LSB September 2021 LR

UNCONSCIONABLE CONDUCT
and recklessly fail to make such inquiries
as an honest and reasonable lender would
make in the circumstances, or at least
have knowledge of circumstances which
would put an honest and reasonable
lender on inquiry’. 8 AJ therefore could
not be treated as having ‘actual’ or
‘constructive’ knowledge of Stubbings’
circumstances. 9 While AJ was broadly
aware of Stubbings’ lack of income and
payment of a token deposit for his Fingal
property, it was entitled to rely upon the
signed and returned certificates of advice
provided by Stubbings as evidence that
he fully understood the legal and financial
consequences of the agreement. AJ was
therefore entitled to refrain from more
forensically enquiring as to his personal
circumstances and capacity to service the
loans and could not be deemed to have
unconscientiously exploited Stubbings. 10
The VCA consequently allowed the
appeal against the trial judge’s findings on
unconscionability.
THE VCA’S RECONSTRUCTION OF KOBELT
The VCA considered the High Court’s
approach in Kobelt when determining
the content of the standard of statutory
unconscionability expressed in ASIC
Act s 12CB(1). Kobelt concerned ASIC’s
investigation into a controversial ‘book-up’
credit system utilised by some storekeepers
in many of Australia’s remote Aboriginal
communities. Mr Lindsay Kobelt was
one such storekeeper. ASIC’s argument
was that this system of supplying credit
to residents from remote Aboriginal
communities was unconscionable under
s 12CB(1). A High Court majority (Kiefel
CJ, Bell, Gageler and Keane JJ; Nettle,
Gordon and Edelman JJ dissenting)
rejected this argument, holding that Kobelt
had not unconscientiously exploited
his customers, but rather fulfilled local
demand and acted on the need for the
book-up system. 11
Chief Justice Kiefel and Bell J
described s 12CB(1) as requiring ‘an
evaluative judgment’, 12 noting that
the pivotal inquiry was whether the
impugned conduct was against conscience,
by reference to the factors outlined
in s 12CC(1) and the totality of the
circumstances. 13 Justice Gageler’s judgment
echoed similar sentiments, 14 noting that
the normative standard of conduct
prescribed by s 12CB(1) would not be met
where a person engaged in conduct ‘so
far outside societal norms of acceptable
commercial behaviour as to warrant
condemnation as conduct that is offensive
to conscience’. 15 Justice Keane emphasised
the moral underpinnings of the evaluative
assessment mandated by s 12CB(1) 16 and
regarded ‘moral obloquy’ as the yardstick
(despite its express retraction by Gageler J
in the same case). 17
The minority judgments aligned
more closely with Gageler J’s analysis.
Justices Nettle and Gordon recognised
that the equitable principles underpinning
unconscionability at common law (and
captured by s 12CA(1)) helped ascribe
meaning to s 12CB(1), but that the s 12CC
factors would be determinative. 18 Justice
Edelman concurred with Nettle and
Gordon JJ, 19 adding that the meaning of
s 12CB(1) could not be understood ‘other
than against its background in equitable
doctrine and the repeated responses by
parliaments to that equitable doctrine’. 20
Whereas unconscionability under s
12CB(1) was not defined exclusively by
reference to the unwritten law (like s
12CA(1)), it was still informed by the
values and norms recognised by the
statute, as well as the broader community
standards and values that underpin
it. 21 The minority concluded that the
indicia of unconscionability in s 12CC
and, more broadly, equitable notions
of unreasonableness and unfairness,
pointed to Kobelt’s conduct as being
unconscionable.
The VCA in Stubbings favoured the
Kobelt minority’s view that the equitable
principles of unconscionability remained
relevant to the interpretation of s
12CB(1). 22 The court analogised equity’s
broad analysis of unconscionable conduct
with the statement in s 12CB(1) that ‘all
September 2021 THE BULLETIN 43