Garcia v National Australia Bank: A Landmark Case in Australian Equity

Business Law Assignment 1
Business Law Assignment
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Business Law Assignment 2
Business Law Assignment
Introduction
Garcia v National Australia Bank (NAB) was a landmark case that was determined in the
High Court of Australia on August 6, 1988. This particular case determined situations where it is
unconscionable for a loaner to execute a deal against a Jean Balharry Garcia. Thus, this is taken
to be very crucial case when it comes to the Australian Equity (legislation) because it carries on
to be the fundamental law in partner-surety cases in Australia1.
Procedural History
This particular case started in the Supreme Court of New South Wales (NSW) in
Australia. During the hearing of the case, the verdict was appealed to the NSW Court of Appeal.
Thus, the claimant of the case was not satisfied with the verdict of that court, where leave was
granted to allow the claimant to appeal in the High Court of Australia2.
Summary of the Facts
Mrs Garcia, as well as then companion, Mr Garcia, executed a mortgage in regard to their
mutually-owned marital residence in preference to NAB IN 1979. This particular mortgage was
that was surrendered to secure bank loan of $5,000 to Jean Garcia that was meant to use for
business purposes, though it was afterward utilized to obtain a mutual individual loan from the
bank. The matrimonial residence was owned by both the husband and wife; however, was
1 Garcia v National Australia Bank HCA48, 6 August 1998, at para 64.
2 Grossi, Renata. Looking for Love in the Legal Discourse of Marriage. (Canberra ACT, Australia : Australian Nacional
University Press, 2014).

Business Law Assignment 3
erected on parcel of land that had been bought by Jean with monetary assistance from her father.
Thus, NAB had emphasized that the land be placed in the names of Mrs and Mr Garcia when the
residence was being erected. This meant that there could be a “wage earner” on the land title
deed. However, between 1985 and 195, the wife signed 4 guarantees that were in the preference
of the NAB. Three of the FOUE guarantees signed by Mrs Garcia concerned Mr Garcia’s
business, Citizens Gold, as well as one other company. The guarantee that was made in
November 1987 was restricted to $270,000 together with interest, expenses, as well as charges3.
Mr and Mrs Garcia divorced in September 1988 while in October 1989; there was a
court order that winded Citizens Gold. In addition, Mr Garcia was served with an order nisi in
November 1989 that became unconditional in 19904. Proceedings started in June 1990 in the
highest court in Australia that the mortgage plus guarantees were regarded as null and void. Mr
Garcia sought relief based on the doctrines of Yerkey v Jones and Commercial Bank of Australia
v Amadio (Amadio) and founded on Contract Review Act of 1988 (New South Wales). It was in
August 1990 that the NAB demanded payment based on November 1987 guarantee along with
the mortgage for monies owing by Citizens Gold5.
Summary of the Issues
In the Garcia v NAB case, there were three primary legal issues:
3 Murray Brown. ‘The Garcia Code’. (2003) 14 Journal of Banking and Finance Law and Practice, 17, 21.
4 Barrett, Patrick. Summary Judgment in Ireland: Principles and Defences. (Haywards Heath : Bloomsbury
Professional, 2013).
5 Garcia v National Australia Bank