Chapter 5 Unconscionable Conduct

1. Chapter 5 Unconscionable Conduct Equitable doctrine and statutory provisions prohibiting unconscionable conduct in Australian law.

2. Outline: • Unconscionability in Equity; • Unconscionability pursuant to statute; • Unconscionability in consumer and small business transactions; • Remedies.

3. Unconscionability in Equity The diverse nature of unconscionable conduct in equity. The doctrine of unconscionable dealing: • Special disadvantage • Knowledge • Exploitation Blomley v Ryan (1956) 99 CLR 362 Commercial Bank of Australia v. Amadio (1983) 151 CLR 447 Defences Remedies

4. Statutory Unconscionability • Rationale • An overview of Part IVA TPA • Sections 51AA, AB and AC • Exclusions nb ss 51AAB • Equivalent provisions in other Commonwealth, State and Territory legislation • Concurrent operation s51ACAA

5. Rationale Origins What is the scope of s51AA – is a narrow or wide view appropriate? What perceived shortcomings in s51AA led to the introduction of s51AC? Elements: 1. A corporation; 2. In trade or commerce; 3. Engage in conduct; 4. Such conduct being unconscionable within the meaning of the unwritten law, from time to time, of the states and territories. Remedies Section 51AA

6. Case Study - Berbatis • Review the facts of ACCC v CG Berbatis (Holdings) Pty Ltd. • What was the first instance decision and rationale? • What decision did the Full Federal Court reach and why? • What were the High Court’s conclusions (if any) on the scope of s51AA (the wide or narrow view) and the applicability of situational disadvantage?

7. Section 51AB(1) 1. A corporation; 2. In trade or commerce ; 3. In connection with the supply or possible supply of goods or services to a person; 4. Engage in conduct; 5. Conduct that is in all the circumstances, unconscionable.

8. Considerations Considerations the Court may take into account when determining whether conduct is, in all the circumstances, unconscionable pursuant to s51AB(1): • s51AB(2)(a)-(e) • s51AB(3) • s51AB(4)

9. Section 51AB(2) Without in any way limiting the matters to which the Court may have regard for the purpose of determining whether a corporation has contravened subsection (1) in connection with the supply or possible supply of goods or services to a person (in this subsection referred to as The consumer), the Court may have regard to: (a)  the relative strengths of the bargaining positions of the corporation and the consumer; (b)  whether, as a result of conduct engaged in by the corporation, the consumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the corporation; (c)  whether the consumer was able to understand any documents relating to the supply or possible supply of the goods or services; (d)  whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the consumer or a person acting on behalf of the consumer by the corporation or a person acting on behalf of the corporation in relation to the supply or possible supply of the goods or services; and (e)  the amount for which, and the circumstances under which, the consumer could have acquired identical or equivalent goods or services from a person other than the corporation.

10. Case Study – ACCC v Lux Pty Ltd • Review the facts of ACCC v Lux Pty Ltd. • List the conduct which indicated unconscionable behaviour on the part of the salesperson. • Place this conduct with s51AB(2)(a)-(e).

11. Development and Rationale Elements: A corporation/person In trade or commerce In connection with, The supply or possible supply of goods or services to a person (other than a listed public company); or the acquisition or possible acquisition of goods or services from a person (other than a listed public company); Engage in conduct Conduct that is, in all the circumstances, unconscionable. Section 51AC

12. Considerations s51AB(3) (a)  the relative strengths of the bargaining positions of the supplier and the businessconsumer; and (b)  whether, as a result of conduct engaged in by the supplier, the businessconsumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and (c)  whether the businessconsumer was able to understand any documents relating to the supply or possible supply of the goods or services; and (d)  whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the businessconsumer or a person acting on behalf of the businessConsumer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the goods or services; and (e)  the amount for which, and the circumstances under which, the businessconsumer could have acquired identical or equivalent goods or services from a person other than the supplier; and

13. Considerations s51AB(3) cont. • (f)  the extent to which the supplier's conduct towards the businessconsumer was consistent with the supplier's conduct in similar transactions between the supplier and other like businessconsumers; and • (g)  the requirements of any applicable industry code; and • (h)  the requirements of any other industry code, if the businessconsumer acted on the reasonable belief that the supplier would comply with that code; and • (i)  the extent to which the supplier unreasonably failed to disclose to the businessconsumer: •                               (i)  any intended conduct of the supplier that might affect the interests of the businessconsumer; and •                              (ii)  any risks to the businessconsumer arising from the supplier's intended conduct (being risks that the supplier should have foreseen would not be apparent to the businessconsumer); and • (j)  the extent to which the supplier was willing to negotiate the terms and conditions of any contract for supply of the goods or services with the businessconsumer; and • (k)  the extent to which the supplier and the businessconsumer acted in good faith. • NB The operation of s51AC(4)

14. Case Study: ACCC v Simply No Knead • Review the facts of ACCC v Simply No Knead Pty Ltd. • List the conduct which indicated unconscionable behaviour on the part of the franchisor. • Itemise the conduct (where appropriate) within s51AC(3)(a)-(k).

15. Future Developments and Discussion Question • Commercial parties should, on one view, be able to negotiate freely and incorporate any terms, even harsh and onerous ones, agreed to by the parties. • However, there is recognition that not all commercial partes are equally well resourced and informed or have the ability to simply walk away if contractual terms are unsatisfactory to them. • Therefore, should commercial enterprises be protected by the doctrine of unconscionable dealing or the statutory unconscionability provisions?