Unconscionable conduct: Full Federal Court decision and what this means for small business
In March this year, the Full Federal Court made a landmark decision about unconscionable conduct that will extend protections for people in small business.
The Court upheld an appeal by the Australian Competition and Consumer Commission (ACCC) in a case against Quantum Housing.
The decision means it’s now possible for a business or company’s conduct to be deemed unconscionable by law without needing to show that the small business or consumer affected by the conduct had a vulnerability or disadvantage exploited by the business or company.
This decision confirmed that the right approach to assessing what is unconscionable is to:
- focus on the conduct
- determine whether that conduct moves away from acceptable commercial behaviour to an extent that it would be against what we know to be conscionable.
The decision: Quantum Housing court case
The ACCC alleged that Quantum Housing made false or misleading representations and engaged in systemic unconscionable conduct. How? By:
- pressuring people investing in the National Rental Affordability Scheme into ending their property manager agreements and engaging a Quantum-approved property manager
- not disclosing their commercial ties to the managers they were putting forward.
The trial judge declared that Quantum Housing had made false or misleading representations, but wasn’t satisfied that this conduct was, by law, unconscionable. Why? Because it hadn’t been shown that Quantum Housing exploited a disadvantage or vulnerability of the investors.
The ACCC appealed this decision to clarify whether special disadvantage was needed for the conduct to be unconscionable.
The Court upheld the appeal, declaring that Quantum Housing engaged in unconscionable conduct in its dealings with investors, in breach of the Australian Consumer Law.
Top tips for protecting against unconscionable conduct
- Make sure you understand all of your rights and responsibilities before signing an agreement and if anything isn’t clear, get advice (e.g. from a business advisor or lawyer)
- Know you don’t have to accept what is offered – you can try to negotiate an agreement that best meets your needs
- Be aware of what unfair contract terms can look like and what to do if you think your contract isn’t fair
- Make sure anything that you agree to is in writing, including any contract variations
- Report instances of potential unconscionable conduct to the ACCC