Key points

The analysis from the Full Federal Court and particularly Chief Justice Allsop’s judgment in Paciocco v ANZ gives a rich exposition of the meaning of statutory unconscionable conduct:

  • unconscionability is a value-laden concept meaning conduct that offends good business conscience, which is to be assessed by reference to accepted and acceptable community values,
  • the values to be applied are those recognised in the unwritten law, especially those in Equity. The starting point is business certainty but there are other values infused within the statutory prohibition, including fair dealing, good faith, the protection of the vulnerable, and the recognition of inequalities of bargaining power, and
  • the esoteric concept of ‘moral obloquy’ is intended to reflect the moral dimension of unconscionability and to distinguish it as a higher standard than unfairness or unjustness. The phrase does not, however, entail a requirement of dishonesty.

The Full Federal Court’s judgment provides businesses with much needed guidance on statutory unconscionability. Although the judgment considers unconscionability in the context of the ASIC Act 2001 (Cth) and Fair Trading Act 1999 (Vic), the same concepts apply to the prohibition against unconscionable conduct in the Australian Consumer Law.


The case concerned a class action challenging various bank fees imposed by Australia and New Zealand Banking Group (ANZ) on its customers. The fees in question included:

  • late payment fees on consumer credit card accounts,
  • honour, dishonour and non-payment fees charged to consumers and business deposit accounts, and
  • over-limit fees on consumer credit card accounts.

The Full Federal Court rejected the applicants’ claims that the fees amounted to penalties, unconscionable conduct, unjust transactions or unfair terms.

The case has important implications for other class actions relating to fees charged by banks, telecommunications companies and utilities. These actions are presently stayed, pending the final determination of the ANZ proceedings. The Full Federal Court’s decision is likely to be the subject of an application for special leave to the High Court.

First instance decision and appeal

In February 2014, Gordon J of the Federal Court found that one of the fees charged by ANZ 'the late payment fees on consumer credit card accounts' amounted to a penalty and was therefore unenforceable, but her Honour rejected the same claim in relation to the other fees. Justice Gordon also rejected the claims that the fees contravened the statutory prohibitions on unconscionable conduct, unjust transactions, or unfair contract terms.

Both ANZ and the applicants appealed Gordon J’s decision to the Full Federal Court. On 8 April 2015, the Full Federal Court allowed ANZ’s appeal on Gordon J’s finding in relation to the characterisation of the late payment fees as a penalty, but dismissed all other appeals, including the appeals of the applicants. Accordingly, pending the outcome of any appeal to the High Court, ANZ’s right to charge the fees has been vindicated.

This note focuses on the Full Federal Court’s analysis of the issues of unconscionable conduct, unjust transactions and unfair contract terms.

Unconscionable conduct

The applicants made claims of unconscionable conduct under ASIC Act 2001 (Cth) and the Fair Trading Act 1999 (Vic).

Chief Justice Allsop’s judgment provides an important exposition of the meaning of statutory unconscionability and ties together a number of different statements in recent judgments on the issue.

With reference to Gordon J’s judgment, Allsop CJ highlighted a number of statements from the case law as to the meaning of ‘unconscionable’. In particular:

  • the term should be given its ordinary meaning, 'being something done not in good conscience and that which is irreconcilable with what is right and reasonable',
  • unconscionable conduct 'must demonstrate a high level of moral obloquy', and
  • the conduct must be evaluated by reference to the 'normative standard of conscience [which is] permeated with accepted and acceptable community values'.

The Chief Justice provided guidance on the term ‘moral obloquy’. The term was used by Spigelman CJ in World Best Holdings and has been the subject of ongoing debate with some commentators arguing that it imposes a different standard than that intended by Parliament. The Chief Justice considered that the term was intended to differentiate unconscionability as a higher moral or normative standard than unfairness or unjustness. This higher standard did not, however, mean that the conduct necessarily should entail an element of dishonesty. In particular, Allsop CJ noted that in the leading case on the equitable doctrine of 'unconscionable conduct' – Amadio – there was no dishonesty on the part of the bank manager. Instead, there was only constructive knowledge by the bank manager of Mr and Mrs Amadio’s position of special disadvantage. 

Chief Justice Allsop stated that in cases alleging unconscionable conduct, the task of the Court is to assess and characterise the impugned conduct against the standard of good business conscience, which should reflect the values and norms recognised by Parliament. The values and norms to be applied are those recognised in the unwritten law, especially those in Equity. The starting point should be business certainty but there are other values embedded into the statutory prohibition, including fair dealing, good faith, the protection of the vulnerable, and the recognition of inequalities of bargaining power. These values are said to promote commerce by maintaining a requisite degree of trust between contracting parties.

Applying these principles to the facts of the case, Allsop CJ concluded that there was no unconscionability on the part of ANZ. In particular:

  • there was no allegation of dishonesty, oppression or abuse of a commercially powerful position,
  • the fees had not been proven to be exorbitant or extravagant, but in any case, this would not necessarily lead to a conclusion of statutory unconscionability,
  • the fees could be avoided by the customer; these applicants chose to run their affairs by risking the fees,
  • the relevant contractual provisions had been clearly disclosed to customers,
  • there was no allegation that the applicants could not understand the relevant provisions,
  • there was no necessity to bank with ANZ; it had no relevant market power or dominance, and
  • the contracts were terminable at will.

In the circumstances, the Court concluded that ANZ had not behaved unconscionably and dismissed the applicants’ appeal.

Unfair terms or unjust transactions

The Chief Justice considered whether the transactions and terms in question were unjust transactions under the National Credit Code or unfair contract terms under the Fair Trading Act 1999 (Vic). While the Fair Trading Act 1999 (Vic) has now been repealed, a similar prohibition is contained in the Australian Consumer Law.

In determining whether the relevant terms or transaction were unfair or unjust, Allsop CJ acknowledged that unconscionability had a higher moral threshold than unfairness and unjustness. Nonetheless, his Honour considered that there was no basis to conclude that the provisions were unfair or the transactions were unjust.

Similarly to his Honour’s analysis on unconscionable conduct, Allsop CJ focused on the fact that the fees could be avoided, that there was no dishonesty on the part of ANZ, the contracts could be terminable at will, and the fees could be avoided by the conduct of the customer. As to the size of the fees, Allsop CJ stated that the Court should not assume the role of a price regulator, and that while price may affect the evaluation of whether a contractual term or transaction is unfair or unjust, it is not determinative.