20 May 2019
We Buy Houses Pty Ltd (WBH) has found itself in hot water in the Federal Court by making representations to consumers in breach of the Australian Consumer Law (ACL, the Act).
The Federal Court imposed record penalties of $12 million against WBH and $6 million against its sole director and shareholder Rick Otton for false or misleading representations through real estate investment strategies.
WBH claimed that by attending their free seminars, paid “boot camps” or mentoring programs, people could learn how to:
WBH also published testimonials from consumers who had allegedly successfully implemented the strategies.
The court dismissed WBH’s argument that the claim “buy a house for $1” constituted mere puffery and was therefore not in breach of the Act. Rather, the court found that an ordinary person would understand from the phrase “buy a house for $1” that by attending the WBH seminars that it would be possible to learn a strategy that corresponded in some realistic sense that would enable them to purchase a “house for $1”.
The Federal Court also noted the repetition of phrases throughout marketing materials indicated significant dishonesty on Mr Otton’s part and this dishonesty must also be attributed to WBH.
Additionally, the ACCC was successful in establishing that WBH did not have reasonable grounds for making the representations and there was a significant risk that consumers who saw these claims would believe them and rely upon them.
In an effort to deter this type of behaviour, this case marks a record increase in penalties for misleading and deceptive conduct under the ACL.
This important decision ushers in a new era of tough penalties, meaning compliance with consumer law obligations is now more critical than ever.
Authors: Dan Pearce & Madison Tonkes
Dan Pearce, Partner
T: +61 3 9321 9840
Angela Flannery, Partner
T: +61 2 8083 0448
Trent Taylor, Partner
T: +61 7 3135 0668
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