I'm not sure what a “rigorous” treatment of unconscionability or exploitation would look like.  The courts have formulated various tests for unconscionability; the Supreme Court of Canada recently, in Uber Technologies Inc. v. Heller, 2020 SCC 16, reverted to the two part test originally proposed by Arthur Leff, “Unconscionability and the Code — The Emperor’s New Clause” (1967), 115 U. Pa. L. Rev. 485, i.e., unequal bargaining power and an unfair bargain, but the application of that test is justified by a host of factors that cannot ever be rigorously applied.

The same is true for “exploitive” contracts.  The best example of the courts treatment of such contracts is in the oppression remedy of the various Canadian Business Corporations Acts.  The statutory test is set out in the Ontario Business Corporations Act:

248(1) A complainant and, in the case of an offering corporation, the Commission may apply to the court for an order under this section.

(2)       Where, upon an application under subsection (1), the court is satisfied that in respect of a corporation or any of its affiliates,

(a)       any act or omission of the corporation or any of its affiliates effects or threatens to effect a result;

(b)       the business or affairs of the corporation or any of its affiliates are, have been or are threatened to be carried on or conducted in a manner; or

(c)       the powers of the directors of the corporation or any of its affiliates are, have been or are threatened to be exercised in a manner,

that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer of the corporation, the court may make an order to rectify the matters complained of.

This provision seems to me to offer a statutory basis for dealing with exploitive behaviour in the corporate context.  In the same way the power the court has under various Partnerships Acts or corporate statutes to wind-up a partnership or corporation when it would “just and equitable” to do so have been used by partners and courts for some considerable time to challenge exploitive behaviour.  I do not know how much “rigour” could be expected when the test is “just and equitable”.

The test adopted by Canadian courts under the oppression remedy is whether the reasonable expectations of the complainant have been defeated by what was done.  This test was adopted by Lord Wilberforce in Ebrahimi v. Westbourne Galleries Ltd., [1973] A.C. 360, [1972] 2 All E.R. 492 (H.L.), in the context of the English Companies Act, 1948, s. 222, (which gave the court power to wind up a company if was “just and equitable” to do so).  Lord Wilberforce said, p. 379 (A.C.):

The words are a recognition of the fact that a limited company is more than a mere legal entity, with a personality in law of its own: that there is room in company law for recognition of the fact that behind it, or amongst it, there are individuals, with rights, expectations and obligations inter se which are not necessarily submerged in the company structure. That structure is defined by the Companies Act and by the articles of association by which shareholders agree to be bound. In most companies and in most contexts, this definition is sufficient and exhaustive, equally so whether the company is large or small. The “just and equitable” provision does not, as the respondents suggest, entitle one party to disregard the obligation he assumes by entering a company, nor the court to dispense him from it. It does, as equity always does, enable the court to subject the exercise of legal rights to equitable considerations; considerations, that is, of a personal character arising between one individual and another, which may make it unjust, or inequitable, to insist on legal rights, or to exercise them in a particular way.

            (Emphasis added.)

Lord Wilberforce is not often criticized for not thinking rigorously.

The test cannot be materially different if there is no statutory basis for relief.

Angela Swan

 

 

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