Commercial Bank of Australia Ltd v Amadio
| Commercial Bank of Australia Ltd v Amadio | |
|---|---|
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| Court | High Court of Australia |
| Full case name | Commercial Bank of Australia Ltd v Amadio |
| Decided | 12 May 1983 |
| Citation(s) | (1983) 151 CLR 447 |
| Court membership | |
| Judge(s) sitting | Gibbs CJ, Mason, Wilson, Deane & Dawson JJ |
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 is an Australian contract law and equity case, in which the legal issue of unconscionable dealing due to a lack of knowledge or education is examined and the implications as to the imbalance in bargaining power are considered.
The case is a formative case for the defence of unconscionability and is studied under contract law in Australian law schools.
The Amadios, whose son carried on business as a builder, guaranteed the son's indebtedness to the Commercial Bank of Australia. To this end, they executed certain documents the effect of which was to provide the bank with a mortgage over a building which they owned. When the son's business failed, the bank sought to enforce the guarantee. In their defence, the Amadios asserted that the guarantee was unenforceable because it was unconscionable. They were held to be at a "special disadvantage" as an equitable doctrine in Equity (law). With unconscionable conduct having no definition at a legislative level (other than conduct lacking in goodfaith) it is largely up to the presiding judicial member to determine as to whether compliance is efficient on a statutory basis.
It was held by the High Court of Australia in 3-1 majority that, in all the circumstances, it was unconscionable for the bank to rely on the guarantee. Notable circumstances taken into the account by the court include:
Justice Mason noted: "Relief on the ground of unconscionable conduct will be granted when unconscientious advantage is taken of an innocent party whose will is overborne so that it is not independent and voluntary, just as it will also be granted when such advantage is taken of an innocent party who though not deprived of an independent and voluntary will, is unable to make a worthwhile judgment as to what is in his best interests (at 462)."
In cases of proven unconscionability, the courts will set aside the contract or refuse to make an order for specific performance of it. As will be seen, if the unconscionable conduct constitutes a breach of statutory law, broader remedies (including damages) may be available.
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