The case
- The case for study is Amadio v CBA
- A PDF of the High Court's judgment has been loaded separately.
- The first step is for students to read the judgment carefully.
- The questions for response will be placed on Moodle in week 9.
This short summary will help you understand the judgments:
- Mr and Mrs Amadio were immigrants to Australia of Italian birth, had a relatively poor command of English and limited business experience.
- They were induced by their son Vincenzo to be guarantors of loans by the bank to Vincenzo, whom they believed to be successful in business. [A guarantee is just a contract between a lender (usually a financial institution) and a person called the guarantor. The contract is formed by the guarantor's making an offer to the lender that if the lender grants a loan to a third party (the borrower), and the borrower fails to repay the loan, the lender can then call on the guarantor to make the repayment. ]
- In fact, Vincenzo's business was in a severe financial difficulties.
- The bank knew this, but allowed Vincenzo to explain to his parents the nature of the guarantee and mortgage documents they were signing.
- Vincenzo failed to repay the loans and the bank called on Mr and Mrs Amadio under the guarantee.
- Mr and Mrs Amadio challenged the enforceability of the guarantee contract.
- At the first hearing the bank was successful in defending the claims brought against it by Mr and Mrs Amadio.
- An appeal court reversed that decision and gave judgement for Mr and Mrs Amadio.
- The bank appealed against that decision to the High Court of Australia where the case was heard by four judges. It is the decision of that court that you read (although contained within it is a summary of what the earlier courts decided).
1 State three causes of action (ie, the legal issues, not just the facts) which Mr and Mrs Amadio relied upon in challenging the mortgage guarantee they had signed?
2 The Appeal Court reversed the decision of the trial (ie, first) judge. State two conclusions the Appeal Court came to, after its examination of the facts, which persuaded it that the bank was liable to the Amadios?
Answer the following from the judgment of Justice Gibbs
3 Is a bank always required to inform an intending guarantor about the state of the account of the customer which is to be guaranteed? If not, in what circumstances would a bank be required to inform a potential guarantor about this?
4 What were two facts in this case which persuaded Justice Gibbs that the bank should have made such a disclosure to the Amadios?
5 What was the ratio for Justice Gibbs's decision of the case in favour of Mr and Mrs Amadio [i.e., what was the legal issue or issues (not just facts) this judge identified to decide the case
Answer the following from the judgment of Justice Mason (who decided the case on different legal reasons):
6 How did the ratio (legal issue) for Justice Mason's decision differ from the ratio used by Justice Gibbs?
7 Justice Mason identified several ways in which the bank on the one hand and Mr and Mrs Amadio on the other hand were in positions of "gross inequality of bargaining power." What were three of those ways?
8 Justice Mason and Justice Deane both explained the legal difference between unconscionable conduct (unconscionability) and undue influence.
State in your own words, the difference which the two judges explained between these two legal issues (you may find it useful to refer to lecture notes for some help in answering this question) and use the facts of the case to show how each of these two legal issues is satisfied by the situation the Amadios were in
Answer the following from the judgment of Justice Dawson (who, as the dissenting judge, came to a different conclusion)
9 What should be the general test (ie, the proper circumstance) in which a bank would be liable to a guarantor who has been induced to give a guarantee as a result of some misrepresentation about the guarantee?
Reference Article - Commercial Bank of Australia Ltd v Amadio [1983] HCA 14;(1983) 151 CLR 447 (12 May 1983) - HIGH COURT OF AUSTRALIA COMMERCIAL BANK OF AUSTRALIA LTD. v. AMADIO [1983] HCA 14; (1983) 151 CLR 447