Australian Securities and Investments Commission v Kobelt

The Australian Securities and Investments Commission (ASIC) appealed a decision of the Federal Court concerning Mr Kobelt's provision of "book-up" credit to Anangu customers of a general store. The dispute centred on whether Mr Kobelt's conduct in operating this credit system was unconscionable within the meaning of s 12CB(1) of the *Australian Securities and Investments Commission Act 2001* (Cth). The High Court of Australia was required to determine if Mr Kobelt's system of credit, which involved retaining customers' debit cards and PINs to withdraw wages or Centrelink payments shortly after they were credited, constituted unconscionable conduct.

The High Court considered the vulnerability of the Anangu customers, who faced remoteness, limited education, impoverishment, and low financial literacy. The book-up system effectively tied these customers to the store, and while they understood its basic elements and generally supported the arrangement, Mr Kobelt's record-keeping was inadequate and often illegible. The court had to weigh these factors against the evidence that the book-up system also protected customers from cultural sharing practices, ameliorated expenditure cycles, and allowed for the purchase of essential goods between paydays. The court also noted that the withdrawals were authorised and that there was no allegation of dishonest use of debit cards or dishonest record-keeping.

The High Court, by majority, dismissed ASIC's appeal. The majority reasoned that when all elements of Mr Kobelt's credit system were considered together, they pointed overwhelmingly to a conclusion of unconscionability. Despite the customers' basic understanding of the system and their general support for it, and the absence of dishonesty, the court found that the overall system operated in a manner that was unconscionable. The appeal was dismissed with costs.