The Unpleasant Truth About Australian Banking

Gerard O’Grady Story

My name is Gerard O’Grady. I would like to share my bad experiences with my bank, which I should not have trusted for ages now.

In partnership with my parents, I ran a very profitable cattle farm. I was also involved in land development, which, if Bendigo Bank had allowed me to complete, would also have been very profitable. Elders Rural Bank, which first provided finance to my beef cattle farm in 2002, was aware of the business I ran, both cattle farming and land development.

In April 2007, I took five-year loans out with Elders Rural Bank (‘Elders bank’) to refinance the Robo loan and to purchase Burkes land. Elders bank initially offered me three loans with variable interest rates and conditions. The security was taken in the form of the first registered mortgage over all Livestock along with property being purchased and exiting real property assets held by me.

Among other special conditions, I was required to market and sell projected land sales, within 12 months of drawdown, and such proceeds to be applied to reduce permanent term loans. I was not advised to seek independent legal advice at the time of signing.

In June 2008, Elders bank offered me three additional loans. Eight months later, in February 2009, it reduced the interest rate for Term Facility 4 and required additional security. It also offered me the fifth facility of $2.5M with variable interest rates, in relation to the restructuring of existing terms and for the purchase of “Maloney”.

On 17 August 2009, Elders bank sold its shareholding to Bendigo and Adelaide Bank, and it became known as Rural Bank.

Up until 2009, I purchased several properties for their development potential; there were variations made to the original loan agreement. Barry O’Neill (local Elders Bank’s Manager) told me to put my home up as security which my parents had a deed over, he said that it could not be mortgaged. He said we would only need it as security for a short time, and I did trust him. I did not know, at that time, this was predatory lending.

In mid-2009, Barry O’Neil, Ross Buzolich (my account), and I met up to work through potential tax issues. O’Neil, on more than one occasion, described me as his best performer. In early November we decided to ask Elders Rural Bank if they would consider releasing seventy-one acres of the Burks land security valued at $480,000 to put into my self-managed super fund. In late November 2009 Elders Rural Bank released the security over the seventy-one acres.

In March 2010, I had conversations with O’Neil in relation to buying 5 acres for $250,000. O’Neill asked me to see if the vendor would draw out settlement until June 2010 and made no indication that funding would be troublesome. On this advisement, I paid a $25,000 deposit in March 2010. However, Elders then failed to provide funding for settlement. Not only did I lose $25,000 plus interest for 6 months, but I was also forced to rescind the contract. Further, the 5 acres’ market value was likely to be around $2M at the time of this report.

In March 2010, I wanted to purchase 30 acres at Lumsdens Lane and asked O’Neil to arrange the financing. The deal ultimately fell through due to the Elders’ conduct. The market value of the 30 acres of land that I intended to purchase for $340,000 is likely to be around $2.7M at the time of this report.

In May 2010, I understood that Elders was no longer interested in funding development opportunities. Further, Elders removed my authorisation to increase livestock numbers, thus precluding me from generating profits from livestock operations, even though the livestock farm had generated profits over the 2008 and 2009 financial years.

In June 2010, O’Neil told me there was a problem with the head office. I was in complete shock. I took it a pond myself to get a new valuation from a valuer who was on the Rural Bank’s panel. The new valuation came up with a further $800.000 worth of value, O’Neil presented the new valuation to Rural Bank, but the bank did not accept it because they did not ask for it.

O’Neil put me in touch with Bruce Keeley (the broker). O’Neil and I worked with Bruce to try to get me refinanced. Firstly, both O’Neil and Bruce pleaded with the Bank to reconsider their actions. Bruce told Rural Bank that what Rural Bank was doing to me was the most disturbing thing he has seen in his 40 years in banking. Bruce managed to find two parties interested in refinancing me if Rural Bank would make sure my lease payments were up to date. He asked Rural Bank for $40,000 to get the lease payments up to date, but they refused.

Rural Bank refused to pay my monthly bills they controlled all my cattle sales. O’Neil informed me that the head office was giving him a hard time because he did not have the stock mortgage up to date. O’Neil informed me that he was requested not to contact me.

On 27 July 2010, Advance Home & Business Loans had the intention to refinance my Elders’ facilities. By then, Elders had not paid me lease payments that were due in June 2010 and may not pay them in the future, which was greatly harming the refinance process. As a result, the refinance was not successful due to Elders refusing to pay the equipment and property leases.

Rural Bank was making all sorts of unreasonable demands regarding the sale of cattle and my properties, the bank was threatening to sell my parents’ home and bankrupt them and myself.

On 27 January 2011, I received Elders’ Default Notice, demanding payment of $3.1M within 7 days.

On 3 February 2011, I found that the Deed of Agreement, dated 22 May 2002 between Laurence, Doreen, and Gerard (‘the 2002 Deed’), stated that the land, which had the dwelling, could not be used for mortgage purposes. Elders was aware of the 2002 Deed and knowingly caused me to breach the 2002 Deed, by mortgaging the land.

In May 2011, Rural Bank took my cattle and sold them undervalued, I did not sign any paperwork concerning the movement of my cattle.

On 17 April 2012, Elders emailed me in relation to the sale of Burkes and other properties on the market, along with reaffirming the bank’s rights to take possession of all properties. as a result of Elders’ unrelenting pressure, Laurence and Doreen feared we would lose our home.

On 27 August 2012, I received a notice to attend Farm Debt Mediation, negotiating the matter with Elders. No agreement was reached at the Farm Debt Mediation. I managed to find some backers we tried to do a debt reduction deal; the Bank could not give us an answer on that day, therefore we agreed to attend another Farm Debt Mediation in September.

On 13 February 2013, the bank’s lawyers issued a Notice of Demand pertinent to Term Loan Facility 4 and Trading Facility 2.

On 21 February 2013, I received a Notice of Demand & Intention to Exercise Power of Sale, pertinent to the Elders debt of approximately $3.4M, for Term Loan Facilities 2, 3, and 5. The 5 properties that were subjected to the mortgagee’s power of sale were valued, and commissioned by Elders, totalled approximately $2.3M and $2.5M on Forced Sale and Controlled Sale basis respectively. The valuation included groundwater licenses and irrigation plant.

On 17 April 2013, I received an email confirmation from Elders’ Counsel that my equipment would be removed prior to the auction as the chattels did not form part of bank security. The next day, the properties were sold at auction for approximate $1.8M. The value achieved was significantly under fair market value, as evidenced by the valuation only 2 months ago, along with the fact the Properties had notable development potential. Prior to the sale, Elders did not allow me to pick up the hay, irrigator, or silage that were situated on one of the five properties and were not part of bank security. Rural Bank colluded with South Rural Water and the new owners of my land to transfer my water licences. Rural Bank did not have a right to my water because they never had a mortgage over my water. I also had some silage and a centre pivot irrigator which Rural Bank gave to the new owner of my land.

I filed a series of complaints to banking regulators, to FOS and ASIC in 2013; to the Farm Foreclosure – Bank Engineering Defaults inquiry in 2015; the Lending to Primary Production Customers inquiry in 2017; to the Banking Royal Commission in 2018 and to AFCA in 2019; however, I did not receive any responses yet.

On 25 March 2013, I filed a complaint with the Financial Services Ombudsman (FOS). Whilst my complaint was lodged with FOS, Elders still sold my properties at auction for $1.8M, which was significantly under fair market value, as evidenced by the valuation only 2 months preceding, along with the fact the Properties had notable development potential.

On 18 June 2013, FOS wrote to my counsel advising that the complaint was not within FOS’ terms of reference except for whether Elders should have paid Gerard Goods & Services Tax (GST) on the sale of cattle; whether Elders breached Gerard’s privacy; whether the pivot irrigator is a fixture of a fitting; and whether Elders provided Gerard with sufficient time to remove his personal items from the security properties. However, FOS did not resolve any of these issues.

One month later, FOS sent me a letter stating that their involvement in the dispute is unwarranted and that they would not continue with any investigation.

On 9 January 2015, Elders sent me a letter offering a Settlement.  At that time, Elders did not make any contact with Laurence or Doreen, even though the bank knew that they were both elderly, Doreen had recently had open heart surgery, they were farmers, not highly educated, had very little banking knowledge, were not advised to seek independent legal advice nor were they parties in the FOS complaint.

We signed the Settlement Letter without knowing it had fully released Elders from any responsibilities. The Settlement Letter claimed Elders would accept $200,000 to release the Home Dwelling as a full and final settlement. Elders claimed that this left us with an approximate $2.1M shortfall.

On 2 January 2016, I received Elders Statements confirming a write-off, per Settlement Letter, of approximate $835,000. However, in the Settlement Letter, Elders advised the write-off was approximate $2.1M.

In December 2015 and January 2016, my counsel filed a Statement of Claim with Elders for approximate $6.8M, as per Mr. Ross Buzolich loss calculations.

In 2020/2021, I filed proceedings in the Supreme Court of Victoria at Melbourne against Elders Lenahan Farms and Collins.

As of the time of this report, I am still in dispute with Elders, with no assets.

In summary, Elders bank caused me a financial disadvantage by doing the following:

  1. failed to allow us to remove the irrigator and silage from the Properties;
  2. transferred Water Licences issued by Southern Rural Water Authority for no monetary consideration, which caused us a loss of $357,500;
  3. sold our properties to obtain a financial advantage dishonestly
  4. provided predatory loans without considering serviceability;
  5. created debt facility breach, along with other breaches of other third-party contracts, by way of not being a prudent and diligent lender nor acting in good faith;
  6. bullied, intimidated, and put undue pressure on us;
  7. breached the loan contracts by withholding documents pertinent to our rights;
  8. did not act in good faith or ethically, which caused material losses in lost trading, and under sale of assets;
  9. caused material financial losses and irreparable reputational damage.

I contacted a research group that has been supporting small businesses and farmers who were victims of the banks. We have obtained evidence that my bank breached several clauses in the 2004 Code, including:

  • not acting fairly and reasonably towards us in a consistent and ethical manner (Clause 2.2)
  • not complying with all relevant laws relating to banking services (Clause 3.1)
  • not ensuring its staff (and its authorised representatives) are trained so that they have adequate knowledge of the provisions of this Code (Clause 7(b))
  • not trying to help us overcome our financial difficulties (clause 25.1)
  • not applying with the internal process for handling our disputes free of charge (Clause 35.1(a))
  • not meeting the standards set out in Australian Standard AS4269-1995 or any other industry dispute standard or guideline which ASIC declares to apply to this Code ((Clause 35.1(b))
  • not adhering to the timeframes specified in clause 35 ((Clause 35.1(c));
  • not providing us with written reasons for its decision on a dispute ((Clause 35.1(d))
  • not providing us with information about its internal process for dealing with a dispute at the time the dispute arises, and any external process (clause 37(a)(b))

I filed complaints with FOS, AFCA, and recently with the bank’s directors, ASIC, and APRA with the evidence that the bank breached the Code of Banking Practice, the AS 4269-1995 Standard, ASIC Regulatory Guide 165 (2001), and, of course, it breached my loan contracts. However, neither the bank nor the regulators have investigated any of my complaints, until now, I am still in disputes with the bank. No customers, like me, are protected when the bank and the regulators did not comply with the rule of law and attempted to avoid paying us compensation and an apology.

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