The Federal Court has imposed record penalties totalling $18 million against We Buy Houses Pty Ltd (We Buy Houses) and its sole director, Rick Otton, for making false or misleading representations about how people could create wealth through buying and selling real estate, following ACCC action.

The penalties of $12 million imposed against We Buy Houses, and $6 million imposed against Mr Otton personally, are the highest ever imposed for contraventions of the Australian Consumer Law by a corporation and an individual, respectively.

The Federal Court also banned Mr Otton from managing corporations for 10 years in Australia and permanently restrained Mr Otton and We Buy Houses from further involvement in the supply or promotion of services or advice concerning real property transactions or investment.

“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,” said ACCC Chair, Rod Sims.

"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,” Mr Sims said.

“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 judgment 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,” Mr Sims said.

We Buy Houses and Mr 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.

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

“In her judgment 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," Mr Sims said.

The Court also found that Mr Otton had made false or misleading representations that he had successfully implemented the wealth creation strategies he taught. In addition, a book authored by Mr Otton, and websites operated by We Buy Houses and Mr Otton, included testimonials from ‘students’ claiming they were able to buy a house for $1, which the court found were false or misleading.

Background

The ACCC instituted proceedings against We Buy Houses and Mr Otton in March 2015 following a coordinated investigation with New South Wales Fair Trading. On 11 August 2017, the Federal Court delivered judgment on liability, finding that Mr Otton and/or We Buy Houses had engaged in multiple contraventions of sections 18, 29(1)(f), 29(1)(g), 34 and 37 of the Australian Consumer Law.

We Buy Houses had been conducting training programs including free seminars, boot camps and mentoring programs throughout Australia since around 2000. Between 2011 and 2014, We Buy Houses generated the majority of its $20 million revenue from conducting these training programs.