The Commercial Bank Of Australia Ltd V Amadio (1983)

The parties to the case are the respondents, Mr and Mrs Amadio and the appellants, The Commercial Bank of Australia. The respondents were two Italian migrants of advanced age, both with limited knowledge of the English language2 and limited formal education.3 Their son’s, Vincenzo Amadio’s company, V. Amadio Builders Pty. Ltd was known to the bank and to the bank manager, Mr Virgo.4 As of October 1976, the company exceeded its overdraft limit of $80,000 and from this time onwards, the company continued to be unable to repay the amount owed.

On 18 March 1977, the bank closed the account due to the overdraft. However, on 24 March 1977, the account was reopened by the bank and the credit limit temporarily increased to $270,000. The bank would

only allow this to proceed with the condition that Vincenzo’s parents, Mr and Mrs Amadio, signed a surety of their Wicks Avenue land.5 In terms of the agreement, Vincenzo told his parents that the guarantee was for only $50,000 and for a limited from of 6 months, when in actual fact it was ‘not so limited’.6 The respondents agreed and signed the memorandum without seeking independent advice nor reading the guarantee.7

The company subsequently went into liquidation and as a result the bank requested the respondents to abide by the terms signed in the guarantee.8 It is at this point when the respondents issued legal actions against the bank to have the guarantee set aside, the bank counterclaimed and set out for the respondents to pay the amount owed as stated in the guarantee. 9

History of the Proceedings
The initial case was heard by the Supreme Court of South Australia, Amadio v Commerical Bank of Australia Ltd (1981) SASC 5303. The ruling was given by Justice Wells and was in favour of The Commercial Bank.10

Upon this decision the respondents appealed to the Full Court of the Supreme Court, The Commercial Bank of Australia Ltd v Amadio (1981) 95 LSJS 419. The judges presiding over the case in the Full Court of the Supreme Court (King C.J, Zelling J. and Jacobs JJ.) allowed the appeal from the Respondents.11

The Commercial Bank of Australia proceeded to appeal this decision to the High Court (Gibbs C.J, Mason J, Wilson J, Deane J. and Dawson JJ). The Commercial Bank of Australia Ltd v Amadio (1983) HCA 151 CLR 447.12
__________________
1.

(1983) HCA 151 CLR 447
2.The Commercial Bank of Australia Ltd v Amadio (1983) HCA 151 CLR 447, 451
3. Ibid 450.
4. Ibid.
5. Ibid 471.
6. Ibid 449.
7. Ibid 472.
8. Ibid 454.
9. Ibid 449.
10. Amadio v Commercial Bank of Australia Ltd (1981) SASC 5303
11. The Commercial Bank of Australia Ltd v Amadio (1981) 95 LSJS, 419
12. The Commercial Bank of Australia Ltd v Amadio (1983) HCA 151 CLR, 447

Ground of Appeal
The grounds of appeal the appellants identified is that the principles applied in the Supreme Court of South Australia (Full Court), from the case Blomely v. Ryan did not apply to the case in dispute.13

The appellants further specified that these principles did not apply as “no situation existed that the bank” would not “naturally expect”. In addition, the bank was also unaware of any misrepresentation or impropriety the respondents had suffered and therefore the bank viewed the guarantee as legally valid. 14

Analysis of Decision

Justice Gibbs C., identifies in his verdict that the appeal should be dismissed as the bank failed to release information it was required to disclose, due to there being factors that were

unusual.15

Justice Deane states that the appeal should be dismissed due to the appellants taking advantage of the disadvantage suffered by the respondents. In this instance, the Blomley v. Ryab (34)16 case is referred to and the term ‘special disability’ is identified and applied to the Armadio case. The judgement noted that the respondents were unable to understand written English, and the bank took advantage of this and their advanced years. This was the distinguishable “disability” of the case.17 Justice Mason J. and Wilson J. both reached the same conclusion to that of Deane J.

Justice Dawson, however, disagreed with this judgement and determined that the appeal should be allowed. In his decision, contrary to the above, Dawson J., stated that the bank was not guilty of unconscionable conduct as the respondents did not suffer from a special disability.18 He also concluded that the bank was not guilty of any breach of non-disclosure as there were no circumstances between the bank and Vincenzo that a reasonable person would not ‘naturally expect’. 19 Dawson J., lastly found that the bank was not guilty of misrepresentation as the bank had no notice of any impropriety. 20

Final Decision
The final decision the High Court made was that the appeal should be dismissed with costs.21 This verdict reaffirmed the previous decision made in The Supreme Court of South Australia (Full Court) and found the respondents should have the guarantee set aside.22
_______________
13. Ibid 450.
14. Ibid.
15. Ibid 458.
16. Ibid 474.
17. Ibid 476.
18. Ibid 490.
19. Ibid 484.
20. Ibid 485.
21. Ibid 490.
22. Ibid 448.

Ratio Decidendi
The ratio decidendi refers to the reasons for the decision. These decisions are binding on lower courts in the same hierarchy.23

The conclusion Justice Gibbs C.J reached was that the appellants case should be dismissed as the bank failed to disclose significant information. The reason for this decision was the bank was required to reveal information to the customer when the surety is under circumstances you would not naturally expect.24

Justice Mason J, Wilson J and Deane J also decided that the appeal should be dismissed. However, their judgment was reached on the basis that the bank was guilty of unconscionable conduct, with the bank taking disadvantage of the weak position of the respondents.25

Justice Dawson J.’s dissenting judgment was formed on the evidence that the respondents were not subject to any disadvantage nor were there circumstances that were unusual between the bank and Vincenzo’s company.26 Therefore, Dawson J concluded that the bank was not guilty of non-disclosure, misrepresentation or unconscionable dealing and the appeal should be allowed.27

Obiter Dictum

The term obiter dictum refers to comments ‘made by the way’, which can be ‘persuasive’ to lower and higher courts and are the judges additional views on the case before them.28

In this judgement, Justice Gibbs C.J includes a range of obiter, including that the bank did not take an “unconscientious bargain” against the respondents.

Moreover, Gibbs C.J states that in order for an agreement to be “unconscientious”, one party must take advantage over any “disabilities” present in the other party. However, he felt that the respondents did not suffer any “disabilities” during the transaction that the bank could have used unfairly.29

The dissenting decision provided by Justice Dawson J. also constitutes as obiter. For example, according to Dawson J., if the respondents had asked questions specifically to the bank, the bank would have been, by law, required to answer those questions. The Amadio’s did not ask any direct inquiries and the bank had no obligation to ‘volunteer’ information to their client.30

________
23.
24. The Commercial Bank of Australia Ltd v Amadio (1983) HCA 151 CLR 447, 455
25. Ibid 448.
26. Ibid 488.
27. Ibid

490.
28.
29. The Commercial Bank of Australia Ltd v Amadio (1983) HCA 151 CLR 447, 459
30. Ibid 487.