In Australian Securities and Investments Commission v Kobelt [2019] HCA 18 the High Court of Australia, in a 4:3 majority decision, dismissed ASIC’s appeal against the decision of the Full Federal Court that Mr Lindsay Kobelt, former owner and operator of Nobby’s Mintabie General Store in the remote South Australian APY Lands was not guilty of unconscionable conduct by operating a system of “book up” credit.
The High Court did not change the Full Federal Court’s decision that Mr Kobelt had engaged in unlicensed credit activity when selling goods and motor vehicles on “book up” credit to his customers, most of whom were Aboriginal . Background.
The appeal focussed on the meaning of “unconscionable conduct”.
A majority of the Court held that Mr Kobelt’s conduct was not unconscionable. The majority held that, although the book-up system rendered the customers more vulnerable to exploitation, no feature of his conduct exploited or otherwise took advantage of the Anangu customers’ vulnerability. The basic elements of the book-up system were also understood and voluntarily accepted by the Anangu customers. The Anangu customers’ acceptance of the terms on which book-up credit was supplied was not the product of their lack of financial literacy, but rather reflected aspects of Anangu culture not found in mainstream Australian society.
The minority judgments concluded that unconscionable conduct was proved.
Justices Nettle and Gordon found that Mr Kobelt did unconscientiously take advantage of his customer’s vulnerability, stating:
“…it is because a transaction that is voluntarily entered into by someone under a special disadvantage that unconscionability, including statutory unconscionability, developed, in order to ensure that persons who are vulnerable and unable to protect their own interests are not the victim of conduct by a stronger party in unconscientiously taking advantage of that vulnerability”.
Justice Edelman also said it was wrong to conceive that the Anangu customers ‘chose’ the system of credit stating that “the conclusion of unconscionability cannot be avoided by pointing to this so-called ‘choice’ between Mr Kobelt’s system of credit and no credit at all”. There were no other options to purchase goods and services leaving book up as the last resort.
