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

High Court of Australia Gibbs C.J. Mason, Wilson, Deane and Dawson JJ. Commercial Bank of Australia Ltd v Amadio [1983] HCA 14

ORDER Appeal dismissed with costs.

Cur. adv. vult.

The following written judgments were delivered:—

1983, May 12 Gibbs C.J.

This is an appeal from the Full Court of the Supreme Court of South Australia which allowed an appeal from the judgment of the primary judge (Wells J.) and ordered that a memorandum of mortgage executed by the plaintiffs (the present respondents) on or about 25 March 1977 in favour of the appellant bank be set aside, and made certain ancillary orders.

At the time when the memorandum of mortgage was executed, the respondents, Mr. and Mrs. Amadio, were aged 76 and 71 respectively. They had both been born in Italy but had lived in Australia for over forty years. Neither had received much formal education. Mr. Amadio had a limited grasp of written English but could speak it reasonably well; Mrs. Amadio had some understanding of spoken English but gave evidence through an interpreter. She had had no business experience, but her husband, who had retired after many years work as a market gardener, had engaged in a number of land transactions, in most of which he had received the assistance of their son, Vincenzo Amadio. The respondents were induced to enter into the transaction now in question by the misrepresentations of Vincenzo Amadio.

Vincenzo Amadio had carried on business as a land developer and builder through a number of companies which he controlled, including V. Amadio Builders Pty. Ltd. ("the company"). He had been, or had appeared to be, very successful. The annual turnover of his companies amounted to millions of dollars. He lived in an opulent style. As late as Christmas 1976 he held a party which was attended by over 2,000 people, including his father, Mr. Amadio, and Mr. Virgo, who was the manager of the branch of the appellant bank at which the company had its account. His parents had every reason to believe that he was a wealthy and successful man. But the bank had reason to think that appearances might be deceptive. At least by October 1976 the company had proved unable to keep within its overdraft limit (which was then $80,000) and in that month it had applied to increase the limit by $45,000 to enable it to meet the immediate demands of its creditors. The increase was granted on condition that clearance of the further advance was definitely to be effected by 31 December 1976. In fact when 31 December 1976 arrived, the account was in debit in an amount exceeding $130,000. In January 1977 an overdraft limit of $125,000 was temporarily continued but the bank required the overdraft to be reduced to that limit. It was not so reduced; the debit balance fluctuated, but gradually increased and by 17 March the account was in debit in an amount exceeding $193,000. Moreover, from about the beginning of 1977 it had been necessary for the company to arrange with the bank selectively to dishonour cheques drawn on its account and presented for payment. Vincenzo Amadio and Mr. Virgo would meet almost daily and would decide which cheques should be paid and which should not. The cheques which were paid were those presented by creditors who, if the cheques had been dishonoured, would have cut off the company's supplies and forced it out of business in a matter of days. Clearly the company could not pay its debts as they became due: it was insolvent.