Identify the borrower, the guaranteed obligations, any indemnity, the security and the circumstances in which payment can be demanded. An all monies clause or continuing guarantee may extend beyond the particular advance being discussed. Check whether later variations or additional borrowing can increase exposure and how a release can be obtained. A company’s limited liability does not remove a director’s separate personal guarantee.
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; [1983] HCA 14 arose from South Australian proceedings involving parents who secured their son’s business debts. The High Court granted relief on the basis of unconscionable dealing. Their disadvantage and the bank’s knowledge were important. The case does not create a general right to escape an unwise guarantee or make limited English alone sufficient for relief.
Sections 12CA and 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) address unconscionable conduct in the relevant financial services context. Their application depends on the transaction and conduct. A business loan should not automatically be treated as regulated consumer credit. Equitable and statutory arguments require evidence, not an assumption that an unpaid or family guarantor is protected.
Use an independent adviser and accurate interpretation. Ask for the borrower’s financial position, the lender’s documents and a realistic explanation of how repayment will occur. Consider whether a capped exposure is commercially acceptable and whether you could meet a demand without losing essential assets. If a demand has already arrived, preserve the original discussions and obtain advice about the documents, defences and response deadline promptly.
Author: Pei Ling Cao
Last updated: October 2026
Jurisdiction: South Australia, Australia
Disclaimer: This article provides general information only and does not constitute legal, financial or tax advice. The law may change and its application depends on individual circumstances. You should obtain professional advice before acting on the information contained in this article.