Financial regulation and a vulnerable Indigenous community

In this much anticipated litigation, (ASIC v Kobelt [2019] HCA 18) the High Court majority (4:3) dismissed ASIC’s appeal against an outback store owner, Mr Kobelt. For about a decade, he operated a ‘book-up’ credit system for his customers; Indigenous persons in a remote community. ASIC alleged his system was unconscionable. Despite the diverging views of the Court, the decision sheds light on confronting social issues in remote Indigenous communities while contributing to the jurisprudence on statutory unconscionability in Australia.

Facts

Mr Kobelt is a man of limited education. Since the early 1980s, he operated ‘Nobby’s Store’ in Mintabie. It is an opal mining community in the Anangu Pitjantjatjara Yankunytjatjara Lands in South Australia, about 1,100km from Adelaide, and, arguably, many miles from regulatory scrutiny. A significant part of Nobbys’ business was the sale of cheap second-hand cars, although it also sold groceries and petrol. Mr Kobelt’s record keeping was rudimentary, largely illegible and transactions were mostly undocumented. His customers were the Anangu People. They are vulnerable, extremely poor and have low literacy and numeracy. About 600 customers were on the books, 200 of whom visited the store each week.

Book-up credit

Book-up credit is not unfamiliar in rural and remote Indigenous communities. It emerged in the 1950s in tandem with the emergence of social security payments to Indigenous persons. It is akin to ‘running a tab’. Inevitably, such a system is ripe for exploitation particularly where consumers are a vulnerable class of persons and the business trappings are crude. Some of these issues were flagged in the Renouf Report, commissioned by ASIC in 2002 which concluded that indigenous persons are the primary consumers of book-up services.