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Commercial Bank of Australia Ltd v Amadio

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by

Maggie Zhang

on 12 September 2013

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Transcript of Commercial Bank of Australia Ltd v Amadio

Commercial Bank of Australia Ltd v Amadio
Facts
The Plaintiffs
[Amadio]
signed a mortgage for the Defendant
[Commercial Bank of Australia]

to secure loans for their son.
Legal Issues
Misrepresentation?
---Bank's failure to disclose to mortgagor guarantor
Decision
References
1. "Commercial Bank of Australia v Amadio". UniStudyGuides. http://www.unistudyguides.com/index.php?title=Commercial_Bank_of_Australia_v_Amadio

2. "Commercial Bank of Australia v Amadio". Australian Contract Law, http://www.australiancontractlaw.com/cases/amadio.html#ca

(1983) 151 CLR 447; [1983] HCA 14
430149041, Wenfang Feng (Wendy)
430081512, Man Zhang (Maggie)

Legal Issues
Ratio
References
Agenda
Facts
They were not well informed about the details of the mortgage, and clearly had no idea what's going on.
They were both Italian and spoke very little English, being pretty much illiterate.
When the Appellant attempted to seize the house, the Respondents attempted to challenge the validity of the of the mortgage.
Was this an unconscionable conduct?
---Whether transaction should be set aside unconditionally.
Ratio
Trial Judge:
ORDER: The bank to pay Amadio $239,830.85
On the issue of unconscionable conduct
On the issue of misrepresentation
Ratio
Decision
Facts
Mr. Virgo (Bank Manager)
The Amadio
Age:70+, Italian, Poor English, Illiterate.
Their sons company was prosperous.
Their liability was limited to $50,000.
"The mortgage is only for 6 months"
"No limitation of time."
Knowing that the company was in a terrible financial situation.
The mortgage has no limited amount.
Did not explain any terms of the contract.
Left without leaving a copy.
Court of Appeal
ORDER: mortgage be set aside.
High court
ORDER: Appeal dismissed with costs.
It was held by the High Court of Australia) in 3-1 majority that, in all the circumstances, it was unconscionable for the bank to rely on the guarantee. Notable circumstances taken into the account by the court include:
The Amadios had a limited understanding of English.
The Amadios did not have the benefit of independent advice, and such advice was not provided or suggested by the bank.
When the mortgage was executed the bank was aware of the Amadios' son's financial situation and knew the Amadios were not so appraised.
The bank did not advise the Amadios that there was no limit on their liability under the guarantee - the Amadios believed the liability was limited to $50,000.
Chief Justice Gibbs based his decision on the issue of misrepresentation by non-disclosure. His Honour held that, while the duty of a bank to disclosure information to a customer in these cases 'arises only where there is a special arrangement between the bank an the customer of a kind which the surety would not expect', that was the case here and, the bank having failed to disclose those special arrangements, misrepresented a material part of the transaction with the result that the guarantee was not binding. The special circumstances in this case included:
the arrangement with the bank and Vincenzo to increase the overdraft and to require Vincenzo to signficantly limit that overdraft within a short period of time.
the bank's selective dishonouring of cheques in an 'endeavour to maintain the [company's] facade of prosperity'.
Full transcript