Jul 20, 2020

Unconscionability: the SCC mis-use of its own unconscionability precedents

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

The SCC in Uber v. Heller [2020] SCJ No.16 renovate the law of contract once again. This time by setting up the doctrine of unconscionability as the instrument to invalidate the arbitration clause that ousts the operation of Canadian law, particularly any possible application of the Ontario Employment Standards Act.

The modern SCC renovation projects in contract law don’t give any respect to the common law history of any doctrine. If the doctrine can be distorted into meeting immediate social justice requirements: if the little guy wins and the big corporation is injured, well that’s a start, isn’t it.

In critiquing the SCC treatment of unconscionability in Uber v. Heller I turn to Abella and Rowe paragraphs 53-60, particularly paragraph 60. It is in this paragraph where Abella and Rowe take a pause in their heavy reliance upon fellow-travelling academics and seek some SCC precedent for their use of unconscionability to strike down Uber’s contract. Abella and Rowe cite four cases. One of the cases is Bhasin v. Hrynew which I will not deal with here. I have dealt with it elsewhere. I will here address the three SCC cases Abella and Rowe suggest support their use of unconscionability:

Hodgkinson v. Simms, [1994] 3 SCR 37

In Hodgkinson v. Simms, [1994] 3 SCR 37, Hodgkinson approached Simms, a chartered accountant, for advice about making investments. In particular Hodgkinson, who knew nothing about tax planning, wanted Simms tax-sheltering advice. Hodgkinson wanted to avoid ‘promoters’ (7).

Simms recommended investments which Simms himself had a financial interest. (10)

For a 4 to 3 majority LaForest deemed Simms to be in a fiduciary relationship with Hodgkinson and therefore under a special duty. All judges determined this case on whether there was or was not a fiduciary duty and whether the loss related to the wrong or was independent of the wrong. Nothing whatsoever turned upon unconscionability.

Norberg v Wynrib [1992] 2 SCR 226

LaForest (and Abella and Rowe) cites Norberg v Wynrib [1992] 2 SCR 226 as the leading case on unconscionability. Norberg was a drug addict, addicted to pain killers. She sought out various doctors to give her prescriptions. Upon encountering Dr. Wynrib, Wynrib made sexual invitations which Norberg eventually consented to in return for various prescriptions. Norberg then sued Wynrib for sexual assault

So the question was: how was the SCC possibly going to vitiate the obvious consent. For a 3 judge plurality, LaForest conceived of the doctor-patient relationship coupled with the drug dependency as a ‘power dependecy’. LaForest then pulled ‘unconscionability’ across from contract law into tort law in order to vitiate the consent. Brilliant! Brilliant! How innovative!

Sopinka appropriately criticized this absurd LaForest slight of hand – so intent was LaForest, Cory and Gonthier to vitiate consent that any old fiction would suffice. Sopinka properly stated that unconscionability in contract does not vitiate the consent, it merely sets aside the bargain.

Hunter Engineering v. Syncrude [1989] 1 SCR 426

Abella and Rowe then cite Hunter Engineering v. Syncrude [1989] 1 SCR 426, the only actual SCC contract case cited in their unconscionability analysis (between para 53-60)

Uber is a contract case about setting aside an arbitration clause because the effect of the arbitration clause is to escape the Ontario statutory ESA regime. Hunter is a case where the US bad guy (Hunter) also seeks to escape the Ontario statutory regime, that being the implied warranty under the Sale of Goods Act.

How ironic then that the SCC in Hunter specifically determine that the Hunter contract specifically ousted the Ontario statutory regime in its warranty clause. I will spell out how Hunter should have applied: Uber sought to oust Canadian law by choosing Netherlands law in the contract. The contract specifically ousted Canadian law. Heller agreed with the contract, operated under it and took the benefits from it from it. If it was the Hunter SCC deciding Uber and applying Hunter, they would manifestly have decided in favour of Uber

By the time Abella and Rowe are finished reversing Hunter v. Syncrude, they somehow manage to enlist Hunter v. Syncrude in support of exactly the opposite proposition from that upon which Hunter was decided (the Ontario statutory regime under the Sale of Goods Act doesn’t apply because the contract ousted the statuory regime).

An economics question:

  • the 'little guy' (Heller) is seeking $400M from Uber;
  • Uber has never made money, not in any year of its existence;
  • Uber lost $7 per share in 2019;
  • Uber has $8B in debt;
  • how many victories in how many jurisdictions will be needed to cripple Uber and put the world back to its taxi monopolies and you driving to get your own take-out?