(ii) Unconscionability
The second requirement is that the defendant’s conduct must have been unconscionable, which is assessed by reference to whether the particular defendant was at fault in some way. The leading case on unconscionability is the decision of the Privy Council in Hart v O’Connor,190 * which concerned whether a transaction for the sale of land could be set aside where the vendor of the property was suffering from senile dementia but the purchaser was unaware of this disability. The decision of the Privy Council concerned two separate grounds for setting the transaction aside, namely the Common Law ground of contractual incapacity and the alternative equitable ground that the defendant’s conduct was unconscionable. It was held that to establish either ground it was not sufficient for the claimant to show that the terms of the transaction were unfair; rather it was necessary to establish that the defendant had committed equitable, or constructive, fraud. This is now the test of unconscionable conduct. But the decision of the Privy Council does not provide much assistance as to what this actually means. Lord Brightman, who delivered the Board’s advice, said that equitable fraud ‘is victimization, which can consist either of the active extortion of a benefit or the passive acceptance of a benefit in unconscionable circumstances’.[1] He went on to suggest that the defendant must have been in bad faith or had taken advantage of the claimant in some way.[2]
The preferable interpretation of Hart v O’Connor is that what must be shown is that the defendant acted in a morally reprehensible manner,[3] either because the defendant knew of the claimant’s special disability or disadvantage, or should have known of it since the defendant was aware of particular facts which would have put the reasonable person on notice that the claimant had a special disability or disadvantage.[4]
- [1] Morgan [2001] EWCA Civ 995, [35] (Chadwick LJ); Yorkshire Bank pic v Tinsley [2004] EWCA Civ 816,
- [2] [2004] 1 WLR 2380.
- [3] 195 Owen and Gutch v Homan (1853) 4 HLC 997, 1035; 10 ER 752, 767 (Lord Cranworth LC); The
- [4] Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447, 467 (Mason J); Nichols v Jessup [1986] 1
