Amadio Case

Background to Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447

The Amadio case is about two elderly migrants, Mr and Mrs Amadio, who were asked to execute a mortgage from the bank by their son Vincenzo Amadio, the purpose being to secure the overdraft of a company which their son owned. Mr and Mrs Amadio agreed to the terms as offered by the bank, believing that the mortgage was to be limited to $50,000 and for six months, however this was not the case. The bank was well aware that Mr and Mrs Amadio had been misinformed regarding the mortgage which they were executing for their son. Soon after, Vincenzo’s company began to deteriorate, and the bank demanded payment from the Amadio’s on the guarantee. When the bank did not receive

its money, they said they would take action and sell the house.
The principles of unconscionability expressed by the High Court in Amadio

The High Court stated that it was the banks obligation in the first instance to disclose all information regarding the transaction to the respondents, Mr and Mrs Amadio. The reason why it was the banks duty to disclose such information directly to the Amadio’s acting as a surety was to clear up any misconceptions or ambiguity that there may be. Mr Virgo, on behalf of the bank knew that Vincenzo Amadio’s company was severely deteriorating and when Mr Amadio pointed out that he thought the deal was to be limited to six months, it was Mr Virgo’s responsibility to ensure that the Amadio’s completely understood what they were doing. Mr Virgo could have advised Mr and Mrs Amadio to seek independent advice, however, he did not. The Commercial Bank of Australia was therefore liable for any misrepresentations made by Mr and Mrs Amadio’s son.
The High Court expressed that whenever two parties are dealing with each other and one of the parties has a ‘special disadvantage’, which may be sickness, financial difficulty or inexperience, and the other party takes advantage of this opportunity, then this can be seen as unconscionable conduct, and that the principles of equity will apply to such scenarios.

In this instance, the Amadio’s were seen as being at a ‘special disadvantage’ primarily due to their age, they could not comprehend the English language well and also because of their lack of experience in such matters. The court labelled the banks conduct as unconscionable because of the advantage which was taken of Mr and Mrs Amadio while they were at a special disadvantage and that they were given false information by their son which made them extremely vulnerable.
Had Mr Virgo disclosed all information to the Amadio’s, especially when Mr Amadio made the statement which suggested he was not properly informed of the terms of the mortgage, and the Amadio’s understood everything, they would not have been able to take to court the Commercial Bank of Australia on the grounds of unconscionable conduct. The fact that their ‘special disadvantage’ was exploited gave passage for them to receive equitable relief for unconscionable

conduct.
Background to Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392

The appellant Harry Kakavas took Crown Melbourne Ltd to the High Court for unconscionable conduct which Kakavas accused them of. A regular user of Crown casino, Kakavas sued the casino in an attempt to recover his $20.5 million expenditure in the casino. Kakavas claimed that he had serious gambling issues and that the casino and two of their employees ‘lured’ him to spend in the casino and allegedly gave him many incentives to do so. He argued in court that his gambling problem was a ‘special disadvantage’ which was exploited. He took action against crown on the grounds of unconscionable conduct.
How the principles of unconscionability impact upon the High Court’s decision in Kakavas

The principles of unconscionability which were found in Amadio, relating to one party taking advantage of a party with a ‘special disability’ impacted significantly on the decision in Kakavas.

Mr Kakavas’ claim that Crown casino and its employees acted unconscionably was dismissed on the grounds that, unlike Mr and Mrs Amadio in their dispute against the Commercial Bank of Australia, Mr Kakavas suffered from no ‘special advantage’ from which he could have been exploited. Mr Kakavas argued that he had a pathological gambling condition and that the casino knew of this and yet lured him into rampantly spending money, and this meant that he should have been entitled to compensation.
Mr Kakavas’ professionally diagnosed pathological gambling addiction was deemed not to have affected his ability to make his own decisions, and that he, at any time could have stopped. In the Amadio case, Mr Virgo became aware that perhaps Mr Amadio did not completely understand the terms of the contract of the mortgage he was executing, and therefore it could be concluded that Mr Virgo on behalf of the bank acted unconsciously. However, in this instance there was no evidence to suggest that Crown was aware of Mr Kakavas’ gambling problem, and that through the use of this knowledge Mr Kakavas was

exploited.
Mr Kakavas could not illustrate in court that the losses which he occurred, summing up to over $20 million, were because the casino blindly chose to ignore the fact that he had an obvious gambling addiction. If he had been able to show that his gambling addiction was made apparent to the casino and their employees and that they, with the use of this knowledge lured him into using their facilities and spending millions, then perhaps he would have been able to receive equitable relief. However, when Amadio was applied to this case, it resulted in Mr Kakavas not being successful in the High Court as it could not be shown that he had a ‘special disadvantage’ which was exploited.