Australia: What’s Unconscionable and am I liable? High Court provides guidance on the principles of unconscionable conduct and accessorial liability

The High Court recently found in favour of the Australian Competition and Consumer Commission (ACCC) in a judgment providing guidance on the principles of unconscionable conduct under the Australian Consumer Law (ACL) and the general law principles of accessorial liability, including in relation to misleading or deceptive conduct claims.

Background

The High Court’s decision concerned two interrelated appeals from a decision of the Full Court of the Federal Court of Australia, concerning the ACCC’s enforcement proceedings over education provider Productivity Partners Pty Ltd (Productivity Partners).

The Full Court’s decision upheld the Federal Court’s findings that Productivity Partners engaged in systemic unconscionable conduct by removing consumer safeguards from its enrolment process which exploited the Commonwealth’s VET FEE-HELP scheme for commercial gain through the onboarding of unknowing and unsuitable students. The Full Court also found that Site Group Limited (Site, the parent company of Productivity Partners) and Blake Wills (Chief Operating Officer of Site) were liable as accessories to the contravening conduct.

Productivity Partners and Mr Wills separately appealed the Full Court’s decision. The High Court considered the principles of unconscionable conduct in the former, and accessorial liability in the latter.

Unconscionable conduct

In the Productivity Partners appeal, the High Court held that Productivity Partners engaged in unconscionable conduct in contravention of s 21 of the ACL.

Productivity Partners proposed that s 21 of the ACL had to be analysed in reference only to the factors set out in s 22. The High Court found that s 22 does not operate as a strict statutory criterion and it is the “the totality of the circumstances relevant to the conduct being considered (as required by s 21(1)) which dictates if any matter in s 22 applies”.

The High Court restated the test for unconscionable conduct, where only conduct which is "outside societal norms of acceptable commercial behaviour [so] as to warrant condemnation as conduct that is offensive to conscience" meets the threshold. In that context, the factors set out in s 22 of the ACL served as “a list of wide-ranging matters to consider when applying these values”. 

Accessorial liability

In Mr Wills’ appeal, the High Court unanimously confirmed the position that to establish accessorial liability, the Court must determine whether the alleged accessory had knowledge of the essential circumstances, matters or facts that constitute the unconscionable conduct.

Further, the High Court confirmed that “an intention [of the alleged accessory] to participate in the conduct that amounts to the essence of a primary offence or contravention is a central requirement that must be satisfied” to find accessorial lability. It is not necessary that the accessor knew that the conduct was unconscionable, rather the accessor must know:

• the essential matters which together made up the conduct ultimately characterised as unconscionable;
• the facts and circumstances which rendered the primary contravener’s conduct unconscionable; or
• the essential facts that constitute the contravention by the principal.

The High Court also took the opportunity to provide guidance on the level of knowledge required to establish accessorial liability in the context of misleading or deceptive conduct under the ACL. To that end, the Court affirmed a decision of the NSW Court of Appeal, which provided that an alleged accessory did not need to know the relevant conduct was capable of being characterised as misleading or deceptive as defined in the ACL (this being a legal question). Rather, the Court needs to establish that the alleged accessory had, as a matter of fact, knowledge of the falsity of the conduct.

Practical implications

The Productivity Partners and Wills appeals provide important guidance on the parameters of lawful conduct for entities carrying on business in Australia.

It also emphasises the practical importance of contemporaneous record keeping for businesses to prove the knowledge of relevant persons/entities in defence of allegations of accessorial liability.

Please reach out to our Australian team of experts listed in this article if you would like to discuss.