FEDERAL COURT OF AUSTRALIA Australian Competition and Consumer Commission v We Buy Houses Pty Ltd [2017] FCA 915 File number: NSD 170 of 2015 Judge: GLEESON J Date of judgment: 11 August 2017 Catchwords: CONSUMER LAW – misleading or deceptive conduct – alleged breaches of ss 18, 29(1)(e), (f) and (g), 34 and 37 of the Australian Consumer Law – where alleged that the respondents represented that the respondents could teach consumers how to buy a house for $1, and/or without a deposit or a bank loan, and/or with little or none of the consumer's money, and/or generate income and profit by dealing with property in various ways – alleged representation that first respondent had been successful in real estate by using the advertised methods – where representations made in a book, on several websites, at free seminars and in various training courses – whether alleged representations were made out – whether mere puffery – whether representations as to future matters – application of s 4 of the Australian Consumer Law – whether there were reasonable grounds for making of the representations – whether first respondent was directly or indirectly, knowingly concerned in, or party to, contraventions of the Australian Consumer Law by the second respondent – contraventions found PRACTICE AND PROCEDURE – leave sought to rely on amended version of statement of claim served during trial – leave refused Legislation: Australian Consumer Law, being Schedule 2 to the Competition and Consumer Act 2010 (Cth) Australian Securities and Investments Commission Act 2001 (Cth) Evidence Act 1995 (Cth) Trade Practices Act 1974 (Cth) Real Property Act 1900 (NSW) Cases cited: .au Domain Administration Ltd v Domain Name Australia Pty Ltd (2004) 207 ALR 521 Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 634; (2014) 317 ALR 73 Australian Competition and Consumer Commission v Dateline Imports Pty Ltd [2014] FCA 791; (2014) 143 ALD 136 Australian Competition and Consumer Commission v Flight Centre Ltd (No 2) [2013] FCA 1313; (2013) 307 ALR 209 Australian Competition and Consumer Commission v Henry Kaye and National Investment Institute Pty Ltd [2004] FCA 1363 Australian Competition and Consumer Commission v Pest Free Australia [2004] FCA 527 Australian Competition and Consumer Commission v Target Australia Pty Ltd [2001] FCA 1326; [2001] ATPR 41-840 Australian Competition and Consumer Commission v Telstra Corporation Ltd [2007] FCA 1904; (2007) 244 ALR 470 Australian Competition and Consumer Commission v Telstra Corporation Ltd [2004] FCA 987; (2004) 208 ALR 459 Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; (2013) 250 CLR 640 Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) [2015] FCA 342 Australian Securities and Investments Commission v Australian Property Custodian Holdings Limited (Recs and Mgrs apptd) (in liq) (Controllers apptd) (No 3) [2013] FCA 1342 Campomar Sociedad Limitada v Nike International Ltd [2000] HCA 12; (2000) 202 CLR 45 Cummings v Lewis (1993) 41 FCR 559 Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 Fraser v NRMA Holdings Ltd [1994] FCA 1397; (1994) 124 ALR 548 General Newspapers Pty Ltd v Telstra Corporation [1993] FCA 473; (1993) 45 FCR 164 Gillette Australia Pty Ltd v Energizer Australia Pty Ltd [2002] FCAFC 223; (2002) 193 ALR 629 Gillette Australia Pty Ltd v Energizer Australia Pty Ltd [2005] FCA 1647 Giorgianni v The Queen [1985] HCA 29; (1985) 156 CLR 473 Given v Pryor (1979) 24 ALR 442 Gore v Australian Securities and Investments Commission [2017] FCAFC 13; (2017) 341 ALR 189 Hadgkiss v CFMEU [2008] FCAFC 22; (2008) 166 FCR 374 Jainran Pty Ltd v Boyana [2008] NSWSC 468 Johnson Tiles Pty Ltd v Esso Australia Ltd [2000] FCA 1582; (2000) 104 FCR 564 National Exchange Pty Ltd v Australian Securities and Investments Commission [2004] FCAFC 90; (2004) 49 ACSR 369 Pappas v Soulac Pty Ltd [1983] FCA 3; (1983) 50 ALR 231 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191 Procter & Gamble Australia Pty Ltd v Energizer Australia Pty Ltd [2011] FCA 1347 Ritz Hotel Ltd v Charles of the Ritz Ltd (1988) 15 NSWLR 158 Robert Bax & Associates v Cavenham Pty Ltd [2012] QCA 177; [2013] 1 Qd R 476 Shahid v Australasian College of Dermatologists [2008] FCAFC 72; (2007) 168 FCR 46 Specsavers Pty Ltd v Luxottica Retail Australia Pty Ltd [2013] FCA 648 Stuart Alexander and Co (Interstate) Pty Ltd v Blenders Pty Ltd (unreported, Lockhart J, 25 September 1981) Sykes v Reserve Bank of Australia [1998] FCA 1405; (1998) 88 FCR 511 Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc [1992] FCA 630; (1992) 38 FCR 1 Trade Practices Commission v J & R Enterprises Pty Ltd (1991) 99 ALR 325 Walker v Walker (1937) 57 CLR 630 Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 Heydon JD, Cross on Evidence (10th ed, LexisNexis Butterworths, 2015) Oxford English Dictionary Date of hearing: 29, 30, 31 August 2016, 1, 2, 5 September 2016 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Category: Catchwords Number of paragraphs: 521 Counsel for the Applicants: Mr S White SC with Mr T Glover Solicitor for the Applicants: Corrs Chambers Westgarth Counsel for the Respondents: Mr S Bell with Ms Z Shahnawaz Solicitor for the Respondents: Websters ORDERS NSD 170 of 2015 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION First Applicant SCOTT GREGSON Second Applicant AND: WE BUY HOUSES PTY LIMITED (ACN 094 068 023) First Respondent RICHARD KEITH OTTON Second Respondent JUDGE: GLEESON J DATE OF ORDER: 11 August 2017 THE COURT ORDERS THAT: 1. Leave to file the third further amended statement of claim dated 5 September 2016 is refused. 2. The applicants file and serve draft orders contended for to give effect to these reasons on or before 18 August 2017. 3. Proceedings be set down for the making of orders to give effect to these reasons on a date to be fixed in consultation with the Associate to Gleeson J. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT INDEX Alleged misrepresentations [8] System and strategies representations [8] Representations about Mr Otton's success in real estate [14] Testimonials supporting use of techniques [18] ACCC's case [23] Leave sought to file third further amended statement of claim [27] Legal principles [30] Applicable statutory regime [31] Relevant provisions of the Australian Consumer Law [37] Proof [44] Representations as to future matters [45] Testimonials [47] Representations [50] Representations in advertising [60] Puffery [64] Half-truths [69] Misleading conduct as to the nature of services [73] Accessorial liability [74] Evidence [79] Mr Otton's evidence [85] Assessment of evidence of Mr Donkin and Ms Siekaup [110] Respondents' submissions about boot camp evidence [112] Findings [119] The respondents' techniques (or strategies) [119] "Rent-to-buy" [123] Technique [123] Model of technique [125] "Sandwich lease option" [130] Model of technique [135] "Deposit builder" [139] Model of technique [144] "Handyman special" or "sweat equity" [149] Model of technique [153] "Vendor finance" or "purchase by instalments" [155] Model of technique [165] "Some now, some later" [169] Model of technique [171] General conclusions about the respondents' techniques [172] The alleged wealth creation system [177] Mr Otton's implementation of the techniques [181] Deception Bay property [186] Quakers Hill property [192] Willmot property [203] Marayong property [208] Cessation of respondents property business [215] Conclusions [218] Ms Siekaup's evidence [222] No evidence from persons who gave testimonials or "Big Kahunas" [231] Witnesses unsuccessful attempts to implement the techniques [236] Witnesses beliefs that techniques can work [249] Can the respondents' strategies be used to buy a house for $1? [254] Mr Otton's personal success [269] Representations [269] WBH financial statements [273] Success in the United States [283] Positive cash flow from properties since 2007 [284] Gross capital profit [286] Respondents' publications [288] Book titled "How to buy a house for $1" [288] "Free Ticket" bookmark accompanying book [291] Content of the book [296] Inside front cover [297] First and last page of book [298] Preface [302] Section entitled "All about buying" [311] Section entitled "All about selling" [317] Section entitled "Five core strategies" [320] Inside back cover [331] Back cover [332] Impact of the book [333] Free seminars [334] Advertising for free seminars [336] 2013 free seminars webpage [337] 2013 free seminars mail-out [339] 2014 free seminars advertisement [341] 2014 free seminars webpage [343] 2014 free seminars email [345] 2014 free seminars mail-out [347] Testimonials on 2013 free seminars webpage [349] Testimonials on 2014 free seminars webpage [350] Emails subsequent to attending a free seminar [354] Free seminar content [356] Power Property Profits Pack [361] Websites [368] www.howtobuyahouseforadollar.com/order.php [370] www.howtobuyahouseforadollar.com/propertypowerpack/step2/? [371] www.howtobuyahouseforadollar.com/media.php [372] Success stories webpage [374] Rickotton homepage [375] www.rickotton.com/index-wp.php/?=1082 [376] www.rickotton.com/freepromodvd/freepromodvd.html [377] Readysetboom webpage (4 March 2014) [378] Readysetboom webpage (12 June 2014) [379] Boot Camps [381] Boot camp manual [386] Boot camp content [389] Go Direct mentoring program [397] Testimonials [399] Issues for determination [403] Were the System and Strategies Representations conveyed? [403] Consumers to whom statements were directed [403] Context of the representations [408] Context of the book [409] Representation (a): "Buy a house for $1" representation [411] Representation (b): "Buy a house without a deposit, bank loan or real estate experience" representation [422] Representation (c): "Buy a house using little or none of the consumer's own money," representation [432] Representation (d): Create passive income streams representation [440] Representation (e): Build property portfolios representation [445] Representation (f): Start making profits immediately representation [450] Representation (g): Create or generate wealth representation [453] Conclusions [457] Were the representations with respect to future matters? [460] Were representations (a), (b) and (c) puffery? [465] Representation (a): "Buy a house for $1" representation [466] Representations (b) and (c):"Buy a house without a deposit, bank loan or real estate experience" and "Buy a house using little or none of the consumer's own money" representations [472] Did the respondents have reasonable grounds for making the representations? [474] Did the representations contain half-truths that were misleading by their insufficiency of information? [484] Were consumers misled? [488] Representations about Mr Otton's financial success? [498] Boot Camps [498] Websites [500] Falsity of representations [504] Did WBH and Mr Otton make false or misleading representations by publishing testimonials [505] Contraventions [508] Section 18 [508] Sections 29(1)(f) [510] Section 29(1)(g) [511] Section 34 [513] Section 37 [517] Conclusion [521] GLEESON J: 1 The applicants ("ACCC") seek relief against the respondents for alleged contraventions of the Australian Consumer Law, being Schedule 2 to the Competition and Consumer Act 2010 (Cth) ("Act"), in connection with their promotion of a "wealth creation system" which purported to enable consumers to "buy a house for $1". 2 The first respondent ("Mr Otton") is the sole director and sole shareholder of the second respondent ("WBH"). He is the author of a book entitled "How to Buy a House for $1" ("book"), published and distributed in Australia by WBH from at least sometime in 2012. Mr Otton provided his services, his image and identity, and his knowledge and strategies in relation to property investment, to WBH. Mr Otton was involved in WBH by making or participating in the making of decisions that affected the whole, or a substantial part, of the business of WBH. As WBH's sole director, Mr Otton had ultimate responsibility for WBH's activities. 3 WBH carried on business in Australia conducting seminars, courses, boot camps, mentoring programs and supplying training materials to consumers (including the book). From at least 1 July 2009 to the present, each of WBH and Mr Otton promoted WBH's business and sold goods and services to consumers and potential consumers, consisting of materials and information, seminars, boot camps and mentoring programs regarding the use of certain techniques regarding property investment. 4 WBH and Mr Otton established and operated websites with the URLs www.howtobuyahouseforadollar.com, www.rickotton.com and www.readysetboom.com.au ("websites") from at least 1 January 2011. The activities of WBH were promoted on the websites. 5 The respondents denied that they promoted a wealth creation system. They said that their activities were to explain ideas whereby persons could invest in real estate. The respondents observed that there was no evidence before the Court of a single consumer complaint about their activities. They said that the statements relied upon by the ACCC invited the consumer to speculate on what might be possible, rather than promising a guaranteed outcome. 6 The ACCC sought to place a far more sinister complexion upon the respondents' activities. It said that the respondents made false or misleading representations, particularly in the book, on the websites and at free seminars to promote boot camps from which WBH earned substantial income. Attendance at the boot camps cost approximately $6,000 for two tickets. The boot camps, the ACCC alleges, were used in turn to promote an "advanced training" and "mentoring" program. Varying evidence was given of the price for the program, but it included around $26,000 for one ticket and $30,000 for two tickets. The "mentoring" program was named "Go Direct" and is described below. The ACCC also submitted that, despite promoting WBH's business by reference to Mr Otton's own success as a "self made millionaire and property investor", the respondents themselves did not deal in property; rather they were in the business of selling a business model that promised an easy to use system for property investment that included tips on who to target (both vendors and purchasers that fit a certain demographic), and that would produce immediate results. 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. Alleged misrepresentations System and strategies representations 8 The ACCC allege that in the course of advertising and conducting the seminars and boot camps, and in the training materials and on various websites, the respondents made representations that, by following or implementing techniques promoted by the respondents (and described in detail below), consumers were able to: (1) buy a house for $1; (2) buy a house without needing a deposit, bank loan or real estate experience; (3) buy a house using little or none of the consumer's own money, including by buying at a discount; (4) create passive income streams through property and/or quit their jobs, including by "[turning] negative gearing into positive cash flow"; (5) build property portfolios without their own money invested and, without new bank loans or without real estate experience; (6) start making profits immediately; and (7) create or generate wealth. 9 In its second further amended statement of claim ("statement of claim"), the ACCC referred to these representations as the "System and Strategies Representations". 10 The statement of claim pleads that the respondents did not have reasonable grounds for making the System and Strategies Representations and relies on s 4 of the Australian Consumer Law, by which a representation as to a future matter is taken to be misleading if the maker of the representation does not have reasonable grounds for making the representation. In his oral opening, senior counsel for the ACCC, Mr White SC, submitted that the parties were in agreement that the System and Strategies Representations are representations as to future matters. That submission was not disputed by counsel for the respondents, Mr Bell, in his oral opening. However, in his closing submissions, Mr Bell observed that the ACCC's case was directed to both the past and the future – in that, as Mr Bell characterised the ACCC's case, it was contending that the respondents' strategies have not worked in the past and will not work in the future. 11 The ACCC also contended that the respondents engaged in misleading or deceptive conduct by failing to disclose to consumers and potential consumers, or warn consumers and potential consumers, that the techniques taught by the respondents were unlikely to achieve the outcomes conveyed in the System and Strategies Representations. 12 By their defence, the respondents deny making the System and Strategies Representations. That defence was maintained in the face of ample written evidence, set out below, that the respondents repeatedly and emphatically said the very things that the ACCC alleged to comprise the System and Strategies Representations. The respondents put a case that their statements were taken out of context but did not satisfactorily explain how their words bore a different meaning once context was taken into account. 13 By their defence, the respondents also say that if consumers followed "certain ideas" that include techniques promoted by the respondents, "they may be able to achieve certain goals including creating or generating income and wealth". The respondents did not put a positive case that, if made, the System and Strategies Representations were true. However, the defence does assert that Mr Otton himself had been successful financially in following the ideas and using the strategies. The defence also contends that, if the System and Strategies Representations were made, then they were puffery "in that they were invitations to attend free seminars and buy the book where the ideas [including techniques promoted by the respondents] would be explained in detail" and that the respondents "did have reasonable grounds in the context". Representations about Mr Otton's success in real estate 14 The ACCC alleged that, during boot camps, the respondents made claims about Mr Otton's financial success in implementing the system and using the techniques. The statements upon which the ACCC relied are contained in a transcript of a boot camp held in April 2014 at the Canterbury Hurlstone Park RSL Club ("2014 Hurlstone Park boot camp"), and are set out in appendix 5 to this judgment (items 16, 17 and 18). 15 By their defence, the respondents "admit" that Mr Otton himself "had been successful financially in following the ideas and using the strategies". The defence also states that Mr Otton was "successful financially in using the ideas pleaded in paras 8.1 to 8.5 of the Further Amended Statement of Claim" by reason of his being the director of WBH. In support of this statement, the defence provides particulars of gross income allegedly earned from property by WBH over the years ended 30 June 2003 to 30 June 2013. 16 Those gross income figures were not borne out by the evidence. 17 The evidence included: (1) the following statements on the webpage http://www.howtobuyahouseforadollar.com/register/, used by the respondents to promote free seminars in 2013 ("2013 free seminars webpage"): (a) next to a picture of Mr Otton: "Rick Otton Director of We Buy Houses Pty Ltd Self-Made Millionaire & Property Investor"; (b) "In the last 22 years I've purchased over 300 properties in Australia and the USA – using little or none of my own money"; (c) "… I'll share with you the same strategies I use to buy properties for $1 and create cash flow income – without ever stepping inside a bank or saving thousands for a deposit"; (d) "Rick's Story: How I became a real estate millionaire without money, finance or even a mobile phone to start with!"; (e) "If you are open minded, then I'd love to show you the no-money-down strategies my students and I regularly use to buy property without a bank, a deposit or even paying stamp duty"; (2) the following statements on the web page http://www.creativerealestate.com.au/readysetboom/, which was used by the respondents to promote free seminars in 2014 ("2014 free seminars webpage"): (a) "About 20 years ago, I discovered a remarkable property investment system that allowed me to purchase 76 properties in 12 months without bank finance and in a FALLING MARKET... Since then my students and I have used this system to PROFIT throughout rising, falling and even BOOMING markets"; and (3) the following statement on the webpage http://www.rickotton.com/about-us/: (a) "Well I'm Rick Otton and I've bought a bunch of properties for $1 and I'd like to share with you why…". Testimonials supporting use of techniques 18 Testimonials are a significant feature of WBH's various publications. The respondents sought to rely on the testimonials in their defence, noting that in the book there are six testimonials between pp 194-197 and 28 testimonials between pp 200-205. The respondents also noted that there are at least 22 testimonials on the www.howtobuyahouseforadollar.com website. 19 The ACCC alleged that the following publications contained representations purporting to be testimonials from consumers who had followed or implemented the techniques to achieve the outcome described by the System and Strategies Representations: (1) advertisements about the free seminar, as set out in [336] below; (2) the www.howtobuyahouseforadollar.com website; and (3) the www.readysetboom.com.au website. 20 The testimonials relied upon by the ACCC and referred to above are identified at [330], [349], [350], [374] and [380] below. Each one contains a claim that the author bought a property for $1. There was no evidence from the persons who had purportedly given the testimonials to verify their claims. 21 The ACCC argued that a significant feature of the experiences of Mr Otton and the persons who purportedly gave the testimonials (as set out in the book, the various web pages set out above and the testimonials) was the ease with which the techniques could be used "(i) on any property, (ii) in any market and (iii) without the consumer having any real estate experience". 22 The ACCC did not contend that the testimonials were fictitious. Its case was that the testimonials were false because it is not possible to buy a house for $1, and that the testimonials are deemed to be misleading under s 29(2) of the Australian Consumer Law (set out below) in the absence of evidence to the contrary. ACCC's case 23 The trial dealt with the ACCC's case that the respondents had contravened the Australian Consumer Law, with questions of relief to be dealt with separately in the event that the Court found the alleged contraventions. 24 The principal findings for which ACCC contended are: (1) WBH and Mr Otton made the System and Strategies Representations: (a) in the book; (b) at the free seminars (and in material promoting those events); (c) at the boot camps (and in material promoting those events); (d) in its training materials; and (e) on the websites. (2) Consumers using the system and strategies promoted and taught by WBH and Mr Otton could not achieve the outcomes represented, because the strategies require either: (a) the purchase of a property using a consumer's own money; a deposit and/or traditional bank finance; or (b) the consumer to act as a "middleman" to facilitate property transactions between third party sellers and third party buyers. (3) WBH and Mr Otton did not have reasonable grounds for making the System and Strategies Representations because: (a) Mr Otton himself had not implemented the strategies in the manner that WBH and Mr Otton taught them; and (b) WBH and Mr Otton called no evidence from anyone who had successfully implemented the strategies to achieve the outcomes represented. (4) The System and Strategies Representations were false, misleading or deceptive or likely to mislead or deceive in that the strategies could not achieve the outcomes represented. (5) WBH and Mr Otton failed to disclose to or warn consumers and potential consumers that the strategies were not easy to implement and work in limited circumstances only. (6) The System and Strategies Representations were not puffery, having regard to the context which saw them repeated throughout the various forums and media in which they appeared. (7) WBH and Mr Otton adduced no evidence that the testimonials were not false or misleading. (8) Mr Otton had not been financially successful in implementing the strategies, and the representations to the effect that he was successful were false, misleading or deceptive or likely to mislead or deceive, because the vast majority of the properties he acquired were acquired using a deposit and mainstream bank finance. 25 The ACCC contended that, accordingly, the Court should conclude that the respondents contravened the Australian Consumer Law. 26 For the reasons that follow, I make, in substance, all of the principal findings for which the ACCC contended. Leave sought to file third further amended statement of claim 27 The proceeding was commenced by an originating application dated 2 March 2015. On 8 August 2016, the ACCC filed a second further amended statement of claim. On the sixth day of the trial, Mr White SC handed up a third further amended statement of claim. The third further amended statement of claim seeks to include an allegation that the respondents made false representations about Mr Otton's financial success in implementing the system and strategies promoted by the respondents on three webpages, set out at [17] above. Mr White SC noted that the second further amended statement of claim alleged that false representations were made about Mr Otton's financial success at boot camps. Mr White SC submitted that there could not be any prejudice to the respondents arising from the proposed amendment. 28 The respondents opposed the filing of the amendment and noted that the representations relied upon extend beyond the representations pleaded in relation to boot camps and include representations concerning Mr Otton's financial success in the Unites States of America. 29 There was no explanation given for why the ACCC had not pleaded the new allegations earlier. I am not satisfied that the respondents would not be prejudiced by the late introduction of the new allegations. Accordingly, I will not grant leave to file the third further amended statement of claim. Legal principles 30 There was no dispute as to the applicable legal principles. Applicable statutory regime 31 The originating application claims relief under the Australian Consumer Law or, in the alternative, the Australian Securities and Investments Commission Act 2001 (Cth) ("ASIC Act"). 32 The Australian Consumer Law regime applies to a supply, or possible supply, of "goods and services" and does not apply to "the supply, or possible supply, of services that are financial services, or of financial products": s 131A(1) of the Act. The ASIC Act regime applies, relevantly, to "financial services". The term "financial services" is defined in s 12BAB(1)(a) of the ASIC Act to mean, relevantly, "provide financial product advice". A "credit facility" is a financial product for the purposes of the ASIC Act: s 12BAA(7)(k). 33 The ACCC submitted that the business of WBH, and Mr Otton's involvement in it, related to the supply of services by the respondents, being the supply of "materials and information, seminars, boot camps and mentoring programs". The ACCC submitted that the techniques, if implemented, might involve or contemplate the use of a credit facility and therefore a financial product within the meaning of the ASIC Act. However, the ACCC argued, the alleged representations do not relate to a credit facility, or any other financial product but, rather, to the outcomes the respondents said could be achieved by implementing the techniques. 34 Accordingly, the applicants submitted, the correct statutory regime against which to assess its case is the Australian Consumer Law. 35 The respondents did not argue against this analysis. 36 I accept the ACCC's submission and have proceeded upon the basis that the relevant statutory regime is the Australian Consumer Law. Relevant provisions of the Australian Consumer Law 37 The ACCC alleges that the pleaded representations variously contravened the following provisions of the Australian Consumer Law: (1) section 18; (2) sub-sections 29(1)(e), (f) and (g); (3) section 34; and (4) section 37. 38 Section 18(1) provides that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. 39 Section 29(1) provides, relevantly, that a person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services: (e) make a false or misleading representation that purports to be a testimonial by any person relating to goods or services; or (f) make a false or misleading representation concerning: (i) a testimonial by any person; or (ii) a representation that purports to be such a testimonial; relating to goods or services; or (g) make a false or misleading representation that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits; … 40 For s 29(1)(g), a performance characteristic, use or benefit in relation to services signifies something that the services can do or something that can be done with the services, or perhaps some consequence of having received the services: cf Australian Competition and Consumer Commission v Pest Free Australia [2004] FCA 527 at [15]. 41 Section 29(2) provides: For the purposes of applying subsection (1) in relation to a proceeding concerning a representation of a kind referred to in subsection (1)(e) or (f), the representation is taken to be misleading unless evidence is adduced to the contrary. 42 Section 34 provides that a person must not, in trade or commerce, engage in conduct that is liable to mislead the public as to the nature, the characteristics, the suitability for their purpose or the quantity of any services. 43 Section 37(1) provides that a person must not, in trade or commerce, make 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. Proof 44 The allegations made against the respondents are serious and must be proved on the balance of probabilities, taking into account the nature of the cause of action, the nature of the subject matter of the proceeding and the gravity of the matters alleged: s 140 Evidence Act 1995 (Cth): cf. Australian Competition and Consumer Commission v Dateline Imports Pty Ltd [2014] FCA 791; (2014) 143 ALD 136 at [14]-[15] ("ACCC v Dateline Imports"); Australian Competition and Consumer Commission v Flight Centre Ltd (No 2) [2013] FCA 1313; (2013) 307 ALR 209 at [8] per Logan J; Australian Securities and Investments Commission v Australian Property Custodian Holdings Limited (Recs and Mgrs apptd) (in liq) (Controllers apptd) (No 3) [2013] FCA 1342 at [33]- [36] per Murphy J. Representations as to future matters 45 Section 4 of the Australian Consumer Law facilitates proof in false, misleading or deceptive representation cases involving representations as to future matters. It has its origins in the former Trade Practices Act 1974 (Cth), s 51A. 46 Section 4 provides that in the case of a representation with respect to a future matter, unless evidence is adduced to the contrary, the person making the representation is taken not to have had reasonable grounds for making it, with the result that the representation will be taken to be misleading. Additionally, the person will not be taken to have reasonable grounds merely because such evidence is adduced. The fact that a person may believe in a particular state of affairs does not necessarily mean that there are reasonable grounds for that belief: Cummings v Lewis (1993) 41 FCR 559 at 565 per Sheppard and Neaves JJ. Testimonials 47 Section 29(2) provides, for the purposes of applying s 29(1), in relation to a proceeding concerning a representation of a kind referred to in s 29(1)(e) or (f), the representation is taken to be misleading unless evidence is adduced to the contrary. 48 Section 29(3) provides: (3) To avoid doubt, subsection (2) does not: (a) have the effect that, merely because such evidence to the contrary is adduced, the representation is not misleading; or (b) have the effect of placing on any person an onus of proving that the representation is not misleading. 49 The ACCC submitted that I should be guided in my review of the evidence by the comments of Lindgren J in Gillette Australia Pty Ltd v Energizer Australia Pty Ltd [2002] FCAFC 223; (2002) 193 ALR 629 at [47]: I have carefully viewed the Modified Advertisement several times and tried to assess its likely effect on viewers. But, as I observed in the earlier Eveready case (at [38]), apart from the difference between a one-off viewing and repeated viewings, the circumstances in which a judge attends to a television commercial for the purposes of a case are not those in which members of the public do so. First, members of the public watch a commercial after and before viewing other things, rather than in isolation. Secondly, unlike the judge, they do not carefully view the commercial with a special interest in noting and memorising its features. Thirdly, they view the commercial, not in the calm of chambers, but against a background of distractions, such as domestic activity, or simply a preoccupation with other more interesting or pressing concerns. Fourthly, usually they do not know in advance that the commercial is about to commence. Representations 50 A representation is a statement, made orally or in writing or by implication from words or conduct, relating to a matter of fact: Given v Pryor (1979) 24 ALR 442 at 446. 51 Whether representations are false, misleading or deceptive or likely to mislead or deceive requires the application of well-settled principles to the circumstances of the case: Specsavers Pty Ltd v Luxottica Retail Australia Pty Ltd [2013] FCA 648 at [49] ("Specsavers"). 52 The principles relevant, in the circumstances of these proceedings, can be summarised as follows. 53 There are two matters to be decided: firstly, whether the pleaded representation is conveyed by the particular events complained of, and if so, whether the representation conveyed is false, misleading or deceptive or likely to mislead or deceive: Australian Competition and Consumer Commission v Telstra Corporation Ltd [2007] FCA 1904; (2007) 244 ALR 470 ("ACCC v Telstra") at [14]-[15]. In that case, Gordon J said at [14]-19]: [14] The relevant legal principles have been well traversed by Australian courts. A two-step analysis is required. First, it is necessary to ask whether each or any of the pleaded representations is conveyed by the particular events complained of: Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45 at [105]; National Exchange Pty Ltd v Australian Securities and Investments Commission [2004] ATPR 42-000 at [18] per Dowsett J (with whom Jacobson and Bennett JJ agreed) and Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd [2006] ATPR 42-106 at [37]. That is, do the 12 Events singularly or collectively convey either of the Coverage Representations and do the 3 Events singularly or collectively convey the CDMA Comparison Representation. [15] Second, it is necessary to ask whether the representations conveyed are false, misleading or deceptive or likely to mislead or deceive. This is a "quintessential question of fact": Australian Competition and Consumer Commission v Telstra (2004) 208 ALR 459; [2004] FCA 987 at [49]. [16] Because the conduct complained of in the present matter was not directed at a specific individual both questions that have been identified must be considered by reference to the class or classes of consumers likely to be affected by the conduct: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199 per Gibbs CJ; Nike at [102], [103], [105] and [106]; Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [36] per Gleeson CJ, Hayne and Heydon JJ. [17] In .au Domain Administration Ltd v Domain Names Australia Pty Ltd (2004) 207 ALR 521; 61 IPR 81; [2004] FCA 424 at [12]–[26] Finkelstein J provided a useful summary of the approach that might be taken where a court is required to assess conduct by reference to a specific class or classes of consumers, and did that by particular reference to Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202–3 per Deane and Fitzgerald JJ and Nike at [100]–[103]. The approach may be summarised in six points, as follows: (1) first, identify the relevant section or sections of the public by reference to which the issue is to be tested. The target section or sections of the public would, of course, vary according to the facts of each case: Parkdale at CLR 209; ALR 14–15; IPR 695–6 per Mason J; Finucane v New South Wales Egg Corp (1988) 80 ALR 486 at 516. The relevant section or sections of the public may be confined by factors such as the time period over which the alleged representations were made and the geographical circulation of the advertisements containing the alleged representations (for an example of geographical circulation defining the relevant test section, see Talmax Pty Ltd v Telstra Corp Ltd [1997] 2 Qd R 444 at 446; (1996) 36 IPR 46 at 47); (2) second, having identified the relevant section or sections of the public, consider who comes within that section or those sections. This may include the astute and the gullible, the intelligent and the not so intelligent, the well educated and the poorly educated: see also Parkdale at CLR 199; ALR 6; IPR 688–9 per Gibbs CJ; (3) third, it is permissible, but not essential, to have regard to evidence that some person has in fact been misled, though this evidence will not be conclusive; (4) fourth, it is necessary to enquire whether any proven misconception has arisen because of the misleading or deceptive conduct; (5) fifth, where the persons alleged to have been misled are members of a class, it is necessary to isolate a representative member of the class and enquire whether that hypothetical person is likely to be deceived; and (6) sixth, when considering the likely effect of the misrepresentation on this hypothetical person, he or she should be judged as an "ordinary" or "reasonable" member of the class, excluding reactions to the representation that are "extreme" or "fanciful". …. [19] As noted, under the two-step analysis that has been described, the court cannot consider each event in isolation. Each event must be considered within the context of the advertising campaign of which it formed part: see Telstra Corporation Ltd v Optus Communications Pty Ltd (1996) 36 IPR 515 at 523–524; Trade Practices Commission v Optus Communications Pty Ltd (1996) 64 FCR 326 at 338; Astrazeneca at [24]; Johnson & Johnson Pacific Pty Ltd v Unilever Australia Ltd (No 2) [2007] ATPR 42-136 at [16]. In a national advertising campaign it would ordinarily be expected that there would be a dominant message and, in such a case, particular attention should be paid to that dominant message. In Telstra Corporation at 524, that principle was stated as follows: In television and print advertising where a false dominant impression is conveyed, its message will not be ameliorated by the accuracy of the detailed message which is derived from a careful analysis of all the constituent parts of the advertisement. 54 Whether a representation is made must be considered in context: Hadgkiss v CFMEU [2008] FCAFC 22; (2008) 166 FCR 374 at [27]: In determining whether a statement is false or misleading, it is necessary to consider the context within which the statement was made: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191 at 199; Given v Pryor (1979) 24 ALR 442 at 446-447. In this case, as the appellant correctly recognised, the task of the primary judge was to make findings not only as to the particular words used by Mr Lane but also as to the implications to be drawn from those words. 55 In Specsavers, at [49], Griffith J said: [W]hether or not conduct is misleading or deceptive is a question of fact to be determined objectively and upon the basis of the impugned conduct being viewed as a whole and in its full context (see Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 at [25] and [102] and Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191 at 199 per Gibbs CJ); … 56 A representation will be false, misleading or deceptive or likely to mislead or deceive if it if it has a tendency to lead into error, or if it induces or is capable of inducing error: Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; (2013) 250 CLR 640 ("TPG") at 651, [39]; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191 at 198; Johnson Tiles Pty Ltd v Esso Australia Ltd [2000] FCA 1582; (2000) 104 FCR 564 at 589-590, [63]. 57 Whether a representation is false, misleading or deceptive or likely to mislead or deceive is 'quintessentially' a question of fact, which should not be complicated or over-intellectualised: Australian Competition and Consumer Commission v Telstra Corporation Ltd [2004] FCA 987; (2004) 208 ALR 459 at [49] (Gyles J). 58 In ACCC v Dateline Imports at [30]-[32], Rangiah J said, concerning a proceeding for breach of s 52 of the Trade Practices Act: [30] … The question is whether a not insignificant number of reasonable persons within the class have been misled or deceived or are likely to be misled or deceived by the conduct, whether in fact or by inference: Hansen Beverage Co v Bickfords (Aust) Pty Ltd [2008] FCAFC 181; (2008) 171 FCR 579 at [46] per Tamberlin J, at [66] per Siopis J; ConAgra Inc v McCain Foods (Aust) Pty Ltd [1992] FCA 159; (1992) 33 FCR 302 at 380-381; Bodum v DKSH Australia Pty Ltd [2011] FCAFC 98; (2011) 280 ALR 639 at [205]. [31] The question of what is the natural and ordinary meaning conveyed by a publication or conduct is to be ascertained by the Court applying an objective test of what ordinary or reasonable readers or consumers in the class would have understood as the meaning: Bodum v DKSH Australia Pty Ltd [2011] FCAFC 98; (2011) 280 ALR 639 at [203]. [32] It follows that where the alleged contravention of s 52 of the TPA involves the making of a representation to the public or a class of the public, it is necessary for the Court to consider what ordinary persons in the class to which the representation is made would understand by the representation, and whether a not insignificant number of such persons would have that understanding. 59 The ACCC submitted that the contextual approach requires consideration of any "hangover effect" caused by earlier representations: ACCC v Telstra (2007) 244 ALR 470 at [20]. Representations in advertising 60 Where representations are directed to members of the public at large, the representations must be judged by their effect on "ordinary" or "reasonable" members of the class: Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 634; (2014) 317 ALR 73 ("Coles") at [43], citing Campomar Sociedad Limitada v Nike International Ltd [2000] HCA 12; (2000) 202 CLR 45 at 86-87, [105]. The ordinary or reasonable person likely to be affected by advertising directed to the public at large or sections of the public may be intelligent or not, may be well educated or not, will not likely undertake "an intellectualised process of analysis … and will be likely affected by an intuitive sense of attraction rather than by any process of analytical or logical choice": Coles at [43]. 61 In assessing advertising material, the 'dominant message' of the material will be of crucial importance: Coles at [42], citing TPG at [45]. Where advertising material uses simple phrases and words evoking attractive notions, but without necessarily precise meaning, ambiguity or reasonably available different meanings may well arise. If one or more of the reasonably available different meanings is misleading, the conduct may well be misleading or deceptive, or false and misleading: Coles at [47]. 62 As stated by Lee J in Australian Competition and Consumer Commission v Target Australia Pty Ltd [2001] FCA 1326; [2001] ATPR 41-840 at [15], " ... it is often the case that the first impression will be the lasting impression". 63 It is not necessary to prove the conduct in question has misled anyone. The question whether conduct is misleading or deceptive is to be assessed by reference to the reaction of the hypothetical representative member of the class to whom the representation is directed: .au Domain Administration Ltd v Domain Name Australia Pty Ltd (2004) 207 ALR 521 at [25] and [26]. Puffery 64 Whether a representation constitutes puffery or marketing exaggeration and, consequently, is not actionable turns on the particular facts considered in light of the ordinary incidents and character of commercial behaviour: Specsavers at [49], citing General Newspapers Pty Ltd v Telstra Corporation [1993] FCA 473; (1993) 45 FCR 164 at 178 and Australian Competition and Consumer Commission v Henry Kaye and National Investment Institute Pty Ltd [2004] FCA 1363 ("Kaye") at [122]. A claim will not be regarded as puffery if there is a definitive statement as to a characteristic or consequence of the claim: Specsavers at [49], citing Jainran Pty Ltd v Boyana [2008] NSWSC 468 ("Jainran") at [117], Gillette Australia Pty Ltd v Energizer Australia Pty Ltd [2005] FCA 1647 at [25] and Procter & Gamble Australia Pty Ltd v Energizer Australia Pty Ltd [2011] FCA 1347 at [168]-[172]. 65 By corollary, a characteristic often attributed to puffery is that it is "incapable of being proved to be correct or incorrect": Pappas v Soulac Pty Ltd [1983] FCA 3; (1983) 50 ALR 231 at 238. In that case, a representation that a shopping centre was a good investment was found to be in the nature of puffery. 66 In Jainran at [117], Bryson AJ gave as examples of puffery statements such as "The greatest show on earth", "the best car in its class on the market today", "leading a new wave of talent" and "we've already been getting interest in this property". 67 In Kaye, at [123], Kenny J held that representations to the effect that Mr Kaye could turn or make ordinary Australians into property millionaires by following his strategies; and that he would demonstrate this claim, were not puffery in the context in which they were made. 68 In Stuart Alexander and Co (Interstate) Pty Ltd v Blenders Pty Ltd (unreported, Lockhart J, 25 September 1981), Lockhart J said, in considering comparative television advertising for coffee: I think a robust approach is called for when determining whether television commercials of this kind are false, misleading or deceptive. The public is accustomed to the puffing of products in advertising. Although the class of persons likely to see this commercial is wide, it is inappropriate to make distinctions that are too fine and precise. Half-truths 69 Half-truths may be misleading by the insufficiency of information that permits a reasonably open but erroneous conclusion to be drawn: Coles at [46], citing Fraser v NRMA Holdings Ltd [1994] FCA 1397; (1994) 124 ALR 548 at 563 and Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc [1992] FCA 630; (1992) 38 FCR 1 at 50. 70 Even information that is literally true can be misleading or deceptive: National Exchange Pty Ltd v Australian Securities and Investments Commission [2004] FCAFC 90; (2004) 49 ACSR 369 at [49]. 71 In Fraser v NRMA Holdings Ltd (1995) 55 FCR 452, at 467 the Full Federal Court stated: Whilst s 52 does not by its terms impose an independent duty of disclosure which would require a corporation or its directors to give any particular information to members … where information for that purpose is promulgated, unless the information given constitutes a full and fair disclosure of all facts which are material to enable the members to make a properly informed decision, the combination of what is said and what is left unsaid may, depending on the full circumstances, be likely to mislead or deceive the membership. 72 In Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) [2015] FCA 342 at [388], White J stated: The principles relevant to this part of ASIC's claim are settled. Many of the principles were discussed in Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31; (2010) 241 CLR 357, in particular, at [16]-[21] (French CJ and Kiefel J). I take the applicable principles to be as follows: (1) Conduct involving silence or omission may, in some circumstances, constitute misleading or deceptive conduct; (2) In considering whether conduct is misleading or deceptive, silence is to be assessed as a circumstance like any other; (3) Mere silence without more is unlikely to constitute misleading or deceptive conduct. However, remaining silent will be misleading or deceptive if the circumstances are such as to give rise to a reasonable expectation that if some relevant fact does exist, it will be disclosed; (4) A reasonable expectation that a fact, if it exists, will be disclosed will arise when either the law or equity imposes a duty of disclosure, but is not limited to those circumstances. It is not possible to be definitive of all the circumstances in which a reasonable expectation of disclosure may arise but they may include circumstances in which a statement conveying a halftruth only is made, circumstances in which the representor has undertaken a duty to advise, circumstances in which a representation with continuing effect, although correct at the time it was made, has subsequently become incorrect, and circumstances in which the representor has made an implied representation; … Misleading conduct as to the nature of services 73 In relation to the expression "liable to mislead the public" in s 34, there will be a sufficient approach to the public if first, the approach is general and at random and secondly, the number of people who are approached is sufficiently large: cf Trade Practices Commission v J & R Enterprises Pty Ltd (1991) 99 ALR 325 at 347-348, cited in Shahid v Australasian College of Dermatologists [2008] FCAFC 72; (2007) 168 FCR 46 at [207]. Accessorial liability 74 By s 224(1)(e) of the Australian Consumer Law, the Court may order the payment of a pecuniary penalty, if the Court is satisfied that a person "has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of", relevantly, a provision of Part 3-1 of the Australian Consumer Law. Sections 29(1)(f), 29(1)(g), 34 and s 37 are provisions of Part 3-1. 75 A person will be regarded as sufficiently involved in a contravention to invoke this provision if the person intentionally participated in the contravention. Intentional participation requires actual, rather than constructive, knowledge of the essential matters that make up the contravention, and a level of involvement: cf Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 at 670 (Mason ACJ, Wilson, Deane and Dawson JJ), 676 (Brennan J); Giorgianni v The Queen [1985] HCA 29; (1985) 156 CLR 473 ("Giorgianni") at 481-482 (Gibbs CJ), 494 (Mason J), 500 (Wilson, Deane and Dawson JJ); Gore v Australian Securities and Investments Commission [2017] FCAFC 13; (2017) 341 ALR 189 ("Gore") at [6]-[16]. However, where there is a combination of suspicious circumstances and a failure to inquire, that may lead to an inference that the relevant person had actual knowledge of the essential matters that make up the contravention, which would be sufficient to attract s 224: cf. Giorgianni at 504-505 (Wilson, Deane and Dawson JJ), cited in Gore at [169]. 76 In this case, Mr Otton was integrally involved in the activities of WBH, particularly as its main presenter at both free seminars and boot camps. Although at times Mr Otton sought to distance himself from some of the material published by WBH (and even some of the material in the book which he authored), there was no serious contest that he was responsible for all of the marketing material that was sent out by WBH. Mr Otton did not suggest that any particular person or persons employed or engaged by WBH acted outside the scope of his or her authority in publishing marketing material. Mr Otton suggested that he was not "in the boiler room", but was "steering a ship". 77 WBH's marketing material included communications that purported to be from Mr Otton, such as a letter titled "Dear Friend" on the 2013 free seminars webpage, referred to below. In cross-examination, Mr Otton showed familiarity with WBH's materials. For example, when questioned about a photograph of a home on the same webpage, under the words "Watch a Real Property Bought for $1 – Right Before Your Eyes", Mr Otton did not hesitate to say that this was not a photograph of a property which had been bought for $1. 78 Mr Otton probably knew and approved the precise content of all of the materials published by WBH that are relied upon by the ACCC, and knew of and approved their publication. To the extent that he did not, Mr Otton knew and approved the substance of all of those materials. Mr Otton said that the proceeding had forced him to look more closely at the marketing material and, had he done so earlier, he would have said "Well, hang on. Let's readdress that". However, Mr Otton did not identify particular statements that he considered ought not to have been made and, in cross-examination, he defended the marketing materials about which he was questioned. In those circumstances, I am satisfied that he was both knowingly concerned in, and party to WBH's publications relied upon by the ACCC. Evidence 79 The parties tendered a brief statement of agreed facts. 80 The ACCC relied on evidence of nine consumers who had attended the respondents' free seminars and boot camps, and who gave evidence of their attempts to utilise the strategies taught by the respondents, as the witnesses understood them. 81 The consumer witnesses were: (1) Igor Jovanovic, a business executive and former real estate agent, who visited the website webpage www.howtobuyahouseforadollar.com, purchased and read the book, attended a free seminar in October 2012, attended a boot camp held in Sydney in December 2012, and attempted to implement the techniques in Bass Hill, Quakers Hill, Homebush West, North Bondi, Eastlakes, Lake Haven, without success; (2) Anh-Lan Nguyen, a tertiary-educated business consultant, who received a bundle of materials created by the respondents called the "Massive Passive Property Pack", attended a free seminar, attended a boot camp held in Sydney in December 2012, and attempted to implement the techniques in various Sydney suburbs without success; (3) Bevan Nel, a chartered accountant and businessman, who purchased and read the book, visited the website www.howtobuyahouseforadollar.com, attended a free seminar in March-June 2013, attended a boot camp held in Sydney in August 2013, and attempted to implement the techniques in Quakers Hill and Cessnock without success; (4) Emmanuel Elturk, a personal trainer, who visited the website www.howtobuyahouseforadollar.com, and attended a free seminar in August 2013; (5) Nadia Panizzutti, a change management specialist, who visited the website www.howtobuyahouseforadollar.com, purchased and read the book, attended a free seminar in Sydney on 27 October 2013, and attended a boot camp held in Sydney in December 2013; (6) Linda Sereni, an executive assistant, who attended a free seminar in Sydney on 27 October 2013, and attended a boot camp held in Sydney in December 2013; (7) Geoffrey Mackenzie, a Senior Constable in the NSW Police Force, who attended a free seminar in Sydney on 27 October 2013 where he received a copy of the book, which he read sometime in 2014; (8) Adele Austin, an Australian Federal Police officer, attended a free seminar in Sydney on 27 October 2013; and (9) Peter Ronhave, a tertiary-educated business consultant, who purchased and read the Book, visited the website www.howtobuyahouseforadollar.com, attended a free seminar in February 2014, attended a boot camp held in Sydney in April 2014. 82 In addition, the ACCC relied on evidence of two ACCC officers who investigated the respondents' activities and officers of other regulators including three New South Wales Fair Trading officers and one Western Australian Department of Commerce officer. 83 In addition to evidence given by Mr Otton, the respondents adduced evidence from Peter Donkin, a chartered accountant who had been providing accountancy services to Mr Otton and WBH since March 2007, and a former student of the respondents, Karin Siekaup. 84 The respondents also tendered a bundle of documents, largely transcripts, recording claims made by former students at presentations made by the respondents. They were tendered as evidence that the respondents had received those "testimonials" from persons identified as James, Sheree, Mark, an unidentified person, Sirah, Simone Toohey, TC, Mark, Brett Mudie and Graham Wilson. Mr Otton's evidence 85 Mr Otton swore affidavits on 14 December 2015, 16 February 2016, 24 August 2016 and 25 August 2016. 86 The December 2015 affidavit contained a lengthy description of Mr Otton's background and experience in the United States, engaging in property deals, including deals involving vendor finance. Mr Otton's evidence was that he started buying properties in the western suburbs of Sydney in 2000. In August 2002, Mr Otton conducted his first "training boot camp" at the Hydro Majestic Hotel in the Blue Mountains outside Sydney. 87 In 2003, Mr Otton started the Vendor Finance Association in Australia. He was the founding president and remained president until 2009. 88 In the December 2015 affidavit Mr Otton gave the following sworn evidence: [61] 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. [62] It has always been important to me that I make a difference in people's lives and that I conduct myself personally and professionally in a law abiding and ethical manner. It has never been my intent to mislead or deceive and do not believe I ever have. 89 The December 2015 affidavit also contains an explanation of the circumstances in which Mr Otton "decided to move on from the business and management of small property transactions and use that time to invest in the educational side of the business". 90 The February 2016 affidavit contains evidence about two property transactions ("48 Ceres" and "9 Chardonnay"). In relation to the first, Mr Otton gives an explanation for why he incurred a capital loss. In relation to the second, Mr Otton describes some elements of an apparently loss making transaction and annexes a letter from Mr Donkin dated 16 October 2014 which lists the loss on that transaction as $62,421. Mr Otton asserts that the price for which the relevant property was sold "allowed the mortgage loan WBH had with National Australia Bank to be paid off." The settlement adjustment sheet for the sale of the property shows that the whole of the amount due on settlement ($248,953.12) was paid to the bank, and an amount of $99.50 for a discharge of mortgage. The respondents did not suggest that either of these transactions provided a basis for any of the System and Strategies Representations. 91 The 24 August 2016 affidavit purports to give examples of the application by Mr Otton of various of the strategies. The limits of that evidence are explained later in these reasons. The 25 August 2016 affidavit corrects the evidence in the 24 August 2016 affidavit concerning a property at Railway Road, Quakers Hill. 92 The cross-examination of Mr Otton quickly demonstrated the paucity of the bases upon which Mr Otton was prepared to make extravagant claims to promote his business activities without any substantial basis. For example, Mr Otton was taken to the following claim on a webpage of www.howtobuyahouseforadollar.com: BRAND NEW EVENT: If you've ever wanted to know how to build a passive income stream so you can retire early or quit work forever, this is the most important message you will ever read… 93 When asked how many people he knew had retired early or quit work forever, using Mr Otton's strategies, Mr Otton said "Only the people who have informed me that they had done that." It was a theme of Mr Otton's evidence that he relied upon other people informing him of their claimed successes. That answer strongly suggested that Mr Otton did not verify the claims made by others before relying upon them to promote his own interest. There was no evidence that Mr Otton attempted to verify any claims upon which he relied. 94 Mr Otton was also taken to the following statement, on the same webpage: All I ask is that you're willing to "think outside the box" while I'll share with you the same strategies I use to buy properties for $1 and create cash flow income – without ever stepping inside a bank or saving thousands for a deposit. 95 As appears below, there was no evidence that either of the respondents had bought a property since October 2006. Mr Otton disagreed with the proposition that people coming to his seminars would gain great comfort in knowing that the person who was tutoring them was himself presently engaged in the implementation of the strategies. In my view, that answer was discreditable. The obvious purpose of the statement was to give that comfort. 96 Mr Otton was shown the following statement in large font on the inside front cover of the book: Discover how Rick bought a property for $1 in 3.5 minutes, turning it into $801 monthly positive cashflow. 97 Mr Otton said that he did not buy a property in 3.5 minutes and he did not know what the statement referred to. When asked to acknowledge that the statement was false, Mr Otton answered: Sir, one of the forms that people sign is a Power of Attorney or a transfer deed. Once the person signs the transfer deed, although that transfer deed is not registered, the fact that they sign it and I sign means I have actually bought the property, sir. 98 Thus, Mr Otton was not prepared to acknowledge the falsity of the statement in his own book, preferring to give an answer that was frankly nonsense in the context of the question. When further questioned about the statement and asked whether it might just have been made up, Mr Otton answered: My staff have written this and it would have been, I'm guessing, to something they saw me do. I can't be – I can't be specific. I can understand how it could be 345 dot minutes. And we will go through the forms on that; how it could be 3.5 minutes. Which property it is in that … I cannot give you any reference. 99 The respondents did not produce any evidence to support the statement. In the absence of such evidence, I conclude that the statement was false. It was to Mr Otton's discredit that he sought to distance himself from the statement by saying that it was written by his staff, when he is the author of the book. It is also to his discredit that he suggested that the statement might have a factual basis when he had no reason to believe that. 100 When asked to identify a single property that he had purchased in Australia without a deposit or a bank loan, Mr Otton responded confidently by naming a property at Quaker's Rd, Marayong and added: "That was where I didn't put any money into that property whatsoever." 101 He also referred to a property at Aloe Street, Quaker's Hill, adding: "I put no money into that property whatsoever." 102 When Mr White SC pointed out that the Marayong property was purchased using a loan facility from the National Australia Bank, Mr Otton feigned surprise that he had been asked to identify a purchase without a bank loan, and identified a property at Deception Bay. The Deception Bay transaction is discussed below. 103 A little later, when asked to identify a property that Mr Otton bought using little or none of his own money, Mr Otton again referred to the property at Quaker's Rd, Marayong. Mr Otton accepted that the property was purchased with vendor finance of $50,000 at 6.5 per cent interest and volunteered that "it was $200,000 that the NAB put for that house." Mr Otton maintained that this was an example of buying a house without using his own money, saying "if it's bank money it's not our money". Mr Otton said that the point that he was making was that "you don't need a lot of cash to get into property". 104 When asked to agreed that he needed cash to service the loans, Mr Otton said: No, because depending on what your exit strategy is for the property. If you're going to buy this house for yourself you would probably need ongoing cash each month. But if you're doing what I was doing with the properties then I didn't. 105 However, as appears below, even on Mr Otton's evidence, he was required to make monthly loan repayments in connection with the Quaker's Rd, Marayong property for 59 months. 106 This evidence demonstrated that Mr Otton was either deliberately dissembling in his evidence to the court, or he was impervious to the fact that his claim that the Quaker's Rd, Marayong property was purchased with little or none of his own money was not true. 107 Ultimately, Mr Otton accepted that, when he said that he purchased over 300 properties using little or none of his own money, he did not mean to suggest that he didn't borrow money from a bank. He accepted that, in every case, he either borrowed money from a bank or from someone else. 108 Somewhat to his credit, Mr Otton conceded that there was a conflict between the book's explanation of the meaning of the word "buy" as "own" (discussed below), and the marketing. However, he then maintained that he "used strategies to own houses where I've put no money in it". Based on his concession that he borrowed money on every occasion, I understood Mr Otton to intend to say no more than that he paid no money towards the purchase of the properties up until the date of settlement of the purchase, and that the money he paid at settlement was all borrowed from a bank or someone else. Based on this understanding, the claim that Mr Otton used strategies to own houses where he put no money in it was not true. 109 I formed the view that Mr Otton was a very unreliable witness who was prepared to maintain or defend statements that were obviously untrue or misleading and who is habitually careless with the truth in making statements and claims designed to promote the respondents' business interests. I do not accept his evidence except to the extent that it was against the respondents' interest, or is corroborated by contemporaneous records. Assessment of evidence of Mr Donkin and Ms Siekaup 110 As explained below, I formed a negative view of Ms Siekaup's evidence. 111 Mr Donkin was a generally straightforward witness. I did not understand the ACCC to make any significant criticism of Mr Donkin's credit. Equally, I did not understand the respondents to place significant reliance on this evidence in their defence. Respondents' submissions about boot camp evidence 112 In a written submission dated 5 September 2016, the respondents argued that it should be able to rely on evidence tendered by the ACCC about what was said at boot camps by the respondents' former students as evidence of the use of the strategies taught by Mr Otton. 113 In support of this argument, the respondents noted that the relevant evidence was not admitted for a limited purpose. However, in Heydon JD, Cross on Evidence (10th ed, LexisNexis Butterworths, 2015) at [1655], Mr Heydon QC states that if evidence, admitted without objection, is legally admissible in proof of some issue in the case, its evidentiary use should be confined to that purpose. In this case, the relevant issue is what was said at boot camps and not the truthfulness or accuracy of what was said. 114 The decision of Walker v Walker (1937) 57 CLR 630, cited by the respondents and described by Mr Heydon QC as "enigmatic" at [1665], has no relevant application. As the respondents' submissions recognise, Walker concerns the consequences of a party calling for a document and inspecting it. Similarly, Robert Bax & Associates v Cavenham Pty Ltd [2012] QCA 177; [2013] 1 Qd R 476 concerned a case where the relevant evidence was inadmissible but admitted without objection. That is not this case: the evidence was admissible as proof of what was said at boot camps. 115 The respondents referred to the principle that the tender of a statement may amount to a waiver by the tendering party of the application of the hearsay rule to that statement but noted the following qualification, stated by McLelland J in Ritz Hotel Ltd v Charles of the Ritz Ltd (1988) 15 NSWLR 158 at 170: The tender of a statement may amount to a waiver by the tendering party of the application of the hearsay rule to that statement, and the absence of objection to the tender may amount to such a waiver by the party against whom the tender is made, but only in my view where such a waiver on each side can reasonably be inferred from the circumstances, and this will occur only where there is no other apparent explanation of the tender and the absence of objection. 116 Here, the explanation of the tender is the need to prove what was said at the boot camps. 117 Accordingly, in my view, the evidence of the boot camps may only be used to prove what was said at the boot camps, and may not be used as evidence of the truthfulness of what was said by Mr Otton's former students. 118 The respondents also sought to tender a second bundle of emails purporting to be testimonials. That material is inadmissible hearsay to the extent that it is tendered as proof of the facts asserted. I will admit the bundle as evidence of communications received by the respondents from individuals claiming to have engaged in property transactions using various of the techniques. Findings The respondents' techniques (or strategies) 119 The respondents taught techniques for dealing in real property to which they gave the names "rent to buy", "sandwich lease option", "deposit builder", "handyman special" or "sweat equity", "vendor finance" or "purchase by instalments", and "some now, some later". The following descriptions of the techniques were not in dispute: (1) "rent to buy": (a) the seller enters into an option agreement with the buyer, granting the buyer the right to buy the house at a future date for an agreed price; and (b) until completion, the buyer occupies the house pursuant to a residential tenancy agreement and pays rent and non-refundable ongoing option fees; (2) "sandwich lease option": (a) a "middleman" enters into an assumptive (purchase) option and residential tenancy agreement with the owner; (b) the middleman then enters into a sale option and sub-lease of the residential tenancy agreement with the buyer; and (c) the middleman keeps the difference between (i) what is received from the buyer in upfront and ongoing option fees and rent and (ii) the fees and rent payable to the owner under the option and residential tenancy agreement; (3) "deposit builder": the buyer pays the deposit on a contract for sale by instalments and is permitted to occupy the property subject to payment of a licence fee; (4) "handyman special" or "sweat equity": the buyer is permitted to carry out non-structural renovations within a specified period in lieu of paying a deposit to purchase the property such that the buyer is credited with the agreed value of the renovations against the deposit; (5) "vendor finance" or "purchase by instalments": the buyer pays the purchase price of the property in instalments and the seller charges interest on those instalments; and (6) "some now, some later": the buyer funds part of the purchase price with a bank loan and the remainder of the purchase price is delayed and paid by the buyer in instalments. 120 Mr Otton's evidence was that the "rent to buy" and "sandwich lease option" are effectively the same strategies, although there is a difference "in implementation". The strategies are similar in that they require the seller to accept an option to purchase the property and to grant a lease over the property. In the case of "rent to buy", the optionee is the tenant; in the case of the "sandwich lease option", the optionee of the second option is the tenant. 121 As explained below, the evidence of the successful application of these techniques in relation particular properties was minimal. 122 For each technique, the ACCC referred to a model of the technique provided to one or more of the consumer witnesses, at a boot camp. The ACCC relied upon the models, described as "answer sheets", to illustrate how consumers were misled about the viability of the techniques. "Rent-to-buy" Technique 123 Chapter 18 of the book refers to this technique as "rent-to-own". Page 172 describes the strategy as follows: [W]hen a buyer purchases a property on a lease option, it's for an agreed-upon price up-front. The buyer makes a monthly payment for a specified period of time and has the option, but not the obligation, to purchase the property – either during or at the end of the lease option period. 124 As described in this passage, if implemented to the point of exercise of the option, this technique enables a consumer to buy a house. Model of technique 125 A sheet headed "Lease Option Answer Sheet", which appears to have been provided to Ms Panizzutti at the boot camp she attended, models a transaction of which the "rent-to-buy" technique is a component, the other component being a property acquisition using a cash deposit and a bank finance loan. It explains how a boot camper who has purchased a property might sell it using the "rent-to-buy" technique. 126 The answer sheet commences with purchasing details for a hypothetical property at a "discounted purchase price" of $360,000 which include payment of a deposit of 20% of the discounted purchase price ($72,000) and a bank loan for 80% of the discounted purchase price ($288,000), with an interest rate of 6% and a term of 30 years. The monthly repayment for the mortgage is said to be $1,726.71. Thus, the total required to service the loan over the assumed option period of 24 months is $41,441.04. 127 The answer sheet then explains a transaction in which the boot camper might sell the property on a 24 month lease option, that is, to a third party buyer who would acquire the property using the "rent-to-buy" technique. The model assumes that the boot camper will be able to negotiate an option with a prospective purchaser who will agree on an option fee of $15,000, a price in the option of $440,000, and to lease the property for of $2,166.67 per month for the duration of the option. If the option is exercised, the prospective purchaser would pay a sum of $417,999.92, being the option price less the option fee and a "price credit" of $7,000.08. The price credit is an amount calculated by reference to a hypothetical deposit on the option price of $440,000. 128 Under the heading "We get paid three ways", the answer sheet identifies payments that would be received by the boot camper from the buyer comprising "Upfront money" (the upfront option fee of $15,000), "Monthly Cash Flow" (the difference between the rent paid by the buyer and the mortgage payments made by the boot camper) and "Back End" (the amount owed by the buyer after 24 months less the amount borrowed by the boot camper from the bank). 129 The model assumes that the boot camper can obtain a "discounted purchase price", can pay the $72,000 deposit for the property, and can obtain a bank loan of $288,000 to complete the purchase. It assumes that the boot camper has other accommodation, because the relevant property will be occupied by the buyer. It also assumes that there will be no delay between the boot camper's purchase of the property for $360,000 and the entry into the option with the prospective buyer for the eventual sale of the property for $440,000 (that is, it assumes that there will be a simultaneous purchase and an entry into an option for sale for a substantially different price). It also assumes that the boot camper will invest $72,000 (the 20% deposit) and borrow $288,000 in order to achieve these benefits. In cross-examination, Mr Otton accepted that the model did not work. He appeared to say that the figures were chosen because they were simple to digest. "Sandwich lease option" 130 This is the technique that, according to the book, enables a consumer to "buy a house for a dollar". 131 The technique is described on pages 183-184 of the book as follows: [Y]ou become the 'Transaction Engineer' and buy a property as an investor on a lease option, then you onsell the property to an end buyer on another lease option at a slightly higher price. And you make sure that you're receiving more money than you're paying so the transaction generates cash flow each month. The sale price is agreed at the start of the transaction, and you effectively sublet the property to the buyer at a higher price than you're paying the seller. This way you get to profit from the sale of the property without ever officially owning it. … Many times when we babysit sellers' loans we do it by using a rent-to-own paperwork system where the option to buy is simply the outstanding balance of the seller's loan at the time we wish to exercise the option to buy. For example, if I babysit a seller's loan of $500,000 payable at a rate of 7% interest over 30 years, whatever the balance of the loan is when I decide to buy is the option price I pay. 132 Using this technique, Mr Otton claims that he could consider himself the "temporary owner" of the property: [I]f I get the house on a lease option and I get my powers of attorney and I get my transfer signed, I believe – and I'm happy if [I've] totally read the Act wrong – that I'm now the owner of that property. 133 In cross-examination, it emerged that Mr Otton was relying on s 43A of the Real Property Act 1900 (NSW) to support his notion of "temporary ownership". Section 43A provides: 43A Protection as to notice of person contracting or dealing in respect of land under this Act before registration (1) For the purpose only of protection against notice, the estate or interest in land under the provisions of this Act, taken by a person under a dealing registrable, or which when appropriately signed by or on behalf of that person would be registrable under this Act shall, before registration of that dealing, be deemed to be a legal estate. (2) No person contracting or dealing in respect of an estate or interest in land under the provisions of this Act shall be affected by notice of any instrument, fact, or thing merely by omission to search in a register not kept under this Act. (3) Registration under Division 1 of Part 23 of the Conveyancing Act 1919 shall not of itself affect the rights of any person contracting or dealing in respect of estates or interests in land under the provisions of this Act. (4) Nothing in subsection (2) or (3) operates to defeat any claim based on a subsisting interest, within the meaning of Part 4A, affecting land comprised in a qualified folio of the Register. 134 In cross-examination, Mr Otton accepted that there is a clear distinction between the buyer and the "transaction engineer" in the book's description of this technique. Mr Otton said: "As a transaction engineer you don't become the owner". Model of technique 135 An answer sheet, also apparently provided to Ms Panizzutti, provides an example in which the boot camper takes an option to purchase a property for $360,000 for a fee of $1. In addition, the boot camper incurs a monthly rental liability of $1,950 (although the vendor credits one-third of the rental against the outstanding purchase price). At the same time, the boot camper grants a buyer an option to buy the property from the boot camper for an upfront fee of $15,000 and a purchase price of $440,000, as well as entering into a lease with rent of $2,080 per month, of which 20% is credited to the purchase price eventually paid by the buyer. 136 Under the heading "We get paid three ways", the answer sheet identifies payments that would be received by the boot camper from the buyer comprising "upfront money" (the option fee of $15,000), "monthly cashflow" (the difference between the rent paid by the buyer and the rent paid by the boot camper to the vendor) and "backend" (the amount owed by the buyer after 24 months less the amount owed by the boot camper to the vendor). 137 This model assumes simultaneous options to purchase the property: by the boot camper for $360,000 and by the buyer for $440,000. As for the previous model, it assumes that the boot camper has other accommodation, because the relevant property will be occupied by the buyer. Why the vendor and the buyer would deal with the "transaction engineer" rather than dealing directly with each other was unexplained. 138 In cross-examination, Mr Otton claimed that he had used "sandwich lease" options to purchase three or four properties in Australia. This claim was not borne out by the evidence. There was no evidence that the "sandwich lease option" technique has been implemented to the point of exercise of the options in respect of a single property. "Deposit builder" 139 By this technique, the buyer pays the deposit on a contract for sale by instalments and is permitted to occupy the property subject to payment of a licence fee until the deposit is paid in full. 140 The ACCC contended that this technique was described in Chapter 16 of the book, entitled "Deposit finance". Although Mr Otton disagreed that the "deposit finance" and "deposit builder" strategies were synonymous, the respondents did not explain the difference. There may be a difference in timing of the completion of the sale. 141 Page 157 of the book describes the "deposit finance" technique as follows: I suggest that the buyer gets a bank loan for as much as they can borrow. I'll lend them whatever they can't borrow and I'll usually mirror the same terms that the lender offers. 142 Pages 158-159 say relevantly: As a seller, I simply offer to finance the buyer's deposit over a period of time, which can be payable monthly with interest or as a lump sum sometime further down the road. This enables potential purchasers to buy your property with no cash deposit, which allows you to sell your property very quickly for full retail price, with no discounting. … When I buy houses I find this is a good strategy, as it is one that agents can get their heads around. … Recently, I met with a seller who needed to sell quickly in order to spend time with his sick father on the south coast. After prolonged discussion, which mainly involved me listening, I learnt that he was an electrician and would leave his employer, but was hoping to grab odd jobs down the coast. I said to him that I could buy his house today, and that I had a 'some now' price and a 'some now, some later' price. He asked me what my 'some now' price was, and I told him $320,000. He said he couldn't make that work. Then he asked me about my 'some now, some later" price, and I told him I could get him $320,000 now, and another $80,000 paid to him as an ongoing income stream to supplement his income while he was with his father. We agreed on $80,000 payable to him at the rate of $500 a month until paid in full, or a future date when the balance of the $80,000 would be paid out in one cheque. … 143 In cross-examination, Mr Otton identified the relevant transaction as the February 2003 purchase of a property in Colyton for $200,000. Mr Otton conceded that the transaction did not occur "[r]ecently" in relation to the publication of the book and the figure of $320,000 was incorrect. He maintained that the figure of $500 per month was correct. On Mr Otton's version of events, the account of the transaction in the book was false. Model of technique 144 The technique was explained in two answer sheets used at boot camps. One was entitled "Deposit Finance Answer Sheet", and appears to have been provided to Ms Panizzutti. The model in this answer sheet assumes that the boot camper: (i) purchases a property for a "discounted purchase price" of $360,000; (ii) pays a deposit of $72,000; (iii) obtains bank finance for the balance of the purchase price of $288,000 with an interest rate of 6% for 30 years. That is, the boot camper does not use the "deposit builder" technique to buy the property. The buyer: (i) pays a purchase price of $420,000; (ii) agrees to pay 10% interest for 5 years on a loan of $84,000 from the boot camper; (iii) obtains bank finance for the balance of the purchase price of $336,000. 145 Under the heading "We get paid three ways", the answer sheet identifies payments that would be received by the boot camper from the buyer comprising "upfront money" of $48,000, "monthly cashflow" of $700 (the interest on the loan of $84,000) and "backend" of $84,000 (the eventual repayment of the loan of $84,000). 146 The $48,000 "upfront money" was not satisfactorily explained. The answer sheet identifies it as the difference between the buyer's bank finance of $360,000 and the consumer's finance of $288,000. Mr Otton said that, when the boot camper's finance was paid out by the buyer's finance, there would be a cheque for $48,000 in favour of the boot camper. As for the "rent-to-buy" option, the analysis assumes that the boot camper has other accommodation and does not take into account the $72,000 that the boot camper was required to pay by way of deposit. If that were taken into account, the cheque for $48,000 would partially re-coup the deposit of $72,000 leaving $24,000 to be recovered by way of interest payments on the loan of $84,000 and the eventual repayment of the $84,000 loan. 147 The second answer sheet is entitled "Deposit Builder Answer Sheet", which appears to have been provided to Mr Ronhave. In this model, the boot camper again purchases a property for a "discounted purchase price of $360,000, paying a 10% deposit of $36,000 and obtaining bank finance for the balance of the purchase price of $324,000 (with an interest rate of 6% for 30 years). The buyer: (i) pays a purchase price of $400,000; (ii) pays a deposit of $15,000; (iii) receives an interest free loan from the boot camper of $25,000 repayable over 4 years, which is said to be in respect of the remainder of a total deposit of $40,000; (iv) obtains finance for the balance of the purchase price of $360,000; (v) pays a monthly licence fee to occupy the property. 148 Under the heading "We get paid three ways", the answer sheet identifies payments that would be received by the boot camper from the buyer comprising "upfront money" of $15,000, "Monthly Cash Flow" of $378.29 (being the difference between the "Buyers Monthly Mortgage Payment" and the consumer's mortgage payment) and "Back End" of $36,000 (the sale price of $400,000 less the deposit of $40,000 less the consumer's loan of $324,000). The Buyers Monthly Mortgage Payment is the sum of a monthly repayment of the interest free loan and the monthly licence fee. The model seems to assume that the buyer will obtain finance for the balance of the purchase price of $360,000 after an unknown period, perhaps after the interest free loan is repaid. As for the previous example, the model assumes the boot camper can obtain the property for a "discounted purchase price", can finance the purchase, can sell simultaneously for a significantly higher price and has other accommodation. "Handyman special" or "sweat equity" 149 As noted above, by this technique the buyer is permitted to carry out non-structural renovations within a specified period in lieu of paying a deposit to purchase the property, such that the buyer is credited with the agreed value of the renovations against the deposit. 150 Chapter 17 of the book describes this technique using two examples. The first example is a transaction that appeared "on the Channel 7 TV show, Hot Property". According to the book, the property was "saleable to an investor at $242,000" but "had a $280,000 debt on it". The property was at Timaru Crescent, Penrith. The book describes Mr Otton's dealings and outcomes involving this property as follows: I babysit the $280,000 loan with a paperwork form. I find a buyer. I sell for $340,000 with a sweat-equity deposit. I get $306,000 cash and pay $280,000 debt. I get a $26,000 profit. 151 The documents evidencing the asserted outcomes were not in evidence. Accordingly, I am not satisfied that the Timaru Crescent, Penrith property is an example of a "handyman special" transaction. 152 When asked in cross-examination, Mr Otton claimed that he could not remember how many houses he had bought using the "handyman special" technique. Mr Otton said that he sold houses on a handyman special. Ultimately, the respondents gave a single example (Railway Road, Quakers Hill), discussed below. It was not clear whether this example was the property previously occupied by an elderly lady and 40 cats, described at p 165 of the book. Model of technique 153 The answer sheet entitled "Handyman Special Answer Sheet" apparently provided to Ms Panizzutti set out the following payments under the heading "We get paid 3 Ways": $0 Upfront Money $944.41 Monthly Cash Flow $156,000 Back End 154 These results were obtained by assuming that the consumer bought an un-renovated house for $300,000 and sold it (unrenovated) for $440,000 including "sweat equity" of $30,000. Thus, the "Back End" figure comprises almost entirely of the difference between the purchase price and the sale price. There is no realistic basis for the assumed difference between the purchase price and the sale price. The model is fanciful. "Vendor finance" or "purchase by instalments" 155 "Vendor finance" or "purchase by instalments" involves the buyer paying the purchase price of the property in instalments and the seller charging interest on those instalments. 156 Chapter 15 of the book, titled "Instalment Contracts", describes this technique in the following terms at page 148: With an instalment contract the settlement is delayed up to 30 years, but the seller receives the sales proceeds over time in the form of monthly principal and interest payments, just like a bank does with a mortgage. 157 The book contains two examples of the application of the technique. 158 The first example was as follows: I bought the first property for $94,500. I advertised it as a home you could own without a bank loan. I had around 15 potential buyers to pick from, and I onsold it to a couple for $106,000. The husband, having worked for 20 years in the air force, was changing careers, and the banks would not give him a loan at that time. He was happy to pay 2% higher than standard variable bank rates over 25 years, because he thought it was a fair exchange for being able to buy a property with just a $6,000 deposit. 159 In cross-examination, Mr Otton referred to this property as "17 Maruba". He said that he purchased the property using "mainstream finance". 160 I accept that this is an example of a sale of a property by Mr Otton using vendor finance. 161 The second example commences with the following description: I recently bought a property where the sellers were moving overseas and the property wasn't selling fast enough. The house was on the market for $430,000, but I was able to buy it for $400,000 by putting down a 10% deposit and securing a 90% loan for the balance at 7% interest, payable over 30 years, which worked out to be $2,395.09 per month. 162 The respondents' evidence did not include any documentation of a transaction meeting this description. When cross-examined, Mr Otton could not identify the property. He accepted that the word "recently" "could be seen as incorrect" and "would be seen as incorrect based on the evidence seen so far". 163 The second example continued: I re-marketed the property at $460,000, which was 7% above the market price. I advertised the property using a classified ad with the headline, 'No bank qualifying to own 3 bed home', and as people called I simply asked them: • When would you be ready to move? • What sort of work do you do? How much do you earn? • How much money do you have to put towards the home? The buyers were doctors who were new to Australia. They had large incomes but had not been in the country long enough to be approved for a loan by Australian banks. They gave me a $25,000 up-front deposit, and I gave them an instalment contract for the balance. The transaction we worked out was $435,000 at 8% for 25 years, which put their payments at $3,357.40 per month, giving me a positive cash flow of $962.31 every month ($3,357.40 less $2,395.09 = $962.31). Then, because they wanted to own the property faster, I reduced the loan term by five years, which increased my monthly cash flow and also saved them interest. As the new owners of the home, the instalment buyers pay all insurances, maintenance and taxes. As the lender I pay no ongoing expenses – I just sit back, having collected $25,000 up-front to help offset my original $40,000 investment in purchasing the property, and collect $11,547.72 a year cash flow, which is a cash on cash return of approximately 77% on the $15,000 cash I still have invested. When the buyers refinance (which 99% of people will do within five years), I'll receive around $35,000 in backend profit. 164 The respondents provided no evidence to support the truthfulness of the second example, although Mr Otton asserted repeatedly that he remembered the doctors. If the example were true, then Mr Otton would have received taxable income (the "cash flow") for which he should have records. In the absence of such evidence, I find that this example is fictitious and that Mr Otton was lying when he claimed to "remember the doctors". Model of technique 165 A model of this technique is contained in an answer sheet provided to Mr Jovanovic in a boot camp. The model assumes that the boot camper buys a property at a discounted price of $310,000 paying a deposit of $31,000 and borrowing $279,000 from a bank. 166 The model also assumes an immediate sale of the property for $372,000. Mr Otton disagreed that, if the boot camper was unable to sell the property, he would have to service the $279,000. Mr Otton's disagreement was on the basis that "we make a house easy for someone to buy" by requiring a deposit of only $10,000. That is, Mr Otton's model made following unstated assumptions: (1) the boot camper has alternate accommodation; (2) the boot camper can pay a deposit of $31,000; and (3) the boot camper can sell the property immediately upon or at least very soon after purchase (and for a price 20% above the boot camper's purchase price). 167 The model does not address the cost of stamp duty on the boot camper's purchase. 168 Mr Otton agreed that the model was an over-simplification. "Some now, some later" 169 The buyer funds part of the purchase price with a bank loan and the remainder of the purchase price is delayed and paid by the buyer in instalments. 170 The book does not descript this technique in a separate chapter. However, p 158 described "deposit" finance" as being "affectionately known as the "some now, some later"". Model of technique 171 The answer sheet, which was provided to Ms Panizzutti modelled a transaction in which the bootcamper received vendor finance, and also provided vendor finance to the buyer. Again, the boot camper is assumed to have alternate accommodation. Mr Otton agreed that it was not a model you can retire on. General conclusions about the respondents' techniques 172 The ACCC submitted that the respondents' techniques do not enable consumers who implement the techniques to "buy" a house. Instead, the ACCC argued, the techniques envisage that the consumer who is implementing them will act as a "middleman" to match up a usually "financially distressed seller" and a "highly motivated buyer". In this context, a "financially distressed seller" is a person who can no longer afford to retain ownership of a property (whether that be because of mortgage distress or change in circumstance), and a "highly motivated buyer" is a person who desires to own a property (usually, as their home) but who, for whatever reason, does not obtain traditional, commercially available, mainstream finance from a third party financial institution ("mainstream finance"). 173 The models are generally predicated on the assumption that the boot camper is able to acquire a property which he or she can sell (immediately upon acquisition) by using one or more of the techniques. The generally assumed "discounted purchase price" reflects the fact that the transactions are designed to involve acquisition of property from "motivated sellers" who are "forced to sell at a discount". The models then assume that the buyer is motivated to deal with the boot camper rather than purchase a property using mainstream finance. An obvious reason for the buyer's motivation is an inability to obtain suitable terms from a mainstream financier. 174 The ACCC submitted that there are considerable risks to all parties concerned in arrangements of the kind contemplated by the respondents' techniques. 175 In response, the respondents contended that there is "no evidence… that the techniques …result in a realistic or likely risk that purchasers take in buying houses or for vendors selling houses. Even with standard contract for sale property vendors and purchasers can lose if a purchaser does not settle for whatever reason." 176 I accept that arrangements applying the respondents' techniques may give rise to a plethora of substantial financial risks. From the perspective of the boot camper who might seek to enter into such an arrangement, these risks include the risk of not finding a willing buyer; default by the buyer, once found; and the risk that the boot camper will be unable to service the costs of the property (which include the costs of bank financing until such time as the buyer may choose to complete the purchase of the property). From the perspective of the tenant/purchaser, risks include the risk that the vendor may sell the property to a third party or otherwise deal with the property in a manner that defeats the tenant/purchaser's ability to exercise the option in due course. The alleged wealth creation system 177 The system allegedly involved real property transactions which purported to enable consumers to, essentially, buy a house for $1, or otherwise buy a house without a deposit or loan and using little of their own money and with little or no risk. 178 The ACCC noted that Mr Otton referred to the techniques that he taught as "systems". The following example appears on the first page of the book, promoting the "How To Buy A House For $1" DVD: How a First Home Buyer can use this system to acquire their first home –without a deposit or bank loan 179 There is also a compact disc entitled "How to turn Negative Gearing to Positive Cash Flow", which formed part of the "Power Property Profits Pack", described below. On that disc, Mr Otton states, for example: I would like to introduce you to a couple of systems that will move you around that, so you can continue to buy properties…I would like to show you some systems that will have you moving forward – so basically anybody who wants to get in the property market and cannot get a bank loan today and does not have a large deposit this will be great as I will show you some systems that will move you into your first property today. And [I]f financial freedom is what property is all about I would like to show you some other systems and processes to get the financial freedom out of real estate … 180 Ultimately, the ACCC did not emphasise the allegation that WBH was the promoter of a wealth creation system, but rather focussed on the individual alleged misrepresentations including that, by following or implementing the respondents' techniques, consumers were able to create or generate wealth. Mr Otton's implementation of the techniques 181 Despite claiming their defence that Mr Otton had been successful financially "in following the ideas and using the strategies", there was almost no evidence that the respondents had used the strategies, let alone used them to make money. 182 There was no evidence that either of the respondents had bought a property since October 2006. 183 In their written closing submissions, the respondents did not identify any property purchased by Mr Otton or WBH at any time using any of the techniques. Orally, Mr Bell argued that Mr Otton implemented the techniques in relation to a property at Deception Bay. As explained below, I do not accept that argument. 184 The respondents relied upon a schedule annexed to Mr Otton's affidavit of 24 August 2016 entitled "Exhibit "RO1" Houses – Bought and Sold" ("Exhibit RO1"). The schedule comprises details of 43 properties purchased between May 2000 and October 2006. The respondents did not suggest that the 43 properties had been purchased using the techniques, with the exception of the Willmot property described below. 185 Mr Otton did not recall an example of the "deposit builder" strategy. I find that neither he nor WBH ever applied the "deposit builder" strategy to buy or sell a property. Deception Bay property 186 Mr Otton's evidence was that the "rent-to-buy" and "sandwich lease option" strategies were both illustrated by transactions in 2007 involving a property at Deception Bay in Queensland. This property is not listed in Exhibit RO1. The documents said to evidence the transactions included: (1) an unsigned option agreement between Steven Davy as seller and WBH as buyer; (2) an incomplete and unsigned statutory declaration by Mr Davy; (3) an incomplete and unsigned option exercise notice addressed to Mr Davy; (4) an incomplete and unsigned assignment notice referring to an assignment of the assignor's interest on the option agreement between Mr Davy and WBH; (5) an incomplete and unsigned nomination notice concerning the nomination of an unnamed nominee to exercise the option granted in the option agreement between Mr Davy and WBH; (6) an unsigned authorisation by Mr Davy; and (7) a signed and registered irrevocable enduring power of attorney granted by Mr Davy in favour of Mr Otton, given "as security for the performance by me under an option to purchase my property located at …Deception Bay…granted by me to the attorney". 187 Mr Otton's evidence was that WBH entered into an option agreement in the terms of the unsigned option agreement. In cross-examination, he confirmed that the option was not exercised. 188 There was also an unsigned option agreement for the sale of the Deception Bay property from WBH to William and Rozanna Horvath and a document entitled "Heads of agreement – Rent to own home" signed by the Horvaths and dated 1 July 2007. There is a letter dated 25 July 2007 from Monardo Solicitors to the respondents purporting to enclose a cheque for $24,000 in favour of WBH "being the balance of the option fee paid by the buyer" in relation to the sale of the Deception Bay property. There is also a Joint Venture Agreement between WBH and Closelink Pty Ltd dated 1 July 2007 concerning the Deception Bay property. 189 Finally, there is a registered transfer of the Deception Bay property from Mr Davy to Judy Pieters registered in February 2009. The transfer is signed by Mr Davy's solicitor under a registered power of attorney. 190 In his affidavit, Mr Otton said that the "gross profit from the exercise of the strategy in this example was $112,693 ($350,000 (selling price)) less $237,307 (purchase price)." In cross-examination, Mr Otton volunteered that this statement was inaccurate in that he did not receive $112,693. 191 Thus, while the evidence shows that some steps were taken to implement a "rent-to-buy" or "sandwich lease option" strategy, the Deception Bay example is an example of a failed attempt to implement one of those strategies. Quakers Hill property 192 Mr Otton gave evidence that transactions involving a property on Railway Road, Quakers Hill illustrated the "handyman special" strategy. Mr Otton initially gave evidence in relation to these transactions in his affidavit sworn on 24 August 2016, but amended his evidence by an affidavit sworn on 25 August 2016. 193 "Exhibit RO1" shows that the property was bought in January 2005 for $273,000 and sold in May 2008 for $355,000. The exhibit records that the transactions involved a "profit" of $82,000 being the difference between the sale price and the purchase price. Documents included in the Court book by the respondents show that: (1) WBH purchased the property for $273,000, paying a deposit of $10,000 and borrowing $218,400 from the National Australia Bank. The remainder of the purchase price was paid using funds of approximately $45,000 from a cheque account. (2) On 14 February 2005, WBH entered into a contract for sale of the property to Amanda Bromfield and Mathew Kemp for $355,000. The contract provided for payment of a $10,000 deposit and for payment of the balance of the purchase price by 780 instalments over a period of 30 years. (3) The purchasers entered into occupation of the property on 1 March 2005. (4) A transfer for the purchase of the property by Ms Bromfield and Mr Kemp dated 9 May 2008 was registered on 22 July 2008. The title search shows a discharge of mortgage on 22 July 2008 and registration of a further mortgage. 194 WBH contributed approximately 20% of the purchase price of the property from its own funds. 195 In his 25 August 2016 affidavit, Mr Otton gave the following evidence: During the period between the purchase of Property C and the sale thereof, [WBH] financed the purchase by a first mortgage from National Australia Bank of $218,400 (80% of the purchase price) at 6.67% interest. The mortgage interest payments are therefore $1,213.94 per month 'C4' (Page 72). The balance of the purchase price ($345,000) and rates on the property were payable by the end purchaser of Property C (Bromfield and Kemp) by monthly instalments of $1,707.30 'C2' (Page 62) and were paid for 39 months. 196 Page 72 of Mr Otton's 24 August 2016 affidavit is a letter from the National Australia Bank to WBH recording a loan of $218,000 for a period of 3 years. There is a handwritten notation on the letter "outgoing $1,213.94 a month". 197 Page 62 is the last page of the contract for sale of the property from WBH to Ms Bromfield and Mr Kemp. There is a handwritten notation on the page of "Monthly income $1,707.30". The source of that figure is not apparent. The evidence does not demonstrate, beyond Mr Otton's assertion, that an amount of $1,707.30 was paid for any period of 39 months. 198 In his 25 August 2016 affidavit, Mr Otton next said: In order to reduce the deposit to $10,000 Bromfield and Kemp agreed to carry out renovations on Property C prior to completion of their purchase 'C3' (Page 70). The mortgage interest instalments payable to National Australia Bank were $1,213.94 per month 'C4' (Page 72) and were paid for the 40 months. Property C sold on 14 February 2005 for $355,000 'C5' (Page 47) for a profit of $100,027.10 calculated as follows: Sale Price $ 355,000.00 Add Buyer Payments (C2) $ 66,584.70 $ 421,584.70 Less Bank Mortgage Interest & Rates (C4) - $ 48,577.70 $ 373,027.10 Less original Purchase Price (Cl) - $ 273,000.00 PROFIT: $ 100,027.10 199 Page 70 of Mr Otton's 24 August 2016 affidavit is part of a separate document which appears to be part of the contract for sale. Clause 45 on page 70 provides: Purchaser agrees to do the following work to the property prior to occupation in lieu of paying the $10,000 deposit which is shown on the contract as having been received. Work to be carried out is: i) Paint & Carpet the House ii) Remove the enclosure which is currently attached to the rear of the house. iii) Replace the rear door. iv) Bring the house up to a presentable and liveable condition. 200 There was no evidence that the purchasers discharged any obligation that they had under cl 45. 201 The evidence is unclear but this transaction may illustrate the "handyman special" strategy. The purchasers may have provided "sweat equity" of $10,000 out of a total purchase price of $355,000. 202 The evidence does not permit a conclusion about whether the transaction was profitable for WBH in the absence of evidence of the costs of the transaction to WBH, including any stamp duty paid on WBH's initial purchase and the total costs of the $218,000 loan in the period December 2004 to July 2008. On the evidence set out above, WBH was required to expend at least $10,000 + $45,000 + $48,577.70 = $103,577.70 to participate in the transaction. Willmot property 203 The property is on Van Diemen St, Willmot. "Exhibit RO1" shows that the property was bought in October 2001 for $115,000 and sold in July 2003 for $154,000. The exhibit records that the transactions involved a "profit" of $39,500 being the difference between the sale price and the purchase price. 204 Mr Otton said that this transaction was an example of the "vendor finance" strategy. The ACCC did not contest that it is practicable to sell properties by providing vendor finance, subject only to the financial capacity of the vendor. 205 The property was bought by WBH using a cash contribution of $23,000 (20% of purchase price) and a loan from National Australia Bank of $92,000. The contract for sale was dated 26 April 2001 and provided for a completion date 120 days after the date of the contract. 206 On 22 November 2001, WBH entered into a contract for sale of the property for $154,000 to Robert Cameron and Kerrie-Lee Walkinshaw. A document, purportedly from that contract, contains a schedule of items which appears to indicate the balance of the purchase price was to be payable by Mr Cameron and Ms Walkinshaw by instalments. 207 I accept that this transaction illustrates the use of the "vendor finance" strategy. Marayong property 208 The property is located on Quakers Road, Marayong, New South Wales. Mr Otton described this property as an example of the "Some Now-Some Later strategy". 209 On 1 November 2002, WBH purchased the property for $250,000 using (i) a deposit of $1,000; (ii) finance from NAB for 80% of the purchase price; and (iii) vendor finance for the remainder secured by a second mortgage. The completion date was 14 days after the date of the contract for the purchase. Thus, the purchase is an illustration of vendor finance. 210 On 25 October 2007, WBH sold the property to David Martin for $295,000. Mr Otton did not suggest that this sale involved the application of any relevant technique. 211 However, there was evidence that WBH had previously sold the property (by contract dated 9 December 2002), with a "mutual rescission" of the contract in May 2005. 212 Mr Otton calculated the "profit" on the resale of the Marayong property as follows: Sale Price (E4) $ 295,000.00 Add Buyer Payments (E6) $ 61,628.00 ($2125.12 x 29 months to date of rescission) $ 356,628.00 Less Bank Mortgage Interest (E7) - $ 78,352.00 ($1,327.92 x 59 months) Interest on Deposit (E3) - $ 12,750.00 $ 265,526.00 Less original Purchase Price (E1) $ 250,000.00 PROFIT: $ 15,526.00 213 However, there was no evidence of the receipt of the "Buyer Payments". In any event, as the ACCC noted, those payments are substantially less than WBH's outgoings. 214 The evidence is insufficient to demonstrate that WBH made any profit from the transactions involving the Marayong property. Cessation of respondents property business 215 In 2007 or 2008, Mr Donkin advised Mr Otton that he should wind down that part of the business involving the acquisition of properties. Mr Otton's evidence was that in about 2008 to 2009, he decided to move on from the business and management of small property transactions and use that time to invest in the educational side of the business. However, based on Mr Donkin's evidence and the absence of evidence of any acquisitions after the option agreement for the Deception Bay property, I find that WBH ceased its business involving the acquisition of properties by some time in 2007 at the latest. 216 It follows that, by the time that the book was first printed in 2011, Mr Otton and WBH had not been in the business of buying residential properties for investment purposes for at least four years. 217 Mr Donkin accepted that financial performance was one of the reasons Mr Otton wound down WBH's real estate operations. Conclusions 218 There is no evidence of the successful implementation of any of the "rent-to-buy", "sandwich lease option" and "deposit builder" techniques by the respondents. 219 There is one possible illustration of the incorporation of the "sweat equity" technique in a transaction. 220 The ACCC did not dispute that it may be possible to buy and sell property using vendor finance. The respondents gave two illustrations of the profitable deployment of that technique, in respect of the Willmot property, described at [203] to [207] above, and the property Mr Otton described as "17 Maruba", described at [158] to [160] above. 221 Contrary to the respondents' submissions, the evidence plainly demonstrated the falsity of the statement, on the inside back cover of the book that "Rick buys, sells and trades property, using little or none of his own money, and structures transactions to create positive cash flow". Ms Siekaup's evidence 222 Ms Siekaup is a property investor who gave evidence that she found that strategies taught to her by Mr Otton to be "most successful". Ms Siekaup received the book and did not read it in detail, but read various headlines of chapters to get an idea of what the book was about. She attended a free seminar given by Mr Otton in 2012. 223 After the seminar, Ms Siekaup enrolled for and attended a three day boot camp conducted in Sydney in 2012. She paid about $3,500 for two people to attend the boot camp. The strategies that attracted her, because she could understand them, were "back to back leases" or "lease to buy" or "rent to buy". Subsequently, she entered into discussions with a potential seller in the Hunter Valley in New South Wales and found the reference materials provided at the boot camp to be "an enormous help". In cross-examination, Ms Siekaup said that she had also received mentoring and learned things through a program called "Go Direct" offered by Mr Otton or WBH. 224 Ms Siekaup gave evidence of transactions involving two properties, one in Gillies St, Kurri Kurri ("Gillies property") and one on Robertson Rd, Killarney Vale ("Robertson property"). 225 Ms Siekaup gave the following evidence concerning the Gillies property: (1) In September 2013, Sieve Storm Pty Ltd ("Sieve Storm"), a company of which she is a director, entered into an option to purchase the property from Yan Murphy for $235,000. The option fee was $1. (2) In about November 2015, Sieve-Storm entered into an option to purchase the Gillies property with Nicole and Jacob Swilks for $314,000. Again, the option fee was $1. 226 Ms Siekaup rejected the ACCC's assertion that the Gillies property was untenanted but did not produce documentary evidence of the tenancies or of rental income from the property, despite having received a subpoena for production of such documents. She agreed that she was required to pay the mortgage in respect of the Gillies property during the option period. Her evidence was that she paid an amount which covered rental and which was equal to the mortgage. 227 Concerning the Robertson property, Ms Siekaup said that: (1) in March 2013, Ms Siekaup entered an option to purchase the property from Yan Murphy for $236,000 with an option fee of $1; and (2) in July 2013, Sieve-Storm entered into an option to purchase the property from Yan Murphy for $236,000 with an option fee of $1. 228 Again, Ms Siekaup claimed that Sieve-Storm rented the Robertson property to a third party and received rent, but did not produce documentary evidence of the tenancies or of rental income from the property. She agreed that she was required to service the mortgage in respect of the property, and volunteered that she paid outgoings as well. 229 Ms Siekaup gave evidence that she is presently in dispute with Ms Murphy in relation to the option agreements for both the Gillies property and the Robertson property. She said that the dispute concerning the Gillies property relates to Ms Murphy's alleged failure to do an agreed subdivision of the property. The dispute concerning the Robertson property was not clear but seemed to relate to Ms Murphy's alleged unwillingness to permit Ms Siekaup to sell the property. 230 In the witness box, Ms Siekaup did not present as a reliable witness. Her answers to simple questions tended to be convoluted and defensive and, on occasions, non-responsive. Having observed Ms Siekaup give evidence, I do not accept her as a credible witness except to the extent that she gave evidence of non-contentious facts or her evidence is corroborated by contemporaneous records. No evidence from persons who gave testimonials or "Big Kahunas" 231 Notwithstanding the prominence of testimonials throughout the book, advertising material and the websites, the respondents adduced no evidence to verify a single testimonial. 232 The boot camps were attended by people identified as "Big Kahunas", whom the respondents claimed to be former students who were implementing the system and the strategies successfully. At the boot camps, the "Big Kahunas" wore Hawaiian shirts which made them readily observable. Ms Panizzutti recalled that the former students who spoke at the camp emphasised that they had regular jobs and backgrounds. According to Mr Nel, all of the former students who spoke put their success down to Mr Otton's teachings. None of the "Big Kahunas" provided evidence in support of the respondents' case. 233 The respondents contended that the number of examples given by former students at boot camps, the diversity of the examples, and the absence of any evidence that the former students were improperly induced into giving the examples at the boot camps, suggest that the Court should accept that what the former students have said is true. 234 But those facts, without evidence from those former students that would demonstrate their success, do not advance the respondents' defence. They only demonstrate that former students claimed to have had success using the strategies. The mere receipt of the testimonials by the respondents does not provide a reasonable basis for the respondents' opinions about the efficacy of the techniques. 235 The ACCC submitted that the absence of evidence from the "Big Kahunas" or authors of testimonials permitted the Court comfortably to conclude that there were no reasonable grounds for making the pleaded representations that were conveyed by the publication of testimonials. I accept that submission. Witnesses unsuccessful attempts to implement the techniques 236 After attending a boot camp, Mr Jovanovic, Mr Nel and Ms Nguyen attempted to implement the techniques. All three witnesses were cross examined about their attempts. 237 Mr Jovanovic attempted to buy properties in Bass Hill, Quakers Hill, Homebush West, North Bondi, Eastlakes and Lake Haven, without success. 238 Following the boot camp, Mr Nel was "quite excited" about trying to implement the techniques. Mr Nel attempted to buy properties in Quakers Hill and Cessnock without success. He and his former partner handed out pamphlets, prepared signs that they affixed to poles, placed advertisements on the website https://www.gumtree.com.au, spoke to local real estate agents and used software called "Real Estate Investor" to find properties that had been on the market for a long time. They commenced their search for sellers by looking initially in Quakers Hill when Mr Nel's sister lived. After a month or two of trying unsuccessfully in Quakers Hill, Mr Nel and his former partner shifted their efforts to Cessnock. In order to ameliorate the risk of entering into a transaction with a seller and being left to pay the full price because they couldn't find a buyer, they targeted properties they would be able to afford themselves and renovate subsequently, if necessary. They put in offers on two or three, which were unsuccessful. After nine to twelve months, they decided to stop trying. 239 Ms Nguyen attempted to implement the techniques in various Sydney suburbs without success. She described her approach as follows: My approach in implementing the strategies was to look for a motivated seller first. Once I had found a motivated seller and assessed their situation, I planned on picking which strategy best suited their situation. I was open to using all the strategies Mr Otton had taught at the Boot Camp. 240 She and her partner looked around Mascot (because it was close to home) and Auburn, Bankstown, Greenacre and Moorebank (because they were inexpensive). She put up signs looking for sellers in front yards and on telegraph poles. She also prepared a marketing plan setting out the various marketing tools she planned on using. Although she received some calls from sellers, and also from possible buyers, after all these efforts over a period of about one year, Ms Nguyen "ended up with only three documented potential transactions with sellers". These were a kebab shop in Kogarah, a five acre block in Austral, and a small retail shop in Smithfield. Ms Nguyen was cross-examined about these three transactions. 241 The respondents submitted that the ACCC's witnesses did not make full attempts to implement the strategies. They noted that five of the nine only attended a free event or read the book and did nothing to try and implement the strategies: Mr Elturk, Ms Sereni, Ms Panuzzuti, Ms Austin and Mr McKenzie. 242 The respondents contended that the four witnesses who did try to implement the strategies failed for a variety of reasons, including that they did not persist, applied it to commercial properties, tried properties which were too expensive, were looking to renovate themselves, and tried to combine strategies. For example, the respondents noted that Mr Nel's strategy in Cessnock of looking for properties to renovate himself was not what Mr Otton taught. 243 The respondents noted that, despite being taught to "avoid deals with developers", Ms Nguyen admitted she attempted to target developers. They also argued that the two other properties Ms Nguyen referred to were both commercial premises at Smithfield and Kogarah, which were outside the scope of the strategies taught by Mr Otton. 244 The respondents criticised Mr Jovanovic's efforts, saying that he tried to implement the strategies for 10 weeks only. In that time, he identified six properties. He offered $225,000 on a property which sold for $490,000 (paras 109-111), indicating his offer was unrealistic. The second and third properties he did not follow through with even though he was asked by the sellers to send a proposal. Another property was taken off the market. The fifth he "had no intention of following up". This was the case even though the property was owned by siblings looking to "cash out", being precisely the type of 'motivated seller' identified in the book and at the boot camps. The final property was over $900,000 on the upper north shore, which was outside the target property range taught by Mr Otton. 245 The respondents further noted that: (1) Ms Sereni read a couple of pages of the book, did not open her box of materials, and said in relation to the boot camp that Mr Otton ''went through each strategy individually along with the relevant section of the folder, I felt that it included a lot of useful information and was very thorough". (2) Ms Panuzzutti stated she "started" to read the book but only "flicked through" it, because she was more "visually oriented" and that she similarly did not read the material in the pack. Despite being a "visually oriented" learner, she also did not watch the DVDs or listen to CDs provided. She never joined the calls offered. Ms Sereni also said that Ms Panuzzuti did not wish to speak to sellers. (3) Mr Ronhave focused his attention on Cammeray and Dee Why, which he agreed was a "premium" area of Sydney. He stated that he felt too "embarrassed" to seek help. The fact that he was reluctant and embarrassed to even ask for help would indicate the level of effort and determination which he directed at succeeding in the strategies. 246 The evidence of the consumer witnesses does not demonstrate that the techniques could not work. I also accept the respondents' submission that the opinions of these witnesses as to the difficulty of implementing the strategies is of limited assistance to the court. However, the evidence tends to falsify statements of the following kind made on the web page http://www.creativerealestate.com.au/readysetboom/: With This System My Students Are Able To: • Make positive cashflow from day 1 with any house. 247 In cross-examination on that statement, for which Mr Otton accepted he was responsible, Mr Otton gave the following evidence: Well, do you say now that you are not able to use the strategies in relation to any house? Well, you might have a, you know, burnt out house that has, you know, got nothing in it. You might have a house, you know, ..... any house. I think the reference was different types of houses. Like, you know, North Sydney, South Sydney, East Sydney, West Sydney. I sense – or – or Brisbane, you know. Like, I think it was meaning generally anywhere if you wanted to start. As long as they're not burnt out? Correct. Yes. 248 The respondents' criticisms of the consumer witnesses' evidence set out above reveal that, even on their own case, the "system" cannot be readily applied to any house. Similarly, the following submission made on the respondents' behalf suggests an acceptance that it would have been misleading to promote the techniques as productive of immediate results for anyone: The complaint by the applicant seems to be not that the strategies are not capable of being successful, but that they require more persistence, determination and panache than their witnesses could muster. In other words, and as acknowledged by each witness, the strategies were harder than they thought. Witnesses beliefs that techniques can work 249 The respondents sought to rely on the evidence from the ACCC's witnesses that many of them, having a "full understanding" of the process, wanted or still want to implement the strategies. I reject the submission that this evidence provides a credible basis for the opinions held by the respondents. 250 For example, Ms Nguyen considered that the information she acquired "is still good", that she was happy with what she learned, and intends to try to implement the strategies in the future: At the end of 2013, because I saw the market, I put a break on the strategy, because for me, ... I was happy and I thought I got good learning and you know, I want to make this work, so – but just I couldn't because of the market going up, so I thought let's put it on break, see how it goes in a few years and do it again when the market is at the right time ... I'm sure this knowledge is still good, that's what I believe, but it's just harder than I thought it would be. 251 Mr Jovanovic, said "I was impressed by the presentations, especially the parts about new ways to control property and make money. I thought it was a novel system". 252 Mr Elturk said that "[a]fter listening to Mr Otton speak I felt excited because by using the We Buy Houses system and process I could assist people resolving their issues and make money for myself". 253 Mr Nel stated that: I read the Book and found it very interesting. What particularly appealed to me was that it presented a system involving a range of strategies, beyond the traditional 'buy and hold' approach to property investing, which could be used if the investor had little or no money of their own and without obtaining a bank loan ... I understood from reading the Book that Mr Otton was looking at property investment as more of a transactional process. He was looking at using legal tools to get in and make a profit through financing rather than capital appreciation. Can the respondents' strategies be used to buy a house for $1? 254 The respondents denied that they made the pleaded representation, that by following or implementing the techniques which they promoted, consumers were able to buy a house for $1. In their closing submissions, the highest they put the position was that it is possible to acquire an interest in a property for $1 using the "sandwich lease option" technique. The ACCC did not dispute that it is possible to enter into an option to purchase a house for an option fee of $1. 255 In particular, I did not understand the respondents to suggest that a house can be bought for $1 by accepting an assignment of debt. If they put such a case, I reject it. In my view, the essence of the representation that a house can be bought for $1 is that the buyer is not required to expend substantial costs or incur a substantial liability to buy a house. 256 The proposition that a "sandwich lease option" strategy could enable a consumer to buy a house for a dollar depends upon on two important provisos: (1) The word "buy" does not entail the acquisition of legal title to the property because, in order to pay only $1, the consumer must not pay the purchase price for the property. That is, the consumer will not be the ultimate buyer of the property but will act as a middleman or "transaction engineer" to facilitate a property transaction between a third party seller and a third party buyer. As Mr Otton's guide on sandwich leases puts it "[a]t the settlement table: Buyer receives title and Investor and Seller are paid out". (2) The consumer must enter into a transaction to sell the property "bought" for $1 pursuant to which the end buyer pays all of the other costs of the transaction. Thus, the transaction to "buy" the property on a lease option must occur together with a transaction to sell the property to a third party under which the third party agrees to pay all of the costs of the transaction apart from the $1 option fee. 257 The ACCC relied on the Oxford English Dictionary definition of "buy", being: "Obtain in exchange for payment; pay someone to give up an ownership, interest or share." 258 The book provides its own explanation of the word "buy" in a table entitled "How to use 'mums and dads' language". In the table, "buy" is listed as "professional jargon"; the equivalent "'mums and dads' language" is "own". Also in the table, "buy from" is listed as "professional jargon"; the equivalent 'mums and dads' language is "working with". 259 The respondents argued that the table has no bearing on the construction of the phrase "how to buy a house for $1" in context. I disagree. At the least, the table forms a part of the relevant context in which the word "buy" is likely to be understood by an ordinary person reading the book. 260 The respondents submitted that, considered in the contexts in which they used the word "buy", it means to acquire an interest. As I understood the respondents' case, it was that the word "buy" extends to include entry into an option to acquire a property. I accept that some members of the relevant class of consumers may have understood the word "buy" to extend to such a transaction particularly in a context which referred explicitly to that kind of transaction. However, in my view, many members of the relevant class of consumers are likely to understand the words "buy a house" to mean acquire a proprietary interest in a house. That understanding is consistent with the book's identification of the word "own" as a synonym for "buy". 261 Accepting in the respondents' favour that there may be some consumers who would consider the word "buy" to have the extended meaning they propose, I do not accept that this is the only reasonably available meaning of the word as it appears in the book. 262 I also accept the theoretical possibility of a set of transactions in which the consumer pays $1 only to acquire an option to buy a house and is able to sell the house pursuant to another option without incurring any other costs. But there was no evidence before the Court of a single occasion on which this had occurred. 263 Therefore, I conclude that there is no evidence that the respondents' strategies can or could enable a consumer to buy a house for $1 and there are no reasonable grounds to believe that the respondents' strategies can or could enable a consumer to buy a house for $1. Further, there is no evidence that the respondents' strategies can be used to buy a house using little or none of the consumer's own money, and there are no reasonable grounds to believe that this outcome can or could be achieved. 264 Even if the "sandwich lease option" strategy could be successfully implemented, the description of that strategy as buying a house for $1 is highly likely to have engendered confusion about the true nature of the strategy because of the likelihood that the word "buy" was understood to mean "own". 265 The ACCC contended that the respondents' various references to buying a house for $1 refer to the "rent-to-buy" strategy where the consumer would secure an option for $1 to purchase a house at a later date, subject to payment of the full purchase price in order to exercise the option. This contention may be consistent with Mr Otton's evidence, mentioned above, that the "rent to buy" and "sandwich lease option" are effectively the same strategies. 266 I do not accept that the "rent-to-buy" strategy permits a consumer to buy a house for $1 in any sense because, in addition to the option fee, it contemplates payment by the consumer of additional amounts, namely, the rent payable for the duration of the option and the balance of the purchase price on exercise of the option. 267 I accept the possibility that the respondents' strategies could enable a consumer to buy a house without needing a deposit, bank loan or real estate experience. Essentially, this depends upon locating a seller who is willing to sell without receiving a deposit and without receiving the purchase price for the property in the ordinary course. There was no evidence that there is any significant market of sellers who are prepared to agree to those terms. Accordingly, I conclude that, in reality, the respondents' strategies do not and cannot enable a consumer to buy a house without needing a deposit, bank loan or real estate experience. 268 Once it is accepted that there is no reason to believe that the respondents' strategies can be used to buy houses for $1; without needing a deposit, bank loan or real estate experience or using little or none of the consumer's money, the success of the strategies to generate income, build property portfolios, make profits or create wealth must depend on buying houses using the consumer's own financial resources (including access to bank loans). There is no argument about the proposition that vendor finance can be used to generate income, profits or wealth for a seller with the requisite financial resources. However, I consider it relatively unlikely that consumers to whom the respondents' business was directed were sellers of that kind. The headline "How to buy a house for $1" indicates that the respondents were directing their efforts principally towards people who were not property rich, but who would be attracted to the idea that they could make money from property without having to pay a significant amount for it. Mr Otton's personal success Representations 269 The ACCC contended that, during boot camps, the respondents represented that Mr Otton himself had been successful financially in implementing the "system" and using the strategies. In their defence, the respondents "admitted" that Mr Otton had been successful financially "in following the ideas and using the strategies" but did not respond to the pleaded representation. 270 The respondents contended that Mr Otton's own success gave a reasonable basis for the opinions he held about the strategies he taught. That contention was based primarily upon dealings by Mr Otton and WBH between 2000 and 2007. 271 As noted above, the respondents did not argue that Mr Otton's success was based on his purchase of properties using the techniques. Accordingly, the proposition must be that his success was derived from the respondents' sale of properties using the techniques. 272 The ACCC contended that Mr Otton's financial success was attributable to the respondents' training business. WBH financial statements 273 The respondents relied upon financial statements for WBH as trustee for the Otton Family Trust for the years ended 30 June 2004 to 30 June 2014. 274 The respondents submitted that they do not have the accounts for 2000 to 2002 but that it would be expected that profits were made otherwise WBH, which was incorporated in 2000, would not have continued in business. The evidence does not permit any inference to be drawn as to the profitability of WBH prior to the period for which accounts are available in the absence of specific evidence. 275 The respondents contended that the accounts for the year ended 30 June 2004 showed a net profit before income tax for the years ended 30 June 2003 and 30 June 2004 of approximately $423,000. That figure is partly attributable to sales of "vendor financed houses". However, it is also attributable to sales of "boot camps" and "Creative Real Estate". References in the financial statements to income from "Creative Real Estate" and "rick.otton" are references to income from the training business. 276 The respondents did not attempt to separate out the extent to which the net profit was attributable to income from sales of "vendor financed houses". 277 The balance sheet as at 30 June 2004 showed that WBH owned seven properties, of which four had been acquired in the preceding 12 months. 278 The financial statements for the year ended 30 June 2005 contain separate trading statements for rickotton.com and We Buy Houses. The profit and loss statement shows that WBH's real estate activities generated a gross profit of $112,092. This compares to a $642,998 gross profit derived from WBH's training operations. After operating expenses, the total net profit before income tax (taking into account income from both real estate and training) was $121,169. Thus, it is reasonable to infer that the net profit earned by WBH from real estate activities that year was less than $121,169. 279 WBH's financial statements for the year ended 30 June 2006 show that its real estate operations made a loss of $70,546. WBH earned gross profit of $1,133,208 from its training operations in that year. 280 WBH's financial statements for the year ended 30 June 2007 show that its real estate operations earned rental income of $131,524, interest income from vendor financed properties of $146,875 and profit on sale of properties of $1,517. WBH's real estate operations derived a loss of $340,080. Income from training operations was $2,636,666. These were the first financial statements prepared by Mr Donkin. 281 The respondents did not point to any significant income from real estate transactions after 30 June 2007. 282 Based on the financial statements: (1) WBH made a profit from vendor financing of real estate transactions in the years ended 30 June 2003 and 30 June 2004; (2) I am not satisfied that WBH otherwise made a significant profit from real estate transactions; and (3) any financial success that the respondents enjoyed in the decade or so prior to and during the period of the alleged misrepresentations was predominantly the result of their training operations. Success in the United States 283 The respondents argued that Mr Otton commenced implementation of his real estate strategies in the United States. As I understood the contention, it was that the court should infer that he made profits from that activity in the United States. The submission was not developed. The evidence concerning Mr Otton's dealings in the United States was not sufficiently detailed to enable me to draw any conclusions about the degree of Mr Otton's financial success in that country or the terms of any real estate transactions by Mr Otton in the United States, or whether any such transactions would be relevant to an assessment of the reasonableness of Mr Otton's opinions about implementation of the techniques. Positive cash flow from properties since 2007 284 Mr Donkin's evidence was that all properties owned by WBH provided a "positive cash flow", in that the income received from those properties, being either rent or interest payments, exceeded the outgoings that either WBH or Mr Otton was paying. 285 Expressed at that level of generality, I am not satisfied that this evidence supports the contention that Mr Otton's success provided a reasonable basis for his opinions about implementation of the techniques. Gross capital profit 286 Mr Otton claimed that the sale of the 43 properties identified in Exhibit RO1 had led to a gross capital profit of $892,850 being the difference between the total of the purchase prices and sale prices for the properties. The respondents claimed that this was a conservative figure since it does not include other income that may have been earned from the properties, such as rental income. 287 Based on Exhibit RO1, the properties were sold over about 13 years between December 2001 and October 2014. Mr Otton disagreed that there were significant expenses that would need to be deducted from the gross capital profit to calculate the net capital profit but the WBH financial statements include significant expenses for stamp duty and land tax. Without any better evidence to demonstrate that the gross capital profit is a reliable indicator that the property dealings the subject of Exhibit RO1 contributed to Mr Otton's financial success in a significant way, I am not satisfied that the gross capital profit figure or any of the other matters identified by the respondents (whether considered separately or together) supports a conclusion that any success experienced by Mr Otton provided a reasonable basis for the opinions he held about the implementation of the strategies that he taught. Respondents' publications Book titled "How to buy a house for $1" 288 From at least sometime in 2012, WBH and Mr Otton distributed, and made available for distribution to consumers, the book. 289 The evidence does not reveal how many copies of the book have been sold or distributed. The book has been available for sale from book retailers, 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. 290 Four witnesses gave evidence of purchasing the book and one other witness gave evidence of reading it after attending a free seminar. "Free Ticket" bookmark accompanying book 291 Ms Panizzutti, Mr Ronhave and Mr Nel gave evidence that their copies of the book contained a cardboard bookmark that was styled as a "Free Ticket". 292 The "tickets" Ms Panizzutti and Mr Nel received with their copies of the book state: Invest One Day With Rick Otton At The Ground-Breaking New "How To Buy A House For A Dollar" Event And You'll Discover … • How you can buy property for just $1, with NO deposit and NO bank loan • How to turn a negatively geared property into a positive cash flow • The #1 way to find 10 times more buyers if you ever need to sell your property • Why you never need to stress about Interest rates or the economy again • The top 5 strategies for creating Positive Cash Flow Properties • Have your property problems SOLVED in the room! (limited to 10 people) • Plus much, much more … Value $1,597, Yours FREE with this ticket. NUMBERS FOR EACH EVENT ARE STRICTLY LIMITED, SO HURRY OVER TO … www.HowToBuyAHouseForADollar.com/Ticket 293 Ms Panizzutti used the ticket to access a website to register to attend a free seminar. 294 The "ticket" received by Mr Ronhave with his copy of the book states: Don't Miss Out On the 2014 Property Boom! FREE ONE DAY REAL ESTATE TRAINING EVENT • How to build wealth through real estate with out using your own cash or credit • The top 5 strategies for creating positive cash flow properties • How to turn a negatively geared property into positive cash flow • Watch a live demonstration as Rick purchases a house from a seller for a $1 • Harness the benefits of property so you can retire • How to generate thousands of dollars a month in positive cash flow • Plus much more… Value $497 - Yours Free with this ticket! NUMBERS FOR EACH EVENT ARE STRICTLY LIMITED-SO SECURE YOUR SEAT NOW www.ReadySetBoom.com.au/Ticket 295 Mr Ronhave used the ticket to access the website to register to attend a free seminar. Content of the book 296 The book is divided into chapters including chapters that describe the techniques. Inside front cover 297 On the inside cover of the book is an image of a smart phone screen displaying eight text messages, apparently addressed to Mr Otton. The messages include: (1) "Just secured $850k house in Katoomba. No money down. I love this! Jovan, NSW"; (2) "Bought a property for $1 – made $10k upfront & $440 per mo positive cash flow & backend profit is $27k Mark, Qld"; and (3) "Can you let rick kno [sic] that i sacked my boss today and became a full time property entreprener [sic]. I have replaced my income and thrown in my crappy job…Rob, WA". First and last page of book 298 Both the front and the last page of the book are entitled "Special free DVD offer for readers of this book". On each of those pages are the following words and images: (1) "How to Buy a House For $1" DVD – Yours FREE! [including picture of DVD which states "How To Buy A House For $1"]"; (2) "Discover how Rick bought a property for $1 in 3.5 minutes … and then turned it into $801 Monthly Positive Cash Flow!"; (3) "How to buy a $460,000 house for $1– without a bank or deposit documented case study"; (4) "Your "wealth blueprint" – there is nothing stopping you from building property wealth now – no matter your age, income or past property experience"; (5) "How a First Home Buyer can use this system to acquire their first home – without a deposit or bank loan"; (6) "How to turn your negatively geared property cash flow positive"; and (7) "How to build a multiple property portfolio – without risking all your hard-earned money" 299 In cross-examination, Mr Otton could not identify the property which he claimed to have "bought … for $1 in 3.5 minutes … and then turned … into $801 Monthly Positive Cash Flow". 300 At page v of the book, under the heading "Acknowledgements" are several paragraphs, including the words: Thanks David Lee for convincing me to show the United Kingdom how to 'buy houses for a pound'. 301 Immediately after the "Acknowledgements" is the following dedication: 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. Preface 302 The preface of the book, which appears on page xiii, is subtitled "CAN YOU REALLY BUY A HOUSE FOR A DOLLAR?". The text appearing immediately under that heading reads: Yes, you can! And I'm here to show you how. Along with my students in Australia, New Zealand and the United Kingdom, I'm living proof that you can buy property every day for a dollar or a pound, and in this book, we'll show you how. 303 At page xiv, under the heading "How to buy a property without qualifying for a bank loan" are the following words: Since banks have pulled back on lending money due to the Global Financial Crisis, it's become more difficult to qualify for, and receive, a bank loan. And now a buyer needs to save even more money for a deposit! In turn, this makes it more challenging for sellers to achieve their asking price, it takes longer to sell property, and it creates added uncertainty about whether buyers can even qualify for loans. 304 Page xiv also includes the heading "How to turn an existing negatively geared property into a cash flow positive or neutral one". 305 Page 1 of the book contains the following: Imagine buying a home without a bank. Imagine buying your home using none of your own money. Imagine buying a house even with less-than-perfect credit … … without paying stamp duty. … without borrowing equity from your existing property. … without saving for a deposit! I'm Rick Otton, and in this book I'll show you that it's possible. It is possible to buy property using little, or none, of your own money. 306 Pages 6 and 7 include the following passage: The strategies we're revealing in this book are all duplicable and transferable. They've changed not only our lives, but thousands of our students' lives as well, and you'll see actual examples of our students putting real-life transactions together that solve real-life problems, including: • buying without a bank loan • turning negative gearing around to positive cash flow • selling when the mortgage is worth more than the house, without needing to write a cheque to cover the difference • creating stepping stones to help everyday people get into home ownership • profiting from renovations without lifting a finger. Literally thousands of students have used our strategies (the exact same strategies you're about to learn in the following pages) to turn their lives around. Our students have been changing lives and creating financial freedom for themselves and their families, and impacting dozens, and sometimes hundreds, of other people's lives in the process. You're about to learn how to build your own property portfolio from scratch using none of your own money, and why we believe absolutely anyone, regardless of their background or circumstances – anyone who truly wants a better life, and is willing to step outside the square and see things and do things a little differently – can do the same. 307 Chapter 2 is entitled "An easier way". Page 9 includes the following words: What if you could buy as many houses as you wanted, using little or none of your own money and without getting a bank loan (even if you have less-than-perfect credit or have been locked out of the traditional banking system)? How many would you buy and how fast would you buy them? What if you could sell houses quickly, within a week or less, and get access to the cash locked up in the houses without delay? 308 Page 10 includes the following words: These days I spend most of my time onstage, travelling the world or working with my mentoring students, presenting seminars to help people just like you create all the time, location (which we'll explain more in Chapter 8) and financial freedom they desire by buying and selling houses for a dollar. One of the most important aspects of our business is the success of our students. Many of our students regularly make six-figure incomes in the house business. … In this book you'll discover how you can start buying and selling houses today, from scratch, and start to profit instantly – even if you have: • never owned a house • never saved a deposit • less-than-perfect credit. You will discover a range of possibilities, as we take you through some of the proven and successful processes that we use ourselves to make money with houses. 309 Page 11 contains the following statement: Millions of people want to buy or sell a house at any moment in time, and are having trouble achieving that dream using traditional methods. You could exponentially increase your income by helping these people to get what they want – and maybe become the next property millionaire in the process! 310 Page 14 contains the following: When you read this book, I want to get you to do three things: • Start to see things differently. • Be willing to change processes. • 'Get' that the profit is in the terms, not the price. Once you do that, you'll see a whole new world of possibility and opportunity open up in front of you. Then, as a bonus, I want you to do something with what you've learnt … whether you buy a house yourself with no money, generate a decent retirement income, or help find a buyer for someone who has had their property on the market the traditional way for months and months and months. Just do something new! Section entitled "All about buying" 311 Page 78 includes the following words: No matter who you're interested in buying property, chances are you'd love to: • buy at a discount • pay as little money up-front as possible • be able to hold onto the property while it grows in value. Most people have trouble achieving even one of these goals. But by the end of the next few chapters, you'll know how to do all three – in any market. 312 Chapter 9 is entitled "Buy and fold". Page 83 includes the following sentence: Imagine if there was another way – a way to profit now instead of waiting for decades? 313 Chapter 10 is entitled "Four ways to buy at a discount". 314 Chapter 11, commencing on page 101, is entitled "How to buy a house for a dollar". In their closing written submissions, the respondents set out chapter 11 in full. In the context of the chapter read as a whole, the title refers to the possibility of buying a house by taking an assignment of the vendor's debt. 315 At the end of the chapter, at page 104, is the following paragraph: When we get to the strategies section, you'll see exactly how to put this concept into action for yourself. But first, I'd like to show you all about selling to ensure that you make a profit when you sell the property you buy for one dollar. 316 The respondents did not point to any part of the book in which a liability arising from an assignment of debt was identified as a consideration in ensuring that a profit was made from selling a property acquired on terms involving acceptance of an assignment of debt. Section entitled "All about selling" 317 Chapter 12 is entitled "Why you can sell in a week". The section under the heading "If I make a house easy to buy, it becomes easy to sell" includes the following words (at pages 111-112): How do we get more buyers? Sydney has the highest property prices in the country at the moment. And Sydney house prices are the furthest out of reach for most people, too. Let's look at an example: To buy a house with a $500,000 price tag (which is a common price in a place like Sydney), a buyer would need a $100,000 (20%) deposit, and another $22,000 to $25,000 for stamp duty and legal costs. How many people in Australia and New Zealand have a lazy $125,000 sitting in a cheque account for a rainy day? Less than 1%. Which means that with the traditional system, over 99% of people couldn't buy that property, just because they can't cover the cash expense. Whether they qualify for a mortgage or not doesn't even come into the picture. But what if the seller said, 'You only need to give me $20,000 cash today, and the rest of the deposit later'? A heck of a lot more people would have that kind of money to get started, so there would be many more potential buyers. The property would sell faster, simply because it would be easy to buy. I define a potential buyer as someone who would be able to afford the monthly payments if they bought the house (and by afford, I mean the monthly payments would be no more than 30% of their monthly income). To be taken seriously by a bank or lender, potential buyers need to be able to do three things: • afford the monthly payments • come up with a deposit • qualify for a loan. I focus mostly on the first factor, because if that's solid, the other two can be figured out in a whole variety of ways, using flexible terms. The last two can often be a little more challenging for a lot of people who are buying the traditional way. 318 Even accepting the premise that less than 1% of Australians do not have "a lazy $125,000 sitting in a cheque account for a rainy day", it does not follow that over 99% of people could not buy a house for $500,000 using the "traditional system", which is a reference to buying a house using finance from a bank or other financial institution. 319 However, this passage reveals a significant premise of the book: that Mr Otton has a solution to a widespread problem, being the problem of obtaining finance to buy a house. The ACCC submitted that, in the book, Mr Otton attempted to persuade readers that the traditional method of purchasing homes in this country was unavailable to the vast majority of Australians and that his techniques were the solution to that problem. I accept that submission. Section entitled "Five core strategies" 320 The five core strategies are: (1) instalment contracts (Chapter 15); (2) deposit finance (Chapter 16); (3) handyman special (Chapter 17); (4) rent-to-own (Chapter 18); and (5) sandwich lease (or back-to-back) (Chapter 19). 321 Page 140 includes the following words: IS THIS YOU? • You want to own your own home but you haven't saved enough deposit and/or your credit isn't perfect. • You are a first homebuyer and you believe that owning a home is almost an impossible dream. • You want to create a home-based business allowing you the freedom and flexibility you can't get with your nine-to-five job. • You are a property investor and you want to keep buying property, but the banks won't extend you additional credit. • You own a negatively geared property and you can't afford to keep making the payments. • You own a property and if you sell it you will have to write a cheque at settlement because you owe more on it than it's worth. If you can relate to any of the above scenarios, this section is all about the solutions you've been looking for. In this section were going to review the most common core strategies that I use, and that my students use, over and over again. Don't think you need to learn all of them, or even understand all of them. The truth is, you can use any one of these strategies, get good at it, and then repeat it over and over against to achieve more than you've ever imagined. 322 The following boxed text appears on page 142: 323 Chapter 18 ("Rent-to-own") commences with the following words (on page 171): The rent-to-own strategy can solve both of the major first-homebuyer hurdles: the deposit and the loan. 324 Chapter 19 ("Sandwich lease (or back-to-back)") commences with the following words (on page 181): Finally, this is how you buy a house for a dollar! When you buy on a lease option, you only need a dollar to make the paperwork stick. 325 Chapter 19 of the book explains the technique referred to as the "sandwich lease option". It refers to the ideas of "buy[ing] on a lease option"; "buy[ing] a property as an investor on a lease option" as the "Transaction Engineer" and then "onsell[ing] the property to an end buyer on another lease option at a slightly higher price"; and "buy[ing] the house from the seller on a Lease Option" and then "turn[ing] around and sell[ing] the house to the buyer on a second Lease Option" and "get[ting] to profit from the sale of the property without ever officially owning it". 326 There is no explanation in chapter 19 of the words "lease option" except what might be implied from the words "get[ting] to profit from the sale of the property without ever officially owning it" and from the words "When the buyer is ready to buy, they exercise their option to buy from you…and you exercise your option to buy from the seller." On p 135 of the book, "lease option" is described as "professional jargon", for which the "mums and dads language is "rent and buy or rent-to-own". 327 Chapter 19 is inherently confusing because of the ambiguity of the idea of "buy[ing] on a lease option". In order to understand chapter 19 in the sense suggested by the respondents, it is necessary to appreciate that the word "buy" is not being used in its ordinary sense of acquiring a proprietary interest in a house. In my view, it is reasonably likely that some ordinary readers would not appreciate that fact because of the repeated use of the words "you buy a house", "you buy" and "you buy the house". Accordingly, it is reasonably likely that some ordinary readers who read the various "buy a house for $1" representations in the book, in their context including chapter 19, would conclude that a "lease option" was a device by which they could acquire a proprietary interest in a house for $1. On the respondents' case, those ordinary readers would be misled because the respondents are not intending to suggest that consumers can acquire a proprietary interest in a house for $1. 328 Chapter 20 is entitled "So, where to now?" The opening words of this chapter (on pages 191-192) are: Imagine now buying your house for one dollar! Imagine now buying your house without a bank. Imagine now buying your home using none of your mown money. Imagine now buying a house even with less-than-perfect credit … … without paying stamp duty. … without borrowing equity from your existing property. … without saving for a deposit! Imagine now how it empowering it will feel! Having read this book, you know it's possible to buy as many houses as you want, using little or none of your own money and without getting a bank loan (even if you have less-than-perfect credit or have been locked out of the traditional banking system). You've seen how to sell houses quickly, within a week or less, and get access to the cash locked up in the houses without delay. Finally, you've experienced real-life stories and seen how positively uplifting it is to solve seemingly unsolvable financial problems simply by transferring houses from people who no longer want them to the people who do. … While I have outlined the basic principles, I've only just scratched the surface of what is possible using these strategies, as I have tried to keep the explanations simple and easy to understand. This path is perfect for anyone who is interested in buying their first property, turning a negatively geared property investment into a positive one, or creating positive cash flow. 329 Chapter 20 concludes with the following passage (at page 199): I've shown you how you can buy your first home, grow your wealth with property and solve your property problems, without the headaches and hassles that have become so commonplace for most Australians and New Zealanders. And the best bit is that you don't need a lot of money or a bank loan to start using these strategies – just the willingness to see things a little differently. Now is the time to move forward. Join us. My students and I welcome you. Make today the day you start putting your knowledge into action and changing not just your life, but the lives of many, many people who would otherwise not be able to enter the property market. Visit www.howtobuyahouseforadollar.com/free-dvd and we'll show you how to get started immediately! 330 The last pages of the book, from pages 201 to 205, contain a section titled "What People Are Saying About Rick Otton". The section contains the following statements: "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 … "We bought a property without a bank loan, we made $10,000 up-front deposit, $800 per month positive cash flow and our backend profit is $70,000." S & M Donaldson, Small Business Owners, Queensland … "Just bought my first place for $1.00 and sold my other property on a lease option for $30,000 more than what the agent could get me. All smiles." C Eckert, New South Wales … "My brother and I received $18,000 up-front in cash and our backend profit is $162,000 from two transactions. We invested no money and did not qualify for any bank loans." P Grimaldi, Telecommunications Serviceman, New South Wales … "I went to Rick Otton's bootcamp for three days, I spent $2.00 and I bought two houses and I made $17,000 cash and $72,000 backend profit … and I have a skill going as well. Thank you very much for that." T Cat, New South Wales … "We bought our first house for $50 and we've got $30,000 in the deal. We're getting $70 a week cash flow out of it and it will settle in 18 months, the people are ecstatic and we're ecstatic, the people who sold it are happy and the people who bought it are more than happy." W & D Bamber, Small Business Owners, New South Wales Inside back cover 331 The inside back cover is entitled "Rick Otton Entrepreneur, Author, Speaker and Property Coach". It includes the following statements: In 1991, Rick Otton uncovered an innovative strategy of buying and selling real estate and went on to amass a portfolio of 76 properties in his first 12 months of investing. Rick buys, sells and trades property, using little or none of his own money, and structures transactions to create positive cash flow. Since 2001, Rick has taught nationally and internationally over 35,000 students how to buy, sell and trade residential property without getting bank loans or acquiring debt, using little cash and minimising risk. Many of Rick's students have been able to create wealth, buy their first home, restructure a negatively geared property to make it cash flow positive and build their property portfolio year after year. … Rick has also been profiled in numerous national and international magazines and books as he shows everyday people how to create wealth in real estate, without bank loans or saving large deposits. Back cover 332 The back cover of the book includes the following words: Impact of the book 333 The following witnesses give evidence of the book and its influence on their subsequently attending either or both a free seminar and boot camp: (1) Ms Panizzutti was attracted by the title of the book to the system promoted by WBH and Mr Otton. Ms Panizzutti purchased the book and started reading it. The concepts discussed in the Book did not resonate with her. She thought the free seminar would "be a faster method to learn the concepts and strategies discussed in the book". (2) Mr Jovanovic purchased the book. He read it. He understood that he would not actually be buying a house for one dollar, and understood that the system taught be WBH and Mr Otton was "a way to acquire a number of properties in a way which involved little to no money upfront". After reading the book, Mr Jovanovic was interested in hearing Mr Otton talk. (3) Mr McKenzie read the book sometime in 2014, after he had attended a free seminar in 2013. By the time he read it, he knew the techniques taught by WBH and Mr Otton could not be used to buy a house for one dollar as claimed by the book's title. (4) Mr Nel purchased the book and read it. According to Mr Nel, the book presented "a system involving a range of strategies" which "could be used if the investor had little or no money of their own and without obtaining a bank loan". After he finished reading the book, Mr Nel visited the website www.howtobuyahouseforadollar.com and registered to attend a free seminar. (5) Mr Ronhave purchased the book. After reading it, Mr Ronhave thought "it was possible to buy a house for a dollar and that this would be easy to do". He thought it would be worth going along to a free seminar to see Mr Otton in person and to learn his methods. Free seminars 334 From at least 1 January 2011, WBH and Otton conducted and held free seminars described as "How to Buy a House for $1 One Day Live Event" and "Ready Set Boom Property Tour 2014" (collectively, "free seminars"). 335 The free seminars were advertised on websites, in an email and in mail-out flyers. Free seminars were held on nine occasions in 2012, 22 occasions in 2013 and 11 occasions in 2014. Throughout 2012, free seminars were held at locations including Parramatta (once), Melbourne (two occasions), Sydney (three occasions), Brisbane (two occasions) and Perth (once). Throughout 2013, free seminars were held at locations including Sydney (nine occasions), Brisbane (four occasions), Melbourne (five occasions), and in Newcastle, Perth, Geelong and Townsville (once in each location). Throughout 2014, free seminars were held at locations including Sydney, Brighton Le Sands, Newcastle, Parramatta, Townsville, the Sunshine Coast, Brisbane, the Gold Coast, Melbourne and Geelong. Advertising for free seminars 336 The ACCC's case included complaints about six publications concerning the free seminars, being: (1) the 2013 free seminars webpage, www.howtobuyahouseforadollar.com/register, published by WBH; (2) the 2013 free seminars mail-out, sent by Mr Otton; (3) the 2014 free seminars advertisement, probably published by WBH; (4) the 2014 free seminars webpage, published by WBH; (5) the 2014 free seminars email, sent by WBH; and (6) the 2014 free seminars mail-out, sent by Mr Otton. 2013 free seminars webpage 337 The content of the 2013 free seminars webpage was proved by a screenshot taken on 12 September 2013. The evidence did not reveal how long the webpage was available to be read in the form of the screenshot. The ACCC relied upon 34 statements on the webpage, set out in appendix 1 to this judgment. 338 Ms Panizzutti, Ms Bassanelli, Mr Elturk and Mr Nel gave evidence that they registered to attend a free seminar using the 2013 free seminars webpage. Mr Riley, from the ACCC, registered to attend a free seminar using a telephone number he located on the 2013 free seminars webpage. 2013 free seminars mail-out 339 The 2013 free seminars mail-out is an advertisement for free seminars in 2013 titled "FREE ONE-DAY REAL ESTATE TRAINING EVENT" sent by Mr Otton. 340 The 2013 free seminars mail-out contains the following four statements: (1) "If you've ever wanted to know how to build a passive income stream so you can retire early or quit work forever, this is the most important message you'll ever read:"; (2) "You can live the lifestyle you want … retire early or quit your current job forever … and make tens of thousands of passive dollars a month (no matter what financial situation you are currently in)"; (3) "In a revealing one day LIVE event, "How To Buy A House For $1" I will show you exactly how I did it, plus some ground-breaking strategies like: How to make positive cash flow so you can retire early or quit work forever. How to build a multiple property portfolio or buy your first house, without risking your hard-earned money. How to purchase an investment property below market value and sell it within 4 days at a 20%-30% profit."; and (4) "At the "How to Buy A House For $1" one day event, I will show you how easy it can be: 2014 free seminars advertisement 341 The 2014 free seminars advertisement is a document titled "READY SET BOOM PROPERTY TOUR" promoting free seminars in 2014. 342 The 2014 free seminars advertisement contains the following four statements: (1) "The Proven Way to Build a Property Portfolio Without Using Your Own Cash or Credit"; (2) "How to turn a negatively geared property into positive cash flow"; (3) "Watch a live demonstration as Rick purchases a house from a seller for a $1"; and (4) "How to generate thousands of dollars a month in positive cash flow". 2014 free seminars webpage 343 The content of the 2014 free seminars webpage was proved by a screenshot taken on 7 May 2014. 344 The ACCC relied upon seven statements on the webpage, set out at appendix 2 to this judgment. 2014 free seminars email 345 The 2014 free seminars email is an email dated 5 April 2014 from WBH from the email address support@rickotton.com that appears to be a marketing email sent to a number of recipients including Shane Riley, one of the ACCC's employee witnesses. Its purpose appears to be to promote the "Ready, Set, Boom National Tour", which appears to have been a series of free seminars held around Australia in 2014. 346 The 2014 free seminars email contains the following five statements: (1) "Here's a glimpse of what you'll discover at the event: * How To Turn Your Negatively Geared Property Into a Positively-Geared One (or at least cash flow neutral-in fact , I'll show you actual figures and examples) * Brand New-How To Create Cashflow With No Loan Liability! (That's right-you don't need to qualify for a bank loan or have much money to put down towards purchase)"; (2) "If you've ever wanted to discover my latest strategies for buying property using little or none of your own money ..."; (3) "If you've ever wanted to buy houses without a bank, deposit or even paying stamp duty ..."; and (4) "If you've ever wanted to generate monthly passive income from real estate investing ...". 2014 free seminars mail-out 347 The 2014 mail-out is an advertisement for free seminars in 2014 titled "Don't Miss Out On The 2014 Property Boom" sent by Mr Otton. 348 The 2014 free seminars mail-out contains the following five statements: (1) "Rick Otton Reveals The Proven Way To Build A Property Portfolio Without Using Your Own Cash Or Credit!"; (2) "Did you miss out on the last property boom? Do you want to build a passive income stream so you can retire early or quit work forever? Are you an investor and the banks said "no" because you have too many properties?"; (3) "Here is the good news: Did you know that no matter whether the market booms or is flat you can build wealth through property AS IF you have no cash or credit?"; (4) "About 20 years ago, I discovered a remarkable property investment system that allowed me to purchase 76 properties in 12 months without bank finance. Since then my students and I have used this system to profit throughout rising, falling and even BOOMING markets."; and (5) "At my Ready Set Boom Property Tour 2014 series of one day events I will demonstrate: Testimonials on 2013 free seminars webpage 349 The 2013 free seminars webpage published the following testimonials: (1) "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"; and (2) "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". Testimonials on 2014 free seminars webpage 350 The 2014 free seminars webpage published the following testimonial, which appears to be by the same person as the second testimonial immediately above: 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. 351 The website, www.howtobuyahouseforadollar.com/register, featured the following statements: I'll Show You How To Buy A House for $1 And Generate Positive Cash Flow From Day One … Even If You have No Deposit, No Bank Loan And No Real Estate Experience … You can live the lifestyle you want … retire early or quit your job and make tens of thousands of passive dollars a month (no matter what financial situation you are currently in) … … Imagine … owning 5 properties, with each one returning you $350 a month POSITIVE cash flow. Or 15 properties returning you $5,250 a month POSITIVE cash flow. Or 30 properties giving you $10,500 a month in POSITIVE income. Sounds unbelievable, doesn't it? I understand. Especially if you've been brainwashed into thinking the only way you can buy property is with a bank loan, a huge deposit, and lose money every month with negative gearing. In the last 22 years I've purchased over 300 properties in Australia and the USA- using little or none of my own money. Anyone Can Do This! 352 This page featured, in prominent yellow boxes along the right-hand side, photographs of individuals with short stories about property transactions. Each box contains a name, occupation and state (apparently of the photographed person or couple). The stories make claims about money made by the individuals from the transactions, such as that they bought a property for $1 or made over $100,000 easily. 353 The website, www.creativerealestate.com.au/readysetboom, featured the following statements: (1) "… I have used this technique to PROFIT throughout rising, falling and BOOMING markets"; (2) "With This System My Students Are Able To: • Make positive cashflow from day 1 with any house • Build property portfolios without their own money invested and without new bank loans"; and (3) "The A to Z of Basic No Money Down … Which Will Have You Owning 1-5 Homes … Then My Supercharged Advanced Secrets Which Will Take You From 5 Homes to 50". Emails subsequent to attending a free seminar 354 Witnesses also gave evidence that, following their attending a free seminar, they received emails from WBH and Mr Otton. Mr Riley received an email which included the following statement: Since 1991, I've been investing in booming, flat and down markets without using a lot of my own cash or credit because I devised property investing strategies whereby I make money predictably, reliably and systematically. 355 A later email, received by Mr Riley, uses similar language: Since 1991, I've been investing in property through various market cycles without using a lot of my own cash or credit. Back then I had to develop a property investing strategy where I could make money predictably, reliably and systematically. Free seminar content 356 The ACCC relied on evidence of 11 individuals, including consumers and investigators, who attended free seminars between 20 October 2012 (Mr Jovanovic) and 15 February 2014 (Mr Ronhave). Based on their evidence, I accept the ACCC's submission that the format and content of the free seminars that the consumer witnesses attended was broadly consistent. In particular, the rooms in which the free seminars were held had display banners and posters with the words "How to buy a house for $1". Some of these banners and posters resembled the cover of the book. Staff members of WBH wore clothing with a logo reading "How to buy a house for $1". 357 Ms Bassanelli's typed notes record: [7] Rick Otton commenced the seminar introducing us to the "benefits from owning a whole lot of houses". He said he was on a mission to change the way we buy and sell houses. He said that he could buy a house in less than 7 minutes for one dollar. … [15] The topics to be covered were: • Buy a house without a bank loan. • Top 5 strategies for creating positive cash flow properties. • Steps for buying a house for $1. 358 Over the course of the free seminars, Mr Otton gave very brief and high-level descriptions of the techniques. He used expressions such as: (1) "Buy like you have no money … you don't need money to buy". (2) "No money down". (3) "Everything for $1". (4) "No physical cash will change hands". 359 The free seminars were used to promote the respondents' boot camps. Attendees at free seminars were encouraged to sign up to attend a three-day boot camp and were given flyers advertising the boot camps dates and locations. 360 Ms Panizzutti gave evidence that, at the free seminar she attended, Mr Otton referred to the boot camps, saying words to the following effect: It will be three intense days with me and my team. We'll give you paper work. You'll get an understanding of how I do things. You'll be surrounded by people who have done it. You'll be given formulas. You'll be shown how to work strategies and implement them. You'll be mingling with other people and you'll start working together. If you want to attend you have to sign up today. … There is a special price available today only for the Boot Camp. The first payment of $995 can be made and the remainder can be paid monthly over 5 months, of a further $995 per month. Power Property Profits Pack 361 From at least 1 January 2011, WBH and Mr Otton distributed and made available for distribution to consumers a package of materials described as the "Power Property Profits Pack" ("Power Property Profits Pack"). 362 The Power Property Profits Pack contained compact discs, a DVD and various documents, including: (1) a compact disc entitled "How to Turn Negative Gearing to Positive Cash Flow!"; (2) a digital video disc entitled "How to Build a Property Portfolio Without Using Your Own Cash or Credit"; (3) a document titled "Cheat Sheet: 4 Ways to Buy at a Discount"; and (4) a "3 Step Report Set" which was available for download, at various times, at websites including www.readysetboom.com.au/download. 363 The cover sheet which accompanied the Power Property Profits Pack is entitled "Your Power Property Profits Pack is enclosed" and contains the following statements: (1) "The proven way to build a property portfolio without using your own cash or credit"; (2) "How to turn negative gearing into positive"; (3) "In this exclusive pack you will discover how EASY it can be to create a PASSIVE INCOME stream through property in your own capital city even if you have little cash, credit or experience"; (4) "I bought a property for $1"; (5) "We bought a property without a bank loan"; (6) "GET STARTED NOW: Devour every piece of information in your pack and start transacting property in your own suburb!"; and (7) "Since 2001, Rick Otton has shown people from all walks of life how to create wealth in real estate, without bank loans or forking out huge deposits." 364 On the compact disc, Mr Otton makes the statements that are set out in appendix 3 to this judgment. 365 On the DVD, titled "The Proven Way to Build a Property Portfolio", Mr Otton makes the statement: How many houses would you buy if you didn't have to get yourself a bank loan to buy them? And how many houses would you buy if you didn't have to use any cash to buy them? Well that's how I've been buying my houses, and I learnt how to do that over 20 years ago in Dallas Texas when I was right there amongst the savings and loans crisis when a large part of their banking system totally collapsed. What I had to do was create systems, methods, processes by which I could buy houses without relying on a bank loan. 366 Also on the DVD is a "story", the transcript of which is set out in appendix 4 to this judgment. 367 The document titled "Cheat Sheet: 4 Ways to Buy at a Discount" contains the following statements: Rick buys, sells and trades property, using little or none of his own money, and structures transactions to create positive cash flow. Since 2001, Rick has taught nationally and internationally over 35,000 students how to buy, sell and trade residential property without getting bank loans or acquiring debt, using little cash and minimising risks. Many of Rick's students have been able to create wealth, buy their first home, restructure a negatively geared property to make it cash flow positive and build their property portfolio year after year. Websites 368 From at least 1 January 2011, WBH and Mr Otton established and operated the websites. 369 The evidence includes screenshots of the following pages of Otton websites: (1) www.howtobuyahouseforadollar.com/order.php, taken on 12 September 2013; (2) www.howtobuyahouseforadollar.com/propertypowerpack/step2/?, taken on 12 September 2013; (3) www.howtobuyahouseforadollar.com/media.php, taken on 12 September 2013; (4) www.howtobuyahouseforadollar.com/success-stories, taken on 12 September 2013 ("success stories webpage"); (5) www.rickotton.com ("rickotton homepage"), taken on 1 October 2013, and various pages within that website, also taken on 1 October 2013; (6) www.rickotton.com/index-wp.php/?=1082, taken on 12 September 2013; (7) www.rickotton.com/freepromodvd/freepromodvd.html, taken on 12 September 2013; and (8) www.readysetboom.com.au ("readysetboom webpage"), taken on 4 March 2014, and 12 June 2014. www.howtobuyahouseforadollar.com/order.php 370 The particular statements relied upon by the ACCC are as follows: www.howtobuyahouseforadollar.com/propertypowerpack/step2/? 371 The particular statement relied upon by the ACCC is as follows: • How to Buy A House Without A Bank Including Property Case Study DVD www.howtobuyahouseforadollar.com/media.php 372 The particular statements relied upon by the ACCC are as follows: (1) The heading beneath the words "Media Page", being "How to buy a house for a dollar"; (2) the heading "A property expert explains how to turn a negatively geared property into an investment that puts cash in your pocket"; (3) the heading "Forty lucky TV SOAP readers can win Rick Otton's new book, How to Buy a House for $1"; (4) the heading "How to buy a house for $1 by Rick Otton"; (5) the heading "Bestreads: How to buy a house for a dollar"; (6) the heading "How To Buy A House for $1 Details Alternative Ways To Buy and Sell Real Estate"; and (7) "Property expert, Rick Otton, has turned the tables on the current ways of buy-ing and selling property through, his book "How to Buy A House for $1"". 373 The respondents noted that, under the heading "How to buy a house for a dollar" are the following words: What do ABC Learning Centres, Sydney's Luna Park and Barings Bank all have in common? They were all sold for $1 through an evolving technique that has been around since the 1800's. This technique is known as 'Vendor Finance'. Success stories webpage 374 The particular statements relied upon by the ACCC are as follows: (1) "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 (2) "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 (3) "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 (4) "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 (5) "My first transaction, paid $1 and my total profit is $45,000." Sirah Mumtaz, South Australia & Queensland (6) "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 (7) "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 (8) "I did my first transaction, paid $1 and made $45,000 profit." Simone Toomey, South Australia (9) "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 (10) "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 (11) "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 (12) "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 Rickotton homepage 375 The particular statements relied upon by the ACCC are as follows: (1) "Why Buy Houses for $1?"; (2) "Imagine if you could also buy your next property the same way…with no cash and no bank finance required…would you buy one?"; (3) "Well I'm Rick Otton and I've bought a bunch of properties for $1 and I'd like to share with you why…"; and (4) Under the words "About Rick Otton": Hi, I'm Rick Otton, How would you like to buy your next property without walking into a bank or filling in a pile of bank forms? I create bank-free ways to buy, sell and hold property in Australia, USA, New Zealand and UK…..needed to discover another way! www.rickotton.com/index-wp.php/?=1082 376 The particular statements relied upon by the ACCC are as follows: (1) "Hi, I'm Rick Otton, How would you like to buy your next property without walking into a bank and filling in a pile of bank forms?"; and (2) "Where You Will Get Instant Access To: A private closed forum, where you can chat and train with me on my ground breaking, positive cash flow property strategies – including buying a house without a bank!" www.rickotton.com/freepromodvd/freepromodvd.html 377 The particular statements relied upon by the ACCC are as follows: (1) "Buy property risk free without getting a bank loan". (2) "See proof with a live case study on buying property without a bank". (3) "Do multiple property transactions without being held back by a bank". Readysetboom webpage (4 March 2014) 378 The particular statements relied upon by the ACCC are as follows: (1) "But what if I could tell you that no matter whether the market BOOMS or not you can still make a lot of money through property with any house, without the risk of using a lot of your own cash?" (2) "About 20 years ago, I discovered a remarkable property investment system that allowed me to purchase 76 properties in 12 months without bank finance and in a FALLING MARKET. Since then my students and I have used this technique to PROFIT throughout rising, falling and BOOMING markets." (3) "With This System My Students Are Able To: Make positive cashflow from day 1 with any house build property portfolios without their own money invested and without new bank loans" (4) "Turn Your Negatively Geared Property Into a Positively-Geared One (or at least cash flow neutral – in fact, I'll show you actual figures and examples)". (5) "The A to Z of Basic No Money Down ... Which Will Have You Owning 1–5 Homes ... Then My Supercharged Advanced Secrets Which Will Take You From 5 Homes to 50". (6) "Brand New-How To Create Cashflow With No Loan Liability! (That's right–you don't need to qualify for a bank loan or have much money to put down towards purchase)". (7) "You'll see a video of me on the phone purchasing a property for $1 in a real-life transaction. I'll be there to explain the whole process step-by-step on how you can buy houses WITHOUT new bank loans or needing large deposits". Readysetboom webpage (12 June 2014) 379 The particular statements relied upon by the ACCC are the same as for the 4 March 2014 webpage. 380 The webpage published the following testimonial on each date: 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 upfront deposit, $440 per month positive cashflow and my backend profit is $27,000. Boot Camps 381 From at least 1 January 2011, WBH and Mr Otton: (1) conducted and held paid seminars described as "boot camps" ("boot camps"); and (2) distributed or made available for distribution at boot camps a publication entitled "No Money Down Boot Camp Manual" ("boot camp manual"). 382 The boot camps were conducted in the period from 1 January 2011 to 13 June 2014. Boot camps were held on 16 occasions in that period: four occasions in 2011, six occasions in 2012, five occasions in 2013 and one occasion in 2014. 383 The ACCC's witnesses included six consumers who attended four boot camps between December 2012 and April 2014. Four of those witnesses gave evidence that, after signing up to attend a boot camp, they received a box of materials described as "No Money Down System Massive Passive Property Pack". 384 A flyer for the boot camps, received by one of the ACCC's consumer witnesses at a free seminar promised: Rick will teach you his advanced strategies and his turn key systems for making profit's in today's property market. 385 The witnesses who completed feedback forms following the boot camps generally gave very positive feedback about the camps. Boot camp manual 386 The ACCC relied on the following six statements contained in the manual: (1) "This publication is sold with the understanding that this is nothing more than a system used successfully by the author". (2) "But when the partnership works, it can achieve rich rewards for all participants". (3) "Vendor 'Carry Back' Financing This can be a very efficient way to purchase property because you're getting your financing from the vendor not the bank". (4) "1. Vendor Finance + Deposit Your vendor agrees to supply all of the finance. You pay the vendor a deposit. The interest rate you pay may be higher than the bank's rate. Your Trade-off: You don't get a discount on the purchase price because your vendor will achieve their selling price (But you receive the terms you want). Depending on what interest rate you pay the vendor, when you on sell the property your monthly positive cash flow may be reduced". (5) "Discover our new home ownership programme with low deposit and no bank qualifying" on a picture of a sample business card. (6) "If you can afford a low deposit and make regular monthly payments our new home ownership program may be what you're looking for and there is no bank qualifying!" on the back of a picture of a sample business card. 387 As the respondents noted, the sample business cards appear to be intended as an example of a card that a boot camper might use to find motivated sellers and buyers. One of the sample cards includes the words "We will rent you a home with the option to buy". 388 The Boot camp manual was made available to attendees at boot camps. Ms Nguyen, Ms Panizzutti, Ms Sereni, Mr Jovanovic and Mr Nel received an "orange bag containing a folder of documents consisting of the [boot camp manual], Legal Commentary and worksheets". Boot camp content 389 Extracts from the transcript of the 2014 Hurlstone Park boot camp are set out in appendix 5. 390 The particular statements in that transcript which are relevant to Mr Otton's own financial success are: (1) "I'm going to show you a transaction I've just finished doing, and I'm going to show you the texts–never seen the house, never seen the seller, done it all by text, and it's you know, $1.2 at Coogee. Don't have to see it. Just have to have a different automated system. But you'll see how much profit is in it." (2) "I would not be here – I would never have bought (indistinct) my houses here in 2000 if I listened to all the people who told me that what I'm teaching you today, you cannot do in Australia." (3) "I was a TV guy, yet when I bought 20 condominiums, and you buy apartments in the United States, ladies and gentlemen – if you buy 20 apartments, one of them is always left empty… Now, I'm there and I'm thinking these puppies can rent for $1,000 bucks a week ..." 391 I accept that, by these statements, the respondents conveyed to the persons who attended the 2014 Hurlstone Park boot camp that Mr Otton himself had been successful financially in implementing the strategies which he was promoting at the boot camp. 392 The ACCC also noted the following additional statement by Mr Otton at the 2014 Hurlstone Park boot camp, concerning a "transaction…on Coogee": I'm about to show you a transaction later on today that will make me over a million dollars on Coogee. Never seen it, never met anybody, right? It's just automate the process. Just understand that when you get the network or people that know what you do, they–you just give the instructions for people to do it, they do, they do it. Does that make sense? 393 There is an unsigned contract for sale of a property at 18 Pauling St Coogee with attachments dated in early May 2014. Mr Otton accepted that this contract was never signed. There are no documents in evidence that record a transaction that Mr Otton had "just finished doing" around the time of the 2014 Hurlstone Park boot camp. In cross-examination, Mr Otton claimed that he had "just finished putting [the transaction] together" and that "the transaction, the structure of the transaction, had all been agreed". 394 Nor is there any evidence that Mr Otton made or will make $1.2 million or any amount of money from a transaction involving a property at Coogee. When asked to explain in cross-examination how he was going to make over a million dollars on the transaction, Mr Otton replied: Your Honour, the lady was becoming a crippled lady and she was going to lose the house to the bank and a financial services company contacted me and they said, "Mr Otton, would you have any way to save this lady from losing this house to the bank?" And she had been renting out the other rooms in this house in Coogee for income and she was about to get to the stage where she was going to go in a wheelchair and she wanted to be able to keep the residency of this house and find a way to keep an income, but she could no longer get around that house to manage these people in the different rooms. I put together, after a lot of consultation with the company that it bought it to me – they said they were handling her affairs. They approached me. And I said, "Look, let me see what I can put together." I worked out an arrangement that she needed about 4000 a month to cover all her expenses and medicals. I organised a program where she could stay in the house and stay residency in that home until she passed away; that she would receive 4000 a month for 980; plus she would also receive on the contract another million dollars in cash to her estate 20 years down the road; plus also out of the 980,000, before it was handed to her, I pay out all her credit card debts and any other debts she had so she that could rely on that income every month. Is that your answer? That's how I put it together. But how I was going to make money out of that property was I worked on a 5 per cent calculation of capital growth on the property over the next 25 to 30 years and back then what I felt was a fair capital growth over this property and that's where I was going to make my money. 395 Mr Otton had no honest basis for claiming that he had just finished a transaction concerning a property at Coogee and no honest basis for claiming that the transaction would make him over a million dollars. Despite this, Mr Otton refused to accept that his statement "I'm going to show you a transaction I've just finished doing" was false, saying "[i]n my mind, the fact that I had been told from the person in charge that the transaction was done - I felt I was in a position to say what I said". In my view, Mr Otton knew that the statement was false and was lying when he said that he thought he was in a position to say what he said. 396 At the boot camp attended by Ms Panizzutti, Mr Otton said: I now only deal with properties in the eastern suburbs. I don't deal with any properties worth less than $3 million. Go Direct mentoring program 397 The respondents did not dispute that, towards the end of a boot camp, Mr Otton would describe a further "mentoring program" that participants could undertake with the respondents. The program was called "Go Direct". An enrolment form stated the price for the program in the following terms: 398 Ms Panizzutti gave evidence that the Go Direct program was promoted as a 12-month course which would bolster participants' results in implementing the techniques promoted by the respondents. Mr Otton would "hold [participants'] hand through your first couple of deals" and participants "can have full access to [Mr Otton]". She also gave evidence that Mr Otton said that participants' would "have access to" a solicitor for the duration of the program. Similar evidence was provided by each of the consumer witnesses that attended a boot camp, Ms Sereni, Mr Jovanovic, Mr Nel, Mr Ronhave and Ms Nguyen. Testimonials 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", set out at [350] above; (3) 12 on the success stories webpage, set out at [374] above; 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, set out at [380] above. 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. 402 WBH was the owner of the websites. Each of the testimonials was published by WBH on the webpages identified above. Issues for determination Were the System and Strategies Representations conveyed? Consumers to whom statements were directed 403 The consumers identified at p 140 of the book under the heading "Is this you?", set out at [321] above are the kinds of consumers to whom the book was directed. In my view, the advertising material was also directed to the same kinds of consumers. 404 At free seminars and boot camps, the representations were made to that section of the public that was in attendance. A large cross-section of the public attended free seminars and boot camps. Those in attendance at the boot camp received the boot camp manual. Some consumers purchased the Power Property Profits Pack. 405 Mr Otton accepted that there was a distinction between the marketing material published by WBH, and the content of the book and the boot camps: the marketing information was directed towards people who were interested in buying real estate and the book and the boot camp were about buying and selling. 406 Mr Otton also accepted that the statement "buy a house for $1" is directed towards people who wish to purchase real estate. 407 In written submissions, the respondents implicitly contended that the relevant class of consumers is persons interested in investing in property. I accept that this is a significant class to whom the respondents' publications were directed although I do not accept that they were limited to that class, as is illustrated by the list on p 140 of the book. The respondents argued that an ordinary, reasonable member of that class would not read, or listen to, a single extracted statement and derive erroneous conclusions from one statement, without listening to the rest of the talk as the case may be, or read only a sentence on a website or a heading in a book. In my view, the correct approach will take into account both the various contexts of the statements relied upon by the ACCC and the fact that the subject matter is one about which consumers are likely to take some care, namely investment in real estate. Context of the representations 408 The representations were made in the following distinct contexts and, arguably in the wider context of the advertising campaign of which they formed a part: (1) the context of the book; (2) the individual contexts of the various items in the Power Property Profits Pack; (3) individual webpages; (4) individual mail-outs; (5) individual emails; (6) free seminars; (7) boot camps; and (8) the boot camp manual. Context of the book 409 In the context of the book, the ordinary reader can be taken to understand that it bears a meaning explained in the book. 410 The ACCC described the context of the book as "first contact deception" whereby consumers and potential consumers were exposed to alluring and evocative language playing on their emotions regarding the perceived benefits of property ownership and investments. Neither party contended that it was relevant that the book was provided to some consumers free of charge. Representation (a): "Buy a house for $1" representation 411 The alleged representation is that, by following or implementing the respondents' techniques, consumers were able to buy a house for $1. 412 The respondents repeatedly made statements which, at least considered in isolation, conveyed the message or represented that by implementing their techniques, consumers were able to buy a house for $1. That representation was conveyed by the title of the book and by statements in the book, set out above: (1) on the inside cover of the book, as set out at [297] above; (2) on the first and last pages of the book, as set out at [298] above; (3) on pp v, xiii, 10, 101, 104, 181, 191, 200, 204, 205 of the book; and (4) on the back cover of the book, as set out at [332] above. 413 The representation was conveyed by the respondents by the statements in the following materials promoting the free seminars: (1) the 2013 free seminars webpage, including by the publication of the "testimonials" of B Mudie and M Kelly; (2) the 2014 free seminars advertisement, by the words "Watch a live demonstration as Rick purchases a house from a seller for a $1"; and (3) the 2014 free seminars webpage, including by the publication of the testimonial headed "I used Rick's Strategy and Made $37,000 With Only $1 Invested!" and by the words "You'll see a video of me on the phone purchasing a property for $1 in a real-life transaction". 414 As it was an integral part of the messages conveyed by the respondents, I accept that a similar representation was probably conveyed at each of the 42 free seminars identified at [335] above. 415 The representation was also conveyed by the respondents in the Power Property Profits Pack, by statements on the compact disc as set out above and by the statement "I bought a property for $1" on the cover sheet which accompanied the Pack. 416 The representation was conveyed at the 2014 boot camp as set out at appendix 5 items 1, 2 and 3. 417 As it was an integral part of the claims made by the respondents, I accept that a similar representation was probably conveyed at each of the boot camps. 418 The respondents addressed the particular example of the following statement made by Mr Otton at the 2014 Hurlstone Park boot camp: "Sir, if I did it today, would you sell me a house for what you owe on it?" A lot of people say yes, and that's a house for a dollar. We'll talk about that bit later. 419 The respondents noted that the statement was made in the context of discussion of circumstances where a seller may be motivated to sell property to avoid the consequences of bankruptcy. However, that observation does not detract from the fact that the statement contains a clear representation that it is possible to buy a house for a dollar (albeit the representation is incongruous in the context of the different idea that it is possible to buy a house for what is owed on it) and that this possibility will be explained. 420 The representation was conveyed by statements on each of the following website pages, as set out above: (1) www.howtobuyahouseforadollar.com/order.php; (2) www.howtobuyahouseforadollar.com/media.php; (3) the success stories webpage; (4) the rickotton homepage; and (5) the readysetboom webpage. 421 The message is dramatic and designed to attract attention. However, it was not a discrete claim. In each case, the representation was conveyed in the context of a more verbose message. It is necessary to consider the broader contexts in order to decide whether the representation, repeatedly made by the respondents, was misleading. Representation (b): "Buy a house without a deposit, bank loan or real estate experience" representation 422 The alleged representation is that, by following or implementing the respondents' techniques, consumers were able to buy a house without needing a deposit, bank loan or real estate experience. 423 As for the "buy a house for $1" representation, the respondents repeatedly made statements which, at least considered in isolation, represented that by implementing their techniques, consumers were able to buy a house without needing a deposit, bank loan or real estate experience. 424 That message was conveyed by statements in the book: (1) on the inside cover of the book, as set out at [297] above; (2) on the first and last pages of the book, as set out as set out at [298] above; (3) on pp xiv, 1, 6, 10, 140, 142, 171, 191, 192, 199, 203 of the book; (4) on the inside back cover of the book, as set out at [331] above; (5) on the back cover of the book, as set out at [332] above. 425 The book refers explicitly to the ideas of buying a house without a deposit on 10 occasions, buying a house without a bank or a bank loan or with "less-than-perfect credit" on 14 occasions and buying a house without real estate experience on 1 occasion. Those references convey the representation that it is possible for the reader to buy a house without a deposit, bank loan or real estate experience. In the context of the book, the references convey the representation that it is possible for the reader to do so by applying strategies described in the book and taught by Mr Otton. 426 The message was also conveyed by the respondents in the Power Property Profits Pack, by statements on the compact disc as set out above, the statement made on the DVD set out at [365] above, the statement on the cheat sheet and by the statement "We bought a property without a bank loan" on the cover sheet which accompanied the Power Property Profits Pack. 427 The message was conveyed by the statements on or in: (1) the 2013 free seminars webpage; and (2) the 2013 free seminars mail-out; 428 As it was an integral part of the messages conveyed by the respondents, I accept that a similar message was probably conveyed at each of the 42 free seminars identified above. 429 The message was conveyed by statements on each of the following website pages, as set out above: (1) www.howtobuyahouseforadollar.com/order.php; (2) www.howtobuyahouseforadollar.com/propertypowerpack/step2/?; (3) the rickotton homepage; (4) www.rickotton.com/freepromodvd.html; and (5) the readysetboom webpage. 430 As for the "buy a house for $1" representation, the message is sensational. It is designed to attract the attention of consumers who do not have sufficient financial resources to buy a house using mainstream bank finance. It is probably also designed to attract the attention of consumers who are interested in making money from investing in real estate. 431 However, as for the "buy a house for $1" representation, the statements are surrounded by verbiage. It is necessary to consider the broader contexts in order to decide whether the representation, repeatedly made by the respondents, was misleading. Representation (c): "Buy a house using little or none of the consumer's own money," representation 432 The alleged representation is that, by following or implementing the respondents' techniques, consumers were able to buy a house using little or none of the consumer's own money, including by buying at a discount. 433 That message was conveyed by statements in the book: (1) on 1, 14, 191 and 199 of the book; (2) on the inside back cover of the book, as set out at [331] above; (3) on the back cover of the book, as set out at [332] above. 434 The message was conveyed by the statements on or in the following materials promoting the free seminars: (1) the 2013 free seminars webpage; (2) the 2014 free seminars webpage; and (3) the 2014 free seminars email. 435 As it was an integral part of the messages conveyed by the respondents, I accept that a similar message was probably conveyed at each of the 42 free seminars identified above. 436 The message was conveyed by statements on the readysetboom webpage as set out at [378] above. 437 The message was also conveyed by the respondents in the Power Property Profits Pack, by statements on the compact disc as set out above and the statement on the cheat sheet (at [367] above). 438 The book refers explicitly to the ideas of buying a house using little or none of the reader's own money on at least 11 occasions, referred to at [305], [307], [310], [311], [328], [329], [330], [331], [332] above. Those references convey the representation that it is possible for the reader to buy a house using little or none of the reader's own money. 439 The statement referred to at [311] above (on p 78 of the book) conveys the representation that it is possible for the reader to buy a house at a discount. That representation is reinforced by Chapter 10 which purports to identify four ways to buy a house at a discount. The idea that it is possible to buy a house for a discount is a recurring theme of the respondent's materials. For example, the models of the various techniques, described earlier, typically assume the purchase of a house at a discount. Representation (d): Create passive income streams representation 440 The alleged representation is that, by following or implementing the respondents' techniques, consumers were able to create passive income streams through property and/or quit their jobs, including by turning negative gearing into positive cash flow. 441 That message was conveyed by statements in the book: (1) on the inside front cover of the book, as set out at [297] above; (2) on the first and last pages of the book, as set out as set out at [298] above; (3) on pp xiv, 6, 11, 14, 192, 200 and 203 of the book; (4) on the inside back cover of the book, as set out at [331] above; and (5) on the back cover of the book, as set out at [332] above. 442 The representation was made in the advertising for free seminars, including by the following statements: (1) in the 2013 free seminars webpage, by the statements recorded in appendix 1 at items 1, 2, 4, 5 and 7; (2) in the 2013 free seminars mail-out, by the statements recorded at [340] above; (3) in the 2014 free seminars advertisement, by the statements recorded at [342(2)] and [342(4)] above; (4) on the 2014 free seminars webpage, by the statements recorded in appendix 2 at items 2, 3, 6; (5) in the 2014 free seminars email, by the statements recorded at [346(1)] and [346(4)] above; and (6) in the 2014 free seminars mail-out, by the statements recorded at [348(2)] and [348(5)] above. 443 The message was also conveyed by the respondents in the Power Property Profits Pack, by statements on the compact disc set out in appendix 3 items 9, 13, 14, 15 and 16, the statements on the DVD set out in appendix 2, the statements on the cheat sheet set out at [367] above and the statements on the cover sheet at [363] above. 444 The representation was also made: (1) at the 2014 Hurlstone Park boot camp, by the statements recorded in appendix 5 at items 6 and 12; (2) on the howtobuyahouseforadollar.com/order.php webpage, by the statements recorded at [370] above (second and third tick points); and (3) the representation was also conveyed on the readysetboom webpage as set out at [378] above. Representation (e): Build property portfolios representation 445 The alleged representation is that, by following or implementing techniques promoted by the respondents, consumers were able to build property portfolios without their own money invested and, without new bank loans or without real estate experience. 446 Representation (e) was conveyed by statements in the book: (1) on the first and last page of the book, as set out at [298(7)] above; (2) on pp 7, 9, 10 and 192 of the book; and (3) on the back cover of the book, as set out at [332] above. 447 The representation was also conveyed and by the statement on the cover sheet accompanying the Power Property Profits Pack at [363(1)] above, and by the statement on the compact disc that formed part of that pack, set out in appendix 3 item 14. 448 The representation was made in the advertising for free seminars, including by the following statements: (1) on the 2013 free seminars webpage, by the statement recorded in appendix 1 at item 19; (2) in the 2013 free seminars mail-out, by the statement recorded at [340 (3)] above; (3) in the 2014 free seminars advertisement, by the statement recorded at [342(1)] above; and (4) on the 2014 free seminars webpage, by the statements recorded in appendix 2 at items 2 and 4. 449 The representation was also made: (1) in the transcript of the 2014 Hurlstone Park boot camp, by the statements recorded in appendix 5 at items 10, 11 and 12; and (2) on the readysetboom webpage, as set out at by the statements recorded at [378] and [379] above. Representation (f): Start making profits immediately representation 450 The alleged representation is that, by following or implementing the respondents' techniques, consumers were able to start making profits immediately. 451 The respondents say that, to the extent that this representation was conveyed, the language used was qualified and not absolute. The submission was not developed and I do not accept it. 452 Representation (f) was conveyed: (1) by the words set out in [308] above from p 10 of the book, in particular, the words "start to profit instantly" and the words set out in [312] above from p 83 of the book; (2) by the statements made on the 2013 free seminars webpage, set out in appendix 1, items 1, 11, 31 and 33. In particular, I accept that the references to generating "positive cash flow from day one" and "cash flow from day one" are likely to be understood by an ordinary reader to refer to generating profits immediately; (3) by the statement made on the 2014 free seminars webpage, set out in appendix 2, item 2 that, with the system, students are able to make a positive cashflow from day 1 with any house; and (4) by statements on the readysetboom webpage, on 4 March 2014 and 12 June 2014, set out at [378] and [379] above. Representation (g): Create or generate wealth representation 453 The alleged representation is that, by following or implementing the respondents' techniques, consumers were able to create or generate wealth. 454 Representation (g) was conveyed by statements in the book: (1) on the first and last page of the book as set out at [298(4)] above; (2) on pp 10, 11, 199, 205 of the book; (3) on the inside back cover of the book, as set out at [331] above; and (4) on the back cover of the book, as set out at [332] above. 455 In addition, representation (g) was conveyed by the following statements: (1) the statement on the "cheat sheet" in the Power Property Profits Pack at [367] above; (2) by the words set out in [308] above from p 10 of the book, in particular, the words "Many of our students regularly make six-figure incomes" and the words set out in [312] above from p 83 of the book; (3) by the statements made on the 2013 free seminars webpage, set out in appendix 1, items 2, 5 and 22; (4) by the statements made on the 2013 free seminars mail-out, set out at [340(1), (2) and (3)] above; (5) by the statements made on the 2014 free seminars webpage, set out in appendix 2, items 1, 2, 6; (6) by the statement made on the 2014 free seminars mail-out, set out at [348(3)] above; (7) the statement in the boot camp manual, set out at [386(2)] above; (8) by the statement made on the howtobuyahouseforadollar.com/order.php webpage, set out at [370] above; and (9) by the statement made on the readysetboom webpage, set out at [378(5)] and [379] above. 456 Representation (g) was also made in the transcript of the 2014 Hurlstone Park boot camp, as set out in appendix 5 items 10 and 15. Conclusions 457 Accordingly, I am satisfied that: (1) The book contained each of the System and Strategies Representations. By distributing the book to consumers, or making the book available for distribution to consumers from at least sometime in 2012, the respondents promoted the strategies as strategies for investing in real estate in Australia. (2) The Power Property Profits Pack contained each of the System and Strategies Representations except representations (f). By distributing the "Power Property Profits Pack" and making it available to consumers from at least 2011, the respondents promoted, at least, the "sandwich lease option" strategy and the "deposit builder" strategy to consumers in Australia. (3) The advertisements about the free seminars contained various of the System and Strategies Representations as identified above. The 2013 free seminars webpage contained each of the System and Strategies Representations. The 2013 free seminars mail out contained representations (b), (d), (e) and (g). The 2014 free seminars advertisement contained representations (a), (d) and (e). The 2014 free seminars webpage contained each of the System and Strategies Representations except representation (b). The 2014 free seminars mail out contained representations (d) and (g). The 2014 free seminars email contained representations (c) and (d). (4) The advertisements about the free seminars on the 2013 free seminars webpage and the 2014 free seminars webpage contained representations purporting to be testimonials from consumers who had followed or implemented techniques promoted by the respondents to buy a house for $1. (5) Based on the content of the advertisements for the free seminars, the content of the book and the evidence of witnesses who attended free seminars including Mr Riley, it is likely that each of the System and Strategies Representations were made at the free seminars. (6) Based on the evidence concerning boot camps and the material provided by the respondents to witnesses who attended boot camps, it is likely that representations (a), (d), (e) and (g) were made at the boot camps conducted by the respondents and that the respondents promoted at least the "sandwich lease option" strategy and the "deposit builder" strategy at the boot camps. (7) The boot camp manual contained representations (b) and (g); (8) The webpage www.howtobuyahouseforadollar.com/order.php contained representations (a), (b), (d) and (g). (9) The webpage www.howtobuyahouseforadollar.com/media.php contained representation (a). (10) The webpage www.howtobuyahouseforadollar.com/propertypowerpack/step2/? contained representation (b). (11) The success stories webpage contained representations (a) and (d). (12) The rickotton homepage contained representations (a) and (b). (13) The webpage www.rickotton.com/freepromodvd/freepromodvd.html contained representation (b). (14) The readysetboom webpage contained all of the System and Strategies Representations. 458 Concerning the representations purporting to be testimonials on the www.howtobuyahouseforadollar.com website, each involves a claim that the author bought a property for $1 and made a specified profit from the transaction. Most of the purported testimonials include a claim that the author made "positive cash flow" from the transaction. From the context in which the representations are published including the use of orange and black colouring, similar to the colouring of the book's cover, a reasonable reader would understand the testimonials to be from consumers who had followed or implemented strategies taught by the respondents to achieve the outcome of buying a house for $1. 459 The purported testimonial from "Mark" appears on the readysetboom webpage under the heading "Real Students, Real Results". It purports to be a representation from a consumer who followed or implemented strategies taught by the respondents to achieve the outcome of buying a house for $1. Were the representations with respect to future matters? 460 As pleaded, the System and Strategies Representations are expressed in the present continuous tense. They are representations concerning the capacity of consumers to do things or have things by following or implementing the techniques promoted by the respondents. An integral part of the representations is that consumers who learn the techniques will be able to apply them to do the things and have the things represented. It follows, in my view, that each of the System and Strategies Representations is a representation with respect to future matters. 461 It follows, from s 4(1) of the Australian Consumer Law, that each of the System and Strategies Representations is taken to be misleading if the person who made the representation did not have reasonable grounds for making the representation. 462 By s 4(2), for the purposes of applying s 4(1), the respondents are taken not to have had reasonable grounds for making the System and Strategies Representations unless evidence is adduced to the contrary. The respondents adduced evidence from Mr Otton, Mr Donkin and Ms Siekap which, in my view, is sufficient to avoid the application of s 4(2). I did not understand the ACCC to contend that s 4(2) applies in this case. 463 Therefore, it is necessary to decide whether the respondents had reasonable grounds for making any of the System and Strategies Representations. 464 If the ACCC has demonstrated that the respondents did not have reasonable grounds for making those representations, subject to the question of whether the representations were puffery, the representations will be taken to be misleading. Were representations (a), (b) and (c) puffery? 465 Although the defence pleaded puffery in relation to all of the System and Strategies Representations, in their written closing submissions, the respondents argued only that representations (a), (b) and (c) are in the nature of puffery. Representation (a): "Buy a house for $1" representation 466 The respondents submitted that, particularly as the relevant phrases appear in promotional materials, such as on websites and in mail-outs, they are clear examples of marketing exaggeration. The respondents submitted that the words are used to encourage interest persons to "find out more" with the "more" then explaining what is meant by the representations. 467 I do not accept that the "buy a house for $1" representation can be characterised as mere puffery in the various contexts in which it was made. 468 For example, on the 2013 free seminars webpage, the representation was made in the context of statements designed to support the veracity of the claim such as a passage in the form of a letter headed "Dear Friend" in running writing script; a passage entitled "Why Am I Sharing My No-Money Down Real Estate Strategies For Free?" and a column of purported testimonials which are accompanied by photographs and names, occupations and states of the purported authors. 469 I accept that an ordinary reasonable reader would not expect the claim to be literally true and would understand it to be a claim that the respondents had an exciting system or strategies, about which they could learn more. However, in my view, an ordinary reader would understand from the "buy a house for $1" representation, in the various contexts in which it was made, that it would be possible to learn a strategy that corresponded in some realistic sense with the claim that it was possible to "buy a house for $1". That understanding would be gained from the various contextual statements to the effect that the representation would be authenticated as the free seminars, for example, by watching a video of Mr Otton buying a house for $1. 470 In the context of the book, the "buy a house for $1" representation cannot be dismissed as puffery. Its frequent repetition, including by statements suggesting that Mr Otton himself and students of Mr Otton had bought houses for $1, convey to the ordinary reader that the representation is not a marketing exaggeration but, rather, it is a representation that is verified by previous real estate transactions. Other language in the book conveys the message that the representation is not a marketing exaggeration. For example, the title conveys the message that the book provides information from which the reader will learn a strategy that corresponds in some realistic sense with the claim that it is possible to "buy a house for $1". In Chapter 11 headed "How to buy a house for a dollar", p 104 says "when we get to the strategies section, you'll see exactly how to put this concept into action for yourself". It then refers to selling "to ensure that you make a profit when you sell the property you buy for one dollar". This language conveys that the "buy a house for $1" representation is referrable to a particular concept that can be put into action to achieve a particular outcome, being the purchase of a house for one dollar. Chapter 11 commences with the words "Finally, this is how you buy a house for a dollar!". This sentence also conveys that the "buy a house for $1" representation is supported by a technique that can be learned by readers. 471 Similarly, in the context of the boot camps, representation (a) was not puffery. It is a claim that is expressed as an outcome that can be achieved by attendance (over three days) at the boot camp. It is expressed as a claim that is "strange but true". Representations (b) and (c):"Buy a house without a deposit, bank loan or real estate experience" and "Buy a house using little or none of the consumer's own money" representations 472 I do not accept that these representations are in the nature of puffery, by reason of their specificity. They are capable of being falsified in the sense that there either are, or are not, opportunities to buy a house without a deposit or a bank loan and without real estate experience; and there either are, or are not, opportunities for a consumer to buy a house using little or none of the consumer's money. I do not accept that an ordinary reader would understand these representations to be mere marketing exaggeration. 473 As for representation (a), the repetition of the representations in the various materials (in particular, the book) reinforces the impression that representations (b) and (c) are not mere puffery but describe realistic possibilities for the reader. Did the respondents have reasonable grounds for making the representations? 474 Ultimately, the respondents did not contend that they had reasonable grounds to make representations (a) to (c). Their contentions were that the representations did not convey the meaning alleged, because they were taken out of context; and were puffery. 475 As I have set out above, I do not consider that representations (a) to (c) were puffery, and I do not accept the submission that they did not convey the meaning alleged when the whole context is taken into account. In the absence of any submissions to the contrary, I consider that the respondents did not have reasonable grounds to make representations (a) to (c). Being representations with respect to future matters, representations (a) to (c) are taken to be misleading. 476 The respondents contended that they had reasonable grounds to hold the opinions that they held, which corresponded with representations (d) to (g). They said that, in the context in which the techniques were explained, there is evidence to demonstrate that there were reasonable grounds for the opinions held. 477 The evidence said to demonstrate reasonable grounds was: (1) the personal success of Mr Otton in implementing the strategies; (2) the statements at each and every boot camp by former students giving examples of successful transactions; (3) the feedback by way of testimonials received on "countless" occasions by the respondents only some of which the ACCC particularised; (4) the evidence of the ACCC's own witnesses showing a positive belief in the potential success of strategies; and (5) the evidence about the $1 option agreement from Ms Siekaup. 478 The respondents also submitted that, in circumstances where: (a) Mr Otton was being told by scores of people that they are successfully using the strategies taught and those people are willing to have their names published; (b) Mr Otton was at boot camps where tens of people were willing to be identified and recorded giving examples of their use of strategies; and (c) there are no complaints to either him or WBH from readers or attendees about the strategies and the effect of the strategies; the respondents had reasonable grounds for the representations pleaded. 479 Based on the findings set out earlier in the judgment, Mr Otton's personal success in implementing the strategies was minimal and did not include the successful implementation of the "sandwich lease option" technique on a single occasion. 480 Statements made at boot camps by former students do not provide reasonable grounds in the absence of evidence that those statements were true. The same applies to testimonials. Particularly where Mr Otton had no experience himself of buying a house for $1 in Australia, and where the statements and testimonials were presented in order to demonstrate the efficacy of the strategies promoted by Mr Otton, in my view, it was not reasonable to rely on the matters set out in [480(a)] to [480(c)] above provided without verifying the truthfulness of what was being said. There was a significant risk (moreover, it was their purpose) that the people who heard the statements or read the testimonials would accept them at face value and rely upon them to buy services from WBH such as boot camps or mentoring programs, and potentially expend significant effort to try to implement the strategies. It would not have been difficult to obtain verification of the claims, if they were true. 481 I also do not accept that the absence of complaints provided reasonable grounds for making the representations pleaded. 482 In determining whether a person had reasonable grounds the matter is to be judged as at the date of the representation: Sykes v Reserve Bank of Australia [1998] FCA 1405; (1998) 88 FCR 511. Accordingly, the evidence of the ACCC's witnesses and the evidence of Ms Siekaup do not provide reasonable grounds for the representations. 483 I conclude that the respondents did not have reasonable grounds for making any of the representations (d) to (g). As they are representations with respect to future matters, representations (d) to (g) are taken to be misleading. Did the representations contain half-truths that were misleading by their insufficiency of information? 484 To the extent it may be possible to implement the techniques, the likelihood of achieving an outcome that corresponds with any of the System and Strategies Representations is far more remote than represented. As explained above, I accept that the techniques could be implemented profitably in the case of a seller with the financial wherewithal to provide vendor finance of the various kinds contemplated by strategies such as "deposit builder" and "handyman special". I accept that there is a theoretical possibility, not demonstrated by an actual transaction, of a "sandwich lease option" transaction which could enable a consumer to participate in the transaction as a middleman without incurring more than nominal costs. 485 In my view, these possibilities do not avoid the conclusion that the representations were misleading or deceptive or likely to mislead or deceive because an ordinary person who read or heard the representations would have understood them to be directed to a realistic possibility that did not apply only to a seller who already owned real estate, or who was able to finance a bank loan. 486 Thus, I accept that the representations were misleading or deceptive or likely to mislead or deceive by reason of the insufficiency of information that would allow a consumer to understand what, in fact, is required to implement the techniques in order to achieve the outcomes represented by the representations. In particular, they were misleading or deceptive or likely to mislead or deceive by failing to disclose the only realistic circumstances in which the techniques could be implemented. 487 The respondents contended that it is inconceivable that an ordinary or reasonable person in the class of consumers likely to have read or heard the representation would have concluded that the "buy a house for $1" meant literally that consumers were able to buy the freehold title to a house for $1 with nothing more. I accept that contention. It would be fanciful to think that a valuable asset could be purchased for a token amount. As noted in ACCC v Telstra at [17](6), referred to at [53] above, extreme or fanciful reactions to a representation should be excluded from consideration. However, I do not think that this contention assists the respondents. Assuming it is accepted, consumers would probably be left in one of two positions: confused because the representation, in its various contexts, was put forward as "strange but true"; or misled because the "sandwich lease option" strategy provides only a theoretical model for "buying" a house for $1 and not a technique that consumers could expect to be able to implement successfully themselves. Were consumers misled? 488 The respondents correctly observed that there is no evidence that any person was misled into thinking that a house could be purchased outright for $1. 489 As Mr Jovanovic explained (at [26] of his affidavit): The Book explained that the concept of "buying a house for one dollar", was essentially the cost of the paperwork. I understood that I would not actually be buying a house for one dollar. Rather I understood that it would be a way to acquire a number of properties in a way which involved little to no money upfront. 490 Mr Bevan Nel stated, at [10] of his affidavit, that "I was skeptical of the title", but , at [33] he stated that, having read the book, he understood that: Based on Mr Otton's explanation of the strategies and variations on them, I understood my job was as 'middle man' to get the best deal from both sides of the transaction. 491 Mr Geoffrey McKenzie (at [62]) stated that: When reading [the Book] I remember thinking that the strategies could be used to make money out of residential properties but that it was not possible to buy a house for $1 as the title of the book claimed. 492 Ms Nguyen stated in respect of the free seminar (at [11]) that "I understood what Mr Otton said to mean that under his system, the house would cost me $1 to control and that I would just have to pay the debt on the house to buy it". After attending the boot camp, she further stated (at 73]): "I knew that the strategies did not allow me to buy a house for $1. I knew that I would be the middleman as between a seller who had difficulty selling their property and a buyer who could not get bank finance." 493 Mr Elturk, stated that he attended the free seminar: [39] … That is when it clicked that I would not be able to actually buy a house using Mr Otton's strategies, but that you acted as a real estate agent, or middleman, matching sellers and buyers and taking any difference between seller's the mortgage repayment and what the buyer was prepared to pay for yourself. [40] What Mr Otton was really teaching was six or seven strategies that would allow you to become a middle man and make a good profit for effectively nothing. 494 Mr Ronhave was the only witness who, that after reading the book and attending the free seminar, claimed: "I still believed that Mr Otton's strategies could enable you to buy a house for $1 and wanted to know how to do that. Of course, at the Boot Camp, I came to realise that you could not actually buy a house $1" (at [101]). 495 The respondents argued that Mr Ronhave's evidence should be discounted because he claimed to have felt cheated at the end of the boot camp although, immediately after the camp, he rated the camp 8 out of 10 on a scale of value for money. 496 The respondents noted that many of the consumer witnesses still want to try to implement the strategies. 497 Even if these submissions are accepted in their entirety, they do not detract from my conclusions as to the misleading nature of the System and Strategies Representations. Representations about Mr Otton's financial success? Boot camps 498 At the 4 April 2014 Hurlstone Park boot camp, the respondents represented to the attendees that Mr Otton himself had been successful financially in implementing the strategies that he was promoting at the boot camp. 499 Based on the claims about Mr Otton's financial success in both the book and on the websites, and on what was said at the 4 April 2014 boot camp, and the evidence of witnesses who attended boot camps, in my view, it is likely that such a representation was made routinely at boot camps. Websites 500 On the 2013 free seminars webpage, Mr Otton says, in a letter addressed "Dear Friend": Discover the amazing investing secret that is so revolutionary, most real estate agents and property investors don't even know it exists. How do I know that? Because I did it. … In the last 22 years I've purchased over 300 properties in Australia and the USA – using little or none of my own money. 501 At the top of the page is a photo of Mr Otton accompanied by the words "Self Made Millionaire & Property Investor. 502 This is an example of a representation Mr Otton himself had been successful financially in implementing the strategies which he was promoting. 503 Words conveying this representation are also set out in [17] above. Falsity of representations 504 Based on the evidence set out above, the representations about Mr Otton's financial success were false and misleading. Did WBH and Mr Otton make false or misleading representations by publishing testimonials 505 By publishing the testimonials referred to at [399] above, the respondents represented that the testimonials in fact related to the services provided by WBH and that the testimonials were true and accurate. In the absence of evidence to the contrary, those representations are taken to be misleading by s 29(2) of the Australian Consumer Law. 506 Accordingly, by publishing those testimonials, the respondents contravened s 29(1)(f) of the Australian Consumer Law. 507 I am not satisfied that this conduct involved a contravention of s 29(1)(e) of the Australian Consumer Law because the representation made by the respondents did not purport to be a testimonial: rather, it was a representation concerning a testimonial within the meaning of s 29(1)(f). Contraventions Section 18 508 For the reasons set out above, I conclude that, in making the System and Strategies Representations, the respondents, engaged in conduct, in trade or commerce in connection with the supply or possible supply of services, or in connection with the promotion of the supply or use of services, that was misleading or deceptive or was likely to mislead or deceive in contravention of ss 18 of the Australian Consumer Law. To the extent that the representations were made by WBH and not Mr Otton, Mr Otton was knowingly concerned in and party to the making of the representations. 509 Further, in making the representations that Mr Otton himself had been successful financially in using the strategies, the respondents engaged in conduct, in trade or commerce in connection with the supply or possible supply of services, or in connection with the promotion of the supply or use of services, that was misleading or deceptive or was likely to mislead or deceive in contravention of s 18 of the Australian Consumer Law. Sections 29(1)(f) 510 In publishing the testimonials referred to at [399] above, WBH and Mr Otton contravened s 29(1)(f) of the Australian Consumer Law. Section 29(1)(g) 511 The System and Strategies Representations were false or misleading for the reasons set out above. As representations about what could be achieved by following or implementing the techniques promoted by the respondents, the System and Strategies Representations were directed to the techniques promoted at the boot camps and the Go Direct programs. In the various contexts in which they were made, the System and Strategies Representations entailed the further representation that WBH and Mr Otton services were useful and beneficial because they taught consumers the techniques. The uses or benefits of the services were that they equipped consumers with skills and information to apply the techniques to achieve the outcomes identified in the representations. 512 Accordingly, by making the System and Strategies Representations, the respondents also contravened s 29(1)(g). To the extent that the representations were made by WBH and not Mr Otton, Mr Otton was knowingly concerned in and party to the making of the representations. Section 34 513 Similarly, the System and Strategies Representations, to the extent that they were made in the book and on the webpages, were liable to mislead the public. I am not satisfied that the representations made in other contexts were addressed to the public in the relevant sense. 514 The System and Strategies Representations entailed representations as to the characteristics or suitability for purpose of the services provided by WBH, in that they entailed the further representation that WBH and Mr Otton services taught consumers the techniques, which could be used to achieve the outcomes identified in the representations. 515 However, on the evidence set out above, for ordinary consumers seeking how to achieve the outcomes stated in the System and Strategies Representations, the free seminars were a waste of time. For those ordinary consumers, the boot camps and the Go Direct programs were an expensive waste of time. There is no reasonable basis for thinking that the techniques taught by WBH and Mr Otton can be used to achieve any of the outcomes identified in the System and Strategies Representations. 516 Accordingly, by making the System and Strategies Representations in the book and on the webpages, WBH and Mr Otton also contravened s 34. Section 37 517 The System and Strategies Representations were each false or misleading in a material particular, being, in each case, the outcome that could be achieved by following or implementing the techniques promoted by Mr Otton. 518 The business activity to which the System and Strategies Representations were directed was buying and selling houses. The System and Strategies Representations each concerned the financial viability of that business activity which is a material aspect of the business activity. 519 The passage set out at 321 above includes a representation that the business activity to which the System and Strategies 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. 520 Accordingly, I am satisfied that the respondents contravened s 37 by making the System and Strategies Representations in the book. Conclusion 521 I will direct the applicants to file and serve draft orders contended for to give effect to these reasons, and the proceeding will be listed for the making of orders to give effect to these reasons. I certify that the preceding five hundred and twenty-one (521) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson. Associate: Dated: 11 August 2017 APPENDIX 1 Statements made on 2013 free seminars webpage, www.howtobuyahouseforadollar.com/register (annexure 1 to statement of claim) 1 I'll Show You How To Buy A House for $1 And Generate Positive Cash Flow From Day One … Event [sic] If You have No Deposit, No Bank Loan And No Real Estate Experience 2 You can live the lifestyle you want ... retire early or quit your job and make tens of thousands of passive dollars a month (no matter what financial situation you are currently in) ... 3 What if you could buy a house for $1 – without a bank loan, a deposit, a mortgage, and without any previous real estate investing experience? 4 What if you could turn your $1 investment into a monthly cash flow income to supplement or even replace your current income? What if you could do this as many times as you like? 5 Imagine... owning 5 properties, with each one returning you $350 a month positive cash flow. Or 15 properties returning you $5,250 a month POSITIVE cash flow. Or 20 properties giving you $10,500 a month in POSITIVE income ... 6 In the last 22 years I've purchased over 300 properties in Australia and the USA- using little or none of my own money ... 7 All I ask is that you're willing to "think outside the box" while I'll share with you the same strategies I use to buy properties for $1 and create cash flow income – without ever stepping inside a bank or saving thousands of dollars for a deposit ... 8 And now I'm on a mission to help 10,000 Australian's [sic] buy a property for $1 – WITHOUT a bank, a huge deposit, or going into debt ... 9 Here's A Sneak-Peek Of What You'll Discover At The "How To Buy A House For $1" Event: 10 How to buy almost any property for $1 – no deposit needed, no bank needed 11 The simple, 100 year old plus secret ... which allows you to buy as many houses as you want using little of your own money and make positive cash flow from the beginning. 12 5 Strategies to create Positive Cash Flow Properties – including the 'Try Before You Buy System', the 10/10 Buy Down and Rick's famous 'Handy Man' special. 13 It doesn't matter if you have a little or a lot of property experience, just bring an open mind and I promise to show you proof how you can make positive cash flow in today's market." 14 We Made $80,000 Without A Bank Loan! We bought a property without a bank loan, we made $10,000 up-front deposit, $800 per month positive cash flow and our backend profit is $70,000. S & M Donaldson, Small Business Owners Queensland 15 Watch A Real Property Bought For $1 – Right Before Your Eyes! [Picture of a house and a $1 coin] This will be one of the most exciting parts of the event. You'll see a video of me on the phone purchasing a property for $1 in a real-life transaction. Once you see this transaction done, right before your eyes, you'll realize just how easy buying houses for $1 really is – and you'll believe YOU can do this too! 16 What's stopping you from creating wealth right now? Can't get bank financing? No deposit? Bad credit rating? Negative gearing gobbling up your cash flow? Your mortgage is worth more than the house? Or are you are [sic] complete beginner to investing? 17 Whatever your challenge is, bring it along to How To Buy A House For $1 event. 18 Through trial-and-error I developed my no-money-down strategy for buying houses – without a bank. 19 In the next 12 months, I used this innovative strategy to purchase 76 properties without a bank or a deposit. Since then, I've literally bought hundreds of properties in Australia, New Zealand, United Kingdom and USA. 20 Since 2001, I have taught nationally and internationally over 35,000 students how to buy and sell property without a bank and using little or none of your own money. 21 $740,000 In Less Than A Year! We bought our first house for $50 and we've got $30,000 in the deal. We're getting $70 a week cash flow out of it and it will settle in 18 months. 22 While some people shake them off as "impossible" my students are out there using these strategies to generate thousands of dollars a month in passive income deals! 23 Inside this ground-breaking book you'll discover ... How you can buy property for just $1, with NO deposit and NO bank loan How to turn a negatively geared property into positive cash flow 24 In this video you'll get to hear my students walk you through real no-money down property deals they have put together. You'll hear some students explain how they purchased houses for $1. Others will share the exact steps they took to create passive income streams. 25 Who Should Attend This Free Event? If you own a negatively geared property that's eating up your income and restricting your lifestyle ... you'll learn how to turn your negative property into positive cash! 26 If you can't get bank financing due to self-employment, bad credit rating, or the banks overly strict lending criteria ... you 'll discover how to buy property without a bank! 27 If you don't have any money for a deposit ... you'll learn strategies for buying quality houses using little or none of your own money. 28 If you're sick of renting and want to own your own home ... then you'll learn how to buy your first property without a bank, finance or stamp duty 29 If you desireto [sic] create passive income streams through property, and want to quit your job so you can enjoy more time with your loved ones, then you'll definitely want to learn the income generating strategies shared at this event! 30 Learn the same no-money-down strategies my students and I use to buy property and create positive cash flow. 31 During the event you discover 5 proven methods for buying property WITHOUT a bank, a loan or a deposit. You'll learnhow [sic] to structure property transactions to generate positive cash flow from day one. 32 You may even use my proven strategies and buy one ... two ... three properties for $1 and create several cash flow incomes for yourself. You could even replace your income, quit your job and start enjoying more holidays with your family. 33 In this 60 minutes video present I explain my "no money down cash flow system" in full and even walk you through several property transactions where I created profit upfront, cash flow from day one, and back end profit too. 34 If you are open minded, then I'd love to show you the no-money-down strategies my students and I regularly use to buy property without a bank, a deposit or even paying stamp duty. APPENDIX 2 Seven statements made on the 2014 free seminars webpage 1 About 20 years ago, I discovered a remarkable property investment system that allowed me to purchase 76 properties in 12 months without bank finance and in a FALLING MARKET… Since then my students and I have used this technique to PROFIT throughout rising, falling and BOOMING markets. 2 With This System My Students Are Able To: Make positive cashflow from day 1 with any house Build property portfolios without their own money invested and without new bank loans 3 Turn Your Negatively Geared Property into a Positively-Geared One (or at least cash flow neutral – in fact, I'll show you actual figures and examples) 4 The A to Z of Basic No Money Down … Which Will Have You Owning 1-5 Homes … Then My Supercharged Advanced Secrets Which Will Take You From 5 Homes to 50 5 Brand New-How To Create Cashflow With No Loan Liability! (That's right-you don't need to qualify for a bank loan or have much money to put down towards purchase) 6 My Students and I are out there, in the market, Generating Thousands of Dollars a Month in Passive Income Right Now! 7 I will be sharing many of my deals and case studies and working through some of your property problems at the event. You'll see a video of me on the phone purchasing a property for $1 in a real-life transaction. I'll be there to explain the whole process step-by-step on how you too can buy houses WITHOUT new bank loans or needing large deposits. APPENDIX 3 Mr Otton's claims on compact disc entitled "How to Turn Negative Gearing to Positive Cash Flow! (Part of Power Property Profits Pack) 1 How are you its Rick Otton speaking and tonight's going to be an absolutely fantastic – how to buy a house for a dollar. We are going to have some exciting examples tonight, I've got one of my students Greg that's come on with me, we're actually going to talk to you about how we bought some houses without getting a bank loan, how we were able to profit from those houses and I think you'll find it very, very exciting as I think it represents the future of the way people are buying and selling houses now right across the world. 2 My goal is to have 10,000 students who have actually transacted their first house transaction without using a whole lot of their hard earned cash and without having to go and get a bank loan. 3 I would like to show you a few ways to lock in those profits so you aren't going to be affected by a falling market and also for investors who want to buy more properties but the banking system has been saying "no" and they're not lending you any more money. I would like to introduce you to a couple of systems that will move you around that, so you can continue to buy properties, especially for developers who might want to sell properties quickly being stuck with them on the plan, can't get rid of them and buyers, buyers if you're short a deposit, you want to get your first property well you can't get a bank loan, maybe you have an issue with your credit. I would like to show you some systems that will have you moving forward – so basically anybody who wants to get in the property market and cannot get a bank loan today and does not have a large deposit this will be great as I will show you some systems that will move you into your first property today . 4 I think that's a shame so I say this to you because if financial freedom is what property is all about I would like to show you some other systems and processes to get the financial freedom out of real estate... 5 I had to create systems and processes to buy and sell house no money ... 6 I am always trying to find new ways and systems on how to buy houses with no money recognising that it is the benefit that I want not necessarily the house but the benefit that comes from the house. 7 I started teaching this some years ago and I like the sellers to look after my stamp duty for me, my legal expenses, all my expenses of getting into the property I just write that into the paperwork, it means there is less cash has to come out of my pocket to get a piece of property. 8 Again, I am just not big on using cash, I like to hold that off and it lets me get in the houses very, very cheaply. 9 I am just going to apply a system to something we already know that just massively increases the cash flow yield from something we are already familiar with today. 10 Luna Park will reap millions for a classic example when they sold Luna Park the same way for a dollar – State Government. ABC Learning Centres if you remember there were 29 learning centres – as long as you are prepared to pick up the loans that were attached to the learning centres just continue the loans on each one was there for a token of $1 each you could just pick up an ABC Learning Centre for $1 – no point having to go and get any more new financing, just continue on the loan that's already there. Here we go Darlinghurst Dunny sold for $1 the same thing just recently happened in Sydney. The Council sold this laneway to the resident for $1. 11 Here's my point – just suppose I picked up the next house for $1 – I'm making the payments on someone else's loan. If I made it easy enough to buy that house from me and I let someone else come in and buy the house from me and I could move in on Saturday with no bank loan, with no stamp duty, three pieces of paper, see the solicitor, move in Saturday would they see a value statement that therefore they've paid for the convenience and this is where we're taking you today. 12 I simply have to say to the seller – sir how fast would you like that house to disappear and they will say straight away and I will say "Mr Buyer let me ask you something – if you could buy this house with no bank loan, no deposit, just start making the payments give me some up front money to get started how fast would you like to become a home owner with three pieces of paper?" they would say "straight away". 13 ...why because they simply make it easier for people to take ownership of the property, now solving real life problems buying a house without a bank loan, creating stepping stones to help everyday people realise their dreams of home ownership, this is, people love the fact that you can come in now and use these tool sets to buy a house without a bank loan and you get in and start making payments you can always transfer out to a bank later on if you want to – for those who have properties they can get their negative gear into positive cash flow – wow just have the next tenant – a buying tenant or a future home owner and that goes from negative to positive overnight, creates a positive passive income that's just electronically comes in their account, makes real estate just an exciting business because it starts making money every day. 14 Greg: Whereas before it was finite I could only get so many loans and then I couldn't do any more and it was burning a hole in my pocket where with this I can just keep adding, adding, adding properties and they're positive cash flow and I can keep doing it infinitely. 15 Mr Otton: David has asked the question you know you have no holding costs but what about servicing the loan that you have taken over? Greg: That's a great question. What happens as a rent to own I make sure that the person coming in the rent to own amount covers or more than covers the outgoings that I have. So I know what the outgoings are, I get the authority from those pieces of paper to know what those outgoings are from his bank and council, water and everything else. So I know before I do anything else what it needs to be. Always make sure there is more coming in than what is going out. 16 Greg: Actually I very, very rarely get even asked what the price is I've found, some do but mostly the opportunity that they see they just jump at it and it's often when you're doing the paperwork that they go oh look at that price, so I get the price I want because it is the opportunity that they see coming in that they grab hold of. Mr Otton: Right and generate a passive monthly income, I always think that is great, let's everybody sleep better at night when money is coming into your bank account, not going out. APPENDIX 4 Mr Otton's claims on DVD, titled "The Proven Way to Build a Property Portfolio" Let me tell you a story about what happened to me recently. An agent called and said: Audience: Rick, would you be interested in this? Mr Otton: What have you got? Audience: I've got a house where the guy owes more money on it than what the house is worth and as a result we can't sell it. Mr Otton: Do you get many houses like that? Audience: We get quite a few, where people have too much debt. We call it negative equity and they simply can't sell the houses. Mr Otton: What have you got? Audience: I've got a man with a house that's worth $460K. The problem is his debt bit is about $465K. Mr Otton: How long have you had it in the market for? Audience: About 8 months. Mr Otton: Is it any possibility that you and the seller get together with me and we'll see what we can work out? So we all got to the seller's office and I said to the seller, how much debt is on your house right now? He told me this much [points to a figure of $465,000 on the screen]. And I said okay, what's the payment on that every single month? He told me that much [points to a figure of $2,787 on the screen]. And I said in a perfect world would you rather the next cheque come out of your cheque book or my cheque book and he said "well your cheque book of course!" And I said, how many more of the future payment would you like to see come out of my cheque book? And he said "all of them!" I said how many left? He said 22 years. I said consider it done. He was excited. So right now I've picked up that house, no bank loan, simply baby-sitting the seller's loan that's there right now. I put a little ad in the paper and I said "who would like to own a three bedroom brick house no bank qualifier no bank loan required?" A whole bunch of people called me up. A man came in and said to me "how much is the house?" I said "$465,000". He said "how much is it a month?" I told him it was this much [points to a figure of $3,588 on the screen]. Now he said to me "Wow! I've done my calculations ["$3,588 calculated at 8% over 25 years" appears on the screen] and if I only have to pay that much a month, it's pretty close to what I'd have to pay to a bank if I can get a bank loan and I can't get a bank loan because I'm self-employed . And I said, why don't you do this! Why don't you simply pay me for a period of time and down the road you can sell a house for a profit or maybe you can refinance and re­ mortgage as your situation changes. He said "fantastic!" So he came in paying me this much every month [points to a figure of $3,588 on the screen]. But bearing in mind that out of my account I only had that much [points to figure of $2, 787 which appears on the screen] going out because I was baby-sitting the seller's loan. Here's the thing, positive cash flow I was making every single month [points to figure that appears in large font on the screen $801] this much! Now here's the thing how many bank loans did I have to get? And how much of my cash did I put in it? APPENDIX 5 Extracts from transcript of 2014 Hurlstone Park Boot Camp Page ref 1 9/28 You're spending three days with me to learn how to buy [a] house for $1 2 13/2 If someone says to me, "You can't buy a house for $1." "Yes you can." 3 16/16 Came back to Australia in 2000. People said, "What did you do today?" "Bought a house for $1." 4 60/22 "Sir, if I did it today, would you sell me a house for what you owe on it?" A lot of people say yes, and that's a house for a dollar. We'll talk about that bit later. 5 129/21 When we get into tomorrow's strategies, they're phenomenally profitable, but there's two things you must understand you get from sellers: a massive discount in price, in which case they'll want the cheque; or they're going to give you incredible terms and 30 years to pay off their house, but they're going to want closer to retail. Does that make sense? They're not going to give you incredible terms plus the incredible price. 6 299/5 AUDIENCE MEMBER: You can turn a negatively-geared property into positively geared quickly. MR RICK OTTON: Correct. You can go from money coming out of your pocket to money coming in, and you can always tell someone who's turned it around using this strategy, because when you go down George Street in the city they walk towards you smiling . Okay. 7 305/18 These days, these strategies are becoming so popular that it should be a $10,000 minimum. You're going to find so many people want these now, that–if you'd asked me a few years ago when they weren't that well known, you might take you know, $8,000 grand or $7,000 grand, but really, if you said, "Look , it's first $10,000 grand gets it..." 8 337/22 I'm about to show you a transaction later on today that will make me over a million dollars on Coogee. Never seen it, never met anybody, right? It's just automate the process. Just understand that when you get the network or people that know what you do, they–you just give the instructions for people to do it, they do, they do it. Does that make sense? 9 375/28 And, "I'll show you how to make money." So what happens is–so you can either go and talk to people and you get $3.50 for a free cup of coffee. Does that make sense? Or you show people. People who say, "Do you want me to tell you or show you?" People say, "Show you." If you tell them, there's $3.50 for a cup of coffee. Show them, you just made $20,000 grand. Because the average transaction is $40,000 grand, give them $20,000, you make $20,000. So what happens is, when you do a joint venture, or an AJV or you come together, right, sometimes the other person has already got the house. You've got the specialised knowledge. They don't have it. Or other people have the money, you've got the skill set. 10 381/4 So what happens is you'll do one or two or three, and eventually you're going to go, "Well hang on. Every time doing $40,000 grand, I'm calling in Barry the mortgage broker and Sally the seller," you're just going to go–listen, I tell you what, you just don't do it that way anymore. You just step in and just, "Oh, I'll take the $40,000 grand myself." So it's just a way that you guys started spending absolutely no money to get into the game, sharing in the profits. It's the–I love it when people will start on my joint ventures like this. 11 381/30 By the way, ladies and gentlemen, the advantage of you doing-building your property portfolio with no money, with nothing invested except oxygen, you're limitless. It's pretty hard for you to get them wrong. You just keep going and you'll just change. 12 444/20 So you can develop all these little income streams and again it's another product that a lot of students just do this product and nothing else, and they develop income streams with nothing in the properties whatsoever. 13 475/7 Now, what they're going to do is, is that's–that's people coming in, plus also the people that are going to come in, not only are they going to get this bank loan to pay you out, not only are they going to pay you 1,581, but I'm also going to want some money up front. So they're going to give 15 grand on that, you–a minimum, minimum 15,000 up front just to come in and take this opportunity. 14 502/9 So those people who were working with me, by the way, if you worked with me in the Go Direct program, I do not want you doing a transaction unless my team knows about it now, because you'll go out and put it together, but if we put it together we would have doubled the profit and I don't want you crying on the end of the phone. Okay, good. 15 511/12 So the amount of money that you're getting up front from people is growing. So what's happened is, the people are giving you $25,000. 16 6/2 I'm going to show you a transaction I've just finished doing, and I'm going to show you the texts–never seen the house, never seen the seller, done it all by text, and it's you know, $1.2 at Coogee. Don't have to see it. Just have to have a different automated system. But you'll see how much profit is in it. 17 20/15 I would not be here – I would never have bought (indistinct) my houses here in 2000 if I listened to all the people who told me that what I'm teaching you today, you cannot do in Australia. 18 22/4 I was a tv guy, yet when I bought 20 condominiums, and you buy apartments in the United States, ladies and gentlemen – if you buy 20 apartments, one of them is always left empty. Now, I'm there and I'm thinking these puppies can rent for $1,000 bucks a week ...