The Law Handbook 2024

692 Section 7: Consumers, contracts, the internet and copyright all three properties. Mr Stubbings also consulted an independent lawyer and an accountant who signed independent legal and financial advice certificates. Shortly after settlement, Mr Stubbings defaulted on the loans and two of the properties were sold. The High Court overturned a decision of the Victorian Court of Appeal and found that the agent’s conduct on behalf of the lenders amounted to unconscientious exploitation of Mr Stubbings’ special disadvantage. Mr Stubbings’ poor financial position and inability to understand the risks of the transaction indicated his vulnerability. The court found that the agent deliberately used a ‘system of conduct’ (which involved asset-based lending only to companies, using an intermediary to deal exclusively with borrowers, and then obtaining legal and financial advice certificates to enhance the enforceability of the loan) that amounted to ‘wilful blindness’. The certificates could not protect the lender from a finding of unconscionable conduct. The loan and the mortgages were ruled to be unenforceable. 2 Statutory unconscionability In addition to the above, section 21 of the ACL (and s 12CB ASIC Act) states that: (1) A person must not, in trade or commerce, in connection with: (a) the supply or possible supply of financial services to a person (other than a listed public company); engage in conduct that is, in all the circumstances, unconscionable. Statutory unconscionability is broader than unconscionability within the meaning of the unwritten law. For example, section 21 of the ACL (and s 22CB ASIC Act) is not intended to be limited to the equitable or common law doctrines of unconscionable conduct (see s 21(4)(a); s 12CB(4)(a) ASIC Act). This means that claimants will not have to establish that they were at a ‘special disadvantage’ through factors like infirmity, age or a difficulty understanding English, before a court would recognise that unconscionable conduct has occurred. This has been confirmed by the full Federal Court in ACCC v Quantum Housing Group [2021] FCAFC 40. An interpretative principle also clarifies that courts can examine the terms and the manner and extent to which the contract is carried out. This principle makes it clear that unconscionable conduct is not limited to the bargaining practices leading to the formation of a contract. Unconscionable conduct can also be apparent in the way in which a party exercises its rights under a contract or in the way in which a party behaves once a contract is made. It can also apply to the way in which contracts are renewed, renegotiated or terminated (see s 21(4)(c) ACL; s 12CB(4)(c) ASIC Act). Another interpretative principle provides that the prohibition on unconscionable conduct applies to systemic conduct or patterns of behaviour and that there is no need to identify a person at a disadvantage in order to attract the prohibition (see s 21(4)(b) ACL; s 12CB(4)(c) ASIC Act). Unconscionable conduct is not limited to individual transactions or events. A pattern of systematic conduct or patterns of behaviour occurring over a period of time – which might include an accumulation of minor incidents – can also amount to unconscionable conduct. Considerations to be taken into account Section 22 of the ACL (and s 12CC ASIC Act) lists the factors a court needs to take into account: • the respective bargaining strengths of the parties; • whether the consumer was required to comply with conditions not reasonably necessary for the protection of the other party; • whether the consumer understood documents relating to the transaction; • whether any undue influence or unfair tactics were used against the consumer; • the price and circumstances under which the consumer could have acquired the goods or services from a third party; • whether the supplier’s conduct was consistent with similar transactions with other customers; • the requirements of any applicable code, if the consumer reasonably believed it would apply; • whether the supplier failed to disclose any conduct or risks that might affect the consumer; • if there was a contract between the parties, the terms of the contract, whether the parties complied with its terms and whether the terms were negotiable; and • the extent the parties acted in good faith. These factors are only a guide and the list is not exhaustive. Conduct may be considered to be unconscionable where there has been serious misconduct or something clearly unfair or unreasonable (see ACCC v Lux Distributors Pty Ltd [2013] FCAFC 90, below).