Productivity Partners Pty Ltd v Australian Competition and Consumer Commission
Wills v Australian Competition and Consumer Commission [2024] HCA 27
The High Court in this case looked at unconscionability under the Australian Consumer Law (ACL), systemic unconscionability and accessorial liability for misleading and deceptive conduct and unconscionable conduct. The Court dismissed two appeals from a decision of the Full Court of Federal Court which raised two issues: firstly, whether conduct engaged in by a college providing vocational education and training, Productivity Partners Pty Ltd (the College), was unconscionable contrary to s 21 of the ACL; and secondly whether Mr Wills, as Chief Executive Officer of the College was knowingly concerned in or party to the College’s unconscionable conduct pursuant to s 224(1)(e) of the ACL. The Australian Competition and Consumer Commission (ACCC) had alleged the College had engaged in a system of conduct that was unconscionable in that it had changed its process for enrolment by removing system controls that had ameliorated risks of unwitting or unsuitable persons becoming enrolled and thereby incurring debts without receiving any corresponding benefit. The High Court unanimously found in favour of the ACCC in six separate judgments. It held that the system of conduct engaged in by the College was unconscionable in contravention of s 21 and that Mr Wills was knowingly concerned in, or party to, the College’s contravention because it had been proved that he knew the essential circumstances, matters or facts that constituted the conduct characterised as unconscionable and that he participated in that contravention.
Interesting excerpts from the case are below:
Gordon J at [97]-[111] on statutory framework [footnotes omitted]
97. Section 21(1) of the ACL prohibits persons from engaging “in conduct that is, in all the circumstances, unconscionable”, in connection with, relevantly, the supply of services to a person in trade or commerce. “Unconscionable” is not defined in the ACL. It is not limited by the unwritten law relating to unconscionable conduct, a reference to the equitable doctrine of unconscionable conduct. “The statutory conception of unconscionability is more broad-ranging than the equitable principles; it does something more”. So, for example, the prohibition can apply “to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour”.
98. “[T]he courts must give effect to what Parliament has enacted” in s 21(1). That provision “prescribe[s] [the] normative standard of conduct” that “[t]he court needs to administer”. Section 21(1), like equity, directs courts to assess unconscionability – to administer a normative standard of conduct – “in all the circumstances”. The court “must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention”. By implication, the court “may have regard to circumstances that were reasonably foreseeable” at the time.
99. Section 22(1) states that “[w]ithout limiting the matters to which the court may have regard for the purpose of determining whether a person … has contravened section 21 … the court may have regard to” various factors enumerated in that sub-section. While the s 22 factors are “mandatorily to be taken into account” when “determining the statutory question posed by” s 21(1), that is only “if and to the extent that they apply in the circumstances”.
100. The s 22 factors are non-exhaustive. They provide “express guidance as to the norms and values that are relevant” to, and inform the meaning of, “unconscionable” in s 21(1) and its practical operation. These norms and values include “certainty in commercial transactions, honesty, the absence of trickery or sharp practice, fairness when dealing with customers, the faithful performance of bargains and promises freely made” and the protection of the vulnerable.
101. As was explained in Stubbings v Jams 2 Pty Ltd, the s 22 factors “assist in ‘setting a framework for the values that lie behind the notion of conscience identified in [s 21]'”. The s 22 factors “assist in evaluating whether the conduct in question is ‘outside societal norms of acceptable commercial behaviour [so] as to warrant condemnation as conduct that is offensive to conscience'”.
102. The ACL does not require a plaintiff in every case to “plead and adduce evidence of facts directed to” the factors in s 22(1). Nor is there warrant for construing the factors in s 22 as “statutory criteria” that set the metes and bounds within which the normative standard prescribed by s 21(1) is to be applied. Neither the text or context of ss 21 and 22 of the ACL, nor the authorities that have considered those provisions, provide any support for that approach.
103. To treat the matters in s 22 as a mandatory set of factors to be applied mechanistically when analysing whether s 21 has been contravened would be contrary to the text of the ACL. It would impermissibly limit the court’s capacity to consider the totality of the circumstances that might render a particular person’s conduct, system of conduct or pattern of behaviour unconscionable. Those circumstances “include”, but are expressly not limited to, the s 22 factors. The appellants’ construction of ss 21(1) and 22(1) is irreconcilable with the text of those sub-sections.
104. Unconscionability has been described as “a normative standard of conscience which is permeated with accepted and acceptable community standards”. But, as we know, values, norms and community expectations can develop and change over time: “[c]ustomary morality develops ‘silently and unconsciously from one age to another’, shaping law and legal values”. Indeed, standards from earlier times can be, in some respects, rougher and, in other respects, more fastidious. Different standards of commercial morality apply in other lands.
105. The legal norm of conduct created by s 21 should not be confused with the factual evaluation of its satisfaction. The factual context – the totality of the circumstances – is vital to understand “what, in any case, is required to be done or not done to satisfy the normative standard”. The court makes an evaluative judgment as to whether conduct is, in all the circumstances, unconscionable. This evaluative judgment is not confined to or arrived at by the “mere balancing” of the factors identified in s 22(1). Nor should it be approached mechanistically by way “of deductive reasoning predicated upon the presence or absence of fixed elements or fixed rules”. Such an approach is the antithesis of the mode of analysis engaged in by Courts of Equity, which has been recognised as the appropriate mode of analysis where a court is performing the task of determining whether a statutory prohibition against unconscionable conduct has been contravened. Assessing statutory unconscionability “calls for a precise examination of the particular facts”. It requires a comprehensive view that “looks to every connected circumstance that ought to influence [the court’s] determination upon the real justice of the case”.
Systemic unconscionability
106. Something more should be said about the fact that the prohibition can apply “to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour”. Section 21(4)(b) makes clear that “the focus of the provisions is on conduct that may be said to offend against good conscience”, rather than the specific “characteristics of any possible ‘victim’ of the conduct (though these may be relevant to the assessment of the conduct)”. Because a specific person need not be identified, “special disadvantage of an individual is not a necessary component of the prohibition”. Importantly, in “remov[ing] the necessity for revealed disadvantage to any particular individual”, the focus is less on a “particular event” or transaction, and more on “an abstraction o[r] a generalisation as to method or structure” of the contravener’s activities.
107. As many of the s 22 factors presuppose the existence of a particular individual and transaction, the concept of systemic unconscionability in s 21(4)(b) invokes a de-individualised mode of analysis. The text of s 21(4)(b) reinforces the view that the s 22 factors provide a framework for the values that lie behind the notion of conscience identified in s 21 and not a mandatory set of factors to be applied in every case.
108. The focus on the “method or structure” of the contravener’s activities in addressing the statutory prohibition is important. Section 21(4)(b) refers to a “system of conduct” or “pattern of behaviour”. A “system of conduct” connotes “an internal method of working” or a plan of procedure. Such a system may develop organically as a practice, operate at a level of policy or be a combination of practice and policy. Corporations “think” and act through systems. Systems are inherently purposive. Systems are objectively designed to achieve certain ends; they coordinate and connect steps and processes to an end. Knowledge of certain matters is often implicit in a system – for example, that a predatory business model will only be profitable if a certain class of vulnerable customer exists and is successfully exploited.
109. As Professor Bant has explained, a corporate system can be understood as a manifestation of corporate intentionality. That is, “corporations manifest their intentions through the systems of conduct that they adopt and operate, both in the sense that any system reveals the corporate intention and in the sense that it embodies or instantiates that intention”. And to better understand the characteristics of a system of conduct, it is often useful to reflect on related concepts such as practices, processes or methods, policies and patterns of behaviour. A “pattern of behaviour” or conduct has been said to connote the external, observable repetition of events. It may signify a sequence of events on which a prediction of successive or future events may be based. In the context of the ACL, that is unsurprising. As we have seen, the court may have regard to circumstances that were “reasonably foreseeable” at the time.
110. Evidence of a system of conduct can be both internal and external to the corporation. Internally it may include employee testimony, internal scripts, remuneration or promotion criteria, complaint processes and scripts, audit outcomes, and default settings on automated programs. Externally it may include patterns of harm to an identified class of customer, communications, incentives and disincentives provided to a target market, and user experiences. Those lists are not exhaustive. In determining whether an identified system of conduct is unconscionable contrary to s 21 of the ACL, identification, assessment and characterisation of the system of conduct is, by reference to the totality of the circumstances, both internal and external to the corporation.
111. As will be seen in this case, the College’s system was designed (or rather a system of controls was dismantled) to achieve a particular end. The College dismantled a system of controls it knew minimised exploitation of students and did so to increase the College’s profit. The Court can and should infer that the College intended this end from the design of its system.
Edelman J at [229]-[242] [footnotes omitted]
Unconscionable conduct under s 21 of the Australian Consumer Law
229. Section 21(1) of the Australian Consumer Law relevantly provides that “[a] person must not, in trade or commerce, in connection with: (a) the supply or possible supply of goods or services to a person … engage in conduct that is, in all the circumstances, unconscionable”.
230. As the College correctly submitted in oral submissions, and as s 21(4)(a) provides, the concept of unconscionable conduct in s 21 goes beyond the equitable concept of unconscionable conduct which is applied in s 20. The legislative history of s 21 (and its predecessor in the Trade Practices Act 1974 (Cth)) reveals an intention to remove the equitable requirements of special disadvantage and a taking advantage of that special disadvantage.
231. The legislative proscription by reference to “conscience” contains layers of uncertainty. Conscience, from the Latin conscientia, denoting a holding of knowledge, has shades of meaning generally related to a subjective recognition of the moral and ethical qualities of action. Locke described conscience as “nothing else but our own opinion … of our own actions”. But Parliament must be taken to have contemplated an assessment of whether conduct is unconscionable by reference to objective standards rather than to a judge’s personal or subjective opinions. Nor is there any indication that the objective standard of assessment should involve a judge’s best guess, or a survey of the empirical evidence, as to the standards of a community, even if such monolithic standards can be taken to exist in a plural society. “Compassion will not, on the one hand, nor inconvenience on the other, be to decide; but the law”.
232. The assessment of an objective standard of conscience must instead import an evaluation of the extent of departure from principles of interpersonal morality as reflected in the values of Australian common law and statute. It is only in that sense that those values are the values of the Australian community. The cornucopia of values in Australian common law and statute was expressed extrajudicially by Allsop CJ as including:
“[T]he deep and abiding requirement of honesty in behaviour; a rejection of trickery or sharp practice; fairness when dealing with consumers; the central importance of the faithful performance of bargains and promises freely made; the protection of those whose vulnerability as to the protection of their own interests places them in a position that calls for a just legal system to respond for their protection, especially from those who would victimise, predate or take advantage; a recognition that inequality of bargaining power can (but not always) be used in a way that is contrary to fair dealing or conscience; the importance of a reasonable degree of certainty in commercial transactions; the reversibility of enrichments unjustly received; the importance of behaviour in a business and consumer context that exhibits good faith and fair dealing; and the conduct of an equitable and certain judicial system that is not a harbour for idiosyncratic or personal moral judgment and exercise of power and discretion based thereon.”
233. The difficulty with the application of the values of Australian common law and statute is that they apply at such a high level of generality, and can point in so many different directions, that the concept of unconscionability has been said to be no more useful than the category of “small brown bird” to an ornithologist. In one recent case, three members of this Court considered conduct to be unconscionable where it involved a system of exploitation of illiterate and innumerate Aboriginal customers involving sales on credit at up to three times market value, without any proper accounting, with requirements of tied purchasing and the surrender of the customer’s bank card and personal identification number. But four members of this Court considered that this exploitation of vulnerable persons from another culture took on a different perspective of conscience because, among other things, it was said that the conduct: was “appropriate” according to other cultures and values; was “a convenient way of managing money”; “suited the interests” of those vulnerable persons “and their families having regard to their own preferences and distinctive cultural practices”; and took place in a remote Aboriginal community where onerous terms were more “acceptable”.
234. Section 22 of the Australian Consumer Law does not codify the values of Australian statute and common law, nor does it resolve such difficulties in application. Rather, it articulates a list of wide-ranging matters to consider when applying these values, including: the terms and conditions of the supply (ss 22(1)(b), 22(1)(e), 22(1)(j), 22(1)(k)); discrimination, undue influence, pressure, unfair tactics and the extent of good faith towards customers by the supplier (ss 22(1)(d), 22(1)(f), 22(1)(l)); conduct of the parties in connection with their relationship, difference in bargaining power and ability to negotiate (ss 22(1)(a), 22(1)(j)); the contents of any industry code (ss 22(1)(g), 22(1)(h)); and the ability of a customer to understand documents and the extent of any unreasonable failure of the supplier to disclose (ss 22(1)(c), 22(1)(i)).
235. In applying the relevant values of Australian common law and statute, all matters and circumstances enunciated in s 22 that are potentially relevant must be considered. So too must any other circumstance that potentially bears upon standards of trade and commerce be considered. Otherwise, the assessment of conscience will have proceeded by reference only to a subset of the relevant values. However, contrary to the submissions of the College, the need for all relevant matters to be considered does not require an assumption that all matters weigh in favour of a supplier unless shown otherwise.
Systems liability
236. A corporation is a construct. It does not have a natural existence in the real world. The notion of a company “doing something” is a heuristic which helps to understand legal rules for corporate liability. Usually, the description of a company as having performed some act, or having held some intention, means that there is someone whose act or intention, under the legal rules of attribution, would count as the act or intention of the company. These legal rules depend upon context or statutory interpretation but they generally require the identification of a person whose act or intention will count as the act or intention of the company.
237. But not always. There is an alternative path to treating a corporation as having performed an action or having an intention which does not involve attribution of the action or intention of a single natural person. That alternative path recognises a corporation as having “acted” or as having an “intention” where a system has been built with the authority of senior persons controlling the company such that the actions of automated processes, or of one or more natural persons, can be properly attributed to the corporation to the extent that they arise out of that system. The point is that actions and intentions are attributed to the corporation directly from its systems rather than from any natural person.
238. This concept of systems liability is recognised by s 21(4)(b) of the Australian Consumer Law, which has the effect that statutory unconscionable conduct can apply “to a system of conduct or pattern of behaviour”. As Professor Bant has explained of legislative innovations akin to s 21(4)(b), “corporations develop their own character and values and should be treated as actors in our society in their own right”. Their intentions “may be identified from decisions and choices that are communicated through corporate policy”.
239. The concept of systems liability, such as that in s 21(4)(b), has been described as group agency. Dr Leow has rightly observed that group agency is a concept that “has intuitive appeal. In law and in ordinary life, it is observable that statements about groups are often not straightforwardly reducible to statements about the aggregate of their members.” Just as a team playing a game “cannot be reduced to the personal acts of the players”—a behind can be scored by the Fremantle Dockers if the ball was rushed through the goal by the opposition rather than being kicked by any of the Dockers’ great players—so too legal rules can provide that a corporation acted even if the action cannot be attributed to the corporation from a single individual.
240. There are good reasons for the treatment of a corporation as capable of having actions and intentions without the necessity for attribution of the actions or intentions of a particular person. One reason is that the dynamics of group behaviour might not be reducible into the behaviour of any individual unit. This is the problem of “diffused responsibility”. Another reason is that the focus on the group avoids any discounting of the potentially pernicious effect of group dynamics on individual moral and ethical judgment. A group can be treated as having intended a result even if its members blindly defer to a policy or to other persons, without having any positive intention of their own as to the result: “The interaction with other people shapes how humans act. ‘Group think’ can cause individuals to disengage their own judgement. ‘Group loyalty’ can lead members to continue with practices that have proven to be ineffective. Organizations have a way of overriding individual judgement and attitudes.”
241. The concept of intention should be applied to a system as though the system, as a construct, were a natural person. Intention is everything that is a “reason for behaving as one does”, whether as an end in itself or as a means to an end. Intention therefore involves a volitional choice of ends or means, not merely a foresight of consequences. Foresight of consequences, even to the extent of a belief that consequences are inevitable, is merely a means of proving that those consequences were chosen as an end in themselves or as a means to an end.
242. Intention, as a chosen end or a chosen means to an end, must be separated from emotional desire. Two examples can be reiterated which illustrate the difference. A person who boards a plane from London to Manchester to escape pursuit has an intention to travel to Manchester even if that is the last place that they seek to be. A person who sets fire to their enemy’s house out of spite commits the act of arson intentionally even if they regret the destruction of the house as a masterpiece of period architecture. The travel to Manchester or the setting fire to the house are chosen as means to the end of escaping pursuit or injuring the enemy, even if those means are not emotionally desired.
Steward J at [282]-[309] [footnotes omitted]
282. I very gratefully adopt the description of the facts in these appeals as set out in the reasons of the other members of this Court. I also respectfully agree with the expression of principle concerning the relevant meaning of “unconscionable” conduct as articulated by Gordon J in Stubbings v Jams 2 Pty Ltd, as set out in the reasons of Gordon J in this matter. In particular, Gordon J in Stubbings adopted the following passage from the reasons of Nettle and Gordon JJ in Australian Securities and Investments Commission v Kobelt:
“The assessment of whether conduct is unconscionable within the meaning of s 12CB [of the Australian Securities and Investments Commission Act 2001 (Cth)] involves the evaluation of facts by reference to the values and norms recognised by the statute, and thus, as it has been said, a normative standard of conscience which is permeated with accepted and acceptable community standards. It is by reference to those generally accepted standards and community values that each matter must be judged.”
283. As a general expression of principle, the foregoing is plainly correct. But there is presently a need for it to be unpacked. In particular, it does not answer the question as to whether unconscionable conduct, both as an equitable doctrine and as a statutory concept, must still involve serious “moral obloquy”. For the reasons which follow, and with very great respect, the concept of moral obloquy, or a form of moral turpitude, endures as an essential attribute of unconscionable conduct. To explain why this is so requires an examination of our legal heritage.
284. The reference in Stubbings to recognised “values and norms” is reflective of what Allsop CJ had earlier said in a number of judgments, but in particular in Paciocco v Australia and New Zealand Banking Group Ltd. There Allsop CJ observed that in applying a law, like s 21 of the Australian Consumer Law, which requires a court to determine whether conduct is “in all the circumstances” unconscionable, the task does not involve “the choice of synonyms” but rather:
“[I]t is to identify and apply the values and norms that Parliament must be taken to have considered relevant to the assessment of unconscionability: being the values and norms from the text and structure of the Act, and from the context of the provision. Parliament has given some guidance to its proper application (and to its meaning) by identifying in s 12CC certain non-exhaustive factors that may be taken into account by a court in deciding whether conduct was unconscionable. Given the value-laden character of the word, it is necessary to ascertain and organise the relevant values and norms by reference to which the meaning of the word is to be ascertained, and by reference to which the application of the section is to be undertaken (the two tasks being distinct). It must, however, be emphasised at the outset that the values and norms that are relevant are those that Parliament has considered, or must be taken to have considered, as relevant.”
285. Earlier in his reasons Allsop CJ referred to the judgment of Spigelman CJ in Attorney General (NSW) v World Best Holdings Ltd. In that case, Spigelman CJ said that unconscionability “is a concept which requires a high level of moral obloquy”. Thus in Paciocco, Allsop CJ emphasised:
“In particular, the phrase ‘moral obloquy’ and a ‘high level of moral obloquy’ has been used to identify a feature of unconscionability”.
286. Referring to The Shorter Oxford English Dictionary on Historical Principles, Allsop CJ said that obloquy involves a “deviation from moral rectitude, sound thinking or right practice”. In Kobelt Keane J also stressed that, even with statutory rules against unconscionable conduct, the presence of some “high level” form of “moral obloquy” remained important. The term is useful in making it clear that the doctrine of unconscionable conduct is not merely about characterising commercial behaviour as “unfair” or “unjust”. Keane J thus said the following (in the context of s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth)):
“The use of the word ‘unconscionable’ in s 12CB – rather than terms such as ‘unjust’, ‘unfair’ or ‘unreasonable’ which are familiar in consumer protection legislation – reflects a deliberate legislative choice to proscribe a particular type of conduct. In its ordinary meaning, the term ‘unconscionable’ requires an element of exploitation. The term imports the ‘high level of moral obloquy’ associated with the victimisation of the vulnerable.”
287. For that last proposition Keane J cited the following long list of authorities: Paciocco v Australia & New Zealand Banking Group Ltd; Attorney General (NSW) v World Best Holdings Ltd; Earl of Chesterfield v Janssen; Commercial Bank of Australia Ltd v Amadio; Louth v Diprose; and Kakavas v Crown Melbourne Ltd.
288. However, the relevance of the concept of “moral obloquy” to the determination of unconscionable conduct has also recently been doubted. In Kobelt, Gageler J rejected it as a measure of such behaviour. He said:
“In Paciocco v Australia & New Zealand Banking Group Ltd, I referred to unconscionable conduct within the meaning of s 12CB as requiring ‘a “high level of moral obloquy” on the part of the person said to have acted unconscionably’. ‘Moral obloquy’ is arcane terminology. Without unpacking what a high level of moral obloquy means in a contemporary context, using that arcane terminology does nothing to elucidate the normative standard embedded in the section. The terminology also has the potential to be misleading to the extent that it might be taken to suggest a requirement for conscious wrongdoing. My adoption of it has been criticised judicially and academically. The criticism is justified. I regret having mentioned it.”
289. Gageler J went on to observe that unconscionable conduct should be seen as behaviour “that is so far outside societal norms of acceptable commercial behaviour as to warrant condemnation as conduct that is offensive to conscience”. The rejection of moral obloquy as a measure to test the presence of unconscionable conduct appears to divorce or detach from the concept of good conscience any societal moral principle and replaces it with something called a “normative standard” of commercial behaviour. This analysis dismisses the term “moral obloquy” as “arcane”.
290. It is unclear what is meant by a “normative standard”; by “societal norms” of commercial behaviour; or by “generally accepted” “values and norms”. These somewhat anaemic concepts appear to mask, or skate over, necessary analysis in accordance with a known methodology. To borrow the words of Professor Birks, it looks like an attempt to “clothe” equitable principle “in more grown-up words”.
291. In that respect, the required “normative standard” cannot be that of Australia’s judiciary; it is not what each judge subjectively, and perhaps collectively, believes to be an acceptable standard of commercial behaviour. If it meant that, commercial life really would be subject to judicial caprice or, worse, mere fashion. It should not, with very great respect, be a “free-form choice”.
292. Nor should recourse to generally accepted “values and norms” be seen as a reference to some form of empirical enquiry into what most Australians might think is a normative standard of behaviour. If it was, how would a judge discern it? Would it be a matter for expert evidence of some kind? Would it be a matter of judicial notice? What if many standards exist: a possibility which is real enough in a multicultural society which may no longer exhibit “monolithic moral solidarity”. And what if the standards themselves are offensive or become so? It was undoubtedly the case that some Australian “values and norms” held before the Second World War would now be considered entirely repulsive. That includes standards about racial bigotry.
293. Prior to the introduction of the concept of statutory unconscionability, with its command that it not be “limited by the unwritten law relating to unconscionable conduct”, equity preferred to confine the concept of unconscionable conduct to clearly articulated rules and principles. This avoided any recourse to judicial whim. In Tanwar Enterprises Pty Ltd v Cauchi a majority of this Court said:
“The terms ‘unconscientious’ and ‘unconscionable’ are, as was emphasised in Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd, used across a broad range of the equity jurisdiction. They describe in their various applications the formation and instruction of conscience by reference to well developed principles.”
294. Kirby J also observed:
“The purchaser accepted that ‘unconscionability’ in this context was not synonymous with a generalised sense of fairness as between the parties or with undefined notions of justice. In order to tame the elements of unpredictability introduced into legal relationships by the imposition of equitable principles, controls upon what might otherwise become a purely discretionary assessment are accepted. They include respect for the particular categories that have emerged in equitable jurisdiction, such that it is not taken to be at large.”
295. But the statutory command applicable here – that s 21 of the Australian Consumer Law is not “limited by the unwritten law relating to unconscionable conduct” – might be thought to preclude the same faithful and complete adherence to the “well developed” principles of equity. However, that acknowledgement does not liberate the judge from underlying principle. Instead, it makes an understanding of underlying principle all the more important. As Keane J has reminded us all, Parliament chose the word “unconscionable” for a reason. When considering the essential “values” which inform statutory unconscionability, Allsop CJ has observed:
“The first group of values are the enduring historical (and contemporary) norms and values that are recognised in the unwritten law referred to in s 12CA, and that are embedded within the conception of unconscionable conduct as referred to in s 12CB. These are the norms and values in the law, especially, but not limited to, Equity, that bear upon the notion of conscience, in this context the conception of a business conscience – one attending conduct in trade or commerce.”
296. But even the foregoing observation begs the question: what are the “enduring historical (and contemporary) norms and values … recognised in the unwritten law”?
297. The historical foundation of equity and its concern with standards of conscience is “ecclesiastical natural law”303 or perhaps more accurately just “ecclesiastical law”. In that respect, judges often refer to the “ecclesiastical” or even the “religious” foundations of equity, without any more elaboration, and may do so in fear of using that one word which more accurately characterises the origins of equity, the doctrine of unconscionable conduct, and the society from which these laws historically emerged: Christianity.
298. The foregoing historical foundation was recently surveyed with his customary learning by Nettle J, writing extra-judicially, as follows:
“Although Chancellors were chosen primarily for their learning and administrative skill, the majority of Chancellors of the Middle Ages were either bishops or archbishops. Thus, as Professor Tim Haskett observes in his summaries of their backgrounds: ‘Even a cursory assessment of the curricula vitae of these men, from the beginning of the chancellorship of Edmund Stafford in 1396 to the end of Thomas More’s tenure in 1532, is telling.’ Of the 18 men who held the office over those 136 years, almost all were bishops or archbishops, and several were cardinals, well versed in ecclesiastical administration. The educational background of them was also significant: at university 4 had studied theology, 5 civil law, and 4 civil and canon law. It is not at all surprising, therefore, that they derived their ideas from the canonists: that the law of God governs the universe, and hence God’s law, and the law of nature and reason, predominate over the laws of the state. As Plucknett reasoned, ‘it must have been a perfectly natural instinct … for a bishop, when faced by a conflict between law and morals, to decide upon lines of morality rather than technical law’. Each of those early Chancellors arrogated to himself the right to interfere in the course of law in particular instances, though they might be regarded as just according to law, if, according to conscience, they worked against the law of God.”
299. Associate Professor Havelock has written that, according to Barton, the first known reference to “conscience” appeared in 1391, and that appeals to conscience became more frequent in the fifteenth century. Fortescue CJ (ca 1394-1476) said that the word “conscience”:
“comes of con and scioscis. And so together they make ‘to know with God’ to wit: to know the will of God as near as one reasonably can.”
300. As Keane J has pointed out, “too much should not be made of the influence of medieval Catholic moral philosophy on the Chancellors and their clerical staff”. Equity was also influenced by other sources, such as mercantile law, and, as both Keane J and Professor Birks have pointed out, by the need for “legal certainty”. There seem to have been no clerical Lords Chancellor since St Thomas More, and as Campbell J, writing extra-judicially, has observed, religious-based concepts of conscience have since the seventeenth century been replaced with particular written rules, based on precedent. He said:
“By the end of the seventeenth century, rules and principles already established were enough to provide a fair measure of certainty of the outcome of most litigious disputes in the Chancery.”
301. Now of course, as Allsop CJ emphasised in Paciocco, the ultimate task “is to identify and apply the values and norms that Parliament must be taken to have considered relevant to the assessment of unconscionability” for the purposes, here, of s 21. That is consistent with the observation of Sir Gerard Brennan, who, writing extra-judicially, observed:
“The coercive power of the State must be reserved to the enforcement of those moral principles which, by a broad community consensus, enjoy recognition and acceptance and which need to be expressed as universal binding rules in order to facilitate a peaceful, ordered, just but free society.”
302. But with those qualifications, the better view remains that “moral obloquy”, or some form of moral turpitude, remains an important measure of unconscionable conduct. The medieval origins of conscience have emerged and developed over the centuries to refer to a more general moral and cultural standard by which commercial behaviour is to be judged as unconscionable or not. That longstanding and enduring moral standard is now juristically to be seen as a societal or community standard and it must be taken to have been included in Parliament’s choice to use the word “unconscionable”. In that respect, even though the statutory concept of unconscionable conduct cannot be confined to its meaning in equity (by reason of s 21(4)(a) of the Australian Consumer Law), it must nonetheless have a meaning; s 21 does not authorise a judge to undertake some enquiry into what is “fair” liberated from past precedent. Rather, the meaning of what is unconscionable conduct remains anchored in, and illuminated by, past case law, which well reflects those traditional concepts of morality which have developed over time.
303. The continuing utility and relevance of the concept of moral obloquy is evident when the “values and norms” come to be fleshed out. Thus, in Paciocco, Allsop CJ rightly rejected any application of “personal intuitive assertion” in determining what is and what is not unconscionable conduct and said that what is required:
“is an evaluation which must be reasoned and enunciated by reference to the values and norms recognised by the text, structure and context of the legislation, and made against an assessment of all connected circumstances. The evaluation includes a recognition of the deep and abiding requirement of honesty in behaviour; a rejection of trickery or sharp practice; fairness when dealing with consumers; the central importance of the faithful performance of bargains and promises freely made; the protection of those whose vulnerability as to the protection of their own interests places them in a position that calls for a just legal system to respond for their protection, especially from those who would victimise, predate or take advantage; a recognition that inequality of bargaining power can (but not always) be used in a way that is contrary to fair dealing or conscience; the importance of a reasonable degree of certainty in commercial transactions; the reversibility of enrichments unjustly received; the importance of behaviour in a business and consumer context that exhibits good faith and fair dealing; and the conduct of an equitable and certain judicial system that is not a harbour for idiosyncratic or personal moral judgment and exercise of power and discretion based thereon.”
304. All of the foregoing is consistent with a need for a grave level of moral obloquy to exist if a finding of unconscionable conduct is to be made.
305. Most, if not all, of the statutory factors set out in s 22 of the Australian Consumer Law, to the extent relevant in a given case, also bear out the traditional societal moral values and norms which underpin our understanding of what constitutes unconscionable conduct. Many of those factors are concerned to protect the vulnerable and the weak; examples include s 22(1)(a), (b) and (c). Others are concerned with “undue influence” and “unfair tactics” and with “good faith”: see, for example, s 22(1)(d) and (l). These factors are directed at immoral behaviour in trade or commerce or behaviour constituting a high level of moral obloquy.
306. Moreover, without some form of a central organising philosophy based on history and precedent, it may in the future also be difficult to apply s 21 with certainty even with the assistance of the s 22 factors. That is because the “written” law of unconscionable conduct found in the Australian Consumer Law applies only a label and then highly generalised language in describing the factors to be considered. As Bathurst CJ observed, writing extra-judicially:
“It would be difficult to find a statutory provision which is more general than a prohibition on ‘conduct that is, in all the circumstances, unconscionable’. As I have already noted, it provides no guidance about what values, ‘norms of society’, or ‘accepted community standards’ might be relevant to a particular type of conduct, and this is largely the source of its problems. The checklist of matters in, for example, s 22 of the Australian Consumer Law (schedule 2, Competition and Consumer Act 2010 (Cth)) provides some assistance to the Court in reaching this conclusion. However, it does not provide certainty except in the most obvious of cases. It would be better for the legislature to take a more active role in prescribing the standards of conduct which it expects individuals to meet. This could well avoid many of the difficulties I see with the general prohibition on unconscionable conduct.”
307. For the reasons given by Gordon J, I respectfully agree that the conduct of Productivity Partners Pty Ltd constituted unconscionable conduct for the purposes of s 21. The removal of the two safeguards was sharp practice and involved the requisite degree of moral obloquy. The majority of the Full Federal Court were correct to so conclude.
308. I also very respectfully agree with Gordon J that Mr Wills was “knowingly concerned” for the purposes of s 224 of the Australian Consumer Law in the contravention of s 21 by Productivity Partners Pty Ltd. He did not need to know that the conduct of Productivity Partners Pty Ltd involved a serious degree of moral obloquy. It follows that Site Group International Ltd is also accessorily liable for that contravention.
309. I otherwise respectfully agree with the orders set out in the reasons of Gageler CJ and Jagot J.
Beech-Jones J at [347]-[268] [footnotes omitted]
Giorgianni and Yorke v Lucas
347. In Yorke v Lucas, this Court construed the provision of the (former) Trade Practices Act 1974 (Cth) that was materially identical to s 224(1)(c)-(f) and the definition of “involved” in the ACL as requiring an intentional participation in the relevant contravention on the part of an accessory. An accessory, including a party said to be knowingly concerned in the contravention, must have knowledge of the “essential matters”, the “essential facts” or the “essential elements” of the contravention. This conclusion was derived from applying the understanding of the words “aided, abetted, counselled or procured” to “designate participation in a crime as a principal in the second degree or as an accessory before the fact” in criminal law as explained in Giorgianni v The Queen.
348. Giorgianni confirmed that, even where an offence committed by a principal is one of strict liability, an accessory to that offence must have some form of guilty knowledge. In Giorgianni, the appellant was convicted of procuring an offence under (former) s 52A of the Crimes Act 1900 (NSW) of driving a motor vehicle at a speed or in a manner dangerous to the public where death or grievous bodily harm is occasioned through the impact of that vehicle with any vehicle or other object. The appellant’s employee drove a truck with defective brakes, which failed, and the truck struck several vehicles of which some passengers were killed or injured. There was evidence from which it could be concluded that the appellant was, or ought to have been, aware that the brakes were defective. The offence under s 52A was strict in the sense that, although the driving must have been conscious and voluntary, to be culpable a driver of the vehicle need not have known of the dangerous condition of the vehicle.
349. The trial judge in Giorgianni directed the jury that the Crown had to prove that the appellant “knew or ought to have known” of the defect with the brakes and “the danger thereby to the public”. This Court held that the trial judge’s summing up was defective insofar as it permitted the jury to convict the appellant based on imputed knowledge (ie, “ought to have known”) as opposed to actual knowledge (or what might be inferred from “wilful blindness”). Using similar language to Yorke v Lucas, the Court referred to the necessity to establish that the accessory had knowledge of what was variously referred to as the “essential circumstances”, the “essential matters” or the “essential facts” of the offence, even though the principal offender could be convicted “in the absence of [such] knowledge”.
350. Two related limitations on the breadth of the proposition in Giorgianni that the accessory must have knowledge of the essential circumstances, matters or facts of the principal’s offence, even though the principal offence is of strict liability, should be noted.
351. First, the accessory’s knowledge must concern the relevant nature, character and circumstances of the principal’s unlawful act, but does not necessarily extend to knowledge of an element of the contravention that is a consequence of that act. Thus, in Giorgianni, it was an element of an offence under s 52A of the Crimes Act 1900 (NSW) that death or grievous bodily harm was occasioned to a person through impact with a vehicle being driven in a manner dangerous to the public. Each member of this Court held that to be an accessory, it is not necessary to have any knowledge or intention concerning the impact of the vehicle or the occasioning of death or grievous bodily harm.
352. Second, the accessory’s knowledge of the essential circumstances, matters or facts that constitute the offence does not extend to knowledge that those circumstances, matters or facts constitute an offence. Further, the requisite knowledge of the accessory does not extend to knowledge of the legal characterisation or complexion of the essential circumstances, matters or facts of the offence. Thus, in Rural Press Ltd v Australian Competition and Consumer Commission, this Court rejected a contention that to be an accessory to a contravention of former s 45 of the Trade Practices Act, the accessory must have knowledge that the principal’s conduct “was engaged in for the purpose or had the likely effect of substantially lessening competition … in the market”, that being the language of the statutory provision applicable to the principal. It was observed that it was necessary to know the “essential facts” but not that those facts were “capable of characterisation in the language of the statute”. In Rural Press, the facts found against the accessories included that they intended that competition in a particular market and area “should be brought to an end”.
353. The conclusion in Rural Press that the characterisation of the market effect of the principal’s conduct was not an “essential fact” of which they needed to have knowledge is consistent with Toohey and Gaudron JJ’s analysis of the meaning of “dishonesty” in Peters v The Queen (which was later endorsed in Macleod v The Queen). In Peters, Toohey and Gaudron JJ held that where “dishonesty” is not used in legislation in a “special sense”, it is established by first demonstrating that a person had some particular knowledge, belief or intent at the time they committed the relevant act and then demonstrating that engaging in the act with that state of mind was dishonest “by the standards of ordinary, decent people”. Their Honours added that whether or not the means employed were contrary to those standards was not a “question of fact”, but a “question of characterisation”. As such, it was not a matter for evidence even though, if there is a dispute about whether the means employed were dishonest according to the standards of “ordinary, decent people”, the issue is left to the jury.
354. In some contexts, the difference between an accessory having knowledge of the essential circumstances, matters or facts (or, to use the language in Yorke v Lucas, the essential matters, facts or elements) concerning the acts of the principal, on the one hand, and the legal characterisation or complexion of those circumstances, matters or facts, on the other hand, can be fine. Many of the dangerous driving cases involving accessories state or imply that an accessory must have knowledge that the relevant defect, manner of driving or condition of the driver was “dangerous” or represented a “danger”. While the word “dangerous” was used in the statutory provisions creating the offences in such cases, requiring such knowledge on the part of an accessory is not necessarily the same as attributing to the accessory knowledge that the vehicle was driven in a manner dangerous to the public. In any event, the operative principle was articulated in Rural Press. As explained next, Rural Press reflected what was decided in Yorke v Lucas in relation to accessorial liability for misleading or deceptive conduct.
Accessorial liability for misleading or deceptive conduct
355. The statutory provision contravened by the principal in Yorke v Lucas was the previous equivalent of s 18 of the ACL. Like s 18, that provision imposed a form of strict liability on a principal that engaged in conduct that was misleading or deceptive or likely to mislead or deceive. In Yorke v Lucas, a corporate land agent representing the vendor of a business was found to have contravened that provision by unwittingly but falsely representing the average weekly turnover of the business to a proposed purchaser. The director of the land agent who made the representation (Mr Lucas) was found not to be involved in the contravention in circumstances where he was “not aware and had no reason to suspect” that the information provided concerning the turnover was incorrect. In concluding that the director had to have knowledge of the falsity of the representation to be involved in the contravention, Mason A-CJ, Wilson, Deane and Dawson JJ observed:
“A contravention of s 52 involves conduct which is misleading or deceptive or likely to mislead or deceive and the conduct relied upon in this case consisted of the making of false representations. Whilst Lucas was aware of the representations – indeed they were made by him – he had no knowledge of their falsity and could not for that reason be said to have intentionally participated in the contravention.” (emphasis added)
356. Brennan J also held that to be knowingly involved in the contravention, the director must have had “knowledge of the acts constituting the contravention and of the circumstances which give those acts the character which s 52 defines” (ie, the falsity of the representation).
357. However, consistent with what was later decided in Rural Press, knowledge of the falsity of the principal’s representation is not to be equated with knowledge that the principal has engaged in conduct that was misleading or deceptive (or likely to mislead or deceive) contrary to the statute. Knowledge of the falsity of the representation was necessary in Yorke v Lucas because the misleading conduct in that case “consisted” of the making of a false representation (to a particular recipient). However, the conduct referred to in s 18 of the ACL is not confined to representations, and not all cases where the conduct can be characterised as the making of a representation are as straightforward as those considered in Yorke v Lucas. An identification of the requisite knowledge that an accessory must possess will depend on the nature of the conduct of the principal that contravenes the statutory provision.
358. For example, in some contexts, the failure to disclose some relevant fact or matter may amount to misleading or deceptive conduct where the circumstances are such that there is a reasonable expectation that the fact or matter would be disclosed. Although it is neither possible nor necessary to exhaustively state in the abstract the requisite knowledge an accessory must possess to be liable for such misleading or deceptive conduct, in broad terms an accessory would have to be aware of the non-disclosure and that disclosure was required. Such knowledge is different to being aware that the principal’s conduct was misleading or deceptive within the meaning of the statute.
359. Similarly, where the conduct is directed towards a large class of persons or the public in general, a conclusion that the principal has engaged in conduct that is misleading or deceptive contrary to the statute will, at least in part, require an attribution of certain characteristics to the “ordinary” or “reasonable” members of that class of persons (or the public in general) to whom the conduct is directed to determine whether the conduct has a tendency to lead into error. The precise state of mind required to establish accessorial liability for such conduct will depend on how the case is framed but it may not necessarily require that an accessory have knowledge of, say, the characteristics of the “ordinary” or “reasonable” members of the class of persons (or the public in general) to whom the conduct is directed.
360. In Anchorage Capital Master Offshore Ltd v Sparkes, the New South Wales Court of Appeal (Ward P, Brereton JA and Griffiths A-JA) noted the existence of a longstanding difference of opinion in the decisions of intermediate courts of appeal as to whether, to be liable as an accessory in circumstances like those considered in Yorke v Lucas, an accessory had to have knowledge of the falsity of the representation or if mere knowledge of the facts that rendered the representation false was sufficient. In this case, the majority of the Full Court of the Federal Court took the latter view. That approach is contrary to Yorke v Lucas and Giorgianni. In Anchorage Capital, the Court of Appeal was correct in adopting the former view, although the Court also erred in equating that knowledge with knowledge that the principal’s conduct was misleading or deceptive.
Accessorial liability for unconscionable conduct
361. In this Court, there were several different formulations of the state of mind Mr Wills contended had to be established before it could be concluded that he was involved in the College’s contravention of s 21 of the ACL. Thus, Mr Wills contended that to be liable as an accessory, it had to be established that he knew that the College’s conduct “involve[d] predation, exploitation, or lack of good faith, or otherwise [bore] the character that render[ed] it against conscience”. The difficulty with this contention is that conduct need not be characterised as predatory, exploitative or lacking in good faith to be unconscionable, and to say that an accessory must know that the principal’s conduct “bears the character that renders it against conscience” is just a different way of stating that the accessory must know that the principal’s conduct was unconscionable.
362. It was also contended that, consistent with Gordon J’s analysis of the meaning of “unconscionable” in Stubbings v Jams 2 Pty Ltd, it had to be alleged and found that Mr Wills knew that the relevant conduct of the College was “offensive to a conscience informed by a sense of what is right and proper according to values which can be recognised by the court to prevail within contemporary Australian society”.
363. This submission should also be rejected. The description of unconscionability in Stubbings and the cases to which it refers were not identifying some essential matter, fact or element of a contravention of s 21(1) of the ACL of which an accessory must have knowledge. To require that an accessory appreciate that the conduct of the principal contravened a community standard identified as part of a judicial exposition of the meaning of unconscionability is no different in substance to requiring that the accessory know the legal complexion or characterisation of the principal’s conduct.
364. To be liable as an accessory, a party such as Mr Wills must, inter alia, have knowledge of the essential facts concerning the conduct of the principal that was said to amount to unconscionable conduct contrary to s 21(1) of the ACL. It follows from the above that this requires a close analysis of what the principal’s contravention of s 21(1) “consisted” of. If, in a simple case, the unconscionable conduct was found to consist of the principal, being a supplier, engaging in conduct requiring a customer to comply with a condition that was not reasonably necessary for the protection of the supplier’s legitimate interests, then the accessory would have to be aware that the condition was imposed and that it was not necessary to protect the supplier’s legitimate interests, even if the supplier did not have knowledge of the latter.
365. However, the analysis of the knowledge an accessory must possess can become more complex depending on the nature of the unconscionable conduct alleged and found against the principal. With unconscionability, the conduct alleged against the principal often involves the attribution of some form of intention or knowledge of at least some conduct, circumstance, consequence of conduct or likely result of conduct to the principal. In such a case, to be liable, the accessory will also have to possess that intention or knowledge. Thus, while a party “involved” or “knowingly concerned” in a contravention of s 21 must possess knowledge of the essential facts of the principal’s contravention, even if in some cases the principal did not, that does not mean that in all cases the intention or knowledge of the accessory will differ from that of the principal.
Mr Wills was involved in the College’s unconscionable conduct
366. The primary judge’s findings of knowledge and intention against Mr Wills included that, from no later than 7 September 2015, he was aware of the proposed enrolment and withdrawal process changes at the College, that the changes were being made to maximise or increase the College’s profits, that there were risks of agents engaging in misconduct in the recruitment of students (ie, the “CA misconduct risk”) and unsuitable students being enrolled (ie, the “unsuitable enrolment risk”), that the process changes would remove mechanisms that mitigated those risks, and that the result of the process changes would be (and over time was) a substantial increase in the number of students who enrolled in the College’s online courses. The primary judge also found that by the time Mr Wills commenced as acting Chief Executive Officer of the College in November 2015, he “knew that substantial numbers and proportion of students were getting nothing from the college yet they were incurring very substantial debts to the Commonwealth”. Lastly, the primary judge found that Mr Wills knew that “the college ran a system of recruitment, enrolment and progression through census dates of students which enabled the college to pocket vast sums of money, effectively from students, via the [FEE-HELP] scheme, in return for which the college had to deliver nothing to very substantial numbers of students”.
367. The effect of the primary judge’s findings was that, from no later than 7 September 2015, Mr Wills knew that the process changes would lead to the CA misconduct risk and the unsuitable enrolment risk materialising and that as a consequence substantial numbers of students would incur debts for courses that they did not properly appreciate they had enrolled in and in respect of which they would not receive any benefit, and knew and intended that the College would derive substantial revenue (and profits) as a consequence. After 7 September 2015, Mr Wills’ belief and expectation that these matters would ensue from the enrolment and withdrawal process changes gave way to knowledge that they had come to pass.
368. As noted, with some contraventions of s 21 of the ACL, the accessory need not possess any greater intention or knowledge than that of the principal. This is such a case. The essence of the unconscionability alleged and found against the College was that it knew of the likelihood that the process changes would lead to misconduct of the agents in enrolling students and that the College intended to take advantage of that likelihood to increase profits. The findings made against Mr Wills were to the effect that he shared that knowledge and intention. Those findings were sufficient to establish that he had the requisite state of mind to be involved or knowingly concerned in the College’s unconscionable conduct.
369. I would reject ground one of Mr Wills’ appeal (and ground three of the College’s appeal).
370. I agree with the orders proposed by Gageler CJ and Jagot J.
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