Kobelt, a shopkeeper in a remote community in South Australia, provided a form of credit to some of his customers. Almost all those customers were indigenous people from the APY lands with limited literacy and numeracy. As part of his system Kobelt withdrew each customer’s money, a total of almost $1 million from 85 different customers over two years, and controlled their access to it until they paid off their debt. He kept no reliable records, although there was no evidence of dishonesty.
The question for the Court was whether Kobelt had engaged in a course of conduct that breached section 12CB of the ASIC Act, which prohibits engaging in conduct “that is, in all the circumstances, unconscionable”.
A sharply-divided Court held 4:3 that he had not. The Court was split on the test for statutory unconscionability and, it seems, deeper questions about how notions of unconscionability interact with agency and paternalism, whether vulnerable consumers can (or should be allowed to) consent to exploitative arrangements, and how mainstream Australian culture interacts with indigenous cultures and norms.
In respect of s 12CB, on the one hand Keane J held that the “moral obloquy” involved in exploitation or victimization was still required, and Gageler J said s 12CB did not create “a form of equity-lite”. On the other, Nettle and Gordon JJ held that statutory unconscionability was “more broad-ranging than the unwritten law”, and Edelman J held that the “bar must be lower” than in equity. Kiefel CJ and Bell J did not address the issue. The only real guidance emerging from the judgments was that it is not necessary to identify some special disadvantage of an individual: Gageler J, Nettle and Gordon JJ and Edelman J.
As a result, any litigation based on statutory unconscionability will remain fraught, both under the ASIC Act and under the equivalent s 21 of the Australian Consumer Law.