In general, unconscionable conduct is defined as conduct that is so harsh that it violates good faith. As per the Australian Consumer Law, when dealing with other companies or their clients, companies shall not indulge in unconscionable conduct. There is no specific legal definition for unconscionable conduct and it is a term that courts have developed on a case-to - case basis over the years. Where it is overly harsh or oppressive, actions can be unconscionable. To be called unconscionable, the action must be more than just unfair; when judged against the laws of society, it must be against conscience (Rajapakse, 2014).
The company's actions will be made unconscionable if it is extremely harsh or aggressive, and is above tough business negotiation. For instance, Australian courts have considered dealings or transactions to be 'unconscionable' if they are deceptive, contain substantial deception or contain unreasonable and irrational actions..
When deciding if the conduct in respect to the sale or delivery of products and services to a consumer or the delivery or purchase of goods or services to or from a company is unconscionable, the judge will weigh a variety of considerations (ACCC, n.d.):
How can the finance company stop unconscionable conduct?
The below realistic tips will help the organizations to stop engaging in unconscionable conduct:
In Australian Competition and Consumer Commission v ABG Pages Pty Ltd, the Federal Court ordered ABG which was an online business directory service to pay a $300,000 penalty for violating the ACL. In regards to its online advertisement services, ABG confessed to intervening in systematic unconscionable behavior, undue abuse, and making inaccurate and misleading statements (ACCC, 2018).
According to section 20 of the Australian Consumer Law, an individual should not, from one period to another, indulge in unconscionable conduct, within the context of unwritten law, in commerce or trade.
The equity of special wives has long been something of a problem in contract law, frequently discussed these days about its significance in society. The rule on special wives' equity emerges in the sense of a very relevant contract law case of Garcia v National Australia Bank Ltd (Wooler, 2018).
There has long been uncertainty about the position of the judgment of the High Court of Australia in Yerkey v Jones. The decision to offer unique equity security to wives who pledged their husbands' loans was considered for several years, prohibiting the creditor from recovering under the guarantee if the man had secured her permission, but the wife did not realize the consequence of the guarantee. Several rulings later held that Yerkey v Jones was no more great law in the New South Wales Court of Appeal. Nonetheless, the High Court of Australia in recent times affirmed the theory of Garcia v National Australia Bank Ltdin contravention of this.
Such an issue poses the interpretation of the values in Yerkey v Jones. Garcia v National Australia Bank Ltd is the basis of the facts of the issue and in that case, the High Court ruled that the protections offered by her cannot be enforced on the grounds of special equity available in benefit of a wife set out in Yerkey v Jones.
In the case of Garcia v National Australia Bank Ltd, the court affirmed the theory articulated by the judge in Yerkey v Jones, as follows: "If the permission of a married woman to give security for the debt of her spouse is obtained by the husband and, without knowing its consequence in critical ways, she implements a guaranteed contract approved by the creditor without explicitly communicating with her individually, she has a prima facie privilege to get it set aside."
In addressing the wife's equity principle, in the case of Yerkey v Jones, the court found the following requisites:
'In deciding that the wife didn't have a misunderstanding, the primary judge suggested that it was important to consider and understand all the following components:
One current Australian case, ACCC v Lux Distributors, stated that unconscionability should be assessed towards conscience by comparison to the social values at issue (Wooler, 2018).
The subject of undue influence has become a subject that for many years has disturbed the courts. Even then, much of the issues were put to rest after the House of Lords ruling in Royal Bank of Scotland plc v Etridge. The Lords determined that where it could be shown that (1) the claimant has put faith and confidence in the other side regarding its financial dealings and (2) there is a questionable transaction, the judge can conclude that, during the lack of a reasonable justification, the payment can only be achieved by undue influence. According to Jayne Hewett v. First Plus Financial Group Plc, if a wife offers protection for the loans of her husband it demands clarification, and the lender is questioned (Mian, 2013). The finance company should take precautions to make sure that the wife's approval to the payment is duly sought and therefore should suggest that independent legal counsel be sought from the spouse. The finance company may not depend on its apparent approval if a wife's approval has already been gained through improper influence, because it has reasonable cause to assume that she knows the purpose and consequence of the payment. If a counsel has been advised to inform the wife and has issued a written notice that they have advised her of the purpose and impact of the deal, this is a valid explanation (Stothard, 2010).
Transactions gained through undue influence are not enforceable and all profits obtained according to it must be repaid. In the sense of relations containing high degrees of faith and trust, undue influence regulates transactions that are made (Chen-Wishart, 2006).
From the above discussion following advice is given to the Finance company which are as stated below:
The legal issues faced by the company is that in view of the judgment of Garcia v National Australia Bank Ltd what precautions have to be taken to safeguard the interest of the finance company whereby securing the loan given to a start-up company is guaranteed by immovable property creating mortgage which is owned either by the spouse of the promoter or his old parents. There is a consistent approach of the court to apply the principle of undue influence in case the spouse takes a stand that she was asked to sign the documents in favor of the financial company as she was under the influence of her husband when such a plea is being accepted by the court at the later stage when the husband is unable to pay debts and the company initiates proceedings for recovery of the debts selling the mortgaged property for realizing the debts (Pascoe, 1997). It is also a point for consideration that for safeguarding the personal property at the time of seeking the loan the wife may be ready and willing to give her consent but subsequently when recovery proceedings commenced, she may change her stand in connivance with her husband to save the property.
In view of such a legal position, the financial company needs to be more cautious and it is advisable to take the following measures to ensure that it should not face adverse situations while recovering the loan financed to the start-up company which does not have their sufficient assets to secure the loan.
In light of the above, it can be concluded that if the finance company adopts the following suggested measures then its business will be secured and the future complications related to the lending business won’t arise.
Common-Law- Contract Law
Australian Consumer Law s(20).
Garcia v National Australia Bank Ltd (1998) 194 CLR 395 Wooler, G. (2018)
Yerkey v Jones (1939) 63 CLR 649
ACCC v Lux Distributors  FCAFC 90, 41
Royal Bank of Scotland plc v Etridge (No 2)  UKHL 44
Jayne Hewett v. First Plus Financial Group Plc  EWCA Civ 312
Wooler, G. 2018. Unconscionable conduct in commercial transactions: global perspectives and applications. United Kingdom: Cambridge Scholars Publishing.
Chen-Wishart, M. 2006. Undue influence: vindicating relationships of influence. Current Legal Problems, 59(1), pp.231- 266.
Mian, N. 2013. A comparative study of a restitutionary remedy for an undue influence between the English law and the Islamic legal principles. IOSR Journal Of Humanities And Social Science. 12(5). pp. 37-42.
Pascoe, J. 1997. Wives, Business Debts and Guarantees. Bond Law Review, 9(1), pp. 1-25.
Rajapakse, P.J. 2014. Unconscionable or unfair dealing in asset-based lending in Australia. Competition & Consumer Law Journal, 22(1), pp. 151-177.
ACCC. 2018. ABG Pages admits misleading and unconscionable conduct. [Online]. Available at: https://www.accc.gov.au/media-release/abg-pages-admits-misleading-and-unconscionable-conduct
[Accessed on October 27, 2020]
Abernathy, D., and Salman, J. 2016. Australia: Queensland Court of Appeal denies wife relief from guarantee. [Online]. Available at: https://www.mondaq.com/australia/charges-mortgages-indemnities/456964/queensland-court-of-appeal-denies-wife-relief-from-guarantee
ACCC. n.d. Unconscionable conduct. [Online]. Available at: https://www.accc.gov.au/business/anti-competitive-behaviour/unconscionable-
Stothard, C. 2010. UK: Undue influence - the concealment of affair amounts to undue influence. [Online]. Available at: https://www.mondaq.com/uk/securities/98106/undue-influence--the-concealment-of-affair-amounts-to-undue-influence
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