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SECURED TRANSACTIONS - Application of principles of law and equity

Friday, June 04, 2021 @ 5:45 AM  


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Reconsideration by the Saskatchewan Court of Appeal of its decision in Input Capital Corp. v. Gustafson following remand by the Supreme Court of Canada (SCC). Input and Gustafson entered several contracts whereby Gustafson agreed to sell high quantities of canola in exchange for advance payments totalling $4.5 million. To secure performance, Input took mortgages and security interests in the property of Gustafson. Gustafson defaulted on its delivery obligations and Input commenced proceedings to enforce its security. The 2018 trial decision concluded, among other things, that the underlying contracts were unconscionable and must be set aside in their entirety. Input was awarded judgment of $4.4 million against Gustafson based on unjust enrichment. Input appealed the finding of unconscionability. In a 2019 decision, the Court of Appeal held that the trial judge erred in his approach to unconscionability and misapprehended the parties’ contractual relationship. The findings on unconscionability were set aside and the matter was remitted for determination of damages and enforcement of the security agreements. In June 2020, the SCC rendered judgment in Uber Technologies Inc. v. Heller, a case involving the doctrine of unconscionability. At the time, the SCC had before it an application by Gustafson seeking leave to appeal the Court of Appeal’s 2019 decision. The SCC remanded the case to the Court of Appeal for disposition in accordance with Heller.

HELD: Appeal decision affirmed. Heller upheld the contextual approach to determination of inequality of bargaining power and whether the contracts amounted to an improvident bargain. Although Heller altered the language used to describe unconscionability, it would not lead to a different result in the predicate case on the issue of the degree of inequality of bargaining power. Applying Heller’s guidance, the court confirmed its finding that the threshold for inequality of bargaining power was not met in this case. The clarification under Heller, to the effect that knowledge of inequality of bargaining power was not a requirement, also had no bearing on the outcome, as the trial judge addressed the issue of knowledge in a manner that was consistent with Heller, and the Court of Appeal did not interfere with that analysis. The contextual approach undertaken by the Court of Appeal to the issue of improvidence was unaffected by Heller. The finding that the trial judge erred by failing to consider the full bargaining context of the parties’ contractual relationship was affirmed.

Input Capital Corp. v. Gustafson, [2021] S.J. No. 153, Saskatchewan Court of Appeal, R.G. Richards C.J.S., N.W. Caldwell and R. Leurer JJ.A., April 8, 2021. Digest No. TLD-May312021010