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 conclusionsthe 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 [4 marks]
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?
The following answers are to be based on the case of Commercial Bank of Australia Ltd v Amadio (1983) HCA 14.
1. Mr and Mrs Amadio had relied on certain legal issues or causes of action on the basis of which they had challenged the signing of the mortgage guarantee. The first legal issue or reason for appeal was that the mortgage guarantee would lead to an unconscionable bargain. It would them into a very disadvantaged situation (Furmston et al., 2012). The reason for such a claim was that the couple did not have the required faculties to understand the transaction. They were ignorant and less informed about the transaction. Another legal claim which the couples raised that they had signed the mortgage guarantee under undue influence. They had relied upon the ingenuity of their son and signed the mortgage guarantee (Anson et al., 2010). This shows that there was absence of free consent. They lacked the freedom of reasoning and completely relied on the representation made by their son. Thus they claim that decision was based on blind trust which was broken. The final legal issue on the basis of which the signing of the mortgage guarantee was challenged was the element of misrepresentation and concealment of material facts.
2. The appeal court in the present case is the High Court of Australia. While dismissing the appeal made by the Commercial Bank of Australia. The court went through the facts of the case and made certain decisions and conclusions. The first conclusion was based on the aspect or issue of unconscionable conduct (Graw, 2012). The majority judges in this case namely Justice Deane, Mason and Wilson agreed to the fact that the couple had suffered from a special kind of disadvantage. It was uncalled for the bank to induce them to believe on the mortgage guarantee. The bank had used its superior position to put the couple into a disadvantaged position. Another issue which was taken up by Justice Gibbs was regarding misrepresentation. The court was convinced that material information was concealed and misrepresentation was caused to the couple.
3. In his verdict regarding non disclosure of material facts, Justice Gibbs observed that the concept of utmost good faith is not always applicable in the case of a contract of guarantee (Phillips, 2010). The guaranteeing bank has to only inform to the guarantor such occurrences between the banker and the principal debtor which cannot be expected in usual circumstances. They have to inform the guarantor about any unusual feature of the bank account which is to be considered for taking guarantee. If the bank fails to disclose these unusual facts taking place between the bank and the debtor to the surety, it would imply that it accepts that the transaction which is taking place does not exist. Thus facts like the account being overdrawn and facing issues are material facts to be disclosed.
4. There were certain circumstances and situations that were occurring which seemed to be unusual enough for the judge to believe that the banks were to intimate the Amadio couples about it (Bigwood, 2013). There was an agreement by which their son and the bank to reduce the overdraft balance to such an extent that it would be lesser than the debit balance of the company. This kind of arrangement was considered to be unusual and such knowledge would be derived by the surety unless proper disclosures were made by the creditor of the company. This only meant that the company was give temporary relief but not completely absolved from the situation. Moreover the bank had selectively dishonoured the cheques. They had made themselves party to the dishonouring of the cheques (Duncan, 2012). This information was hidden to the disadvantaged couple.
5. The decisions made by Justice Gibbs were based on certain issues on the basis of which he dismissed the appeal made by the Commercial Bank of Australia. The first decision was based on the aspect of the issue of non disclosure made by the bank to the couple. The other issues on the basis of which Justice Gibbs made his decision was the aspect of misrepresentation and unconscionable conduct.
6. There does not seem to be much difference between the ratio and legal issues that have been considered by both Justice Mason and Justice Gibbs. There is rather a consensus in their thoughts (Black, 2011). However when reading through the verdicts of both the judges it seems that Justice Mason seems to have elaborated and discussed the issues in depth. He has identified issues which had put the bank into a disadvantageous position. These are additional observations which were absent in the analysis put forward by Judge Gibbs. Thus from the above comparison it can be understood that Justice Mason had identified additional points and issues which were overlooked by Justice Gibbs. He had covered the facts of the case in details and made critical analysis of the same.
7. Justice Mason were able to identify factors by which the bank on one hand the respondents on the other hand were in situations of gross inequality in terms of bargaining power. The inequality was to such an extent that the respondents were in a circumstance of special disadvantage compared to the bank with respect to the concerned bank mortgage guarantee. The respondents did not have the judging capacity to understand their best interests with respect to entering into the transaction as sureties. However the fact that they had complete intent to help their son has to be respected and given regard to. The respondents had been put into the situation of special disadvantage because they believed and put their reliance on the mortgage guarantee which was needed by the bank as a condition to increase the present overdraft limit of the defaulting company from $ 80,000 to $ 2, 70,000 (Bigwood, 2011). The bank had given them misleading information as to the stability and the credibility of the company. The fact that they had relied on their son also speaks of their disadvantaged situation. They were elderly Italia couples with limited knowledge of the English language. Moreover they had no knowledge of business.
8. In the present case both Justice Dean and Mason made a distinction between the legal concepts of unconscionable conduct and undue influence. Thus these concepts have to be understood to find their relation with the present case (Virgo, 2015). When speaking about unconscionable conducts or dealing it refers to benefit that is gained by deliberately misusing an imbalance of power or special disadvantage. Thus unconscionable conduct is focussed on the activity of the more advantaged party. When speaking of the concept of undue influence it is a situation where the disadvantaged party is put under influence to enter into an agreement. When there is actual undue influence it happens as a result of physical pressure or coercion which does not allow the weak party to use their independent power of reasoning (Burns, 2011). The most pertinent fact about which separates the concept of undue influence to be considered in this case is the fact that relation of old parents and adult children are not considered. It cannot be presumed that such relation leads to undue influence. The respondents had readily agreed and understood the bank guarantee. However they were not disclosed of some facts which put them in such situation.
9. Justice Dawson had dissented to the decisions of the other judges. He had identified situations where the bank should have made disclosures. He identified the problematic financial situation of the company as information that should have been disclosed to the couple. Moreover the information about selected payment of cheques had to be disclosed.
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