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Unconscionable Conduct – a question for the lawyer or the philosopher?

Gene Schirripa

19 Apr 2021

Topics

  • Business Law
  • Business services
  • Commercial Disputes

Australian Competition and Consumer Commission v Quantum Housing

On 19 March 2021, the Full Court of the Federal Court clarified the meaning of unconscionable conduct (in the context of the Australian Consumer Law) in the decision of ACCC v Quantum Housing Group Pty Ltd [2021] FCFCA.

The case concerned a housing development group (‘Quantum’) who sent misleading letters to investors with a view to encouraging them to terminate their partnerships with existing property managers and transfer to managers associated with Quantum.

First decision

The case was initially brought before the Federal Court, which held that despite engaging in misleading and deceptive conduct, and making false and misleading representation (in contravention of ss 18(1) and 29(1) of the ACL), Quantum’s conduct did not amount to unconscionable conduct.  This was because, in accordance with established authorities, Quantum, had not “taken advantage of or exploited some pre-existing vulnerability, disability or disadvantage”.

The ACCC appealed the decision on the question of unconscionability to the Full Federal Court.

So what did the Full Federal Court say?

The Full Federal Court held that, in terms of establishing unconscionability:

  • A special disadvantage is not an essential requirement of unconscionability; it is a common feature but not a necessary feature;
  • Unconscionable has an ordinary and natural meaning of doing what should not be done in good conscience that is derived from the inner human sense of doing right;
  • The task at hand for a Court is to evaluate whether the conduct in question can be characterised as a “sufficient departure from the norms of acceptable commercial behaviour”.

Key takeaway

The law surrounding unconscionability has been clarified, and expanded.

Directors of companies may receive hefty penalties for such conduct and it is important they remain aware of this in the course of running their businesses.

In this case, the company received a penalty in the sum of $700,000.00 and the sole director was ordered to pay a penalty of $50,000.00.