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22 March 2021

Ombudsman welcomes ‘norms’ of acceptable commercial conduct test for unconscionable conduct

The Australian Small Business and Family Enterprise Ombudsman Bruce Billson has welcomed the landmark decision of the Full Federal Court to make ‘a sufficient departure from the norms of acceptable commercial behaviour’ a test of whether conduct is ‘unconscionable’ under the Australian law.

“This is a great day for Australian small businesses seeking protection from unconscionable conduct that can harm enterprises and livelihoods,’ Mr Billson says.

“The decision ensures egregious commercial conduct can be captured by the unconscionable conduct provisions under the Australian Consumer Law without having to prove that the harmed small business or consumer has a special disadvantage or vulnerability that was exploited.

“I welcome the Full Court confirmation that conduct may be found to be unconscionable as a result of deviations from the norms of acceptable commercial behaviour, even where there has not been a special disadvantage or vulnerability that was exploited.

“This should reassure smaller businesses that remedies are available for the harm caused by the unconscionable conduct of a counterparty are available and that fair and reasonable commercial dealings support Australian commerce, even where a larger, more powerful corporation is involved.

Mr Billson congratulated the ACCC and its chair, Rod Sims, for appealing an earlier Federal Court decision that required that a business could only be found to have acted ‘unconscionably’ under the Australian Consumer Law and other similar laws, if it had exploited some disadvantage or vulnerability on the part of the consumers or small businesses affected.

“While the exploitation of a disadvantage or vulnerability is an important criteria for establishing if a business has acted ‘unconscionably’, egregious conduct that causes harm to another business cannot be acceptable purely by the absence of this specific form of exploitation,” says Mr Billson.

“We look forward to seeing further protections for small businesses through changes to the unfair contract terms legislation in the near future.”