Amadio case essay PDF

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How has the case of amadio affected private law ...

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LAW252 SHORT ESSAY 2018 Introduction The functions of private law in Australia largely revolves around four main areas – contracts, torts, unjust enrichment and property. Contracts to establish what parties consented to and to regulate private dealings. Torts to establish the rights of parties and to remedy those rights who have been infringed. Unjust enrichment to remedy and provide restitution and lastly property to determine the ownership of property and to protect the interests over property. Private law is a body of law that pertains to how individuals interact with one another or how they interact with companies. Private law in Australia is primarily formed upon common law however has increasing influence from legislation. This essay aims to highlight the significance and impacts of the case of Commercial Bank of Australia Ltd v Amadio [1983] HCA 14 on private law in Australia. Was there a contract Contracts are fundamental to the our daily lives, businesses and organisations. For that reason it is crucial that it is executed impartially and when breached or rescinded, it is equitable. In the circumstance of the Amadios, there was a contractual arrangement between them and the Commercial Bank of Australia Ltd (henceforth referred to as “bank”).1 The arrangement was for the parents of Mr Vincendio Amadio to guarantee a debt. The documents were duly signed and authorized in accordance with the basis of typical contracts. When the documents were signed, they affirmed the binding contract regardless if they were aware of the full contents of the contract by a general rule.2 Rescinding a Contract In Private Law, contracts can be rescinded or set aside if there deceit, misrepresentation or unconscionability. In the circumstances of the Amadios, they fell into the category of unconscionability when the court held that there elements to be satisfied. Deane J asserted that these were – one party in the transaction having to be at a special disadvantage, the stronger party having knowledge of the special disadvantage, the stronger party taking advantage of the special disadvantage and lastly the advantage must be unconscientious.3 These elements were established when Deane J stated “The result of the combination of their age, their limited grasp of written English, the circumstances in which the bank presented the document to them for their signature and, most importantly, their lack of knowledge and understanding of the contents of the document was that … they lacked assistance and advice where assistance and advice were plainly necessary if there were to be any reasonable degree of equity between themselves and the bank.”4 Aside from unconscionability, there were elements of misrepresentation when the bank failed to disclose unusual features pertaining to the Vincenzo Amadio’s 1 Commercial Bank v amadio 2 L’estrange v E. Graucob Ltd 2 KB 394 3 Above n1 474. 4 Above n1 477

overdrawn account and CJ Gibbs asserted that this amounted to misrepresentation and was sufficient to set the deed aside.5 Furthermore, the bank arranged to increase the company’s overdraft in a short period of time and was selectively dishonouring cheques to provide a false image of the company. The case of Amadio was applied to other cases and this demonstrates the array of the types and forms unconscionably. In the case of Bridgewater v Leahy (1988) CLR 457, a transaction was set aside by a 3:2 majority after concluding that an emotional dependence was being exploited. A connection between emotional attachment and a non-commercial transaction amounted to unconscionability.6 The type of unconscionability between the case of Amadio and that of Leahy can be contrasted here, however still constituting unconscionability. Another case of emotional dependence is that of Louth v Diprose (1992) 175 CLR 621 whereby the it held that the plaintiff had exploited the defendant’s emotional dependence and had a house purchased by the defendant and transferred to the plaintiff’s name out of love and dependence. Mason CJ asserted the plaintiff’s conduct was unconscionable in that it was ‘dishonest and and calculated’.7 The case of Blomley v Ryan was applied and relied by that of Amadio to demonstrate that there are many situations whereby relief will be granted to set a transaction aside should there be any circumstances that adversely affect a party. These include poverty or a need of any kind or a lack of education or assistance or explanation as per Fullagar J. In this case, the defendant was relieved of his transaction for a property that he was going to see undervalued because of his impaired judgement from habitual drinking to excess, thereby unable to formulate rational judgement.8 His drunkenness was seen as a special disadvantage. The case of Blomley and Amadio can been distinguished from another case of special disability and unconscionability – Kakavas v Crown Melbourne Ltd [2013] HCA 25. In this case the plaintiff claimed the defendant had engaged in inconscionable conduct by exploiting his gambling problem and had encouraged it.9 The court unanimously dismissed the appeal on the basis that the appellant’s interest in gambling was not a special disadvantage but rather a decision made on his own.10 The respondent was not seen to have taken advantage of him and therefore distinguishing Amadio. This principle is known as the ‘Amadio principles’ with instances referring to a transaction where a party is taking taking unfair advantage of his own superior position or bargaining power. Legislation Since Amadio Since the Amadio case, amendments have been made and enacted to the Trade Practices Act 1974, Australian Securities and Investments Commission Act 2001 and Corporations Act 2001. In 1992, new parts of the Trade Practices Act 1974 were was incorporated to factor in unconscionable dealings, there are from s 51AA to s 52B. 11 5 447 6 Bridgewater v Leahy (1998) 194 CLR 457. 7 Louth v diprose 8 Blomey v Ryan (1856) CLR 362. 9 Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392 10 Ibid. 11 TPA

One such protective clause is in s 51AA which prohibits corporations from engaging in conduct that may be represented as unconscionable in its trade and commercial dealings.12 Aside from the Trade Practices Act 1974, similar legislation are present in Australian Consumer Law. Key sections pertaining to unconscionable conduct are present from s 20, s 21 and s 22.13 S 20 of the act is identical to s 51 AA of the Trade Practices Act and therefore does not apply when s 21 applies to avoid an overlap. S 21 prohibits unconscionable conduct in connection with the supply or acquisition of goods or services by or from a person. To protect the rights and interests of consumers, s 22 is set out with a broad range of factors to assist the court in determining whether specific conduct in unconscionable.14 Impacts on Australian Private Law Since Amadio, the rights of Australians are more protected and consumers are more informed with the easier access to information media. The decision in Amadio shows that law prevails and that consumers are free from unjust and unconscionable dealings. There are statutory and non-statutory checks to provide remedy to victims. This case puts forward authority for a presumption of unconscionable conduct wen the weaker party can establish that they were of special disability, and that it was sufficient to make the stronger party to have procured or accepted the weaker party’s assent. On the other hand, the stronger party must show that the transaction was just and impartial.

12 Ibid. 13 ACL 14 S22 acl...