Category Archives: Contract

Equity – Guarantee – Mortgage – Guarantor under disability – Unconscionable bargain – Misrepresentation

Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447 (12 May 1983).

http://www.austlii.edu.au/au/cases/cth/HCA/1983/14.html

“Equity – Mortgage and guarantee – Right to set aside – Unusual transactions between bank and customer – Bank’s failure to disclose to mortgagor guarantor – Misrepresentation.
Guarantee – Guarantor under disability – Dealing with bank – Bank knowing of disability – Unconscionable bargain – Onus of proof – Whether transaction should be set aside unconditionally.”

An elderly Italian migrant couple had mortgaged land they owned as a guarantee for a loan from the bank to their son’s business. The business then went into liquidation and the bank demanded payment of the guarantee and then attempted to exercise a power of sale over the land.”

The Amadios argued that the guarantee and mortgage should set aside as:

  • they spoke limited English;
  • they did not receive independent advice and were not advised to do so;
  • they were not aware of their son’s financial situation, although the bank was; and
  • they mistakenly believed that the liability was limited to $50,000.

The court held that the mortgage and guarantee must be set aside as it was unconscionable for the bank to enter into those transactions in circumstances where the bank through it’s superior bargaining power had gained an unconscientious advantage to the detriment of the Amadios who suffered a special disability.

Lawyers

Sydney, Australia

1300 00 2088

Commercial Bank of Australia Ltd v Amadio [1983] HCA 14 | 12 May 1983

ON THIS DAY in 1983, the High Court of Australia delivered Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447 (12 May 1983).

http://www.austlii.edu.au/au/cases/cth/HCA/1983/14.html

“Equity – Mortgage and guarantee – Right to set aside – Unusual transactions between bank and customer – Bank’s failure to disclose to mortgagor guarantor – Misrepresentation.
Guarantee – Guarantor under disability – Dealing with bank – Bank knowing of disability – Unconscionable bargain – Onus of proof – Whether transaction should be set aside unconditionally.

An elderly Italian migrant couple had mortgaged land they owned as a guarantee for a loan from the bank to their son’s business. The business then went into liquidation and the bank demanded payment of the guarantee and then attempted to exercise a power of sale over the land.”

The Amadios argued that the guarantee and mortgage should set aside as:

  • they spoke limited English;
  • they did not receive independent advice and were not advised to do so;
  • they were not aware of their son’s financial situation, although the bank was; and
  • they mistakenly believed that the liability was limited to $50,000.

The court held that the mortgage and guarantee must be set aside as it was unconscionable for the bank to enter into those transactions in circumstances where the bank through it’s superior bargaining power had gained an unconscientious advantage to the detriment of the Amadios who suffered a special disability.

Lawyers

Sydney, Australia

1300 00 2088

Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24 | 11 May 1982

ON THIS DAY in 1982, the High Court of Australia delivered Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 (11 May 1982).

http://www.austlii.edu.au/au/cases/cth/HCA/1982/24.html

“Contract – Construction – Implied terms – Frustration – Contract to carry out excavations for rail authority – Completion required by certain date – Contractor working three shifts seven days per week – Injunction granted to third party restraining contractor from working at certain times – Whether implied term of contract that authority would grant reasonable extension of time and indemnify contractor against additional costs occasioned by grant of injunction – Whether injunction frustrated contract – Extrinsic evidence of intention.
Arbitration – Jurisdiction to entertain claim that contract frustrated – Power to award interest on award – Compound interest – Supreme Court Act 1970 (N.S.W.), s. 94(1).”

Codelfa contracted with the State Rail Authority’s predecessor, the NSW Commissioner for Railways, to perform the excavations on Sydney’s Eastern Suburbs railway. It was agreed that Codelfa would perform three shifts per day over a fixed period, but they were unable to meet this requirement because of injunctions brought by local residents.

Codelfa sought damages from the SRA on two grounds: (1) that there was an implied term that if they were restrained by injunctions the SRA would extend time for completion or would indemnify Codelfa for any losses caused by the injunctions; in the alternative, (2) that the contract was frustrated by the injunctions.

Mason J at 352 observed that the “true rule” regarding the admission of evidence of the surrounding circumstances is that such evidence is admissible if the language of the contract is ambiguous or capable of more than one meaning but is not admissible to contradict the language which has a plain meaning.

The court held that there was no implied term. Even if a term needed to be implied to give efficacy to the contract, the was not a term “so obvious it goes without saying”. The court referred with approval to its earlier decision in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596.

Codelfa was nevertheless successful with the court holding that the contract was frustrated because “the performance of the contract in the events which have occurred is radically different from performance of the contract in the circumstances which it, construed in the light of surrounding circumstances, contemplated”.

Lawyers

Sydney, Australia

1300 00 2088

Statute of Frauds 1677 | 16 April 1677

ON THIS DAY in 1677, the English Parliament enacted the Statute of Frauds 1677.

This Act required certain dealings with real property, sale of goods, estates, trusts and marriage be reduced to writing and signed in order to avoid fraud or perjury.

The provisions of the Act have since been incorporated into many pieces of legislation around the common law world.

 

Lawyers

Sydney, Australia

1300 00 2088

Paciocco v Australia and New Zealand Banking Group Limited [2015] FCAFC 50

ON 8 APRIL 2015, the Full Court of the Federal Court of Australia delivered Paciocco v Australia and New Zealand Banking Group Limited [2015] FCAFC 50 (8 April 2015).

http://www.austlii.edu.au/au/cases/cth/FCAFC/2015/50.html

BANKING AND FINANCIAL INSTITUTIONS – CONSUMER PROTECTION – whether various stipulations for fees are penalties at law or equity, or genuine pre-estimate of damage or compensation – whether the relevant stipulations were for breach of term of contract, collateral or accessory in the nature of security for, and in terrorem of the primary stipulations, or for a further contractual right or accommodation – the relevance of the “tests” in Dunlop Pneumatic Tyre Company Limited v New Garage and Motor Company Limited [1914] UKHL 1; [1915] AC 79 to the construction and characterisation of the provisions – whether the fees were extravagant or unconscionable – whether the charging of the fees constituted unconscionable conduct, unjust transactions or unfair contract terms under Australian Securities and Investments Commission Act 2001 (Cth), National Consumer Credit Protection Act 2009 (Cth), and Fair Trading Act 1999 (Vic)

LIMITATION OF ACTIONS – whether recovery statute-barred – construction of s 27(c) of the Limitation of Actions Act 1958 (Vic) – whether it applied to a mistake of law

The Full Court:

1.Dismissed an appeal by Paciocco against the decision of Gordon J of the Federal Court in Paciocco v Australia and New Zealand Banking Group Limited [2014] FCA 35.
2.Allowed an appeal by Australia and New Zealand Banking Group Limited against the decision of Gordon J of the Federal Court in Paciocco v Australia and New Zealand Banking Group Limited [2014] FCA 35.

The Full Court held that the bank fees in dispute were not penalties as it had not been proven that they were extravagant or unconscionable.

The Full Court also held that the fees were not unconscionable or unfair under the Commonwealth and State legislation concerning unconscionability, unjustness and unfairness.

Lawyers

1300 00 2088

tralia and New Zealand Banking Group Limited [2015] FCAFC 50 (8 April 2015).

http://www.austlii.edu.au/au/cases/cth/FCAFC/2015/50.html

BANKING AND FINANCIAL INSTITUTIONS – CONSUMER PROTECTION – whether various stipulations for fees are penalties at law or equity, or genuine pre-estimate of damage or compensation – whether the relevant stipulations were for breach of term of contract, collateral or accessory in the nature of security for, and in terrorem of the primary stipulations, or for a further contractual right or accommodation – the relevance of the “tests” in Dunlop Pneumatic Tyre Company Limited v New Garage and Motor Company Limited [1914] UKHL 1; [1915] AC 79 to the construction and characterisation of the provisions – whether the fees were extravagant or unconscionable – whether the charging of the fees constituted unconscionable conduct, unjust transactions or unfair contract terms under Australian Securities and Investments Commission Act 2001 (Cth), National Consumer Credit Protection Act 2009 (Cth), and Fair Trading Act 1999 (Vic)

LIMITATION OF ACTIONS – whether recovery statute-barred – construction of s 27(c) of the Limitation of Actions Act 1958 (Vic) – whether it applied to a mistake of law

The Full Court:

1.Dismissed an appeal by Paciocco against the decision of Gordon J of the Federal Court in Paciocco v Australia and New Zealand Banking Group Limited [2014] FCA 35.
2.Allowed an appeal by Australia and New Zealand Banking Group Limited against the decision of Gordon J of the Federal Court in Paciocco v Australia and New Zealand Banking Group Limited [2014] FCA 35.

The Full Court held that the bank fees in dispute were not penalties as it had not been proven that they were extravagant or unconscionable.

The Full Court also held that the fees were not unconscionable or unfair under the Commonwealth and State legislation concerning unconscionability, unjustness and unfairness.

Lawyers

1300 00 2088

Yerkey v Jones [1939] HCA 3

ON THIS DAY IN 1939, the High Court of Australia delivered Yerkey v Jones [1939] HCA 3; (1939) 63 CLR 649 (6 March 1939).

http://www.austlii.edu.au/au/cases/cth/HCA/1939/3.html

Yerkey v Jones provides that: (1) a wife may have a guarantee set aside if the consent was obtained by undue influence, unless she received independent advice (at 649, per Dixon J); and (2) a wife has a prima facie right to have a guarantee set aside if she failed to understand the effect of the guarantee or its significance, unless steps were taken by the lender to inform the wife of such matters (at 683, per Dixon J).

Lawyers

Sydney, Australia

1300 00 2088

Pavey & Matthews Pty Ltd v Paul [1987] HCA 5 | 4 March 1987

ON THIS DAY IN 1987, the High Court of Australia delivered Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221 (4 March 1987).

http://www.austlii.edu.au/au/cases/cth/HCA/1987/5.html A builder was entitled to recover remuneration for building work done despite there being no written enforceable contract because the client had accepted the benefit and therefore was obliged under the doctrine of unjust enrichment or restitution to pay fair and just compensation for the benefit accrued.

Section 45 of the Builders Licensing Act 1971 (NSW) (which provided that a building contract is not enforceable unless in writing and signed) did not prevent a builder from bringing an action in quantum merit (“as much as he has earned”) for the work done and materials supplied.

A claim based upon quantum merit does not require there to be an implied contract. A claim in quantum meruit is based upon restitution or unjust enrichment.

Lawyers 1300 00 2088