r v. Pitcher, 2017 NLCA 13

Roger Downer (appellant) v. Elizabeth Pitcher (respondent) (13/53) Indexed As: Downer v. Pitcher 2017 NLCA 13 1 C.A.N.L.R. 496 Court of Appeal of Newfoundland and Labrador Green C.J.N.L., Harrington and Hoegg JJ.A. February 21, 2017

Summary: The parties were involved in a vehicle collision in which Mr. Downer’s car rear-ended Ms. Pitcher’s taxicab. There was no issue as to liability. The parties agreed on a settlement. Mr. Downer agreed to pay for the cost of repairs of Ms. Pitcher’s vehicle and to pay $300 for Ms. Pitcher’s lost income. In return, Ms. Pitcher signed, without legal advice, a document headed “Full and Final Release”. The document had been prepared based on a precedent given to Mr. Downer by a lawyer who was an acquaintance.

The document described itself as a “full and final compromise of all claims and proceedings … now or hereafter brought, for damages, loss or injury” in relation to the collision. Ms. Pitcher subsequently developed symptoms of soft tissue injury and made a claim against Mr. Downer. She argued that there was no “meeting of the minds” regarding the release and hence no concluded agreement. She argued she thought that the release related to property damage and income loss only.

The trial judge found that there was a concluded agreement that purported to cover personal injury claims, but found that the release was unconscionable according to equitable principles and declared that it was unenforceable. Mr. Downer appealed. Held: Appeal allowed, release declared enforceable. Green C.J.N.L. (Harrington and Hoegg JJ.A. concurring): The parties disagreed about the proper test for unconscionability established by the case law. One ought to use caution in placing too much emphasis on parsing the specific language used in reasons for judgment as if the words were enacted in a statute.

Eschewing attention to rigid linguistic formulae is especially important when dealing with equitable concepts and principles, as opposed to common law rules. It is the underlying rationale for the doctrine that must always be kept in mind when seeking to invoke the equitable jurisdiction of the Court. The scope of the Court’s equitable jurisdiction cannot be defined by focusing on the specific words used in individual judgments to explain how the judge reached the conclusion he or she did in one particular case. A return to first principles every time will likely yield a more satisfying result in each case.

Many of the early cases asserted a two-part test: (

i) proof of inequality in the bargaining position of the parties; and (ii) proof of an improvident bargain. In more modern times, the focus has been less on proof of an improvident bargain and more on determining whether a position of inequality existed and whether it was unfairly taken advantage of. The key question must be whether there was a degree of vulnerability that had the potential of materially affecting the ability, through rational autonomous decision-making, to protect one’s own interests.

If so, a duty will be cast on the other party not to act or to refrain from acting in such a way that the resulting transaction is reached in a manner that involves the victim being unfairly taken advantage of. Obviously, for the resulting transaction to be rendered impeachable, it must be shown that it resulted from the disadvantage that existed. It is not any inequality of position that will do.

It must be such that it has the potential for seriously affecting the ability of the relief- seeker to make a decision as to his or her own best interests and thereby allows the other party an opportunity to take advantage of the claimant’s personal or situational circumstances. The inequality must relate to a special and significant disadvantage that has the potential of overcoming the ability of the claimant to engage in autonomous self-interested bargaining.

It need not be found in some disabling circumstance affecting the physical or mental abilities of the claimant, but can result from situational circumstances such as severe

financial need or other external pressures or special relationships that require the claimant to place trust in or reliance on the othercontracting party. There has to be something more than mere inequality of information between the parties as to their respective legalpositions. The equitable jurisdiction is focused on protection of the vulnerable from an “unconscientious” use of a power imbalance.

While by itsnature the jurisdiction has to be based on some degree of fault or responsibility on the part of the person from whom relief is beingsought, there no reason why equity’s fastening on the “conscience” of the defendant to justify relief cannot include other forms of faultas well as actual knowledge of the disadvantage that is available to be taken. Actual knowledge in equity includes willful blindness orwillfully or recklessly failing to make relevant and reasonable inquiries, but constructive knowledge could also be covered.

The absence of legal or other suitable advice is not a requirement for relief; instead, the presence of relevant advice may be strongevidence that the claimant was not taken advantage of as a result of the inequality of bargaining power. In this case, absent any representation by him that misled Ms. Pitcher to think that the release did not cover personal injury and absentany knowledge by Mr. Downer that Ms. Pitcher was mistaken as to the scope of the release, Mr. Downer was not required, as a matter ofconventional contract law, to disabuse Ms.

Pitcher of any mistaken belief or to educate her as to the effect of the release on her legalrights. The trial judge nevertheless concluded that here was an inequality of bargaining power arising out of the ignorance, need or distress ofMs. Pitcher. The mere fact that a bargain turns out to be improvident or foolish for one party does not provide a basis for relieving thatparty from the product of his or her foolishness. In this case, aside from being described by the trial judge as “meek and unsophisticated”no personal special disadvantage existed.

As to the judge’s conclusion that an inequality existed because of “need”, resulting from Ms. Pitcher being deprived of income while hervehicle was being repaired, I am not satisfied that her potential loss of income for the short time the vehicle would be out of service wasof such a magnitude that she was placed at a significant disadvantage that compelled her to agree to disadvantageous terms. There was nodegree of vulnerability present that that could have been exploited by Mr. Downer.

In these circumstances the ordinary common lawpolicies of promoting sanctity of contract and permitting self-interested bargaining are not displaced by any equity based onunconscionability. Mr. Downer incurred a detriment in return for the total release. It cannot be said therefore that there was no consideration furnished forthe release of the personal injury claim.

Furthermore, the right of insured tortfeasors to make private agreements with tort claimants so as to avoid risk classificationreassessments by their insurers would be effectively negated if attempting to do so is regarded as an unconscionable attempt to takeadvantage of a tort claimant. The trial judge therefore erred in concluding that the release was unenforceable on grounds of unconscionability. The appeal wasallowed and the release declared enforceable. Cases cited: Howell v. Reitmans (Canada) Ltd. (2002), (NL SC), 215 Nfld. & P.E.I.R. 240 (Nfld. T.D.) Cain v.

Clarica Life Insurance Co., 2005 ABCA 437 Norberg v. Wynrib, (SCC), [1992] 2 S.C.R. 226 R. v. Henry, 2005 SCC 76, [2005] 3 S.C.R. 609 R. v. Hutchings, 2012 NLCA 2, 316 Nfld. & P.E.I.R. 211 R. v. Hart, 2012 NLCA 61, 327 Nfld. & P.E.I.R. 178 Harry v. Kreutziger (1978), (BC CA), 95 D.L.R. (3d) 231 (B.C. C.A.) Morrison v. Coast Finance Ltd. et al (1965), (BC CA), 55 D.L.R. (2d) 710 (B.C. C.A.)

Stephenson v. Hilti (Canada) Ltd (1989), (NS SC), 93 N.S.R. (2d) 366 (N.S. S.C.) Floyd v. Couture, 2004 ABQB 238, [2005] 3 W.W.R. 287 Titus v. William Cooke Enterprises Inc., 2007 ONCA 573 Lloyd’s Bank Ltd. v. Bundy, [1975] Q.B. 326 Hodgskinson v. Simms, (SCC), [1994] 3 S.C.R. 377 Dyck v. Man. Snowmobile Ass. Inc., (SCC), [1985] 1 S.C.R. 589 Hunter Engineering Co. v. Syncrude Canada Ltd., (SCC), [1989] 1 S.C.R. 426 Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494 Miglin v. Miglin, 2003 SCC 24, [2003] 1 S.C.R. 303 Torrance v. Bolton (1872), 8 Ch. App 118 Fry v. Lane (1888), 40 Ch. D. 312 Lono v.

Lono (1984), 52 Nfld. & P.E.I.R. 208 Eagle Construction Ltd. v. Chaytor (1986), 58 Nfld. & P.E.I.R. 23 (T.D.) Campbell v. Campbell (No. 2) (1990), (NL SC), 83 Nfld. & P.E.I.R. 340 (T.D.) Russell v. Mifflin (S.W.) Ltd. (1991), (NL SC), 89 Nfld. & P.E.I.R. 168 (T.D.) Mushrow v. Mushrow (1986), (NL CA), 60 Nfld. & P.E.I.R. 305 (Nfld. C.A.) National Westminster Bank, plc v. Morgan, [1985] A.C. 686 (H.L.) Commercial Bank of Australia Ltd. v. Amadio (1983), 151 CLR 447 Chesterfield v. Janssen (1750), 2 Ves. Sen. 125 Kakavas v. Crown Melbourne Ltd. (2013), 298 ALR 35 Albert Pearl (Management) Ltd. v. J.D.F.

Builders Ltd., (SCC), [1975] 2 S.C.R. 846 Counsel: Edward Vankerkloet, for the appellant; Toby Bristow, for the respondent. This appeal was heard on December 17, 2014 before Green C.J.N.L, Harrington and Hoegg JJ.A. The following judgment was delivered on February 21, 2017 by Green C.J.N.L. for the Court. ______________________________________________________________ Green C.J.N.L.: [1] This appeal addresses whether a trial judge erred in setting aside a release, made as part of settling a motor vehicle damageclaim, on the grounds of unconscionability. The specific issues to be addressed on appeal are:

(1) Whether the trial judge erred in her formulation of the test for applying the doctrine of unconscionability;

(2) Whether the trial judge erred in applying the proper legal test to the evidence and in concluding that (

a) there was an inequality ofbargaining power between the parties; (

b) the inequality was improperly exploited by the appellant; and (

c) the settlement was unfair inthe sense of being unconscionable.

Context [2] The release arose out of discussions between Mr. Downer, the appellant, and Ms. Pitcher, the respondent, following a vehiclecollision in which Mr. Downer’s car rear-ended Ms. Pitcher’s taxicab. There was no issue as to liability. Mr. Downer agreed to pay forthe cost of repairs of Ms. Pitcher’s vehicle and to pay $300 as compensation for income lost while Ms. Pitcher’s taxicab was out ofservice being repaired. In return, Ms. Pitcher signed, without legal advice, a document headed “Full and Final Release” which wassubsequently presented to her by Mr. Downer.

The document had been prepared based on a precedent given him by a lawyer who was anacquaintance. [3] The document purported to release Mr. Downer “without qualification or limitation” from all claims and causes of actionincluding “not only all known injuries, losses and damages, but also injuries, losses and damages not now known or anticipated butwhich may later develop or be discovered.” The document also described itself as a “full and final compromise of all claims andproceedings … now or hereafter brought, for damages, loss or injury” in relation to the collision.

It is conceded for the purposes of thisappeal that the words chosen cover claims for physical injuries arising in the future. [4] Although Ms. Pitcher said she felt fine at the time of signing the release, she developed symptoms of soft tissue injuryapproximately seven months later and made a claim against Mr. Downer, claiming that there was no “meeting of the minds” and henceno concluded agreement on essential terms (relinquishment of claims for personal injury) because when she signed the release she didnot read it in its entirety and she thought that it related to property damage and income loss only.

The trial judge found that there was aconcluded agreement that purported to cover personal injury claims. Her conclusions in that regard are not challenged on this appeal. [5] The trial judge did, however, conclude that the release was unconscionable according to equitable principles and declared that itwas unenforceable so that Mr. Downer could not rely upon it to preclude Ms. Pitcher from advancing her personal injury claim. Mr.Downer challenges that result. Unconscionability: Principles (

a) The Futility of Using Linguistic Formulae for Determining Unconscionability Issues [6] Mr. Downer submits that the trial judge formulated and applied the wrong test for determining whether an agreement can be setaside on grounds of unconscionability. It is therefore necessary to examine the scope of the jurisdiction of the Court in this regard. [7] The trial judge purported to apply the “test for unconscionability” set out in Howell v. Reitmans (Canada) Ltd. (2002), (NL SC), 215 Nfld. & P.E.I.R. 240 (Nfld.

T.D.), which stated as follows: [21] … Exceptionally, a court will set aside a release or refuse to enforce it if the circumstances demonstrate that the bargain arrived atwas unconscionable… [22] To establish unconscionability, three things should generally be shown: 1. There was an inequality of bargaining position arising out of ignorance, need or distress of the weaker party; 2. The stronger party unconscientiously used a position of power to achieve an advantage; and 3.

The agreement reached was substantially unfair to the weaker party or substantially divergent from community standards ofcommercial morality that it should be set aside. (Underlining added.) [8] Mr. Downer had submitted that the test was more properly described in the Alberta Court of Appeal decision in Cain v.

ClaricaLife Insurance Co., 2005 ABCA 437 which, after referring to a number of cases, approached the matter using these words: [32] Those authorities discuss four elements which appear to be necessary for unconscionability. (Some cases state some of the four asexceptions to be disproved by the alleged oppressor, but nothing turns on onus in this case.) The four necessary elements are: 1. a grossly unfair and improvident transaction; 2. victim’s lack of independent legal advice or other suitable advice; 3. overwhelming imbalance in bargaining power caused by victim’s ignorance of business, illiteracy, ignorance of the language of thebargain, blindness, deafness, illness, senility, or similar disability; and 4. other party’s knowingly taking advantage of this vulnerability. (Underlining added.) [9] The trial judge rejected this alternative formulation and purported to apply the Howell formulation, characterizing the Howelltest as “a slightly lower threshold” (paragraph 64).

In differentiating between the two formulations, she focused on the “more extremelanguage” used in Cain by referring to and comparing the adjectives and adverbs underlined in the quotations above. [10] At this point, it is also worth noting that, in addition to using “more extreme” descriptors in the formulation of the test, Cain alsorequires, as “necessary” elements that must be present, that (

i) the victim have a lack of independent legal or other suitable advice; and(ii) the other party must “knowingly” take advantage of the victim’s vulnerability, i.e. he or she must have actual knowledge of the

victim’s disability.

In contrast, lack of legal advice is not mentioned as an element of the test in Howell, nor is actual knowledge of thevictim’s vulnerability required, only that there be a use of or reliance on a power imbalance that is characterized in all the circumstancesas “unconscientious.” [11] In Cain, Coté J.A. observed that the tests for determining unconscionability “are not always stated the same way” (paragraph 31).In saying this, he was recognizing that this area of the law has seen, in its development, a considerable degree of fluidity in the way theunderlying concept has been formulated and applied in concrete situations.

As noted by Sopinka J. in obiter in Norberg v. Wynrib , (SCC), [1992] 2 S.C.R. 226 at 309, “the doctrine of unconscionability and the related principle of inequality of bargainingpower are evolving and, as yet, not completely settled areas of the law of contract.” This is no doubt due in part to the tension thatnecessarily exists at the intersection of the operation of the doctrine with traditional notions of freedom and sanctity of contract, asexemplified in such notions as caveat emptor and the refusal of the court to inquire into the adequacy of consideration.

The scope of thedoctrine is also affected by having to make conceptual distinctions from other related equitable remedies based on claims of duress,undue influence, mistake and misrepresentation, among others. [12] One ought to use caution in placing too much emphasis on parsing the specific language used in reasons for judgment as if thewords were enacted in a statute: R. v. Henry, 2005 SCC 76, [2005] 3 S.C.R. 609 at paragraph 57; R. v. Hutchings, 2012 NLCA 2, 316Nfld. & P.E.I.R. 211 at paragraphs 60-61; R. v. Hart, 2012 NLCA 61, 327 Nfld. & P.E.I.R. 178 at paragraphs 195-197.

Parsing the wordsin a statute is unlike the process of interpreting and giving life to general common law, let alone equitable, principles stated by a judge inthe course of his or her reasons in a judgment. As Goodhart reminds us, “the first rule for discovering the ratio decidendi of a case is thatit must not be sought in the reasons on which the judge based his decision” (Arthur L.

Goodhart, “Determining the Ratio Decidendi of aCase” (1930), 40 Yale L.J. 161 at 164); rather, it is to be sought in a reconstructed principle that best explains the result by reference tothe facts of the case that are deemed material by the judge. Again in Goodhart’s words: … it is not the rule of law “set forth” by the court, or the rule “enunciated” as Halsbury puts it, which necessarily constitutes theprinciple of the case.

There may be no rule of law set forth in the opinion, or the rule when stated may be too wide or too narrow …Nevertheless each of these cases contains a principle which can be discovered on proper analysis. [13] Eschewing attention to rigid linguistic formulae is especially important when dealing with equitable concepts and principles, asopposed to common law rules. Equity fashions its principles and remedies by reference to the conscience of the parties as displayed inthe particular circumstances of the case.

Those circumstances are infinitely variable and often do not admit of a rule-based result relyingon a formulaic “test.” It is the underlying rationale for the doctrine that must always be kept in mind when seeking to invoke theequitable jurisdiction of the court. [14] Debating, in a particular case, whether there was an “overwhelming imbalance” or merely an “inequality” of bargaining power orwhether the transaction was “grossly” or merely “substantially” unfair – to focus on some of the differences in language in Cain andHowell – is a sterile and artificial exercise.

Such adjectives have differing penumbras of meaning depending on who is employing them. In Harry v. Kreutziger (1978), (BC CA), 95 D.L.R. (3d) 231 (BCCA) Lambert J.A. warned that focusing on suchlanguage differences may deflect from considering and applying correctly the principle underlying the court’s jurisdiction.

He argued forthe formulation of a broad principle rather than focusing on questions such as: [29] … a consideration of whether the consideration was grossly inadequate, rather than merely inadequate, separate from theconsideration of whether bargaining power was grievously impaired, or merely badly impaired.

Such separate consideration of separatequestions produced by the application of a synthetic rule tends to obscure rather than aid in the process of decision. [15] Lambert J.A. advocated that “the single question is whether the transaction, seen as a whole, is sufficiently divergent fromcommunity standards of commercial morality that it should be rescinded.” While I do not agree that this is the appropriate or sufficientformulation of the scope of the jurisdiction, I do agree that the scope cannot be defined by focusing on the specific words used inindividual judgments to explain how the judge reached the conclusion he or she did in one particular case. [16] Indeed, the descriptors used in setting out the applicable principles are not uniform in other case law or in academic discussion.See Morrison v.

Coast Finance Ltd. et al (1965), (BC CA), 55 D.L.R. (2d) 710, per Davey J.A. at p. 713 and SheppardJ.A. at p. 721; Harry v. Kreutzier, per McIntyre J.A. at paragraph 15; Stephenson v. Hilti (Canada) Ltd (1989), (NSSC), 93 N.S.R. (2d) 366 per Hallett J. at p. 87; Floyd v. Couture 2004 ABQB 238, [2005] 3 W.W.R. 287, per Coutu J. at paragraphs 139-152; Titus v. William Cooke Enterprises Inc., 2007 ONCA 573, per MacPherson J.A. at paragraph 38; Bradley Crawford, “Restitution –Unconscionable Transaction – Undue Advantage Taken of Inequality Between Parties” (1966) 44 Can. B.

Rev. 142 at p. 143; S.M.Waddams, “Unconscionability in Contracts” (1976) 39 Can B. Rev. 369 at p.392. [17] Although the Supreme Court of Canada has not dealt with the issue from a comprehensive doctrinal point of view, it has hadoccasion to refer to the nature of the unconscionability jurisdiction tangential to dealing with other issues. When doing so, the descriptivelanguage employed is equally non-uniform. See Norberg v.

Wynrib per LaForest J. (“overwhelming imbalance in the power relationship”(para 30); “an inequality of bargaining power” (33; 41); “grossly inadequate” consideration (31, quoting Denning M.R. in Lloyd’s BankLtd. v. Bundy, [1975] Q.B. 326 at p. 339); “improvident” bargain (41)); Hodgskinson v. Simms, (SCC), [1994] 3 S.C.R.377, per LaForest J. (“abuse of a pre-existing inequality of bargaining power” (para 27); Dyck v. Man. Snowmobile Ass.

Inc., (SCC), [1985] 1 S.C.R. 589, per Curiam (“differences between the bargaining strength of the parties … where the strongerparty has taken unfair advantage of the other” (p. 592); Hunter Engineering Co. v.

Syncrude Canada Ltd., (SCC),[1989] 1 S.C.R. 426, per Wilson J. (“inequality of bargaining power … to permit the strong to take advantage of the weak in the makingof the contract” (p. 516). [18] At most, the adjectives chosen – all of which emphasize that something out of the ordinary should be present – should beregarded simply as shorthand ways of emphasizing that something substantially more than bargaining imbalance simpliciter and aprecise measuring of the benefits of the transaction in a meticulous search for any slight difference in relative advantage anddisadvantage, is required.

Without this emphasis, the fundamental underpinnings of the traditional notions of freedom of contract, basedon the idea that one can bargain in a self-interested way so long as bargaining process standards (no fraud, duress, undue influence,

misrepresentation, etc.) are observed, would be significantly undermined. As noted by Cromwell J. in obiter in Bhasin v. Hrynew, 2014SCC 71, [2014] 3 S.C.R. 494 at paragraph 74, the doctrine of unconscionability by its nature “impose[s] limits on the freedom ofcontract.” Generally speaking, however, restrictions on freedom of contract are process-related and do not extend into regulating thesubstance of a transaction that is a result of a process that is not tainted by fair process concerns. [19] The evaluation of the merits of the transaction is generally for the parties, not the courts, to determine.

The point was put thisway by LeBel J., dissenting (but not on this point) in obiter in Miglin v. Miglin, 2003 SCC 24, [2003] 1 S.C.R. 303: [208] … The stringency of the test for unconscionability reflects the strong presumption that individuals act rationally, autonomouslyand in their own best interests when they form private agreements.

Non-enforcement of the parties’ bargain is only justified when thetransaction is so distorted by unequal bargaining power that this presumption is displaced. [20] A level of unequal bargaining power that distorts a transaction to the point that the presumption of rational autonomy in self-interested contract-making is displaced is a better way of describing the point at which equity should intervene than by simply using asingle adjective that is malleable in its meaning.

It ties the examination to a consideration of the underlying purpose of equitableintervention and its place among the fundamental concepts that support contractual enforceability. That said, any attempt to define abright line that clearly identifies on which side of the line a particular case falls will likely fail. That is why a return to first principlesevery time will likely yield a more satisfying result in each case. (

b) Scope of the Jurisdiction to relieve Against Unconscionable Bargains [21] Notions of unconscionability as a means of relieving a party from his or her bargain have existed in the law for a long time, butthey originally grew up in discrete categories directed at specific (and narrow) categories of power imbalance. The equitable principlesthat allowed for relief against “catching bargains” with heirs and reversioners are early examples. See the discussion by G.W. Keaton inAn Introduction to Equity, 6th ed. (London: Sir Isaac Pitman & Sons Ltd., 1965),

Chapter 12, which collects early examples of casesdealing with inequitable and “unconscientious” bargains under the general heading of “Fraud in Equity”. Citing James L.J. in Torrance v.Bolton (1872), 8 Ch.

App 118, Keaton asserts that “‘fraud’ came to include a wide range of transactions ‘in which the court is of opinionthat it is unconscientious for a person to avail himself of the legal advantage which he has obtained.’” Although “unconscientious” has anumber of diverse meanings, in the current context it refers to situations where a person seeks to take advantage of a legal position andequity, in response, fastens upon the conscience of the individual and provides a remedy to prevent him or her from unfairly takingadvantage of that position. [22] The decision of Kay J. in Fry v. Lane (1888), 40 Ch.

D. 312, which dealt with a case of poor and ignorant persons entitled to areversionary interest who were induced to sell at an undervalue without independent advice, attempted to express the applicableprinciples in terms of the ignorance and vulnerability of the vendors, regardless of their reversionary status, thus providing a moregeneral and broader principle for the exercise of the equitable jurisdiction. [23] The key to the granting of relief in most of the early cases was the vulnerability stemming from some mental or physical frailtyor need of the party seeking relief which was capable of being – and was - taken advantage of by the other, stronger, party.

As LaForestJ. noted in obiter in Norberg, the doctrine of unconscionability (among other doctrines) has “arisen to protect the vulnerable when theyare in a relationship of unequal power” (paragraph 28). [24] There is a discernible reluctance in the case law towards allowing a generalized doctrine of unconscionability based on simplenotions of unfairness to supercede or undermine common law doctrines of freedom of contract. Thus it is often reiterated that there is nogeneral power in the courts to protect people from improvident or foolish bargains.

To assert otherwise would be to interfere with self-interested bargaining. The struggle has been to find an appropriate principled balance between continuing to recognize freedom ofcontract while ensuring that the mechanistic application of that doctrine does not become an instrument of abuse in ways that wouldgenerally be regarded as unfair. [25] The modern era of the articulation of the principles that will allow disregarding the strict notion of freedom of contract in order toprovide relief on grounds of unconscionability stems from the British Columbia Court of Appeal decision in Morrison v. Coast FinanceLtd.

Davey J.A. articulated the principle as follows at p. 713: … a plea that a bargain is unconscionable invokes relief against an unfair advantage gained by an unconscientious use of power by astronger party against a weaker. On such a claim the material ingredients are proof of inequality in the position of the parties arising outof the ignorance, need or distress of the weaker, which left him in the power of the stronger, and proof of substantial unfairness of thebargain obtained by the stronger.

On proof of those circumstances, it creates a presumption of fraud which the stronger must repel byproving that the bargain was fair, just and reasonable. …; or perhaps by showing that no advantage was taken. [26] Davey J.A.’s description in Morrison has been cited and relied on in numerous subsequent cases. See e.g. Norberg, per LaForestJ. at paragraph 30 and Sopinka J. at paragraph 138; Lono v. Lono (1984), 52 Nfld. & P.E.I.R. 208, per Cameron J. at p. 213; EagleConstruction Ltd. v. Chaytor (1986), 58 Nfld. & P.E.I.R. 23 (NFSC, TD) per Noel J. at p. 29; Campbell v.

Campbell (No. 2) (1990), (NL SC), 83 Nfld. & P.E.I.R. 340 (NFSC TD), per L.D. Barry J. at p. 349; Russell v. Mifflin (S.W.) Ltd. (1991), (NL SC), 89 Nfld. & P.E.I.R. 168 (NFSC, TD), per L.D. Barry J. at paragraph 24. Other cases, while not citing Morrison,express a similar approach. See Mushrow v. Mushrow (1986), (NL CA), 60 Nfld. & P.E.I.R. 305 (NFCA), per GushueJ.A. at p. 306. [27] All of the foregoing cases assert a two-part test: (

i) proof of inequality in the bargaining position of the parties; and (ii) proof ofan improvident bargain. [28] Bradley Crawford, in a well-known case comment in the Canadian Bar Review in the year following Morrison (44 Can. B. Rev.142) purported to summarize the law to that point by stressing the same two “ingredients” mentioned by Davey J.A. (inequality in theposition of the parties arising out of ignorance, need or distress and substantial unfairness of the resulting bargain). He stated it this wayat p. 143:

… the courts intervene to rescind the contract whenever it appears that one of the parties was incapable of adequately protecting his interests and the other has made some immoderate gain at his expense. If the bargain is fair the fact that the parties were not equally vigilant of their interest is immaterial. Likewise if one was not preyed upon by the other, an improvident or even grossly inadequate consideration is no ground upon which to set aside a contract freely entered into.

It is the combination of the inequality and improvidence which alone may invoke this jurisdiction. (Emphasis added.) [ 29 ] Crawford nevertheless bemoaned the fact that the amorphous nature of the jurisdiction rendered its application uncertain in practice, noting that one’s perception of what amounts to taking undue advantage and what amounts to inequality often depends on the eye of the beholder. He therefore argued, at the very least, against loosening the jurisdiction and urged that both elements must be present “in compelling degree” (p. 147).

Indeed, the twin factors of inequality and resulting unfair bargain have often been reiterated in subsequent cases as being the two fundamental requirements for the exercise of the unconscionability jurisdiction. [ 30 ] Attempts have been made subsequently to reformulate the principles and widen the circumstances where relief could be given. One of the most well-known is Lord Denning’s attempt in Lloyd’s Bank v.

Bundy to collapse notions of unconscionability, as described in Morrison , as well as other concepts such as fraud, duress, undue influence and undue pressure into one general notion of inequality of bargaining power. His attempted reformulation has been criticized and not been widely accepted. See e.g. National Westminster Bank, plc v. Morgan , [1985] A.C. 686 (H.L.) , Swan, Canadian Contract Law, 1st ed. (Markham, ON: LexisNexis, 2006), pp. 673- 675. [ 31 ] A narrower attempt to reformulate the unconscionability jurisdiction has also been advocated.

This approach questions the need, in every case, to establish that the bargain resulting from inequality of position is improvident or unfair. Professor S.M. Waddams, The Law of Contracts (Toronto: Canada Law Book Inc., 2010), p. 399 expresses it this way: … not every case lends itself to analysis in terms of equality of exchange and sometimes it may be that there is a case for relief even when the values exchanged are approximately equal. … One intending to leave a farm to her son is persuaded to sell it to a stranger.

Even though the sale is for full value there is, surely, a case for relief if the stranger uses unfair methods to induce agreement. A young man is persuaded to purchase twenty years of dancing lessons. If the person was influenced to agree to the transaction by abuse by the dancing instructor of an emotional relationship it should, surely, be no answer to a claim for relief that the lessons were worth the agreed price. [ 32 ] Mitchell McInnes, The Canadian Law of Unjust Enrichment and Restitution (Markham, ON: LexisNexis, 2014) also makes the same point but in a slightly different way.

He argues that the organizing principle justifying the application of the unconscionability doctrine should only be based on procedural unfairness rather than substantive unfairness. That means that the second prong of the Morrison formulation (improvidence in the result – an element of substantive unfairness) would not necessarily be a requirement. He puts it this way at p. 552: A purely procedural model of unconscionability also better accords with the fundamental principles underlying unjust enrichment.

In formulating laws to govern private transactions, a liberal society must focus on procedures, rather than results. The aim is not to secure equality of holdings or even equivalence of exchange. Rather, it is to establish a system within … which each person, as an autonomous agent, is entitled to pursue individualized goals. Freedom of choice, of course, entails the right to choose well and to choose poorly. In terms of material outcomes, success and failure are inevitable incidents of liberalism and therefore provide no basis for state intervention.

The only transactions that ought to be upset arguably are those that … violate the rules implemented to ensure procedural fairness. If procedural fairness, in itself, does constitute a sufficient ground for relief, an additional requirement of substantive unfairness may be worse than superfluous – if may engender injustice. Despite finding that the defendant unfairly took advantage of the claimant’s weakness, a court would be compelled to uphold a transfer if the impugned exchange was supported by sufficient consideration. The result would often be repugnant.

It arguably is inappropriate, for instance, to deny relief to the befuddled pensioner who was duped into selling her home at market value. [ 33 ] McInnes makes the same point as Waddams: an absolute requirement, as a condition of relief, that the claimant for relief must show a substantial unfairness of the bargain obtained by the stronger (per Davey J.A. in Morrison ) may work an injustice in some cases.

It does not adequately take account of the exceptional case where the “advantage” gained from the unequal relationship may not be a resulting unequal bargain but may include the conferring of intangible benefits (such as obtaining a unique heirloom which the vulnerable owner would not, but for the unequal relationship, have wanted to sell, whether for a fair price or not). [ 34 ] This point is now recognized in Australia where proof of substantial unfairness is no longer regarded as a condition of relief. See Bigwood, “Antipodean Reflections on the Canadian Unconscionability Doctrine” (2005), 84 Can B.

Rev. 171 at pp. 178-192; Commercial Bank of Australia Ltd. v. Amadio (1983), 151 CLR 447 . That is not to say, of course, that substantial unfairness of the resulting transaction is no longer a relevant consideration in the unconscionability analysis, just that it is not a necessary requirement in all cases.

Existence of substantial unfairness of the resulting bargain will still be important, as McInnes notes at p. 550, “not as an element of unconscionability per se , but rather as evidence of a procedurally flawed disposition.” It may support the inference that a position of disadvantage existed and it may also show that an unfair use was made of the position of disadvantage by the other party. [ 35 ] Jettisoning the requirement of a resulting improvident bargain as a requirement for the application of the unconscionability doctrine, and affirming it, instead, as an important consideration in determining whether a position of inequality existed and whether it was unfairly taken advantage of will bring the doctrine into line with the early English cases which placed emphasis on vulnerability resulting from a disparity of bargaining positions and the taking advantage of that vulnerability.

See for example, Chesterfield v. Janssen (1750), 2 Ves. Sen. 125 where Lord Hardwicke stressed the need to “prevent taking surreptitious advantage of the weakness or necessity of another.” [ 36 ] In more modern times, the same emphasis appears in some cases in the Supreme Court of Canada without reference to a resulting improvident bargain. See Dyck , referring simply to holding a transaction unconscionable and unenforceable “where the stronger party has taken unfair advantage of the other,” and Hunter Engineering per Dickson C.J. at p. 462 describing unconscionability simply as

“situations of unequal bargaining power between the parties” and per Wilson J. at p. 516, referring to “the source of unconscionability” being “traditionally” inequality of bargaining power permitting “the strong to take advantage of the weak in the making of the contract,” and Hodgskinson v.

Simms per LaForest J. who wrote at paragraph 27 of unconscionability being “triggered” by abuse of a pre-existing inequality of bargaining power and at paragraph 35 of the vulnerability of people in a “power-dependency” relationship. [ 37 ] Viewed in this light, the key question must be whether there was a degree of vulnerability that had the potential of materially affecting the ability, through rational autonomous decision-making, to protect one’s own interests.

If so, a duty will be cast on the other party not to act or to refrain from acting in such a way that the resulting transaction is reached in a manner that involves the victim being unfairly taken advantage of. As expressed by Coutu J. in Floyd v. Couture et al at paragraph 146 , “what is meant by inequality in power is where one party is at a serious disadvantage, so serious that they can be taken advantage of or exploited.” [ 38 ] Obviously, for the resulting transaction to be rendered impeachable, it must be shown that it resulted from the disadvantage that existed.

Only then can it be said that the claimant has been taken advantage of. (

c) The Nature of the Required Inequality of Bargaining Power [ 39 ] It is not any inequality of position that will do. As Coutu J. observed in Floyd v. Couture , every contract involves some disparity between the parties in terms of bargaining power. It must be such that it has the potential for seriously affecting the ability of the relief- seeker to make a decision as to his or her own best interests and thereby allows the other party an opportunity to take advantage of the claimant’s personal or situational circumstances. That is why terms such as “overwhelming” or “substantial” or “special” have been used.

While trying not to fall back into the linguistic trap I have eschewed previously, I would venture to say that what is meant by such terminology is that the inequality must relate to a special and significant disadvantage that has the potential of overcoming the ability of the claimant to engage in autonomous self-interested bargaining. [ 40 ] Furthermore, there has to be something more than mere inequality of information between the parties as to their respective legal positions. Rarely will the knowledge platform or appreciation base be the same on each side.

As Swan observes in Canadian Contract Law (Markham, Ontario: Lexis Nexis Butterworths, 2006) at 675: The other important aspect of inequality is the unequal possession of or access to information on the terms of the transaction, its consequences and the alternatives. It is almost inevitable that there will be this kind of inequality in any contract between a merchant and a consumer or even between a large corporation and a very much smaller one or a business person on his or her own. The important question will be whether this kind of inequality is a proper basis for relief.

From one point of view, it is essential that such an imbalance by itself not be a basis for relief, for otherwise most consumer and many commercial contracts would be little better than voidable. (Underlining added.) [ 41 ] The type of inequality, whether lack of knowledge or otherwise, must be significant in the sense that it allows for the potential of someone being unfairly taken advantage of. The early cases talked in terms of physical and mental disability or economic need. But the relief cannot be limited to that; there cannot be a closed list of categories. It will be a fact to be proven in each case.

In Norberg LaForest J. in obiter commented: [33] An inequality of bargaining power may arise in a number of ways. As Boyle and Percy, Contracts: Cases & Commentaries, 4th ed., (Toronto: Carswell, 1989), note at pp. 637-38: [A person] may be intellectually weaker by reason of disease of the mind, economically weaker or simply situationally weaker because of temporary circumstances. Alternatively, the “weakness” may arise out of a special relationship in which trust and confidence has been reposed in the other party. The comparative weakness or special relationship is, in every case, a fact to be proven.

As the last sentence of this passage suggests, the circumstances of each case must be examined to determine if there is an imbalance of power in the relationship between the parties. [ 42 ] It follows that the inequality need not be found in some disabling circumstance affecting the physical or mental abilities of the claimant.

The inequality can result from situational circumstances such as severe financial need or other external pressures or special relationships that require the claimant to place trust in or reliance on the other contracting party. [ 43 ] But whatever the nature of the circumstance creating the conditions of inequality, they must be significant in the sense that they have the potential of resulting in the claimant being unfairly taken advantage of and they must in fact lead to that advantage being taken. (

d) Taking Advantage: Knowledge of the Claimant’s Disadvantageous Situation [ 44 ] The next question is whether the resulting transaction must come about as a result of the stronger party’s intending or at least knowing that the power imbalance is bringing about this result. The case law is replete with phrases such as the “unconscionable” or “unconscientious” (in the sense of lacking conscience) use of power or “exploitation” or “abuse” of the vulnerable position of the claimant. These phrases imply that the stronger party must knowingly act.

In fact, in many cases, it is expressly stated that the defendant must “knowingly” take advantage of the other’s vulnerability. See, for example, Earl of Chesterfield v. Janssen where Lord Hardwicke wrote of taking surreptitious advantage of the weakness or necessity of another “which knowingly to do is equally against conscience as to take advantage of his ignorance [p. 155; emphasis added]. Similarly, Cain , quoted earlier, expressly refers to knowingly taking advantage.

Indeed, this idea is consistent with the notion of equity fastening on the conscience of an individual and providing a remedy to prevent him or her from seeking to take unfair advantage of a legal position in unconscientious circumstances. But what type of knowledge is required? Is it limited to actual knowledge or can some form of constructive knowledge suffice? As McInnes points out, the

point is unsettled in Canada (p. 546). [ 45 ] The notion of exploiting an unequal relationship or victimizing or preying upon or even simply taking advantage of the other party would suggest that there must be some culpability or fault on the party from whom relief is being sought. Yet from the point of view of the relief-seeker, the victimization resulting from the events that occur is the same whether or not the other party was a knowing participant. He or she will still be a “victim” of the situation.

Indeed, so long as the other party has not acted to his prejudice in reliance on the transaction or cannot rely on some other restitutionary defence such as change of position or estoppel, why should a requirement of knowledge make any difference? [ 46 ] Limiting the relief to circumstances where there is actual knowledge favours transactional security and enhances freedom of contract whereas extending relief to circumstances involving a broader conception of knowledge will promote the notion of protecting the weak, naïve or innocent as the primary consideration.

The equitable jurisdiction is focused on protection of the vulnerable from an “unconscientious” use of a power imbalance.

While by its nature the jurisdiction has to be based on some degree of fault or responsibility on the part of the person from whom relief is being sought, I see no reason why equity’s fastening on the “conscience” of the defendant to justify relief cannot include other forms of fault as well as actual knowledge of the disadvantage that is available to be taken. [ 47 ] Actual knowledge in equity of course includes willful blindness or willfully or recklessly failing to make relevant and reasonable inquiries, but in my view constructive knowledge such as knowledge of circumstances as would indicate special and significant disadvantage flowing from relationship inequality could also be covered.

In other words, if the person from whom relief is being sought knew or ought to have known of the disadvantage and the opportunity to be had if the disadvantage were exploited, and jumped at the chance, that should be enough. [ 48 ] I recognize that this conclusion is inconsistent with the recent decision of the High Court of Australia in Kakavas v.

Crown Melbourne Ltd. (2013) , 298 ALR 35 which held, in the context of construing a statutory provision relating to unconscionable transactions relief, that actual knowledge of the victim’s disadvantage was required in order to constitute exploitive conduct in the sense of preying upon the victim, but that decision has been criticized on this point. See Bigwood, “Still Curbing Unconscionability: Kakavas in the High Court of Australia” (2013), 37 Melbourne University Law Review 465.

I am not persuaded to follow Kakavas . [ 49 ] I am satisfied that it would be open to a court in an appropriate case to conclude that unconscionable behavior exists on the part of the person from whom relief is being sought where that person (

i) actually knew of, (ii) was willfully blind to, (iii) willfully or recklessly failed to make reasonable inquiries concerning, or (iv) had knowledge of circumstances that pointed to, special and significant disadvantage created or flowing from an inequality of bargaining relationship that presents an opportunity for that person being taken advantage of. (

e) Role of Legal Advice [ 50 ] In Cain , Justice Coté stated that “lack of independent legal advice or other suitable advice” was a requirement of entitlement to relief on grounds of unconscionability. That would mean that being legally or otherwise suitably advised would automatically be fatal to a claim. I do not share this view. [ 51 ] I recognize that even in the early cases, such as Fry v. Lane, the absence of protective legal advice was regarded as an important factor in the granting of relief. But that is not the same as saying that the presence of advice automatically disentitles one to relief.

Clearly, a person facing serious disadvantage that was capable of being taken advantage of and who proceeds in the face of comprehensive and relevant legal advice that points out the disadvantage and cautions not to proceed will face a very difficult time in being able to justify a claim for relief. But that begs the question as to what the nature of the advice is and whether there might be also other aspects of the inequality of bargaining power that might be influencing the relief-seeker to proceed anyway.

What if the legal advice was incompetent or was pro forma in nature and did not address the issues under consideration? The most one can say is that the presence of advice may, in a particular circumstance, level the playing field and may remove any concerns about victimization, thereby providing a defence to an otherwise apparent claim. [ 52 ] I therefore prefer not to state the absence of legal or other suitable advice as a requirement for relief; instead, the presence of relevant advice may be strong evidence that the claimant was not taken advantage of as a result of the inequality of bargaining power.

Re-statement of the Applicable Principles [ 53 ] Although generally the courts should try to develop and apply the common law and equity in a uniform manner throughout the country (except where local conditions may dictate otherwise), in this case there is little consistency on this subject throughout the country and no definitive guidance from the Supreme Court of Canada.

Further, there is no definitive statement on the subject from previous decisions of this Court, except possibly Mushrow which contained three separate opinions which were not all expressed in the same way. [ 54 ] Under these circumstances, I believe the applicable principles could be stated as follows: 1 . A person claiming relief on grounds of unconscionability may succeed where: (

a) there is an inequality of bargaining power between the parties resulting from or created by a special and significant disadvantage by reason of some condition or circumstance that provides an opportunity for the other party to take advantage of the party suffering from the disadvantage; and (

b) the other party unfairly or unconscientiously (in the sense of lacking conscience) takes advantage of that opportunity.

2 . Inequality of bargaining position that is relevant to a claim for relief on grounds of unconscionability may arise from the personal characteristics of the claimant or the situation in which he or she finds him- or her- self. For example, (

a) personal inequality could include special and significant disadvantage resulting from age, immaturity, senility, mental weakness, ignorance resulting from lack of access to critical information or physical disability; (

b) situational inequality could include special and significant disadvantage resulting from severe financial need or other pressure or dependence based on a trust or confidential relationship.

No matter what the nature of the disadvantage, however, it must involve more than what would be regarded as reasonably tolerable differences and risks of normal human activity and interaction that one would expect from persons engaged in self-interested bargaining (i.e. the disadvantage must be “special”) and it must also have the potential, if allowed to govern the relationship, of the claimant being unfairly being taken advantage of (i.e. the disadvantage must be “significant”). 3 .

The advantage resulting from the inequality of bargaining power need not be a financial advantage; it could be of a more intangible kind that results in a transaction that, but for the disadvantage, the relief-seeker or no reasonable person in the position of the relief-seeker would not likely have entered into. 4 .

The circumstances surrounding the taking of advantage of the relief-seeker must be such that they make the other party’s actions unconscientious in the sense that in gaining the advantage the other party knew or ought, as a reasonable person in those circumstances, to have known of the relief-seeker’s vulnerability, therefore making it prima facie unfair or unconscionable for the other party to obtain and retain the benefit from the disadvantaged party.

Knowledge could be either actual (personal, willful blindness or willful or reckless failure to make relevant and reasonable inquiries) or constructive (knowledge of circumstances as would indicate, in the mind of a reasonable person, the relief-seeker’s vulnerability). 5 . Where the conditions in (1) are present, the normal policies of preserving the freedom and sanctity of contract will be displaced in favour of providing relief to the party claiming to have been taken advantage of, unless the other party can demonstrate: (

a) the resulting transaction was not unfair in the sense that it was not improvident or otherwise did not in fact confer an undue advantage, whether tangible or intangible, on the other party; (

b) the relief-seeker had the benefit of relevant legal or other advice and, knowing of the disadvantage, voluntarily chose to proceed with the transaction anyway; (

c) the other party took steps to bring the unequal circumstances to the attention of the relief-seeker or otherwise acted reasonably to be protective of the relief-seeker’s vulnerable position; (

d) recognized equitable defences apply. 6 . While not a requirement for relief, evidence of the existence of a resulting improvident bargain, in the sense of some financial detriment to the relief-seeker, may be relevant to drawing an inference that a special and significant disadvantage existed or that an unfair or unconscionable use was made of the position of disadvantage of the relief-seeker by the other party.

Application to this Case [ 55 ] While in conducting her analysis the trial judge was trying to tie her findings and conclusions into the specific language of the Howell test - a linguistic test that is not determinative - her unchallenged factual findings may still form the basis of an analysis in accordance with the proper approach to determining unconscionability claims. [ 56 ] The trial judge found as a fact that when she signed the release, Ms.

Pitcher thought she was only signing away her right to claim for vehicle repairs and her loss of income for the time during which her vehicle was being repaired (Paragraph 66). She also found that Mr. Downer did not inform Ms. Pitcher that the release referenced her right to make a personal injury claim (Judgment, paragraph 67). These findings have not been challenged on appeal. I would note, however, that Mr. Downer had no duty, in ordinary circumstances of

contractual bargaining, to inform Ms. Pitcher of her right to make a personal injury claim. [ 57 ] It also appears from the evidence that Mr. Downer made no overt representation to Ms. Pitcher that the release did or did not cover personal injury. In the words of the trial judge, he “turned a blind eye” to the issue. He did, however, say in his evidence that he relied on Ms. Pitcher’s assurance at the time that she felt okay and he did not think that she had been injured.

It is difficult in these circumstances to say that he “turned a blind eye” to something he knew nothing about or, as a reasonable person ought to have known about. Although the judge concluded that it was not reasonable for Mr. Downer to assume that there was no potential personal injury claim, that is different from saying that he knew of the existence of one or that it would have been reasonable for him to have inquired further. [ 58 ] Absent any representation by him that misled Ms. Pitcher to think that the release did not cover personal injury and absent any knowledge by Mr. Downer that Ms.

Pitcher was mistaken as to the scope of the release, Mr. Downer was not required, as a matter of conventional contract law, to disabuse Ms. Pitcher of any mistaken belief or to educate her as to the effect of the release on her legal rights. [ 59 ] The trial judge nevertheless concluded that here was an “inequality of bargaining power arising out of the ignorance, need or distress” of Ms. Pitcher (Judgment, paragraph 70). She reached this conclusion on the bases that (

i) she was a taxi driver and required her vehicle to earn a living, thus creating a “need” that Mr. Downer was aware of; and (ii) she had no experience with signing a release for property damage, did not read the release before signing and had no legal advice, thus creating an “ignorance” of her legal position; and (iii) she “naively” placed trust in Mr. Downer “when she erroneously assumed that the release merely impeded her ability to claim for property damage and lost income”. [ 60 ] The judge contrasted the relative positions of the parties in two ways. First, she contrasted Ms.

Pitcher’s absence of any legal advice with the fact that Mr. Downer had had the benefit of some advice from his insurance company as to the importance of obtaining a full release and had obtained a precedent for a release from a lawyer. Secondly, she described Ms. Pitcher as “meek and unsophisticated” and Mr. Downer as “quite sophisticated.” [ 61 ] The trial judge concluded on these facts that the ability of Ms. Pitcher to properly protect her interests was “improperly impaired” by an inequality of bargaining power. She also concluded that Mr.

Downer “unconscientiously used a position of power to achieve an advantage” over Ms. Pitcher by turning a “blind eye” to the possibility that Ms. Pitcher might have suffered personal injury (even though she told him she was okay) and by proceeding to obtain the release (even though he had suggested she read the release but she did not do so in its entirety when she signed). [ 62 ] The judge also concluded that the agreement reached was “substantially unfair” to Ms.

Pitcher because she relinquished her right to claim for personal injury damages essentially for no consideration. [ 63 ] The first and most important question to be faced is whether there was a degree of vulnerability on the part of Ms.

Pitcher such that by virtue of the relationship and interactions of the parties there was such a substantial inequality of bargaining power between them, flowing from a special and significant disadvantage, that equity ought to step in and upset the bargain reached. [ 64 ] The mere fact that a bargain turns out to be improvident or foolish for one party does not provide a basis for relieving that party from the product of his or her foolishness. In this case, aside from being described by the trial judge as “meek and unsophisticated” no personal special disadvantage existed. There is no suggestion here that Ms.

Pitcher, a self-employed woman earning a living by driving a taxicab, was so unsophisticated that she was incapable of looking out for her own interests. She had a high school education with some computer training at College of the North Atlantic. She had also been injured in another previous motor vehicle accident, had retained a lawyer and signed a release as part of a settlement. There is no suggestion of immaturity, senescence, or mental or physical impairment.

As to the judge’s finding that she was acting out of ignorance of her legal position because she had no legal advice and did not read the full release before signing, her failure to read the release was her own choice and was not brought about by any representation by Mr. Downer as to what it contained or any pressure by him. There was no evidence that Mr. Downer knew or ought to have known that Ms. Pitcher believed that the release did not cover personal injury damages.

Furthermore, although she did not read the full release document, she did read the heading which read “Full and Final Release.” There is nothing in the evidence here to suggest that because of some special or significant disadvantage, she was unable to protect her own interests by reading the release. [ 65 ] Mere inequality of information as to respective legal positions relative to the terms of a transaction, its consequences or alternatives will not normally be sufficient to establish a special disadvantage. This is because this type of inequality will exist in most contracting situations.

That cannot in itself be enough to justify setting aside the transaction. As Professor Swan noted, in the passage quoted earlier, “otherwise most consumer and many commercial contracts would be little better than voidable.” [ 66 ] As to the judge’s conclusion that an inequality existed because of “need”, resulting from Ms.

Pitcher being deprived of income while her vehicle was being repaired, I am not satisfied that her potential loss of income for the short time the vehicle would be out of service was of such a magnitude that she was placed at a significant disadvantage that compelled her to agree to disadvantageous terms. We know nothing of Ms. Pitcher’s other financial circumstances to place the projected loss of income into context. In other words, we do not know how desperate she was.

To conclude that the potential loss of two days’ income in itself created a special disadvantage justifying relief on grounds of unconscionability would be to put virtually all settlements at risk. [ 67 ] There was no degree of vulnerability present that that could have been exploited by Mr. Downer. Furthermore, it cannot be said, in the circumstances of this case on the facts as found by the trial judge, that Mr. Downer unfairly or unconscionably took advantage of any “inequality” if that was what it was.

While it is true that he clearly wanted to obtain a release from all future liability, he did not know that Ms. Pitcher believed the release only covered property damage and income loss. He suggested to Ms. Pitcher that she read the document before signing and he did not represent to her that it was anything else than what the words clearly conveyed (which was that all claims, including personal injury claims, were being released). It cannot be said that he knew, in either the actual or constructive sense, of any vulnerability, in the sense of any special and significant disadvantage that Ms.

Pitcher was suffering from. [ 68 ] In these circumstances the ordinary common law policies of promoting sanctity of contract and permitting self-interested

bargaining are not displaced by any equity based on unconscionability. Ms. Pitcher’s arguments based on the alleged improvident resultdo not in the circumstances justify a contrary conclusion or inference that there was in fact an inequality of bargaining power or that animproper use was made of any disadvantage. [69] Ms. Pitcher argued that inasmuch as the payments pursuant to the settlement were only for property damage and income loss,there was no consideration furnished for the release of the personal injury claim and that therefore the result was improvident.

While Iagree that the calculation of the amount of the settlement was based on the extent of the property damage and income loss, the amountspaid are expressed to be consideration for the release of all claims. Mr. Downer incurred a detriment in return for the total release. Asthe promisee, he has furnished consideration. See Albert Pearl (Management) Ltd. v. J.D.F. Builders Ltd., (SCC), [1975]2 S.C.R. 846. It cannot be said therefore that there was no consideration furnished for the release of the personal injury claim. [70] Furthermore, I agree with counsel for Mr.

Downer that the right of insured tortfeasors to make private agreements with tortclaimants so as to avoid risk classification reassessments by their insurers - something that is permitted in this jurisdiction (see InsuranceCompanies Act, RSNL 1990, c. I-10, s. 96.2; Automobile Insurance Prohibited Underwriting Regulations, NL Reg 80/04, s. 4(1)(b)) –would be effectively negated if attempting to do so is in effect regarded as an unconscionable attempt to take advantage of a tort claimant.

Conclusion and Disposition [71] I conclude, therefore that the trial judge erred in concluding that the release was unenforceable on grounds of unconscionability. [72] I would allow the appeal and declare that Mr. Downer may rely on the release in defending against Ms. Pitcher’s personal injuryclaim. [73] The trial judge also indicated in her judgment that if the parties were unable to agree upon the next stage of the proceedings, theycould seek directions.

Since it is not clear as to whether anything remains to be litigated in view of the conclusion in this Court, I wouldremit the matter to the Trial Division for further action, if any is required. [74] I would award costs on a party-and-party basis on a column 3 basis to Mr. Downer both in this Court and in the Court below. Appeal allowed.