INTHEBLACK July 2022 - Magazine - Page 37
“Because this decision makes it clear that it is not
necessary to demonstrate exploitation of vulnerability,
it extends the reach of the statutory unconscionable
conduct prohibition, so that it will protect more
consumers and small businesses against egregious
conduct by corporations.”
Former ACCC head and professorial fellow with
the University of Melbourne, Allan Fels AO, says
that, historically, cases of unconscionable conduct
have hinged on whether businesses have exploited
consumers that were disadvantaged in some way and
who had been given no choice when entering contracts.
“The courts have been reasonable, but really middle
of the road,” Fels says.
“In this latest case, it comes back to inherent
unfairness and makes it clear that unconscionable
conduct is pretty broad.”
ONGOING LEGAL UNCERTAINTY
Professor Jeannie Paterson, who specialises in contracts,
consumer protection and consumer credit law at
the University of Melbourne, says there is still legal
uncertainty around unconscionable conduct.
“The decision, in my view, just highlighted the
ongoing uncertainty about unconscionable conduct,
because the view presented in the case has been one
that we’ve already seen from the Full Federal Court in
the past,” she says.
“I think it’s a very sensible view, but it’s not a view
that’s been taken by all courts, and it’s not a view that as
yet has been confirmed by the High Court.
“We’re still in a situation where we don’t really
know what the rules are going to be and, therefore,
it’s a situation of great uncertainty for everybody,
unfortunately.”
Fels says that overall, courts have been wary when
making judgments on unconscionable conduct because
they often involve difficult exercises of judgment.
The ACCC is in the process of recommending
that a new provision be introduced into Australian
Consumer Law, which would be a prohibition on unfair
commercial practices.
“Floating around in the background is the question
of whether you should just have ‘unfair’ as a test,” Fels
says.
“The problem is that ‘unfair’ can cover a multitude of
situations in a daily sense. So that’s opening the door
too wide, because every contract can be questioned.”
IMPLICATIONS FOR BUSINESS
Unconscionable conduct cases typically revolve around
some form of exploitation of disadvantaged customers.
The term “disadvantaged” can encompass individuals
lacking mental or educational capacity who are coerced
into making decisions, and even those with limited
English language skills.
Above: Professor Jeannie Paterson,
University of Melbourne
“For people doing
business, really what
it comes down to is
finding out a little
bit about your
customer and
making sure they’re
in a position to
understand and act
upon any advice
that they’re given in
a way that improves
their overall
outcome.”
PROFESSOR JEANNIE PATERSON,
UNIVERSITY OF MELBOURNE
Paterson says it is important for businesses to be
mindful of their conduct toward customers.
“For people who are doing business, really what it
comes down to is finding out a little bit about your
customer and making sure they’re in a position to
understand and act upon any advice that they’re given
in a way that improves their overall outcome,” she says.
“And if they are hamstrung in some way in
protecting their own interests – perhaps because the
information is complex and they are using English
as a second language, are dealing with other complex
financial problems or are acting under some disability
that impedes their cognitive capacity – more care needs
to be taken. Obviously, bullying or trickery should be
avoided.
“It may also be important for the customer to have
an opportunity to consult a trusted person to make sure
they understand the transaction they’re thinking about
entering into.”
Above: Allan Fels AO,
University of Melbourne
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