The High Court Decision in Commercial Bank of Australia Ltd v Amadio forced banks to behave more ethically in the future management of mortgages.
It involved two Italian migrants in their 70s whose son, Vincenzo Amadio, ran a troubled building company. The company was insolvent, but the Commercial Bank of Australia allowed the company to maintain the appearance of liquidity by selectively honouring cheques until March 1977, when it closed the account.
Later that month, the account was reopened and the overdraft limit lifted to $270,000.00 to allow Vincenzo to clear the debt. The account was to be secured by a mortgage over the house owned by Vincenzo’s parents, who had a limited understanding of written English.
Vincenzo told his parents (“Amadios”) that the mortgage was for $50,000.00 and would last for six months. However, the Commercial Bank had drawn up a deed that included a guarantee securing all the company’s current and future debt against the house.
The branch manager went to the Amadios home to have the mortgage signed and the father mentioned that he thought it was only going to be in force for 6 months. The bank proceeded anyway, knowing that the Amadios were being mislead, and that they had received no independent legal advice.
Vinenzo’s company went into liquidation and the bank demanded $239,000.00 from the Amadios. The Amadios’ sued on the ground that the bank acted unconscionably. The Bank succeeded before the Supreme Court of South Australia, however the Amadios’ appealed to the Full Court of South Australia and won. The Bank appealed to the High Court, where Elliott Johnston argued that it had taken advantage of the Amadios’ limited understanding of English and reliance on their son.
The High Court agreed and set aside the mortgage agreement, removing the couple’s liability for their son’s debt
The judgment was enough to put the banking community on notice and it became mandatory for mortgagees to have access to independent advice
This was one of the last and most important cases Elliott Johnston QC argued before becoming a Judge of the SA Supreme Court. Twenty-five years later, then High Court Chief Justice Gleeson cited the Amadio case as one of the landmarks in equity jurisprudence.
Lessons learnt from the recent High Court cases of Fairfax Media Publications Pty Ltd v Voller  HCA 27 and Google LLC v Defteros  HCA 2. Prepared by Caitlin Walkington and Richard Bradshaw.
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