Hobson's Choice? Statutory Unconscionability Revisited In ASIC v Kobelt

By a 4:3 majority, the High Court of Australia has upheld the Full Federal Court's decision regarding the actions of a storekeeper who provided a "book-up" credit service to indigenous residents in rural South Australia. It found that this did not amount to unconscionable conduct within the meaning of s 12CB(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).

The issue at the heart of Australian Securities and Investments Commission's (ASIC) appeal revolved around the difference between the standard of unconscionability under the "unwritten law" and under the ASIC Act.1

In this respect, section 12CB(4)(a) expressly provided that "this section is not limited by the unwritten law...relating to unconscionable conduct" (emphasis added), and section 12CC identified a range of matters to which the Court may have regard in determining whether there has been a contravention.

In dismissing the appeal, Kiefel CJ and Bell J, Gageler J and Keane J all held that statutory unconscionability entailed no less a standard of moral wrongdoing than under the "unwritten law". In their dissenting opinions, Nettle and Gordon JJ and Edelman J separately criticised this approach as unduly narrow and restrictive.

In turn, their Honours' approaches to this central issue informed their assessments of a key subsidiary issue, namely the weight to be given to the voluntariness of a "weaker" party's conduct in determining whether a "stronger" party has behaved unconscionably. Aside from adding to the wide body of case law on the subject of what does and does not constitute unconscionable conduct, this case will also attract interest in its treatment of expert anthropological evidence in informing the voluntariness of the decisions made by a "weaker" party - which may have wider application to the question of "voluntariness" beyond the facts in question in this case.

Background

From the mid-1980s until 2018, Mr Kobelt operated "Nobbys", a small convenience store in the remote town of Mintabie, South Australia, selling a range of goods including food, groceries, fuel and second-hand cars. Mr Kobelt offered his indigenous customers from remote communities in the Anangu Pitjantjatjara Yankunytjatjara Lands (Anangu customers) a form of credit known as "book-up".

Under the book-up system, customers gave Mr Kobelt their debit cards and PIN details, authorising him to withdraw their funds to repay their debts in return for the further supply of goods over the interval between successive pay days. At least half of the Anangu customers were dependent on Centrelink benefits as their main source of income, with many being both illiterate and innumerate. The book-up system was only offered to the store's Anangu customers, with Mr Kobelt extending credit to his non-indigenous clientele on different terms.

Procedural history

ASIC brought proceedings in the Federal Court relevantly alleging that Mr Kobelt operated his book-up system in breach of s 12CB(1) of the ASIC Act. This section prohibits a person engaging in conduct in connection with the supply of financial services that is, in all the...