What is Unconscionability
Abstract
Equity is flexible – it has to be. It has taken nearly five centuries to develop its existing maxims which act as guiding principles to the judges to land on just and fair outcomes. The presence of equity is to modify and soften the rigid application of common law. Conscience is at the heart of equity and the significance of its role is observable in the treatments of imperfect gifts.
This article looks at how conscience underpins the equitable jurisdiction in the context of incomplete gifts and whether the statement made by Sir Anthony Mason about the increasing determinacy of rules and principles in equity applies. Cases will be looked at to examine the role of good conscience or unconscionability. It will subsequently analyse if the concept of unconscionability can and should be unified.
It was found that albeit equity has over time become more principled and rule-based, flexibility should be reserved. The argument put forward by Sir Anthony Mason that the rules and principles of equity are becoming more determinate is not completely accurate and certain cases in regards of the treatment of imperfect gifts have proved that. This article also found that a unifying concept of unconscionability should be dismissed.
Introduction
Deliberating what is good conscience, is just as extensive as examining what is law? This is a device of equity which has an infinite environment of guidelines which both principles and doctrines are all fixed. This article will open by endeavouring to outline good conscience. It debates that the “key-stone of the whole arch” is that equity is both good conscience and fairness. Hence to be able to fully answer this question, this article will begin by discussing critically equity as a parallel method to law. This is done to fully clarify to the reader how equity was established how equity has been redeveloped today from how it was established hundreds of years ago. It will then debate the doctrine of good conscience or unconscionability is what the court will see when deliberating if equity comes into play. This article will then analytically highlight examples used by the courts of unconscionability in relation to law of incomplete gifts. This article will go on to question if the idea of conscionability, can be incorporated into one merging concept? The article will then be concluded based on its findings.
Philosophically the idea of Equity can be evidence back to Aristotelian ethics, in which it was questioned by Aristotle how fixed laws would be capable of determining situations that were unknown. The theory behind equity is to do what is just. Where law does not provide redress then the judge can seek to do what is equitable through equitable maxims. Aristotle questioned how fixed laws would be able to resolve unknown situations. More specifically throughout past time Aristotelian equity has been explained to come to signify what the equity courts of Britain deal predominately in recompense for unjust enrichment.
The increased currency use in the late 1300s required both courts and contracts to alter the way that equity was determined in order to convert immeasurable values into monetary awards. Equity was still the focus even throughout disagreements between judicial theorists of the 1600s. It was believed by Thomas Hobbes that judges in relation to finding equity should have a free hand where no law exists or when it is at odds with the law. Whilst it was argued by Jeremy Bentham that through an adjusted process of the law equity could be found. We see the split here among those who consider that there is a natural law and utilitarian theorists and this is evident in the way that they trust judges should act. Over time the jurisdiction of equity has developed to protect a new class of individuals but conclusively continues to ask if the party who is weaker has the entire knowledge of the agreement that they are entering. What we can determine from this is what is argued by Snell, that the predominant thread through equity is "Equity suffers no wrong without a remedy.” So what is the relationship with this and good conscience?
At one time in English law two parallel systems where when disputes arose it would be assigned to an appropriate court depending on the concerned dispute. Over hundreds of years this dual system has grown and developed. Common law courts appeared not to be doing justice this was the general consensus. The courts did at one time in legal history become artificial, rigid, and courts would adhere to firm precedents and real justice of the case was not considered. At one time it was thought that equity was part of a greater framework of jurisprudence which centred on what or who had power over a body of an individual. Today the development of equity is becoming more understood as “judges, by repeatedly evaluating the facts of particular cases within a certain class in light of the demands of conscience, may over time come to a clearer understanding of these demands that in turn renders them more determinate.”
At one time the grounds of equity could be reduced to 11 maxims. In all cases the end goal is to ensure that individuals are not wronged without a remedy. There is no one way to resolve questions regarding equity due to the historic construction and its nature contained in common law, there are just guidelines in place to support resolving individual conflicts. Macnair draws an example between Aristotelian equity and the equity in courts of Britain which deal primarily in unjust enrichment. It is argued by Snell that:
"Each maxim often contains by implication what belongs to another. The cause of this incapability of logical division lies in the history of equity—that it arose not as one harmonious whole, the creation of one mind or one and the same period, but gradually developed in the course of five centuries, out of an idea vague and indefinite at first, to a comprehensive and admirable science."
It can be argued that equity is structured on maxims which are both flexible and loose. Judges may apply these maxims, but it is at their own discretion. Thus, the weakness is that the maxims do not furnish any faith in the law, it is said that more is needed. Lord Keeper, Lord Chancellor and Lord Nottingham from 1673 to 1682 are seen to be the fathers of equity, evolving a more detailed clarification of conscience for purposes of detecting intent as well as the difference between private conscience and public conscience. Peter Millett when portraying the relationship of equity and common commented:
“The common law provides redress for breach of contract, and in order to do justice it may imply terms into existing contracts and even imply the existence of a contract; but Equity’s approach is different. It is called into play, not by breach of contract express or implied, but by unconscionable conduct, and the duties which it enforces are those which it considers to be inherent in the relationship of the parties.”
Millet is implying ‘unconscionable conduct’ is the trigger that will open the door to equity. The fundamental focus of equity is apparent from common law in that the compliance of the weaker party is not the centre of equity law which focuses instead on the intention of the powerful party. Millet stresses
"The equitable doctrine differs significantly from the common law remedy for economic duress, with which it may be usefully be compared. The common law remedy looks at the means by which the consent of the weaker party was obtained; equity looks to the conduct of the stronger party to see if the transaction is one which he can maintain good conscience."
What is definite is the unconscionability notion is at the foundation of equity judgments and is the provision by which equity supersedes normal judicial decision-making.
The use of unconscionability is seen in failed gift cases, in particular Pennington v Waine where the courts chose not to give effect the equitable maxim equity will not perfect an imperfect gift. Contrastingly it can be said the courts in this case allowed equity to extend the doctrine that exists to do justice in a case at the cost of certainty. In Pennigton v. Waine unconscionability is mistakable. The facts of Pennington are Ada Crampton desired to present 400 shares on Harold, her nephew. Ada wanted to do this as she wanted Harold to sit as a director, for which he needed to be a shareholder. Ada told Mr Pennington, who was the auditor of the company, to carry out a stock transfer form in relation to the shares she wanted to give to Harold. Ada told Harold about the transfer she had proposed. A 288A form was sent to Ada’s nephew by Mr. Pennington detailing the transfer of 400 shares to him. During this time Mr. Pennington did not carry out anything further and Ada passed away. It was argued by Ada’s nephew that although the legal titles were not transferred to him in regards to the shares, the titles in equity of the shares were passed to him. Ada’s nephew went to the courts for recourse and depended on the doctrine in Re Rose. It was expressed in the doctrine Re Rose by Lord Evershed that:
“…the settlor did everything which, according to the nature of the property comprised in the settlement, was necessary to be done by him in order to transfer the property- the result necessarily negatives the conclusion that, pending registration, the settlor was a trustee of the legal interest for the transferee”.
This indicates that if donor has carried out everything in their power to bestow the legal interest of the shares to the done, then this will be adequate enough to allow the gift to pass. Judge Howarth in the first instance, found support for Harold, Ada’s nephew. It appeared that the authority of Re Rose were irrelevant in circumstances of this case. It is apparent that Judges do not fully understand the context in which Re Rose was formed but yet are still applying the equitable principle here. Equity will not perfect an imperfect gift, meaning the judge has done the contrary of what equitable maxim says. On the grounds that the trial Judge had made a mistake, Pennington came before the Court of Appeal.
The appeal was dismissed by the Court of Appeal. Clarke LJ who formed the minority expressed the gift was effective and valid, even without Harold having knowledge of the gift. It was opined by Clarke LJ that the delivery of the transfer forms or share certificate was not a prerequisite to t the doctrine which Re Rose laid down. It is suggested that equity will perfect the imperfect gift and transfer is not an essential requirement. The reasoning of Clarke LJ can be criticised because his decision means, by having completed the transfer form will in turn result to an equitable assignment of shares. This implies a disposition of legal interest can become content by a lawful disposition of the equitable interest. This has the outcome of no longer leaving distinction between a legal and equitable transfer. This is a general use of Re Rose. The analysis appears to disregard the age old principle in Milroy v. Lord which established three methods of making a voluntary settlement: (i), by the settlor declaring himself the trustee; (ii) by transferring property directly to beneficiary; and (iii) by transferring property to trustee to hold on trust. The decision from Re Rose can only be used when one of the above methods is used and the gift is unsuccessful. It can then be asked of the court to give effect to the gift by permitting assignment of the legal interest as a constructive trust or a trust. It is debated that the reason why Clarke LJ erred in his approach was due to him applying a principle which was too broad in the circumstances.
The majority of the Court of Appeal Schiemann LJ and Arden LJJ through different reasoning came to the exact same conclusion. They concluded that the principle is that “the donor [Ada] will not be permitted to change his or her mind if it would be unconscionable, in the eyes of equity, vis a vis the donee to do so”. The concept of good conscience was then introduced. Unconscionability is used to emphasise that it would be unreasonable and unfair for Ada to have revoked the transfer of her shares to her nephew. This appears to be artificial as Ada has never planned to revoke the transfer. Therefore the courts have used what Ada had not done to perfect the gift. Furthermore, Ada would have not been able to revoke the transfer as she passed away. Oakley describes the addition of unconscionability into the reasoning as a “wholly novel proposition”. Oakley further says “this decision seems to have been based on a complete misunderstanding of the decision of the Privy Council in Choithram v Pagarani” which stated that where a co-trustee is also a settlor his trust declaration if not correctly established remains effectual. However the decision in Choithram is consistent with both Milroy v, Lord and Re Rose. Oakley further argues the addition of unconscionability by the courts and their treatment of cases has applied good conscience inconsistently.
Given that unconscionability is applied differently, can the principle be refined to help the courts. Common themes emerge in areas of equity. An example of this would be going back on one’s word, in the growth of the common intention constructive trust. It has been argued for a long period of time to be a main feature in the development of a constructive trust. The courts have mentioned the prevention of unconscionability and the concept of conscience in many cases. Logically, the next question would be to decide whether unconscionability can be unified into a consistent concept. Discussions have been held in relation to whether doctrines such as unconscionable bargain-making and undue influence can be merged into one doctrine. The only main difference between them is whether the more powerful party have the intention of taking advantage of their relationship. It is argued by Halliwell that unconscionability is a pivot by which many equitable doctrines are generated. Halliwell feels that courts would be better equipped if they used unconscionability as a tool if they understood it as a principle by which equity operates. In turn she believes that merging unconscionability will demonstrate to be insignificant and what is better is to comprehend how the doctrine can be better used as a foundation for equitable activity. By some it is believed that creating a system in which good conscience is defined would entirely demolish the principle of equity. Nevertheless, if good conscience is determined only a relational concept, in which the individual situation is the key to evaluate then there is no risk of inequitable action occurring as a result of the rulings. The concept of unconscionability is validated by Dunn as providing a move toward a broad principle and away from "rigid definitions". For the modern age she feels this is the right tool:
"For equity to develop in a meaningful way, the recognition of an organising principle of unconscionability, if accepted, cannot take place as before in a vacuum. The survival of equity depends not so much upon re-conceptualising past mistakes, as it does upon a re-evaluation of the legal system as a whole."
It was argued the risk of equity doctrine is in the perception, once unconscionability becomes determined then everything that is eligible as unconscionable must be determined as well. It is then questioned whether actions are unconscionable in any circumstance.
Conclusion
In conclusion this article has given contrasting views of leading academics and that over 150 years the growth of equity has been steady. Without having reference to pivots such as conscience and unconscionability equity cannot be defined. The above concepts are significant in ensuring that in each individual case that justice is done and cannot be ignored. Thus, the question should be broader asking whether these concepts can be fused under the subject of equity, the answer to this being no. It is suggested by all of the evidence that the above concepts need not to be formalised into a body of rules or defined but left open. This is due to judges having to be bound by this which in turn goes against the reason that equity was formed to ensure that each individual case done justice.
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