Garcia v National Australia Bank Ltd (1998) (1998) 194 CLR 395

In 1979, Jean Garcia and her then husband, Fabio Garcia, executed a mortgage over their jointly owned matrimonial home in favour of National Australia Bank Ltd (NAB).
Between 1979 and 1987, Jean Balharry Garcia signed several guarantees.
These guarantees were signed to secure a loan that was made to Fabio Garcia for use in his company, Citizens Gold Bullion Exchange Pty Limited (Citizens).
The Garcias divorced in 1988 and Citizens was wound up.
Mrs Garcia commenced proceedings in the NSW Supreme Court, seeking declarations that the guarantees were of no effect due to undue influence by Mr Garcia. Young J held that the guarantees were void, due to the spousal rule of undue influence found in Yerkey v Jones (Rule of Yerkey v Jones).
NAB appealed and Mahoney P, Meagher and Sheller JJA held that the Rule of Yerkey v Jones had been superseded by Commonwealth Bank v Amadio.
Mrs Garcia appealed to the High Court.

The High Court majority upheld the Rule of Yerkey v Jones.
The Rule of Yerkey v Jones is a seperate doctrine to that found in Commonwealth Bank v Amadio – it concerns the circumstances under which it is unconscionable for a lender to enforce a transaction against a wife, taking into account the specific nature of a husband/wife relationship.

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