Unconscionable conduct under the Australian Consumer Law 

Australian law now recognises two distinct doctrines of unconscionable conduct that a student can easily conflate: the older equitable doctrine of unconscionable dealing, and a newer statutory prohibition under the Australian Consumer Law. This article focuses on the statutory version and on how it relates to, and departs from, its equitable ancestor.

From equity to statute

The equitable doctrine of unconscionable dealing gives relief where one party suffers from a special disadvantage — a condition seriously affecting their ability to look after their own interests, such as illness, age, inexperience or a lack of education in the relevant context — which the other party knew or ought to have known about, and unconscientiously took advantage of. That doctrine is examined in detail in unconscionable conduct in equity. Parliament added a statutory prohibition on unconscionable conduct partly because the equitable doctrine's insistence on an identifiable special disadvantage was seen as too narrow to reach some forms of unfair commercial dealing — cases where a stronger party exploits an imbalance of bargaining power, exerts undue commercial pressure, or departs from ordinary standards of commercial dealing, without the weaker party necessarily suffering the kind of personal incapacity equity has traditionally required.

The statutory prohibition

The ACL prohibits a person from engaging, in trade or commerce, in conduct that is unconscionable, and it does so in two sections. Section 20 prohibits conduct that is unconscionable within the meaning of the unwritten law. Section 21 prohibits conduct that is, in all the circumstances, unconscionable, in connection with the supply or possible supply of goods or services to a person, or their acquisition or possible acquisition from a person.² Section 21 is therefore not confined to consumers: the person supplied and the person supplying are both within it, so it reaches business-to-business dealings in a way the guarantees regime does not. Courts assess the conduct against a normative standard informed by ordinary community and commercial standards of conscience, rather than by asking only whether the weaker party suffered a special disadvantage in the strict equitable sense. This makes the statutory standard, in some respects, broader and more flexible than its equitable counterpart — though it remains a demanding standard, and hard bargaining or driving a good deal is not, without more, unconscionable — as ACCC v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51¹ illustrates: a landlord's refusal to renew a lease unless the tenants dropped unrelated litigation was not unconscionable, because their need to settle did not amount to a special disadvantage the landlord exploited.

The statutory factors

Rather than turning on a single threshold requirement, the statutory prohibition is assessed against a non-exhaustive list of factors the legislation identifies as relevant. These typically include matters such as the relative bargaining strength of the parties; whether the stronger party imposed conditions not reasonably necessary to protect its legitimate interests; whether the weaker party could understand relevant documents; whether undue influence, pressure or unfair tactics were used; whether the parties acted in good faith; and the extent to which conduct was consistent with prior dealings or any applicable industry code. No single factor is decisive, and courts weigh the factors together against the whole context of the dealing, which makes this a genuinely multi-factorial, contextual inquiry rather than a search for one defining element.

Contrast with the equitable doctrine

Several differences are worth holding onto for a problem question. First, the equitable doctrine requires an identifiable special disadvantage in the weaker party, known to the stronger party at the time of the transaction; the statutory prohibition does not impose that same threshold and can catch broader forms of process or bargaining unfairness. Second, the statutory prohibition reaches business-to-business dealings as well as dealings with consumers, whereas the equitable doctrine is not defined by reference to trade or commerce at all. Third, because the statutory prohibition sits within a regulatory scheme, it can be enforced not only by the disadvantaged party but by the regulator, which materially changes the remedies realistically in play.

Remedies

Remedies for statutory unconscionable conduct are correspondingly broader than equity's traditional response of setting the transaction aside. Courts can grant injunctions, award damages or compensation for loss caused, and make orders varying or voiding all or part of a contract. Because a regulator can bring proceedings for a contravention, courts can also impose pecuniary penalties on corporations and individuals involved in the contravention — a consequence equity's own unconscionable dealing doctrine, being concerned with relief between the parties rather than public enforcement, does not produce.

Which section you are in decides whether that case governs. Section 20(1) of the Australian Consumer Law² provides that "[a] person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time" — so the equitable cases, Berbatis included, apply directly to it. Section 21 is different by design: s 21(4) states "[i]t is the intention of the Parliament that: (a) this section is not limited by the unwritten law relating to unconscionable conduct; and (b) this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged". Naming the section before reaching for the case law is the discipline here.

Applying this in a problem question

1. Work out whether the facts raise the equitable doctrine, the statutory prohibition, or both, and address them separately rather than blending them.
2. For the statutory claim, confirm the conduct occurred in trade or commerce, and for s 21 that it was in connection with the supply or acquisition of goods or services. Then name the section: s 20, where the unwritten law and so the equitable cases apply directly, or s 21.
3. Work through the non-exhaustive statutory factors against the facts, rather than searching for a single special disadvantage.
4. For the equitable claim, check for an identifiable special disadvantage known to the other party, and unconscientious exploitation of it.
5. Identify who may bring the claim — the disadvantaged party, or the regulator — and match the remedy sought to that choice.