Following an appeal from the Australian Competition and Consumer Commission (ACCC), the Full Federal Court has recently established that for conduct to be held unconscionable, “it is not necessary to establish that the business engaging in the conduct has exploited some disadvantage or vulnerability on the part of the consumers of businesses affected”.
The case before the Court followed Quantum Housing Group Pty Ltd, an approved participant of the National Rental Affordability Scheme (NRAS). The NRAS is a government initiative that “provides financial incentives to people who rent dwellings to eligible low and moderate-income households at a rate that is at least 20 per cent below the market rate.” As an approved participant, Quantum was responsible for ensuring that NRAS dwellings remain compliant with the scheme. However, in April 2019, the ACCC instituted proceedings against Quantum claiming that Quantum pressured property investors to terminate their prior NRAS arrangements and sign with Quantum property managers. In doing so, the ACCC further claimed that Quantum provided false or misleading representations as to its position in the NRAS by failing to inform investors of its commercial links with the property managers it recommended.
At first instance, the Federal Court ordered that Quantum pay $700,000 in pecuniary penalties for false or misleading representations under the Australian Consumer Law for its conduct relating to the NRAS. The Court noted that this conduct was deliberately engaged in to trick investors into switching property managers. However, the ACCC appealed this decision, arguing that the Court should have identified that this conduct was not only misleading or deceptive but also unconscionable. ACCC Chair Rod Sims provided that the rationale behind the appeal was “to seek clarity from the Full Federal Court on whether the Australian Consumer Law requires there to be special disadvantage on the part of the target or victim of the alleged unconscionable conduct for that conduct to be unconscionable in breach of the Australian Consumer Law.”
Consequently, in its recent landmark judgment, the Full Federal Court clarified the legal test for statutory unconscionable conduct and held that it is not necessary to establish such a disadvantage. The Court concluded that the focus is to be on the conduct rather than an exploitation of a vulnerability. Accordingly, with a wider ambit, consumers and small businesses will be offered more protection in the future against unconscionable conduct engaged in by corporations.
For the full reading of the media release, see here.