FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v We Buy Houses Pty Ltd (No 2) [2018] FCA 1748

ORDERS

THE COURT ORDERS THAT:

    1. Leave be granted to the applicants to file a further amended originating application in the form dated 5 February 2018.

THE COURT DECLARES THAT:

    2. The first respondent, We Buy Houses Pty Ltd, contravened s 18 of the Australian Consumer Law, being Schedule 2 to the Competition and Consumer Act 2010 (Cth), (“ACL”) by representing on occasions between 1 January 2011 to 2 March 2015, and specifically:

(a)    on the websites www.howtobuyahouseforadollar.com, www.rickotton.com” and “readysetboom.com.au” (“websites”);

(b)    at least from sometime in 2012, in the book titled “How to buy a house for $1” (““How to buy a house for $1” book”);

(c)    in advertising materials for “free seminars”;

(d)    at 42 “free seminars”;

(e)    at 16 “boot camps”;

(f)    in a publication entitled “No Money Down Boot Camp Manual”; and

(g)    in a package of materials described as the “Power Property Profits Pack”,

to consumers or potential consumers that by following or implementing techniques promoted by the respondents, consumers were able to:

    (i) buy a house for $1;

    (ii) buy a house without needing a deposit, bank loan or real estate experience;

    (iii) buy a house using little or none of the consumer’s own money, including by buying at a discount;

    (iv) create passive income streams through property and/or quit their jobs, including by turning negative gearing into positive cash flow;

    (v) build property portfolios without their own money invested and, without new bank loans or without real estate experience;

    (vi) start making profits immediately; and

    (vii) create or generate wealth (“offending representations”),

which representations were false or misleading, when We Buy Houses Pty Ltd did not have reasonable grounds for making the offending representations, and thereby engaged in conduct in trade or commerce that was misleading or deceptive or likely to mislead or deceive.

    3. We Buy Houses Pty Ltd contravened s 29(1)(g) of the ACL by making the offending representations which entailed the further false or misleading representation that its services equipped consumers with skills and information to apply techniques to achieve the outcomes identified in the offending representations, and thereby in trade or commerce in connection with the supply or possible supply of services made false or misleading representations that its services had uses or benefits.

   4.  We Buy Houses Pty Ltd contravened s 18 of the ACL by representing at 16 “boot camps” conducted between about 18 March 2011 and 2 March 2015 that Richard Otton had been successful financially in implementing the strategies that he was promoting at the “boot camp”, which representations were false or misleading, and thereby engaged in conduct in trade or commerce that was misleading or deceptive or likely to mislead or deceive.

    5. We Buy Houses Pty Ltd contravened s 29(1)(f) of the ACL by publishing the testimonials set out in annexure A to these orders, and thereby in trade or commerce in connection with the supply or possible supply of services made misleading representations that the testimonials were true and correct.

    6. We Buy Houses Pty Ltd convened s 34 of the ACL by:

(a)    distributing and making available for distribution the “How to buy a house for $1” book; and

(b)    establishing and publishing pages on the websites,

in which and on which We Buy Houses Pty Ltd made the offending representations to consumers or potential consumers, which entailed the further false or misleading representation that the services provided by We Buy Houses Pty Ltd taught consumers techniques which could be used to achieve the outcomes identified in the representations, when there was no reasonable basis for each such representation, and thereby, in trade or commerce, engaged in conduct that was liable to mislead the public as to the characteristics or suitability for their purpose of the services supplied by We Buy Houses Pty Ltd.

    7. We Buy Houses Pty Ltd contravened s 37 of the ACL by distributing and making available for distribution the “How to buy a house for $1” book in which We Buy Houses Pty Ltd made the offending representations, which representations were false or misleading, and thereby, in trade or commerce, made representations that were false or misleading in a material particular and concerned the financial viability of a business activity represented in the book as one that could be, or be to a considerable extent, carried on at or from a person’s place of residence, being a material aspect of such a business activity.

    8. Richard Otton was knowingly concerned in and a party to the contraventions of We Buy Houses Pty Ltd identified in declarations 1 to 7 above.

    9. Richard Otton contravened s 18 of the ACL by making the offending representations on occasions between 1 January 2011 to 2 March 2015, and specifically:

(a)    on the websites;

(b)    at least from sometime in 2012, in the “How to buy a house for $1” book”;

(c)    in advertising materials for “free seminars”;

(d)    at 42 “free seminars”;

(e)    at 16 “boot camps”;

(f)    in a publication entitled “No Money Down Boot Camp Manual”; and

(g)    in the “Power Property Profits Pack”, and

which representations were false or misleading when Richard Otton did not have reasonable grounds for making the offending representations, and thereby engaged in conduct in trade or commerce that was misleading or deceptive or likely to mislead or deceive.

    10. Richard Otton contravened s 29(1)(g) of the ACL by making the offending representations which entailed the further false or misleading representation that services supplied by We Buy Houses Pty Ltd equipped consumers with skills and information to apply techniques to achieve the outcomes identified in the offending representations, and thereby in trade or commerce in connection with the supply or possible supply of services made false or misleading representations that services supplied by We Buy Houses Pty Ltd had uses or benefits.

    11. Richard Otton contravened s 29(1)(f) of the ACL by publishing the testimonials set out in annexure A to these orders, and thereby in trade or commerce in connection with the supply or possible supply of services made misleading representations that the testimonials were true and correct.

    12. Richard Otton contravened s 34 of the ACL by:

(a)    distributing and publishing the “How to buy a house for $1” book; and

(b)    establishing and publishing pages on the websites,

in which and on which he made the offending representations to consumers or potential consumers, and which entailed the further false or misleading representation that the services provided by We Buy Houses Pty Ltd taught consumers techniques which could be used to achieve the outcomes identified in the representations, when there was no reasonable basis for each such representation, and thereby, in trade or commerce, engaged in conduct that was liable to mislead the public as to the characteristics or suitability for their purpose of the services supplied by We Buy Houses Pty Ltd.

    13. Richard Otton contravened s 37 of the ACL by distributing and making available for distribution the “How to buy a house for $1” book in which he made the offending representations, which representations were false or misleading, and thereby, in trade or commerce, made representations that were false or misleading in a material particular and concerned the financial viability of a business activity represented in the book as one that could be, or be to a considerable extent, carried on at or from a person’s place of residence, being a material aspect of such a business activity.

THE COURT FURTHER ORDERS THAT:

Injunctions

    14. Pursuant to s 232 of the ACL, We Buy Houses Pty Ltd be restrained permanently, whether by itself, its servants or agents or howsoever otherwise, from being directly or indirectly involved in, or knowingly concerned in:

(a)    the supply of services or advice (whether general or specific) concerning real property transactions or real property investment;

(b)    the promotion of services or advice (whether general or specific) concerning real property transactions or real property investment; and

(c)    conduct in connection with the supply or promotion of services or advice (whether general or specific) concerning real property transactions or real property investment.

    15. Pursuant to s 232 of the ACL, Richard Otton be restrained permanently, whether by himself, his servants or agents or howsoever otherwise, from being directly or indirectly involved in, or knowingly concerned in:

(a)    the supply of services or advice (whether general or specific) concerning real property transactions or real property investment;

(b)    the promotion of services or advice (whether general or specific) concerning real property transactions or real property investment; and

(c)    conduct in connection with the supply or promotion of services or advice (whether general or specific) concerning real property transactions or real property investment.

    16. Pursuant to s 232 of the ACL, We Buy Houses Pty Ltd be restrained permanently, whether by itself, its servants or agents or howsoever otherwise, from making any of the offending representations to consumers or potential consumers.

    17. Pursuant to s 232 of the ACL, Richard Otton be restrained permanently, whether by himself, his servants or agents or howsoever otherwise, from making any of the offending representations to consumers or potential consumers.

    18. Pursuant to s 232 of the ACL, We Buy Houses Pty Ltd be restrained permanently, whether by itself, its servants or agents or howsoever otherwise, from representing that Richard Otton has been successful financially in implementing the strategies that he was promoting at the “boot camps” the subject of the proceeding.

    19. Pursuant to s 232 of the ACL, Richard Otton be restrained permanently, whether by himself, his servants or agents or howsoever otherwise, from representing that he has been successful financially in implementing the strategies that he was promoting at the “boot camps” the subject of the proceeding.

Pecuniary penalties

    20. Within 28 days of the date of these orders, We Buy Houses Pty Ltd pay to the Commonwealth of Australia a pecuniary penalty of $12,000,000 in respect of the conduct referred to in orders 3, 6 and 7 above.

    21. Within 28 days of the date of these orders, Richard Otton pay to the Commonwealth of Australia a pecuniary penalty of $6,000,000 in respect of:

(a)    his involvement in the conduct of We Buy Houses Pty Ltd, referred to in orders 3, 6 and 7 above; and

(b)    the conduct referred to in orders 10 to 13 above.

Disqualification order

    22. Pursuant to s 248 of the ACL, Richard Otton be disqualified from managing corporations or any corporation for a period of 10 years from the date of this order.

Other orders

    23. Pursuant to s 246(2)(b)(i) of the ACL:

(a)    We Buy Houses Pty Ltd and Richard Otton establish a compliance program, being a program designed to ensure We Buy Houses Pty Ltd and its officers, employees and agents awareness of the responsibilities and obligations in relation to s and/or Richard Otton’s obligations under Chapters 2 and 3 of the ACL;

(b)    Richard Otton establish a compliance program in all businesses in which he is an officer or shareholder now or in the future (which businesses’ services or offerings or marketing materials may be available to Australian consumers), being a program designed to ensure We Buy Houses Pty Ltd and its officers, employees and agents awareness of the responsibilities and obligations in relation to We Buy Houses Pty Ltd and/or Richard Otton’s business under Chapters 2 and 3 of the ACL; and

(c)    within 3 months of these Orders being made and again at least once per year for the following five years, Richard Otton will procure and attend practical trade practices training administered by a qualified compliance professional or legal practitioner with expertise in consumer protection law, which training is to focus, in particular on the responsibilities and obligations imposed by and the consequences of contravening, Chapters 2 and 3 of the ACL.

    24. Within 14 days of the date of this order, the respondents cause corrective advertising, in the terms and form (including font and formatting) of annexure B to these orders (as amended by agreement in relation to a mobile version of the website), to be published on the websites and on any other website operated or controlled by either of the respondents, such advertising not to be removed for a period of 10 years thereafter.

    25. Within 28 days of the date of this order, the respondents send a letter to each person who attended an event conducted by either or both of them in Australia between 2012 and 2015 in the terms and form of annexure C to these orders:

(a)    by mail to all mailing addresses of such persons known to the respondents; and

(b)    by email to all email addresses of such persons known to the respondents.

    26. Within 42 days of the date of this order, the respondents file and serve an affidavit setting out the steps taken to comply with order 24 above and, without limitation, identifying the number of persons to whom the letter was sent.

    27. The reasons for judgment in Australian Competition and Consumer Commission v We Buy Houses Pty Ltd [2017] FCA 915, with the seal of the Court affixed thereon, be retained on the Court file for the purposes of s 137H of the Competition and Consumer Act 2010 (Cth) until 31 December 2021.

    28. The respondents pay the costs of the proceeding.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Annexure A to 15 November 2018 orders

1.    Testimonials on 2013 free seminars webpage:

(a)    “My Hourly Rate is $12,000! I had a seller call me yesterday and after two minutes on the phone, I agreed to meet him at the house. I bought it for $1 at 10:30am this morning. By lunchtime I'd signed a buyer up, got a deposit and handed over the keys-AND got an invite back for a BBQ! That's an hourly rate of about $12,000! Love this business!” B Mudie, Former IT Consultant, Queensland

(b)    “I Made $37,000 With Only $1 Invested I bought a property for $1.00. I made $10,000 up-front deposit, $440 per month positive cash flow and my backend profit is $27,000 ... Learning Rick’s strategies I developed skills, now I know where I’m going and why I’m doing it and how I’m going to get there.” M Kelly, Former Developer, Queensland

2.    Testimonial on 2014 free seminars webpage:

I used Rick’s Strategy and Made $37,000 With Only $1 Invested! My name is Mark, I have a wife and four kids. After meeting Rick and listening to his strategies, I purchased a property for just $1.00! I made $10,000 up-front deposit, $440 per month positive cash flow and my backend profit is $27,000.

3.    Testimonials on the success stories webpage:

(a)    “I bought a property for $1, I made $10,000 upfront deposit, $440 per month positive cash flow and my backend profit is $27,000” Mark Kelly, Queensland

(b)    “I bought a property for $1, I made $12,000 upfront deposit, $262 per month positive cash flow and my backend profit is $22,000.” Greg Dixon, New South Wales

(c)    “I bought a property for $1, I made $20,000 upfront deposit, $607 per month positive cash flow and my backend profit is $32,850.” Sheree Becker, Victoria

(d)    “I bought a property for $1, I made $8,000 upfront deposit, $531 per month positive cash flow and my backend profit is $20,000.” James Monaghan, South Australia

(e)    “My first transaction, paid $1 and my total profit is $45,000.” Sirah Mumtaz, South Australia & Queensland

(f)    “We bought a property for $1, I made $10,000 upfront deposit, $1028 per month positive cash flow and our backend profit is $27,000.” Jovan and Sally Sarai, New South Wales

(g)    “I bought a property for $1, I made $20,000 upfront deposit, $671 per month positive cash flow and my backend profit is $27,000.” Ben Chislett, Victoria

(h)    “I did my first transaction, paid $1 and made $45,000 profit.” Simone Toomey, South Australia

(i)    “I bought a property for $1, I made $27,000 upfront deposit, $200 per month positive cash flow and my backend profit is $46,000.” Graham Thomas, New South Wales

(j)    “I bought a property for $1, I made $5,000 upfront deposit, $200 per month positive cash flow and my backend profit is $45,000.” Tim Hart, Victoria

(k)    “I bought a property for $1, I made $47,000 upfront deposit, $707 per month positive cash flow and my backend profit is $3,000.” Nathan Wright, New South Wales

(l)    “I bought a property for $1, I made $20,000 upfront deposit, $200 per month positive cash flow and my backend profit is $14,000.” Rowan Lines, Western Australia

4.    Testimonial on readysetboom webpage:

I used Rick’s Strategy and Made $37,000 With Only $1 Invested! My name is Mark, I have a wife and four kids. After meeting Rick and listening to his strategies, I purchased a property for just $1.00! I made $10,000 up-front deposit, $440 per month positive cash flow and my backend profit is $27,000.

Annexure B to 15 November 2018 orders

Annexure C to 15 November 2018 orders

REASONS FOR JUDGMENT

GLEESON J:

1    On 11 August 2017, I made findings concerning the respondents’ liability for contraventions of the Australian Consumer Law (“ACL”), being Sch 2 to the Competition and Consumer Act 2010 (Cth) (“CCA”) in connection with business of the first respondent (“WBH”) in Australia of conducting seminars, courses, boot camps and mentoring programs and supplying training materials to consumers which purported to enable consumers to “buy a house for $1”: Australian Competition and Consumer Commission v We Buy Houses Pty Ltd [2017] FCA 915 (“liability judgment”). The contraventions occurred between about January 2011 to March 2015 (“relevant period”).

2    On 6 October 2017 and 4 May 2018, I conducted hearings principally on the question of relief to be granted as a consequence of the various findings of contravention in that judgment.

3    By the end of the 4 May 2018 hearing, the applicants (“ACCC”) had identified the precise relief sought, comprising:

(1)    Declarations as to the contraventions of the ACL by WBH and the second respondent (“Mr Otton”).

(2)    A declaration that Mr Otton was knowingly concerned in and a party to WBH’s contraventions of the ACL.

(3)    Injunctive orders restraining WBH and Mr Otton from doing various things.

(4)    Pecuniary penalties of $12 million payable by WBH and $8.6 million payable by Mr Otton.

(5)    An order that Mr Otton be disqualified from managing corporations for a period of ten years.

(6)    Orders for the establishment of a compliance program by WBH and Mr Otton.

(7)    Orders for corrective advertising and “adverse publicity”.

(8)    An order that the reasons for judgment, together with the Court’s orders be retained for the purposes of s 137H of the CCA.

(9)    Costs.

Leave to file Further Amended Originating Application

4    Following the delivery of the liability judgment, the ACCC sought leave to file a further amended originating application, arguing that the proposed amendments reflect the findings made in the liability judgment and noting that the respondents do not point to any prejudice that they might suffer if leave is granted.

5    The proposed amendments comprise:

(1)    Changes to the declarations and injunctions sought, intended to reflect the terms of the liability judgment.

(2)    Additional injunctions addressing the representation that Mr Otton had been successful financially in implementing the system and strategies promoted by the respondents. The ACCC noted that the alleged representation was pleaded and addressed in the liability judgment at [509].

(3)    An amendment to the proposed compliance program order, to extend it to Mr Otton’s business activities.

(4)    Amendments to the proposed corrective advertising and adverse publicity orders to cover all internet websites operated or controlled by the respondents.

(5)    An additional order to invoke the operation of s 137H of the CCA.

6    The respondents opposed the grant of leave to amend, arguing:

(1)    The ACCC have not explained why they did not seek the proposed amendments earlier.

(2)    The purpose of an originating application is to give the respondents proper notice of the claims made against them and the relief sought so that the respondents have proper notice and the consequential opportunity to answer. The grant of leave in this case is not consistent with that purpose.

(3)    The ACCC have not explained why the amendments are necessary or of importance to their case.

(4)    The ACCC have not discharged their onus of persuading the Court that leave should be given.

(5)    If leave is granted, the respondents will be deprived of an opportunity to decide how best to run their case by reference to the case as amended, including whether to adduce further evidence, call further witnesses or seek different representation.

7    I will grant leave to the ACCC to file the further amended originating application, having regard to the following matters.

8    The respondents did not offer any detail as to how they might have run their case differently if the proposed amendments had been made earlier, and I am not satisfied that they will suffer any prejudice as a result of the filing of the further amended originating application.

9    While an important purpose of an originating application is to give the respondents proper notice of the case against them, it also functions as a record of the proceeding which may be narrowed or expanded to reflect what was in fact addressed at trial: Betfair Pty Limited v Racing New South Wales [2010] FCAFC 133; 189 FCR 356 at 374. It is therefore appropriate that the ACCC be permitted to revise the relief claimed, in a manner that is consistent with the case addressed at trial and that does not cause any identified prejudice to the respondents, and which is intended to address the findings of the liability judgment. In particular, it is of importance that the ACCC identifies the extent to which, having regard to the findings in the liability judgment, they now seek relief which is narrower than the relief previously sought.

10    Further, it is convenient to record changes to the relief sought in a further amended originating application which, in my view, are essentially matters of detail as to the precise scope of relief. In particular, this is likely to be useful in any appeal from my decisions.

Declarations

11    The Court has a wide discretionary power to make declarations under s 21 of the Federal Court of Australia Act 1976 (Cth). Before making a declaration three requirements should be satisfied:

(1)    The question must be a real and not a hypothetical or theoretical one.

(2)    The applicant must have a real interest in raising it.

(3)    There must be a proper contradictor: Forster v Jododex Australia Pty Ltd [1972] HCA 61; (1972) 127 CLR 421 at 437 per Gibbs J quoting Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438 at 448 per Dunedin LJ.

12    I accept that these requirements are satisfied in this case:

(1)    There is a significant legal controversy in this case which has been determined. The proposed declarations relate to conduct that contravenes the ACL.

(2)    It is in the public interest for the ACCC to seek to have the proposed declarations made and for the proposed declarations to be made. The ACCC as the public regulator responsible for the ACL has a genuine interest in seeking the declaratory relief.

(3)    WBH and Mr Otton are proper contradictors because both are respondents and are the subject of the proposed declarations. The ACCC seeks declaratory relief following their unsuccessful defence of the proceeding.

13    Any such declarations should contain a sufficient indication of how and why the conduct complained of is a contravention of the ACL: see Rural Press Ltd v Australian Competition and Consumer Commission [2003] HCA 75; (2003) 216 CLR 53 at [89]-[90].

14    On 25 August 2017, the ACCC filed a document outlining the proposed declarations sought to record the contraventions found in the liability judgment. The respondents served a competing version on 5 October 2017, and I heard submissions on these competing orders on 5 October 2017.

15    Further, having regard to Nicholson J’s reasoning in Australian Competition and Consumer Commission v Construction, Forestry, Mining and Energy Union [2006] FCA 1730; (2007) ATPR 42-140 at [6], I accept that it is appropriate to make declarations recording the contraventions found in the liability judgment, because they are likely to:

(1)    record the Court’s disapproval of the contravening conduct;

(2)    vindicate the ACCC’s claim that the respondents contravened the ACL;

(3)    assist the ACCC to carry out the duties conferred upon it by the CCA;

(4)    inform consumers of the respondents’ contravening conduct; and

(5)    deter other corporations from contravening the ACL.

16    I will make declarations in a form which reflects the findings in the liability judgment.

Injunctions

17    The ACCC proposed injunctions expressed to restrain the respondents from engaging in conduct found to have contravened the ACL “anywhere in the world”. The ACCC also sought an injunction requiring the respondents to take steps to remove the offending representations from all internet websites operated or controlled by them.

18    The respondents consented to injunctions that, in their submission, would correspond with the terms of the declarations of contravention, that is, injunctions restraining the respondents from engaging in conduct of the kind that has been found to have contravened the ACL. In fact, the orders the respondents consented to were expressed in more general terms.

Relevant legal principles

19    The relevant legal principles were not in dispute.

20    Section 232(1) of the ACL empowers the Court to grant an injunction, in such terms as the Court considers appropriate, if the Court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute a contravention of, relevantly, a provision of Chapter 2 of the ACL.

21    Section 232(4) provides:

The power of the court to grant an injunction under subsection (1) restraining a person from engaging in conduct may be exercised:

(a)    whether or not it appears to the court that the person intends to engage again, or to continue to engage, in conduct of a kind referred to in that subsection; and

 (b)    whether or not the person has previously engaged in conduct of that kind; and

(c)    whether or not there is an imminent danger of substantial damage to any other person if the person engages in conduct of that kind.

22    In Australian Competition and Consumer Commission v TPG Internet Pty Ltd (No 2) [2012] FCA 629 at [17]-[18], Murphy J said relevantly:

Section 232 of the ACL provides broad powers to the Court subject to at least three limitations:

(a)    the relief should be designed to prevent a repetition of the contravening conduct;

(b)    there must be a sufficient nexus or relationship between the contravention and the injunction; and

(c)    the injunction must relate to the case or controversy: Australian Competition and Consumer Commission v Z-Tek Computer Pty Ltd (1997) 78 FCR 197 at 203 to 204.

The Court must also consider whether an injunction is appropriate as a matter of discretion. Relevant factors include matters such as:

(a)    whether the [ACL] needs to be supplemented by the availability of sanctions applicable to contempt of court;

 (b)    the contraventions found;

(c)    the risk of similar contraventions in the future and the utility of an injunction in minimising that risk;

(d)    whether the conduct was intended, isolated and/or occurred many years before the enforcement proceedings;

 (e)    the clarity and specificity of the injunction; and

 (f)    the intended methods of enforcement of the injunction.

23    By s 5(1)(g) and (h) of the CCA, the ACL (other than Part 5-3) extends to capture conduct engaged in outside Australia by bodies corporate incorporated or carrying on business within Australia or Australian citizens. Injunctive relief expressed to extend to conduct outside Australia was found to be appropriate in Australian Competition and Consumer Commission v World Netsafe Pty Ltd [2000] FCA 1827 at [7] and Australian Competition and Consumer Commission v Bio Enviro Plan Pty Ltd [2003] FCA 232 at [53]. Similarly, in Australian Competition and Consumer Commission v Worldplay Services Pty Ltd [2004] FCA 1138, Finn J granted injunctive relief against a company (registered in Australia and operating from premises on the Gold Coast) in respect of pyramid-selling conduct which targeted overseas consumers through a website which was inaccessible to consumers in Australia.

ACCC’s submissions

24    The ACCC relied on the following matters in support of their proposed form of injunctive orders:

(1)    On 2 September 2016, during Mr Otton’s cross-examination during the hearing on liability, he said to the Court:

… I’ve made the decision that I will no longer be doing the seminar business… So, your Honour, you wouldn’t have to constrain me. I’m not doing it. I’m – and I haven’t in this country.

When asked about plans for the United Kingdom, Mr Otton said:

We’re having discussions right now that – there is one more event planned for England, but we’re having discussions right now, as we’re talking, to just call it a day …

… The last camp, if it goes ahead or – I’ve, sort of, made a decision it will not.

(2)    A web capture of the website rickotton.co.uk, taken on 20 January 2017, which states under the heading “About Rick Otton”:

He is director of We Buy Houses business that operates in Australia and the UK. Tune in and listen to his popular, property investing podcast www.webuyhousesradio.com.

The same web capture shows that the website was promoting a “Free Property Investor’s Toolkit”, by which consumers can “Quickly Learn How To Buy And Control Property AS IF You Have Little Cash or Credit”.

(3)    The web capture contains testimonials of a similar kind to testimonials that were the subject of the proceedings, in that they purport to record “success stories” by consumers who have “used Rick’s system”. It also represents that four “We Buy Houses Community Meetups” had occurred on 11, 18 and 19 January 2017 (at Birmingham, Southampton, Manchester and London).A web capture of the website buybootcamp.com, taken 23 February 2017, shows that the website was promoting a three day event in the UK entitled “Rick Otton’s New Rules of Property Intensive” on 24-26 March 2017, stating also “July 2016 sold out event returns”.

(4)    A web capture of rickotton.co.uk/intensive, taken on 23 February 2017, promotes the “Go Direct” mentoring program including with the words:

You see, a couple of times a year behind closed doors, an elite community of property investors gather for Go Direct coaching with me. We don’t just learn. We do. It’s not a seminar room. It’s a work room where we do deals.

But these Go Direct strategies and 3 day intensives are only available a couple of times a year due my time commitments. [sic]

Are you frustrated with property courses that are long on promises but fall short on delivery? They’re like movie trailers, full of coming attractions but fail to give the “how to, real work” information that allows you to go out and to a transaction in its entirety after the event.

I call this training an intensive because I am the primary educator for 3 days. While a couple of my students will share their case studies and a solicitor will join me, this is not a multi-speaker event. It’s me training you.

The web capture also includes testimonials similar to the ones described above.

(5)    In a webinar entitled “Shift Happens” webinar conducted on 23 February 2017, Mr Otton said this:

Now, the how-to, we need the three days to unpack, to lay out that tool set. This is the overview of the concepts, which has really changed the way people are buying and selling houses. How to Buy A House for $1 is the best seller.

…

It’s all over the – different parts of the world are now getting copies of this book. I’m going to actually give you an original signed copy of that book and I’m going to hand mail it to you so you have it before you come to that event. It’s the overview not the how to.

(6)    A web capture of the website rickotton.co.uk, taken on 1 May 2017, shows that the website was promoting a three day event entitled “Rick Otton’s New Rules of Property Intensive” on 16-18 June 2017, stating also “March 2017 sold out event returns”. The statements set out on the 23 February 2017 web capture of rickotton.co.uk/intensive also appear on this web capture. The web capture also includes testimonials similar to the ones described above.

(7)    A web capture of the website rickotton.co.uk, taken on 4 October 2017, shows a photo of Mr Otton with the words “Rick Otton Director of We Buy Houses Limited Self Made Millionaire & Property Investor”. The web capture shows a frame of a video with the words “Rent to Own Houses for a £1”. A side bar refers to a “House for a Pound Manual” with a stated value of £497 and “House for a Pound Audios”, also with a stated value of £497.

(8)    A web capture of buybootcamp.com/course, taken on 4 October 2017, promotes the “Profitable Deal Playbook Program”, which appears to be paid electronic educational goods and services including core training modules, “Rick Otton’s legal paperwork”, scripts and templates and two free tickets to the “Profitable Deal Workshop”.

25    By affidavit sworn 16 April 2018, Mr Otton gave the following affidavit evidence concerning “boot camps”:

The last boot camp I or WBH conducted in Australia was in April 2014 …

A Boot Camp was scheduled to be held in England in either October or November 2016. In September 2016, I caused that Boot Camp to be cancelled and each person who had paid a fee was refunded his or her money.

I did participate in two boot camps in March and June 2017. I took into account the representations listed in paragraph 9.1 of the Second Further Amended Statement of Claim filed in these proceedings. I consciously made an effort not to make those representations (nor buy a house for a pound) in either the documentation for the boot camps in England now in the words I spoke at the boot camps. I have not conducted any boot camps anywhere in the world since June 2017.

26    The ACCC submitted that the evidence demonstrates that Mr Otton is continuing to operate in a manner “substantially the same” as that through which the contravening representations came to be made. Further, the ACCC submitted that, since the commencement of the proceeding, Mr Otton has continued to engage in conduct which generally is similar to that which was considered in the liability judgment.

27    Against that background, the ACCC contended that the injunctions proposed by them sought, in a precise and confined manner, to restrain the respondents from making the very representations that have been found to have contravened the ACL.

Respondents’ submissions

28    As stated at [18] above, the respondents consented to injunctions that would correspond to the declaratory relief. However, they also submitted that the injunctions “should be framed in the light of behaviour in Australia and to people in Australia”. The respondents noted, in respect of his activities in the UK, that authorities in that jurisdiction are “well capable of determining whether Mr Otton’s activities breached their own consumer laws and to take any corrective action that they deem necessary”.

29    In relation to the proposed injunctions concerning representations of Mr Otton’s financial success, Mr Bell submitted that these should not prevent Mr Otton from making appropriate statements about any future financial success.

Consideration

30    The available evidence falls short of demonstrating that Mr Otton is continuing to operate in a manner substantially the same as that through which the contravening representations came to be made. However, it shows that despite his evidence to the Court, Mr Otton did not cease his business activities in the UK until at least October 2017 and he conducted a “boot camp” in the UK as recently as June 2017. In October 2017, after the delivery of the liability judgment, Mr Otton was associated with the use of the promotional slogan “House for a Pound”. In my view, this behaviour indicates that there is a very high risk that Mr Otton may seek to repeat his contravening conduct. At the least, the evidence demonstrates that it would be imprudent to rely on Mr Otton’s statements that he will no longer be conducting “the seminar business” in Australia, and that he has no intention to conduct “any seminars or boot camps in respect of any of the matters related to property investment”.

31    In my view, it is appropriate to make injunctive orders to the effect consented to by the respondents. In addition, and for the avoidance of doubt, I will make injunctive orders to restrain the respondents permanently from engaging in the conduct which I have found to have contravened the ACL. In my view, the words “anywhere in the world” are superfluous for the purposes of an order that will restrain the respondents from engaging in particular conduct and I will not include them for that reason.

32    On the other hand, having regard to the high risk of future contraventions by Mr Otton, the injunctions should not be expressly confined to conduct in Australia or to conduct affecting Australians but should simply injunct the respondents from making any of the offending representations to consumers or potential consumers.

33    Having regard to the findings in the liability judgment, I am satisfied that there is no real prospect that Mr Otton will enjoy financial success in implementing the strategies that he was promoting at the “boot camps” the subject of the proceeding. In my view, an injunction to the effect proposed by the ACCC will not impede the respondents from making any true claim that they might wish to make concerning Mr Otton’s financial success.

Pecuniary penalties

Relevant legal principles

34    Again, the relevant legal principles were not in dispute.

35    Pursuant to s 224 of the ACL, the Court may impose a pecuniary penalty on a person who has contravened, or has been in any way, directly or indirectly, knowingly concerned in or party to a contravention of, a provision of, relevantly, Part 3-1 of the ACL (which includes, relevantly, ss 29(1)(f) and (g), 34 and 37 of the ACL). Section 224 of the ACL was preceded by, and is in substantially identical terms to, s 76E of the Trade Practices Act 1974 (Cth) (“TPA”).

36    The Court may order the person to pay such pecuniary penalties in respect of ‘each act or omission’ as the Court determines to be appropriate.

37    The maximum penalty in respect of a contravention of a provision of Part 3-1 of the ACL:

(1)    for a body corporate, is $1.1 million; and

(2)    for a natural person, is $220,000.

The primary purpose of penalty – deterrence

38    The principal object of a pecuniary penalty is deterrence, both the need to deter repetition of the contravening conduct by the contravener (specific deterrence) and to deter others who might be tempted to engage in similar contraventions (general deterrence). Thus, in Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate; Construction, Forestry, Mining and Energy Union v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 258 CLR 482 (“CFMEU case”), the plurality explained (at [55]):

[W]hereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd, is primarily if not wholly protective in promoting the public interest in compliance:

Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV [of the Trade Practices Act]. ... The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.

39    Penalties must be set at a level which will not be seen as “an acceptable cost of doing business … [T]hose engaged in trade and commerce must be deterred from the cynical calculation involved in weighing up the risk of penalty against the profits to be made from contravention”: Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; (2012) 287 ALR 249 at [68] (“Singtel Optus”), endorsed by the High Court in Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; (2013) 250 CLR 640 (“TPG”) at [64] and [66].

Instinctive synthesis

40    In Australian Competition and Consumer Commission v Coles Supermarkets Pty Ltd [2015] FCA 330; (2015) 327 ALR 540 (“Coles”) at [6], Allsop CJ stated:

The process of arriving at the appropriate sentence for a criminal offence involves an intuitive or instinctive synthesis of all relevant factors: Markarian v The Queen [2005] HCA 25; 228 CLR 357. The approach set out by the High Court in Markarian can be taken to be applicable to civil penalty proceedings of this nature. The setting of the penalty is a discretionary judgment that does not involve assessing with any precision the “range” within which the conduct falls or by applying incremental deductions from the maximum penalty. Nonetheless, the maximum penalty must be given due regard because it is an expression of the legislature’s policy concerning the seriousness of the proscribed conduct. It also permits comparison between the worst possible case and the case the court is being asked to address and thus provides a yardstick: Markarian at 372 [31].

(Citations omitted)

41    In TPG Internet Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 190; (2012) 210 FCR 277 at [145]-[146], the Full Court explained assessment of penalties in the following terms:

[145]    The process to be applied in arriving at a particular penalty figure was considered in the context of criminal sentencing by the High Court in Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357. That process is also applicable to the assessment of pecuniary penalties under s 76 of the Act: see Australian Competition and Consumer Commission v Liquorland (Australia) Pty Ltd (2005) 27 ATPR 42-070 at [68].

[146]    In Markarian, Gleeson CJ, Gummow, Hayne and Callinan JJ held:

(a)    the Court’s assessment of the appropriate penalty is a discretionary judgment based on all relevant factors (at [27]);

(b)    “... careful attention to maximum penalties will almost always be required, first because the legislature has legislated for them; secondly, because they invite comparison between the worst possible case and the case before the court at the time; and thirdly, because in that regard they do provide, taken and balanced with all of the other relevant factors, a yardstick.” (at [31]);

(c)    it will rarely be appropriate for a Court to start with the maximum penalty and proceed by making a proportional deduction from that maximum (at [31]);

(d)    the Court should not adopt a mathematical approach of increments or decrements from a pre-determined range, or assign specific numerical or proportionate value to the various relevant factors (at [37] citing Wong v The Queen [2001] HCA 64; (2001) 207 CLR 584 at [74]-[76] per Gaudron, Gummow and Hayne JJ);

(e)    it is not appropriate to determine an “objective” sentence and then adjust it by some mathematical value given to one or more factors such as a plea of guilty or assistance to authorities (at [37]);

(f)    the Court “may not add and subtract item by item from some apparently subliminally derived figure” to determine the penalty to be imposed (at [39]); and

(g)    since the law strongly favours transparency, accessible reasoning is necessary in the interests of all, and, while there may be occasions where some indulgence in an arithmetical process will better serve the end, it does not apply where there are numerous and complex considerations that must be weighed (at [39]).

Matters for consideration

42    In determining the appropriate pecuniary penalty, s 224(2) of the ACL requires the Court to have regard to all relevant matters, including:

(a)    the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission;

(b)    the circumstances in which the act or omission took place; and

(c)    whether the person has previously been found by a Court in proceedings under Chapter 4 or Part 5-2 of the ACL to have engaged in any similar conduct.

43    When considering the imposition of a penalty under s 76E of the TPA, in Australian Competition and Consumer Commission v Singtel Optus Pty Ltd (No 4) [2011] FCA 761; (2011) 282 ALR 246 at [11], Perram J set out the following relevant non-mandatory considerations:

(1)    the size of the contravening company;

(2)    the deliberateness of the contravention and the period over which it extended;

(3)    whether the contravention arose out of the conduct of senior management of the contravener or at some lower level;

(4)    whether the contravener has a corporate culture conducive to compliance with the ACL, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention;

(5)    whether the contravener has shown a disposition to cooperate with the authorities responsible for the enforcement of the ACL in relation to the contravention;

(6)    whether the contravener has engaged in similar conduct in the past;

(7)    the financial position of the contravener; and

(8)    whether the contravening was systematic, deliberate or covert.

44    This distillation was referred to without demur on appeal in Singtel Optus at [37], and has been relied upon in numerous subsequent decisions: see, for example, Australian Competition and Consumer Commission v Snowdale Holdings Pty Ltd (No 2) [2017] FCA 83 (“Snowdale Holdings (No 2)”) at [51]; Australian Competition and Consumer Commission v Ozsale Pty Ltd [2016] FCA 1049 at [24]; Australian Competition and Consumer Commission v Online Dealz Pty Ltd [2016] FCA 732 at [228]; and Australian Competition and Consumer Commission v CLA Trading Pty Ltd [2016] FCA 377 at [142]-[143].

45    The respondents acknowledged the relevance of the considerations identified by Perram J.

46    There are very few cases analogous to the present proceedings in which pecuniary penalties have been sought. For instance, pecuniary penalties were not sought in Australian Competition and Consumer Commission v Henry Kaye and National Investment Institute Pty Ltd [2004] FCA 1363 or in Australian Securities and Investments Commission v Macro Realty Developments Pty Ltd [2016] FCA 292, proceedings which both concerned the promotion of property investment schemes.

47    In any event, NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 295, Kiefel and Burchett JJ noted that:

[T]he facts of that case should not be compared with a particular reported case in order to derive therefrom the amount of the penalty to be fixed. Cases are authorities for matters of principle; but the penalty found to be appropriate, as a matter of fact, in the circumstances of one case cannot dictate the appropriate penalty in the different circumstances of another case.

48    Similar comments appear in Singtel Optus at [60], Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2007] FCAFC 146; (2007) 161 FCR 513 at [67] and Australian Competition and Consumer Commission v Woolworths Limited [2016] FCA 44 at [129]-[137].

49    In Australian Competition and Consumer Commission v Global One Mobile Entertainment Limited [2011] FCA 393; (2011) ATPR 42-358 at [140], Bennett J considered a submission that one of the contraveners in that case had no capacity to pay a penalty, observing:

The Commission submits that it is not relevant that 6G has effectively no assets and that an appropriate penalty should be imposed whether or not it would “ruin” the company. In Australian Competition and Consumer Commission v High Adventure Pty Ltd [2005] FCAFC 247; (2006) ATPR 42-091, the evidence did not indicate that the company would be forced into liquidation provided it was given time to pay but the Full Court said that, in any event, an appropriate penalty should be imposed by reference to the need to deter future contraventions rather than by focussing on the detriment to the respondent. The possibility of liquidation ‘must not prevent the Court from doing its duty for otherwise the important object of general deterrence will be undermined’ (at 44,564).

The totality principle and the course of conduct principle

50    The ACCC submitted that, in the present circumstances, where the contravening representations were made on hundreds, and possibly thousands, of occasions, the determination of the appropriate penalties involves an assessment of the overall extent and seriousness of the contravening conduct: Coles at [18]. Given these circumstances, the ACCC submitted, the Court should have regard to the ‘totality’ and ‘course of conduct’ principles.

51    The totality principle requires that the total penalty for related offences ought not to exceed what is proper for the entire contravening conduct involved: Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR 41-375 at 40,169; Australian Competition and Consumer Commission v Safeway Stores Pty Ltd [1997] FCA 450; (1997) 145 ALR 36 at 53.

52    The Australian Competition and Consumer Commission v Cement Australia Ltd [2017] FCAFC 159; (2017) ATPR 42-557 (“Cement Australia”), the Full Court explained the course of conduct principle as follows:

[421]    The course of conduct principle is commonly referred to as the recognition that “where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality”: [Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39; (2010) 269 ALR 1] at [39].

[422]    In Royer v Western Australia (2009) 197 A Crim R 319; [2009] WASCA 139 (Royer v WA), Owen JA stated at [22]:

At its heart, the one transaction principle recognises that, where there is an interrelationship between the legal and factual elements of two or more offences with which an offender has been charged, care needs to be taken so that the offender is not punished twice (or more often) for what is essentially the same criminality. The interrelationship may be legal, in the sense that it arises from the elements of the crimes. It may also be factual, because of a temporal or geographical link or the presence of other circumstances compelling the conclusion that the crimes arise out of substantially the same act, omission or occurrences.

(Emphasis added.)

[423]    We note that a Court must be cautious in the application of this principle in a civil penalty context when it is so frequently expressed using the language of the criminal law, especially since the decisions [in the CFMEU case] and more recently [Australian Securities and Investments Commission, in the matter of Whitebox Trading Pty Ltd v Whitebox Trading Pty Ltd [2017] FCAFC 100; (2017) 251 FCR 448]. For example, the notion of “criminality” in relation to “offences” is obviously unsound in the context of civil penalties. There are other, more subtle distinctions, such as the fact that the concept of an offender being “punished” may be different in a civil penalty context as opposed to a criminal context.

[424]    Putting expressions of caution to one side, the course of conduct principle is commonly employed and is a useful “tool” in the determination of appropriate civil penalties: Cahill at [41]. As we have already indicated, the principal object of the penalties imposed by s 76 of the Act is that of specific and general deterrence. With this in mind, in a civil penalty context, the course of conduct principle can be conceived of as a recognition by the courts that the deterrent effect in respect of a civil penalty (at both a specific and general level) is measured by reference to the nature of the conduct for which it is imposed. It is therefore of paramount importance to identify whether multiple contraventions constitute a single course of conduct or separate instances of conduct, so as to ensure that an appropriate deterrent effect is achieved by the imposition of the penalty or penalties in respect of that particular conduct.

[Citations added.]

53    The Court is not limited to ordering a penalty fixed by the number of “courses of conduct” established. In Coles at [15], [16] and [21], Allsop CJ recognised that as many contraventions may constitute a course of conduct, a course of conduct may appropriately attract a maximum penalty which exceeds the maximum penalty for an individual contravention.

54    In Australian Competition and Consumer Commission v Aveling Homes Pty Ltd [2017] FCA 1470 (“Aveling Homes”) at [53], McKerracher J noted that the totality and course of conduct principles “should not be given excessive weight or paramountcy in the process of assessing an appropriate penalty and operating as a de facto limit on the penalty to be imposed”.

55    In Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; (2016) 340 ALR 25, the Full Court noted relevantly (at [156]-[157]):

[156]    Care must be taken to ensure that the maximum penalty is not applied mechanically, instead of it being treated as one of a number of relevant factors, albeit an important one. Put another way, a contravention that is objectively in the mid-range of objective seriousness may not, for that reason alone, transpose into a penalty range somewhere in the middle between zero and the maximum penalty. Similarly, just because a contravention is towards either end of the spectrum of contraventions of its kind does not mean that the penalty must be towards the bottom or top of the range respectively. However, ordinarily there must be some reasonable relationship between the theoretical maximum and the final penalty imposed.

[157]    In this case, the theoretical maximum was in the trillions of dollars (some 5.9 million contraventions at $1.1 million per contravention). By way of example only, even if the appropriate penalty per contravention for each sale was $1, the penalty would approach $6 million. It follows that the assessment of the appropriate range for penalty in the circumstances of this case is best assessed by reference to other factors, as there is no meaningful overall maximum penalty given the very large number of contraventions over such a long period of time. Given this, we consider that, to the extent that the course of conduct principle had any meaningful work to do, the better way to look at it was in terms of each of the four “types” of packaging, each with its own consumer target audience. This proceeding really involves four types of contravention, with many individual contraventions each over the five years. The webpage contraventions can be viewed as one or two serious courses of conduct. But ultimately this discussion itself serves to demonstrate the limited utility of the course of conduct principle in the circumstances of a case such as the present, and why any such characterisation could not properly have the significance which the primary judge gave to it at [94]-[95] of the penalty reasons.

56    Where it is proposed that both a pecuniary penalty and a disqualification period be imposed upon an individual (as is the case with Mr Otton), the totality principle requires the Court to consider the appropriateness of both the pecuniary penalty and the disqualification order to ensure that the total penalty imposed on the individual is appropriate: Australian Competition and Consumer Commission v SensaSlim Australia Pty Ltd (in liq) (No 7) [2016] FCA 484 (“SensaSlim”) at [62], applying Kerkhoffs v Registrar of Aboriginal and Torres Strait Islander Corporations [2014] FCAFC 66 at [17]-[21].

Application of the legal principles to the facts

The nature and extent of the contravening conduct and of any loss or damage suffered as a result of that conduct (ACL s 224(2)(a))

57    The relevant contravening conduct is:

(1)    The making, in various circumstances, of the representations referred to in the liability judgment as the “System and Strategies Representations” (referred to in this judgment as the offending representations) in contravention, variously, of ss 29(1)(g), 34 and 37 of the ACL. Those representations were that, by following or implementing techniques promoted by the respondents (and described in detail below), consumers were able to:

(a)    buy a house for $1;

(b)    buy a house without needing a deposit, bank loan or real estate experience;

(c)    buy a house using little or none of the consumer’s own money, including by buying at a discount;

(d)    create passive income streams through property and/or quit their jobs, including by “[turning] negative gearing into positive cash flow”;

(e)    build property portfolios without their own money invested and, without new bank loans or without real estate experience;

(f)    start making profits immediately; and

(g)    create or generate wealth.

(2)    The publication of purported testimonials, which entailed implied representations that the testimonials in fact related to the services of WBH and that the testimonials were true and accurate, representations which are taken to be misleading by s 29(2) of the ACL and, consequently, in contravention of s 29(1)(f) of the ACL.

Contraventions of ss 29(1)(g) and 34

58    The contraventions of ss 29(1)(g) and 34 of the ACL involved:

(1)    making false or misleading representations that WBH’s services had uses or benefits; and

(2)    engaging in conduct that was liable to mislead the public as to the nature, characteristics or suitability for purpose of the services provided by WBH.

59    The contraventions of ss 29(1)(g) occurred in all of the contexts in which the offending representations were made. The contraventions of s 34 occurred to the extent that the offending representations were made in the “How to buy a house for $1” book and on the webpages: liability judgment at [513].

60    The offending representations were the primary promotional message conveyed by WBH and Mr Otton to entice consumers and potential consumers to attend “free seminars”, with a view to persuading them to enrol in “boot camps” and otherwise to purchase training and materials offered for sale by WBH.

61    They were proved to have been made in the ““How to buy a house for $1” book, on the websites “www.howtobuyahouseforadollar.com”, “www.rickotton.com” and “readysetboom.com.au” (“websites”); in advertising materials for “free seminars”; in the package of materials described as the “Power Property Profits Pack”; at 42 “free seminars”, at 16 “boot camps” and in the “No Money Down Boot Camp Manual”.

“How to buy a house for $1” book

62    In the liability judgment, at [288], I found that the respondents distributed, and made available for distribution to consumers, the book from at least sometime in 2012. At [289], I recorded that the evidence did not reveal how many copies of the book have been sold or distributed. However, the book had been available for sale from book retailers, namely, Dymocks and Angus and Robertson, and was also provided to persons who registered to attend free seminars and given to persons who attended free seminars.

63    In the liability judgment, concerning the offending representations made in the “How to buy a house for $1” book, I found that the “Buy a house for $1” representation was made on 14 occasions and by the title of the book (at [412]), while the other representations were each made more than once and, in some instances, on many occasions (at [424], [433], [441], [446], [452], [454]).

64    On my calculation, I found that there had been a total of 66 contraventions of each of ss 29(1)(g), 34 and 37 of the ACL, arising from the offending representations made in the book.

65    The representations are made in the context of:

(1)    Offers for a “special free DVD”.

(2)    A suggestion that the “How to buy a house for $1” book is an act of altruism on the part of Mr Otton:

I dedicate this book to all property buyers and sellers in the world who are frustrated with the current system of buying and selling property the traditional way. You continue to motivate me to find solutions to help solve your problems so you can achieve your dreams…

(3)    A section entitled “What people are saying about Rick Otton”, evidently designed to bolster his credibility in the eyes of readers.

66    All of this was designed to entice consumers into the WBH’s “marketing web”: see TPG at [50] citing Trade Practices Commission v Optus Communications Pty Ltd (1996) 64 FCR 326 at 338-340, for the financial benefit of WBH and Mr Otton.

Websites

67    At [457] of the liability judgment, I found that the following webpages contained the following instances of the offending representations:

(1)    The webpage www.howtobuyahouseforadollar.com/order.php contained representations (a), (b), (d) and (g).

(2)    The webpage www.howtobuyahouseforadollar.com/media.php contained representation (a).

(3)    The webpage www.howtobuyahouseforadollar.com/propertypowerpack/step2/? contained representation (b).

(4)    The [webpage www.howtobuyahouseforadollar.com/success-stories] contained representations (a) and (d).

(5)    The rickotton homepage [www.rickotton.com] contained representations (a) and (b).

(6)    The webpage www.rickotton.com/freepromodvd/freepromodvd.html contained representation (b).

(7)    The [webpage www.readysetboom.com.au] contained all of the offending representations.

Advertising materials

68    At [457] of the liability judgment, I found that the following advertising materials contained the following instances of the offending representations:

(1)    The 2013 free seminars webpage [www.howtobuyahouseforadollar.com/register] contained each of the offending representations.

(2)    The 2013 free seminars mail out contained representations (b), (d), (e) and (g).

(3)    The 2014 free seminars advertisement contained representations (a), (d) and (e).

(4)    The 2014 free seminars webpage [http://www.creativerealestate.com.au/readysetboom/] contained each of the offending representations except representation (b).

(5)    The 2014 free seminars mail out contained representations (d) and (g).

(6)    The 2014 free seminars email contained representations (c) and (d).

69    The “How to buy a house for $1” book, the websites and the advertising materials operated as “first contact deception”, whereby potential consumers were exposed to alluring and evocative language regarding the perceived benefits of property ownership and investment so as to entice the consumers into “the marketing web”.

“Power Property Profits Pack”

70    At [457(2)] of the liability judgment, I found that the “Power Property Profits Pack” contained each of the offending representations except representation (f).

Free seminars

71    At [457(5)] of the liability judgment, I found on the balance of probabilities that each of the offending representations was made at each of the free seminars. Each free seminar gave rise to a separate set of contraventions: each occurred on a different occasion and involved conduct directed to different groups of consumers.

Boot camps

72    At [457(6)] of the liability judgment, I found on the balance of probabilities it is likely that representations (a), (d), (e) and (g) were made at each of the boot camps. As for the free seminars, each boot camp gave rise to a separate set of contraventions.

“No Money Down Boot Camp Manual”

73    At [457(7)] of the liability judgment, I found that the manual contained representations (b) and (g).

74    The evidence does not reveal the precise number of occasions on which the contravening representations were made. In the case of the websites, they were designed to be made to the public at large but there was no evidence about how many consumers viewed them. There is also no evidence about how many consumers viewed or received the advertising materials for “free seminars”, which comprised two webpages, two mail outs, an email and a document simply described as “advertisement”. However, the websites and the advertising materials suggest a substantial effort to reach a wide audience for the ultimate purpose of gaining business from consumers.

75    The evidence was that approximately 3,400 consumers attended the 42 free seminars and approximately 2,000 consumers attended the 16 boot camps. It is likely that the “No Money Down Boot Camp Manual” was provided to the boot camp attendees. The evidence does not reveal how many consumers received the “Power Property Profits Pack”, which seems to have been available at no cost from the website www.howtobuyahouseforadollar.com.

Contravention of s 37 (Misleading representations about certain business activities)

76    These contraventions occurred by the respondents’ making the offending representations in the “How to buy a house for $1” book. Section 37(1) of the ACL proscribes the making of a representation that:

 (a)    is false or misleading in a material particular; and

(b)    concerns the profitability, risk or any other material aspect of any business activity that the person has represented as one that can be, or can be to a considerable extent, carried on at or from a person’s place of residence.

77    At [321] of the liability judgment, I recorded a passage of the book in which WBH represented that the business activity to which the offending representations were directed is one that can be, or can be to a considerable extent, carried on at or from a person’s place of residence.

Contravention of s 29(1)(f) (Testimonials)

78    At [399]-[401] of the liability judgment, I found:

[399]    The testimonials particularised in the statement of claim are:

(1)    two on the 2013 free seminars webpage, from “B Mudie” and “M Kelly”, set out at [349] above;

(2)    one on the 2014 free seminars webpage, from “Mark”…;

(3)    12 on the success stories webpage …; and

(4)    the same testimonial from “Mark” that appeared on the 2014 free seminars webpage, appearing on the readysetboom webpage on 4 March 2014 and 12 June 2014 …

[400]    Several of these testimonials are repeated, or repeated in substance, in the book.

[401]    The respondents did not dispute that the statements identified by the ACCC constitute testimonials. Each is a statement that purports to attest to the author’s success in purchasing a property for $1.

79    Thus, the relevant conduct occurred by the publication on three webpages. In their submissions, the ACCC did not seek a pecuniary penalty in respect of the repetition of the testimonials in the “How to buy a house for $1” book.

Loss or damage

80    In the liability judgment, I found (at [7]):

The respondents conducted free seminars and boot camps throughout Australia between 1 January 2011 and 13 June 2014. During that period, approximately 3,400 consumers have attended free seminars and approximately 2,000 consumers paid to attend boot camps conducted by the respondents. Approximately 700 consumers participated in the Go Direct mentoring program. WBH generated a substantial income from conducting boot camps and the advanced training and mentoring programs, and from the sale of training materials. It admitted to a turnover of over $20 million during the period from 1 January 2011 to 17 June 2014.

81    The ACCC contended that the loss and damage to the community as a result of the contravening conduct was at least $21 million. The admitted turnover figure of over $20 million is an indication of the size of WBH, showing that the business that it operated in the relevant period was substantial. On the figures in [6] and [7] of the liability judgment, the total revenue was in the order of $24.2 million (calculated by reference to the sums paid for boot camps (2,000 consumers x $3,000 = $6 million) and for the Go Direct mentoring program (700 consumers x $26,000 = $18.2 million)).

82    While I did find that the services provided by WBH were a waste of time, contrary to the ACCC’s submissions, I do not accept that there is sufficient evidence to support a finding that the entirety of WBH’s turnover, or any particular amount, can be sourced to the contravening conduct. The evidence did not reveal the extent to which the offending representations led consumers either to attend the free seminars or to purchase services from WBH. However, the offending representations were plainly intended to promote WBH’s business and it is not unreasonable to infer that they probably had the intended effect.

The circumstances in which the contravening conduct took place (ACL s 224(2)(b))

83    The contravening conduct occurred over a substantial period and formed part of a concerted marketing campaign for WBH’s services. The tools of “free seminars”, testimonials, sensational and verbose webpages and advertising and offers of slabs of materials conveyed a sense of excitement and promise. In that context, consumers (and especially gullible consumers) were more likely to be deceived by the contravening conduct.

84    The testimonials were designed to lend support to the false “Buy a house for $1” representation, by suggesting that individuals had in fact achieved what the respondents were promising, and thereby to add enticement to WBH’s offerings. The apparent veracity of the testimonials was enhanced by photographs, names and (except on the readysetboom website) locations. In the case of the success stories webpage, the testimonials were presented together with other testimonials, conveying an impression that they form part of a body of evidence supportive of the claims of WBH and Mr Otton. They were accompanied by a phone number to call in order to acquire a free “Power Property Profits Pack”, thereby enticing the consumer to start dealing with WBH.

Previous adverse findings (ACL s 224(2)(c))

85    Neither of the respondents has previously been found by a Court to have engaged in similar conduct.

The size of the contravening company and financial position of the contraveners

86    WBH conducted a substantial business during the relevant period. I have noted above WBH’s admitted turnover of over $20 million during the period from 1 January 2011 to 17 June 2014.

87    The respondents gave evidence that refunds were paid to 258 consumers, while another two consumers were given partial refunds and a third consumer was forgiven a final payment due. They did not submit that the Court should have regard to any particular quantum of refunds in determining relief. Based on the respondents’ evidence, the quantum of these refunds could be in the region of approximately $400,000 to $500,000.

88    The respondents noted that WBH is and at all material times was the trustee of the Otton Family Trust. The beneficiaries of the trust are Mr Otton, Jane Otton and We Buy Finance Pty Ltd. The sole shareholder of We Buy Finance Pty Ltd is We Buy Homes Pty Ltd. The sole shareholder of We Buy Homes Pty Ltd is Mr Otton.

89    The financial statements for the years ended 30 June 2011 to 30 June 2014 show the following substantial net operating profits:

Year ended 30 June 2011    $1,507,476

Year ended 30 June 2012    $1,719,733

Year ended 30 June 2013    $2,752,813

Year ended 30 June 2014    $704,293

90    The ACCC sought to rely on a revenue ledger produced by WBH for the year ended 30 June 2017, which shows total revenue of $835,946.05 and total expenses of $122,561.88. From those figures, the ACCC calculated a profit before tax ratio of approximately 85%. By applying a ratio of expenses to revenue of 85% to the $20 million turnover generated in the period from 1 January 2011 to 17 June 2014, the ACCC estimated a profit before tax of $17 million for the period.

91    The respondents described the ledgers as “working documents from unknown origin”. I do not accept this description. They are plainly records of WBH, about which the respondents were in a position to give evidence.

92    Even so, I prefer not to make a finding as to WBH’s profit before tax in the relevant period. It is sufficient to note that the nature of WBH’s business did not require substantial infrastructure or the incurring of substantial costs. The profitability of WBH’s business in the period of the contravening conduct is reflected in the net operating profit figures in the Otton Family Trust financial statements.

93    I have given further consideration to the financial position of the respondents below.

The deliberateness of the contraventions and the period over which it extended

94    The ACCC submitted that the contraventions were deliberate, largely intended to entice consumers to purchase services offered by WBH and occurred over a substantial period, from about January 2011 to March 2015. I accept the latter two submissions: the former requires more analysis.

95    In addressing this topic, the respondents submitted, without elaboration, that there was reason for Mr Otton to believe that what was said and wrote was not in contravention of the law. The submission appears to refer to Mr Otton’s affidavit evidence concerning the role of Mr Cordato in relation to WBH. Relevantly, Mr Otton gave the following evidence:

(1)    Mr Cordato was and is the principal of the law firm Cordato Partners.

(2)    Mr Cordato was acting for WBH from at least 2004.

(3)    Mr Cordato attended each of the boot camps run in Australia.

(4)    Mr Cordato prepared documentation for the boot camps and prepared the legal documentation that appears in the “Massive Passive Property Pack”.

(5)    Mr Cordato was provided with draft chapters of the “How to buy a house for $1” book and made certain notes on those drafts.

(6)    Mr Otton does not specifically recall asking Mr Cordato about whether what he was saying in the book, websites, seminars or at boot camps or anywhere else was wrong or against the law. He thought that he relied on Mr Cordato was general advice about his business and WBH though he does not recall that he ever gave Mr Cordato that specific instruction.

(7)    Mr Cordato did not ever tell Mr Otton that anything that was written in the book or said at seminars was wrong in law or breached either the TPA or ACL. Had Mr Otton been so informed, he would have made changes.

96    The respondents acknowledged that Mr Cordato was not responsible for what WBH and Mr Otton said and wrote. However, they argued:

[It] is reasonable to accept that Mr Otton thought he could rely on the absence of advice that any conduct was wrong in law in circumstances when he had a reasonable expectation that he would be so advised if that be the case.

It is not a case that Mr Otton went on a wild frolic of his own and conducted the business of WBH without professional advice. He had a legal advisor.

With the benefit of hindsight he should have sought specific advice.

97    I reject this argument. At [109] of the liability judgment, I stated:

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.

98    Based on this assessment of Mr Otton’s credibility, I do not accept Mr Otton’s more recent affidavit evidence at face value.

99    Further, it is manifestly not reasonable to accept that Mr Otton thought he could rely on the absence of relevant advice. The facts deposed to by Mr Otton do not bear out any basis for a reasonable expectation that Mr Cordato would give him relevant advice. Mr Otton’s evidence does not suggest that, prior to this proceeding, he ever gave consideration to whether he could rely on an absence of advice from Mr Cordato. In any event, to the extent that Mr Otton in fact thought such a thing (as suggested by the respondents’ submission), but took no steps to test that proposition with Mr Cordato, it would demonstrate a profound lack of interest on Mr Otton’s part in compliance with the ACL.

100    Apart from this, the respondents did not suggest that their conduct involved some honest mistake. At [515] of the liability judgment, I found that there was no reasonable basis for thinking that the techniques taught by WBH and Mr Otton could be used to achieve any of the outcomes identified in the offending representations. Mr Otton must have known this: the making and repetition of the offending representations therefore involved significant dishonesty on his part. That dishonesty must also be attributed to WBH.

101    It is also relevant to note the ACCC’s submissions that the respondents have engaged in similar conduct in the past, namely:

(1)    in 2004 and 2005, when the respondents were warned by the ACCC about representations appearing on a website operated by them; and

(2)    in about August 2013, when the respondents gave an enforceable undertaking to the Western Australian Department of Commerce to cease engaging in certain conduct in Western Australia for a period of 2 years.

102    By the enforceable undertaking Mr Otton, Rick.Otton.com Pty Ltd and WBH gave undertakings in connection with the conduct of the “Otton Scheme”, concerning the making of representations similar to some of the offending representations. In particular, the undertakings concerned representations that:

(a)    utilising the Otton Scheme, one is able to buy a house for $1; and

(b)    the Otton Scheme enables the generation of substantial income without a bank loan or saving for a deposit and without experience in the real estate industry.

103    The enforceable undertaking records concerns raised by the Commissioner for Consumer Protection (Western Australia) that the “Scheme Representations” may be capable of misleading Western Australian consumers in contravention of the ACL.

104    No steps were taken by Mr Otton (on his own behalf or on behalf of WBH) after the enforceable undertaking to review the legality of the offending representations or, more generally, to determine whether WBH and Mr Otton were complying with the requirements of the ACL.

105    In engaging in the conduct that contravened the ACL after August 2013, Mr Otton (on his own behalf and on behalf of WBH) demonstrated that, indeed, he was profoundly uninterested in compliance with the ACL.

Whether the contraventions arose out of the conduct of senior management of the contravener or at some lower level

106    The contraventions arose primarily out of the conduct of Mr Otton, who was, at all relevant times, the sole director and sole shareholder of a director of WBH: see liability judgment at [2] to [4].

107    The respondents did not suggest that anyone apart from Mr Otton was responsible for WBH’s contraventions.

Whether the contravener has a corporate culture conducive to compliance with the ACL, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention

108    The ACCC submitted that there is no evidence of a culture of compliance within WBH, stating that the respondents were unable to produce any documents in response to a notice to produce seeking documents relating to compliance.

109    Further, the ACCC submitted that there is no evidence of the respondents taking steps to improve compliance since the ACCC commenced its investigation in approximately August 2013 or since the proceedings were commenced.

110    The respondents contended that WBH does have a corporate culture of taking corrective measures, citing the following matters:

(1)    When confronted with an allegation from the ACCC in 2004, corrective action was taken in conjunction with the firm of solicitors Cordato Partners.

(2)    When confronted in 2014 with allegations in a notice issued pursuant to s 155 of the ACL by the ACCC, WBH stopped conducting free seminars and boot camps in Australia.

(3)    Mr Cordato, solicitor, read the drafts of the book.

(4)    When requests have been made of WBH for refunds, in about 95% of cases the refund has been given. Where refunds were not given there are adequate reasons.

111    I accept that matters (1) and (2) demonstrate a limited culture of taking corrective action to address regulatory breaches when pursued by the ACCC. However, as evidenced by the facts of this case, the corporate culture of WBH has not been conducive to compliance with the ACL. In particular, the mere fact that Mr Cordato read a draft of the “How to buy a house for $1” book is not indicative of a culture conducive to compliance in the absence of evidence that he was retained to provide legal advice about whether the book complied with the ACL. The mere fact that refunds have been given is not indicative of a culture conducive to compliance: there was no evidence that the refunds were made as a result of WBH’s recognition of its contraventions of the ACL.

Whether the contravener has shown a disposition to cooperate with the authorities responsible for the enforcement of the ACL in relation to the contravention

112    The ACCC submitted that the respondents have not cooperated with the ACCC in any respect. A brief statement of agreed facts was tendered in the hearing on liability. It contained no admissions from the respondents. Indeed, in their defence, and during the liability hearing, the respondents denied making the offending representations “in the face of ample written evidence … that the respondents repeatedly and emphatically said the very things” that comprised the representations: liability judgment at [12].

113    The respondents contended that their disposition to cooperate was evidenced by:

(1)    the response to the s 155 notice issued by the ACCC, including the provision of written answers and documents;

(2)    the absence of evidence that the respondents attempted to hide documents or facts from the ACCC in its investigation; and

(3)    the cessation of free seminars and boot camps following the issue of the s 155 notice.

114    These matters do not evidence a disposition to cooperate. It is an offence to fail to comply with a s 155 notice. A failure to hide documents or facts is not active dishonesty, but it is also not cooperation. A decision to cease contravening the law is not cooperation. This contention demonstrates that the respondents have no relevant disposition towards cooperation.

Whether the contravener has engaged in similar conduct in the past

115    The ACCC submitted that the respondents have engaged in similar conduct in the past, namely:

(1)    in 2004 and 2005, when the respondents were warned by the ACCC about representations appearing on a website operated by them; and

(2)    in about August 2013, when the respondents gave the enforceable undertaking mentioned above.

116    The evidence did not reveal the nature of the representations that were the subject of the ACCC’s action in 2004 and 2005, except that material on the www.rickotton.com website was amended in the light of the concerns raised by the ACCC. However, the respondents did not make a positive submission that the representations were not an instances of past similar conduct.

117    Nor did the respondents make a positive submission that the August 2013 enforceable undertaking did not concern an instance of past similar conduct. The enforceable undertaking is plainly addressed to conduct that had been occurring prior to August 2013 including conduct of the kind the subject of this proceeding and, quite probably, including conduct that was in fact the subject of the proceeding.

118    The ACCC sought to rely on evidence that “associates” of the respondents have been the subject of enforcement action by state regulators. This evidence does not constitute instances of past similar conduct by the respondents, although it tends to support the need for general deterrence of the contravening conduct.

119    For their part, the respondents argued that history shows that, when informed of a problem, Mr Otton fixes it. In particular, Mr Bell noted that there had been no suggestion that Mr Otton has repeated the activities that was brought to his attention in 2004, and that the ACCC did not argue that Mr Otton had breached the enforceable undertaking.

Financial position of the respondents

120    The respondents submitted that neither of them has significant financial resources available to them. The ACCC submitted that the respondents’ evidence does not substantiate this claim.

121    The respondents submitted that WBH has effectively ceased business, in accordance with the fact that boot camps ceased in Australia in 2014.

122    The respondents referred to financial statements showing substantial net operating losses and equity deficiencies for the trust in the years ended 30 June 2015 and 2016 ($776,000 and $899,813), although there had been a substantial net operating profit (of $704,293 in the year ended 30 June 2014). For the year ended 30 June 2017, the trust accounts also show a net operating loss.

123    On the available evidence, it is far from clear that WBH has resources from which to pay a pecuniary penalty or an order for costs.

124    Mr Otton’s 16 April 2018 affidavit verified that he did not own certain properties in Queensland and Victoria, but did not otherwise seek to demonstrate that he does not have significant financial resources available to him. The ACCC noted Mr Otton’s interest in a property at Bondi Beach, Sydney and his apparent association with a group of entities including companies, a property trust, a family trust, a commercial trust and a limited partnership.

125    The ACCC contended, based on records obtained under a notice to produce, that the substantial financial position of the “Otton Group” of entities is indicated by the following:

(1)    The sale of a property at Rose Bay, Sydney in April 2016 for $3.05 million by the Otton Property Trust. Funds from this sale were then distributed to Jane Otton ($913,878) and the Otton Superannuation Fund ($2,089,906). The funds transferred to Jane Otton were deposited in a joint account held with Mr Otton. The funds transferred to the Otton Superannuation Fund were reinvested in “The Commercial Trust”, which in turn appears to have deposited those funds in a joint account of Mr Otton and Jane Otton. These funds were then used to repay a commercial bill in the names of Mr Otton and Jane Otton.

(2)    The trustee of The Commercial Trust, We Buy Commercial Pty Limited, is the registered proprietor of a commercial property in Surry Hills, Sydney.

(3)    Mr Otton held over $1.1 million in vested benefits in the Otton Superannuation Fund as at 30 June 2016. The primary investment held by the Otton Superannuation Fund is units in The Commercial Trust.

(4)    The granting of an unsecured loan of $3.98 million to Mr Otton and Jane Otton by the company We Buy Homes Pty Ltd. A further share issue occurred in July 2013, with Mr Otton now holding 4,000,001 shares in the company. This may indicate that Mr Otton has invested money in We Buy Homes, which in turn distributed that money as an unsecured loan to the benefit of Mr Otton and Jane Otton.

126    In the light of these matters and the absence of more evidence from Mr Otton, I am not satisfied that Mr Otton does not have significant financial resources available to him.

Whether the contravening conduct was systematic, deliberate or covert

127    The conduct was systematic: the website representations and the representations in the book were calculated to entice consumers to attend free seminars and to purchase materials and services from WBH. The misrepresentations made at the free seminars were calculated to entice consumers to purchase materials and services from WBH. I accept the ACCC’s submission that the contravening conduct was a critical component of the respondents’ business operations.

128    It was not covert.

129    The contravening conduct was deliberate, in the sense that it was planned, coordinated and intended to entice consumers to engage with WBH and, sooner or later, to acquire its services.

Courses of conduct

130    The ACCC contended that the respondents’ contraventions should be analysed as eight courses of conduct, being the various representations made:

(1)    in the “How to buy a house for $1” book;

(2)    on the howtobuyahouseforadollar.com website, the rickotton.com website and the readysetboom.com.au website;

(3)    in advertising materials for the “free seminars”;

(4)    in the “Power Property Profits Pack”;

(5)    at the 42 free seminars;

(6)    at the 16 boot camps;

(7)    in the “No Money Down Boot Camp Manual”; and

(8)    the publication of the testimonials on the three webpages.

131    I accept that this is a case where the very large number of contraventions has the consequence that the theoretical maximum penalty is vastly in excess of what is proper for the entire contravening conduct.

132    The ACCC suggested that WBH’s turnover of at least $20 million is an appropriate measure of the loss and damage suffered by consumers. As I have explained earlier, I do not accept that the evidence permits an inference that the entirety of WBH’s turnover should be attributed to the contravening conduct: there may have been consumers who were determined to buy the respondents’ snake oil regardless of the respondents’ conduct.

133    I accept that the ACCC’s courses of conduct analysis may have some utility in identifying appropriate penalties, particularly where multiple contraventions occurred on a single occasion.

134    However, I do not agree that the “free seminars” and the “boot camps” are correctly analysed as two single courses of conduct. They involved separate occasions and separate groups of consumers, and multiple contraventions on each occasion.

Applicable penalty in the circumstances

135    The ACCC submitted that a penalty of $12,000,000 should be ordered against WBH and a penalty of $8.6 million should be ordered against Mr Otton. The respondents submitted that penalties in this order would be manifestly excessive.

136    The ACCC submitted that these penalties should not be made joint and several. In Cement Australia at [391], the Full Court stated:

[T]he case law on the approach of the Court on this joint and several issue is divergent, and does not mandate any particular finding. And to the extent other cases are useful in addressing the issue for determination in these proceedings, the one principle to be discerned is that each contravenor must be separately responsible for its own course of conduct. This is not just a discretionary factor. The legislature has indicated that the contravenor should be subject to the “appropriate” pecuniary penalty – the “appropriateness” is to be determined by reference to the contravenor’s own conduct and the acts and omissions of that person.

137    The ACCC submitted that it would be appropriate to impose global penalties in the amounts proposed or, alternatively, separate penalties in the following amounts based on a course of conduct analysis:

(1)    in relation to WBH a penalty of:

(a)    $3 million for the “How to buy a house for $1” book, the “Power Property Profits Pack” and the “No Money Down Boot Camp Manual”;

(b)    $1.5 million for the three websites containing the offending representations;$1.5 million for the three webpages containing the testimonials;

(c)    $2.5 million for the “free seminars”; and

(d)    $3.5 million for the boot camps; and

(2)    in relation to Mr Otton:

(a)    $1 million for the “How to buy a house for $1” book, the “Power Property Profits Pack” and the “No Money Down Boot Camp Manual”;

(b)    $300,000 for the three websites containing the offending representations;

(c)    $300,000 for the three webpages containing the testimonials;

(d)    $3 million for the “free seminars”; and

(e)    $4 million for the boot camps.

138    The ACCC submitted that the conduct of Mr Otton is more egregious than that of WBH because he made the offending representations; directed WBH to publish the book and promotional material; controlled what information was placed on the websites; and made all the operational decisions about how the information was conveyed to consumers and potential consumers. The ACCC argued that, as a matter of public policy, individuals should not be permitted to escape an appropriate penalty by creating a corporate structure which seeks to avoid the imposition of an appropriate penalty. The ACCC therefore submitted that, while the penalty sought against Mr Otton is significant, it properly reflects his involvement, and the systematic and deliberate nature of the conduct in which he engaged.

139    I am not convinced that it is correct that say that Mr Otton’s conduct is more egregious than that of WBH. Much of the offending conduct involved Mr Otton acting as the directing mind and will of WBH, with the consequence that WBH earned substantial revenue.

140    The contraventions in this case are very serious. The principal contraventions for which pecuniary penalties are payable were contraventions of s 29(1)(g) of the ACL. These contraventions arose from the fact that the offending representations entailed the further false or misleading representation that the services of WBH equipped consumers with skills and information to apply techniques to achieve the outcomes identified in the offending representations. Thereby, in trade or commerce in connection with the supply or possible supply of services, the respondents made false or misleading representations that the services of WBH had uses or benefits when the true position was that those services had no value: learning their techniques could not enable a consumer to achieve the outcomes promised by the offending representations.

141    In the cases of the “How to buy a house for $1” book and the webpages, additionally, WBH contravened s 34 of the ACL.

142    The contravening conduct was a significant part of a marketing campaign by which WBH effectively duped thousands of consumers. The contravening conduct was predatory, being designed to appeal to the gullible and to consumers who hoped to “get rich quick”.

143    The respondents have not shown contrition or remorse for their conduct, except to the limited extent that they consented to declarations and injunctions, as well as corrective advertising (to be undertaken by WBH). I attribute minimal weight to this matter, where it was close to inevitable that such orders would be made. However, I do note that they have not been the subject of previous adverse findings by a court and this is a significant factor in their favour in the determination of appropriate penalties.

144    The respondents vigorously defended the proceeding brought by the ACCC. When confronted with the liability judgment, Mr Otton sought to reduce his culpability by reference to the presence of Mr Cordato in connection with the WBH business, even though neither he nor WBH had engaged Mr Cordato to provide legal advice in relation to the contravening conduct. By his defence of this proceeding, that evidence and his oral testimony, Mr Otton has himself demonstrated that the need for personal deterrence of Mr Otton from future similar contraventions is of great importance. In my view, WBH does not require deterrence: on the evidence, it has ceased business and there is no reason to think that it will operate a business in the future.

145    This is a case in which appropriate penalties will have a significant general deterrent effect, to discourage similar conduct by others who would might otherwise be encouraged by the apparent financial success of the respondents’ business model.

146    In my view, the most egregious contraventions are those which occurred at the “free seminars” because they occurred in the context of face to face marketing for the purpose of enticing consumers to enrol in the boot camps which, I have found, were an expensive waste of time.

147    Although only a small number of the contraventions occurred at the boot camps, those contraventions were relatively serious because they formed part of the marketing for the respondents’ mentoring services, from which WBH earned substantial revenue.

148    Taking account of all of the matters set out above from [57], in my view, penalties in the order proposed by the ACCC should be imposed on WBH for its various contraventions of the ACL.

149    In the case of WBH the following penalties, totalling $12,000,000 should be imposed on for its various contraventions of ss 29(1)(g), 34 and 37 of the ACL:

(1)    in the “How to buy a house for $1” book: $3,000,000;

(2)    on the three websites: $1,500,000;

(3)    in the advertising materials for the “free seminars”: $600,000;

(4)    in the “Power Property Profits Pack”: $100,000;

(5)    at the 42 free seminars: $4,200,000;

(6)    at the 16 boot camps; $1,600,000;

(7)    in the “No Money Down Boot Camp Manual”: $100,000; and

(8)    for its contraventions of s 29(1)(f) of the ACL, the publication of the testimonials on the three webpages: $900,000.

150    Penalties imposed on WBH may be borne by Mr Otton, by reason of his situation as a beneficiary of the Otton Family Trust which will bear the diminution of WBH’s assets as a result of the pecuniary penalty. However, on the available evidence, WBH presently has a significant deficiency of assets and, accordingly, I do not accept that the penalty to be imposed on Mr Otton should be reduced to take account of this matter.

151    In my view, a single penalty should be imposed on Mr Otton by reason of his being knowingly concerned in or a party to each of WBH’s contraventions. Mr Otton and WBH presented Mr Otton as the human face of WBH. He was the named author of the “How to buy a house for $1”. He was the main presenter at the “free seminars” and the “boot camps”. As presented by WBH and by himself, Mr Otton was a “property expert” who was living proof of the success of the techniques taught by him on behalf of WBH, was critical to the presentation of WBH’s business. His conduct was integral to the contraventions of WBH. Separate penalties should not be imposed for Mr Otton’s individual contraventions of ss 29(1)(f), (g) and 34, because they arise from the same conduct as the contraventions of WBH.

152    On this basis, I am not satisfied that it is appropriate to impose on Mr Otton a penalty that is over 70% of the penalty to be imposed on WBH. In my view, such a penalty would pay insufficient regard to the maximum penalties for a single contravention of a provision of Pt 3-1 of the ACL, and in particular, the fact that the maximum for an individual is 20% of the maximum for a corporation. On the other hand, while I consider that there is a comparable degree of seriousness in the contraventions of the respondents, I also consider it to be very significant that there is no apparent need for specific deterrence in the case of WBH, while the need for specific deterrence in Mr Otton’s case is very significant.

153    Taking into account those matters including the other matters set out above, an appropriate penalty in Mr Otton’s case is $6,000,000. I am satisfied that this penalty is not excessive for the entire contravening conduct involved, taking into account the disqualification order discussed below.

Disqualification order

154    Section 248 of the ACL permits the Court to disqualify a person from managing a corporation. This provision is modelled on similar provisions in the Corporations Act 2001 (Cth): Australian Competition and Consumer Commission v Halkalia Pty Ltd (No 2) [2012] FCA 535; [2012] ATPR 42-399 at [110].

155    The power may be exercised if the Court is satisfied that the person, relevantly, has contravened a provision of Pt 3-1 and is satisfied that the disqualification is justified.

156    Disqualification orders are designed to protect the public by seeking to safeguard the public interest in the transparency and accountability of companies and in the suitability of directors to hold office: Australian Competition and Consumer Commission v Renegade Gas Pty Ltd [2014] FCA 1135 (“Renegade Gas”) at [93]. Protection of the public also envisages protection of individuals that deal with companies, including, relevantly, consumers: Renegade Gas at [94]. It is therefore necessary to balance any personal hardship to the respondent against the public interest and the need for protection of the public from any repetition of the conduct: Australian Securities Commission v Donovan [1998] FCA 986; (1998) 28 ACSR 583 at 607.

157    In SensaSlim at [59]-60], Yates J had regard to the principles distilled by Santow J in Re HIH Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler [2002] NSWSC 483; [1972] 2 NSWLR 790 at [56], which involved a disqualification order under the Corporations Act:

[59]    In Adler, Santow J at [56] said:

The cases on disqualification gave orders ranging from life disqualification to 3 years. The propositions that may be derived from these cases include:

(i)    Disqualification orders are designed to protect the public from the harmful use of the corporate structure or from use that is contrary to proper commercial standards.

(ii)    The banning order is designed to protect the public by seeking to safeguard the public interest in the transparency and accountability of companies and in the suitability of directors to hold office.

(iii)    Protection of the public also envisages protection of individuals that deal with companies, including consumers, creditors, shareholders and investors.

(iv)    The banning order is protective against present and future misuse of the corporate structure.

(v)    The order has a motive of personal deterrence, though it is not punitive.

(vi)    The objects of general deterrence are also sought to be achieved.

(vii)    In assessing the fitness of an individual to manage a company, it is necessary that they have an understanding of the proper role of the company director and the duty of due diligence that is owed to the company.

(viii)    Longer periods of disqualification are reserved for cases where contraventions have been of a serious nature such as those involving dishonesty.

(ix)    In assessing an appropriate length of prohibition, consideration has been given to the degree of seriousness of the contraventions, the propensity that the defendant may engage in similar conduct in the future and the likely harm that may be caused to the public.

(x)    It is necessary to balance the personal hardship to the defendant against the public interest and the need for protection of the public from any repeat of the conduct.

(xi)    A mitigating factor in considering a period of disqualification is the likelihood of the defendant reforming.

(xii)    The eight criteria to govern the exercise of the court's powers of disqualification set out in Commissioner for Corporate Affairs (WA) v Ekamper (1987) 12 ACLR 519 have been influential. It was held that in making such an order it is necessary to assess:

•    character of the offenders;

•    nature of the breaches;

•    structure of the companies and the nature of their business;

•    interests of shareholders, creditors and employees;

•    risks to others from the continuation of offenders as company directors;

•    honesty and competence of offenders;

•    hardship to offenders and their personal and commercial interests; and

•    offenders’ appreciation that future breaches could result in future proceedings.

(xiii)    Factors which lead to the imposition of the longest periods of disqualification (that is disqualifications of 25 years or more) were:

•    large financial losses;

•    high propensity that defendants may engage in similar activities or conduct;

•    activities undertaken in fields in which there was potential to do great financial damage such as in management and financial consultancy;

•    lack of contrition or remorse;

•    disregard for law and compliance with corporate regulations;

•    dishonesty and intent to defraud;

•    previous convictions and contraventions for similar activities.

(xiv)    In cases in which the period of disqualification ranged from 7-12 years, the factors evident and which lead to the conclusion that these cases were serious though not “worst cases”, included:

•    serious incompetence and irresponsibility;

•    substantial loss;

•    defendants had engaged in deliberate courses of conduct to enrich themselves at others’ expense, but with lesser degrees of dishonesty;

•    continued, knowing and wilful contraventions of the law and disregard for legal obligations;

•    lack of contrition or acceptance of responsibility, but as against that, the prospect that the individual may reform;

…

(xv)    The factors leading to the shortest disqualifications, that is disqualifications for up to 3 years were:

•    although the defendants had personally gained from the conduct, they had endeavoured to repay or partially repay the amounts misappropriated;

•    the defendants had no immediate or discernible future intention to hold a position as manager of a company;

•    in Donovan’s case, the respondent had expressed remorse and contrition, acted on advice of professionals and had not contested the proceedings;

[60]    In Rich v Australian Securities and Investments Commission (2004) 220 CLR 129; [2004] HCA 42, the High Court made it clear that a disqualification order can be imposed by way of punishment and not merely as a protective measure, thereby qualifying Santow J’s proposition (v) in Adler.

[Citations omitted]

158    The ACCC seeks a period of disqualification of 10 years, being a duration that will balance the personal hardship of the order against the public interest and the need to protect the public from a repetition of the contravening conduct, in light of the following, interrelated, matters:

(1)    The degree of seriousness of the contraventions: As mentioned above, the offending representations were systematic and deliberate, being the primary method by which consumers were enticed to attend “free seminars” and then to enrol boot camps and acquire other services from WBH. They occurred in a range of media over a lengthy period. Mr Otton controls WBH and is its directing mind and will. Mr Otton knew of, and approved the publication of, material that contained the representations and at least the substance, if not the precise content, of those materials: see the liability judgment at [76].

(2)    Mr Otton’s refusal to acknowledge the seriousness of the contraventions: During the hearing on liability, Mr Otton refused to accept the seriousness of the effect of the representations on consumers and potential consumers, instead making efforts to defend material containing the impugned representations: see the liability judgment at [76]-[78].

(3)    Mr Otton’s propensity to engage in similar conduct in the future: Paragraph [109] of the liability judgment records that “Mr Otton … is habitually careless with the truth in making statements and claims designed to promote the respondents’ business interests”. It is evident, having regard to Mr Otton’s recent conduct in the UK, that he has displayed the propensity to engage in similar conduct in the future. He continues to present seminars regarding property transactions and operates in a substantially similar manner to the way in which he operated between 2011 and 2015.

(4)    The likely harm that to the public: The offending representations misrepresented the effect of the various techniques taught by the respondents, techniques that give rise to a “plethora of substantial financial risks” to consumers: see the liability judgment at [172].

159    Mr Otton’s evidence at trial set out Mr Otton’s almost lifelong experience in the business of real estate, particularly using vendor finance. Mr Otton conducted his first “training boot camp” in 2002. In 2003, Mr Otton started the Vendor Finance Association in Australia. He was the founding president and remained president until 2009. Mr Otton suggested that his work involved an element of altruism, claiming (as noted at [88] of the liability judgment):

Through the years, I have poured most of my time and energy into going the extra mile for our sellers, buyers and our students because I care what happens to them. I think it is important to educate and empower them to know there are many ways to invest in property.

160    These matters indicate that Mr Otton has invested a substantial proportion of his career in developing the business that was operated by WBH and indicate that he is highly likely to seek to do so in the future, unless prevented by orders of this Court.

161    On Mr Otton’s behalf, Mr Bell submitted that a disqualification order would not operate to protect the public in this case where the contravention was significant and serious, but not intentional; Mr Otton has learned his lesson; there is no allegation of continuing ACL breaches, and WBH has paid significant refunds and needs someone to process any further refunds.

162    Taking into account all of the above matters, I am satisfied that protection of the public warrants Mr Otton’s disqualification from managing corporations for a significant period. Whatever lessons Mr Otton may have learned from this litigation, I am not persuaded that he can be relied upon to know and adhere to the requirements of the ACL, or to know when he should take steps to find out his legal obligations, or to find out his legal obligations in a case where he may have some doubt. Mr Otton has demonstrated a significant capacity to develop and operate a business based upon contravening conduct and thereby to be a significant hazard to consumers. In my view, the evidence that Mr Otton thought he could rely on Mr Cordato’s presence demonstrated a profound lack of appreciation of Mr Otton’s obligations as a director. The contention that it was reasonable for Mr Otton to think so demonstrates that this deficit has not been rectified and strongly reinforces the requirement for protection of the public from Mr Otton.

163    At the hearing, Mr White SC noted that in Sensaslim, Yates J made a disqualification order for life although the ACCC had sought a 20 year ban. I am concerned as to whether the duration of the proposed disqualification order is sufficient. Mr Otton is now 61 years of age and, based on his presentation in the witness box, could quite conceivably engage in trade or commerce in 10 years’ time through a corporate structure. Mr Otton meets some of the criteria that Santow J found might warrant a longer period of disqualification, particularly, a high propensity for similar activities or conduct in the future; and a lack of significant contrition or remorse.

164    In my view, the proposed 10 year disqualification is at the bottom end of the range of what is an appropriate duration for a disqualification order in this case. However, in the absence of previous convictions or findings of contravention, I accept that it is appropriate to make a disqualification order for that duration and I am therefore satisfied that such an order is justified.

Compliance program

165    The Court has power under s 246 of the ACL to order that a respondent establish and implement a training program to assist in ensuring that it avoids future contraventions of the CCA and the ACL.

166    The proposed compliance program is linked to the relevant conduct, in that the training is to cover the relevant provisions of the ACL.

167    I doubt that such a program is likely to have any great utility, particularly having regard to the injunctive relief that I will order, the unlikelihood that WBH will conduct any further business, the disqualification order and my view that Mr Otton is not motivated to comply with the ACL.

168    Even so, accepting the ACCC’s view that such an order is an appropriate exercise of the power in s 246(2)(b)(i) of the ACL, I will make an order in the form proposed by the ACCC.

Corrective advertising and adverse publicity order

169    Section 246 of the ACL empowers the Court to order the publication of corrective advertising. Section 247 of the ACL provides power to make an adverse publicity order.

170    In Australian Competition and Consumer Commission v Singtel Optus (No 3) [2010] FCA 1272; (2010) 276 ALR 102 at [31], the Court ordered the respondent to publish online corrective advertising and to send a corrective letter to customers. In Australian Competition and Consumer Commission v SMS Global Pty Ltd [2011] FCA 855; [2011] ATPR 42-364 at [130], the Court ordered a notice to be published on the respondent’s website.

171    The ACCC submitted that the respondents should publish a form of notice that sets out, in summary form, the outcome of the proceeding and the contravening conduct. The proposed notice also states that Mr Otton has “more recently promoted those techniques [regarding property investment, which were the subject of the proceeding] in the United Kingdom”.

172    The ACCC contended that the notice should be published on all internet websites operated or controlled by each of the respondents.

173    The ACCC argued that the proposed notification:

(1)    Serves to alert affected consumers (Janssen Pharmaceutical Pty Ltd v Pfizer Pty Ltd (1986) ATPR 40-654 at 47,295) to the fact of the contraventions. This level of notification is appropriate because, between 2011 and 2015, the respondents relied on the offending representations as the primary method by which consumers were enticed to attend Free Seminars and Boot Camps and to purchase other materials offered for sale by them. Another relevant factor is that Mr Otton may cause WBH to engage in similar conduct in the future.

(2)    Serves to educate the real estate seminar industry as to the requirements of the ACL.

174    The ACCC’s proposed adverse publicity order requires the respondents to disclose the Court’s declarations and other final orders to attendees of events conducted by them between 2012 and 2015.

175    The respondents contended that the form of orders made under s 246 should reflect the terms of the other final orders made by the Court. The respondents also stated that the relevant websites and customer lists are the property of WBH, so that the orders should be directed to that respondent and not to Mr Otton.

176    The respondents submitted that proposed order under s 247 is unnecessary and, if made, should require communication by email and not by mail, having regard to the unlikely utility of attempted communication by mail.

177    I will make an order under s 246 in terms that reflect the Court’s orders. I will not include the proposed reference to Mr Otton’s conduct in the UK because I am not satisfied that the evidence supports that reference expressed, as it is, in very general terms. I will require publication of the order on all internet websites operated or controlled by either or the respondents, in order to maximise the prospect that the corrective advertising will come to the attention of affected consumers.

178    I will also make an order under s 247 in the form proposed by the ACCC. Whether or not such an order is “unnecessary”, it is plainly appropriate that the relevant persons should be informed of the Court’s orders. In the absence of evidence as to the likely reach of an order which requires communication by email only, I am not satisfied that an order in those terms will be sufficiently effective.

Findings of fact order

179    Section 137H of the CCA is an evidentiary provision that provides that findings of fact made against a respondent in earlier proceedings will be prima facie evidence of those facts in later proceedings by any person for damages pursuant to s 237(1) of the ACL or compensation pursuant to s 239(1) of the ACL.

180    The ACCC submitted that the proposed order was is in essentially the same terms as made by the Court in previous decisions, including Aveling Homes; Snowdale Holdings (No 2); Australian Competition and Consumer Commission v Harrison (No 2) [2017] FCA 182 (“Harrison”); Australian Competition and Consumer Commission v Clinica Internationale Pty Ltd (No 2) [2016] FCA 62; Australian Competition and Consumer Commission v Lifestyle Photographers Pty Ltd [2016] FCA 1538; and Australian Competition and Consumer Commission v Safe Breast Imaging Pty Ltd (No 2) [2014] FCA 998.

181    The proposed order was not opposed by the respondents and it is appropriate that an order to the effect sought be made. Following the approach in Harrison, I will require that the reasons for judgment be retained on the Court file until 31 December 2021.

Costs

182    The respondents submitted costs should be ordered against them on a proportional basis, reflecting the proportions of any pecuniary penalties. I do not see any justification for such an order. Costs should follow the event, as in the ordinary course.

Associate:

Dated:    15 November 2018