Focus: The Competition and Consumer Legislation Amendment Act 2011
Services: Financial Services, Disputes & Litigation
Industry Focus: Financial Services

On 6 December 2011, the Competition and Consumer Legislation Amendment Act 2011 (the Act) received Royal Assent.

The Act provides for (amongst other things) the amendment of the unconscionable conduct provisions of the Competition and Consumer Act 2010 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) which:

  • unify the current separate provisions relating to unconscionable conduct in respect to individuals and businesses so as to remove the risk that courts might accord different meanings to the two sets of provisions
  • introduce a statement of interpretative principles to assist the courts in applying the statutory prohibition of unconscionable conduct and clarify the meaning and scope of the provisions.

The current position

Commonwealth legislation in respect to unconscionable conduct was set out in Part IVA of the Trade Practices Act 1974 (the TPA) until 31 December 2010. On 1 January 2011, the name of the TPA was changed to the Competition and Consumer Act 2010 (CCA). Provisions in respect to unconscionable conduct are now contained within the Australian Consumer Law which is Schedule 2 of the CCA.

Broadly, the Australian Consumer Law (Part 2-2 of Schedule 2 of the CCA) contains the following three substantive provisions in respect to unconscionable conduct:

  • Section 20 (formerly s 51AA of the TPA) prohibits conduct that is unconscionable within the meaning of the unwritten law of the States and Territories
  • Section 21 (formerly s 51A of the TPA) prohibits unconscionable conduct in connection with the supply of goods or services to a person
  • Section 22 (formerly s 51AC of the TPA) prohibits unconscionable conduct in connection with the supply or acquisition of goods or services to or from a corporation.

Almost identical provisions relating to unconscionable conduct in respect to the supply of financial services are set out in sections 12CA, 12CB and 12CC respectively of the ASIC Act.

The changes

Unification of provisions for business and consumer transactions

The Act consolidates the former sections 21 and 22 of the Australian Consumer Law, as a new section 21 and consolidates the former sections 12CB and 12CC of the ASIC Act as a new section 12CB.

The explanatory memorandum to the Act notes that the meaning of unconscionable conduct under each provision was intended to be the same and that the unification will avoid the risk that courts may have accorded different meanings to the two sets of provisions.

As a result, the factors to which a court may have regard when considering whether conduct is unconscionable will be the same for both business and consumer transactions.

The interpretative principles

With a view to clarifying the position for the courts, the Act adds statements to the following effect to section 21 of the Australian Consumer Law and section 12CB of the ASIC Act:

  • the sections are not limited by the equitable or common law doctrines of unconscionable conduct
  • the sections are capable of applying to a system of conduct or pattern of behaviour whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour
  • in considering whether conduct to which a contract relates is unconscionable, the court's consideration of the contract is not limited to consideration of the circumstances relating to formation of the contract and may include consideration of the terms of the contract and the manner in which and the extent to which the contract is carried out.

Without limiting the factors to which the court may have regard, the new sections 22 and 12CC provide an extensive list of factors to which the court may have regard for the purpose of sections 21 and 12CB.

Summary of structural changes

  • the old sections 21 and 22 of the Australian Consumer Law are unified in the new section 21
  • the old sections 12CB and 12CC of the ASIC Act are unified in the new section 12CB
  • the new sections 22 and 12CC provide identical lists of factors that the court may consider which were previously largely duplicated in the two separate sections.

Sections 20 and 12CA remain unchanged.

Upshot

Ultimately, whilst the amendments restructure and clarify the existing statutory prohibitions against unconscionable conduct, they are not expected to have a significant practical impact. The above amendments take effect from 1 January 2012.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.