Court rules property spruiker Rick Otton has broken consumer law with his strategies "an expensive waste of time"

Court rules property spruiker Rick Otton has broken consumer law with his strategies
Court rules property spruiker Rick Otton has broken consumer law with his strategies "an expensive waste of time"

A Federal Court Judge has found the property spruiker Rick Otton has broken Australian consumer laws. 

Justice Jacqueline Gleeson concluded there was no evidence that the strategies spruiked by Otton could actually enable a consumer to buy a house for $1.

The judgement advised that the We Buy Houses seminars that students attended were an "expensive waste of time".

The claim by Otton's that his clients could "buy a house for $1" was misleading and and contravened the Australian Consumer Law.

Rick Otton's company We Buy Houses (WBH) had a turnover of more than $20 million.

Between January 2011 and June 2014, 3,400 people attended free seminars, 2,000 paid to attend a boot camp to learn more information, and 700 did another expensive course with mentors.

Would-be investors were given some information at the initial free session, then more if they paid $3,000 to attend the boot camp and the $26,000 mentoring workshops.

"For ordinary consumers seeking how to achieve the outcomes stated ... the free seminars were a waste of time," Justice Gleeson said.

"I formed the view that Mr Otton was a very unreliable witness who was prepared to maintain or defend statements that were obviously untrue or misleading and who is habitually careless with the truth."

"The headline 'how to buy a house for $1' indicates that [WBH and Otton] were directing their efforts principally towards people who were not property rich, but who would be attracted to the idea that they could make money from property without having to pay a significant amount for it," Justice Gleeson said.

"The message is sensational. It is designed to attract the attention of consumers who do not have sufficient financial resources to buy a house using mainstream bank finance."

The Australian Competition and Consumer Commission [ACCC] had alleged that WBH's further claims that a consumer could buy a house without needing a deposit, bank loan or experience, start making profits immediately, and create wealth were also misleading and deceptive.

Justice Gleeson's judgement said consumers enticed by WBH were given a variety of strategies and tips to achieve property ownership — some of which included "rent-to-buy", a "sandwich lease option" involving a middleman, and "sweat equity" option, where the buyer carries out renovations in lieu of paying a deposit.

Justice Gleeson accepted that some of the WBH strategies were theoretically possible, but added there was no evidence they had been used by its students successfully.

None of WBH's most successful students, known as "big kahunas", provided evidence to the court to show what they had claimed to have achieved, and while a number of testimonials were shown to the court, the judge said there was no evidence of the claims in them.

The ACCC called nine consumers as witnesses to describe how they had never achieved success by implementing what they learned.

One consumer and his partner attempted to buy properties in Bass Hill, Quakers Hill, Homebush West, North Bondi, Eastlakes and Lake Haven.

"Despite claiming that Mr Otton had been successful financially "in following these ideas and strategies", there was almost no evidence that [Mr Otton and WBH] had used the strategies, let alone used them to make money," Justice Gleeson said.

"I conclude that, in reality, the respondents' strategies do not and cannot enable a consumer to buy a house without needing a deposit, bank loan or real estate experience."

The ACCC instituted proceedings against We Buy Houses and Otton in March 2015 following an investigation with New South Wales Fair Trading.

"Today's judgment sends a strong message to 'property spruikers' that they must not make false or misleading representations about the success and profitability of their 'wealth creation strategies' to induce consumers to pay significant sums to learn about them," ACCC Deputy Chair Delia Rickard said.

In a statement, Otton said he was pleased that the court accepted it was inconceivable that an ordinary or reasonable person would take the phrase "how to buy a house for a $1" at face value.

"As I so often explained, the technique was designed to help homeowners who can no longer pay home loan repayments and with the help of a turnaround specialist, ensures that they do not become mortgagee sale roadkill," Otton said.

"We accept Her Honour's findings that insufficient proof was presented to prove how this vendor finance technique can work in practice."

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Rick Otton Federal Court

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