PRIVATE LAW, CONSCIENCE AND MORAL REASONING: THE ROLE OF THE JUDGE.

• Date: 01 December 2022
• Author: C., Chris Maxwell A.,Harding, Matthew
• Published date: 01 December 2022
• Author: C., Chris Maxwell A.

CONTENTS I Introduction II Conscience-Based Doctrines and Moral Reasoning in Transactional Settings III Judicial Legitimacy and Capability IV Judges and the Communicative Function of Conscience-Based Doctrines A 'Objective' and 'Subjective' Dimensions B Linguistic Choices V The Role of the Judge in Wider Context A Lawyers B Regulators C The Business Community VI Conclusion I INTRODUCTION

Conscience figures as an organising idea in private law in a variety of ways. (1) For the purposes of this article, our interest lies in those private law doctrines that, in one way or another, explicitly invoke conscience to set standards for citizens in their dealings with each other. Such invocations of conscience are most closely associated with equity, where conscience informs a range of doctrines that apply in contractual and other settings. (2)

In recent decades, the language of conscience has also been adopted by the Commonwealth Parliament in statutory provisions defining standards of business conduct. For example, s 20(1) of the Competition and Consumer Act 2010 (Cth) sch 2 ('Australian Consumer Law') provides that '[a] person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time'. And s 21(1) of the same law states that, in transactional settings that entail the provision of goods or services, '[a] person must not ... engage in conduct that is, in all the circumstances, unconscionable' (3) In what follows, we use the term 'conscience-based doctrines' to refer to both equitable and statutory doctrines which explicitly invoke conscience to set standards for transacting parties.

In this article, we argue that conscience-based doctrines can--and should--provide guidance for parties who are transacting with one another, so as to minimise the risk of unconscionable conduct arising in transactional settings. We argue that conscience-based doctrines might effectively achieve this objective by provoking moral reasoning on the part of transacting parties. We also argue that judges necessarily engage in moral reasoning when applying conscience-based doctrines in evaluating past conduct. When they do so, we contend, they should explain their decisions in terms that expose their own moral reasoning, thereby making clear the need for moral engagement on the part of transacting parties.

Our analysis proceeds in four parts. In Part II, we consider conscience-based doctrines themselves, emphasising the desirability of such doctrines provoking moral reasoning in transactional settings. In Part III, we consider some threshold questions that arise once the role of the judge in giving effect to conscience-based doctrines is in view; these threshold questions concern judicial legitimacy and capability. In Part IV, we consider how judges might best ensure that conscience-based doctrines are fit to provoke moral reasoning, paying special attention to the communicative function of those doctrines. Part V concludes by placing judicial contributions to the operation of conscience-based doctrines in wider context, noting the important roles that lawyers, regulators and the business community itself must play if conscience-based doctrines are to be truly effective.

II CONSCIENCE-BASED DOCTRINES AND MORAL REASONING IN TRANSACTIONAL SETTINGS

Conscience-based doctrines are often analysed and evaluated with reference to the contributions they make to the resolution of disputes by adjudication. In such remedial settings, conscience-based doctrines enable judges to engage in fact-sensitive assessments often focused on a defendant's conduct, and thereby achieve outcomes in justice that would not be available otherwise. (4) Characterised less benignly, conscience-based doctrines are said to invite judges to interfere with the rights, duties, powers and liabilities of parties to private law disputes in ways that ought to be of concern in light of rule of law values. (5)

From time to time, key cases--usually but not invariably arising in equity--provide focal points for debate about this remedial operation of conscience-based doctrines. The decision of the Court of Appeal of England and Wales in Pennington v Waine, in which the Court invoked the demands of conscience to perfect an imperfect gift, was one such case. (6) The decision of the Supreme Court of the United Kingdom in Pitt v Holt, in which Lord Walker adopted a broad conscience-based approach to the question whether a mistaken gift should be set aside in equity, was another. (7)

Our starting point in this article is that, while conscience-based doctrines perform an important remedial service in the setting of adjudication, they should also have a forward-looking operation, beyond adjudicative settings, helping to set standards and expectations for parties transacting with each other. To understand why, we need only reflect on recent Australian developments.

In February 2019, Commissioner Kenneth Hayne submitted his final report in the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. (8) The report documented widespread predatory behaviour in the provision of banking and financial services. Such behaviour included pressuring customers to enter into loan or insurance arrangements in circumstances where those customers were not likely to be able to make proper judgments as to their best interests; (9) it also included charging fees for financial adviser services in cases where advisers were not allocated or customers were dead. (10)

2019 also saw the publication of an equally concerning report by the Australian Securities and Investments Commission ('ASIC'), Consumer Credit Insurance: Poor Value Products and Harmful Sales Practices. (11) That report described a range of harmful conduct prevalent in the consumer credit insurance industry, including selling consumer credit insurance to consumers who were ineligible to claim for or unlikely to need such insurance, (12) pressure selling and other unfair sales practices, (13) and charging premiums even though consumers had no credit arrangements in place. (14) Following the publication of the report, ASIC exercised its enforcement powers to secure remediation for affected consumers, and in May 2020 it reported that it had secured over $160 million for the benefit of over 434,000 consumers. (15)

The bleak Royal Commission and ASIC reports of 2019 raise serious questions about conduct in the Australian business community, especially among parties that enjoy considerable market power. Indeed, as Commissioner Hayne put it in an interim report, when asking about the motivations underpinning the practices in question, '[t]oo often, the answer seems to be greed--the pursuit of short term profit at the expense of basic standards of honesty'. (16) Such widespread, even systemic, abuses call for legal responses that go beyond the application of legal rules and principles in the resolution of disputes. They call for regulation. There are numerous potential sources of such regulation; for present purposes, our interest is in the potential of equitable and statutory conscience-based doctrines to operate beyond adjudicative settings and help to set standards and expectations of conduct that might contribute to a business culture in which exploitative practices have no place and in which litigation following unconscionable conduct is minimised as a result.

At times, an objective of guiding conduct is explicit in conscience-based doctrines. For example, s 20(1) of the Australian Consumer Law is expressed in imperative language, directed at transacting parties, that clearly reflects a legislative purpose to impose standards on those parties and thereby influence their behaviour: 'A person must not ... engage in conduct that is unconscionable' (17) To use the language of Keane J of the High Court of Australia in the recent case of Australian Securities and Investments Commission v Kobelt ('Kobelt'), this provision articulates 'a statutory norm of conduct'. (18)

At other times, an objective of guiding the conduct of transacting parties is not explicit in conscience-based doctrines: for example, in the case of equitable doctrines under which a decision-maker may set aside a contract on the basis that one party to it has, in some legally significant way, exploited the other. (19) But even in remedial settings where conscience-based doctrines do not explicitly aim to guide transacting parties, there are reasons to think that, to some degree, they might be deployed to provide such guidance. After all, even where conscience-based doctrines are applied in adjudication, their application is explained and justified in written statements of judicial reasoning that can function as sources of guidance to parties in analogous cases. (20)

Conscience-based doctrines might guide conduct in transactional settings in various ways. The guidance offered might be specific and tailored to particular circumstances. To illustrate, consider Garcia v National Australia Bank Ltd ('Garcia'), in which the High Court set aside a guarantee given by a wife in respect of her husband's business debts. (21) The majority found that it would be unconscionable for the creditor to take the benefit of the guarantee in light of the guarantee's voluntary character, the relationship of trust and confidence between the wife and the husband, and--critically for present purposes--the fact that the creditor took no steps to explain the transaction to the wife or to ensure that such an explanation had been provided by a third party. (22) In its reasoning, the majority thus laid out a 'roadmap' for creditors seeking guarantees in circumstances analogous to those in Garcia. According to the roadmap, the creditor who provides or procures an explanation of the transaction in which the guarantee is sought may minimise the risk of liability on the grounds of conscience. As Kirby J...