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LEGL101 Introduction to Business Law- Facts of Amadios Case

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Q1. Provide a summary of the background facts of the Amadio case.

Q2. Outline three causes of action (i.e. legal issues) which the Amadio’s lawyers raised to challenge the validity of the mortgage guarantee.

Q3. Explain the three conclusions that the appeal court came to after its examination of the facts

Look at the judgement of Chief Justice Gibbs:

Q4. Outline the ratio for Chief Justice Gibb’s decision in favour of Amadio (i.e. what were the legal issue or issues that Chief Justice Gibbs identified to decide the case)? 

Look at the judgement of Justice Mason:

Q5. What was the ratio of Justice Mason, and how did it differ from Chief Justice Gibb’s ratio?

Q6. Justice Mason raised the point that there were three different ways in which there was “gross inequality of bargaining power” between Mr and Mrs Amadio and Commercial Bank. Identity three of those ways.

Q7. Justices Mason and Deane explained the difference between unconscionable conduct (“unconscionability”) and undue influence. Outline in your own words what distinguishes unconscionable conduct from undue influence.

Look at the judgement of Justice Deane:

Q8. Outline the ratio of Justice Deane for supporting Mr and Mrs Amadio.

Q9. Which judge dissented (that is, disagreed with the majority opinion) in the Amadio case?

According to this judge, what is the general test for when a bank will be liable to a guarantor who has been induced to give their guarantee as a result of misrepresentation?

Q10. (2 parts: A & B)

A. What remedies are available to victims of unconscionable conduct? (such as Mr and Mrs Amadio) Do you think that these remedies provide a sufficient outcome for victims of unconscionable conduct?

B. The law of unconscionable conduct is now also dealt with by statute under the Australian Consumer Law (ACL). Outline how the ACL deals with unconscionable conduct.


1. Summary of facts of Amadio’s case

Mr. and Mrs. Amadio had signed a mortgage to secure an overdraft facility for their son’s company. The respondents herein were Italians and were not conversant with English language hence they could not understand the terms of the guarantee and mortgage. They were told by their son that the overdraft was only limited for six months and the maximum amount that could be raised was $50,000 when in fact the facility was unlimited and funds in excess were drawn. The bank did not as well provide an explanation to the couples on the details contained in the document. The couple ended up signing the documents based on wrong information given to them by both their son and the bank. The bank paid the son lots of money in excess of $50,000 and when the son’s company could not pay they sought to exercise their power of sale under mortgage.

2. Legal Issues in Amadio’s case

The first legal that arose is unconscionable conduct. Amadio’s lawyers argued that the couples belonged to a special group of persons who could be disadvantaged in the dealings therein. They were of the reasoning that the bank and the son had superior knowledge on the terms of the mortgage and guarantee compared to Amadio hence the unconscionable conduct. The second legal issue is non-disclosure. The argument by the lawyers is premised on the fact that the bank by failed to disclose the terms of mortgage and guarantee therefore contravenening their duty of disclosure to customers. Had such a disclosure been made the couples would not have signed the document. Lastly is the issue of express misrepresentation. Misrepresentation in this instance was first brought about by the son who wanted to get paid. The bank on the other hand seemed aware of the underlying issues of misrepresentation and it failed to make full disclosure when required to. This amounts to express misrepresentation.

3. Three conclusions of appeal court

On the issue of unconscionable conduct, the court held that Mr. and Mrs. Amadio belonged to the special group of persons because of their lack of understanding of English language. The bank and the other had superior knowledge which they took advantage of in relation to the transaction. The court herein dismissed the respondents’ claim on ground of unconscionable conduct. For non-disclosure, the court first observed that the duty of utmost good faith was not material in the case but the circumstance therein needed such a disclosure from the bank. The court held that non-disclosure herein led to an implied misrepresentation. Finally the court made a decision on issue of express misrepresentation. The court observed that the son of Amadios made express misrepresentation. However, it is the view of the court that the bank is responsible because it ought to have looked into the circumstances giving rise to the given consent. This misrepresentation is thought to have influenced Amadios to enter into the transaction.

4. Rationale for Judgment of Chief Justice Gibbs

The first rationale is in relation to the issue of misrepresentation. His Honour in dismissing the suit for non-disclosure relied in the case of Lloyds Bank Ltd v Harrison. Reasoning there from, he argued that in light of the circumstance of this case the bank ought to have disclosed the terms of guarantee and mortgage since failure of which would amount to fraud. The second issue is unconscionable conduct. His Honour quoted the case of Blomley v. Ryan. He argued that the couples did not understand fully the English language but nevertheless the bank never took advantage of such. Therefore this was not unconscionable conduct.

5. Ratio of Justice Mason and how did it differs from that of Chief Justice Gibb’s

His Honour basically dwelt on the issue of unconscionable conduct. He argues that there was an inequality in bargaining power because the respondents were of a special group of persons who would ordinarily be disadvantaged. Moreover it is his view that that the bank is guilty for unconscionable conduct since it reasonably would have disclosed the nature of the transaction because of the nature of the contract herein. The rationale is the same except in relation to categorization whereby Justice Mason holds that misrepresentation, fraud, non-disclosure form part of unconscionable conduct whereas the chief justice differentiates misrepresentation and unconscionable conduct and make separate rulings.

6. Gross inequality of bargaining power

The first point giving rise to inequality is the fact that the couples were of Italian origin with a poor understanding of English language as compared to the Bank who had a good grasp of English language and they fully understood the transaction. Secondly, the son was an adviser in the transaction. It is obvious that because he needed the money from the bank he was advancing his own interest. Lastly, the son and the bank both misled the respondents on the nature of the transaction. The son who was the alleged adviser did not properly explain the terms of the guarantee and mortgage.

7. Difference between undue influence and unconscionable conduct

In the context of the judgment given, undue influence involves lack of voluntariness by one party to a transaction. However, for an unconscionable conduct, one of the parties who is superior takes advantage of a weaker individual in relation to the transaction so involved. It is noteworthy from the rulings therein that in undue influence a party could be forced to enter into a transaction but for unconscionable conducts no force is used but rather a stronger party perhaps with superiority in knowledge takes advantage of a weaker party or a party with a special disadvantage. Unconscionable conduct affects the judgment of an individual such that he would not be able to make a sound decision because of a disadvantage unlike in duress where an individual knows exactly what he is engaged in but he is forced to act otherwise.

8. Ratio of Justice Deane for supporting Mr and Mrs Amadio

The honourable judge reasoning is that the couples were of an advanced age with a poor grasp of English language. Additionally, the couples were not given advice on the nature of the transaction involved. He also argues that the bank having probably known their inability to pay the debts and generally the nature of the document ought to have explained to the respondents the consequences of the transaction.

9. Dissenting judge

Justice Dawson is of the dissenting opinion. He makes reference to the case of Gutch v Homa in relation to misrepresentation and non-disclosure. He argues that in order for a bank to be held accountable to a guarantor for misrepresentation, the bank ought to have been notified about the impropriety first or the likely hood of such an impropriety occurring. He argues that it is not a bank’s duty to make disclosure on the contents of the guarantee and moreover when there is a non-disclosure in a guarantee the contract would still be valid.

10 A. The first remedy is in relation to setting aside of the transaction. The court would repudiate the contract on ground of unconscionable conduct. This would therefore mean the court will discharge parties to the guarantee and assume that such duties and obligations never existed. There is also compensation for the victim whereby the court will reward all damages incurred. Alternatively, the court could vary the terms of the contract such that there would be equity in the transaction. The court could also direct a party to do a specific task to remedy the unconscionable conduct. Repudiation of the contract would be sufficient if parties have not incurred expenses in the transaction. Compensation is also sufficient where the subject matter can be paid, otherwise compensation might not be relevant in every transaction. Varying the terms of the contract or otherwise helps to remedy what the weaker party ought to have remedied. Directing a stronger party to act specifically in this case is a rather justifiable thing to do. A weaker party will be able to get what he or she specifically requires for the compensation to be sufficient.

B. To begin with, the Australian consumer law outlaws any act that is unconscionable in nature under the unwritten law. Under the same provision, any unconscionable conduct is supposed to be investigated accordingly. The act also outlaws any practice in supply of goods or service that is unconscionable in nature hence guarantying protection of consumers. The act has also listed instances where unconscionable conduct will be said to have arisen. In other words the act presupposes instances when unconscionable conduct will be said to have arisen. The Australian consumer act has also protected small businesses from unconscionable conduct under its provisions. The Australian competition law however requires parties to bring suits within a period of six months from the day the cause of action arose.


Owen and Gutch v Homan (1853) 4 H.L. C. 997.

Lloyds Bank Ltd v Harrison (1925)4 LDAB 12.

Blomley v. Ryan (1956) 99 CLR 362.

Goodwin v. National Bank of Australia Ltd [1968] HCA 30; (1968) 117 CLR 173

Commercial Bank of Australia v Amadio (1983) 151 CLR 447; [1983] HCA 14

Black Ashley, ‘Unconscionability, Undue Influence and the Limits of Intervention in Contractual Dealings: Commercial Bank of Australia Ltd. v. Amadio’ (1986) 11 Sydney L. Rev.  134, 139.

Australia Competition and Consumer Commission, Unconscionable Conduct (6 May 2017) <>

Australian Consumer Law 2010 s. 20

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