High Court clarifies principles governing unconscionable conduct and accessorial liability

Productivity Partners, Captain Cook College and Wills

The High Court has found in favour of the ACCC in an important proceeding raising fundamental issues concerning the scope of the systemic unconscionable conduct prohibition and the principles concerning accessory liability.

Background

In 2018, the ACCC instituted a proceeding against education provider Productivity Partners Pty Ltd (trading as Captain Cook College) (Productivity Partners) alleging that it engaged in systemic unconscionable conduct arising out of its abuse of the Federal Government’s VET Fee-HELP vocational education scheme. The conduct involved Productivity Partners claiming and retaining VET FEE-HELP revenue from the Commonwealth in respect of unwitting or unsuitable students, totalling approximately $54 million. It was alleged that Productivity Partners’ parent company, Site Group Limited (Site), and its COO, Mr Blake Wills, were involved in Productivity Partners’ unconscionable conduct and therefore liable as accessories.

The ACCC was successful at first instance and on appeal in establishing that Productivity Partners engaged in a system of unconscionable conduct in contravention of section 21 of the Australian Consumer Law (ACL), and that both Site and Mr Wills were knowingly concerned in Productivity Partners’ unconscionable conduct.^[1]

Both Productivity Partners and Mr Wills appealed the Full Court’s decision to the High Court. Special leave was granted on 14 September 2023.

Issues to be determined by the High Court

The High Court was tasked with determining:

1          in the Productivity Partners appeal:

(a) the correct approach to determining an alleged contravention of section 21 of the ACL, including whether the assessment of conduct that is alleged to have contravened section 21 of the ACL must be analysed by reference to the “framework” provided by the factors identified in section 22;

(b) whether the Full Court erred in holding that Productivity Partners’ conduct, in removing two consumer safeguards and operating an enrolment system without those safeguards, in the absence of an intention that the risks ameliorated by those safeguards eventuated, constituted unconscionable conduct in contravention of section 21 of the ACL;

2          in Mr Wills’ appeal:

(a) whether a person will be liable as an accessory to a contravention of the statutory prohibition on unconscionable conduct without knowing that the relevant conduct amounted to a contravention of the law or even that the conduct involved predation, exploitation, or lack of good faith, or otherwise bore the character that rendered it against conscience; and

(b) the necessary conditions to satisfy the participation element for accessorial liability.

The High Court’s findings

The High Court unanimously found in favour of the ACCC, dismissing both appeals with costs.

The High Court held that the system of conduct engaged in by Productivity Partners was, in all the circumstances, unconscionable in contravention of section 21 of the ACL. Further, that Mr Wills was knowingly concerned in, or party to, Productivity Partners’ contravention, it having been proved that he knew the essential matters which together made up the conduct characterised as unconscionable and that he participated in that contravention. By reason of Mr Wills' knowledge and conduct being attributed to Productivity Partners’ parent company, Site was also knowingly concerned in Productivity Partners’ contravention.

Further, the High Court, in upholding the ACCC’s notice of contention, determined that the only error by the Full Court was in overturning the primary judge's finding that Mr Wills was knowingly concerned in the contravention of section 21 of the ACL from 7 September 2015. There was no error in the primary judge's finding to that effect and, accordingly, no basis for the Full Court to overturn that finding.

The matter will now proceed to a penalty hearing before the primary judge.

Guidance from the High Court

While the High Court was unanimous in dismissing the appeals, six separate judgments were delivered. By these judgments, the High Court has significantly clarified the law in relation to both unconscionable conduct and accessorial liability. A close consideration of these judgments is required to grapple with the gravity of the Court’s findings and their implication not only in the context of the consumer law, but more broadly.

Some key matters arising from the appeals follow.

Unconscionable conduct

The High Court has confirmed the position that “section 22 of the ACL does not require a court to evaluate the impugned conduct by reference to the presence or absence of the circumstances that provision specifies irrespective of the relevance of those circumstances to the impugned conduct or to the cases as put by the parties to the court” (Gageler CJ and Jagot J at [11]). That said, the Court has made clear that insofar as a factor in section 22 of the ACL is applicable “that matter must be considered. If not applicable, the matter need not be considered” (Gageler CJ and Jagot J at [57]).

Section 22 of the ACL does not “codify the values of Australian statute and common law” or “resolve such difficulties in its application”. The provision articulates “a list of wide-ranging matters to consider when applying these values” (Edelman J at [234]). However, it is important to keep in mind that “it is the totality of the circumstances relevant to the conduct being considered (as required by s 21(1)) which dictates if any matter in s 22 applies” (Gageler CJ and Jagot J at [57]). Section 22 of the ACL does not act as “statutory criteria” that determine the “metes and bounds within which the normative standard prescribed by s 21(1) is to be applied” (Gordon J at [102]). It remains the case that conduct will not be characterised as unconscionable unless it is "outside societal norms of acceptable commercial behaviour [so] as to warrant condemnation as conduct that is offensive to conscience" (Gageler CJ and Jagot J at [60]; Gordon J at [101]; Steward J at [289]). Moral obloquy or “some form of moral turpitude, remains an important measure of unconscionable conduct” (Steward J at [302]).

As a general proposition, the High Court has also confirmed that it is “not necessary in every case to plead and adduce evidence directed to the factors in s 22(1)” (Gordon J at [102]).

As to the question of exposure to risk, the Court has unanimously confirmed that this was sufficient on the facts to support a finding that Productivity Partners’ conduct was in all the circumstances unconscionable. The High Court held that the appellants “contention [was] wrong in principle”. The High Court found that the appellant’s position “ignore[d] the corollary of s 21(3)(a) that, for the purpose of determining whether conduct in which a person has engaged is unconscionable, regard can be had to circumstances that were reasonably foreseeable at the time of the conduct. An increase in a risk of misconduct being undetected that was reasonably foreseeable at the time of the conduct in question can be considered in determining whether conduct is unconscionable without need for any intention that the misconduct occur” (Gageler CJ and Jagot J at [66]).

Accessorial liability

The High Court has unanimously endorsed the Court’s previous decisions in Yorke v Lucas (1985) 158 CLR 661 and Giorgianni v The Queen (1985) 156 CLR 473. In particular, the High Court confirmed the position that the alleged accessory must have knowledge of the essential circumstances, matters or facts that constitute the primary contravention. The accessory need not know: (i) that the primary contravener’s conduct amounted to a contravention of the law (as articulated in Rural Press Ltd v ACCC (2003) 216 CLR 53); or (ii) of the consequences that result from the primary contravener’s conduct.

The High Court distilled the relevant principles in relation to knowledge at [82] (per Gageler CJ and Jagot J) as follows:

The relevant distinction is not between facts and the law. Nor is it between objective facts and evaluative facts. It is between the essential matters constituting the contravention (be they facts, circumstances, or states of mind) and the character, quality, nature, or status of those matters for the purpose of the characterisation of the conduct the statute requires. For accessorial liability, knowledge of the former is required but knowledge of the latter is not.

This being said, the High Court also acknowledged that such a distinction between essential facts of a contravention and evaluative judgments made from those facts can be fine. However, guidance is to be provided by reference to the statute and what is required to be pled and proven in order to establish the relevant contravention. The High Court stated “[p]erhaps the single greatest difficulty in the area of accessory liability lies in identifying the essence of the alleged conduct that a person must intend to participate in, and therefore the associated facts that must be known to form that intent, before that person can be an accessory. This intention, and the associated knowledge, is to be identified from the allegations made in the indictment or pleadings read in light of the offence or contravention provision” (Edelman J at [263]).

As to the question of intention, the High Court has confirmed that “an intention to participate in the conduct that amounts to the essence of a primary offence or contravention is a central requirement that must be satisfied before liability for one person's offence or contravention can be attributed to another as accessory” (Edelman J at [201]).

In the context of unconscionable conduct, it follows that it is not necessary for the purpose of establishing accessorial liability that the accessor knew that the conduct was “against conscience” or “unconscionable”. As stated above, what is required is that the accessor knew “the essential matters which together made up the conduct ultimately characterised as unconscionable” (Gageler CJ and Jagot J at [12]), “the facts and circumstances which rendered the primary contravener’s conduct unconscionable” (Gordon J at [154], Steward J agreeing) or “the essential facts that constitute the contravention by the principal” (Beech-Jones J at [339], Gleeson J agreeing). The High Court found that an accessor “need not know that the principal’s conduct constitutes unconscionable conduct or otherwise have knowledge of the legal characterisation of complexion of those essential facts, including that the conduct is contrary to a particular standard that embodies what is meant by unconscionable” (Beech-Jones J at [339], [361]).

The High Court has also clarified what level of knowledge is required for an individual to be found liable as an accessory for misleading or deceptive conduct. Endorsing the decision in Anchorage Capital Master Offshore Ltd v Sparkes (2023) 111 NSWLR 304, the High Court has remarked that for the purposes of misleading or deceptive conduct, it is necessary to establish that the accessory knew that the representation was false (Gageler CJ and Jagot J at [83]; Gordon J at [153]; Edelman J at [269]; Beech-Jones J at [357]-[360], Gleeson J agreeing). However, it is not necessary to establish that the accessor knew that the conduct was capable of being, or would be, characterised as misleading or deceptive within the meaning of the relevant statutory provision (Gageler CJ and Jagot J at [83]; Gordon J at [153]; Edelman J at [269]; Beech-Jones at [357]-[360], Gleeson J agreeing).

Significance of the judgment

The principles arising from these appeals are significant.

Unconscionable conduct is regulated by both the ACCC and ASIC. Section 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) is identical in substance to section 21 of the ACL. The outcome of this appeal has clarified the law of unconscionable conduct under both statutes.

Yorke v Lucas and Giorgianni v The Queen were decided by the High Court nearly 40 years ago. Rural Press Ltd v ACCC was decided over 20 years ago. This is the first time that accessorial liability in the context of unconscionable conduct has been considered by the High Court. Although the proceeding concerned allegations of unconscionable conduct, the Court has also clarified the knowledge an accessory must have in order to establish that they were involved in a contravention of the misleading or deceptive conduct provisions, resolving a long-standing controversy in decisions such as Quinlivan v ACCC (2004) 160 FCR 1 and Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 as to whether knowledge of falsity of the relevant representation was required.

There is a real prospect that the High Court’s views on the issue of accessorial liability will have broader application across the Commonwealth statute book, including in the context of the criminal law.

Tom Jarvis, Nicholas Briggs and Karl Barnett of Johnson Winter Slattery act for the ACCC in relation to this proceeding.

^[1] The primary judgement is ACCC v Productivity Partners Pty Ltd (trading as Captain Cook College) (No 3) [2021] FCA 737 (Stewart J). The Full Court judgment is Productivity Partners Pty Ltd (trading as Captain Cook College) v ACCC [2023] FCAFC 54 (Wigney, O’Bryan and Downes JJ).