- within Finance and Banking topic(s)
- with Senior Company Executives, HR and Finance and Tax Executives
- in Canada
- with readers working within the Banking & Credit, Business & Consumer Services and Consumer Industries industries
The concept of unconscionable conduct has, in recent times, been increasing in prominence, both as a regulatory enforcement tool and as a focal point for private litigants. Of course, the use of that concept to protect vulnerable sections of the community from exploitation is nothing new. However, the combination of recent legal developments and evolving expectations of the way that modern companies behave has led to unconscionable conduct becoming an increasingly attractive vehicle for challenging corporate decision-making and behaviours at a structural level.
The potential for unconscionable conduct to be used as a tool against perceived consumer harm poses real challenges for corporations seeking to navigate their obligations to consumers by reference to clear and fixed parameters. Particularly in areas where both regulatory and social norms and expectations are continually evolving, companies and senior executives will need to be particularly careful to ensure that they stay on the "right" side of the line.
Recap on the framework for unconscionable conduct claims
While the concept of unconscionable conduct has its origins in equity, there are also various statutory formulations of the prohibition, including in ss 21 and 22 of the Australian Consumer Law (ACL).
The introduction of statutory unconscionable conduct has arguably expanded the circumstances in which a finding of unconscionability can be made. The High Court has had cause to refine the test for unconscionable conduct on a number of occasions in recent years, although many of those cases have resulted in members of the Court writing separate judgments. While this has made it somewhat challenging to follow developments in this area, members of the Court have recognised the following elements of statutory unconscionability:
- Conduct will generally be denounced by a court as unconscionable if it is "outside the societal norms of acceptable human behaviour [so] as to warrant condemnation of conduct that is offensive to conscience",1 although the courts have recognised that "values, norms and community expectations can develop and change over time".2
- It follows that whether or not conduct falls outside accepted community standards is an objective question.3
- While standards, norms and practices of a particular industry are relevant to consider, this will not shield a party from a finding of unconscionability.4
- The High Court has not yet clarified whether it is necessary for a plaintiff to establish they are subject to a special disadvantage" in a claim for statutory unconscionability,5 although we note the Full Court of the Federal Court has accepted that it is not necessary to demonstrate an inpidual is subject to a special disadvantage of which another party has taken advantage. 6
One of the more significant recent developments impacting the reach of statutory unconscionable conduct arises from the High Court's decision in Productivity Partners v ACCC [2024] HCA 27. In that case, the Court accepted that the removal of two systems controls which had previously been in place to ameliorate specific risks amounted to a system of conduct, or pattern of behaviour, which was unconscionable in contravention of s 21 of the ACL. The High Court also upheld findings that senior executives who intentionally participated in the conduct and knew the "essential matters constituting the contraventions" were accessorily liable, even though they did not appreciate the conduct in question was unconscionable. 7
Recent illustrations
The protection of vulnerable consumers remains an enduring priority for both the ACCC and ASIC, and recent enforcement actions for unconscionable conduct have resulted in the imposition of substantial civil penalties. To illustrate:
- Penalties of $438 million were imposed on Phoenix (a registered training organisation approved to offer VET FEE-HELP loans) and CTI (which marketed various training organisations including Phoenix) in relation to a business model which was designed in a way that exploited vulnerable students for financial gain. 8
- A penalty of $100 million was imposed against a telecommunications provider after it admitted to engaging in unconscionable conduct related to the sale of mobile phones and contracts, and debt collection activities resulting from those sales. The consumers impacted by this conduct were disadvantaged or vulnerable, and many of those affected were First Nations Australians from regional and remote communities. 9
- In a somewhat different context, a penalty of $80 million was imposed on ANZ for unconscionable conduct in the supply of financial services relating to a government bond deal. 10
Claims for unconscionable conduct are also spilling over into private litigation. A current Australian example is the class action commenced against Aristocrat Leisure Ltd and two of its related entities. One of the claims made on behalf of the class action is that Aristocrat and its related entities engaged in statutory unconscionable conduct by developing, marketing and distributing social casino games to vulnerable persons, such as those who were under the age of 18, or who have been diagnosed with, or are suffering from, gambling disorders. This example serves to underscore the growing potential for unconscionable conduct claims to be raised against companies in respect of their dealings with consumers en masse.
Conclusion
As consumer harm continues to be a key point of focus for regulators and private litigants alike, we expect the number of unconscionable claims brought by private litigants will continue to grow. While this might best be seen as a natural extension to the recent narrative around corporations needing to operate by reference to a "social licence", it underscores the real risk to those companies who fail to account for evolving public expectations when it comes to their products, services and management of non-financial risk and compliance.
Where previously the focus of private consumer claims has tended to be on causes of action in contract, negligence, or misleading or deceptive conduct, the very nature of unconscionable conduct claims enables allegations to be framed at a much higher level of generality, and with respect to a company's systems rather than inpidualised conduct. All of these factors mean that defending unconscionable conduct claims can raise reputational concerns for companies, particularly where the claims concern vulnerable consumer segments.
Having regard to the continued evolution of this area of law, companies and senior executive should give careful consideration to the structure of their dealings with consumers.
Footnotes
1. Productivity Partners Pty Ltd v ACCC [2024] HCA 27 at [60] per Gageler CJ and Jagot J
2. Productivity Partners Pty Ltd v ACCC [2024] HCA 27 at [104] per Gordon J
3. ASIC v Kobelt [2019] HCA 18 at [59] per Kiefel CJ and Bell J
4. See, eg, Productivity Partners Pty Ltd v ACCC [2024] HCA 27 at [62(3)] per Gageler and Jagot J; ACCC v Medibank Private Ltd [2018] FCAFC 235 at [248]-[249] per Beach J
5. Although note the comments at Productivity Partners Pty Ltd v ACCC [2024] HCA 27 at [106] per Gordon J; [230] per Edelman J, cf [320] per Gleeson J.
6. ACCC v Quantum Housing [2021] FCAFC 40 at [4].
7. Productivity Partners Pty Ltd v ACCC [2024] HCA 27 at [82] per Gageler and Jagot J, at [149] per Gordon J; at [203] per Edelman J; and at [339] per Beech-Jones J.
8. Australian Competition and Consumer Commission v Phoenix Institute of Australia Pty Ltd (Subject to Deed of Company Arrangement) (No 3) [2023] FCA 859.
9. Australian Competition and Consumer Commission v Optus Mobile Limited [2025] FCA 1177.
10. Australian Securities and Investment Commission v
Australia and New Zealand Banking Group Limited (Treasury Bonds
Case) [2025] FCA 1592.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
