The Law Handbook 2024

Chapter 7.2: Consumer protection laws 691 1 unconscionable conduct under the ‘unwritten law’ (s 20 ACL; s 12CA ASIC Act); and 2 statutory unconscionability (s 21 ACL; s 12CB ASIC Act). Importantly, section 20 of the ACL (and s 12CA ASIC Act) does not apply to conduct that is prohibited by sections 21 of the ACL. 1 Unconscionability under the ‘unwritten law’ Section 20 of the ACL (and s 12CA ASIC Act) states 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. This section appears to refer to the doctrine of unconscionable dealing as it has been interpreted in case law. However, the courts have not yet settled on what constitutes unconscionable conduct ‘under the unwritten law’ as referred to in section 20, and it may go beyond the doctrine of unconscionable dealing to include other equitable doctrines (e.g. equitable estoppel (where a court will not grant legal relief to a party that has not acted fairly)). Unconscionable dealing, as interpreted in case law, occurs where two requirements are satisfied: 1 one party to a contract or transaction is under a ‘special disability’ (see ‘Types of special disability’, below); and 2 the other party takes unfair advantage of that disability, either with knowledge of that disability or where the other party has ‘closed their eyes’ to the disability. Although not an express requirement, the courtsmore readily hold that a party has taken unconscionable advantage of a person where the transaction is extremely disadvantageous to that person. Types of special disability The courts have found that a special disability existed and was exploited by the other party to the transaction, in a variety of circumstances. For example, in Blomley v Ryan [1956] HCA 81 at [9], Justice Fullagar of the Federal Court described the range of circumstances to include: … poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary. In that case, the court set aside a contract for the sale of a farm for less than its true value because the purchasers were held to have taken advantage of the farmer’s drunkenness when he signed the contract. Case examples Commercial Bank of Australia Ltd v Amadio [1983] HCA 14 The Amadios, an elderly couple, signed a guarantee with the bank on behalf of their son. They thought their son’s business was prosperous, when in fact it was in financial difficulties. The bank enhanced the business’s appearance of solvency by selectively honouring cheques that overdrew its account. When the son’s business failed, the bank sought to enforce the guarantee against the Amadios. The guarantee was set aside by the court as unconscionable. It was held that the guarantee was ‘manifestly disadvantageous’ to the Amadios and that the bank must have known this and took no steps to ensure that the Amadios were properly advised in relation to the transaction. Collection House Ltd v Taylor [2004] VSC 49 An employee of Collection House contacted Taylor in 2001 about a debt that was incurred in 1992. The employee claimed that if the debt was not paid legal action might be taken against Taylor. Taylor then agreed to pay $5000 to settle the debt. However, the next day she sought the advice of a financial counsellor and discovered that the debt was, in fact, statute barred (for an explanation of this term, see ‘Statute-barred debts’ in Chapter 5.2: Are you in debt?). Collection House was also aware that Taylor was in difficult personal and financial circumstances at the time. Justice Nettle of the Victorian Supreme Court upheld the decision at VCAT that Collection House had engaged in unconscionable conduct in breach of (the then) section 7 of the FT Act. He held that Taylor had been at a special disadvantage because of her lack of knowledge of the matters at issue and that Collection House had wrongly exploited its position of advantage. Stubbings v James 2 Pty Ltd [2022] HCA 6 Mr Stubbings, who was unemployed and had no regular income, owned two properties and wanted to purchase a third. He used his company to enter into an asset-based loan with a lender, with the assistance of an agent. Mr Stubbings provided a personal guarantee that was secured by mortgages against