When is Conduct Unconscionable?

When is conduct ‘unconscionable’?  A norm by reference to ‘conscience’?  Mercedes distributors complained about the term of their franchise agreements in AHG WA (2015) Pty Ltd v Mercedes-Benz Australia/Pacific Pty Ltd [2025] FCAFC 86 (9 July 2025). Given the stakes involved, surely a case heading to the Supreme Tribunal? Moshinksy, Bromwich and Anderson JJ – in respect of ss 21 and 22 of the Australian Consumer Law (Cth) – wrote:

…

The appellants’ submissions

[115]  In oral submissions, senior counsel for the appellants said that the appellants’ central submission is that his Honour did not apply the correct principles to the question of unconscionable conduct, namely those stated by the High Court in Productivity Partners [Pty Ltd (trading as “Captain Cook College”) v ACCC [2024] HCA 27; 419 ALR 30].

[116]  Senior counsel submitted that the essential holding of the High Court was that the court must evaluate the impugned conduct against a normative standard of conscience which is permeated with accepted and acceptable community standards to determine whether s 21 has been contravened.

[117]  Senior counsel submitted that there were three key aspects of the High Court’s reasons in Productivity Partners:

(a) First, the proper judicial method for assessing statutory unconscionable conduct is to conduct an evaluative assessment of impugned conduct against the standard he had referred to. Senior counsel relied on Productivity Partners at [50]–[64] per Gageler CJ and Jagot J (especially at [60]) (Gleeson J agreeing at [310], Beech-Jones J agreeing at [340]). Senior counsel also relied on [282] per Steward J.

(b) The second aspect of judicial method is that set out in Paccioco v Australia and New Zealand Banking Group Ltd [2015] FCAFC 50; 236 FCR 199 (Paccioco) at [263]–[299] per Allsop CJ The norms and values demanded in one case may be different from those in another, to cover broad and evolving practices in different sectors of the business community. 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. Critically, opportunistic conduct is conduct which the courts have identified as potentially offending those norms and values. Senior counsel submitted that various members of the High Court in Productivity Partners adopted the reasons of Allsop CJ in Paccioco: see Productivity Partners at [100] and [105] per Gordon J, [284] per Steward J, [314] per Gleeson J, [340] per Beech-Jones J.

(c) The third aspect is that the matters listed in s 22 of the Australian Consumer Law embody in a non-exhaustive way statutory values and norms which may indicate that conduct was unconscionable. Section 22 provides a frame of reference for identifying the values expressed under the statute which, in turn, informs whether conduct or a course of conduct is unconscionable within the meaning of s 21. Section 22 does not act as statutory criteria that determine the metes and bounds within which the normative standard prescribed by s 21 is to be applied. Senior counsel relied on Productivity Partners at [100]–[105] per Gordon J (Steward J agreeing at [282], Gleeson J agreeing at [314], Beech-Jones J agreeing at [340]).

[118]  Senior counsel submitted that Gordon J’s approach was “completely contrary” to the approach taken by the primary judge in the present case. Senior counsel submitted that the primary judge’s reasoning, particularly at J[3506], demonstrated error. Senior counsel submitted:

Far from being intellectual fairy floss, the search for accepted and acceptable social and community standards is the central task to the court’s role in seeking to identify whether the conduct was unconscionable. The trial judge erred in holding to the contrary and that necessarily truncated his analysis of the circumstances.

(emphasis added)

[119]  Later in oral submissions, senior counsel for the appellants submitted that the primary judge rejected the analysis of Gordon J in Stubbings, but that analysis is now the law. He submitted that the primary judge said that you cannot go beyond the analysis in ss 21 and 22 and that those sections set the limit. He submitted that that approach has been rejected and is just wrong. He submitted that the primary judge’s distillation of principles described as “intellectual fairy floss” were the very statements of principle which have been adopted by the High Court as the proper approach.

Consideration

[120]  In our opinion, the appellants’ submissions cannot be accepted.

[121]  As we understand the argument, it is essentially that: (a) Productivity Partners stands for the proposition that the task of the court, in applying ss 21 and 22, is to search for and apply accepted and acceptable community standards; and (b) the primary judge erred by rejecting the search for, and the application of, such standards.

[122]  In our view, the premise of the argument is not correct. We do not read the judgments in Productivity Partners as establishing that the task of the court is to search for and apply accepted and acceptable community standards. Rather, we read those judgments as standing for the proposition that ss 21 and 22 recognise or embody certain accepted and acceptable community standards. Importantly, it is the statutory notion of unconscionability against which conduct is to be evaluated.

[123]  Productivity Partners was a proceeding brought by the Australian Competition and Consumer Commission against Productivity Partners Pty Ltd (trading as Captain Cook College) (the College), a vocational education and training provider. At first instance, the trial judge found that the College had engaged in unconscionable conduct in contravention of s 21 of the Australian Consumer Law and that Mr Wills (the acting CEO of the College for part of the relevant period) was knowingly concerned in the College’s systemic unconscionable conduct. On appeal to the Full Court of the Federal Court, by a majority, the appeal was dismissed. The Full Court did, however, interfere with the trial judge’s decision as to the date from which Mr Wills was knowingly concerned in the College’s contravention of s 21. The College and Mr Wills appealed, with special leave, to the High Court of Australia.

[124]  The High Court dismissed the appeal, a conclusion in which all seven members of the High Court joined. All members of the High Court affirmed the conclusion of the trial judge and the majority in the Full Federal Court that the College engaged in unconscionable conduct in contravention of s 21. Further, all members of the High Court were of the view that the date from which Mr Wills was knowingly concerned was the date decided by the trial judge. Separate judgments were delivered by: Gageler CJ and Jagot J; Gordon J; Edelman J; Steward J; Gleeson J; and Beech-Jones J. In relation to the meaning of “unconscionable conduct” in s 21 of the Australian Consumer Law, Steward J (at [282]), Gleeson J (at [314]) and Beech-Jones J (at [340]) agreed with the reasons of Gordon J. In relation to the disposition of grounds one and two of the College’s appeal (which concerned whether the College engaged in unconscionable conduct), Gleeson J (at [310]) and Beech-Jones J (at [340]) agreed with the reasons of Gageler CJ and Jagot J. We will therefore focus on the judgments of Gageler CJ and Jagot J, and of Gordon J.

[125]  Gageler CJ and Jagot J rejected the College’s contention that s 22 of the Australian Consumer Law limited the scope of s 21: at [50]. Their Honours also rejected the proposition that the presence or absence of each matter specified in s 22(1)(a)-(l) constituted, in and of itself, a mandatory relevant consideration to be weighed in the circumstances of every case: at [54]. In the course of rejecting that proposition, their Honours said at [56]:

… the matters in s 22(1)(a) – (l) are non-exhaustive. As such, they embody “the values and norms recognised by the statute” by reference to which “each matter must be judged” to the extent that it “appl[ies] in the circumstances” [Stubbings at [57]].

(emphasis added)

[126]  The language that the s 22 factors “embody” values and norms “recognised by the statute” is inconsistent with the appellants’ proposition that the court’s task is to search for and apply accepted and acceptable community standards.

[127]  After referring to five key aspects of the provisions, their Honours stated at [60]:

That the presence or absence of each matter in s 22(1) is not a mandatory relevant consideration to be weighed by a court in every case, irrespective of the circumstances, does not mean that the required evaluation involves nothing more than, as the College put it, an “instinctive reaction that the legislation sought to avoid”. The normative standard set by s21(1) is tethered to the statutory language of “unconscionability”. While that term is not defined in the legislation and, in its statutory conception, is “more broad-ranging than the equitable principles”, it expresses “a normative standard of conscience which is permeated with accepted and acceptable community standards” [Stubbings at [57]], and conduct is not to be denounced by a court as unconscionable unless it is “outside societal norms of acceptable commercial behaviour [so] as to warrant condemnation as conduct that is offensive to conscience” [Kobelt at [92]. See also Stubbings at [58]]. The items listed in s 22(1)(a) – (l) are matters that the legislation requires to be considered, in the overall evaluation of the totality of the circumstances to be undertaken for the purpose of s 21(1), if and to the extent those matters are applicable. This is why both “close attention to the statute and the values derived from it, as well as from the unwritten law” [Kobelt at [153]] and “close consideration of the facts” [Kobelt at [217]] are necessary.

(some footnotes omitted; emphasis added)

[128]  In the above passage, their Honours referred to Stubbings at [57] and [58]. In those paragraphs, Gordon J stated:

57. Section 12CB of the ASIC Act, like equity, requires a focus on all the circumstances. The court must take into account each of the considerations identified in s 12CC if and to the extent that they apply in the circumstances. The considerations listed in s 12CC are non-exhaustive, but they provide “express guidance as to the norms and values that are relevant to inform the meaning of unconscionability and its practical application”. They assist in “setting a framework for the values that lie behind the notion of conscience identified in s 12CB”. “The assessment of whether conduct is unconscionable within the meaning of s 12CB 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”.
58. Put in different terms, the s 12CC considerations 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”. A court should take the serious step of denouncing conduct as unconscionable only when it is satisfied that the conduct is “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”.

(footnotes omitted; emphasis added)

[129]  We do not read either of the above passages as suggesting that the test of unconscionability in s 21 involves application of a standard of conscience defined by community standards in the abstract (ie untethered from the statute). Rather, we read those passages as standing for the proposition that the statutory provisions (both ss 21 and 22) “recognise” certain values and norms. It is in this sense that the statutory test is “permeated” with accepted and acceptable community standards.

[130]  The same analysis applies, in our opinion, to the judgment of Gordon J in Productivity Partners. In that case, her Honour stated:

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 [at [57]], 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’” [ Stubbings at [58]].
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.
104. Unconscionability has been described as “a normative standard of conscience which is permeated with accepted and acceptable community standards” [Stubbings at [57]]. 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.

(emphasis added; some footnotes omitted)

[131]  We do not read the above passage (or the passage in Gordon J’s judgment at [150]–[151]) as suggesting that the test of unconscionability is untethered from the statutory language. To the contrary, those passages reinforce the point that the statutory provisions recognise and give effect to certain accepted and acceptable community standards, and that the court’s role is to apply a standard prescribed by the statute.

[132]  In Productivity Partners, Edelman J considered the relevant principles concerning unconscionable conduct under s 21 of the Australian Consumer Law commencing at [229]. His Honour’s discussion included:

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”.
     
     …

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. …
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: …
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. …

(footnotes omitted; emphasis added)

[133]  The above passage does not provide any support for the appellants’ submission that the task of the court is to search for and apply accepted and acceptable community standards.

[134]  As already noted, Steward J (at [282]) agreed with Gordon J’s expression of principle concerning the relevant meaning of “unconscionable conduct”. Steward J noted that Gordon J in Stubbings adopted the following passage from the reasons of Nettle and Gordon JJ in Kobelt (at [234]):

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.

(emphasis added)

[135]  As this passage makes clear, the impugned conduct is to be assessed against the values and norms “recognised by the statute” rather than accepted and acceptable community standards at large.

[136]  In the context of discussing the role, if any, of the notion of “moral obloquy”, Steward J stated:

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.

(footnotes omitted; emphasis added)

[137]  These statements, in particular the first sentence of [292], are inconsistent with the appellants’ submission that the court’s task is to search for and apply accepted and acceptable community standards.

[138]  As noted above, Gleeson J agreed (at [310]) with the reasons of Gageler CJ and Jagot J in relation to grounds one and two of the College’s appeal. Gleeson J also agreed (at [314]) with Gordon J’s analysis of the meaning of “unconscionable conduct” in s 21. Gleeson J wrote separately to explain the two ways in which s 22 informs the analysis required for a conclusion that conduct is unconscionable within the meaning of s 21. In the course of that explanation, Gleeson J stated:

315. First, s 22 provides “express guidance as to the norms and values that are relevant to inform the meaning of unconscionability and its practical application”. Unconscionability within the meaning of s 21(1) is itself a standard. However, the content of the statutory standard of unconscionability is not obvious because Parliament has appropriated, without definition, the terminology of “unconscionability”. Under the general law, “unconscionability” is a value-laden concept by which a person’s conduct is judged against “standards of personal conduct compendiously described as the conscience of equity”. Since s 21(1) is “shorn of the constraints of the unwritten law”, it may apply in a case that involves a departure from “societal norms of acceptable commercial behaviour” that would not ground a claim for relief under the general law.
316. The terms “norm” and “value” are overlapping. Generally, a norm is a standard of conduct, such as a standard set by an industry code. A value, which could encompass a norm, is a quality that is desirable. In these reasons, I will refer simply to standards.
317. Secondly, s 22 provides relevant guidance by “setting a framework for the values that lie behind the notion of conscience” in s 21(1). Section 22 facilitates the identification of “the circumstances”, within the meaning of s 21(1), in which allegedly unconscionable conduct must be assessed by listing, non-exhaustively, “matters” to which the court “may have regard” in deciding whether the conduct has contravened s 21(1).

(footnotes omitted; emphasis added)

[139]  The above passage and the passage at [319]–[321] reinforce that the statutory provisions recognise and give effect to certain norms and values. The passages do not provide support for the appellants’ submissions.

[140]  We are reinforced in our view that there is no error in the primary judge’s statement of principles by the fact that the primary judge relied (at J[3504]–[3505]) on the judgment of Gageler J in Kobelt (at [87]) and the judgment of Nettle and Gordon JJ in Kobelt (at [153]). The judgments of Gageler CJ and Jagot J and of Gordon J in Productivity Partners do not indicate any departure from those passages in Kobelt. To the contrary, Kobelt at [87] is cited in the footnotes to the judgments of Gageler CJ and Jagot J and of Gordon J.

[141]  Insofar as the appellants relied on the judgment of Allsop CJ in Paccioco, and the adoption of parts of that judgment by members of the High Court in Productivity Partners, we do not see any substantive relevant difference between those statements of principle and the primary judge’s judgment. As set out above, the primary judge specifically relied on Allsop CJ’s judgment in Paccioco in formulating J[3510], as the primary judge explained at J[3511]. To the extent that J[3511] queried whether “the values and norms that inform the living Equity” play much of an additional useful role in the context of statutory unconscionability to the extent that they are not already enshrined in ss 21 and 22, the primary judge’s qualification was carefully calibrated and this is not a matter that was the subject of detailed analysis in Productivity Partners.

[142]  In summary, no error is shown in the primary judge’s statement of the applicable principles. We do not consider there to be any difference as a matter of substance between the primary judge’s statement of the applicable principles and those set out by the High Court in Productivity Partners. In the passages criticised by the appellants, the primary judge was not seeking to convey that accepted and acceptable community standards are irrelevant to ss 21 and 22 of the Australian Consumer Law. Rather, his Honour was making the point that in applying s 21, the Court is to be guided by norms and values recognised by the statute (ie those identified at J[3510]), not carry out its own inquiry as to the content of accepted and acceptable community standards in the abstract. His Honour was correct to do so.

…

(emphasis added)

The link to the full case is here.