Four-wheel-drive vehicle hire business Smart Corporation, which previously traded as Australian 4WD Hire and is now in liquidation, has been fined $1.2 million after making false and misleading representations to consumers about insurance cover.

Smart Corporation must pay a $870,000 penalty and former directors Vitali Roesch and Maryna Kosukhina, both disqualified from managing a company for three years, were each ordered to pay more than $170,000 as well as around $9500 in redress to five consumers.

The Australian Competition and Consumer Commission (ACCC) instigated court action a year ago after receiving more than 60 complaints about the four-wheel drive vehicle rental company, which was based on the Gold Coast and operated from 10 locations in Queensland, NSW, NT, WA, SA and Victoria.

Its primary target market was holiday makers seeking four-wheel drive rental vehicles suitable for off-road travel.

“Australian 4WD Hire’s treatment of some of its customers was particularly egregious,” ACCC Chair Rod Sims said.

“The misrepresentations made about insurance cover gave customers a false sense of security that they would have the benefit of being covered by insurance, in particular for the off-road use of the vehicles, when this was not the case.”

The firm’s website said its rental vehicles had comprehensive off-road insurance, using statements such as “All Vehicles Off-Road Insured”, and “All Australian 4WD Hire Vehicles are insured for Off-Road use subject to our terms and conditions, allowing you to travel worry-free".

The Federal Court found that was false and misleading because at times many of the vehicles did not have comprehensive insurance coverage.

Australian 4WD Hire also obscured that its hire contract gave the company discretion to decide whether to submit an insurance claim or hold the customer liable for damage.

Contract terms allowed it to charge customers up to $500 each time they drove at night outside of built-up areas, above the speed limit or in fog or heavy rain. These terms, allowing deduction of a consumer’s security bond for “trivial breaches,” were found to be unfair and therefore void.

“The company sent “intimidatory correspondence to deter the consumer from disputing the claim or raising any other legitimate issues” and “harsh and unjustified” threats of legal action and other adverse consequences for customers which were “out of all proportion to any prejudice which Australian 4WD Hire had suffered”.

Australian 4WD Hire’s conduct was found to lack honesty and fairness, and involve bad faith, deception, unfair pressure and sharp practice.