Aug 5, 2020

Unconscionability: The SCC dispenses with the common law. So what?

Uber Technologies Inc. v. Heller, 2020 SCC 16 (CanLII)

Everyone knows that the SCC expanded the doctrine of unconscionability in Uber v. Heller. This is a critique of that SCC impulse to expansion. By expansion I mean: not in keeping with the common law development of the doctrine.

We all know the SCC laughs at critiques that say it’s not being faithful to the common law. Policymaking inconsistent with the development of the case law almost seems to be the deliberate point.

On the assumption that there is any value is showing that Abella’s doctrine of unconscionability is not in keeping with the common law tradition I start with a critique of para 55 of the reasoning of Abella and Rowe.

Here is Abella and Rowe at para 55:

[55] Unconscionability is widely accepted in Canadian contract law, but some questions remain about the content of the doctrine, and it has been applied inconsistently by the lower courts (see, among others, Morrison v. Coast Finance Ltd. (1965), 1965 CanLII 493 (BC CA), 55 D.L.R. (2d) 710 (B.C.C.A.); Harry v. Kreutziger (1978), 1978 CanLII 393 (BC CA), 9 B.C.L.R. 166 (C.A.), at p. 177, per Lambert J.A.; Downer v. Pitcher, 2017 NLCA 13, 409 D.L.R. (4th) 542, at para. 20; Input Capital Corp. v. Gustafson, 2019 SKCA 78, 438 D.L.R. (4th) 387; Cain v. Clarica Life Insurance Co., 2005 ABCA 437, 263 D.L.R. (4th) 368; Titus v. William F. Cooke Enterprises Inc., 2007 ONCA 573, 284 D.L.R. (4th) 734; Birch v. Union of Taxation Employees, Local 70030, 2008 ONCA 809, 305 D.L.R. (4th) 64; see also Swan, Adamski and Na, at p. 982; McInnes, at pp. 518-19). These questions require examining underlying contractual theory (Rick Bigwood, “Antipodean Reflections on the Canadian Unconscionability Doctrine” (2005), 84 Can. Bar Rev. 171, at p. 173).

I have shown elsewhere how Abella and Rowe essentially ignore the ratio of Morrison. Here I will address their next authority:

Harry v. Kreutziger (1978), 1978 CanLII 393 (BC CA)

Harry was an Indian who lived in Powell River with his wife and 6 children. He graduated grade 5, was almost deaf, and ‘not widely experienced in business matters’ (1). He was a commercial fisherman and a logger. He had a license worth $15,000 by itself. The boat may have been worth $2000.

After a number of haggling-type discussions, Harry apparently sold his boat (to which the license attached) to Kreutziger for $4500 (10). McIntyre J.A. determined this to be a grossly improvident bargain. (11)

The trial judge approached the question looking for ‘false representations’ of which there were none. (In other words, the trial judge asked himself the wrong question). The trial judge did not set aside the contract.

McIntyre J.A. applied Waters v. Donnelly (1884), 9 O.R. 391 and Morrison v. Coast Finance Ltd. (1965), 1965 CanLII 493 (BC CA) (12), to set aside the contract.

My law comment:

  • Here we have Harry, a classic disabled plaintiff within the tradition of Waters v Donnelly and Morrison v. Coast Finance.
  • Here we have a grossly improvident bargain, strictly conforming to the tradition of Waters v Donnelly and Morrison v. Coast Finance.
  • Here we have the application of Waters v Donnelly and Morrison v. Coast Finance.

Where is the 'confusion' in the cases which Abella sets up as her reason for rushing to the rescue of the doctrine of unconscionability?

My philosophy comment:

Every lawyer’s experience in front of judges, is an education in the use and mis-use of precedent. It takes decades to develop the eye to see a given ratio properly and predict how a judge will use or distinguish a case. This is the essence of understanding the common law and the genius of the spontaneous order of the common law.

What genius?

That a thread of authority, that no particular judge has dictated, has evolved through centuries, to a point where it is used today to strike down a contract (contract being another and more important common law concept). That a given judge has applied previously-determined parameters to his own facts, without having the hubris to think he (that particular judge) can successfully announce either a dispensing-with previously determined parameters, or the adding-of new parameters at his fancy. That is the common law and parenthetically the only meaning of rule of law (that other phase much loved by the SCC and respected only in the breach).

So what’s wrong with policy-making?

Against the spontaneous order of the common law is the spectacle of supreme court judges purporting to announce, a new and improved rule of law regarding unconscionability. Abella’s unconscionability decision is in the same category with Cromwell’s good faith in contract decision in Bhasin. That is to say: they indifferently expand a contract-exception for the one-time benefit of a questionable plaintiff. Abella and Cromwell do this because, in their heads they have a theory of social interaction whereby the restriction of contract maximizes social welfare.

The social justice impulse of the SCC is its Achilles heel. Without the social impulse they would be like any other judge, trying to be faithful to the finding of the thread of law through the centuries of cases. Once Abella’s social motivation takes control, she no longer really cares what the cases say. It all about the announcement.

So what? Who cares if we abandon fidelity to common law development?

Abella and Cromwell are not unique. We know the SCC has been trying to do this for decades. Kenyon, two hundred years before Cromwell, also tried to ‘announce’ a 'good faith' rule of law regarding the purchase of a ship sight unseen, only to be reversed because the facts of subsequent cases showed his announced rule to be an inadequate replacement for the pre-existing common law rule.

The point is that no one judge (or court) possesses or can possess the level of knowledge necessary to announce any rule. That is why there is genius in common law spontaneous development. Piece-meal development.

My premise is that the spontaneous development of the common law rule of unconscionability, without dictate from on high, in fact optimizes the application of the rule which cannot be accurately announced in abstract terms.

The point is that dictation of the rule distorts the spontaneous (piece-meal case-by-case) development of the rule which is the optimizing growth path of the rule.

Okay, so we proceed by announcing rules and then ‘adjusting’ those supposedly fixed rules? So what?

Relying upon common law reasoning is equivalent to instrument-flying in fog. The reality of decision-making is that we are always in a fog. The SCC cannot see what effect its ‘unconscionability’ ruling will have. That is why judges eschew trying to make decisions without common law tools.Whichever way you look at it, the SCC was totally indifferent to the fact that past unconscionability cases pointed to the opposite answer than the answer the SCC produced.

Consider how many auto-pilot rules the SCC broke in saving this Uber driver from the consequences of the contract:

  1. That arbitrators decide their own jurisdiction
  2. That arbitration clauses are to be upheld
  3. That there needs to be a disabled plaintiff
  4. That there needs to be something significant given away by the disabled plaintiff

The first two of these rules were arduously constructed over decades by the SCC itself. Perell at first instance made a point of emphasizing it. The last two rules were developed over centuries. The breaking of all four rules will whiplash in the face of the SCC. We will soon see the SCC reiterate its earlier position on arbitration clauses. I expect the SCC will return to the old common law rule on unconscionably. You can be assured that the SCC will pretend that Uber was strictly within the tradition.

This is not 'announcement' and 'adjustment'. This is drifting off course and making a course-correction while pretending you didn’t drift in the first place.

So what?

The doctrine of unconscionability stops being a special-case protection of the vulnerable plaintiff from a grossly improvident bargain and becomes a universal tool to break open the contract (equivalent to the family law setting).

Does it matter that almost all contracts are now vulnerable to unconscionability attack?

Growth models in economics identify adherence to the common law as one of the few foundation stones of long term economic growth. Disregard for the exceptionalism of setting aside contracts and now for the most trivial of reasons, is the economic signal that Abella sends in Uber, that Cromwell previously sent in Bhasin.

You’re exaggerating! The law of contract is robust!

Economists speak on the margin. In a contractual universe of millions of transactions, it is not easy to observe the marginal effect of Abella’s introduction of uncertainty anymore than it is easy to empirically observe the Cromwell-effect in Bhasin. But there is an effect on overall transaction efficiency and the effect is negative.

The robust contract universe we presently live in is a result of the self-correcting common law stream suppressing excessive obiter of people like Kenyon, when such judges are undisciplined enough to meander away from the common law line.

The problem is that for every 100 economically-efficient and carefully reasoned decisions at the SCC, there is one decision which so destabilizes contract that the welfare-increasing economic effect of the institution of the SCC is somewhat neutralized.