The Unpleasant Truth About Australian Banking

John Wharton Story

My name is John Wharton. I would like to tell you about my experience with my lenders, which committed one of Australia’s greatest crimes.

I was a Councilor in 1991, before being appointed Mayor of Richmond in 1997. At that time, I was managing my family’s farming business with my wife. In 2007, we owned two properties, Runnymede, purchased in 1992, and Yarrabong, purchased in 2004.

In 2007, we had a Bankwest Agri One Overdraft 625-000895-5 with a limit of $750,000, and Landmark debt of $3M. However, with additional Bankwest funds, we could purchase two more properties, Red Rock and Canyon. At that time, it was not easy to service the debt because we had limited working capital.

On 30 June 2008, I was having discussions with Bankwest so that I could purchase Red Rock and Canyon. In July, Runnymede and Yarrabong were valued by Herron Todd White (HTW) at $11M for Bankwest. In August, Red Rock and Canyon were also valued by HTW at $6.3M.

In September 2008, after we purchased Red Rock and Canyon, we agreed to sell Canyon to reduce debt.

Bob Kayes, Bankwest’s Agribusiness Manager, Rockhampton, was managing our account at that time. When we finished mustering Red Rock/Canyon’s 6,006 head of cattle, Kayes said: “You would have missed a few, wouldn’t you? If you can make it 6,606 it will save me having to go back and do another cashflow review.”       

The contract for the Red Rock and Canyon included 4500 branded cattle, so any more was a bonus.

Bankwest knew we only had 6,006 cattle, but Kayes ‘created’ cattle (phantom cattle), so he could have the bank’s loan application approved. Kayes said without additional cattle, the bank would require a full review of the loan application so cashflow was acceptable. It posed a problem for my business because the cash flow provided to the bank was not accurate.

This also put me into a difficult financial position because more debt increased my servicing costs and pressure on cashflows. In December 2009, I received a letter of Facilities Variation from Kayes. It secured the properties and cattle on all four properties.

This became more serious in 2010 because the debt had escalated to $13.7M. During the next two years, we were in a worse position and there was a declining market, the Global Financial Crisis, and floods.

In March, I received another letter of Facilities Variation from Kayes. In April, the bank claimed I had defaulted on the Facilities, and the bank appointed Korda Mentha to carry out an Investigative Report. It cost us $37,000 and did not come up with changes to the existing program. At that time, we had a good line of cattle and had often topped the sales.

Four months later, the bank again engaged Korda Mentha to prepare a Review and required the investigating accountant to prepare a report on our business. It charged us $39,914.42. Taylor Byrne’s report now showed Yarrabong was valued at $1.2M, Runnymede at $5.5M, Red Rock at $3.9M, and Canyon Station at $1M. The valuations cost us $12,850, Gadens’ legal fees were $5,461, and accounting fees of $8,000, which meant the total cost of the review was $66,225.42.

In October 2011, we put Red Rock on the market and Elders estimated it would bring in between $3M to $4M, with no cattle. It was going to be auctioned prior to the end of the year and we receive a lot of interest.

In November, the bank’s receivers moved in and took the property off the market. Elders claimed they had never seen such aggressive behavior from the Receivers Korda Mentha and the Ray White agent, Kevin Currie. When it became a receivers’ sale, the property’s value dropped and with 1200 cattle, it was sold for $2.6M in 2012. This caused us a significant loss of $1.6M. Red Rock sold in the last 12 months for $11M.

We had numerous bank meetings attempting to resolve our differences, but I found the bank, Korda Mentha, and Ray White Rural were aggressive. We employed a Farm Financial Advisor, who previously worked with Government Department to review our books and make an independent offer. It was submitted to the bank but was then rejected. I wrote to the bank and met with the managers in Brisbane and Townsville, but they did not show any leniency.

On 20 December 2010, I signed a Deed of Forbearance hoping to slow the enforcement action before 30 June 2011. We were requested to:

  1. unconditionally sell Yarrabong by 28 February 2011,
  2. unconditionally sell Canyon by 30 June 2011,
  3. provide the bank with a monthly marketing report from 31 December 2010,
  4. direct all livestock sale proceeds to the bank’s overdraft, and
  5. provide copies of monthly accounts from 31 December 2010.

On 30 June 2011, the bank claimed I had not complied with the obligations in the Deed of Forbearance, as Canyon had not been sold and the loan-to-value ratio had not been satisfied. I was selling Canyon to the Qld Government as a National Park, and this process took more than 12 months, as we were dealing with Government, and it was taking a long time. The bank knew this but showed no empathy and moved on us with Receivers and Managers two weeks after the funds went into our account.

In early September, a contract for Canyon was entered into and due to be settled by 31 October 2011. Later that month, the bank wrote to me regarding my ability to meet the ongoing servicing and other requirements. The bank advised me that the sale of Canyon would not remedy my concern and I needed an alternative plan to rectify defaults.

In September and October 2011, Steve Esdale helped me prepare a letter for the bank which provided details of my proposal for facilities extension to 30 June 2015.

On 11 October 2011, Gavin Nolan of KordaMentha replied confirming their engagement to provide an addendum to the Independent Accountants Review of our Group that was conducted in October/November 2010, as part of the bank’s process in considering my offer.

On 4 November 2011, the bank rejected my offer.

On 15 November 2011, the bank appointed Richard Buckby and Robert Hutson of KordaMentha as Receivers and Managers of my properties. The next day, my access to my business bank accounts was suspended.

A week later, Lorin Bishop, Elders, Rural Property Specialist, wrote to me stating the best sale result for Red Rock would have been achieved by continuing the marketing program, which had started two weeks prior. Bishop said the property received favorable interest from initial promotion and, in his opinion, marketing as a Receiver’s sale usually negatively impacted the eventual sale price.

In early December 2011, I was concerned for the welfare of the livestock, which was now under the management of the receivers. I engaged Veterinarian Elizabeth Lynch BVSc, who wrote a letter to examine the welfare of Runnymede cattle based on their proposed transport for sale.

In January 2012, there was a fire that burned for a week through the Canyon untreated, lick was not being distributed on Red Rock, and livestock were not being managed correctly by the Receivers.

On 7 June 2012, I found myself being charged with Contempt of Court on 4 May 2012, in relation to the above matters that were being managed by receivers.

In 2014, there seemed no other way to resolve disputes with the bank and I commenced an action against it for unconscionable conduct by its associate, Bankwest. It changed my budget to justify Bankwest’s 2008 loan. The hearing was set down for 7 days but lasted for 1½ days. I was the only person to provide evidence to Honor Justice Greenwood. My lawyer, Stewart Levitt wanted me to sack him the morning of the Court Case, for lack of effort, but I refused as I needed to get on the stand and tell my side of the story.

We had agreed to a budget for the purchase of Red Rock and Canyon in July 2008 with Bob Kayes, which would have given us a total of 10,000 head of cattle in total between our properties. In late August, Bob Kayes rang me and informed me that they had approved the loan, and we could start mustering Red Rock/Canyon. We immediately began mustering with the sellers in attendance, as the sellers had guaranteed 4500 heads of branded cattle, and once that number had gone through the yards and been ticked off, the sellers could leave the property. Bob Kayes even came up for a few days and participated in the muster. He would have seen how poor in the condition the cattle were from a lack of management. On 4 September my wife and I drove to Townsville from Red Rock, where we were mustering, to sign the final Loan documents, which seemed odd, since we were already on the property and moving cattle off. We signed these documents in a hurry, in our Lawyer Arthur Browne’s office, as we needed to get back to Red Rock that night. Having faith in our Bank manager and Bank, we were under the belief that these documents were the same as our July budget. Our lawyer also witnessed us sign a blank page, which the Rockampton branch of Bankwest asked us to do, and they would fill in the necessary details later. Unknown to us, the bank had changed the budget from what we agreed to back in July with Bob Kayes and included a statement that we had to reduce the debt significantly within 12 months of buying the properties. This would have required us to sell 7000 head of cattle the following year, leaving us with fewer cattle than we originally started with. I refused to agree to such a plan, and that is when we found out about the changed budget. Plus, the inclusion of having to muster 6600 head of cattle, not the 4500 head in the contract.

At the Federal Court hearing with Justice Greenwood, I was the only person to give evidence, and when I provided the 2 differing budgets, which Justice Greenwood showed much interest in, asking me to refer to them again, Gadens walked out of Court. We adjourned for lunch 30 minutes after that, and Gadens called my lawyer during the break and offered to write off all debt. My wife and I were totally exhausted, traumatized, and broke that we accepted it, so we could go home.

There is no doubt that the bank shafted us badly in this process and we lost everything that we had worked so hard to achieve over a lifetime. In the period after my court case, many banks began to write off huge amounts of debt with many of their clients in our region. About 50% of the debt was written off.

We paid $450,000 in legal fees fighting this case with Bankwest and Commonwealth Bank, yet under the law, the Code, and the AS 4269-1995 Standard, which were all part of my loan contracts, disputes had to be resolved free of charge. It surprised me that the bank and its lawyers had not read my contract carefully because, under Code Compliance Monitoring Committee Bulletin 8, they had to tell me that they would comply with the Internal Disputes Resolution procedures in clause 35 of the Code. At no time did they attempt to deal with this. It seems the rules of law did not comply with either the bank or its lawyers.

In 2018, I attended a meeting at Parliament House with other small businesses and farmers who had also suffered damages due to misconduct by these banks. I believed the directors had hidden documents, but ASIC and APRA had not taken any action. It surprised me and other Queensland farmers that throughout this period, ASIC could have suspended or cancelled bank licensees but never protected customers.

In July 2021, I was advised that Commonwealth Bank was operated by officers in Sydney and was therefore an NSW bank. Some of the other Commonwealth Bank farmers told me to purchase a copy of the AS 4269-1995 Standard, which was included in the IDR procedures in clause 35.1(b) of the 2004 Code. The government, regulators, and banks do not meet their requirements under the Code or the Standard.

The Standard represented the interests of the Committee OB/9 Committee members including the Australian Consumers Association (CHOICE); Department of Consumers Affairs NSW; Law Consumers Association (ACCC); and Law Society NSW. It was unacceptable that these organizations did not remove the Standard from the 2004 Code when there was evidence of a scam which is defined as a dishonest scheme, a fraud.

Share This ...

Mobile Blog


Scan QR-Code for Smartphone