A Queensland company and its former directors have been ordered to pay nearly $600,000 after pleading guilty to 11 different counts of making false and misleading representations in relation to selling “exclusive” distribution licenses to other businesses.
Southport-based Eco Boss and its two former directors appeared before the Queensland Magistrates Court, following an investigation by the Queensland Office of Fair Trading.
According to the Office of Fair Trading, Eco Boss had told 11 interested purchasers that it held an agreement with a UK-based company to sell territorial licenses within Australia for the sale and installation of a certain smoke detector brand.
Eco Boss then proceeded to sell the “exclusive” distribution licenses between October 2015 and June 2016, according to regulator, but when the company was asked to prove it had the right to sell the licenses, Eco Boss produced a falsified contract to convince the purchasers.
During court proceedings, the two directors of Eco Boss admitted to the Queensland Magistrates Court they made false claims and misled the 11 purchasers.
The court subsequently fined Eco Boss Pty Ltd $250,000. One director was ordered to pay $40,000 in fines, $102,200 in restitution to affected distributors, and $89.90 in court costs. The other director was made to hand over $85,000 in fines, $102,200 in restitution and $89.90 in court costs. A conviction was also registered against one of the directors.
In a statement, Fair Trading acting executive director Craig Routledge said the case serves as a warning for businesses to act honestly and to be transparent.
“The conduct of Eco Boss Pty Ltd [and the directors] was calculated and manipulative, and there is no place in Queensland for traders who behave in such a deceptive and misleading manner,” he said.
Eco Boss appears to no longer be trading, with the Australian Securities and Investments Commission publishing a notice of deregistration for Eco Boss Pty Ltd in May 2017.
SmartCompany contacted Eco Boss for comment but received no response. SmartCompany was also unable to contact the directors.
Businesses should conduct ‘due dilligence’ before signing on
Partner at business law firm Hall & Wilcox Ben Hamilton tells SmartCompany all businesses should be conducting due dilligence to check if companies they intend to work with do in fact have the right to carry out certain arrangements.
This could involve bypassing the seller entirely and going straight to the source.
Sometimes distributors may be hesitant to provide the contracts and prove their legitimacy for one reason or another, and in this case, Hamilton says it’s ultimately up to the discretion of the business operator.
“There’s always to a judgment call to be made when doing a commercial deal, and its difficult to insulate yourself against risk when there’s black and white false representation,” he says.
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“It depends on the deal and the risk appetite, it’s hard to make generalisations because it becomes a matter of accepting your tolerance for risk.”
Cases like this are uncommon, says Hamilton, who says there was likely little reason for the purchasers to suspect any misleading behaviour and Eco Boss did provide a contract.
“I think its rare to see what might be described as materially false representations but it does happen,” he says.
“It’s a matter of being on guard and exercising judgment, which is easy to say in hindsight.”