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Week 7 Unconscionable Transactions / Conduct (It provides a remedy where…

- - - - (1) one party is at a special disadvantage or disability; and
      - (2) the stronger party knows of that special disadvantage; and
      - (3) the stronger party exploits that disadvantage.
- - - - A ‘special disadvantage’ is a ‘characteristic’ that ‘seriously affects the ability of an innocent party to make a judgement as to his own best interests': Amadio, at 462.
      - Factors that go to demonstrating a ‘special disadvantage’ can be ‘constitutional’ or ‘situational’: ACCC v Samton Holdings Pty Ltd (2002) 117 FCR 301, 308. [13.14]
        
        constitutional factors include poverty, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy, or lack of education: Blomley v Ryan (1954) 99 CLR 362.
        [13.16]
        It must amount to ‘a position of disadvantage as against the other party’: Blomley v Ryan (1954) 99 CLR 362, 405; see also Anderson v McPherson (no 2)
        [13.17]
        
        In Amadio, the guarantors were in a position of special disadvantage
        
        ‘situational’ special disadvantage read Radan and Stewart’s summary of Louth v Diprose [13.22]-[13.25].
        More recently it has been accepted that emotional dependency may amount to a special disadvantage for the purposes of the doctrine: Louth v Diprose (1992) 157 CLR 621; Bridgewater v Leahy (1998) CLR 457; Trevenar v Ussfeller [2005] NSWSC 582.
        
        Contrast of gift decision Mackintosh v Johnson contrast to Louth although a gift of cash was made, the wealth of Johnson was such that it was within his means as opposed to Louth [13.26]
    - - ‘defendant must have knowledge of the special disadvantage of the other party
        [13.28]
        type of knowledge in Amadio Mason J clarified that the requisite knowledge could be actual knowledge or constructive knowledge, e.g. the defendant ought to have known in the circumstances.
        
        Actual - [I]f A having actual knowledge that B occupies a situation of special disadvantage in relation to an intended transaction, so that B cannot make a judgment as to what is in his or her own interests, takes unfair advantage of his (A’s) superior bargaining power or position by entering into that transaction, his conduct in doing so is unconscionable.
        
        Louth v Diprose [13.31]
        
        Blomley v Ryan [13.32]
        Ryan had actual knowledge of Blomley being a alcoholic and proceeded to take advantage of that with regards to a property transaction.
        
        Elkofairi v Permanent Trustee Co Ltd [13.33]
        issuing of loan, based on asset lending knowing that the financial situation of the applicant will likely result in there asset being forfeited. Alone not enough, other factors must be present.
        
        Constructive - And if, instead of having actual knowledge of that situation, A is aware of facts that would raise that possibility in the mind of any reasonable person, the result will be the same.
        
        Constructive knowledge refers to ‘wilful ignorance …’ which for the purposes of relieving against equitable fraud is not different from actual knowledge’: Kakavas v Crown Melbourne Ltd (2013) 250 CLR 447, 438.
        [13.29]
    - - the stronger party must exploit the weakness that he or she knows to exist in the other ‘in order to procure consent to a transaction’. [13.35]
        
        However, heedlessness of, or indifference to the best interests of the party is not sufficient for this purpose’, and what is required is ‘a predatory state of mind’ that creates the ‘victimisation or exploitation’ (Kakavas).
        [13.38]
      - There are several cases that illustrate unconscientious exploitation of the disadvantage: ,
        [13.37]
        
        Amadio
        
        Louth v Diprose
        
        Blomley v Ryan
    - - https://www.ags.gov.au/publications/express-law/express-law-no-295#:~:text=ACCC%20v%20Quantum%20Housing%20Group,necessary%20feature%20of%20statutory%20unconscionability.
        Australian Competition and Consumer Commission v Quantum Housing
        Group Pty Ltd [2021] FCAFC 40
        some form of exploitation of or predation upon some vulnerability or disadvantage of a person or class or persons will often be a feature of conduct which satisfies the characterisation of unconscionable conduct under s 21 of the ACL, but such vulnerability or disadvantage is not a necessary feature of statutory unconscionability and nothing in the decision of Kobelt required this ([4], [62], [73], [78]-[79] and [84]-[85])
        
        Conclusion from Kobelt in the High Court
        78 From the above we reject the proposition that ratio or seriously considered obiter dicta of a majority of the High Court, indeed, of any justice of the Court in Kobelt (other than Keane J) requires in any case that for conduct to be unconscionable by reference to ss 12CB and 12CC of the ASIC Act (or ss 21 and 22 of the ACL) there must be found some form of pre-existing disability, vulnerability or disadvantage of which advantage was taken.
        79 The notion of what is a “pre-existing” vulnerability or disadvantage as we described it at [36] above introduces a requirement that the so-called victim of the conduct brings to the relationship an attribute of vulnerability in some factor and to some degree. Such vulnerability or disadvantage will often exist: as it did in the Anangu people in Kobelt. But their Honours’ reasons in Kobelt (other than Keane J) do not express that requirement as a matter of principle as to the meaning of s 12CB (s 21).
        
        Commentary on the decision;
        “The Full Court has made clear that for conduct to be held to be ‘unconscionable’ under the Australian Consumer Law and other similar laws, it is not necessary to establish that the business engaging in the conduct has exploited some disadvantage or vulnerability on the part of the consumers or small businesses affected, although this may often be the case.”
        “The Full Court has confirmed that the correct approach to assessing statutory unconscionability is to focus on the conduct, and assess whether it is a sufficient departure from the norms of acceptable commercial behaviour as to be against conscience or to offend conscience,” Mr Sims said.
        “Because this decision makes it clear that it is not necessary to demonstrate exploitation of vulnerability, it extends the reach of the statutory unconscionable conduct prohibition so that it will protect more consumers and small businesses against egregious conduct by corporations.”
        https://www.accc.gov.au/media-release/full-federal-court-ruling-provides-vital-clarification-of-the-law-on-statutory-unconscionable-conduct
      - Australian Securities and Investments Commission v Kobelt [2019] HCA 18