Conscious of unconscionability

The recent High Court decision in the case of Productivity Partners Pty Ltd v Australian and Consumer Commission [2024] HCA 27 clarified what constitutes systemic unconscionable conduct under the Australian Consumer Law (ACL) and the principles concerning accessory liability.

Unconscionable conduct is prohibited in Australia pursuant to section 21 of the ACL, which provides that persons must not, in trade or commerce, in connection with the supply or possible supply of goods or services, or the acquisition or possible acquisition of goods or services from a person, engage in conduct that is, in all the circumstances, unconscionable. When such conduct forms the system by which a business operates, it is termed as “systemic unconscionable conduct”, which is also prohibited.

In simple terms, accessorial liability extends liability beyond the primary contravener to a person who is involved with, or who assists with, committing the contravention. Relevant to this case, under the ACL, accessorial liability may apply where a person “has been in any way, directly or indirectly, knowingly concerned in, or party to” the contravention (see section 224(1)(e) of the ACL).

Background

Productivity Partners Pty Ltd (the College) was a vocational education and training (VET) provider under the Commonwealth’s Vocational Education and Training Fee Higher Education Loan Program (VFH Scheme). Under the VFH Scheme, the Commonwealth helped fund eligible persons’ VET by paying their tuition fees directly to the VET provider on the basis that the person would incur a debt to the Commonwealth in the amount of the VET fees plus a 20% loan fee. The VET student would be required to repay the Commonwealth over time through the tax system once that person earned above a specific threshold.

The ACCC alleged that the College engaged in a system of conduct for the period 7 September 2015 to 18 December 2015 which was, in all the circumstances, unconscionable. During this period, the College changed its process of enrolment by removing two system controls which had previously been in place to ameliorate risks of unwitting or unsuitable students being enrolled in courses. The College then claimed the VET fees from the Commonwealth and those people incurred a VFH debt to the Commonwealth (which included the VET fees plus the loan fee).

Issues considered by the High Court

In this case, the High Court considered at two issues:

1. whether the conduct engaged in by the College was, in all the circumstances, unconscionable and contrary to section 21 of the ACL; and
2. whether Mr Wills (the acting CEO of the College and COO of the parent company, Site Group International Ltd) and, through him, Site Group, were knowingly involved with the alleged unconscionable conduct.

Decision

The High Court held that the College’s system of conduct was unconscionable in all circumstances, in contravention of section 21 of the ACL, and Mr Wills was knowingly concerned in or party to the College’s contravention. Further, because Mr Wills’ knowledge and conduct were attributed to Site Group, Site Group was also knowingly concerned about the College’s contravention.

The Court considered the scope of section 22 of the ACL, which includes an inexhaustive list of matters that the Court may consider for the purpose of determining whether there has been a contravention of section 21. For example, the relative strengths of the bargaining positions of the supplier and the customer and whether the customer was able to understand any relevant documents. The Court found that the word “may” in section 22(1) was conditional and not permissive, meaning that if one of the factors in section 22 applies to the relevant conduct, it must be considered. The Court also noted that it is the “totality of the circumstances relevant to the conduct being considered… which dictates if any matter” in section 22 is applicable. Conduct will not be considered unconscionable unless it is “outside societal norms of acceptable commercial behaviour [so] as to warrant condemnation as conduct that is offensive to conscience”.

In relation to accessorial liability, the Court noted that an accessory must intentionally participate in the conduct that implicates them in the primary contravention. In addition, the accessory must have “knowledge of the essential facts or circumstances constituting the contravention”. However, it is unnecessary to prove that the accessory was aware of the illegality of the conduct of the primary contravener, or that the accessory subjectively determined that the conduct was unconscionable.

This decision is significant because it is the first time that the High Court has considered accessorial liability in the context of unconscionable conduct and has provided clarity in relation to the “knowledge” aspect of the statutory scheme. Importantly, the High Court’s decision clarifies that that it is unnecessary to prove that the accessory had knowledge that the conduct of the primary contravener was unconscionable. Further, the High Court’s decision in relation to the scope of section 22 of the ACL provides helpful guidance on the factors that should be considered when determining whether particular conduct is unconscionable.