In a watershed decision on 19 March 2021, the full Federal Court upheld an appeal brought by the Australian Competition and Consumer Commission (ACCC) against Quantum Housing Group Pty Ltd (Quantum), declaring conduct by businesses can be unconscionable even in the absence of the exploitation of a weaker party’s pre-existing disadvantage, disability, or vulnerability.
The significance of this decision is that it extends the scope of who can claim relief from harm caused by unconscionable conduct from what was previously only consumers and small businesses with a particular vulnerability, disability or special disadvantage, to any and all consumers who have experienced harm.
- The Federal Court’s decision extends protection from unconscionable commercial conduct to all consumers and small businesses, as opposed to just a limited, vulnerable subset of consumers.
- Under the Australian Consumer Law (ACL) it is now not necessary to establish the circumstances of the victim, and refocuses the assessment onto the behaviour of the respondent, regardless of the vulnerability of the victim.
- The consequence of this is two-fold: it can promote a greater standard of accountability and conscionable dealing from corporations in commercial settings; and further, allows for remedies for harm suffered by any consumer or small business, caused by unconscionable dealings.
The specific need for small businesses to have a pre-existing disadvantage or vulnerability has enabled larger businesses to consistently evade having to behave at a level of basic, commercial conscionability, as consequences would only apply if the applicant was particularly vulnerable. This is what rendered the Court unable to capture the ubiquitous misuse of Quantum’s considerable bargaining power in comparison to its smaller investors, who were pressured into transferring the management of their properties to managers who had a commercial interest with Quantum, and more concerningly, failing to inform the investors of those commercial ties.
The original June 2020 decision exemplified the rigid and inequitable nature of these arbitrary special disadvantage requirements when the Court found that while the representations made by Quantum were misleading, it did not amount to conduct that was unconscionable. The arbitrary restrictions as to what amounts to unconscionability has only allowed for a greater systematic exploitation of consumers, failing to capture the inherent vulnerability of consumers and small businesses in these situations.
Full Federal Court of Appeal’s Decision
On appeal, the Federal Court clarified the assessment for unconscionable conduct from the previous test under ASIC v Kobelt which looked to whether there was specific exploitation of a particular consumer’s special disadvantage, and refocused the examination to assess whether the conduct could be “characterised as a sufficient departure from the norms of acceptable commercial behaviour as to be against the conscience”. The significance of ‘acceptable commercial behaviour’ is important to note for corporations, who are not expected to surrender their best commercial interests in lieu of unreasonable accommodation for those parties they engage with. Rather, the new scope allows Courts to provide relief to those who suffered from unconscionable dealings, and impose penalties on misconduct that was not captured previously due to the onerous requirements to prove a special disability.
What are the implications for corporations, small businesses and consumers?
Small businesses and consumers should be aware that in light of this decision, it is easier to seek damages, as awarded in the Quantum case, without having to prove a special disability as the decision has effectively extended the scope of unconscionable conduct under Australian Consumer Law in protecting all consumers and small businesses. These sentiments were echoed by Bruce Bilson, the Australian Small Business and Family Enterprise Ombudsman, who stressed this change now ’reassures smaller businesses that remedies are available for harm suffered…. that can impact enterprises and livelihoods’.
From a commercial perspective, this decision has the potential to promote a greater standard of accountability for systemic, conscionable, commercial conduct within corporations in pursuit of their business operations.
Pragma Lawyers can provide advice to you and your business in relation to commercial dealings or disputes. Contact us today by clicking here or call us on (08) 6188 3340.
 Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd  FCAFC 40.
 Australian Consumer Law (Sch 2, Competition and Consumer Act 2010 (Cth) s 21.
 Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd  FCAFC 40, . http://www.worldlii.org/form/search/?method=auto&meta=%2Fworld&query=cth%20consol_act%20caca2010265%20sch2&results=20&rank=on&
 Australian Competition & Consumer Commission, Quantum Housing to pay $700,000 in penalties for misleading property owners (June 2020) < https://www.accc.gov.au/media-release/quantum-housing-to-pay-700000-in-penalties-for-misleading-property-owners>.
[Image reference] Qantas (n.d.), Travel Insider