Conclusion
The Walter family, naïve migrants from Germany, learned an important
lesson about how business and politics is done in Australia. It has been a
very expensive lesson. To a large extent, the Walters have been fodder in
the machinations of a larger process.
The Walters have experienced a traumatic loss of their business, family
home and accumulated savings. Yet this phenomenon does not register in the
overarching structure that is conventional banking practices and culture
and its legal and regulatory complements. The Walters are not even a
statistic, because theirs and myriad comparable experiences are not
perceived, acknowledged, aggregated, and analysed.
Thus is the overarching structure reproduced.
Ironically, it is difficult to discern a rationality in the process for
which the NAB’s treatment of the Walters is representative. There are some
cases in which a bank’s foreclosure on a small business will reap it
monetary gains. Yet a representative foreclosure may involve the
commitment of internal resources, substantial legal costs reduced net gain
through sale of secured assets under value, enhanced claims on secured
assets in the receiver/manager arrangement, not to mention the expense of
a public relations apparatus devoted to offsetting adverse publicity. An
outsider might inquire as to whether it would not be more profitable for
banks to eradicate such practices by performing competently and ethically
on a comprehensive basis. Of course, bank denial of any impropriety27,
and judicial and regulatory indifference to such practices, means that the
environment conducive to such an inquiry is unlikely to arise.
As
a prelude to questioning the rationality of the larger process
per se,
it is appropriate to posit questions that expose components of the
process. The questions below, all of
which are pertinent to the Walter case, refer to curious dimensions of
bank foreclosure practices that anyone in command of their senses would
interpret as demanding of ready investigation and answers.
1.
Why do some borrowers who have never defaulted on loan payments have their
facilities withdrawn and their assets subsequently commandeered?
2.
Why do borrowers who have had a productive relationship with a bank but
who may have experienced problems (possibly short-term) have their
facilities withdrawn, as opposed to two alternatives: working with the
customer to re-establish their viability with appropriate instruments and
terms for mutual benefit of both customer and lender; or working with the
customer to facilitate an ending of the relationship on terms that
minimise the costs to the borrower without substantially inconveniencing
the lender?
3.
What is the rationale of foreclosing on a borrower on terms that would
have left the bank with better returns if the alternatives of either
continued support or support until sale as going concerns had been
pursued? Are there net gains to the bank from tax deductions arising from
write-offs of the debt?
27
Surprisingly this denial has persisted under a new generation of
management at the NAB, in particular, which has inherited the sins from
its predecessors,
4.
Why are foreclosed customer assets perennially sold under value, and often
substantially under value?
5.
Why do customers not have the most appropriate credit facilities for their
needs, with the potential for inappropriate facilities contributing to
their demise?
6.
To what extent is staff turnover at the point of contact with customers a
contributory factor in a customer’s demise? What principles have driven
the substantial staff turnover at branch manager level in recent years,
and has the functionality of such turnover been evaluated?
7.
On occasions when the apparent cause of customer problems is incompetence
on the part of bank employees, why is the customer left (or pursued
through the courts and often to bankruptcy) as the ultimate victim?
8.
(Relevant to 5. above) Is it possible that banks have traditionally and
continue to determine facilities on the criterion of borrower assets
rather than that of borrower business prospects?
9.
(Relevant to 5. above) Is it possible, as appears likely from experience
of defaulted customers, that credit facilities are strategically designed
to facilitate default of the borrower at the bank’s discretion (as
evidenced by the draconian common overdraft contract, and by the 12-month
facility)?
10. Is the perennial and continuing use of security over the family home a
morally legitimate practice? This issue was raised in
Finding a Balance
(House of Representatives Standing Committee on Industry, Science &
Technology, 1997: p.150), which in turn noted that the issue had also been
raised in the House Industry Committee’s previous report on small business
in 1990 (House of Representatives Standing Committee on Industry, Science
& Technology, 1990).
11. Following the bank’s decision to place customer assets on an impaired
status, are all customer bank statements (including both conventional
‘mainframe’ and red ink/shadow ledger statements) distributed to
customers, as per the recommendations of a Federal Parliamentary Committee
(Parliamentary Joint Statutory Committee on Corporations and Securities,
2000)?
12. Why is bank discovery of relevant documents, following request from
aggrieved customers, a belated, inadequate and probable deceitful process?
13. In banking litigation, why do the courts persist with the farce that
the ‘receiver is the agent of the mortgagor’ (the borrower) and that ‘the
mortgagor is solely responsible for the receiver's acts and defaults and
for the payment of the receiver's remuneration’
(National Australia Bank v Walter, 2004; National Australia Bank v
Freeman, 2002)?
Is
this fiction a perennial de facto vehicle for the mortgagee (the bank
lender) to exercise discretion over the receiver’s actions without
incurring any legal responsibility?
The questions above are part of a larger list that concluded a 2004
dossier (Jones, 2004a) on NAB victims sent to the CEO of the NAB, John
Stewart, and to the regulators. Nobody has yet seen fit to address these
questions.
References
Official and secondary literature
Australian Competition & Consumer Commission (2001), ‘Federal Court
Declares
National Australia Bank Acted Unconscionably’,
Media Release,
5 June.
Australian Competition & Consumer Commission (2004),
Guide to unconscionable conduct.
October.
Australian Competition & Consumer Commission (2005),
A
small business guide to
unconscionable
conduct.
May.
Australian Competition & Consumer Commission (2006),
Know how to complain:
Stand up for your consumer rights.
December.
Australian Prudential Regulation Authority (2004),
Report into Irregular Currency Options Trading at the National Trading
Bank,
23 March.
Costello, Peter (2005), ‘Address to the National Press Club’, Parliament
House,
Canberra, 11 May.
http://www.treasurer.gov.au/tsr/content/speeches/2005/006.asp
Clout, Jason & Boyd, Tony (2004), ‘Property valuations under scrutiny’,
Australian Financial Review,
21 December.
Crowe, David & Fabro, Allesandra (2005), ‘Split spoils spruiker fight’,
Australian Financial Review,
18 February.
House of Representatives Standing Committee on Industry, Science &
Technology [Beddall Committee] (1990),
Small business in Australia: challenges, problems and opportunities,
Canberra: A.G.P.S.
House of Representatives Standing Committee on Industry, Science &
Technology [Reid Committee] (1997),
Finding a Balance: towards fair trading in Australia,
Canberra: A.G.P.S.
Jones, Evan (2004a), ‘The Banks and Small Business Borrowers: case studies
of adversity’,
Working Paper,
ECOP2004-3, School of Economics and Political Science, University of
Sydney, April.
Jones, Evan (2005b), ‘Small Business – Corporate Business Relations:
Dimensions of Structural Subordination in Australia’,
Working Paper,
ECOP2005-1, School of Economics and Political Science, University of
Sydney, September.
Laker, John F (2005), ‘Corporate Governance in Financial Institutions –
Some Remarks’, ABAC/ABA/PECC Symposium on Promoting Good Corporate
Governance, Melbourne, 19 October 2005
National Australia Bank (2004),
The Star
[The National’s Australian Employee Magazine], September.
National Australia Bank (2005), ‘National Press Club announces new
Principal Sponsor - 28 April 2005’,
Media Release.
http://www.nabgroup.com/0,,65516,00.html
National Press Club (n.d.), Website under ‘Corporate Membership’.
http://www.npc.org.au/corporateMembership.html
Parliamentary Joint Statutory Committee on Corporations and Securities
(2000),
Report on ‘Shadow Ledgers’ and the Provision of Bank Statements to
Customers,
October.
Patten, Sally (2007), ‘Bank regulator warns on bad loans’,
Australian Financial Review,
19 March.
Correspondence
Boocock, Terry (2001) to Walter. Case Officer, Australian Banking Industry
Ombudsman, 23 May.
Bugalski, Natalie (2002) to Walter. Secondee Solicitor, Public Interest
Law Clearing House, Victoria, 22 November.
Cassidy, Megan (2001) to Walter. Complaints Management Program, Australian
Securities and Investments Commission, Melbourne, 27 August.
Clarke, P. J. (1986), ‘Reserve Bank of Australia’. File Note, Deputy
Treasurer Foreign Exchange, Westpac, 9 December.
Fraser, Bernie (1993) to Paul McLean, sometime Democrat Senator, 24 March.
Fredericks, David (2004) to Jones. Acting Deputy Secretary, Policy and
Cabinet Group,
Department of Premier and Cabinet, Victoria, 2 September.
Jones, Evan (2002) to the Premier of Victoria, c/f Tim Pallas, 4 February.
Jones, Evan (2004b) to the Premier of Victoria, c/f Tim Pallas, 24 August.
Jones, Evan (2005a) to John Martin, [Small Business] Commissioner,
Australian Competition & Consumer Commission, 13 January.
Jones, Evan (2007) to Nigel Ridgway, General Manager, Compliance
Strategies, Australian Competition & Consumer Commission, 28 February.
Kangarathan, Anusha (2001) to Walter. Senior Investigator, Australian
Competition & Consumer Commission, 24 April.
Killey, Ian (2003) to Jones. Director Legal Branch, Department of Premier
and Cabinet, Victoria, 11 March.
Laird, Philip (2004) to Walter. National Complaints Management, Australian
Securities and Investment Commission, Melbourne, 21 December.
Lane, David (2003) to Walter. ACTRO Business Centre, Department of
Immigration and Multicultural Affairs, 22 July.
Lumsden, Andrew (2001) to Walter. Chief of Staff, Joe Hockey, Minister for
Financial Services & Regulations, 12 June.
McLean, Paul (2003) to Bernie Fraser, Governor, Reserve Bank of Australia,
14 March.
Pallas, Tim (2001) to Walter. Chief of Staff, Office of the Premier,
Victoria, 20 April.
Ridgway, Nigel (2005) to Jones. General Manager, Compliance Strategies,
Australian Competition & Consumer Commission, 8 April.
Salmon, John (2005) to John Laker. Chairman, Australian Prudential
Regulation Authority, 12 January
Tanzer, Greg (2004) to Jones. Executive Director, Consumer Protection,
Australian Securities and Investment Commission, 15 June.
Williams, Lynne (2001) to Walter. Director Economic Policy, Victorian
Department of Premier and Cabinet, 23 July.
Court cases
Australian Competition and Consumer Commission v Berbatis Holdings (2003)
High Court of Australia HCA 18
Judgment Gleeson, Gummow, Hayne & Callinan JJ, 9 April 2003
Berbatis Holdings v ACCC (2001)
Federal Court of Australia FCA 757
Judgment Hill, Tamberlin, Emmett JJ, 27 June 2001
Commercial Bank of Australia v Amadio (1983)
High Court of Australia 151 CLR 447
Judgment Gibbs, Mason, Wilson, Deane, Dawson JJ, 12 May 1983
Commonwealth Bank of Australia v Muirhead (1995)
Supreme Court of Australia QSC 105
Judgment Thomas J, 5 June 1995
Handberg v Walter & Anor (2001)
Supreme Court of Victoria VSC 145
Judgment Beach J, 7 May 2001
Muirhead v Commonwealth Bank of Australia (1996)
Supreme Court of Queensland, Court of Appeal QCA 241
Judgment McCrossan, McPherson, Davies JJ, 19 July 1996
National Australia Bank v Freeman (2002)
Federal Court of Australia Queensland FCA 244
Judgment Spender J, 12 March 2002
National Australia Bank v Petit-Breuilh & Ors (2000)
Supreme Court of Victoria VSC 291
Judgment Balmford J, 26 July 2000
National Australia Bank v Walter (2004)
Supreme Court of Victoria VSC 36
Judgment Dodds-Streeton J, 16 February 2004
Smarter Way & Anor v D’Aloia & Ors (2000)
Supreme Court of Victoria VSC 408
Judgment Byrne J, 11 October 2000
Walter v Dodds-Streeton (2004)
Melbourne Magistrates Court
Magistrate Fitzgerald, 18 May 2004
Walter & Ors v National Australia Bank (2006)
High Court of Australia HCATrans 97
Judgment Gummow J, 7 March 2006
