Jul 17, 2020

Unconscionability in Contract: What is really wrong with Uber v. Heller?

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

Brown J. at para 165 makes reference to Waters v. Donnelly [1884] O.J. No. 294 to show what is wrong with the majority unconscionability reasoning. The majority dispenses with any mens rea requirement on the part of Uber. The majority is content with deemed ‘knowledge’ to convict Uber of unconscionability. Is there more wrongdoing required of the bad guy for a finding of unconscionability?

Waters v. Donnelly [1884] O.J. No. 294 is how Ontario courts first came to the doctrine of unconscionability in contract

In 1883, Waters was a peach farmer in Niagara having inherited from his peach farmer father.

[9] The plaintiff is a man of about twenty-seven or twenty-eight, and there is a great mass of evidence which would lead one to the conclusion that he is very far from being intelligent; not only that he is not a business man, but is a man of a lower degree of intelligence than most men. He is a man whom I should describe as decidedly weak minded and very easily led;

Donnelly on the other hand:

[9]…is a man who, should say from his appearance and manner in the box, is rather above the average of the capacity of business men, and I should call him a remarkable shrewd intelligent man. I do not mean for a moment to suggest, nor do I think he is a man who would deliberately and willfully take any advantage of his neighbour, but still he is a man with whom the plaintiff would be by no means on equal terms. While the plaintiff cannot be described as imbecile, he would be very much like wax in the hands of a man like the defendant.

Waters asked Donnelly for a loan. Donnelly said no. Water persisted, using the intermediary of Hutchison who held a mortgage of $800 on Water’s Peach farm. Donnelly still said no.

Water persisted asking Secord to intervene with Donnelly. Secord was a sort of ‘half lawyer’ who had acted for Water’s father on occasion. (11)

Donnelly knew a sucker when he saw one. Donnelly and Waters entered discussions with ‘half-lawyer’ Secord present. What ended up happening was not a loan of $200, but rather an exchange of real property: Waters would give Donnelly the peach farm (worth $7000) and Donnelly would give Water a livery stable in town (valued by Donnelly at the low! low! price of $7000)

The high court sitting in Chancery, noted that there was no independent valuation. When the bailiff gave evidence that suggested equality of value, the court flatly rejected the bailiff’s evidence. (15)

Now for the best part:

After writing up their agreement on a memorandum, the parties proceeded the next day to the office of Donnelly’s lawyer to have an actual agreement drawn up. ‘Half-lawyer’ Secord was present with Waters but concedes to giving no advice. (16)

Donnelly’s lawyer ultimately writes up an agreement whereby the peach farm is exchanged for Donnelly’s livery and Donnelly gets a further mortgage against Waters of $2029 and Waters agrees to throw in two more properties belonging to Waters’ sisters.

At trial the court dismissed Waters’ attack on the contract. Waters merely wanted the original memorandum of exchange of properties carried out. (1)

On appeal Osler J.A. (who had done the trial) though better of his own ruling at trial, overturning himself

A man of Waters intelligence couldn’t possibly have understood the lawyer’s written agreement (18). He had no proper advice (18).

There was a material difference in the value of the two properties (21)

my legal comment:

When judges go from the facts to their attempts at abstract reasoning, they fail. They fail because they are not up to the task of articulation. It is likely that the language is not up to the task of articulating the ratio in abstract language. From the above facts Osler abstracts: that there was inequality of bargaining power and that one party took ‘undue advantage’. This is the nonsense that ends up in the text books for the next century. No one can use these abstractions to delineate an unconscionable contract, but every lawyer can see the absurdity of the facts.

Of factual import is that Waters was prepared to accept any valuation for Donnelly’s property and that Waters was intellectually deficient (24). It is from this that the court says ‘undue advantage’.

The phrase ‘undue advantage’ so loved by judges and law professors, themselves wedded irrevocably to abstraction, is meaningless without the factual matrix.

Now turn to Uber:

Does the Uber driver sell his peach farm? No.

Is the Uber driver’s asset somehow undervalued in the transaction with Uber? No.

Is the Uber driver of such deficient intelligence that he cannot know what is good for him? No.

Is the target Uber transaction such that the Uber driver gained such a gross difference of value from the deal that transaction is ‘to be heard of with uplifted hands and exclamations of astonishment’? (21) No!

Of course not. The Uber transaction resembles the Waters transaction in only one particular. The Uber driver does not resemble Waters. Uber did not know the Uber driver and took no steps whatsoever to induce him into a transaction.

The Uber document somewhat resembles the Donnelly document in the court deeming both Waters and the Uber driver not to have read or understood its meaning.

Brown uses Waters v. Donnelly to show that the SCC has dispensed with the necessity of any mens rea component by the bad guy to the transaction.

I rather think that Waters v. Donnelly also proves that the SCC has dispensed with any requirement that the bargain be grossly unfair (See Perell in Graham v Impark at 118) The Uber driver has to have demonstrably lost something. What did he lose? A right to make a claim in Ontario for employee status.

It was only by the logical error of the SCC majority assuming 'employee' status that the SCC can then trumpet the alleged need for an immediate geographically-convenient remedy. If the 'employee' status was not assumed by the SCC, they would have had no justification whatsoever for finding anything lost to the driver.

Think about the sophistry required to construct something lost to the Uber driver. Compare this with what was lost to Waters. Compare this to what was lost to the 79 year old widow in Morrison.

There are more unconscionability cases to be discussed in the continuing critique of Heller v. Uber. This is not the final word. But does anyone for a moment think that the Uber driver's facts remotely track the classic unconscionability cases?