Australia's Inquiry into Unconscionable Conduct

Australia’s Commonwealth Senate is conducting an Inquiry into whether a statutory definition of ‘unconscionable conduct’ is required in the Trade Practices Act. Here is Information about the inquiry.

Stronger parties are always going to draft contracts to their advantage.   Before 1998, franchisees in Australia had no statutory avenue by which to seek redress for post contractual unilateral changes to the deal unless they could establish a connection with the State of New South Wales (NSW).  Many (not all) aggrieved franchisees have obtained redress for post contractual unconscionable conduct by their franchisor via s 106 Industrial Relations Act 1996(NSW) (IRA) and its predecessors sections 275 and 88F in earlier versions of the IRA.

Section 51AC of the Trade Practices Act 1974 (Cth) was introduced in 1998 to provide redress for unconscionable conduct for franchisees all over Australia. Unconscionable conduct occurs where big business players (often franchisors) delivered on their obligations to the letter of the franchise agreement, but interpret that contract in a way that the franchisee had never dreamed possible, to the disadvantage of the franchisee.  The section lists specific conduct that could be unconscionable but beyond the list it does not limit the conduct a court may take into account in assessing whether conduct is unconscionable.   Despite the section’s broad scope, and the fact that several cases have been prosecuted (with mixed success) during the 10 year life of section 51AC, the section has not delivered. 

What’s the problem?Are retail landlords and franchisors so well behaved that the legislation was never needed?Are franchisees and the regulator (the ACCC) so under resourced that they can not afford to take a case to the High Court to put some meat on the statutory bones of unconscionable conduct?Is there another problem? 

Submissions are due on 17 October 2008.