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Garcia v National Australia Bank [1998] HCA 48 2017

   

Added on  2020-05-04

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BUSINESS LAW2 | P a g eIntroductionGarcia v National Australia Bank1 is a leading matter which was decided on August 06th, 1998 in the High Court of Australia2. Through this case, the situation in which the unconscionable conduct for a lender was decided upon regarding enforcing a transaction against a wife. Under the Australian Equity law, this is a prominent case, particularly due to this being spouse-surety cases3. Case SummaryIn this case, Jean Balharry Garcia in 1979, along with her husband of that time, Fabio Garcia had executed a mortgage on the jointly owned matrimonial house in National Australia Bank’s favour. During 1979-1987, Jean had signed different guarantees. The documents related to this were signed for securing a loan which was made for the use of company of Fabio, i.e., Citizens Gold Bullion Exchange Pty Limited. After the separation of the couple in 1988, the company of Fabio wound up the very next year. The key issue of this case revolved around whether or not there was the presence of undue influence in this case4. In the year subsequent to the company’s winding up, judicial proceedings were initiated in the Supreme Court of New South Wales against Jean and she sought declaration that the different documents had no effect or force and were hence, void. Young J was the trial court 1 [1998] HCA 482Anne Finlay, Garcia v National Australia Bank HCA 48, 6 August 1998 (2017) <http://www.austlii.edu.au/au/journals/NewcLawRw/1998/15.html>3 Michael Bryan, Vicki Vann and Susan Barkehall Thomas, Equity and Trusts in Australia (Cambridge University Press, 2nd ed, 2017) 110.4At 2

BUSINESS LAW3 | P a g ejudge, who applied the case of Yerkey v Jones5 to the present case and granted the declaration regarding none of the guarantees which were given by the appellant were bound to her6. The reason for the trial court ruling in favour of Jean was that she knew what a guarantee was but shedid not know that the guarantee had been secured by an earlier signed “all moneys mortgage”7. When the appeal was made to the New South Wales Court of Appeal, Sheller JJA, Mahoney P and Meagher stated that the rule given under Yerkey v Jones should not be applied in the nation as the same had been overruled through the case of Commercial Bank of Australia Ltd v Amadio8. And as a result of this, the leave to appeal before the High Court of Australia was granted to the appellant9. When the matter was presented before the High Court, McHugh, Callian, Hayne and Gaurdon JJ decided by a majority of five to one, that the approach adopted in Barclays Bank plc v O’Brien10by Lord Browne-Wilkinson had to be declined and instead there was a need to hold the rule given under Yerkey v Jones, as the same was still applicable in the nation. However, a dissenting judgment was given by Kirby J who stated that the approach which had been taken under the case of Yerkey v Jones had to be rejected. Though, there was a unanimous overturning of the Court of Appeal’s decision by the High Court and reinstated the order of the trial judge. It was also held by the High Court that the unconscionability which had been covered under the case of Commercial Bank of Australia Ltd v Amadio failed to cover the rule which was covered under Yerkey v Jones. Instead, both of these cases were based on distinctive doctrines11. 5 [1939] HCA 3, (1939) 63 CLR 6496 Renata Grossi, Looking for Love in the Legal Discourse of Marriage (ANU Press, 2014) 71.7Australian Contract Law, Garcia v National Australia Bank (2010) <https://www.australiancontractlaw.com/cases/garcia.html>8 [1983] HCA 14, (1983) 151 CLR 4479 Ewan McKendrick and Qiao Liu, Contract Law: Australian Edition (Palgrave Macmillan, 2015) 395. 10 [1993] UKHL 6, [1994] AC 18011At 9

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