In a groundbreaking ruling poised to reshape the Australian business landscape, the High Court has sent a clear and powerful message that unethical practices and profit-driven exploitation of consumers will not be tolerated. The recent High Court decision in Productivity Partners Pty Ltd v Australian Competition and Consumer Commission; Wills v Australian Competition and Consumer Commission [2024] HCA 27 is a pivotal ruling for businesses operating in Australia, particularly those in customer-facing industries with structured systems and processes.
The case revolved around the Vocational Education and Training Fee Higher Education Loan Program (VFH Scheme); a government-funded loan program designed to support students pursuing vocational education. The ACCC alleged that the College involved in the case engaged in a pattern of unconscionable conduct by removing essential system controls designed to prevent unsuitable or unsuspecting students from incurring debts under the VFH Scheme without receiving corresponding benefits. This conduct was deemed exploitative and harmful to consumers.
When the case was first heard, the primary judge found that the College’s conduct was unconscionable under section 21 of the Australian Consumer Law (ACL). The judge also found that Productivity Partners’ parent company Site Group Limited and its CEO Mr. Willis were knowingly involved in the College’s conduct. They were therefore liable as accessories.
Productivity Partners and Mr. Wills appealed to the High Court.
The High Court affirmed that the College’s conduct was harsh, oppressive, unreasonable, and contrary to good conscience. By removing system controls, the College enabled students to incur debts without receiving corresponding benefits, resulting in what the Court classified as unfair and unethical business practices. The Court concluded that the College’s actions were driven by profit maximisation, exploiting students in the process. The enrollment system, designed primarily to boost profits, was determined to be adverse to the interests of students, a violation of fairness and ethical standards. Additionally, the Court noted that the College’s practices were not aligned with standard practices among other vocational education providers. The directors’ actions were deemed unconscionable and in violation of the law.
The High Court also confirmed that Mr. Willis was “knowingly concerned” in the College’s unconscionable conduct, meaning he was aware of the key facts that made the conduct unconscionable and played a role in it. As a result, Site was also held liable for the College’s misconduct.
Key Takeaways for Directors and Businesses
- Companies can be held responsible for business models that prioritise profits over ethical conduct, particularly when those models exploit consumers.
- Directors and business managers can be held personally liable for participating in or having knowledge of business models that breach ACL standards. The ruling shows that courts will punish unfair tactics not only retrospectively but also with foresight, aiming to prevent future violations.
