LSB October 2018_Web

CONSUMER LAW
When the company line is
unlawful: an overview of
systemic unconscionable conduct
THYME BURDON, SENIOR LAWYER, AUSTRALIAN COMPETITION AND CONSUMER COMMISSION 1
Unconscionable conduct is an area
of the law that should be front of
mind for any lawyer advising on business
practices around dealing with consumers
and suppliers. Importantly, unconscionable
conduct prohibitions under both the
Australian Consumer Law (ACL) 2 and the
Australian Securities and Investments Commission
Act 2001 (Cth)(ASIC Act) are capable of
applying to “systems” or “patterns” of
conduct as well as conduct in relation to
specific individuals.
This article provides an overview of
systemic unconscionable conduct under
the ACL and ASIC Act.
KEY POINTS
• The statutory prohibitions are broad:
Systemic unconscionable conduct may
encompass a wide range of conduct,
often incorporating conduct that
constitutes stand-alone contraventions
of other consumer laws, and is highly
fact-specific.
• Penalties can be significant:
“Systems” cases have attracted large
financial penalties, most recently $10
million in ACCC v Ford [2018] FCA
703. Penalties are likely to grow with
the recent increase to maximum
financial penalties under the ACL.
Disqualification orders are also common
where senior managers are closely
involved.
• The law is still developing:
Practitioners should be particularly
mindful that the concept of
systemic unconscionable conduct is
comparatively new and still evolving. 3
ASIC and the ACCC continue to bring
more “systems” cases and private
enforcement via consumer class actions
is increasing. 4
22 THE BULLETIN October 2018
MEANING OF STATUTORY
UNCONSCIONABLE CONDUCT
Subsection 21(1) of the ACL prohibits
a person from engaging in conduct in
trade or commerce in connection with the
supply or acquisition, or possible supply
or acquisition, of goods or services to
or from another person that is, in all the
circumstances, unconscionable. Section
12CB(1) of the ASIC Act replicates this
prohibition for financial services.
Both statutes do not define
“unconscionable conduct”, but state that
it is not limited by the common law. 5 Case
law does not provide any determinative
interpretation, but makes clear that
statutory unconscionable conduct goes
beyond “unfairness” or “unjustness”,
although this may exist in conduct that is
also unconscionable. 6
The range of conduct that may fall
foul of the prohibitions is ‘…wide and can
include bullying and thuggish behaviour, undue
pressure and unfair tactics, taking advantage of
vulnerability or lack of understanding, trickery or
misleading conduct.’ 7 Importantly, dishonesty
is not a necessary requirement. 8 Courts
have previously sought to impose notions
of moral obloquy, but recently have
moved away from this terminology as it is
not found in the statutory wording. 9
The legislation provides a non-exhaustive
list of matters that a court may consider
when determining whether a person has
engaged in unconscionable conduct,
including the parties’ relative bargaining
strengths, the terms of the relevant
contract and whether it was negotiated,
whether conduct was reasonably
necessary to protect a party’s legitimate
interests, whether relevant documents
were comprehensible and whether undue
influence or unfair tactics were used. 10
MEANING OF ‘SYSTEM OF CONDUCT OR
PATTERN OF BEHAVIOUR’
The statutory prohibitions are “capable
of applying to a system of conduct or
pattern of behaviour, whether or not a
particular individual is identified as having been
disadvantaged by the conduct or behaviour”. 11
There is little authority on the terms
“system of conduct” or “pattern of
behaviour” despite the growing number
of contested cases. However, the Full
Federal Court has recently stated that
“a “system” connotes an internal method of
working, a “pattern” connotes the external
observation of events” and that no “gloss” is
to put on these phrases. 12
Many successful “systems” cases point
to formalised internal documents as
evidence of systemic unconscionable
conduct, such as marketing scripts,
training materials and written policies. 13
Evidence of similar examples of
unconscionable conduct in regard to
particular individuals can also be used to
demonstrate the features of a system or
pattern, without requiring any proof of
disadvantage to a particular individual. 14
However, it is insufficient to prove
that each critical feature of an impugned
process is present “in a number of ”
interactions with consumers, rather it is
necessary to show that ‘the critical features
are present in combination in a sufficient
number... [of those interactions such] that it
was more likely than not… [that the respondent
] had designed and operated that combination
as a… system”. 15 The Full Federal Court
has recently stated that “the more generic the
alleged conduct and the less the unconscionability
depends on the attributes of consumers, the more
probative evidence about what happened to a
number of consumers may be.” 16