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Today the Federal Court of Australia found that We Buy Houses Pty Ltd (We Buy Houses) and its sole director, Rick Otton, made false or misleading representations in promoting a number of wealth creation strategies involving real estate (mainly lease options), following ACCC action.
We Buy Houses promoted these strategies throughout Australia via published material, seminars, boot camps and mentoring programs.Consumers were enticed by these false or misleading representations to attend training programs, including paid boot camps and mentoring.
The Court found that We Buy Houses did not have a reasonable basis for representing that, by following its strategies, consumers could:
The Court found that We Buy Houses failed to sufficiently inform consumers that the strategies could only realistically be successfully implemented by a consumer who already owned real estate, or who was able to finance a bank loan.
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.
“We Buy Houses sold a lie to vulnerable consumers that home ownership could be achieved easily through strategies taught by Mr Otton,” ACCC Deputy Chair Delia Rickard said.
“Around 2,000 consumers spent around $3,000 per ticket to attend Mr Otton’s boot camps, and approximately 700 consumers participated in the mentoring program at a cost of up to $26,000.”
“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,” Ms Rickard said.
“Consumers who attended We Buy Houses seminars, boot camps and mentoring should be aware that, in her judgment, Justice Gleeson stated that for ordinary consumers seeking to achieve the outcomes represented by We Buy Houses and Mr Otton, the free seminars were a waste of time, and that the boot camps and the mentoring programs were an expensive waste of time.”
Her Honour also 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 in making statements and claims designed to promote [his and We Buy Houses’] business interests.”
The Court held that Mr Otton knew and approved of all the materials published by We Buy Houses, and was both knowingly concerned in and a party to the conduct of We Buy Houses.
The ACCC will now prepare the matter for a hearing seeking relief against both We Buy Houses and Mr Otton, including penalties, and a disqualification order against Mr Otton.
The ACCC instituted proceedings against We Buy Houses and Mr Otton in March 2015 following a coordinated investigation with New South Wales Fair Trading. The ACCC alleged breaches of the Australian Consumer Law (ACL) and the Australian Securities and Investments Commission Act 2001 (ASIC Act). The Federal Court concluded that the conduct was within the ambit of the ACL, not the ASIC Act.
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.Since the original court date, Otton appears to have ceased doing business in Australia, but has been promoting, and running seminars, in the UK under the auspices of Simon Zutshi.Rick Otton was also responsible for teaching Ben Rogers about lease options and Ben Rogers went on to become another lease options guru, subsequently going bankrupt, having borrowed millions off people within facebook and pin networks.See - Ben Rogers - is Simon Zutshi correct?
Here are some excerpts from the 126 page decision below.
92 The cross examination of Mr Otton quickly demonstrated the paucity of the bases upon which Mr Otton was prepared to make extravagant claims to promote his business activity without any substantial basis.
96 Mr Otton was shown the following statement in large font on the inside front cover of the book:
Discover how Rick bought a property for one dollar in 3.5 minutes turning it into $801 monthly positive cash flow.
97 Mr Otton said that he did not buy property in 3.5 minutes and he did not know what the statement referred to. When asked to acknowledge that the statement was false, Mr Otton answered:
Sir, one of the forms the people signed is a Power of Attorney or a transfer deed. Once the person has signed the transfer deed, although that transfer deed is not registered, the fact that they sign and I sign means I have actually bought the property, Sir.
98 Thus, Mr Otton was not prepared to acknowledge the falsity at the statement in his own book, preferring to give an answer that was frankly nonsense in the context of the question. When further questioned about the statement and asked whether it might just have been made up Mr Otton answered:
My staff have written this, and it would have been, I’m guessing, to something they saw me do. I can’t be- I can’t be specific. I can understand how it might be 345 dot minutes. And we will go to the forms on that. Which property it is in that…I cannot give you any reference.
109 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 in making statements and claims designed to promote the respondents’ business interests. I do not accept his evidence except to the extent that it was against the respondents’ interest, or is corroborated by contemporaneous records.
164 The respondents provided no evidence to support the truthfulness of the second example, although Mr Otton asserted repeatedly that he remembered the doctors. If the example were true, the Mr Otton would have received taxable income(the “cash flow” ) for which you should have records. In the absence of such evidence, I find that this example is fictitious and that Mr Otton was lying when he claimed to remember the doctors.
Mr Otton’s implementation of the techniques.
181 Despite claiming their defence that Mr Otton had been successful financially “ in following the ideas and using the strategies”, there was almost no evidence that the respondents had used the strategies, let alone used them to make money.
182 There was no evidence that either of the respondents had bought the property since October 2006.
183 In their written closing submissions, the respondents did not identify any property purchased by Mr Otton or WBH at any time using any of the techniques. Orally, Mr Bell argued that Mr Otton implemented the techniques in relation to a property at Deception Bay. As explained below, I do not accept that argument
479 based on the finding set out earlier in the judgement, Mr. Otton’s personal success in implementing the strategies was minimal and did not include the successful implementation of the “sandwich lease option” technique on a single occasion.
Falsity of representations
504 Based on the evidence set out above, representations about Mr Otton’s financial success was false and misleading.
508 For the reasons set out above, I conclude that, in making the System and Strategies Representations, the respondents, engaged in conduct, in trade or commerce in connection with the supply or possible supply of services, or in connection with the promotion of the supply or use of services, that was misleading or deceptive or was likely to mislead or deceive in contravention of ss 18 of the Australian Consumer Law. To the extent that the representations were made by WBH and not Mr Otton, Mr Otton was knowingly concerned in and party to the making of the representations.
509 Further, in making the representations that Mr Otton himself had been successful financially in using strategies, the respondents engage in conduct, in trade or commerce in connection with the supply or possible supply of services, or in connection with the promotion of the supply or use of services, that was misleading or deceptive or was likely to mislead or deceive in contravention of s 18 of the Australian Consumer Law.
510 in publishing the testimonials referred to at  above , WBH and Mr Otton contravened s 29(1) (f) of the Australian Consumer Law.Court media release Property Tribes warned about Rick Otton and the impending court case in Guru and lease options crash - Rick Otton but, despite these warnings, Rick Otton was brought back to the UK and promoted as an expert.This result not only highlights the deceptive marketing techniques used by some wealth creation gurus, but also how some of them do not undertake the strategy themselves, and, in this case, it also highlights that the strategy itself might be flawed.
SEE ALSO - Buying property with none of your own money UP NEXT - 15 things they WON'T teach you at a property/wealth creation seminar DON'T MISS - STOP! Don't pay for property education or mentoring until you have watched this! NOW WATCH:
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
there was almost no evidence that Rick Otten had used the strategies, let alone used them to make money.
What? goes arround the world promoting stratagies, selling courses and does not do them himself. That is rather shocking.
_________________________________________________________________________The above post is not financial advice, its often me rambling - passing time on a coffee break.If you are looking for the Best BTL Mortgage? Call the Specialist Team at Bespoke Finance._________________________________________________________________________
Rick Otton was labelled a "spruiker" by the media reporting this case. I am not familiar with the word "spruiker" so I looked it up.It means a showman or sales person that touts for business by tooting their own horn and making big claims about their own achievements, wealth, and success.Perhaps "guru" should be retired in favour of this new word?!
Its first time I have heard this Australian term.I like it. "guru" always indicated some kind of superior knowledge when that is not often true. Property Spruiker perhaps better!
From the Sydney Herald:"Despite the "deceptive and misleading" findings, Mr Otton is still in the property spruiking game, plugging a "new rules of property intensive" course on his website".
The American version is
Snake oil salesman.
We call them
They abound everywhere.
Just got to be on your guard against such types.
Unfortunately many gullible people exist which is why these con merchants persist.
It seems that there is little regulators can do as they are always behind the curve by which time the serious damage has been done.
Of course better late than never.
People just have to learn not to be so trusting.
Something I'm sure many of us have all been guilty of at some stage or other!
Property Tribes warned about Rick Otton and the impending court case in Guru and lease options crash - Rick Otton but, despite these warnings, Rick Otton was brought back to the UK and promoted as an expert.
Who on earth had him as a speaker? Long before the court case everyone knew he was a spoofer.. How about Property Tout, as opposed to guru...... as in ticket tout?
Stewardson Developments Ltd.
Burson Land Ltd. & Jennings & Gilchreaste Ltd.
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Rick Otton spoke at pin events throughout 2016. He spoke at Eastbourne pin in October 2016. Those are just two I found on a quick search.You'll note the RO "Guru crash" thread that warned of impending court proceedings started November 2015.It would also appear from his website that he was active in the UK as recently has July!
ohh dear. thats embarrasing
so, is there any penalty for doing this? has any judgement made by the Court?
Hi Pete,It stated in the opening post that the court would revert back with penalties, relief against Rick Otton and his companies, and a disqualification order against RO.I will report back with the outcome of that in due course.