Australian Securities & Investments Commission v Kobelt

[2018] HCATrans 153

[2018] HCATrans 153

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Adelaide  No A11 of 2018

B e t w e e n -

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Applicant

and

LINDSAY KOBELT

Respondent

Application for special leave to appeal

GAGELER J
NETTLE J
EDELMAN J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 17 AUGUST 2018, AT 9.31 AM

Copyright in the High Court of Australia

MR J.C. SHEAHAN, QC:   May it please the Court, I appear with my learned friend, MS K.E. CLARK, for the applicant.  (instructed by the Australian Securities & Investments Commission)

MR T.J. NORTH, QC:   If the Court please, I appear with MR H.M. HEUZENROEDER on behalf of the respondent.  (instructed by Lempriere Abbott McLeod)

GAGELER J:   Mr Sheahan.

MR SHEAHAN:   Your Honours, in an application for special leave from a finding concerning unconscionability the applicant has an obvious problem, and that is that findings of unconscionability depend upon a close examination of the facts of the particular case and the precise characterisation of the relations between the parties. 

In this case there are three features of the matter that make it unusual.  The first is a failure by the Full Court distinctly, in our submission, to appreciate the significance of the customers’ voluntary entry into the transactions in question when assessing statutory unconscionability. 

The second is the Full Court’s failure to appreciate that, in a statutory unconscionability context, conduct may be characterised as exploitative or predatory without a finding of subjective bad faith or dishonesty.  Under that rubric we will wrap together what are the second and third special leave grounds in the written submissions.

The third is a misuse, we think possibly unprecedented, of historical and cultural considerations to excuse what would otherwise be unconscionable when in truth those considerations were either neutral or were primarily relevant to showing the vulnerability of the affected group and the need for closer attention to their welfare than was given by the respondent.

GAGELER J:   Do you accept the relevance of taking cultural considerations into account in an appropriate case?

MR SHEAHAN:   In a broad sense, yes.  What has happened here is a quite distinct misuse of that consideration by the Full Court. 

GAGELER J:   A misuse of the level of principle or a misuse in terms of factual analysis?

MR SHEAHAN:   What we would say is that it is a misuse ‑ we could not characterise it as being at the level of principle – which raises questions of general significance as opposed to merely significance with this particular case. 

EDELMAN J:   Do you mean by that, essentially, that facts that might be characterised generally as unconscionable are instead characterised in light of a cultural norm?

MR SHEAHAN:   Yes, and the process of reasoning by which that happens, which is where the generality intrudes, is one that is misconceived, in our respectful submission. 

NETTLE J:   It is back to front.

MR SHEAHAN:   Yes, back to front.

NETTLE J:   Instead of exacerbating the unconscionability it is used to alleviate it.

MR SHEAHAN:   Yes, precisely.

GAGELER J:   Mr Sheahan, have you given any further attention to your grounds of appeal?

MR SHEAHAN:   I have not given further attention to the grounds of appeal.  I had given further attention to the special leave grounds.  The grounds of appeal ‑ ‑ ‑

GAGELER J:   There are a lot of them.

MR SHEAHAN:   Your Honours, there are.  Were special leave to be granted, we would give close attention to them, obviously.

GAGELER J:   Mr Sheahan, we might be assisted from hearing from Mr North at this point.

MR SHEAHAN:   Thank you, your Honours.

GAGELER J:   Perhaps you could give some attention to the detail of the grounds.

EDELMAN J:   Particularly if the three points that you make are really the essence of your application then it may be that those three points are simply the three grounds.

MR SHEAHAN:   Yes.

GAGELER J:   Mr North.

MR NORTH:   Can I press the three points which were made rather than the four special leave questions which have been put forward, the first of which deals with the question of the voluntariness of entering into the transactions.  Rather than deal with 1 and 3 separately, if you look at them, they are really interlinked.  The third one is the misuse of historical data, so it is explained, to excuse the behaviour.  In fact, that is, with respect, not a fair way in which to reference what happened in the court at first instance or in the appeal.

What the historical and cultural norms were used for was not by way of a misuse or an excuse but by way of an explanation of the actual voluntariness of the community itself to enter into the transactions and it is a factor which is to be taken into account seems to have been conceded as a relevant matter to be analysed. 

It is of course common ground by each of the parties, both at first instance and on appeal, that the cases and the arguments on appeal were all used for the purposes of explaining why it was that the restricted customer base, in the circumstances of which the customer base was found, found the circumstances of a book‑up system as pleaded was something of significant advantage to the customer base.

EDELMAN J:   It might have been a significant advantage but there was not really any other form of credit to choose from, was there?

MR NORTH:   No, but the circumstances in Mintabie were that there were two other storekeepers offering exactly the same service.  Other forms of provision of service in those circumstances were matters that were taken into account because accessibility to the purchase of goods and services in such circumstances by the group of customers all found it significant and helpful in their circumstances because of the cultural norms such as demand sharing and those significant issues such as the boom‑and‑bust cycle and also the fact that there was a degree of trust in the storekeeper, otherwise called an agency or a brokerage arrangement.

EDELMAN J:   Do you accept that it is not just the system but also the way that the system is implemented?  In other words, even if the book‑up system itself were either neutral or, as you say, advantageous, if it was implemented in a way such as to charge 43 per cent interest, to permit unauthorised withdrawals on a number of occasions to control the food that is purchased and so on, that that could itself have the character of unconscionable conduct.

MR NORTH:   Yes, the evidence in this case was completely different to that, with respect, your Honour, because the evidence was that, in relation to the provision of services, setting aside motor vehicles for a moment, the groceries which were the subject of the supply were supplied not at levels as it was alleged that were beyond market expectations.  There is no suggestion that a fee was rendered for the provision of any credit arrangement in holding a card and PIN accessibility at all in these circumstances.  The car analysis, motor vehicle purchasing, was restricted to an analysis of a list price, a negotiated price and a discounted price for cash.  Those circumstances, with respect, are not unusual in normal commerce. 

The issues which were germane to this arrangement are far different from a suggestion which is put in the grounds of appeal of targeting a customer base.  That customer base was on an aboriginal land holding called the APY Lands, in short compass, and the majority of the customers were obviously going to be aboriginal customers who brought with them the manners and way in which they had been in a process of education and understood the transaction.

It was found, both in first instance and on appeal, that they not only appreciated the system for the acquisition of goods and services which were being provided to them but they also appreciated the fact that there was this interrelationship between them and the storekeeper, an historical one, as well as the fact that there was an obvious willingness of the aboriginal community to use the services and trust the storekeeper whose relationship was one that had existed for decades and decades.  So the book‑up system itself is not bad.

I just want to deal with the second point raised by my friend, if I might, as well:  the question of exploitation and predatory conduct.  In this case it is only measured against issues such as there has been no finding of any suggestion of dishonesty at all by the storekeeper.  There is no suggestion that the withdrawal conduct was not in fact authorised.  It was a matter which was understood, and properly understood.

EDELMAN J:   But you do not suggest dishonesty is required, do you? 

MR NORTH:   I am sorry, your Honour?

EDELMAN J:   You do not suggest that a finding of dishonesty is required?

MR NORTH:   No, I do not, but it is a matter to be taken into account as part of those matters which were the subject of the summary by the Full Court in both forms of judgment.  Each of those matters are all facts and circumstances that weighed against the conclusion that there was unconscionability in the form of transactions used by the simple taking of a debit card and the simple utilisation of withdrawal of funds out of the account whilst the circumstances of the use of the card over a two‑week cycle which sat with a Centrelink payment was a process which was, we say, sensible and commonplace and, in essence, like a form of effective budgeting to assist the acquisition rather than buying all of the goods at the beginning of the cycle and then having no funds necessarily available.

I might also add that there is no suggestion here that any person who was a customer was ever left without the necessities of life, as it was suggested.

EDELMAN J:   Except not the necessities that they wanted to choose always.

MR NORTH:   I do not know that there is much evidence about that either.  The reason I say that, your Honour, is because the individual cases that had been put forward – there were five in number; a husband and wife team at the same time – all of those were not pressed.  There was no illustration of an absence of a particular type of good which was desired. 

This is an unusual case to test the propositions which my friends now put before you this morning, because the case was put on the basis that there was a secondary case for individual unconscionability which was effectively abandoned on the last day of the trial.  Therefore, we respectfully say, quite the contrary to a suggestion of targeting.

The essence of the circumstances in which the customer base found themselves may have incidences of vulnerability, but at first blush, when assessed with the necessities required for aboriginal communities to have access to the provision of goods and services and a form of guidance by a storekeeper over a period of time, the transactions were quickly categorised as not giving rise to any sense of unconscionability.

The only issue which we further would like to address whilst we have a moment is that, if special leave were considered, we respectfully say that the circumstances set out in our response submission, in the final paragraph, suggest that if there was to be special leave granted, there ought to be a consideration of the payment of costs for the respondent, and those are in circumstances where the respondent age and positioning, being a storekeeper in an aboriginal land area, Mintabie, are such that he should not have the costs and expenses of running these questions in the High Court.  We respectfully say they ought to be borne by the applicant if leave were granted.

GAGELER J:   As I understand the orders that are sought by ASIC, they are not seeking to disturb the costs orders below.  Is that your understanding?

MR NORTH:   I am not sure about that.  I think we requested an indication of whether they would pay any costs of the appeal should leave be granted.  I understood that they got a refusal of that position.  Perhaps Mr Sheahan can clarify it.

GAGELER J:   Yes.  Thank you.

MR NORTH:   Yes, they do in paragraph 41.  Your Honour is quite correct ‑ paragraph 41 of their outline.  That is all I submit.

GAGELER J:   Thank you.  Mr Sheahan, what do you say about costs and what do you say about your grounds of appeal?

MR SHEAHAN:   In relation to costs, ASIC’s position is as stated in paragraphs 41 and 42 of its written submissions, but we are in the Court’s hands.  If the Court thinks it is appropriate to make a further order as sought by the respondent, so be it.  The only qualification to that is that it is not immediately obvious to the applicant why the third part of the order sought by the applicant should be made ‑ that is, precluding set‑off ‑ but again that is a matter for the Court.

As regards the grounds of appeal, the first ground of appeal and its many subparagraphs can be omitted.  The remaining grounds of appeal line up with the three matters that I was going to address your Honours on in this fashion:  paragraph 2 is the first; paragraphs 3, 4 and 5 are aspects of the second; and paragraphs 6 and 7 are aspects of the third, so we would leave them unchanged.  They could be made more elegant but the structure is workable.

GAGELER J:   Thank you.  On the undertaking of the applicant not to seek its costs of the special leave application or of the appeal, special leave to appeal is granted in this matter.

AT 9.47 AM THE MATTER WAS CONCLUDED