The Australian Consumer Law protects the interest of consumers. This law provides safety to consumers against any wrongdoing. In the leading case law - “Commercial Bank of Australia v Amadio” the meaning of the unconscionable conduct is clearly explained. This case explained that mortgage and guarantee are not enforceable when there is the presence of unconscionable conduct.
- What are the relevant facts and issues related to the “Commercial Bank of Australia v Amadio”?
- Explain the meaning of Unconscionable conduct with reference to the leading case of Australia- “Commercial Bank of Australia v Amadio”?
- What changed the decision of the court of appeal in case of “Commercial Bank of Australia v Amadio”?
Australian Consumer Law
The Australian consumer law (ACL) is a national law in Australia which provides guarantee and safety to the consumers of products and services. This law protects the interest of consumers. This law along with the protection of consumers also provides them with compensation or damages in case of a breach. In Australian Consumer Law, it is considered illegal to engage in any activities that relate to unconscionable conduct by any business organisation. The activities can either be with any other business organisation or any customer.
Relevant Facts of the case:
Mr. and Mrs. Amadio were an elderly couple who migrated from Italy to Australia. They had little knowledge of business and little did they knew English language. The couple had son named Vincenzo Amadio who was managing director and principal shareholder of a building company. Their son asked them to mortgage the block of property they own to Commercial bank of Australia (CBA) to secure the overdraft of his company for the period of 6 months. He also informed them that their liability would be limited to only $50,000. Both his parents believed as they were under impression that the company of their son was in profit.
The bank reached his parents house to get the mortgage papers signed believing that their son already informed his parents about the same. The bank knew that son's company was in financial difficulty as he overdrawn the overdraft with the bank. The bank was also well aware of the fact that the parents were not given true information related to the the papers they were signing. They bank even after knowing all the facts did not inform Mr. and Mrs. Amadio.
The company of the son of Mr. and Mrs. Amadio came under debt and went into liquidation. The bank demanded property under the guarantee. Mr. and Mrs. Amadio commenced proceeding for setting aside mortgage on the basis that they did not knew the terms and conditions of the paper work they signed. Later bank counter claim that they own amount from their son's company.
The respondents to the case claimed that the bank can not enforce the mortgage as it was unconscionable bargain made and it was made under undue influence. The bank too did not discloses the facts as it was their duty to represent the true facts and disclose all the important details which were important for the parents to know. It was the duty of the bank personnels to disclose the facts mentioned on the agreement paper. The parents were clueless to the fact that they were suppose to make payment and other important details to which they had right over. Bank failed to perform their duty. The act of the bank was unethical and they were not professional while carrying out professional activity.
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Unconscionable Conduct do not have any specific definition but it refers to any conduct or behaviour which is against the norms of the society and the people of society do not accept it. This refers to the exploitation of the special disadvantages of other person. For e.g. taking help of a friend or relative to influence the decision of another person, fails to disclose important information necessary for a party to know, etc. There are various remedies available in case an unconscionable conduct has occurred. They are:
- compensation against the loss caused or damages.
- Penalties on Finances
- party can declare the contract void either partially or whole.
- Party can make the contract varied.
- Party can ask for refund or can also seek specified service performance.
Was the guarantee given by Mr. and Mrs. Amadio for mortgage was unenforceable due to the Commercial bank of Australia's Unconscionable conduct?
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- Trial judge: The trial judge decided in favour of the bank and ordered Mr. and Mrs. Amadio to pay the amount of $239,000 to the bank. As there was no evidence of undue influence. And the misrepresentation was not the fault of the bank instead it was Vincenzo who should be help for misrepresentation.
- Court of Appeal: It was held by the court that Mr. and Mrs. Amadio is under no obligation to pay any amount as it was banks duty to disclose the information before making them sign the papers. The court also held that the transaction made by the back was of unconscionable nature.
- High Court: The court dismissed the appeal on the grounds that the bank did not disclosed the information to Mr. and Mrs. Amadio and also dismissed it on the grounds of misrepresentation of facts of the mortgage and guarantee. This made Mr. and Mrs. Amadio not bound to pay any compensation amount to the bank and there exist no obligations towards the bank. Legal obligation is created only when all the essentials of a valid contract are fulfilled by the party. But the party did not represent the actual facts of the documents.