A pizza oven provider has been found to have misled its small business customers about the contracts by which they obtained the ovens and the terms under which their finance contracts could be cancelled.
The Australian Competition and Consumer Commission obtained orders in the Federal Court, Sydney yesterday against Original Mama's Pizza and Ribs Pty Ltd, its managing director, Mr George Terence Hilder (aka George Hilder, George Hilda, Brett Hilder, Brett Hilda, Terry George Hilder, Terry George Hilda) and sales representative, Mr Richard Soo, for breaches of the Trade Practices Act 1974 and the Australian Securities and Investments Commission Act 2001.*
The court declared that Original Mama's breached sections 52 and 53(g) of the Trade Practices Act (or the equivalent ASIC Act provisions) and that Mr Hilder and Mr Soo were knowingly concerned in those contraventions.
Mr Hilder and Mr Soo, on behalf of Original Mama's, made misleading representations to small business owners, such as service station, cafe and convenience store owners, which induced them to enter into long-term financing agreements with third party finance companies, in order to obtain the pizza oven systems.
These misrepresentations included representations to the effect that:
- if the oven system was not a success, the small business owner would be able to cancel their financing agreement and Original Mama's Pizzas & Ribs would be obliged to remove the oven, with no costs being incurred by the small business owner, and that the small business consumer would be released from all financial obligations in respect of the oven, and
- the oven system would be risk free because of a six or 12 month free trial period.
The court found that once the small business owners had entered into the financing agreements, Mr Hilder would sell the ovens to the finance companies at an inflated price of between $15,000 and $19,500 (plus GST). When the small business owners tried to terminate their obligations under the financing agreements, they were told the agreement could not be cancelled.
The court also made a range of orders against Mr Hilder and Mr Soo, including injunctions, costs and corrective orders. The corrective orders include Mr Hilder and Mr Soo being required to publish an advertisement accurately summarising the Court's judgement in daily newspapers in every region where an oven system was supplied. The advertisement must also advise persons who may have suffered losses as a result of the conduct found by the Court to be unlawful of their entitlement to seek damages from the Respondents under the TPA and/or the ASIC Act.
The ACCC did not institute proceedings against any of the financial companies which provided finance for the oven systems. However Justice Madgwick did state that: "…it may bear examination that financiers should be able to profit from transactions induced by unlawful conduct such as the respondents engaged in here when in fact, whatever the legal position may be, the perpetrators of the unlawful conduct constitute the means and bridge, in non-technical language: the agency, by which the financiers acquire their borrowers."
ACCC Chairman, Mr Graeme Samuel, said: "This is an important outcome for the small business owners who were misled by the actions of the company, Mr Hilder and Mr Soo. Significantly, it also sends a strong message to finance companies to do their best to ensure that borrowers are not unlawfully induced by others to enter into such agreements."