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Unconscionable Conduct 'cheat sheet' provided by Barone DCJ

In the recent case of Australian Securities Ltd v Ehrenfeld [2023] WADC 121 Barone DCJ gave a 30,000-foot-view of unconscionable conduct which provides a good starting point for those not familiar with the cause of action.

Barrone DCJ stated from paragraph 220:

The law regarding unconscionable conduct

It is unnecessary for this court to delve into a lengthy review of the disputed state of the law regarding unconscionable conduct. Justice Martin's review of the relevant law in Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 15][ is both instructive and binding.

I take from the court's review in Sino Iron the following:

(a) There is a significant textual overlap between the unconscionable conduct provisions in the ASIC Act and the ACL, therefore the observations of courts regarding each are instructive.

(b) The court is required to undertake a comprehensive fact-specific analysis of all underlying circumstances surrounding a contention of statutory unconscionable conduct.

(c) The state of the present law is that to establish statutory unconscionable conduct, it is not necessary that there be some form of pre-existing disability, vulnerability or disadvantage of which advantage was taken.

(d) There is no clear baseline moral standard for what constitutes statutory unconscionable conduct. The standard must be lower than that developed in equity.

(e) As to the necessary level of gravity in the conduct, unconscionable conduct is characterised by a substantial departure from that which is generally acceptable commercial behaviour. It is a departure which is so plainly or obviously contrary to the behaviour to be expected of those acting in good commercial conscience that it is offensive.

(f) Not every breach of the norms underpinning commercial laws, or those expressed in codes of conduct or prevailing business standards will be a contravention of the statutory unconscionable conduct provisions. Nor will every conduct that involves an element of hardship or unfairness to the other party.

(g) Whilst it is not within the remit of the court to undermine a fairly agreed bargain between sophisticated commercial parties, the concepts of freedom of contract and any allocation of risk do not provide a platform for parties to act contrary to law.

The applicable standard is a normative one involving the evaluation of whether the conduct in question is so far outside societal norms of acceptable commercial behaviour as to warrant condemnation as conduct that is offensive to conscience. The evaluation exercise is informed by the non-exhaustive list of factors in s 12CC of the ASIC Act.

The court must take into account each of the considerations identified in s 12CC of the ASIC Act to the extent they apply in the circumstances. The considerations are non-exhaustive, but they provide express guidance as to the norms and values that are relevant to inform the meaning of unconscionability and its practical application.

Statutory prohibitions on unconscionable conduct do not require altruistic conduct.

In Paciocco v Australia and New Zealand Banking Group Ltd[ the evaluation of conduct was described as an evaluation that:

... must be reasoned and enunciated by reference to the values and norms recognised by the text, structure and context of the legislation, and made against an assessment of all connected circumstances. The evaluation includes a recognition of the deep and abiding requirement of honesty in behaviour; a rejection of trickery or sharp practice; fairness when dealing with consumers; the central importance of the faithful performance of bargains and promises freely made; the protection of those whose vulnerability as to the protection of their own interests places them in a position that calls for a just legal system to respond for their protection, especially from those who would victimise, predate or take advantage; a recognition that inequality of bargaining power can (but not always) be used in a way that is contrary to fair dealing or conscience; the importance of a reasonable degree of certainty in commercial transactions; the reversibility of enrichments unjustly received; the importance of behaviour in a business and consumer context that exhibits good faith and fair dealing; and the conduct of an equitable and certain judicial system that is not a harbour for idiosyncratic or personal moral judgment and exercise of power and discretion based thereon.


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