Landmark Federal Court Ruling on Unconscionable Conduct

A recent decision of the Full Federal Court has lowered the threshold for unconscionable conduct. The decision of Australian Competition and Consumer Commission (‘ACCC’) v Quantum Housing Group Pty Ltd [2021] FCAFC 40 (‘Quantum Case’) has removed the need to establish a special disadvantage on the part of the victim, placing a stronger emphasis on the commercial conduct.

Historical Position

Traditionally, for conduct to be considered unconscionable, there must have been present a special disadvantage or vulnerability in the person or persons who the conduct was being directed towards and this disadvantage must have been known and exploited.

A special disadvantage is a weakness or deficiency of a person or persons that seriously effects their ability to act in their own best interests. The courts have recognised the following attributes and features as constituting a special disadvantage, including:

  • lack of education or illiteracy;
  • sickness;
  • age;
  • infirmity of body or mind;
  • poverty or need of any kind;
  • drunkenness; or
  • lack of assistance or explanation where assistance or explanation is necessary.

Current Position

The ruling in the Quantum Case has removed the requirement to demonstrate that a special disability or vulnerability exists. All that must now be established is that the unconscionable conduct was a substantial departure from the norms of acceptable commercial behaviour. While Their Honours recognised that the exploitation of a special disadvantage will often be a feature of unconscionable conduct, they considered it unnecessary to establish.

Considerations

The Quantum Case has extended the reach of statutory unconscionability providing small businesses and consumers with stronger protections against the egregious conduct of corporations by ensuring that they have a greater opportunity of proving the existence of unconscionable conduct. Consumers and small businesses should now be more confident that they will be successful in a proceeding for unconscionable conduct.

Alternatively, companies and businesses that provide goods or services to small businesses or consumers should make themselves acutely aware of the reduced threshold requirements to establish unconscionable conduct. In doing so, companies and businesses should understand what ‘acceptable commercial conduct’ is in their given industry. Generally, companies and businesses should:

  • not force, pressure or threaten customers to enter into signing a contract or agreement;
  • not use their bargaining power unfairly;
  • not make false or misleading representations to customers;
  • act with integrity in all dealings with customers;
  • disclose all commercial associations;
  • ensure their customers understand the terms of an agreement; and
  • be transparent in all dealings with customers.

Should you have any further questions on unconscionable conduct or you have concerns that you have been the subject of unconscionable conduct, please contact Rebecca Halkett.

Written by Tyson Brazel.