We have major problems with this in NZ too. As HH says, there probably needs to be a bit of education about the need to activate your XPDR in Mode C in ALL airspace. Although I do think that if the altitude reporting feature is U/S or incorrect, the transponder should be turned off when outside controlled airspace, particularly outside SSR coverage where there is no SAR advantage to having it on.
One excuse I've heard from chopper pilots is 'I was only just above the deck, so I didn't think I needed the ALT function selected', obviously showing a lack of understanding of TCAS (which could be forgiven if one hasn't been specifically educated). When you have scheduled airline (RPT) traffic operating in uncontrolled airspace, and into uncontrolled airports, you need to maximise the use of whatever safety nets you have.
Even more distressing, I've heard horror stories of inappropriate use of TCAS (TA only mode) on RPT aircraft leading to severe reduction in separation. Flight safety systems are only ever useful if they are understood, and used appropriately.