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A firming roadmap for determining unconscionable conduct?

Several jurisdictions are now firming in a common approach and 'roadmap' for analysing unconscionable conduct under section 21 of the ACL.

In the recent case of Finetea Pty Ltd v Block Arcade Melbourne Pty Ltd (Building and Property) [2019] VCAT 1529, Senior Member Walker adopted the roadmap applied by Murphy J in the Federal Court case of ACCC v South East Melbourne Cleaning Pty Ltd (In Liquidation) [2015] FCA 25 who in turn had adopted the analysis of the full bench in PT Ltd v Spuds Surf Chatswood Pty Ltd [2013] NSWCA 446 to consider an allegation of unconscionable conduct.

Murphy J stated:

"In PT Ltd v Spuds Surf Chatswood Pty Ltd [2013] NSWCA 446 (“PT Ltd”) at [112] Sackville AJA (McColl and Leeming JJA agreeing) described the necessary steps for determination of whether conduct is unconscionable in the following terms:

(a) the correct principles of law governing a decision as to whether conduct is unconscionable must be stated; (b) the court must find the primary facts on the basis of which the court makes its determination as to whether the impugned conduct was unconscionable; (c) the court must decide whether, on the facts as found, the conduct should be characterised as unconscionable.

I respectfully agree.

  1. Dealing first with the principles of law, amongst other things, the following matters underpin a proper approach to unconscionability under the ACL:

(a) The Court must first and foremost have regard to the language of the statute rather than judicial explanations of unconscionability: PT Ltd at [101]; Director of Consumer Affairs Victoria v Scully and Another [2013] VSCA 292; (2013) 303 ALR 168 (“Scully”) at [45] per Santamaria JA (Neave and Osborn JJA agreeing). (b) “Unconscionability” is not a term of art but simply means “something not done in good conscience”: Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90 (“Lux”) at [41] per Allsop CJ, Jacobson and Gordon JJ; Scully at [36]; Australian Securities and Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226; (2005) 148 FCR 132 at [33] per Tamberlin, Finn and Conti JJ. (c) The court should have due regard to the remedial and beneficial objects of the legislation: Investec Bank v Naude [2014] NSWSC 165 (“Investec”) at [54] per McDougall J. (d) The court must have regard to the non-exhaustive and non-prescriptive list in s 22(1) although the presence of one or more of these matters will not be determinative to an unconscionability enquiry: Scully at [41]. However these matters may nevertheless assist the court in illuminating the scope and meaning of unconscionable conduct: Scully at [42]; Body Bronze International Pty Ltd v Fehcorp Pty Ltd (2011) 34 VR 536 at [76] per Macaulay AJA (with whom Harper and Hansen JJA agreed). (e) The court is not constrained by the general equitable concept of unconscionability although equity’s exploration of unconscionable conduct may assist the court: s 21(4)(a) ACL; Investec at [55]; Scully at [40]. (f) In determining unconscionability, the court is prevented from having regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention: s 21(3)(a) ACL. (g) Whether or not conduct is unconscionable will depend on careful consideration of all of the conduct and involves standing back and looking at the whole episode: Lux at [44]. (h) The Court’s task involves evaluating conduct by reference to a normative standard of conscience which may develop and change over time and which must be understood and applied in the context in which the circumstances arise: Lux at [23] and [41]; Scully at [56]. (i) Notions of moral obloquy or moral tainting are relevant, but it must be recognised that it is conduct against conscience by reference to the norms of society that is in question: Lux at [41]. The task of statutory construction must focus on the text of the statute and a number of the factors in s 22 of the ACL do not necessarily involve dishonesty, sharp practice or conscious wrongdoing (eg s 22(1)(a), (b), (c), (e), (f), (h) and (j)). While conduct involving dishonesty, sharp practice or conscious wrongdoing is no doubt unconscionable, conduct which does not involve those factors may still be regarded as unconscionable. Substituting a test of “a high level of moral obloquy” for the standard of “unconscionability” is of doubtful assistance in determining whether the statutory prohibition has been contravened: PT Ltd at [101]-[106]. (j) As “unconscionability” in this context is predicated on “conduct”, a person’s conduct is to be distinguished from the consequences that that conduct may have on the lives of other people: Scully at [39]; Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392 at [19] per French CJ, Hayne, Crennan, Kiefel, Bell, Gageler and Keane JJ. (k) A determination of unconscionability involves a broadly based value judgment, applied to the facts on which reliance is placed, to the extent that they are proved: Investec at [59]; Lux at [23].

I note that:

(a) “conduct” is broadly defined in s 4(2) of the CCA and includes the doing or refusal to do any act; (b) conduct will be “in trade or commerce” when it has a trading or commercial character: Kowalczuk and Another v Accom Finance Pty Ltd [2008] NSWCA 343; (2008) 77 NSWLR 205 at [188] per Campbell JA (Hodgson and McColl JJA agreeing); (c) “in connection with” bears a broad meaning that should promote the purpose or object underlying s 21 in protecting businesses and consumers: Monroe Topple & Associates Pty Ltd v Institute of Chartered Accountants in Australia [2001] FCA 1056 at [255] per Lindgren J; and (d) a “supply” of goods or services is not confined to a contractually based transaction but may include a course of dealing or proposed dealing: Ford Motor Co of Australia Ltd v Jefferson Ford Pty Ltd [2007] FCA 870 at [27] per Jessup J."

By Rob Norton and Louise Gehrig


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