A Case Study in the Adverse Small Business Environment in Australia

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Evan JonesThe bank lender – small business borrower relationship intrinsically structures the latter into a dependent and vulnerable position. In Australia, the major banks have consistently abused this asymmetric relationship. This behaviour has resulted in devastating consequences for small business bank victims, but it has also resulted in the corruption of governance in this significant domain of the Australian economy. The Walter family experience is used as a case study to highlight the dimensions of the problem. It incorporates representative bank litigation (especially with the customer as self-litigant), covering issues of apprehended bias, the ‘shadow ledger’ phenomenon, (mis)representations of bank staff, and the allegiance of the receiver/manager. It includes the involvement of the Victorian government in bringing the Walter family to Australia. It includes a reflection on bank culture for which gaining business is more important than the establishment of long-term mutually beneficial relationships, and in which public relations counts for more than competent and ethical practices. Finally, it includes the inaction of the panoply of regulatory authorities on the matter of bank malpractice. A regulatory impasse has ensued, with adverse implications for the vitality of the entrepreneurial class in Australia. -- Evan Jones


Table of Contents

Bank Fraud Exposed - Money out of YOUR Pocket!

Paul McLean is Back to Expose Bank Fraud

Bank Fraud in Australia is Systemic - part 2 - part 3

The Foreign Currency Loan Experience in 1980s Australia: Dwyer v Commonwealth Bank of Australia -  2 - 3 - 4 - 5

The Quade Appeal on Decision vs CBA - 2 - 3 - 4 - 5 - 6 - 7

Jones Letter to CBA Noting Hypocrisy concerning Dwyer

Dwyer Letter to Kevin Rudd

Bank Fraud in Australia Is a Step Toward Controlling the Economy and the People

Bank Fraud in Australia Is Systemic and Affects All Australians

Articles by Evan Jones

The NAB and Its Publicity Grabs

Innovation at the NAB and Grab

NAB accused of dirty tricks in Queensland

Bank Fraud and John Howard

Australian Four Pillars Bank Policy

Document Discovery and the Australian Courts

Final Warning: A History of the New World Order

Banks Behaving Badly

When the Bankers became Con-men

NABbed - an overcharging scandal involving the biggest Australian bank

A Case Study in the Adverse Small Business Environment in Australia

The Walter Family and the National Australia Bank - part 2

The Victorian Courts  - part 2

The Industry and the Federal Authorities

The State of Victoria and the Bracks Government

The NAB and the New Public Relations Program

The Regulators, the Law and Bank Malpractice - part 2

Conclusion and References

Tony Rigg -Never in Default


2 - Fraudulent Swiss Franc loans

3 - Insider Trading within a Secret Society

4 - Corrupt Receiver and Illegal Eviction

5 - Collusion in Government

6 - Commonwealth Bank Code of Practice

7 - Pioneer in Steel Structure Building

8 - Summary of Argument on Appeal from Federal Court

9 - Brief for Joanna Gash, Federal MP from Gilmore

Steve Heinrich's Last Submission to Federal Court

Wilfred Taylor

Corporate Australia


Patricia Poulos, Senior Consultant and Head of Litigation

The plight of Tony Rigg and others is a disgrace.

What a blight on the Legal System and the government, when the likes of successful businessman Tony Rigg has had to assume the role of his own lawyer.

Try though they may, these wonderful Australians are no match for those who act for the banks and other lending institutions and who, without
conscience, sacrifice these innocents to the scrapheap.

It is imperative that the battle fought is on 'legal' grounds and the result obtained is financially beneficial to the battlers.

I am saddened that so many, spend so much of their life, with very little reward.

I have been where these fine people are, and now have a real
opportunity to assist. I now own an Incorporated Legal Practice - "NICHOLAS POULOS LAWYERS" and we specialise in litigation (but have a general practice).

With my knowledge and experience, no stone will be left unturned in researching documents in order to uncover the truth and put it before the courts.

patricia.nicholas@hotmail.com]  pager (02) 9962.8172."

Patricia Poulos

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Your Credit File Rights

The National Australia Bank v Walter/Palatinat:

A Case Study in the Adverse Small Business Environment in Australia

Evan Jones
Political Economy Discipline

Faculty of Economics & Business
University of Sydney


April 2007

Disclaimer: The responsibility for the opinions expressed in this article rests solely with the author(s). The Faculty of Economics & Business gives no warranty and accepts no responsibility for the accuracy or the completeness of the material.

The National Australia Bank v Walter/Palatinat:

A Case Study in the Adverse Small Business Environment in Australia

Evan Jones


In August 2004, the National Australia Bank issued a Statement of Corporate Principles (National, 2004: 6). The statement, summarised here (not accessible on the NAB website), embodies a strong ethical code of practice:

Our core beliefs and values are based on the following principles:-

We will be open and honest

We take ownership and hold ourselves accountable (for all of our actions)

We expect teamwork and collaboration across our organisation for the benefit of all stakeholders

We treat everyone with fairness and respect

We value speed, simplicity and efficient execution of our promises

And we do not have room for people who do not live these principles.

This formal code needs to be juxtaposed against questionable NAB treatment of some small business borrowers, treatment that has extended over an extended period. What follows is a case study of one borrower, the Walter family, who established with NAB credit a brewery/restaurant in Albury/Wodonga on the New South Wales/Victorian border. The experience of the Walter family in the courts is not unrepresentative of bank litigation involving small business customers. Moreover, the experience of the Walters with the regulatory agencies is particularly instructive on the profound vacuum that exists in Australia in the regulation of the relationship between bank lenders and small business borrowers.1

1 The structured subordination of small business borrowers to their lenders is but an extreme case of more pervasive structured subordination of small business to corporate business across key sectors in the Australian economy (Jones, 2005b).

The Walter Family and the National Australia Bank

Fritz and Ingrid Walter ran a successful business in Germany, had acquired a reasonable nest egg and lived a comfortable life. Several holidays in Australia generated an interest in migrating permanently to this country. In the late 1980s, the Walters attended a seminar at Frankfurt sponsored by Australian government officials on the attractions of business migration to Australia. They met Victorian government officials who promoted the Albury/Wodonga area, reinforced by local officials when the Walters visited the area in 1994. Local officials were promoting the ‘Gateway Island’ project (adjacent to Sydney/Melbourne traffic) as a tourist attraction.

The website of the Victorian government’s Frankfurt office (reproduced below, since removed) promoted Victoria as possessing a number of fundamental ingredients for doing business, including sound financial infrastructure.


Victorian Government Business Office

The Victorian Government Business Office in Frankfurt was established in 1969. The office is available to assist prospective investors with advice and information about Victoria. It also provides support to Victorian companies seeking to export to the countries serviced by the Frankfurt VGBO.

Countries serviced by the Frankfurt VGBO

Germany, Switzerland, Austria, Scandinavia and Eastern Europe.

Victoria offers :

A cost efficient place to do business

Secure and familiar legal and financial infrastructure and services

Political stability in a democratic OECD economy

A location in the Asia-Pacific time zone

Access to highly skilled and affordable employees

A strong base in innovation and research

A high technology manufacturing sector

Strong safeguards for your intellectual property

Communication and transport that link you to global markets

A network of Government Offices in Asia to assist your expansion into the region

First class quality of life for expatriate executives

Victorian Government Business Office in Frankfurt


Grueneburgweg 58-62 D-60322 Frankfurt am Main | Germany

Phone: +49 69 668074–0 | Fax: +49 69 6680 74-66

The language has to be seen as misleading and frivolous, indeed dishonest, in the light of the Walter family experience.

By 1997 the Walters bought land in the ‘Gateway Island’ domain, planning a brewery and restaurant. They hired as consultant an Australian-based compatriot with experience in boutiques breweries. Funds for the purchase and development of the property came predominantly from the disposal of existing family assets, generating over $700,000 in capital. Later, sale of another asset added $200,000, totaling over $900,000 in family capital. Additional funds were later made available from sale of the Walter family business in Germany for $2.2 million. Total expenditure by the Walters on the project was of the order of $3.5 million.

Fritz and Ingrid and their daughter Carmen Walter moved to Wodonga in February 1998. Construction had begun in July 1997 and the brewery was officially opened (albeit prematurely) by the then Victorian Premier, Jeff Kennett, in May 1998.

The Walters began banking with the National Australia Bank, and developed a seemingly good relationship with the then Wodonga Business Banking Centre manager, Mr. Wayne Keating. The Walters obtained a bridging loan, secured by the unimproved land, in September 1997, and equipment leasing facilities, an overdraft and a home loan in May 1998.

By October, it was clear that business turnover was not up to expectations. There were cost overruns due to the high quality of construction and outfitting, and inadequate understanding of Australian building codes. Original cashflow projections were too optimistic.

The Walters claim that they were let down by the Council which had not proceeded with the precinct project. Moreover, the Council had failed to install traffic lights on the main thoroughfare that would make the business accessible to traffic passing in the opposite (Melbourne to Sydney) direction. The traffic lights were belatedly installed after the business had been closed down by the NAB and the property sold.

The claim that promised support was not forthcoming was reinforced by the then Branch Manager in a later Credit Memorandum of June 1999. The Manager noted:2

On 7th May 1998 the business prematurely opened at the request of the local council who were trying to promote the Gateway Island project to the Premier of Victoria and wanted to show him on a visit that there was commercial investment happening.  2 B. Membery, ‘Walter Connection Credit Memorandum’, 1 June 1999, p.1.

The Walters approached their manager via their accountant in October 1998 and asked for a restructuring of their loan facilities to reduce monthly repayments. The then manager claimed that the request would probably be acceptable to his superiors. At about this time, the Walters’ branch manager resigned, and was replaced by Mr. Barry Membery.

It was not until two months later, in December 1998, that the Walters’ received a response. The Walters’ accountant had requested a single bills facility, an instrument over which borrowers can exercise some discretion. The Walters were offered $1.38 million (their existing indebtedness), comprising a fixed interest one-year bank-funded loan of $1 million and a principal and interest loan of $380,000. This mix of debt seemed bizarre to the Walters. According to the Walters, the new manager declined to explain the loan’s character, and offered it on a ‘take it or leave it’ basis.

Carmen Walter asked Membery, ‘How did the bank arrive at these pre-determined facilities?’ (or words to that effect). Membery replied: ‘You wouldn’t understand’. His general response to questioning was that ‘it is best for your business’. The Walters presumed that the one-year loan would be turned over (subject to interest rate movements), and they were not disabused of this belief. The discussion generally focused on the interest rate payable; there was no discussion regarding repayment of principal.

The other key change in the restructured facilities was that the home loan debt was unilaterally moved from a personal housing loan and transferred to the business facilities as a ‘business combination’ loan. As a consequence, the converted housing loan debt faced a higher interest rate and larger repayments (from $3500 per month to $5925 per month). This change was done without explanation or permission.

Document discovery highlights that the initial loans were made on the security of the Walters’ assets, with inadequate attention to the business.3 The Walters had come from a country with an entrenched tradition of banks which specialise in small business lending and which take seriously the business of their small business borrowers.

3 ‘Lending to this connection has in the past been based on security held’. Barry Membery, Credit Memorandum, 13 October 1998. 

 1 - 2 - 3 - 4 - 5 - 6 - 7 - 8 - 9

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