
    It's rotten to the core the real estate sector!

  • by IZ 15/11/2018 9:37:01 PM

    There are hundreds of these peddling the same information and "advice" really just to feather their own nests with large commissions, often hidden or undisclosed. Examples are those that sold properties in mining towns and walked away with hundreds of thousands in commissions, whilst unsuspecting investors saw their property values and rents dropped by more than half.

    Their prey is usually interstate investors, and Valuers are mostly onto this now, valuing properties less than purchase price to allow for the commissions. I have seen positive articles about investment areas given to buyers, but negative articles are thrown in the bin.

    People just need to realise they can do their own research, and can buy these same properties directly, without having to pay for a spruiker's commission. Buyer beware!