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Another educator unconscionably cashes in on 'ghost students'

In another example of unscrupulous educator behaviour, in the matter of Australian Competition and Consumer Commission v Phoenix Institute of Australia Pty Ltd (Subject to Deed of Company Arrangement) 2021 FCA 956, the Federal Court of Australia has found that Phoenix and its parent company, CTI, acted unconscionably in targeting vulnerable Australians with offers of a free laptop to sign them up for VET loans via enrolment in education courses they had little to no prospect of successfully completing.

In an extensive decision considering not only the individual conduct of Phoenix and CTI with respect to a number of individual cases, but more broadly the system of behaviour which resulted in around 11,393 students enrolling in full time courses (often two full time courses at the same time), of which just nine individuals successfully graduated.

In finding that Phoenix and CTI had engaged in an unconscionable system of behaviour, Justice Perry considered the section 22 of the ACL factors to conclude:

  • Phoenix was in a superior bargaining position;

  • students had no understanding of the VET FEE-HELP loan documents or the existence and nature of the debt they had assumed;

  • Phoenix regularly enrolled students in multiple courses and created multiple VET FEE-HELP debts without their knowledge;

  • students were not informed of their right to withdraw from enrolled courses and Phoenix failed to cancel the enrolment of students who sought to opt out of courses;

  • potential students were subjected to undue influence, pressure and unfair tactics through high pressure sales tactics by brokers and agents of Phoenix and CTI; and

  • there was a consistent absence of good faith in multiple aspects of the brokers, agents and Phoenix's own dealings with potential students and enrolled students.

Perry J summed up the behaviour of Phoenix and CTI as:

"It is no exaggeration to describe the respondents’ conduct as grossly exploitative and at times dishonest, and as lacking in any respect for the dignity and autonomy of the vulnerable consumers who were targeted (Kobelt at [93] (Gageler J)). It is conduct that, when assessed according to values prevailing within Australian society, is self-evidently well outside societal norms of acceptable commercial behaviour and is properly to be condemned as conduct offensive to conscience."

By Rob Norton and Louise Gehrig

Unconscionable conduct is behaviour so harsh or unjust that it falls well outside the norms of society and therefore offensive to good conscience. In the face of such conduct, courts have both an equitable and statutory jurisdiction to sanction that unconscionable behaviour.


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