Key Developments in the Law of Unconscionable Conduct

The recent Full Federal Court decision in favour of the ACCC
in their unconscionable conduct appeal against Lux Distributors Ptd Ltd (Lux) is an important case in developing the law both in regard to unconscionable conduct by a business towards customers and/or other businesses, and the law of unconscionable conduct generally.

The judgement is the first Full Court judgment on the application of the ACL’s prohibition on unconscionable conduct relating to transactions involving “unsolicited consumer agreements” and, provides important guidance on the application of the prohibition against unconscionable conduct present in s 21(1) of the Australian Consumer Law (ACL) (and its predecessor, s 51AB(1) of the Trade Practices Act 1974 (Cth)).

Last week the Full Federal Court declared that Lux engaged in illegal unconscionable conduct when its sales representative conducted unsolicited in-home sales of vacuum cleaners to elderly, vulnerable customers in 2010 and 2011, overturning the trial decision of Justice Jessup. Please click here for more on the facts of the case: A win for vulnerable consumers in the Federal Court

The decision is of particular significance as the judicial approach
to the statutory concept of unconscionable conduct has been unsettled, with some taking the view that the common law concept of unconscionable conduct has been improperly influencing the court’s approach to statutory unconscionable conduct.

Key aspects of the decision include:

1.  Clarifying that sales tactics that used to be regarded as legitimate and routine may be held by a Court to be unconscionable in contravention of the ACL;
2. Highlighting the importance of a consideration of the nature of the respondent’s conduct, as opposed to the customer’s response to that conduct in deciding whether the respondent’s conduct contravenes the statutory unconscionable conduct provisions. Simply because the conduct is towards a defiant or resilient consumer will not necessarily negative a finding of unconscionable conduct under the ACL;
3. Dispensing with any contention that a statutory cooling off period which relates to a sale will counterweigh unconscionable conduct in obtaining that sale;
4. Establishes that the Court’s interrogation of “all the circumstances” of the disputed conduct will be carried out as a whole, rather than each aspect on its own. Individual circumstances which may not, on their own, amount to unconscionable conduct, may interact to create a continuum of conduct which could be appropriately characterised as unconscionable conduct;
5. Emphasises that evaluating ‘unconscionability’ involves evaluating the facts against a ‘normative standard of conscience … permeate with accepted, and acceptable, community values" and that legislation created to protect vulnerable customers may be used as a yardstick of ‘societal norms’ against which the conduct in question may be measured; and
6. Spells out that businesses which conduct in-home sales activities will be held to a high standard which includes acting in a manner which is honest, fair and without deception.

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