Background of the Legal Case
Describe about the Introduction to Business Law for Comprehend the Transaction.
1: The three causes of action on which the respondents had relied upon were: (i) that the bargain was unconscionable; (ii) That the transaction has been procured as a result of undue influence; (iii) and the transaction has been induced as a result of a misrepresentation or due to the reason of the concealment of facts regarding which a duty was present on the bank to disclose. However, these contentions of Mr. and Mrs. Amadio were rejected by the learned primary judge who believed that on the basis of the facts that the bank was aware of, the bargain between the parties was an ordinary one, that was created in the usual and regular course of commerce and the bank was not aware of any inequality of bargaining power. Moreover, the primary judge also stated that there was no evidence regarding undue influence or any misrepresentation or concealment on part of the bank or Vincenzo Amadio. The result was that Mr. and Mrs. Amadio raised these issues to challenge the mortgage guarantee that they have signed.
2: The three conclusions of the appeal court while reversing the decision of the trial judge after examining the facts of this case. Therefore these three inferences were:- (i) The bank had an obligation to reveal the noteworthy additions to Mr. and Mrs. Amadio however in this case, this obligation was not fulfilled by the bank. At the same time, the other conclusion on the basis of which the decision of the trial judge was reversed by the appeal court was that (ii) The bank can be held accountable for the representation that has been made by the son of the respondents, Vincenzo Amadio. The 3rd inference that was made by the appeal court in this case was that (iii) under the circumstances, the transaction between the parties can be termed as unconscionable. The result is that it can be said that in view of the nature of the transaction, equity demands that really should be provided to the other party, in this case Mr. and Mrs. Amadio.
3: While delivering his judgment in this case, Gibbs J. arrived at the conclusion that the company controlled by the son of respondents, Vincenzo Amadio was facing financial problems and the company had crossed its overdraft limit. Moreover the cheques issued by the company were also being regularly dishonored, the circumstances alone cannot be considered as being sufficient for imposing a duty on the part of the bank which requires the bank to disclose these facts to any potential surety. In this regard, Gibbs J. stated that when the contract that has been created between the bank and one of its customers is unusual in nature, there is a duty on the part of the bank according to which such a disclosure should have been made to the potential surety. Therefore, Gibbs J. was of the opinion that there was a duty of disclosure present on the bank as there was a special arrangement between the bank and its customer, Vincenzo Amadio. Moreover, on the basis of the nature of the arrangement, it can be said that generally a surety will not expect the presence of an arrangement of such a nature. Therefore this duty to disclose these circumstances to the potential surety has been imposed on the bank as a special arrangement has been concluded between the bank and his customer and normally, a probable surety will not expect the presence of such an arrangement.
The Appeal Court's Findings
In this case, Gibbs J. noted the fact that special reasons were present for the bank to maintain a tolerant attitude towards the company owned by Vincenzo Amadio. Not only the bank highly valued its connection with Vincenzo due to the reason that he was a significant client but also in view of the business that Vincenzo brought and also on account of the fact that his company was engaged in building houses with a company that was the subsidiary of the bank. Therefore the company built the houses at cost plus 10 percent which only covered the administrative charges and the intention was that any profit on the sale of the buildings has to be shared between the subsidiary of the bank and another company that was controlled by Vincenzo Amadio.
However, the bank realized that it can allow no longer the account of the company of Vincenzo to be conducted as before. Therefore the bank decided that further operations should be stopped on the overdraft accounts and it was to be treated as a fully drawn advance account. All the cheques that were drawn on the account had to be dishonored. Therefore the company had to open the second account and this account was kept in credit.
4: In this case, there were two facts on account of which Gibbs J. stated that the relevant circumstances need to be disclosed to the respondents, Mr. and Mrs. Amadio by the bank. The firs relevant circumstance in this regard that was noted by Gibbs J. was the fact that the bank had a special arrangement with its customer, Vincenzo Amadio. The bank treated Vincenzo as a special customer as he brought a lot of business to the bank from other parties, apart from his own business. Under these circumstances, there was an arrangement present between the bank and the company owned by Vincenzo Amadio according to which, it was decided that the bank will provide an overdraft limit of $270,000 to Amadio Builders immediately. However there was a condition attached to this arrangement. According to this condition, the overdraft limit was going to be reduced to $230,000 by the bank within a week. Similarly after a fortnight, the bank was going to further reduce the limit to $180,000. The result was that according to this arrangement, in a period of 3 weeks, the bank was going to reduce the overdraft limit less than the debit balance. Consequently, the court stated that the failure to disclose the circumstances to the respondents can be treated as misrepresentation. Hence, in view of these sects, Gibbs J. arrived at the conclusion that in this case, the bank had a duty to make the relevant disclosures to the respondents.
Gibbs J.'s Decision and Reasoning
5: in this question, the ratio due to which Gibbs J. ruled in favor of Mr. and Mrs. Amadio needs to be discussed. Therefore in this case, the ratio behind the decision that was delivered in this case by Gibbs J. was that the bank had a duty to disclose the relevant facts to the elderly couple but the bank had failed in its duty to disclose the relevant circumstances to Amadio couple. The result was that Gibbs J. arrived at the conclusion that the appeal should not succeed. Hence the legal issue on account of which, Gibbs J. had arrived at the decision was related with the failure by the bank to disclosure when circumstances to the elderly couple.
6: The ratio behind Mason J’s judgment was different from the issue adopted by Deane J. although Mason J. had confirmed the detailed statement related with the facts of this case made by Deane J and in the same way, Mason J. had also confirmed the conclusion that was made by Deane J. according to which in this case, according to the facts, relief needs to be granted to the respondents. The ratio adopted by Mason J. was not the same as that of Deane J. due to the reason that Mason J. believed that the bank can be held responsible for unconscionable conduct. At the same time, it was also the opinion of Mason J. that in this case the conduct of the bank was unconscionable when it had obtained the guarantee from the elderly couple.
7: A difference existed between the ratio of Mason J. and the ratio on the basis of which Gibbs J. had arrived at this conclusion. The difference between these two was present due to the reason that in case of Mason J., the emphasis was on the fact that even if the doctrines that dealt with unconscionable dealings and the equitable doctrines regarding the undue influence have a connection in common but still these two are not the same. Considering the difference that is present in these two, generally where the court is going to provide relief to a party to the contract on account of unconscionable dealings, the court considers the fact if proper consideration was supplied by the stronger party to the contract. But there can be certain instances where the stronger party may have provided adequate consideration still the court will look into as being unjust or unfair, in view of the disability that was present on part of the other party. Consequently, this ratio adopted by Mason J. was different from that of Gibbs J. who was of the opinion that the failure of the bank to reveal all the relevant circumstances to Mr. and Mrs. Amadio amounted to misrepresentation.
Ratio of Decision by Gibbs J.
8: in this case, Mason J. had identified three ways in which it can be said that a gross inequality of bargaining power existed between the respondents and the bank. These facts can be described as follows:-
There was a lack of ability among Mr. and Mrs. Amadio to determine if the transaction was in their best interest or not, especially due to the reason that they were particularly motivated by the wish to help their son, whom they believe to be doing very well otherwise.
In this case, the respondents were dependent on their son for advice who had asked his parents to enter the transaction of mortgage contract for the purpose of serving his own interest.
In this case the respondents, Mr. and Mrs. Amadio were immigrants from Italy and they were in advance years of age. Moreover, they have very little knowledge of written English and similarly there experience of business matters was also very insignificant.
9: A difference was present when the two judges explained the legal issues of unconscionable conduct and undue influence. Therefore in their judgments, both these judges stated that a difference is present between undue influence and unconscionability although a connection is also present between the two as these two doctrines are doctrines of equity. Consequently, both the judges pointed out towards the legal differences that existed between these two terms. According to them, when the matter is based on an influence, the court has to consider the quality of consent that has been provided by the weaker party. However when a party has alleged unconscionable conduct, the court reasoned that the requirement to consider the conduct of the stronger party for the purpose of enforcing or retaining the benefit received by such party due to dealing with the other party that has been facing a particular disability.
10: The ratio on the basis of which, Deane J. had arrived on his decision in favor of the elderly couple can be described as follows. He noted the fact that clear evidence was present in this case according to which the respondents required to advise to understand the nature/effect of the deal that they were going to create. Similarly, this fact was also noted by Deane J. that the advice provided to the elderly couples should have included the advice concerning the importance of the surety to discover the state of account of the person concerning which the surety is going to provide a surety and the surety should also be aware of the fact that any unusual features were present, regarding the account. On these grounds, Deane J. arrived at the conclusion that if this information would be given to the respondents, they would have refused to enter the mortgage contract. In the opinion of Deane J., the transaction between the respondents and the bank needs to be considered in view of the special disability on part of Mr. and Mrs. Amadio and also the fact that this disability was quite clear to the bank.
11: In this case, Dawson J. had given a dissenting judgment. He was of the opinion that the respondents, Mr. and Mrs. Amadio relied on their son's misrepresentation and as a result, the bank had not made this misrepresentation but now, he said that the respondents want that responsibility should be shared by the bank even if the misrepresentation was only made by Vincenzo Amadio. Under these circumstances, Dawson J. was of the opinion that in this case, it is not suggested by the circumstances that the respondents have been misled when they have entered into the mortgage contract with the bank. Similarly, Dawson J. also pointed out towards the fact in his decision that the relationship that existed between the respondents and their son can be treated as a valid reason due to which the respondents have entered into the transaction, especially as they wanted to help their son. Dawson J. also mentioned in his dissenting judgment that for the purpose of applying equitable jurisdiction, it is required that a party to the contract should have exploited the other party on the grounds of its disadvantages position and consequently, it can be claimed that the party that has received the benefit under the contract should not be allowed to retain such a benefit in good conscious.
Hence, it was the opinion of Dawson J. that in the present case, there are no grounds due to which it can be said that the respondents, Mr. and Mrs. Amadio were in any disadvantages position and any benefit has been taken by the Bank of such a position. Similarly, Dawson J. also mentioned in his judgment that the facts like the advanced age of the respondents cannot be treated as an infirmity. Similarly he pointed out that the fact that the respondents have limited knowledge of English cannot be said to be establishing any difficulty for the respondents to comprehend the transaction. He also said that it has not been established in this case that the respondents depended on the bank to provide them with proper advice.
Commercial Bank of Australia Ltd v Amadio  HCA 14
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