A case study in banking fraud and legal and judicial complicity. John Salmon and Evan Jones April 2017
The lengthy story of bank bastardry detailed below took place between 30 and 20 years ago. It retains its relevance. The story is a gold standard of the victimisation and suffering of innocent parties by a system comprehensively corrupt or complicit with corruption.
The dimensions involve bank officers engaged in fraudulent activity against a customer couple, and a bank that steps in to defend its staff over its customers. It involves a legal profession short on competence at best and ethics at worst. It involves judicial members steadfastly resolving to decide for the bank contra the evidence. It involves players on the margin who fail to act so that justice is comprehensively denied to the victims. These players include other bank employees, the bankruptcy trustee, the police service and other public officials.
This story can be outlined in detail because John Salmon witnessed the events at close hand. Soon after retirement in the mid-1980s, after a working lifetime of employment in the National Australia Bank, Salmon was approached by the victims’ solicitors to provide an insider’s perspective on bank practices and bank documentation. Salmon’s personal involvement and his familiarity with banking procedures is complemented by the availability, through court-ordered discovery, of incriminating bank documents.
The close experience of this case shocked Salmon at the time, and it has continued to shock him decades later.
Of crucial relevance, nothing has changed in the ensuing period. The banks retain the discretion to be corrupt, the legal profession willing to prostitute itself on the bank teat, and the judiciary willing to stay ignorant of or complicit with bank malpractice.
This story retains its pertinence for the current age, not least for the myriad victims who struggle to understand their own predicament and who can find no redress from authority or the courts.
Chapter 1 The Somersets meet the NAB, with dire results
The victims of the banking scam described below are Edward Plantagenet (Ned) Somerset and Elsie Joy Somerset and their companies, Kabwand Pty Ltd and EJR Pastoral Company Pty Ltd. The culprit is the National Australia Bank Limited, with particular involvement of branch manager Colin Herbert Cannon and regional manager Robert James Parry Arkell.
Ned Somerset and Joy Somerset were successful farmers and graziers. In 1952 the Somersets commenced as soldier settlers, acquiring balloted land in the first Brigalow land development scheme in Wandoan in Queensland. In early 1984, after 32 years producing wheat, sheep and cattle, the Somersets sold their western rural holdings intending to retire to Toowoomba.
During this 32-year period, the Somersets had owned and managed four grazing properties. This entailed regularly seeking advice and support from their bankers – a productive relationship. The Somersets had developed trust in the banking profession and were thus unprepared for the fraud that would be perpetrated on them in 1984 and 1985.
The Somersets were in the course of finalising the sale of their grazing property, Bimbadeen, west of Dalby. Joy Somerset was the owner of a two-unit block in Toowoomba and was in the process of erecting six additional units on the block (which took place during late 1984 and early 1985), to be strata-titled in due course.
In August 1984 Ned Somerset was approached by a Stuart MacDonald and his wife with a view to borrowing money to assist him in the purchase of a strawberry farm property known as ‘Gunnadoo’. The price asked by the then owner was $625,000. This contract was unconditional and called for settlement by 31 October 1984.
In late August and again in September MacDonald took Ned Somerset to the Gunnadoo property where Ned met the owner, Jeffrey Robert Cardell. (Joy Somerset first visited Gunnadoo only in late October.) During October Cardell called regularly at the Somersets’ residence adjacent to the Range Shopping Centre where Woolworths was a tenant and to which Cardell delivered strawberries. Later Supreme Court proceedings against Cardell for fraud revealed that Cardell regularly purchased strawberries from a Gatton farmer and resold them to Woolworths under representation that they had been harvested from Gunnadoo.
The Somersets were originally interested in purchasing for cattle fattening purposes a 95 acre property known as Glenhaven, and made an offer in October 1984. This contract was dissolved on the instruction of regional manager Arkell to the branch handling the Glenhaven account (33 Russell St, Toowoomba), in spite of that branch manager’s opinion, buttressed by Brisbane administration, that the sale to the Somersets should proceed.
Ned Somerset sounded out his then bankers, ANZ and CBA, concerning their opinion on the strawberry farm figures. They claimed that they had no customers engaged in this activity and could not comment on their veracity, thus were not prepared to assist in this venture.
Towards late October 1984, Cardell offered to introduce the Somersets to his NAB bank manager, Colin Cannon, and an appointment was initially set down for the 29th. Ned met with Cannon on the 30th. Joy Somerset did not accompany her husband to this eventful meeting because of problems with the builder in the construction of the strata units.
At the meeting with Cannon on the 30th, Cannon confirmed that his customer, Cardell, had acquainted him with the position to date. Ned Somerset informed Cannon that he and his wife had signed a contract to purchase Glenhaven for $285,000. At this interview Cannon reiterated Cardell’s previous claim to Ned that strawberry farm income had grossed over $1 million and netted $600,000 on the basis of $50,000 per month.
Cardell had previously told Ned that he was making so much money that he was disclosing only a portion of it to the tax authorities. When Ned Somerset asked Cardell about his tax liability, Cardell claimed that most of his revenue came from cash sales at the property’s roadside kiosk, leaving the taxation authorities out of the loop.
Cannon claimed that he had to respect the confidentiality of his customer regarding Gunnadoo. Yet he disclosed that Cardell was planning to build a $3.7 million motel. Cannon claimed that Cardell ‘owes no money to anybody and puts a lot of black market money in a security box’.
Ned informed Cannon that Cardell wanted $625,000 for the strawberry farm and Cannon responded by saying that if you decide to buy the strawberry farm “you will not regret it”. Ned then enquired of Cannon whether his bank could assist with the purchase of Glenhaven if they decide to purchase the strawberry farm.
Cardell wanted $500,000 on signing the contract with the balance being carried by Cardell on a first mortgage basis until full payment on 31 January 1985. The Somersets had already committed themselves to the purchase of Glenhaven and, following settlement, cash reserves would have been significantly reduced by half.
It later transpired that Cannon and Cardell sought to ensure that the first property considered for purchase by the Somersets was the strawberry farm. The owners of Glenhaven had been defaulted by the NAB and Demand had been issued. Arkell’s action to prevent ready sale to the Somersets was induced by Cannon (confirmed by Russell St Branch manager) and this enabled the bank to direct the Somersets to give the strawberry farm purchase first priority, bearing no relation to their experience as successful farmers.
The strawberry farm was failing and its owner in default. The natural inference is that Cannon sought to get the bad debt off his branch’s books by its sale to the Somersets. Discovered bank documents would later confirm that inference.
The 30 October meeting concluded with Ned making arrangements to have a further meeting with Cannon on 1 November. Ned was buoyed by Cannon’s claims regarding the cash flow sales of Gunnadoo, seemingly confirming Cardell’s assertions.
On 31 October, Ned Somerset wrote a cheque for $500,000, as part payment for the strawberry farm, and gave it to Cardell.
The Somersets’ solicitor was unavailable on the 1st and the contract signing was set down for 2 November. Ned called on Cannon as arranged on the 1st (Joy again did not accompany him) and he gave Cannon handwritten documentation (2 pages) which recorded details of their Assets and Liabilities. Assets aggregated to $1,902,000 with liabilities recorded at $818,000 (strata units and Gunnadoo mortgages, proposed Glenhaven purchase, etc).
Ned also handed over to Cannon a statement of strawberry farm production figures, given to him by Cardell, for confirmation as to authenticity. There was no detracting commentary from Cannon as Cardell’s bank manager. Ned repeated to Cannon Cardell’s purchase terms. Cannon reiterated to Ned that “he would not regret it at that price” and that “it was a very good business”.
Cardell had bought Gunnadoo in April 1981. He belatedly moved to grow strawberries in March/April 1982, and strawberries were gradually produced from May 1982 onwards. He was buying strawberries from other growers from as early as late 1982. By June 1983, the land was entirely given over to strawberries. Cardell originally planted the plants according to Department of Primary Industry advice, but later plantings (which other growers and experts commented on) put the plants abnormally close together. Later crops apparently involved smaller and poorer quality fruit.
The NAB’s discovered documents (Cardell’s bank statements) confirm that the cash flow of the strawberry farm never grossed more than $180,000 per annum in any twelve month period from 1 January 1983 to 30 September 1984.
The NAB’s discovered documents also reveal that Cardell’s NAB business account, Gunnadoo Enterprises, had been irregular for 352 days during the period 1 October 1983 to 30 September 1984. The chronically irregular account indicated ongoing financial difficulty and lax banking supervision. The account would have been subject to on-going reporting to the bank’s senior administration – the account would have appeared in the computer-generated printout known as ‘Manager’s Watch List’, a document issued weekly.
Any branch manager in charge would have been aware that the escalating indebtedness of Gunnadoo Enterprises meant that sale of the property was the only solution to the problem. After February 1984 (with Cannon in control of the branch) the indebtedness grew from $180,000 to $240,000, with the Gunnadoo Enterprises facility described as ‘bridging’.
This tolerance of ongoing indebtedness occurred contrary to the instruction of Cannon’s regional manager Arkell as recorded on the Cardell file. Arkell recorded on a Line of Credit Application, dated 4 January 1984, for $180,000, submitted to Arkell for approval: “For lack of alternative, we are there now, however absolutely no more and sale or refinance by 30 June 1984 is to be a definite obligation by customer.”
The significant misrepresentation by Cardell of his cash flow / good business claims, repeated by Cannon, was confirmed by the sales of strawberries grown on Gunnadoo following the transfer of ownership to the Somersets. The Somersets’ accountant’s financial reports reveal that gross sales for the period from 1st November 1984 to 17th December 1985 aggregated $139,985.39.
The evidence highlights that Cannon was involved in more than one instance of fraudulent misrepresentation. The misrepresentations, prior to the Somersets entering into the contracts, appear to have been made recklessly, not caring whether they were false and knowing that the Somersets’ working of Gunnadoo would involve them in substantial monetary loss.
A well known statement of this principle of law is that by Lord Herschell in Derry v. Peek (1989) 14 App.Cas.337 at p.374. His Lordship said that to sustain an action of deceit there must be proof of fraud, and that fraud is proved when it is shown:
1) That a false representation has been made knowingly, or
2) Without belief in its truth, or
3) Recklessly, careless whether it be true or false
Cannon’s misrepresentations fit this precedent entirely.
On the afternoon of 2 November, the property contract (under Kabwand P/L) and business contract (under EJR Pastoral Company P/L) were signed in the office of Cardell’s solicitor, Davidson & Sullivan. Joy Somerset asked Cardell’s solicitors to produce the Certificate of Title. Cardell claimed that they were not entitled to sight the deed. The Certificate of Title, together with attaching mortgage (released, but not yet registered) was still being held by the NAB, Cardell’s mortgagee. A heated discussion took place concerning this issue between Cardell (supported by his solicitor) and the Somersets. The Somersets’ solicitor should have insisted that the Gunnadoo Certificate of Title be produced. The Somersets were naturally legally entitled to sight this document.
The certificate of title would have revealed that the NAB held first and second registered mortgages (to the National Bank Savings Bank and to the National Australia Bank respectively). If Joy Somerset, or her solicitor John Davies, had sighted the certificate of title, the Cardell scam and Cannon’s complicit deception would have been revealed at the outset.
Contracts to purchase Gunnadoo were the Property Contract at $310,000 and the Business Contract at $315,000, with the latter’s apportionment as follows:
Plant and vehicles ……………………......$9,000
Irrigation equipment …………………… $20,000
Fittings and cold rooms ………………... $36,000
Goodwill and strawberry plants……......$250,000
Total ……. $315,000
Contracts were dated 1 November 1984. After this 2 November meeting, following completion of normal settlement procedures, Cardell handed to Ned outside on the footpath a document labelled ‘Estimated Cash Flow Strawberry Growing Venture – Owner’, dated 2 November, under the signature of R N Elliott & Co, Chartered Accountants.
This document made the preposterous claim that strawberry production was expected to generate $229,680 per month which, fixed for 10 months (in the abstract, real months not specified), summed to $2,229,680.
(The document also allowed for a running expense of strawberry plant purchases of $12,250 per month for 11 months. This allowance is also spurious as no such regular replacement had previously occurred. The presumption behind these plant replacement figures also runs counter to the highly inflated valuation of the strawberry plants acquired by the Somersets at purchase, granted by the judge in the Somersets’ action against Cardell, treated below.)
The Elliott document noted: “No attempt has been made to substantiate the basis for these estimates. Accordingly, no warranty or accuracy or reliability is given to any person.” How could an accounting firm sell out its integrity so readily? This document was exhibited during the Trial and Appeal hearings and its significance regarding duplicity was ignored.
On 5 November, Ned telephoned Cannon to inform him that he was in possession of all information which would enable him and his wife to submit an application for finance to facilitate the purchase of Glenhaven, to be auctioned soon (following Arkell’s instructions). Cannon set down the appointment for the next day, the 6th.
On arrival at the bank on the 6th, Ned introduced his wife to Cannon and she immediately questioned him on the cash flow of the Gunnadoo strawberry farm. Cannon responded again with comparable claims that “it was a good business” and “you will not regret your decision, it has an excellent cash flow”.
At this interview a copy of Cardell’s Cash Flow (Farming Operations) 1984/5 was handed to Cannon. Cannon called his Manager’s Clerk Greaves into the office and introduced the Somersets. Ned was asked to sign a Statement of Position, which he did. Ned gained the impression that this document was previously pre-prepared and was dated 6 November 1984. The writings thereon were hand written and the document appeared to be a bank stationery item. Assets were then shown as $1,509,000 and Liabilities $465,000, representing a surplus surpassing $1,000,000.
The Somersets also signed a Customer Record Card on account of their other company, EJR Pastoral Company P/L. They made an initial deposit of $90,000 representing transfers from their other banking accounts. This interview lasted about one hour and the next appointment was set down for 8 November.
Early on the 8th, Cardell called on the Somersets at their residence to inform them that he was having lunch with Cannon that day.
Later in the day the Somersets met with Cannon at the bank, and Cannon informed them that the bank would lend them the funds to purchase Glenhaven at auction, along with funds towards erecting a hydroponic shed on Gunnadoo and to pay out Cardell’s first mortgage. Cannon advised that they could bid at auction for Glenhaven to a maximum of $300,000. He advised that the bank was holding the Certificate of Title for the strawberry farm. Cannon handed Ned a five leaf cheque book so that they could issue cheques immediately if necessary.
The cash flow of the strawberry farm was discussed once again, with Ned noting “we do not want the National Bank tacking on notices to our front door”. Cannon’s response was along the lines of “even if Gunnadoo produced half the figures, you will be well ahead”. Even that statement was fanciful.
Cannon also informed the Somersets that he was having lunch with Cardell that day.
On 9 November, the Somersets were successful in their bid for Glenhaven, albeit at $320,000 – $20,000 above the bank’s advised maximum. Settlement was set down for 14 December 1984. Ned Somerset issued a cheque for $32,000 as deposit. This amount was $35,000 in excess of that for the Somersets’ previous contract, which had been torn up by the bank.
On 12 November, Ned telephoned South East Queensland Electricity Board to make arrangements to have power connected to Glenhaven. Mrs Somerset was informed by an employee of the Board that connection was not possible due to an outstanding requisition. The Somersets called on Cannon to inform him of the developments regarding Glenhaven and Cannon advised that he would have the SEQEB requisition attended to expeditiously.
It is noteworthy that in the lead-up to the NAB auctioning Glenhaven, a file note made at the Russell St branch, dated 11 October, recommended that there be ‘no repair to electricity defects’. The electricity defects were not forewarned at the auction. More, that same note documented information from the auctioneer, dated 4 October, of substantial relevance: “Expresses dismay re condition of property and considers value $200,000 to $220,000 now.” In spite of that information, the bank recommended that “Reserve remain at $265,000”. The Somersets were taken for a ride on Glenhaven as well.
At the 12 November meeting, the Somersets also discussed with Cannon the aspect of borrowing further monies from the bank to pay out the first mortgage to Cardell of $125,000. The cost of erecting the glasshouse was considered to be in the vicinity of $100,000, whereas legal costs and stamp duty also needed to be taken into consideration together with carry-on commitments.
An aggregate of $250,000 in further accommodation was needed. Cannon skipped over any response to these matters. This meant that all-up borrowing could reach as high as $550,000.
Mr and Mrs Somerset called at the bank on several occasions to discuss the status of the two properties they had purchased. They were anxious to know when the bank’s security documentation would be available for their signature. They were fobbed off by Cannon for various reasons.
In December 1984, Cannon was due to proceed on annual leave in February 1985 and he effectively removed himself from the scene before Christmas. After the payment of deposit on Glenhaven, farm running expenses and further expense in erecting a glasshouse on Gunnadoo, the Somersets’ overdraft immediately became irregular. Cannon’s intention was to use his relieving manager to resolve the irregular overdraft situation by the latter’s submission of a Line of Credit Application on behalf of the Somersets’ group of companies. Once this had been achieved, settlements to perfect bank securities on the Somersets’ assets could then take place. Cannon, with his superior Arkell, had placed their employer in a dangerous predicament and he had to distance himself from the inevitable bad debt fiasco, which soon came to pass.
The overall entrapment can be segmented into stages – grounds for inducement, actual inducement and the augmenting ‘facts’ supporting the inducement.
Grounds for inducement
The financial position of strawberry farm vendor, Cardell/Gunnadoo Enterprises, was in severe financial stress. Since Cannon had assumed control of the Toowoomba NAB branch in January 1984, the Gunnadoo Enterprise’s bank debt had been allowed to escalate such that the working account debt had been converted to a ‘Bridging Loan’ with an expiry date of 31 October 1984.
The only way that Cardell could extricate himself was to sell the strawberry farm. Otherwise, the bank would sell the strawberry farm as mortgagees in possession. Cannon would have been held responsible for permitting the Gunnadoo Enterprises debt to be classified as bridging. The Trial hearing (below) disclosed that Cardell was endeavouring to sell Gunnadoo as early as July 1984.
If a NAB mortgagee in possession sale eventuated, a residual bad debt write-off was inevitable and this would be detrimental to Cannon’s banking career, virtually denying any future promotion. Cannon was then the most senior branch manager for his age in Queensland. The NAB was seemingly adopting the practice of accelerating the promotion of ‘high fliers’. A NAB manager, at one stage superior to Cannon, had described Cannon to fellow employees as “a big gun with a small calibre” – that quip doing the rounds of NAB personnel in Queensland.
In the Somersets’ subsequent action against Cardell for fraud, Cardell informed the court that he had a friendly relationship with Cannon. Cardell stated that he would discuss business account matters with Cannon in his office two to three times a month.
The actual inducement
There are many instances of inducement on Cardell’s part. In late September 1985, Ned Somerset gave Cannon documentation which stated that Cardell had been found guilty of ‘intent to defraud’ in New South Wales, highlighting that Cardell had previously fallen foul of the law.
The actual inducement on the part of Cannon is contained in his interviews with Ned Somerset on 30 October 1984 and 1 November 1984.
The basic ingredient of direct inducement and intentional misrepresentation can be located in the words by Cannon to Ned Somerset: “$50,000 per month [net] as is”. This was a blatant lie, presumably designed to influence the Somersets to purchase the strawberry farm.
Cardell was in regular contact with his bank manager friend and kept him informed regarding sale negotiations. It was Cardell who suggested that Ned Somerset discuss the strawberry farm purchase with Cannon. Cannon acknowledged to Ned Somerset that Cardell had telephoned him.
Both Cannon and Cardell would have had to be aware that if their misrepresentation was acted upon the Somersets would automatically suffer substantial losses. The actual turnover, recorded in bank records for the year ending 30 September 1984, was by comparison insignificant.
When Cannon informed Ned that “I have to respect my client’s confidentiality”, the implication is that Cannon needed to avoid exposing to Ned the anomalies in Cardell’s representations.
The augmenting facts which support the actual inducement
Prior to the 2 November meeting for Gunnadoo settlement, the Somersets had meeting with their accountant who advised that the purchase of Gunnadoo should be represented by two contracts – a property contract of $310, 000 and business contract of $315,000.
Cannon does not disclose in bank records that the Somersets’ purchase of Gunnadoo was represented by two contracts. Yet it was Cannon’s standard NAB practice to have the customer/borrower produce copies of all relevant contracts – as confirmed by perusal of Diary records. Cannon’s action here is most irregular, contrary to the most fundamental of procedures, with significant facts being misrepresented to superiors. The misrepresentation of the two contracts as one was a clear indication that a scam process was in operation. Cannon admitted in court that the bank held copies of the two contracts.
The Somersets’ Statement of Position, dated 6/11/1984 (discovered by the bank under the forged date of 26/11/1984, with the figure ‘2’ inserted), records in a bank employee’s handwriting, ‘Other property: Gunnadoo Toowoomba $625,000’.
The recording of this figure was directly contrary to NAB policy of the day. The correct figure should have been stated at $310,000. The second component of $315,000, representing the business and not real property, was mostly made up of $250,000 as ‘goodwill and strawberry plants’. This amount should have been stated in the space provided, i.e. ‘goodwill of business Est. $…’. Pursuant to NAB policy, this means that a customer’s ability to borrow against this amount is considered zilch in such circumstances. Cannon has classified the amount of ‘goodwill and strawberry plants totalling $250,000’ as first class (real estate, Category ‘A’) security.
Cannon stated in response to cross examination during the G65 hearing that “the bank lent on assets, which was approved by my superior”. This is a duplicitous statement because, although correct de facto, all relevant information records the loans to the Somersets being dependent on the strawberry farm’s more than adequate cash flow.
Cannon’s Customer Interview Record, 8 November, records:
The strawberry farm has an excellent cash flow situation and it is expected that servicing of the $300,000 Bills would be quite easy under reasonable weather conditions. In fact when the [hydroponic] sheds are in place, the strawberry situation should be secure for all year round strawberry trowing and they expect to harvest some 3 kilos per plant which will make a considerable amount of money for the company.
Cannon’s late November 1984 Line of Credit – Credit Assessment Review reads:
Does Cash Flow Budget/Servicing table show adequate surplus to meet proposed repayment program and all other commitments including tax? Yes (attached) [the attached document was the crucial General Report, never discovered by the bank]
Is Cash Flow Budget realistic compared to past year’s record? (especially Trading Statement). Yes, although the cash flow does show an increase which is due to production of year round crop.
Cannon’s Line of Credit Application follow-up (in response to demands for further information from Brisbane office), 10 December, claims:
In the meantime serviceability should not present any problems as the cash flow from the strawberry farm has been confirmed at $50,000 per month as is. The attached estimated cash flow is for 12 months after all the [hydroponic sheds] come into production but I believe this has to be treated with some caution. However even being conservative and taking say half the estimated production the business should be a winner.
When Cannon informed the Somersets on 8 November 1984 that they could bid at the Glenhaven auction up to $300,000, the Somersets were not in a position to make an acceptable borrowing application to the bank which would conform to the NAB’s lending manual guidelines of the day.
Cannon’s Line of Credit Application submitted to his Regional Administration for $300,000, dated 26 November 1984 (another reconstructed date?), did not include Joy Somerset’s eight strata title units as security. Yet Cannon’s Customer Interview Record of 8 November 1984 records an addendum written by Regional Manager Arkell, ‘Against adequate security cover including the James Street Town Houses’. The bank’s discovered documents revealed that Cannon did not include Mrs Somerset’s Town Houses as security in his LOCA.
It is Salmon’s contention that Arkell recorded this addendum in the course of reconstructing and/or a re-assessment of the Somerset’s bank predicament. Cannon had made overtures on more than one occasion to Mrs Somerset that the bank would need to take security over her eight town houses. However, her ongoing response was “the bank has more than enough security, you’re not going to get those”.
Cannon’s signed LOCA, dated (2)6 November 1984, includes security schedules which record that he has valued the market values with their applicable bank values as follows:
Market Value ($) Bank Value ($)
Glenhaven 305,000 244,000
Gunnadoo 475,000 380,000
Deduct 1st Mortgage Cover @70% capitalisation of $125,000 ($125,000 / .7 = $178,600)
Net lending margin available on Gunnadoo
Total 601,400 445,400
Cardell’s first mortgage of $125,000 of Gunnadoo, as per bank rules, was subject to 70% discounting – i.e. the mortgage was treated as constituting a $178,000 charge over Gunnadoo.
Cannon’s LOCA recorded the Lending Category as ‘A’. This means that the Limits/Loans applied for are contained within 70% of the Bank Value stated above, viz. $445,400. Thus the maximum which can be lent under Category ‘A’ will extend to $311,080. The lending sought at $300,000 comes within Category ‘A’ by the barest of margins.
Any NAB manager would have readily discerned that Cannon’s Market Valuation vide his security schedules are incorrect and fraudulent. Cannon should never have placed a Market Value exceeding that arising from the following correct procedures:
Market Value ($) Bank Value ($)
Glenhaven 300,000 240,000
Gunnadoo 310,000 248,000
Deduct 1st Mortgage Cover @70% (as above)
Net lending margin available on Gunnadoo
Total 431,400 309,400
Category ‘A’ lending classification would need to be contained within the amount of $216,580 (70% of $309,400). Cannon’s LOCA was for a Commercial Bills Facility at $300,000. This figure exceeds the category ‘A’ maximum by $83,420. Under the bank’s lending manual guidelines, the lending category classification should have been recorded as ‘B’.
Once Cannon engaged in these procedures, defying bank conventions from the beginning of the Cannon/Somerset association, the charade becomes ongoing until such time as the bank ‘sting’ operation explodes.
In addition, Cannon de facto dramatically increased the Market Value of Gunnadoo to $475,000 (compared to the $310,000 contract price). Just prior, at 1 September 1984, Cannon’s Market Value of Cardell-owned Gunnadoo was only $260,000.
Although Cannon has obtained his regional manager’s approval for the Somersets to borrow $300,000 he still needs to obtain formal approval by way of a sanctioned memorandum to his LOCA submitted originally under date of 6 November 1984.
The LOCA reached the desk of the regional manager’s supporting regional manager W J (Bill) Overs. Bill Overs was well known to Salmon and his reputation was first class. It is Salmon’s belief that when Overs examined the content of Cannon’s LOCA seeking approval of a Commercial Bill discount facility, he would have found it unacceptable at the most fundamental level.
Overs was already aware of Cardell’s financial difficulty. In the Trial litigation (G65), the NAB was required to discover all file records in Cardell’s name. Several internal bank memorandums were discovered which disclosed Overs’ signature.
One such Internal Memorandum, dated 27 August 1984, addressed to TOOWOOMBA 441 Ruthven Street, where Cannon was manager, informed the branch as follows:
“Branch will need to re-inspect securities with detailed comments to support any increases with some caution so far as we are concerned and our values assessed in the light of verified market indicators”.
Overs’ concern was sufficient that Cannon was forced to sign off on an Internal Lending Memo, dated 10/12/1984, addressed to Regional Operations, with additional information, required before formal approval for the Somerset loan could take place. In Cannon’s Internal Memo he makes no reference to the fact that he was responding to the Overs’ memorandum. This implies that matters of concern to Bill Overs have been solely discussed over the telephone between Overs and Arkell.
The statements of inducement which can be found in the Cannon 10 December memorandum to facilitate formal approval are as follows:
(i) Cannon states, “Applicants were previously customers of the ANZ Bank and have been let down by the fact that they claim they can never see the manager and are always dealt with by junior staff”. This statement is a transparent lie.
The Somerset’s banking business was shared equally between the ANZ and the CBA. As graziers with over thirty years’ experience on the land, the Somersets had cause to have countless interviews with bank managers and had never experienced any difficulty in arranging these interviews with the respective bank managers.
(ii) Cannon states, “Because of the need for future expansion of the year round growing of strawberries the property known as ‘Glen Haven’ in close proximity has been purchased at auction.” All components of this statement are transparent lies.
Glenhaven was the first property which the Somersets intended for cattle fattening purposes on a small scale – on the style of a hobby interest. The Somersets signed a contract for $285,000. However, as the NAB was selling Glenhaven as mortgagees in possession, Cannon was able to have this contract rescinded to have Gunnadoo purchased by the Somersets beforehand.
(iii) Cannon states, “Security position is quite adequate on a Category ‘A’ basis after a reduction of $150,000 in market value of Gunnadoo”. This is another transparent lie. The figure of $150,000 refers to the difference between the dual contract price of $625,000 and Cannon’s inflated market valuation of the property of $475,000. The first figure represents an outrageous rip-off (and irrelevant to bank market value, as above) and the second a fraudulent valuation, so Cannon’s provocative inference of extreme caution in the phrase “a reduction of $150,000 in market value” is a dramatic misrepresentation to his superiors par excellence.
If Cannon had complied with the NAB’s Lending Manual: Applications for Lines of Credit, the exemplar would have calculated out at Category ‘B’.
Cannon does not record anywhere in bank records that the Somerset’s Gunnadoo purchase is represented by two contracts with the property contract (real estate) price stated at $310,000.
(iv) Cannon admits, “We believe price paid $625,000 was somewhat high”. For a change, Cannon is correct. As a contract price, it was ridiculous. Cannon should have alluded this fact to the Somersets, or otherwise he should have informed them that his bank was unable to assist.
(v) Cannon states, “Debt is to be cleared either from overseas loan, said to be arranged …”. The ‘overseas loan’ factor is a furphy. A foreign currency loan (then being pushed by bank officers to unsuspecting customers) was an impossibility given the Somersets’ borrowing status.
Under NAB Foreign Currency Loan lending guidelines, all lending applications had to include a Category ‘A’ additional margin of 20%. Other major lending institutions had similar stringent conditions.
(vi) Cannon states (as noted above), “serviceability should not present any problems as the cash flow from the strawberry farm has been confirmed at $50,000 per month as is”. This is the quintessential lie. Recorded in the 10 December memo, the lie then acquires ‘official’ status.
Cannon would have known from Cardell’s customer file records that the figure “$50,000 per month as is” is a made-up number. There would have been several computer printouts in the Cardell/Gunnadoo file known as ‘Limit Enquiry – Summary of Account Activity’ which would have revealed aggregate turnover for the strawberry farm for the previous twelve months.
(vii) Cannon records in his memorandum, “proposition was placed before Mr Arkell who gave his approval”. Cannon reiterates this statement in his ultimate paragraph which reads, “as previously stated application has been approved by Regional Manager and is forwarded for record purposes”.
Cannon is making sure by reiterating this statement that his regional lending manager must sign off on this LOCA submitted on behalf of the Somersets for $300,000, originally dated 6 November 1984.
The misrepresentations listed above reveal how Cardell, Cannon and Arkell extricated themselves from an impending crisis at the NAB Toowoomba branch.
There are two conspiracies involved, the Cardell/Cannon association and the Cannon/Arkell employee association.
Given this background, how could the Somersets lose their legal action against the NAB on grounds of unconscionable conduct in the Federal Court of Australia?
Bank settlement for Glenhaven, together with payout of Cardell’s first mortgage on Gunnadoo, finally took place on 15 March 1985. Mrs Somerset had become extremely unsettled in the intervening months, due to the ongoing settlement delay allied with the fact that strawberry farm sales achieved to date were nothing like the past actual and projected sales figures that they were relying upon. Some uncertainty prevailed, due to the fact that the district had experienced severe thunderstorms which had caused strawberry plant damage.
Mrs Somerset had approached their Toowoomba solicitors with a view to rescinding both contracts. Their legal advice was, “Joy, if you attempt to do this, the bank will sue you for damages”. This prospect then lapsed.
In early May 1985, Cardell’s son, Jeffrey Cardell Junior unexpectedly called at the Somersets’ residence and informed them that his father was a ‘con man’. Cardell Junior informed the Somersets that his father started with a $50,000 overdraft which progressively was increased to $240,000 by October 1984 and that the NAB was intending to sell them up. Bank records confirm that Cardell Junior’s statements were correct. Further, his father had never put aside any monies to dodge tax. Strawberry sales, after living expenses, were generally deposited into the banking account to reduce debt.
The Somersets sought an interview with Cannon the next day to advise him that they had been placed in an horrific situation. They also proceeded to obtain legal advice to ascertain what actions they could instigate. The Somerset’s Toowoomba solicitor sought legal opinion which recommended that writs be served on both vendor Cardell and the NAB, alleging fraud.
The envisaged litigation to be conducted in the Supreme Court of Queensland was beyond the capacity of the Toowoomba solicitor. It was agreed by the parties that it would be in the Somersets’ interest if their litigation file was transferred to Brisbane solicitors who had experience in litigation. The appointed firm was Cranston McEachern & Co.
An initial opinion from a reputable barrister advised that it would be appropriate to join Cardell and the National Australia Bank in a single action. The Somersets’ newly appointed instructing solicitors immediately obtained a second counsel’s opinion. It was decided that the fraud charges against Cardell should continue to be pursued in the Supreme Court whereas the NAB should defend in Federal Court an allegation that they had breached Section 52 of The Trade Practices Act. This separation was in our opinion a mistake.
The G65 of 1986 FCA Trial hearing was spread over ten days, commencing on 15 February 1988. The bank’s initial discovered documents were made available to the applicant’s instructing solicitors in September 1987. The bank’s discovery was far from complete and it became patently obvious that the bank was intentionally withholding documents, with subsequent discovery occurring in dribs and drabs.
Justice Neaves’ first duty on 15 February 1988 was to deal with outstanding discovery issues – effectively a Directions Hearing. It was eventually decided by the Somersets’ junior counsel, Michael White, that the serious status of further and better discovery would be ‘taken on the run’ – that is, particular documents, if found wanting, could be called for during the Trial hearing. The problem was that the Somersets’ counsel did not understand the significance of the bank’s withheld documents, and they declined to consult the knowledgeable Salmon. The casual acceptance by White of the bank’s strategic partial discovery of documents was to have disastrous consequences in the end.
Justice Neaves handed down his judgement on 29 September 1988 and the Somersets and their companies lost on all counts.
Neaves considered that both Mr and Mrs Somerset lacked credibility and he believed the bank’s version of events, principally because of a seemingly strong chronological set of contemporaneous records. Basically, once Justice Neaves came to the determination that Ned Somerset had not met with Cannon on 30 October and 1 November 1984, the Somersets were never going to win. Witnesses who claimed that they had accompanied Ned in his trip to the bank on the 30th and drove him to the bank on the 1st were treated by Neaves as unreliable (judgment, pp.68-71).
Ned Somerset’s meetings with Cannon on 30 October and 1 November definitely took place. Having spent considerable time inspecting the bank’s belatedly discovered documents, Salmon became convinced that a total reconstruction of the bank’s Somerset file with ancillary documentation had taken place.
The Somersets’ responses to cross examination in the G65 hearing could be construed as obfuscation by a detached observer. But the vital questions put to them were on a poisoned scenario – bank discovered documents represented a reconstruction. The Somersets’ counsel was unable to assist their clients in their predicament. Salmon’s view was that the Somersets’ solicitors, Cranston McEachern, were also sceptical about the Somersets’ recollections of meeting dates with Cannon.
When it was revealed in evidence that Cannon’s diary notes had been partially reconstructed, the whole issue of bank discovery should have been subject to a thorough and forensic examination, with the Judge ruling an adjournment to achieve it.
The Somersets’ proposition of 8 November 1984 for the purchase of Glenhaven was certainly based on the claimed cash flow of Gunnadoo and this information is in turn reiterated by Cannon in his Line of Credit Application, dated 26 November 1984 (altered from 6th). Cannon claimed in evidence that “the strawberry farm has an excellent cash flow situation”. Cannon also admitted in evidence that the bottom line was that “the Somersets had assets”. This meant that if loan serviceability proved to be a problem, then assets will be available (although the alleged net assets were simply not there) to clear bank indebtedness.
When the Somersets presented their proposition on 8 November 1984, Cannon should have responded by informing the Somersets that his bank is unable to assist; any ethical bank manager would have done this. The evidence points to Cannon having been engaged in wilful misrepresentation – fraud. It was only a question of time before the Somersets found themselves destitute and reliant on the public purse for sustenance.
Chapter 2 The interregnum between purchase, occupation and contract signing
During December 1984 and January 1985, Ned and Joy Somerset had numerous interviews with Cannon, relating to the SEQEB Requisition but also regarding the questionable status of the strawberry farm production. It was already evident by mid-January 1985 that there was a severe lack of cash-flow from Gunnadoo, as the production figures were nowhere up to indicated expectation.
Cannon was compelled to continue with this charade, because he had committed the bank to further approve the ongoing expenditure, including the payout of Cardell’s first mortgage on the strawberry farm of $125,000 set down for payout on31 January 1985. Cannon needed to continue in this mode until his annual leave began on 4 February 1985.
Cannon initiated discussions with the Somersets regarding the aspect of interlocking their personal guarantees, which would give the bank a second charge over Joy Somerset’s Toowoomba units, an asset over which she was the sole registered proprietor.
Joy Somerset was strongly opposed to giving a charge over the units, as it was her initial intention to sell four of the eight units and keep four. Of the four retained units, one was required for their own occupancy and another was to be leased to her elderly father. However, if she was forced to give the bank security over two of the retained units, she was adamant she would not give security over the two that the family were to use.
By mid-January, Ned and Joy were expecting Cannon to advise them that the bank’s security documentation was ready for their signature. This did not transpire. Cannon informed the Somersets during the last week in January that he was leaving on annual leave for four weeks and that he would introduce them to the relieving manager Patrick M Albion who would perform relieving duties while he was away.
The bank approved a Line of Credit Application on 10 December 1984 for $300,000. The object was to obtain security both over the Glenhaven property, about to be auctioned, and over the strawberry farm, Gunnadoo. One infers that the ultimate object was to lock the Somersets into debt before the inevitable failure of the strawberry farm came to light.
The $300,000 loan application remained pending. Court discovered documents disclosed a Customer Interview Record signed off by Cannon dated 18 January 1985, compiled following an interview with the Somersets. Cannon disclosed in this record that he would propose to the bank adding a further $200,000 to the loan. But this figure was manually crossed out and replaced with a figure of $190,000.
This alteration was undoubtedly done to ensure that the Line of Credit Application for the lower sum of $490,000 would come within the Delegated Lending Authority of regional manager Arkell. Cannon needed to ensure that the details did not go for examination to higher authorities in the bank.
By the end of January 1985 the situation was already disastrous, with production dramatically lower than that promised. The Somersets informed Cannon they had come to the decision not to pay Cardell the balance due to him, $125,000, due on 31 January. This decision was tempered by the fact the hydroponic glasshouse, which Cardell had undertaken to erect, was incomplete. Cardell had begun the job in December and, after continuing following a holiday, had walked off the job. The Somersets had handed over $40,000 for this partial construction.
Cannon remonstrated when he learned that the outstanding balance of the money may not be paid, and it was only after heavy pressure was placed on Ned Somerset that he agreed to pay the amount, despite his wife’s better judgement. It was later revealed through the court discovery process that Cardell’s overdraft account was still substantially irregular. Cardell remained in danger of dispossession and needed funds from the Somersets to pay off his debt.
As planned, Cannon’s annual leave commenced on 4 February 1985. Before his departure, Cannon had to increase again the market value of the existing bank securities to ensure that his replacement, Pat Albion, would succeed in having his second line of Credit Application (to cover the total refinancing of all existing liabilities, the payout of the first mortgage to Cardell, and the legal expenses and general carry-on requirements) sanctioned by the bank’s administration.
Before going on leave, Cannon increased the market value of Gunnadoo again, by a mammoth $100,000 to $575,000. In January 1984, Gunnadoo was given a market value of $210,000. In September 1984, the value was increased to $260,000. In November 1984, Cannon revalued it again to $475,000, thence to $575,000 two months later. The increases and the resulting level are preposterous and fraudulent. The true market value for the bank lending purposes was $310,000 at best. (In November 1985, with the bank in the process of foreclosing on the Somersets, Cannon valued Gunnadoo at $350,000.)
Cannon had also inflated the physical size of the Gunnadoo property by a factor of two. In the bank’s Schedule of Securities (Cardell as owner) dated 4 January 1984, Gunnadoo is designated as 2 hectares in size. In the Schedule of Securities (the Somersets as new owners) dated 16 November 1984, the size is magically designated as 4 hectares. (In the Schedule of Securities, with the bank foreclosing on the Somersets, dated 20 November 1985, the size has miraculously shrunk again to 2 hectares.)
The predominant issue for Cannon after the Somerset purchase of Gunnadoo was to conceal indefinitely his misrepresentations from his victims.
Cannon was questioned in his Trial cross-examination evidence (23 February 1988) concerning his reasons for increasing the market value of Gunnadoo by $100,000 to $575,000 on 1 February 1985. When Cannon was asked the question by the Somersets’ senior counsel; “What were the reasons for the increase in valuation?” Cannon responded: “There were improvements.” This answer was transparently false.
The ‘improvements’ referred to the partially erected glasshouse shed demountable, estimated to cost $120,000 on completion. Moreover, the glasshouse shed was owned by the Somersets’ operating company, EJR Pastoral Company Pty. Ltd. This company had given no security of this asset to the bank and the shed itself was never completed or rendered functional.
Chapter 3 Relieving Manager Pat Albion’s Involvement in the Bank Fraud Saga
Ned and Joy Somerset saw relieving manager Pat Albion during the first week of his relief duty in early February 1985. They reiterated their concerns regarding the settlement for Glenhaven and the residual payout to Cardell for Gunnadoo as they had previously placed before Cannon. Albion informed them that there was a great deal of work to be done on his part before any signing of the bank’s documentation could take place, and that included the first payout of the Gunnadoo first mortgage to Cardell of $125,000.
In early November the Somersets had paid a deposit of $500,000 to Cardell, of a $625,000 agreed price. After Cardell received the $500,000 his account went briefly into credit before returning to debit – due to expenditure on land and costs associated with a planned motel erection on a neighbouring property he had bought for $70,000 in mid-1983 (which expanded further Cardell’s debt). This fact came to light after the court discovery process produced related diary notes. This additional debt compounded
Cannon’s dilemma; it was imperative that the bank extract the residual $125,000 from the Somersets so that Cardell’s debt could be extinguished.
For the next two to three weeks Ned and Joy called on Albion virtually every second day with information that Albion required so that he could submit an application for accommodation to the bank’s State Administration on their behalf.
Albion, accompanied by two other bank employees, inspected both Glenhaven and Gunnadoo. Inspection of Joy Somerset’s strata title units to be was also undertaken by bank officers, including Arkell. There had been no discussion with Albion concerning the units and it was Joy Somerset’s thoughts at the time of the unit inspection that it was simply a situation of confirming the value which she and her husband had placed on the units, $640,000 in total, i.e. 8 x $80,000.
Albion’s first Line of Credit Application (LOCA) was submitted for $915,000 at end of February 1986, which incorporated taking over Esanda finance attached to Joy Somerset’s strata title units to be. Albion never discussed with either Ned or Joy the matter of holding security over the Somerset units as security.
Albion’s LOCA was declined with sign-off by the bank’s Senior Lending Manager in Brisbane, Noel Board. Board’s comment was that “it was not attractive to the bank, and the quality of the budget was substandard for this type of lending” (cited from a memo produced in discovery).
It is pertinent that no past performance figures relating to strawberry farm sales and by-products accompanied the LOCA as presented by Albion.
Albion then submitted a replacement LOCA for the Somerset Group for borrowing facilities aggregating $575,000, which excluded the refinance of the Esanda lending for Joy Somerset’s eight strata title units to be.
This second application was approved on the following basis:
(a) Instalment Loan on account of Kabwand Pty Ltd ………… $225,000
Repayments per month …………………… $3,189
(b) Instalment Loan o/a E.J. & E.P. Somerset ……. $230,000
Repayments per month …………………… $3,260
(c) Overdraft in Reduction o/a Elsie J. Somerset $120,000
(the overdraft facility to expire on 28/2/1986)
The Cash Flow Budget which accompanied Albion’s application for the twelve month period 1/03/1985 to 28/02/1986 recorded the following information with respect to projected income split-up for the twelve month period:
Runners ……………………………………………....$ 12,000
Rental of hydroponic shed ………………….......,,.$ 22,000 (already hypothetical)
Strawberry sales from leased crops ………........$500,000 (ditto)
When Albion was compiling this Cash Flow Budget in company with Ned Somerset, Albion said to Ned: “I’ll buy you a beer if you produce anything like these figures.” Albion had access to Cardell’s actual figures (a fact admitted in Trial cross-examination) and he would have been aware that the strawberry farm had never achieved turnover at such an inflated level in any given twelve month period. Albion, as regional relieving manager, had already performed a stint in the Ruthven Street Toowoomba branch and was familiar with the Cardell/Gunnadoo file.
The Somerset’s were lifetime graziers, with no experience in growing/marketing strawberries. The hydroponic shed remained uncompleted so the prospect of leased crops was non-existent. Monthly repayments of the two Instalment Loans, totalling $6,449, were to commence on 30 April 1985. The Somersets were being set up to fail, and that almost immediately.
Why did Albion submit this LOCA for $575,000? It is reasonable to infer that the LOCA was sanctioned by Arkell. Discovered documents revealed that Arkell raised a special addendum, attached to the Line of Credit documentation, which read; “Injection of $80,000.00 net proceeds following the sale of six units (security No: 3) appears reasonable and safe.”
Note the terminology “appears safe”. Arkell was an experienced senior administrative bank employee. Arkell would have known that the aggregate accommodation approval of $575,000 was far from safe. The cash-flow estimates of income were ludicrous and the bank’s security position was thus highly precarious.
Esanda had a first mortgage over the units. Arkell was proposing to take security over the units but at this stage (February) Joy Somerset was oblivious to these intentions.
The settlement between the bank and the Somersets finally took place in late March (supplanting the bogus proposals from December). Settlement was for the two properties – Glenhaven (bought in December at auction but settlement delayed) and Gunnadoo. As part of the settlement, the bank demanded a second mortgage over 6 of the 8 units. Joy Somerset was presented with a fait accompli, and had no choice but to comply. The units had not then been strata titled, something that did not take place until late 1985 after the Building Units Plan had been processed and registered at the Titles office. In the meantime, Joy was forced to sign individual mortgages over each of the units to be taken as security.
However, under no circumstances would she give the bank security over the remaining two units. As noted, one of these units was to be leased to her elderly father; the other was to be occupied by the Somersets themselves.
Albion continued with the process, even though he would have been aware that Cannon’s valuations of Gunnadoo were fraudulent. Albion conveyed to Salmon (in February 1988) that he was ‘protected’ in his actions. Of which more below.
The figures below are obtained from the bank’s documentation in discovery, under ‘Security Schedules’, signed off by Cannon. Relieving manager Albion took them as a fait accompli.
Note that NAB’s risk margin here is 20%, so that bank value is 80% of market value. For Joy Somerset’s strata units, already mortgaged, the bank sought security via a second mortgage, which attracted its own risk margin of 70%.
Bank manager Cannon’s valuation of Somerset properties, held as security
Market Value ($) Bank Value ($)
Glenhaven ………………… 335,000 @ 80% 268.000
Gunnadoo ………………… 575,000 @ 80% 460,000
Sub-Total ………………………… 910,000 728,000
Eight strata-title units to-be at James St. @ $80,000 640,000 544,000
Less units’ Esanda first mortgage cover @ 70% 485,714 485,714
where first mortgage indebtedness is $340,000 ($340,000/.7 = $485,714)
Sub-Total 154,286 58,286
TOTAL ………………………………………….............1,064,286 786,286
The NAB guidelines regarding categorisation of lending for ‘A’ must be contained within 70% of total bank value. Category ‘B’ exceeds 70% but not in excess of bank valuation, whereas approved facilities in excess of bank valuation are classified as ‘C’, described as unsecured.
It follows that the Category of Albion’s sanctioned submission should stand at Category ‘B’ as the aggregate facility of $575,000 exceeds Category ‘A’ limits ($550,403, 70% of bank value of $786,290) by $24,597.
The Market Value and Bank Value figures, allied with the contents of the Arkell internal file note, were not in accordance with guidelines as laid down in the NAB’s Lending Manual. Six not eight units were claimed to be taken as security. Reasonable valuations should have been in the vicinity of:
Market Value ($) Bank Value ($)
Glenhaven ………………………………………….............. 335,000 268.000
Gunnadoo …………………………………………............... 310,000 248,000
Sub-total …………………………………………................ 645,000 516,000
Six strata-title units to-be ……………....................... 480,000 408,000
Less units Esanda first mortgage cover @ 70% 364,286 364,286
where first mortgage indebtedness is $255,000, 6/8 of $340,000 ($255,000/.7 = $364,286)
Sub-total ………………………………………….................. 115,714 43,714
TOTAL ………………………………….………….......... 760,714 559,714
Albion’s net aggregate Bank Valuation of $786,290 has overstated a more realistic bank valuation aggregate of $559,714 by a mammoth 40 per cent. In line with the NAB’s guidelines with respect to their security Category the appropriate categorisation of Albion’s LOCA was ‘C’, i.e. Unsecured.
The NAB’s lending manual guidelines states: “Market Value is the current realisable value of the asset on a sale basis (where both buyer and seller would be willing participants). The amount of credit facility required must not be taken into account when assessing value.” It can readily be inferred that Cannon, as the inspecting bank employee of Gunnadoo, had knowingly breached his bank’s lending guidelines with respect to Valuation of Securities.
The combination of a flawed security valuation and a phoney Cash Flow Budget projection meant that financial disaster was a foregone conclusion for the Somersets.
The bank’s contemporary lending manual (comprising over 500 pages) was discovered during the G65 trial. The bank’s guidelines demand caution. The manual included the statement:
“The resolving of question on cash flow, properly considered, is virtually the keystone of a lending proposition. The provision of a sound cash flow budget, carefully checked against past performance is a necessary requirement in assessing both soundness of purpose and viability of repayment program for business.”
But no past performance strawberry farm sales figures were incorporated in the LOCA signed off by relieving manager Albion.
Once the bank authorised settlement in early March to take place pursuant to Albion’s Line of Credit Application, it was only a matter of time before the catastrophic situation materialised for both branch manager Cannon and his regional manager Arkell who had set out to exploit the Somersets – as evidenced by the bank’s discovered documentation. But it can be inferred that the personnel at Brisbane who had approved Albion’s transparently inappropriate application were also implicated in the scam.
Chapter 4 The Line of Credit Applications
Two line of credit applications (LOCAs) were devised, namely:
Cannon’s Line of Credit Application, (2)6 November 1984, for $300,000;
Relieving Manager Albion’s LOCA, 26 February 1985, submitted on behalf of the Somerset Group of Companies for $575,000.
The first application was approved verbally by Cannon’s regional manager Arkell and subsequently by sanctioned memorandum with sign-off by Arkell’s subordinate, regional lending manager Bill Overs.
When Cannon signed his employment agreement with the NAB, there was a requirement to act honestly at all times, and to observe the rules and regulations of the bank and not engage in acts of insubordination. All employees were formally bound not to engage in deceitful process. It is Salmon’s contention that Cannon breached his agreement with his employer by virtue of his statement and actions vide contents of his November LOCA.
In Cannon’s November LOCA he states, “serviceability should not present any problem as the cash flow from the strawberry farm has been confirmed at $50,000.00 per month as is”. Standard banking procedure would have revealed in the Cardell lending file (permanent file section) that turnover in Cardell’s account never exceeded $180,000 per annum from 1st January 1983 to 30th September 1984 (from Cardell bank statements, some of which were discovered for the Trial).
Turnover is stated on a quarterly basis on a computer generated printout known as ‘Information Current Account: Limited Enquiry – Summary of Account Activity’. This printout was then a mandatory inclusion in all LOCAs submitted from NAB branches. It was also a mandatory requirement that the most recent LOCA had to be included with the current LOCA being submitted to the bank’s administration for approval.
On this (2)6 November 1984 LOCA, Cannon placed a market value on the strawberry farm for lending purposes of $475,000, which exceeds the sale contract price of $310,000 by $165,000 and which exceeds the last market value raised by Cannon in the file of vendor Cardell ($260,000) by $215,000. This action by Cannon is clearly fraudulent.
Contrary to Arkell’s instructions, Cannon permitted Cardell’s strawberry farm indebtedness to escalate from $160,000 to $240,000 in the space of ten months where the status of the $240,000 debt is determined as ‘bridging’, meaning that if Cardell has not sold the strawberry farm by 31/10/1984, the bank will do so as mortgagees in possession. Foreclosure would have involved a loss to the bank and Cannon would have been subject to admonishment by his superiors.
Given evidence pointing to Cannon having induced the Somerset’s to purchase the strawberry farm, then Cannon had engaged in a fraudulent act and had breached sections of the Queensland Criminal Code.
What has been stated above regarding Cannon and his employment agreement also applies to regional manager Arkell. At this juncture, Arkell had been regional manager for the 441 Ruthven Street Toowoomba Branch for five years and had held senior branch managerial appointments before his elevation.
Arkell’s duties required him to visit this Toowoomba Branch bi-monthly for overview purposes. From the evidence available, it is clear that Arkell would have been familiar with Cardell’s bank borrowing. Arkell would thus have had knowledge of the strawberry farm cash flow matters, and would have fully understood the implications of Cannon’s valuations of the strawberry farm security following the purchase by the Somerset’s Company, Kabwand P/L.
Cannon stated in his LOCA that, “because of the need for urgency proposition was placed before Regional Manager Arkell who gave his approval”. Cannon continued to reiterate this statement; “As previously stated application has been approved by the Regional Manager as is forwarded for record purposes.” Thus Arkell had approved Cannon’s LOCA raised on behalf of the Somersets for $300,000.
From Salmon’s contemporary knowledge of NAB Queensland personnel, Cannon and Arkell were favoured employees, given promotions and latitude. Queensland State management, allied with Head Office administration in Melbourne, were in a bind, but ended up supporting the duo against their victims.
Moreover, relieving manager Albion had had over twenty years of managerial experience with the NAB at the time he assumed relieving manager duties at 441 Ruthven Street Toowoomba in February 1985. Arkell and Cannon’s duties to their employer pursuant to the agreement they signed with the bank also applies to Albion.
Salmon considers that Albion would never have submitted his first LOCA for $915,000 to State Administration on behalf of the Somerset companies unless he had been directed to. The application was transparently not a banking proposition given the bank’s lending guidelines.
Albion would have seen, in the course of the compilation of his first LOCA, that Cannon had inflated the market value of the strawberry farm. Bank security schedules for the strawberry farm accessible to Albion highlighted that Cannon had increased the market value from $260,000 to $575,000 in the space of just over four months.
Senior Lending Manager Board’s response to Albion’s first LOCA for $915,000 was that the incorporation of takeover of Esanda’s debt on Joy Somerset’s units of $340,000 “was not attractive”. Board also sought Albion’s explanation on many issues. However, “we are committed to advancing $300,000.00”, so the implicit direction is to resubmit at the lowest level. Albion was instructed to proceed, and his second LOCA for $575,000.00 was quickly approved.
Albion proceeded as instructed with the cash flow budget for 1 March 1985 to 28 February 1986 recording gross income under the heading of strawberries at $640,000 supported by ancillary strawberry farm gross income of $534,000. As noted, these figures are totally absurd.
Why did Albion submit his two LOCAs when he knew that they did not represent a banking proposition in any shape or form? The only reasonable inference, knowing NAB procedures, is that Albion proceeded down this line of action because he was instructed to do so by Arkell. Albion later confirmed this to Salmon in early 1988.
Joy Somerset had no idea that Albion had included her proposed eight strata title units as part of the bank’s securities, as this was never put to her in any preliminary discussions. Her first indication that a second mortgage over the units was to be part of the deal was when she and her husband received the bank’s Letter of Offer dated 11th March 1985 which recorded terms and conditions of approval of Albion’s LOCA for $575,000.
On receiving this notification, the Somersets called on Albion and voiced their objection. Joy Somerset then reluctantly agreed to give the bank a mortgage over six units. Note that the NAB did not discover any Customer Interview Records or Diary Notes raised by Albion, despite the fact it was his usual practice to do so.
It is Salmon’s opinion that the formal position in the bank’s file held on behalf of the Somerset Group regarding bank security was that Joy Somerset had agreed to give a second mortgage over all eight units. This inference is reinforced by discovered internal memorandums and file notes between Branches and Administration which record that Joy Somerset had agreed to give the bank a second registered mortgage over all units. An Administration file note, 10/12/85, records: “These people [the Somersets] are not playing the ball by refusing to sign mortgages over two units; it is obvious the strawberry farm is a financial disaster; so we can now go in boots and all.”
Arkell states in a Bad & Doubtful Debt Report for submission to Head Office, 16 December 1985, that the Somersets reneged in not giving the bank security over eight units. It appears that there is an ongoing need for Arkell to misrepresent events so he can conceal the conspiracy.
Chapter 5 On the Road to Litigation
The payout of the residual debt to Cardell of $125,000 took place with the settlement on 15 March 1985 and settlement for Glenhaven took place about a week later. At this time, Joy Somerset decided to make four and three payments to Instalment Loans (a) and (b) respectively. These monies were allocated from the couple’s private reserves.
As each week passed in April 1985, Joy Somerset formed the view that she and her husband had been the victims of deceit and fraudulent misrepresentation by strawberry farm vendor Cardell. Joy also believed that the NAB manager must be implicated in some way. Cardell had advised Ned to go and see Cannon who would confirm that he had a ‘good business’ to sell.
During the last week of April, Joy discovered that Cannon had dishonoured cheques drawn on their working operating account. An attempt was made to contact him immediately. However he was very elusive and Joy was forced to converse with Manager's Clerk Edward Greaves, which proved unsatisfactory.
As noted above, in early May 1985, Cardell's son, Jeffrey Robert Junior, called at the Somersets' unit residence and informed them that they had been conned by his father, claiming:
• His father started with a $50,000 overdraft with the National Australia Bank in 1981.
• When they (the Somersets) purchased the strawberry farm, the overdraft was then standing at $240,000.
• The NAB was going to sell them up.
• His father had never put monies aside to dodge tax; all funds went into the bank to pay off the debt.
The whole scam was now in the open. Joy's concerns had been realised.
The next day, Ned Somerset made an urgent appointment for them to see Cannon. The meeting became very heated and Cannon eventually admitted that he had intended to foreclose on Cardell if he didn't sell the strawberry farm. Joy then pointed out to Cannon that the income derived from the strawberry farm to date was nothing like the information they were given by Cardell and subsequently ‘confirmed’ by the bank.
According to the Somersets, it all added up to an enormous fraud which he (Cannon) was cognisant of and he had permitted his employer, the NAB, to be a participant in that fraud.
Joy pointed out to Cannon that they had been placed in a disastrous situation where they could lose their life savings. They had mortgaged all their assets and relied upon the integrity of National Bank employees. Joy said to Cannon, "how come you let us in, a clean skin client, we put in all our assets on your fraudulent misrepresentation?” Cannon's response was "I inherited him as a client”. Cannon further stated to the effect that ‘his predecessor was always chasing him [Cardell], and I was left to put the brakes on him now’.
These latter statements of Cannon are inconsistent with the evidence. Cannon had permitted Cardell's strawberry farm debt to increase from $180,000 to $240,000 in the space of eight months. Moreover Cardell stated in Trial evidence in the Queensland Supreme Court (Kabwand v Cardell, below) that he called upon Cannon usually every time he deposited monies with the bank and discussed his position on a week to week basis. Cardell goes on to say, "I would have called on him 60 times, and we were good friends".
Joy demanded to immediately see a more senior administrative employee of the bank, but Cannon would not accede to Joy's request. Cannon always responded that he was in charge of the file and that a meeting of this nature would need to have his agreement, and he was not giving it. This situation proceeded into 1986 and, in her last discussion with Cannon, Joy informed Cannon that she would make her own arrangements and endeavour to contact a senior employee of the bank's administration herself.
Joy eventually contacted NAB Administration and was put through to J. B. Tilbrook, General Manager Northern & Rural Zone, who undertook to arrange a meeting. Tilbrook instructed Joy to contact her Toowoomba solicitor, John Davies, who should in turn contact Doug Spence of Thynne & Macartney, the bank's solicitors. The meeting was to take place on Friday 24 August 1986 at National Australia Bank building, cnr Adelaide & Creek streets, Brisbane at 11 am. Transport for the meeting was arranged by the
Somersets' solicitor, John Davies, and they motored down from Toowoomba with the Somersets as passengers in Davies' vehicle.
In attendance for the bank was Tilbrook, Noel Board, Brisbane-based Senior Lending Manager, Neville A. Clark, Queensland Manager Legal (Clark had no legal qualifications), and Douglas Spence, senior partner with Thynne & Macartney, acting for the NAB.
The meeting lasted approximately two hours with Joy Somerset ventilating her and her husband's predicament in detail and emphasising that, in her and her husband's opinion, bank manager Cannon was certainly implicated by degree. Spence made no attempt to participate in any dialogue and made copious notes throughout the meeting. The meeting finalised with Tilbrook advising the Somersets that they would be in touch with Davies in due course. There was no subsequent response.
The next few months saw Ned & Joy's financial position progressively deteriorate. This was despite the fact that they were working long hours and seeking professional assistance from the Department of Primary Industry. Gunnadoo was not generating anywhere near the profits promised.
At the instigation of separate legal action against Cardell, Joy contacted Cannon's secretary by telephone and asked her to ensure that all diary records were retained. It was later claimed by the bank that the bank's internal auditors had destroyed these documents.
In September 1985, the Toowoomba NAB branch forwarded to their State Securities Department the surveyor's plan for strata title consent. However the branch made no attempt to obtain security on the six individual units to which Joy had reluctantly agreed.
In this Internal Memorandum, the branch recorded the bank balances/limits of all accounts in the Somerset Group. These writings indicated that all instalment loans and the Overdraft In Reduction Account were irregular, with the latter from the 31st March 1985.
It would be obvious to any NAB employee of managerial status that the branch had been concealing the state of irregularity from the bank's administration at State managerial level. It eventually became known through Trial cross examination of Senior Lending Manager Noel Board that, during the past five months, he had called for Level 3 (i.e. State manager control) Customers' Liability Irregular Returns, over which he presided, and none had been received. Arkell is implicated here, as it was part of his duties to check the branch ‘watch list’, which would have highlighted that the Somerset irregular accounts had not been forwarded to Brisbane.
In NAB protocol, Cannon’s omission to raise these Irregular Returns would have been viewed very seriously. However there was no admonishment record on the Somerset file in this regard, and Cannon’s personnel file was not made available in discovery. It can be inferred that the State Manager of Queensland decided that Arkell and Cannon merited protection. The Somersets were to be thrown into financial oblivion and their group of companies to be struck off the company register.
Belatedly during October 1985, Cannon was forced to respond to an administration internal memorandum with respect to the state of irregularity of the Somerset Group accounts and to organise a re-inspection of bank securities – in particular for Gunnadoo.
In his Bad & Doubtful Debt Return submitted to Administration on 16 December 1985, Cannon placed responsibility for the financial disaster solely on the Somersets. He claimed that they were totally incompetent, allied with lack of previous experience. He claimed that they were devious and held back income from strawberry sales by not depositing same to the business account.
Cannon refrained from admitting to his State Manager that, as far as he was concerned, the bank's situation was that cash flow was irrelevant – the bank was lending against assets. Cannon stated in his affidavit, filed for G65 Trial purposes, "part of the advance is based on asset backing". The question of asset backing was put to Cannon in cross examination at the Trial by Somerset counsel and he responded, "they were selling items specifically to pay out the debt, capital assets, which my regional Manager granted to them, yes".
Cannon was required to re-inspect Gunnadoo, which he did on 20 November 1985 and he recorded a Market Value at $350,000, with a Bank Value (at 80%) of $280,000. In the space of twenty two months, Market Values of Gunnadoo have been altered as follows:
January 1984 $210,000
September 1984 $260,000
November 1984 $475,000
February 1985 $575,000
November 1985 $350,000
Cannon's explanation for the dramatic reduction in just nine months during 1985 was, "the severe recession of rural values in the area".
Salmon undertook considerable research to check the validity of Cannon’s ‘recession’ statement, and discovered that Cannon’s statement was baseless. Salmon contacted three experienced professional valuers with respect to valuations of rural property surrounding Toowoomba with emphasis on 1984-86, coupled with examination of relevant Annual Reports of the Department of the Valuer General. Cannon’s statement re ‘recession’ was a complete furphy.
Cannon’s manipulation of the market value of Gunnadoo evidences the fraud within the banking structure. This is confirmed by senior Lending manager, Board, in his internal Memorandum to the branch dated 11th December 1985 when he says, “Position is quite hopeless". Indeed it was. The Somersets had abandoned Gunnadoo that month. What a disastrous venture.
By notices dated 20 December 1985, the NAB made demands upon the Somersets and Kabwand Pty Ltd in respect of their indebtedness under the loan agreements, guarantees and mortgages.
Aggregate debt in the Somerset Group account at the NAB then exceeded $63,000. Combined with the original Gunnadoo/Glenhaven loan of $575,000, aggregated indebtedness summed to $638,000. The bank was applying penalty interest at 20% to this debt. A forced sale of Glenhaven and Gunnadoo would nowhere cover the aggregate bank indebtedness.
The NAB eventually sold Gunnadoo as mortgagees in possession for $175,000 on 11 July 1988. A subsequent title search by Salmon revealed that the immediate owner of this property set about sub-dividing same into some 25 allotments. Company searches of these allotments revealed that a related party of a later member of the Somersets’ legal team was the owner or had an interest in some of these allotments.
The ‘hopeless’ situation, as raised by Senior lending manager Board, required Board to instruct the branch to submit a Bad and Doubtful Debt Report to the State Manager. This was done and signed off by Cannon on 16 December 1985. In his Bad & Doubtful Debt Report, Cannon advised his superiors that, despite the depressed state of the market, securities were quite saleable. Yes, at a giveaway price. How could Cannon and his superior Arkell survive this bank fiasco without admonishment?
Cannon also states: “Considerable time and money was poured into the hydroponic strawberry growing which failed miserably". This claim is transparently false. The hydroponic strawberries were never produced, as the shed was never completed. Cannon never mentioned the disastrous aspect of actual strawberry sales compared to the glowing cash flow forecasts. Cannon concealed how he had extricated himself from his Cardell mire with the help of regional manager Arkell.
The permeating factor of Cannon's misrepresentations can be found in the comments of the file note raised (10 December 1985) by a Senior Credit Analyst who informs his State Manager, "we can now go in boots and all". It will be seen what drastic events bank victims can expect.
In an attempt to cover his own fault lines, there is a need for Cannon to explain that the Branch overlooked to take individual security of Mrs Somerset's eight units (in practice, six at most).
Mrs Somerset only became aware that the bank required security over her eight unit complex after the bank had approved Albion’s LOCA for $575,000. When the time came for her to execute the individual mortgages over the eight units, she eventually executed mortgages over five units because one had been sold with the first mortgagee taking all sale proceeds.
All documentation from Albion’s loan application onwards records eight units, but that is a deception. Cannon blames the security clerk at the branch for this ‘oversight’ (Bad & Doubtful Debt Return, 16 December 1985). State Administration determined that the Security Clerk should receive a letter of admonishment in this regard. No such letter was obtained in discovery – it might never have been raised.
During this period, it was not a common practice for a bank to be asked to consent to the strata titling of its security. The security clerk would have been under superior supervision at the Branch – he should have been the last employee to be admonished. Cannon was Senior Branch Manager at Ruthven Street Toowoomba where staff members numbered between 25 and 30. There would have been at least five staff members who were more senior to the security clerk.
State Administration notation on Cannon's Bad & Doubtful Return submission was, "As soon as reserves have been set, a report is to be sent to Credit Bureau Head Office as market value of security involved is in excess of $200,000”. The initial response from the Credit Bureau was that they found the contents ‘confusing’. The opening remark, ill-informed, raised by Queensland Manager Northern & Rural Zone (Tilbrook, second in seniority in Queensland) was, “They [Mr & Mrs Somerset] retired to Toowoomba and sought finance from this bank to acquire two properties to farm properties by hydroponics”.
Fraud concealment by the NAB at State managerial level is thus in place and has apparently been done to protect two senior employees of the State. Glenhaven was the first and desired property to be purchased by the Somersets (seen as a hobby farm, raising cattle), and the aspect of growing strawberries at that stage was completely foreign to them. In so far as Gunnadoo was concerned, vendor Cardell had brought the hydroponic aspect into play.
The overall bank strategy was being created on the run. Tilbrook also informed Credit Bureau that no income was passing through the account and that the Somersets had walked off Gunnadoo after just over twelve months growing. There was to be no mention at any time of actual strawberry farm turnover as against forward cash flow projections. That would have been incriminating and have given the game away.
Tilbrook made a recommendation for a $60,000 write-off. This figure was contained within the limit of the State Manager for Queensland’s Delegated Lending Authority ($75,000), so that the action would not be registered at a more senior level. A more appropriate write-off would have been at least $100,000, but that would have triggered bells up the hierarchy. This write-off took place shortly before the end of the NAB's financial year on 30 September, 1986. Shortly thereafter, Tilbrook was forced to advise Credit Bureau that a further $200,000 was required in bad debt write off. Just eighteen months after the loan/overdraft for the Somerset group of companies was approved, 45% of the principal was written off.
On 14 January 1986, the NAB gave notice to the Somersets and their companies that unless the default was remedied within 30 days, it would proceed to exercise its power of sale held under the mortgages over Gunnadoo and Glenhaven and 7 strata title units at 17 James Street, Toowoomba. The bank never discovered any document that proved that it held security over any of the Toowoomba units.
The Somersets and their companies took the bank to court and filed an application in the Federal Court of Australia, recited as No G65 of 1986, with the court registry on 17 June 1986. Before analysing the litigation against the NAB it is necessary to summarise the litigation against the vendor of Gunnadoo.
Chapter 6 Taking Cardell to Court
Legal action was commenced against Cardell and his family on behalf of the Somerset group of companies – Kabwand (purchaser of the Gunnadoo property) and EJR Pastoral (purchaser of the Gunnadoo business). The action proceeded to trial upon a claim for damages for deceit, pursuant to Writ No 2643/1985. The Somerset group was successful in its action before Shepherdson J (Kabwand & EJR Pastoral v Cardell & Ors, QSC 86/299, 9 July 1986). Shepherdson J awarded aggregate damages to the Somersets amounting to $170,769.15, being $138,300 plus interest.
The damages awarded were trivial. Behind the low figure was the convention that standards of proof are much stricter for fraud allegation than for personal injury cases.
On the Kabwand claim against the property purchase, the judge granted that the property was overvalued by $30,000 ($280,000 compared to the $310,000 paid). With associated interest on debt, the judge granted the Somersets $49,800 in damages.
On the business purchase, ‘goodwill and strawberry plants’ constituted 80% of the purchase price of $315,000 (see above). There followed a taxing conundrum of the effective value of the strawberry plants in situ. Here were non-experts cogitating on the life cycle of a strawberry plant. Predominant strawberry cultivation occurred near the coast where a two-year turnover of plants was the norm. Toowoomba, however, was cooler, and Cardell’s plants were surviving in late 1984 and producing runners. For how long? The Somersets’ valuer opined that they were worthless. The Cardell’s valuer put them at $1.66 each! (This same valuer later claimed to Salmon that the Somersets had been victims of fraud.) The judge’s acceptance of Cardell’s numbers (115,000) gave them a value of $191,000. Damages ordered on the business purchase thus amounted to a paltry $98,500.
Total damages awarded by Sherpherdson J were thus $148,300, plus interest to date of trial. However, even that sum could not be recovered as Cardell had put himself into bankruptcy.
Of significance from the Shepherdson judgment is that the Somersets are vindicated. Shepherdson declares:
“In respect of conflicts of evidence between the first defendant and Mr Somerset I have generally preferred Mr Somerset’s evidence. …
“I find that the 80% first quality claim was reckless and dishonest. [Cardell had consistently claimed that each plant produced 2 ½ kilograms per year, divided between 2 kg of quality fruit and ½ kg for processing purposes. The realistic divide, given severe weather disruptions, was closer to 50/50.] …
“I find that the representation made to Mr Somerset [extravagant claims regarding productivity and returns made to Ned Somerset at Gunnadoo on 17 September 1984] which I have set out above was false, that it was made knowingly and recklessly careless whether it be true or false. …
“I find also that the representation [17 September again] was made by Mr Cardell Senior to the plaintiffs with the intention of inducing them to purchase Gunna-doo and that this representation above all others was the one representation which induced the Somersets by their companies the two plaintiffs to enter into their respective contracts.”
The Shepherdson judgment transcript provides important additional figures on Cardell’s myriad claims to Ned Somerset regarding Gunnadoo’s profitability. During Ned’s visit to Gunnadoo on 17 September, over lunch, Cardell claimed (noting it on paper) that Gunnadoo grossed $1,056,000 in the previous financial year. Net proceeds, arising from $4 per plant, were claimed to be $460,000 (i.e. $38,300 on average per month). Cardell also gave to Ned a letter from his accountants, Elliotts, ‘documenting’ results for July 1983 to May 1984. It appears that the figures on this letter roughly aligned with the oral claims of Cardell.
One document discovered in the Trial was another Elliott statement, dated 27 July 1984, outlining a cash flow budget for August 1984 – July 1985, from figures supplied by Cardell several months earlier. It is noteworthy that there was a snowstorm in early July, devastating the crop, with the plants apparently not returning to ‘normal’ until late September. This event has not dented the optimism of this Elliott document. The judgment transcript records that this document claims prospective sales at $920,000 plus puree at $172,500, totaling $1,092,540. The projected cash surplus was listed as $468,640 ($39,000 per month).
In the last week of September, Ned accompanied Cardell on the latter’s delivery round and admitted that he was definitely interested in purchasing Gunnadoo. Cardell reiterated the $460,000 net profit figure.
In addition, there was the claim by Cannon that the farm generated ‘$50,000 per month as is’. Another Elliott document given to Ned Somerset immediately after he signed the contract (as above) on 2 November, claimed gross returns of $229,680 per month for a 10-month period.
Bizarrely, Cardell’s claims over several months were inconsistent, save that they had in common fantastic exaggerations. A trading Profit & Loss Account for 1983-84 was discovered for the Trial which showed total sales of $215,797 and net profit of $29,549. These figures differ from those documented by Salmon from Cardell’s bank statements, discovered for the G65 trial. However, the difference may be due to cash informally retained by Cardell, discretionary sums allocated to family wage payments, etc.
However, the dramatic disparity between the figures on the 1983-84 P & L account and the various fantastic claims by Cardell to Ned Somerset were sufficient in themselves for Shepherdson to determine for the Somersets.
It is rather mysterious, being confronted with widely varying claims by Cardell regarding Gunnadoo profitability, that Ned Somerset did not get suspicious and draw a halt to the process. He appears to have been so mesmerised by the extravagant claims, such as ‘$460,000 net’, that rationality and detachment flew out the window – as Shepherdson concluded. Somerset signed a cheque for $500,000 on 31 October 1984 the moment that MacDonald’s leeway for concluding a contract came to an end on that date.
Cardell’s false representations were conveyed to Cannon and repeated by Cannon to the Somersets. Yet Neaves J was to find Cannon’s testimony more credible than the Somersets. The Shepherdson judgment was ignored by the court in the Somersets’ litigation against the NAB.
Chapter 7 Salmon’s Consultancy and the pre-Trial hearing process
Salmon was contracted to assist in the Somerset litigation in October 1987, following contact from solicitors Cranston McEachern. They had clients who considered that they had been defrauded by Salmon’s former employer, the NAB. Litigation was underway in the Federal Court of Australia. They were in possession of the bank’s initial discovered documents and needed expert opinion as to whether it was a full and genuine discovery of documents which would normally come into the bank’s possession.
Documents discovered by the NAB were contained within the lending and general files of Jeffrey R Cardell and the Somerset companies, EP & EJ Somerset, EJR Pastoral Company Pty Ltd and Kabwand Pty Ltd. Salmon readily discerned that there were numerous documents which the NAB should have discovered and had not. He also determined that the Somersets and their companies had definitely been defrauded by the bank and the person at the centre of this problem would have to have been branch manager Colin H Cannon.
During the next four to six week period to December 1987 Cranston McEachern raised considerable correspondence addressed to the bank’s solicitors, Thynne & Macartney, outlining the inadequacy of the bank’s discovery. It was obvious that the bank and its solicitors were not playing ball on the discovery process. Salmon was well versed in the fact that it was no trouble at all for the NAB to breach statutes of this country if it wished to do so.
It should have been a relatively simple exercise for Cannon to make available all relevant Branch documentation following instructions to do so by the NAB’s State Legal Officer. The documents that Cannon should have automatically retrieved for despatch included:
• Customer file contents for both Cardell and the Somerset group of companies. These files contained three sections – permanent section, general section and customer interview record section.
• Customer Liability Irregular Returns. These returns are raised in given sets of circumstances with respect to an irregular account. A state of irregularity exists where the liabilities of a customer exceed the approved limit by $1.00 or more; are current when the approved facility has expired; are $1.00 or more if no facility is approved. The Gunnadoo Enterprises’ banking account had been irregular for 352 days from 1 October 1983 to 27 September 1984, whereas the Somerset Group of accounts indicated that a state of irregularity existed from 31 March 1985 to 30 November 1985, 245 days straight.
• Computer printouts, viz: Reference Reports, Managers’ Watch Lists. The latter report issued weekly with respect to all irregular accounts conduced at the Branch.
• Sundry Branch Reports, viz: Manager/Cannon’s Diary which should record all pre-arranged appointments/meetings, etc; Cannon’s secretary’s appointment diary; Diary binders which incorporate duplicate Customer Interview Records (commonly known as Diary Notes).
The then branch accountant working at 441 Ruthven Street Toowoomba was Victor Caplick, who Salmon knew well because they had been fellow employees at another NAB Branch for just on twelve months. Salmon contacted Caplick to extract any commentary he might know about the Somerset’s strawberry farm fiasco, and Caplick was willing to talk about the subject. Caplick’s opening remark was, “That fiasco – that is the fault of the relieving manager, Pat Albion”. Salmon responded, “Is that right Vic?”, whose response in return was, “Yes, administration knows that he has got the bank into a lot of trouble.”
Albion was single, never married, and his banking career has been spent mostly in a relieving capacity. It appears that the bank had adopted the view that it would make Albion the scapegoat. Albion received an Early Retirement Offer twelve months later in November 1986.
Caplick’s employment position mainly involved internal administration for his sizeable branch; he was not involved in lending. However, he informed Salmon that it was standard Branch practice that all Customer Interview Records (Diary Notes) be prepared in triplicate with the duplicate copy placed in a Diary Binder. Salmon immediately realised the importance of the Diary Binder for discovery purposes and he informed Cranston McEachern of this situation.
In late December or early January 1988, the Somersets’ solicitors handed to Salmon a transcript copy of Federal Court directions hearing held on 14 December 1987, comprising 35 pages. The Somersets’ junior counsel pointed out to His Honour the shortfalls in the bank’s discovery. The bank was represented at the bar table by its instructing solicitor. The bank’s solicitor adopted a total rebuttal approach to everything the junior counsel put forward and he informed His Honour that bank manager Cannon was present in the courtroom.
As soon as Salmon read the transcript, he realised that the bank’s solicitor was deceiving the court with his bar table comments and was treating court rules with contempt. The most blatant lie, amongst several, told by the bank’s solicitor was that, “the Cardell Account (Gunnadoo Enterprises) was never an irregular account”. The bank’s solicitor was perjuring himself with these statements because the bank’s own discovered documents, already discovered under affidavit cover, revealed on more than one occasion that the account was irregular.
Salmon prepared a report for Cranston McEachern which spelt out in detail the documents that still needed to be discovered by the bank. All were identified and how they came into being, pursuant to the bank’s lending manual regulation which had also been discovered by the bank.
Salmon’s report was personally handed to Peter Deed, Senior Partner with Cranston McEachern. Salmon told Deed that he had prepared this report regarding the directions hearing of 14 December 1987. Salmon noted that if his former employer was going to play the game that way (contempt of court rules and unprincipled in due process), then his clients were very unlikely to win their action. Salmon emphasised that they would need to put him in the witness box.
Deed responded by informing Salmon that this would not be possible, as their clients’ litigation was such that it was being funded by legal aid. Raising an affidavit with Salmon as the deponent would have the effect of bringing on a directions hearing by the bank’s solicitors with the aim of seeking an adjournment of the Trial hearing date. This would be granted; however the cost of this trial postponement would be for their clients’ account and there was no funding available to cover this. Salmon was not in a position to comment in this regard.
At this point, Salmon’s consultancy services with respect to bank discovery were finalised, save any follow-up. Deed asked Salmon if he was prepared to continue to act as a consultant on a pro bono basis. Thus Salmon’s involvement was henceforth not limited to issues of bank discovery, and some overarching reports written by Salmon ensued.
Sometime after the Somerset’s appeal process had come to a tragic end with their appeal being dismissed in the High Court in June 1989, Salmon informed the Somersets of the substance of his discussions which he had had with Deed. Joy Somerset noted that what Deed had claimed was incorrect. The cost of the litigation was approximately $800,000. The Somersets had paid their solicitors just on $400,000 with the balance paid by legal aid. Joy Somerset claimed that if she and Ned had been made aware of the substance of the discussion that Salmon had with Peter Deed, she was certain that funding could have been raised through family members.
The bank’s Somerset file revealed highly unusual factors, indicating that the whole file had been tampered with and represented a reconstruction. It had been manufactured to conceal what actually happened. The reconstruction by the NAB created a state of confusion which placed the Somersets in an invidious position.
A significant inclusion of any Line of Credit Application is the ‘General Report’ which is signed off by the branch manager and carries his recommendation. This report would contain all pertinent information with respect to the Somersets’ standing – e.g. the fact that Somersets had no experience in growing strawberries commercially and how they were going to overcome this, their current income tax status, etc.
Cannon’s Line of credit Application dated (2)6 November 1984 records in his own handwriting, “See General Report”. This document was never discovered by the bank despite the fact that it had been asked to do so on more than one occasion.
The bank did not discover any Customer Interview Records raised by Relieving Manager Albion, despite the fact that the Somersets called on Albion on numerous occasions prior to Albion’s two LOCA submissions. Of the CIRs raised with respect to the Somerset companies, those discovered were in a mix of names – Edward Plantaganet Somerset and Elsie Joy Somerset; Kabwand Pty Ltd; EJR Pastoral Company Pty Ltd. In Salmon’s view, Cannon was the only bank employee capable of carrying out the reconstruction which incorporated setting up a deliberate state of confusion for anyone who might be called upon to examine the NAB documents.
At the time Salmon handed his report to Peter Deed with respect to the directions hearing of 14 December 1987, he informed Deed that he should endeavour to obtain opinions from other retired NAB employees of the appropriate standing to confirm Salmon’s dramatic conclusions. Deed agreed and Salmon gave him three names of retired managers who may have been interested in giving an opinion on the status of the documents discovered to date. Salmon informed Deed that he, Deed, would need to contact each one personally. He did so.
Two of the three agreed to act as consultants, labelled Consultants ‘B’ and ‘C’. Salmon became Consultant ‘A’. Consultant ‘B’ was Trevor Best, whose involvement was eventually made known to the Somersets. Salmon and Best then had no knowledge that Consultant ‘C’ existed.
Following conclusion of the Somersets’ later appeal to the High Court, Salmon told the Somersets that all consultants had raised several reports concerning their former employer’s position pursuant to the discovered documents. Consultants ‘B’ and ‘C’ had been provided with Salmon’s reports and both had confirmed the veracity of their contents. However, Joy Somerset informed Salmon that they had never been shown any of the consultants’ reports.
Salmon had pointed out to the Somersets’ solicitors that it seemed strange that relieving manager Albion had not raised any CIRs. Salmon noted that he had previously worked at the same branch as Albion and that they had a friendly, if casual association. Albion was then residing in Toowoomba.
Deed asked Salmon would he be prepared to contact Albion and seek an interview and ascertain whether he would be co-operative for their clients’ cause. Salmon agreed and the meeting was set down for 1 February 1988 at the Shamrock Hotel in Ruthven Street Toowoomba. Salmon was instructed by Deed to stress that “an injustice has been done, you are a witness of the court, you must eventually answer all questions and your reputation is first class”.
Deed was aware from Salmon’s discussions that Albion was held in high regard as far as his banking career was concerned. Deed had instructed his clients’ junior and senior counsel that Albion was to be called to the witness box and be subject to cross examination. Deed was aware that Albion is recorded as swearing to many instances in ‘his’ affidavit and wanted Salmon to warn Albion not to commit perjury as the consequences could be damning.
A friendly discussion between Salmon and Albion took place over lunch (1 February 1988) and one of the critical issues discussed was whether or not he had raised CIRs with the Somersets during the many meetings he had with them. His response was, “Yes I can definitely say it was two or three”. Albion said that in his first attempt to prepare his first LOCA for $915,000 for the Somersets, he had to start from scratch because the Somerset lending file supporting the standing $300,000 LOCA approval was bereft of the vital information which should normally be included in the file. Was the file culled? “Yes it certainly seemed so”, said Albion.
When Salmon asked whether Albion would be a witness for the Somersets, he said that he would contact someone and get back to him. Some days later, Albion telephoned Salmon to advise that he was unable to help as suggested and that he was ‘protected’. A possibility was that the aspect of ‘protection’ may have originated from the bank’s solicitors, Thynne & Macartney. It transpired that this firm had filed a 35 page affidavit which they prepared without input from Albion. Albion was required to travel to Brisbane to sign the affidavit as if it was of his making. Thynne & Macartney then filed the original in the Federal Court, copy to Cranston McEachern. Albion highlighted this fact to Salmon. Salmon raised a diary record of his interview with Albion which was handed to Cranston McEachern.
Counsel for the Somersets decided that the further and better discovery issues should be pursued and it was Salmon who should depose to certain issues by way of affidavit. Consultant ‘B’ would also depose to certain issues at the same time and would also concur in principle with the contents of Salmon’s affidavit.
A special court hearing was brought on following the filing of the two affidavits. The issues were heard before Justice Spender on 11 February 1988, four days before the Trial proper commenced on 15 February 1988. The contents of the two affidavits clearly indicated that the National Australia Bank was treating Federal Court rules with respect to discovery issues with contempt.
His Honour concluded the hearing pointing out to bank counsel that their client’s position was unsatisfactory. The hearing was adjourned until the commencement of the Trial proper on 15 February 1988; meanwhile, the bank was to investigate discovery matters further.
At this special hearing, the NAB’s instructing solicitors filed sworn evidence which contradicted their previous sworn evidence. The deponent to this sworn evidence was a senior employee with the position of Administrative Office Regional Operation. He alleged that there had been a re-organisation of operations to decentralise management, and in that process he had authorised the shredding of certain classes of documents, which included ‘Managers Watch Lists, Customer Liability Returns Limit Enquiry – Summary of Account Activity’. Some five days later, the NAB’s State Security Officer Neville Clarke deposed to an affidavit in which he now admitted discovery of the above documents. The prior claim, under sworn evidence, had been a lie.
During the week prior to trial hearing commencement, Salmon was informed by solicitor Michael Millar, Deed’s subordinate, that he was not to attend the court hearing during the first week when the Somersets gave evidence. He was advised that it would be in order to attend the second week when bank employees would be subject to examination and cross examination. Salmon was asked to take notes with respect to all inaccuracies in bank employees’ evidence.
During the second week of the Trial hearing, Salmon in attendance, the bank’s first witness subject to cross examination was Cannon. Cannon gave evidence over a three day period, resulting in just over 200 pages of transcript. After Salmon read Cannon’s evidence, he concluded that Cannon gave misleading responses to questions on no less than forty-two occasions. Cannon could respond thus because the Somersets’ barrister was not conversant with NAB working procedures. Salmon confirmed that his previous advice to Peter Deed that their clients would lose the action unless Somersets’ counsel called him to the witness box was vindicated.
Cannon’s evidence in cross examination crystallised the fact that the NAB was abusing court principles, and its instructing solicitors were active partners in this process. Salmon was concerned that just on two months had passed since he informed Deed of the existence of the reconstructed Duplicate Running Sheets (Diary Notes) and he had received no resulting advice since. This crucial additional information was not being utilised.
Chapter 8 The Trial
At the G65 trial hearing, the NAB's legal team claimed before the Judge: "We have got some notes and it may speed up things and assist if we can hand up some of them but there is only one copy at the moment." This action by the bank’s legal team has been undertaken on their own volition because there is no recording in the transcript where His Honour asks both parties to raise highlight notes or proceedings to date. It is obvious that the NAB's legal team had been independently engaged in a deceptive process concerning this issue.
‘Notes for Address’ is a fairly comprehensive document. It comprises 18 pages and deals with 39 specific issues. Court convention has it that when such submissions are handed up a copy is always handed to their opponents. But here, senior counsel makes special mention, “… there is only one copy at the moment".
The Somersets' senior counsel, junior counsel and Cranston McEachern personnel all claimed to have never sighted ‘Notes for Address – First Draft’. Why wasn't this document placed with all other Federal Court files relative to the litigation? Legal profession deception reigns supreme.
The Trial commenced on 15th February, 1988 before Justice Neaves, a Federal Court judge normally presiding in NSW. Neaves initially had to deal with the adjourned proceedings of 11th February, relevant to the vital un-finalised issue of further and better discovery of the bank's documents – especially those for the critical period from November 1984 to December 1985.
The Somersets' junior counsel addressed Neaves J to inform him that the respondent bank's counsel had filed further affidavit material re discovery, and that they still considered the bank’s discovery to be deficient. Both parties were of the view that the discovery issue should be resolved before the Trial commenced.
Somersets' counsel then sought approval from Neaves J to cross examine the deponent of the most recently filed affidavit as well as the bank's State Security Officer, N A Clarke, who had previously been subject to cross examination on the 11th. Neaves J refused this request on both accounts.
The most recently filed affidavit by the bank's counsel was clearly duplicitous in content. However an expert witness with a NAB background would be necessary to advise the Somersets’ counsel of the full ramifications of its content.
The discovery issue was concluded with the Somersets' junior counsel informing Neaves, "we are prepared to take this matter on the run, without adjourning the Trial”. This consent proved to be a disastrous decision, a gross error of judgement.
The Somersets' solicitors had raised a series of interrogatories concerning the subject of further and better discovery issues and many of these remained unresolved as at 15 February 1988. Some of the documents were as follows:
* The vital issue of Customers Liability Irregularity Returns (CLIR) for both the J R Cardell account and the Somerset accounts. A state of irregularity existed without question, with the Cardell account being irregular for 352 days straight, and the Somerset Group was 245 days straight. There were three types of CLIR which could be called for – standard, issued by computer download; $20,000 & Over, as called for by Regional operations; and Level 3 CLIR's as called for by the State's Senior Lending Manager.
With respect to the Cardell account, these returns would most definitely have been raised, particularly with respect to the computer printout and the $20,000 and over. Such CLIR documents were discovered in other litigation involving the NAB, notably Nobile v NAB, G22 of 1986 FCA (1987), O’Connor v NAB FCA (1988) and NAB v Walter VSC 36 (2004). The returns would have contained incriminating material concerning account irregularity. Cannon as branch manager should have signed off on these returns.
* Cannon's personal annual diaries for years 1984 and 1985 which should have recorded his appointments.
* Cannon's personal secretary diary which record appointments she made for Cannon.
* The NAB's internal audit reports which most certainly would have assessed the Somerset/Kabwand fiasco. This was a vital document. It was NAB policy to audit all NAB branches once every two years, unless special circumstances apply. When Salmon assumed control of the Palm Beach Queensland Branch in June 1973 he called for a special audit due to the fact that the branch was in a mess, even though the previous audit had only taken place three months previously.
* Sundry other documents, e.g. Cardell's criminal record.
* Customer Interview Records (Diary Notes)
Bank employees scheduled to furnish evidence were bank manager Colin H Cannon, relieving manager Patrick M Albion, manager's clerk Edward M Greaves, regional manager Robert J P Arkell and Noel E Board Senior State Lending Manager.
Salmon’s recollection is that on the second day of his presence in court, the Somersets' solicitors handed to him Diary Binders containing Customer Interview Records (Duplicate Running Sheets), representing copies of all CIRs raised by branch staff at 441 Ruthven Street Toowoomba Branch for 1984 and 1985. The binders comprised just on 1200 pages, including index.
Some months later Salmon was informed by Joy Somerset that two of these Diary Binders were handed over in the stairwell on the first Saturday after the Trial commenced. These diary binders were handed to Joy by Peter Deed who remarked, “they are all OK, Joy”. One binder contained copies of all Customer Interview Records for the months of October 1984 to March 1985, the most critical period. The handover from Peter Deed took place on a Sunday and Joy immediately set about comparing the original CIRs which had already been discovered by the respondent with the Duplicate Running Sheets as contained in the Diary Binder.
Joy discovered that three 'originals' did not agree with the wording as disclosed in the Duplicate Running Sheets. These three CIRs were raised in the names of Gunnadoo Enterprises (31 July 1984), J R Cardell (6 December 1984) and E J R Pastoral Company Pty Ltd (15 September 1985). Salmon later discovered a fourth discrepancy.
It appears that Cannon had trawled through bank records with respect to the customer files of J R Cardell and the Somerset Group and had re-written original CIRs and deleted selected incriminating content relating to the two parties – the customer and the bank.
Three deletions are of substantial relevance regarding ‘incriminating content’.
One, the deletion of 31 July 1984 (referring to an early prospective sucker): “Should this contract come to fruition it will certainly solve Mr Cardell’s problems and ours alone with it.”
Two, the deletion of 6 December 1984. Cannon’s CIR summarises the nature of this meeting:
“Mr. Cardell called and sought our assistance in filling out an application for finance to a company called Commercial Credits (sic) in Sydney. This application is for $4M and whether or not it comes off is a matter for some conjecture. However, if it does, Cardell has certainly hit the jackpot.”
In the top copy discovered for the Trial hearing, the last sentence has been deleted. In passing, this account exposes the hallucinatory mindset of Cardell, a state evidently tolerated by his bank.
Three, the deletion of 13 September 1985. The Somersets called on Cannon to advise that they were attempting to sell both properties. Cannon agreed to assist with costly auctioning expenses. In the top copy, the sub-clause “as they both admit they have been duped” has been deleted.
The evidence points to Cannon having trawled through both the primary CIRs and the duplicate CIRs for the relevant period. However, the discrepancies cited here were evidently overlooked in the reconstruction exercise. Crucially, no CIR was discovered, either primary or duplicate, for the meetings of 30 October and 1 December 1984.
The task of reconstruction probably began sometime after the meeting that John Davies, the Somersets' Toowoomba solicitor, organised at NAB State headquarters in August, 1986. At this meeting, the Somersets disclosed their meeting times with Cannon which took place before they signed the contract to purchase Gunnadoo. Doug Spence, the NAB's instructing solicitor, present at this meeting, would have known that his clients had a slim chance of succeeding in their defence if these meetings were validated in the courtroom. It is reasonable to infer that Cannon has received instruction that he should reconstruct bank records along the lines that he has done.
The work involved in reconstructing these records would have been considerable. It is known that Cannon had altered the dates of at least one document so as to confuse the .Somersets and their solicitors. Once a bank engages in an exercise of this nature the bank's victims have virtually no chance. It would be a forensic nightmare.
In particular, Cannon's LOCA dated 26 November 1984 originally attracted the date of 6 November 1984. Cannon's security schedules which formed part of his LOCA attracted various dates, viz. 6/11/84, 16/11/84 and 26/11 /84. The date of 6/11/84 coincides with Ned and Joy Somerset's interview with Cannon. This interview date was denied by Cannon, and Manager's Clerk Greaves swore pursuant to his affidavit that he, Greaves, interviewed Ned Somerset on that day. This was a lie. The meeting without a doubt took place in Cannon's office. Ned Somerset signed the bank's Statement of Position in Cannon's office with Greaves being present there.
This was the same modus operandi that the NAB had engaged in with Nobile – confirmed to Salmon by the branch accountant at the Zillmere Branch Queensland who saw the reconstruction actually take place over two days.
In Nobile v NAB (1987), Nobile won simply because it was revealed during evidence that the significant Customer Interview Record discovered by the bank represented a reconstruction. Bank manager Bannerman recorded in his CIR that six guarantors called at the bank at the same time to execute the bank's guarantee, whereas there were four separate visits to the bank by the guarantors to execute the guarantee to perfect the bank’s security.
The Somersets purchased the strawberry farm on the basis of claimed cash flow/profitability of the farm, and all their meetings with Cannon revolved around this issue. Cannon always responded, directly or indirectly, that Cardell, as owner/vendor had made considerable profits from the strawberry farm. At no stage did Cannon mention that borrowings would need to be serviced from sale of assets – in particular, strata title units proceeds – as well as strawberry farm cash flow. Yet asset sales de facto were central to Cannon’s application for a $300,000 loan dated 26 November 1984.
In Cannon’s filed affidavit brought into evidence, it was stated that: “I have no doubt that part of the advance is based on asset backing”. The Somersets' counsel was able to extract from Cannon in cross examination that he (for the bank) was lending against the Somersets' asset backing. Cannon's transcript response:
In other words they had assets? – Yes.
So it was contemplated on both sides, that the accommodation which you granted to them to the extent of $300,000 would be paid out of capital assets? – Which my Regional Manager granted to them, yes.
Which you recommended? – That is correct.”
Rather, the clear position at the time was that serviceability of the approved lending facility would be derived from cash flow and not sale of the Somersets’ assets, as outlined at length above.
Further deception can be found when Cannon responds to counsel's question, "what documents do you rely upon with respect to strawberry farm turnover and profitability?” Cannon responded by saying, "bank statements".
This response is a blatant lie. The correct response should have been, "Limit Enquiry – Summary of Account Activity”. This document, a·computer printout, specifically records the turnover of an account on a quarterly basis – March, June, September and December. Moreover, bank lending guidelines required that all LOCAs include the ‘Limit Enquiry’ printout.
The NAB only discovered one such ‘Limit Enquiry – Summary of Account Activity’ printout, dated 4 May 1984. There should have least been four of these computer printouts discovered in the Cardell file alone. These printouts would have given the Somersets' legal team valuable information regarding turnover and strawberry farm profitability and it appears that all but one has been destroyed in the reconstruction exercise.
The Somersets sought an interview with Cannon in May 1985 to inform him that they had been ‘conned’ by his customer, J R Cardell. No CIR was discovered by the NAB regarding this vital interview. It is a matter of logic that any bank manager would ensure that a CIR would be raised which would record all vital details as related by the Somersets.
Two to three months later, the Somersets handed to Cannon during another meeting a copy of Cardell's criminal conviction for ‘fraud’. No CIR was discovered and Cannon could not recall this subject matter when the question was put to him by the Somersets' counsel.
Cannon informed the court that it was not his practice to raise a CIR with respect to customers’ telephone discussions. However, perusal of the Diary Binders Duplicate Running Sheets revealed that he had raised CIRs on no less than 25 occasions from February 1984 to December 1985 with respect to telephone discussions.
It transpired that the Somersets’ senior counsel Robert O’Regan QC had also acted as senior counsel for Nobile in Nobile v NAB in 1986. In this action the NAB discovered ‘Customer Liability Returns – $20,000 and over’, with the contents incriminating the bank manager, showing him to be a liar (as noted above). Thus the Somersets’ senior counsel was fully cognisant of the ramifications of these CIRs. O’Regan brought to Neaves’ notice that none of those documents discovered in Nobile had been discovered by the NAB in the present litigation, despite the fact that both the Cardell and Somerset group of accounts were chronically irregular.
Senior counsel for the NAB, on a point of order, informed His Honour, "They have full discovery". The Somersets’ counsel responded with the statement, "Full discovery, protracted dribs and drabs and after many months”. His Honour responded, "I do not want to get into an argument about that". At that point the vital issue of further and better discovery was lost.
Along with the CIRs, Cannon’s appointment diaries for the years 1984 and 1985 were also not discovered, yet they were vital with respect to the Somersets' claims. Cannon told the court, “I can only act to definite instructions as to what is produced. I am sorry, but that is the way it is. I do not understand unless I am requested to produce certain things."
The evidence of Cannon's Manager's Clerk Edward M Greaves was vital because he had deposed to the fact, by way of filed affidavit, that Mr & Mrs Somerset had called at the branch on 6 November 1984 and had approached the receptionist indicating that they wished to discuss a loan application. The receptionist sought Greaves’ assistance and Greaves carried out an interview discussion with the Somersets at the counter in the banking chamber, as Greaves had no office.
The interview covered background history and the fact that the Somersets now wished to get loans for some hundreds of thousands of dollars to assist in the purchase of a strawberry farm, then owned by a NAB customer, Jeffrey Robert Cardell.
Greaves alleges that Ned Somerset handed him a document titled, “Structure of EP & EJ Somerset" which included a list of assets and liabilities. From this document, Greaves transferred the relevant figures to a bank form described as 'Statement of Position' which he asked Ned Somerset to sign and he did. In his own handwriting Greaves inserted the date of 6/11/84. Under bank account balances, Greaves inserted, ‘Commonwealth Bank $20,000 and ANZ $79,000’.
Greaves claims that, at some stage, he saw Cannon in his office and he called Cannon over and introduced him to the Somersets. Cannon was in a hurry and left after the basic introduction.
The Somersets did have a meeting at the bank on 6 November 1984 – with Cannon himself. Cannon instructed Greaves to prepare the Statement of Position and he, Greaves, was present in Cannon's office when the document was signed on 6 November 1984.
The NAB discovered Statement of Position signed on 6 November 1984 by Ned Somerset now displays the date of 26/11/84. It is obvious to the naked eye that the ‘2’ had been inserted at a later date. In cross examination, Greaves admitted that it was ‘probable’ that the ‘2’ had been inserted sometime later. This tampering is a crucial example of document reconstruction.
Greaves was asked whether he raised a CIR concerning his interview with the Somersets on 6 November 1984. Greaves made the ludicrous response that the Somersets "Structure of EP & EJ Somerset" document was treated as a Diary Note.
Greaves responded to cross examination in no less than 14 instances with the answer, "I cannot recall”. It is apparent that Greaves adopted this style of response to avoid incriminating his employer, which would have occurred with a truthful answer.
Relieving manager Patrick M Albion was cross examined by the Somersets' junior counsel in view of the fact that the Somersets' senior counsel and Albion had both attended the same school in Toowoomba.
It was brought to the attention of the court that Albion had stated in his $915,000 LOCA submission that a document had been handed to the bank by the Somersets on 1 November 1984. The bank, through Cannon, was denying that an interview took place on that day. There is no doubt that what Albion has stated in his LOCA submission is correct. This anomaly confirms once again that Cannon has engaged in a reconstruction of the Somerset Group files.
Albion was the deponent to a substantial affidavit sworn into evidence. The document notes Albion’s standard practice of raising CIRs; however it does not mention that it was branch practice to raise an original typed record of the interview, together with two copies. Bank discovery did not disclose any CIR or copies raised by Albion regarding interviews he held with Mr & Mrs Somerset in preparing his loan application submissions to the bank’s administration.
Albion responded to the question in cross examination as to whether he raised CIRs as a direct result of his interviews with the Somersets by saying: “I could be exact, two”. These records were not discovered.
Albion’s cross examination should have been a disaster for the bank. Counsel for the Somersets made the bold statement, “I am going to explore what's on this file". He then put the question to Albion, “what documents were on the file?” with Albion’s response, "what do you mean by documents?" Somersets' counsel could not satisfactorily respond to Albion’s question because he had not been able to assimilate NAB banking procedure. In reports prepared for the instructing solicitors, Salmon had described all documentation which would be incorporated in a LOCA.
When senior counsel for the bank persistently objected to his learned opponent’s line of questioning, Albion’s cross examination could only be described as a disaster for the Somersets.
Regional manager Arkell was asked to respond to the question in cross examination, “What was the capability and serviceability of the strawberry farm while under the proprietorship of J R Cardell in 1984?” This question was objected to by the bank's senior counsel on the grounds that Arkell was not classified as an expert; he was presumed not competent to answer the question. Neaves J agreed with the bank's counsel.
Bank counsel’s objection, with Neaves’ consent, is ridiculous. Arkell's career had spanned over 36 years (confirmed in evidence) and he had senior branch manager experience before being appointed to his present position. If Arkell was not to be classified as an expert witness, the prospect of having Salmon accepted as an expert witness was slim.
Arkell was asked, as Cannon' s superior, what he would do when he learnt that Cannon had reconstructed CIR's following destruction of the originals. Arkell responded by saying that his subordinate would be severely censured.
Arkell was asked, did he write the addendum at the conclusion of Cannon' s CIR of 8 November 1984, which stated that Cannon must include the St James Street Town Houses as bank security. Arkell replied in the affirmative. However he was not asked the critical question, "were you aware that Cannon did not include the St James Street Town Houses as security in his LOCA dated 26/11/1984?”
Brisbane-based Senior Lending Manager Noel E Board was asked in cross examination, "When did you become aware of the critical state of the Kabwand accounts?" Board responded: "sometime in August or September I think". The correct month was September 1985. A state of irregularity in the Kabwand group of accounts had existed since 1 April 1985.
Board confirmed in evidence that he had called for Level 3 CLI Returns and none had been received. This means that Cannon has concealed the state of irregularity of the Kabwa0nd Group of Accounts for over five months – a serious offence formally liable to severe admonishment.
The above detail highlights that the Somersets would have had no chance in their litigation when the bank was extensively engaged in a reconstruction of bank records, destruction of bank records, withholding crucial bank records and swearing of falsehoods.
The asymmetry in the litigation was highlighted when Cannon was asked to inform the court what justification he had for increasing the Market Value of Gunnadoo from $475,000 to $575,000. Cannon responded: “there were improvements". That claim is a lie.
There were no improvements to bank security. At this juncture, Neaves J made the remark, "a bank can value a property for any amount they like.” This shocking statement was deleted from the transcript.
Chapter 9 Reflections on the Neaves’ Trial judgement
His Honour Justice Neaves handed down his judgement on 29 September, 1988.
Justice Neaves’ Reasons for Judgement covered seventy nine pages of which the first thirty four pages were devoted to the background which led to the Somersets’ predicament. His Honour presented the respondent bank’s version of events on six pages only.
Neaves prefaces his remarks by stating “the two versions of events could not be reconciled”. The substantive claims for damages of the Somersets depended on the fact that bank manager Cannon conducted interviews at his office with Edward P. Somerset on 30 October and 1 November 1984. The import of these interviews resolves around the fact that they took place before Ned and Joy Somerset signed the two contracts – a property contract for $310,000 and a business contract for $315,000 on 2 November, 1984 (though dated 1 November 1984).
Cannon denied in evidence that these two interviews took place and claimed that his first interview with the Somersets did not take place until 8 November 1984. His Honour concurred with Cannon’s claim, despite evidence to the contrary. His Honour also accepted without question the evidence of the bank’s witness, Manager’s Clerk Greaves.
Bank records indicate that the interview that the Somersets had with Cannon on 6 November 1984 has been transformed to become an interview conducted by Greaves with the Somersets at the bank’s enquiry desk on the same day.
Greaves was asked the question “Did you raise a CIR of this important interview?”. Greaves’ response was no. When asked ‘why’, he responded by saying that the Statement of Position of the Somersets confirms that the interview took place. However, this Statement of Position was discovered bearing the date of 26 11 1984. Greaves admitted that the ‘2’ had been inserted later.
Greaves had proffered contradictory claims but he has succeeded in having Justice Neaves believe him. Neaves states in his Reasons for Judgement (p.72 & 73), “Although it is implicit in what I have already said, I should state formally that I accept the evidence of Mr Greaves and Mr Cannon as to what occurred on the 6th November, 1984.” Neaves’ conclusion that an interview was conducted on the foregoing lines defies imagination, and the evidence.
Neaves readily accepts the bank’s evidence unconditionally that the Somersets walk in off the street, enter the NAB branch, inform a junior employee of the bank that they wish to borrow ‘hundreds of thousands of dollars’ to purchase a property. The Somersets then inform this bank employee that they have just bought a strawberry farm known as ‘Gunnadoo’ owned by the bank’s customer, Jeffrey Robert Cardell, for $625,000. The bank employee’s response to this statement is, “I don’t know the customer or the strawberry farm, Gunnadoo”.
Greaves’ sworn evidence with respect to the above is false and ludicrous. Greaves was apparently setting up a camouflage for Cannon so that the latter could distance himself from the meetings that Ned Somerset had with Cannon on 30 October and 1 November 1984, and the meeting that both Ned and Joy Somerset had with Cannon on 6 November.
This means that Cannon and/or others have been able to induce a junior employee of the bank to commit perjury. There is no way that Mr & Mrs Somerset, long experienced in banking relationships, would be discussing issues relating to borrowing hundreds of thousands of dollars with a junior officer of the bank at the front counter in the bank chamber.
Yet bank manager Cannon and manager’s clerk Greaves corroborated one another’s evidence concerning the bank / Somerset contact of 6 November 1984: To reconcile the irreconcilable, His Honour comes to the conclusion that Edward P. Somerset was an habitual liar.
When the bank produced Statement of Position (Exhibit 31) in the discovery process, it bore the date of 26/11/1984 and it was patently obvious to the Somersets that the ‘2’ had been inserted at a later date immediately in front of the 6/11/1984. The ‘2’ was out of alignment with the original figures – 6/11/1984. All the writings on this document were in Greave’s handwriting. As noted, under cross examination Greaves was forced to admit that, on the balance of probability, the Statement of Position signed by Edward P. Somerset originally attracted the date of 6/11/1984.
On Exhibit 31 were the following recorded details,
Bank Account balances …
Commonwealth Bank …… $20000
ANZ …………………….......... $79000
When the two bank account balances were reconciled with cheque butts and bank statements, it was clear that the bank balances were incorrect as at 26/11/84, but correct as at 6/11/84. The tampering with this crucial record was prima facie evidence that someone was reconstructing the bank’s records.
Neaves states in his judgement (pp 72 & 73): “I accept the evidence of Mr Greaves and Mr Cannon as to what occurred on the 6th November, 1984”. An astute judge would have had clear doubt as to the veracity of the two bank witnesses’ evidence, given the above details.
A further critical issue is the fact that no CIR was discovered for Greave’s supposed interview with the Somersets on 6 November 1984. Greave’s evidence that he treated the Statement of Position as a CIR is fanciful. The Duplicate Running Sheets records the fact that Greaves had a telephone conversation with a customer who sought the bank’s permission to draw a cheque for $12.80!
It follows that when Neaves J concluded, “Generally in relation to this day [6 November, 1984], either the Somersets or the two bank officers are lying.” To claim that it is the former is clearly incorrect.
Neaves acknowledges that Cannon has substituted two Diary Notes at a time well after the recorded events took place. These two Diary Notes concerned interviews that took place on 31 July and 6 December 1984. His Honour claims that “Cannon can be justifiably criticised” and further states, “I do not regard his conduct in that regard as affecting his credibility as to the events which this case is concerned”. Neaves’ statement here is astounding. The evidence indicates that Cannon has trawled through bank records of years past and amended those records to enhance the bank’s (and his own) position.
This vital issue came into evidence because the bank was forced to discover the Duplicate Running Sheets (Customer Interview Record) for 1984 and 1985. This late discovery by the bank was undoubtedly forced upon them following the instructions made by Spender J during a directions hearing on 11 February 1988 where the respondent bank was represented by junior counsel. Spender J informed the bank’s counsel that “he should instruct his instructing solicitors, at the highest level in the bank, to take steps that independent people and the solicitor’s staff search to make sure that the bank had carried out its obligatory procedures”. What appears to have happened is that the senior officer responsible for bank discovery, State Legal Officer Neville Clarke, was no longer prepared to take the heat for malpractice regarding discovery on his watch.
The critical issues were that these three bank employees had deposed in detail in their filed affidavits the process involved concerning the raising of Customer Interview Records. In each case they failed to mention the duplicate copy and that it became permanently housed in a binder. After this CIR had been prepared by the typist, it would then have been read by the interviewing employee (in this case Cannon, Albion or Greaves), for correctness and initialled.
These three employees appear to be setting out to deceive the Somersets, and they have deceived the court. These three employees have engaged in a conspiracy to defeat justice.
As soon as members of the Somersets’ legal team came into possession of these Duplicate Running Sheet binders, they should have immediately been able to discern that the court-filed sworn evidence of these three employees was false, intentionally so. The commentary they affirmed to regarding their practice as to raising CIRs was a distinct lie.
The whole question concerning the bank’s discovery process of the Duplicate Running Sheet Binders is exacerbated by the fact that Salmon informed the senior partner in the Somersets’ legal team early in December 1987 that at the 441 Ruthven Street Toowoomba NAB Branch it was standard practice that all CIRs be typed out in triplicate. The original was placed on the customer’s file, the duplicate placed in the diary binder while the third copy was circulated to office staff and eventually destroyed. This practice was only adopted by large branches and offices of the NAB in Queensland.
Thus the Somersets’ instructing solicitors possessed the knowledge for approximately seven weeks that the responding bank was withholding documents from the discovery process and that Cannon, Albion and Greaves had committed perjury pursuant to their sworn affidavits.
Yet His Honour comes to the conclusion on more than one occasion in his judgement that Cannon is a ‘credible’ witness. His Honour makes a brief reference to the fact that “There is no suggestion that the diary note of the 8th November, 1984 [Exhibit DD] was originally different in content.” Salmon informed the Somersets’ solicitors that he was of the strong opinion that this CIR raised by Cannon was a reconstruction and that the original had been destroyed.
Cannon’s opening remarks in his CIR of 8 November 1984 are as follows: “8/11/84 Mr and Mrs Somerset called to discuss their need for assistance to the extent of $300,000 to allow them to purchase a property Glenhaven at auction.”
Salmon pointed out to the Somersets’ solicitors the implications of regional manager Arkell’s addendum, namely that Cannon did not include Joy Somerset’s strata title units as security as directed. There was no follow up despite the fact that the addendum clearly indicated that Arkell was also engaged in the reconstruction of bank records in the names of the applicants.
Neaves also states in his judgment (p 67), “Another significant matter is that no complaint of alleged misleading misconduct on the part of Mr Cannon was made to any officer of the respondent prior to the commencement of this proceeding. Such complaints as were made related to other matters.” His Honour’s conclusions here borders on the perverse.
As soon as the strawberry farms vendor’s son Robert Cardell Junior called on the Somersets at their unit residence on 5 May 1985 to inform them they had been ‘conned’ by his father, Mrs Somerset made an appointment to see Cannon the next day.
After this crucial meeting, not subject to any discovered CIR raised by Cannon, Mrs Somerset made several approaches to Cannon requesting that he make the necessary arrangements for her and her husband to discuss their predicament with an officer in senior management of the bank. Cannon refused on each occasion. Cannon’s response was that he was in charge of the file, and was solely responsible to deal with the situation. This claim was of course false.
Mrs Somerset responded on several occasions in the witness box to confirm that she had attempted to complain about her predicament to senior personnel of the bank, but was prevented in this regard by Cannon. The Somersets also laid out their complaints comprehensively in the 23 August 1986 in Thynne & McCartney’s Brisbane office, as outlined above.
Cannon and associates were all involved in a conspiracy and could be charged with breaches of the Queensland Criminal Code. It transpires that on a complaint by the Somersets to the Queensland Police Service in 1989, the Director of Criminal Prosecution authorised criminal proceedings to be instigated against bank personnel so involved. The Director’s decision to commence criminal proceedings was given sometime during 1991.
However, he rescinded same in December 1991 when the Detective investigating the Somersets’ complaint was instructed that his investigations were to cease, and he was to proceed on annual leave. On his return, the detective was relocated to Gladstone and put in charge of the Juvenile Aid Bureau. The investigating detective indicated that an employee in the office of the Queensland Director of Public Prosecutions Office had rescinded his previous approval for the police to swear out the appropriate search warrants.
This litigation before Neaves should have considered whether Cannon has engaged in false and misleading and deceptive conduct. Mrs Somerset knew that Cannon was culpable when she and her husband complained to Cannon on 6 May 1985, only six weeks after settlement for the purchase of the strawberry farm. She knew immediately following the meeting on 5 May with Robert Cardell Junior that both her and her husband’s assets were in severe jeopardy. These assets had been built up over a period exceeding thirty years through her toil and Mrs Somerset would leave no stone unturned to achieve retribution.
Justice Neaves’ Judgement was handed down on 29 September 1988, a tardy seven months after trial hearing completion. It was an absolute disaster for the Somersets. Neaves decided that Elsie J Somerset was a perennial liar and her husband Edward P Somerset was a liar of lesser extent. This claim meant that the Somersets’ supposed highly damaged credibility would be held against them in any future litigation.
Once Justice Neaves held that the critical appointments that Cannon had with Ned Somerset on 30 October 1984 and 1 November 1984 did not take place, the applicants’ action was lost.
After trial completion, Salmon concluded that His Honour demonstrated clear bias against the Applicants and he deduced that he had exhibited all the hallmarks of a rogue judge.
In May 2015 Salmon attended a funeral where also in attendance was R S O’Regan QC, senior counsel in the G65 Trial hearing for the Somersets and their companies. After general salutation, the conversation proceeded along the following lines: “John do you know what happened to the Somersets?” Salmons’ response: “Yes Rob, they have both passed away in the last twelve months.” Rob’s response, “You know John, I think that we could have won that case [G65] if we had a different judge; he was definitely against us all the way.” Salmon said: “You’re right for sure there, Rob, I think that he was bought off by the bank“. It appears that the Somersets v NAB Trial under Neaves J remained in O’Regan’s mind over almost 30 years, as it did with Salmon’s.
O’Regan had been subject to continual prejudice when cross examining bank witnesses in the G65 Trial. Every time O’Regan put questions to the bank witnesses concerning deceitful conduct, the bank’s senior counsel H G Fryberg QC rose to object and his objection was always upheld. O’Regan’s planned cross examination was severely disrupted and he could not advance his client’s case at all.
O’Regan endeavoured on more than one occasion to inform His Honour that certain documents had not been discovered by the bank, in spite of protracted applications to the court. The bank’s senior counsel claim that “they have full discovery” was a blatant lie and senior counsel for the bank was well aware of that.
Prior to Trial hearing commencement, the bank’s solicitors had filed two affidavits executed three to four weeks apart where the first deposed to the fact that documents sought had been subject to ‘flooding’ and were no longer available (A ‘the dog ate my homework’ scenario). The second affidavit so deposed exhibited the so called ‘flooded’ documents. His Honour’s response to the foregoing exchange was, “I do not want to get into an argument about that.” Anyone present in the courtroom when this exchange took place would have realised that the Somersets and their companies had already lost.
O’Regan was aware of Cannon’s fraudulent manipulation of the Gunnadoo valuations for bank lending purposes – he had been fully briefed in this regard. O’Regan was cross examining Cannon on his increased valuations when the bank’s senior counsel rose on a point of order to address the judge on relevancy. Neaves responded, “A bank can value their securities for any amount they like”. O’Regan was prevented from further cross examination on this issue.
This response by His Honour does not appear in the hearing transcript. This action demonstrates distinct bias, and it has all the hallmarks of a judge who had pre-determined his decision.
His Honour’s elevated position in the legal profession would automatically indicate to the lay observer that he was capable of deducing the implications of O’Regan’s questions with respect to Customers’ Liability Irregular Returns. It is obvious, but the judge was unable to do so. His Honour should have been able to discern the underlying purpose of concealment of this highly important standard process of the bank. After all, in Nobile v NAB (1987), Jackson J had no difficulty understanding the importance of ‘Customer Liability Irregular Returns’.
Justice Neaves, holding many prestigious positions in law in New South Wales and elevated to the bench of the Federal Court of Australia in March 1985, should have been able to discern from the evidence before him that, on balance of probabilities, the Plaintiffs should win the day. Neaves was unable or unwilling to assess the status of the vital evidence.
Three issues clearly indicate that bank witnesses’ evidence was untrue and manufactured so as to set up a confused set of circumstances.
(1) Despite the fact that it was stupid for the Somersets to purchase the strawberry farm, leave alone for $625,000, it is inconceivable that Neaves could conclude that Edward P Somerset did not have an interview discussion with Cannon on either 30 October or 1 November 1984.
(2) Neaves concludes that Bank Manager Cannon informs the Somersets at an interview discussion on 8 November 1984 that they are to bid at auction to the extent of $300,000 to purchase Glenhaven after having just contracted to purchase Gunnadoo, yet he, Cannon, is supposed to have never interviewed the Somersets before. This is ludicrous.
(3) The Duplicate Running Sheets are handed over during the first weekend during the Trial without affidavit cover. This aspect raises no concern in His Honour’s mind as to why they are being discovered at this very late stage. There were just on 1200 pages of Customer Interview records (Diary Notes) belatedly handed over to examine.
As noted, it was realised during the weekend by the Somersets’ solicitors that three originals in previous discovery are different when compared to the record in the Duplicate Running Sheets. Customer Records as far back as two years had evidently been examined and reconstructed where there is discriminating comment unsuitable to the bank’s cause. This disturbing revelation is given curt dismissal by His Honour when he states, “I do not regard his [Cannon’s] conduct in that regard as affecting his credibility as to the events to which this case is concerned.”
A critical question that His Honour should have considered is, what other documents has the bank seen fit to withhold and/or destroy? Several such documents are mentioned in evidence which was brought to His Honour’s notice – in particular, Albion’s Customer Interview Records and the matter of Customers’ Liability Irregular Returns.
Given that all the critical discussions which took place between the Somersets and Cannon generated no covering Customer Interview Record in discovery, the conclusion is self-evident. The respondent bank, through its employees, was involved in a conspiracy to defraud the Somersets and to consummate that conspiracy.
Justice Neaves proved himself to be either highly incompetent or his decision has all the hallmarks of a pre-determined disposition that the National Australia Bank will win the day.
Chapter 10 The Federal Court Full Bench Appeal
Mr and Mrs Somersets’ legal advisors came to the conclusion, after examining Justice Neaves’ Reasons for Judgement, that there were legitimate grounds for appeal and they so recommended. The appeal was heard just over six months after the primary decision was handed down – on 21 April 1989. The junior counsel in the G65 Trial hearing became senior counsel in the Federal Court Full bench appeal, recited as Kabwand Pty Ltd., E.J.R Pastoral Company Pty Ltd., Edward Plantaganet Somerset and Elsie Joy Somerset v National Australia Bank Limited, G355 of 1988.
Documents filed for the appeal consisted of over 4,500 pages. The Appeal Book Binder documents were settled with all page transcripts of proceedings, including directions hearings, included. This was despite the fact that the bank’s instructing solicitors pressed for the exclusion of all transcript pages regarding directions, which of course included all the contentious matters relating to the bank’s discovery. The bank’s solicitors also desired the exclusion of Salmon’s and the other two consultants’ affidavits, where content referred to the controversial issue of client’s discovery. Their intentions were unsuccessful in this regard.
The Appeal hearing was conducted before their Honours Hill, Hartigan and Lockhart, with Lockhart as presiding judge. The principal issues for deliberation turned on questions of fact and credibility of the directors of the Appellant Company, Kabwand Pty Ltd – Mr & Mrs Somerset.
The primary issues in this regard were again Ned Somerset’s alleged appointments with Cannon on 30 October and 1 November 1984, and the appointment with Cannon on 6 November 1984 when both Mr and Mrs Somerset were present. Since the primary judge concluded that the meetings of 30 October and 1 November 1984 did not take place, and the meeting of 6 November 1984 was conducted in a different format than alleged by the Somersets, Cannon and Manager’s Clerk Greaves’ evidence won the day as each corroborated the other. It followed that the representations by Cannon, alleged by the Somersets, could not have been made with respect to the Gunnadoo strawberry farm purchase.
This left the residual situation, the representation that Cannon confirmed in his evidence that the “strawberry farm had an excellent cash flow situation” (Customer Interview Record, 8 November 1984, probably reconstructed) and that this representation was in the context of the Somersets’ purchase of the original property of interest, Glenhaven.
Counsel for the Somersets then sought to make four amendments to their clients’ Statement of Claim, but this was refused on the casting vote of the presiding judge. The successful rebuttal argument mounted by counsel for the bank was that their learned friends were now alleging that it was a fraud case. If that had been the situation, they would have run their clients’ action along completely different lines. The bench considered it to be unfair to give a benefit of this nature to the Appellants, indicating that the Respondent bank could not be compensated for costs or otherwise and would be victim of injury.
Senior Counsel for Kabwand spent considerable time in address regarding the inadequacy of the bank’s discovery which incorporated non-discovery of documents as well as Cannon’s admittance that he destroyed two of his original Customer Interview Records. Time was also expended on the two crucial issues regarding confidentiality/disclosure and inducement.
Neaves had claimed that any information that passed between Gunnadoo vendor Cardell and bank officer Cannon deserved a confidentiality status. Yet Cardell had initiated the proposed sale to the Somersets and had brought the Somersets to Cannon. The Somersets were then presented with false figures regarding Gunnadoo returns, not least at the meetings of 30 October and 1 November at which Cannon’s inducement to purchase Gunnadoo took place. Neaves held that these two meetings did not take place, implicitly denying the possibility of inducement. The Appeal Court upheld Neaves both with respect to the principle of confidentiality (no duty of disclosure) and the absence of inducement.
Neaves realised and acknowledged that at least some of Cannon’s discovered Customer Interview Records were fraudulent reconstructions. Yet Neaves considered that Cannon’s action in this regard did not affect Cannon’s credibility. The Appeal Court accepted this seeming lack of logic as well.
The Appeal Court hearing also proved a disaster for the Somersets. Neaves’ non-rational acceptance of the appropriateness of non-disclosure to the Somersets, his denial that meetings took place in which inducement on false information occurred, and his overlooking of the significance of reconstructed records all point to an obliteration of the evidence that points ineluctably to a fraud taking place against the hapless Somersets. The Appeal Court accepted Neaves’ ‘reasoning’ on all these vital matters.
All arguments went against the Somersets and their Honours also saw fit to include in their judgement a reiteration of Neaves’ denial that the Somersets had never made a complaint to a bank officer concerning the misleading conduct of Cannon. As for Neaves, this was a transparently erroneous inference.
No mention was made in their judgment concerning the serious shortfalls in the bank’s discovery process, vital to the Somersets’ case. Court rules pursuant to the discovery process were being treated with contempt by the bank and their legal team. The Somersets’ legal team should have pursued this matter to the ultimate resolve. The team had the reports from the three expert witnesses to assist them in the discovery process, but they failed to use the experts’ knowledge.
As was expected, the primary judge’s strong commentary on the Somersets’ credibility, Mrs Somerset in particular, was not questioned by their Honours in the Appeal Court.
As a result, the bank, as cross claimants, was entitled to recover possession of Gunnadoo and Glenhaven pursuant to mortgages executed 14 March 1985 and the Appeal was dismissed.
High Court Appeal
Through counsel, the Somersets then filed an Application for special leave to appeal to the High Court, recited as No B12 of 1989. The hearing was held in Brisbane on 30 June 1989. The transcript of proceedings totalled nine pages.
Attention was given to “the Strawberry farm has an excellent cash flow situation” and the fact that it was well known to Cannon at the time of making that statement that vendor Cardell’s indebtedness had been constantly increasing.
The aspect of inducement and confidentiality were raised. Another aspect raised was the claim that the monies advanced ($575,000 drawn down pursuant to Loan Agreements) were unenforceable due to the fact that the bank could vary the base interest rate applying on a day to day basis (the base rate had been increased from 13-14% to over 16%) – they could be so charged at will. The higher interest bill charged on the debt constituted another nail in the coffin.
The Somersets and their companies’ Application was summarily dismissed, with costs.
Chapter 11 Reflections on the legal profession in the Somersets’ litigation
Salmon’s consultancy on the Kabwand/Somerset case commenced in 1987. His initial task was to compile a report which was to list all bank documents which he considered had not been discovered and should have been discovered by his former employer.
It was sometime during this period of examining the documents that he was informed by the solicitors that their clients were taking action against the National Australia Bank because the bank had breached Section 52 of the 1974 Trade Practices Act, i.e. the bank had engaged in false, misleading and deceptive conduct against its clients. At the time, Salmon was unaware of the distinction between 'false and misleading conduct' under s52 and ‘fraud.
Salmon was requested to participate in two pre-trial conferences by the Somersets’ solicitors prior to Trial hearing commencement where junior counsel for the Somersets Michael White was present. Salmon had previously pointed out on several occasions that in his opinion their clients were the victims of a mammoth fraud.
Salmon early informed the Somersets’ solicitors that bank manager Cannon's manipulation of the market value of the Gunnadoo strawberry farm for bank lending purposes not only breached the stated practice of valuing bank securities pursuant to the bank's lending manual, but that it was clearly fraudulent. Salmon pointed out that Cannon's actions in this specific regard, allied with other factors, strongly supported their client's version of events, i.e. that Ned Somerset's appointments with Cannon on 30 October and 1 November 1984 did take place.
Salmon’s inference of fraud was brought to the knowledge on two or three occasions to the attention of White and his response always was 'our pleadings will cover this’. White also determined that the bank would be pursued for misleading conduct rather than for fraud. It was subsequently revealed by the response of their Honours in the Somersets’ appeal before the Full Court that White's determination was misconceived.
Salmon at the time concluded that the Somersets’ own solicitors had failed to advance the Somersets’ case assertively, given the evidence overwhelmingly in the Somersets’ favour. These instances deserve brief recapitulation.
First, Salmon’s insistence that he had to be put in the witness box as expert witness on the nature of bank documentation was ignored.
Second, none of Salmon’s reports were ever furnished to the Somersets.
Third, Salmon informed the Somersets' solicitors that copies of Customer Interview Records were maintained in a diary binder. Salmon stressed the importance of these documents, given the numerous discrepancies in early bank discovered documentation regarding the Somersets’ meeting with Cannon, Albion and Greaves. The solicitors took no formal action to have these documents discovered. They were eventually handed over due to court pressure (Spender J), in spite of the Somersets’ solicitors’ inaction.
These latter documents disclose indubitably that select Diary Notes raised on behalf of both strawberry farm vendor Cardell and the Somersets had been destroyed or withheld or altered prior to bank discovery.
Fourth, information gleaned during Salmon's meeting with relieving manager Albion, prior to trial commencement, was not fully utilised by the solicitors. This inaction was to have disastrous consequences for the Somersets in later bankruptcy proceedings.
Fifth, at the 2 November 1984 settlement for the strawberry farm, the Somersets' Toowoomba-based solicitor ignored Joy Somerset's specific request to insist that the vendor and/or his legal representatives produce the relative title deed for the strawberry farm for sighting. The title deed would have recorded two encumbrances – the first being a registered mortgage to the National Savings Bank Limited and the second a registered mortgage to the National Australia Bank Limited. This information was revealed in bank discovered documents, specifically known as Schedule of Securities. If this vital information had been disclosed, exposing deception to date, the purchase of the strawberry farm would have been immediately truncated.
The Somersets wished to bring into evidence at the Trial the August 1985 Brisbane meeting regarding their complaint of misrepresentation by the bank. Cranston McEachern’s Peter Deed responded by saying that evidence of this nature could only be introduced if it was corroborated by their Toowoomba solicitor. Their Toowoomba solicitor subsequently claimed to not remembering travelling to Brisbane with his clients or attending a meeting at NAB State headquarters with senior bank personnel, including the State Manager for country branches in Queensland. The Toowoomba solicitor could not locate any diary record of such a meeting.
When Salmon brought up the issue of timely complaint of misrepresentation by bank officers Cannon, Albion and Greaves shortly after the High Court had handed down its decision, Joy Somerset informed him what had taken place as outlined above. Salmon was flabbergasted.
Salmon instructed Joy Somerset to seek an appointment with her Toowoomba solicitor John Davies and ask him once again to re-check his records concerning the appointment of 23 August 1986. Joy did and Davies ordered a search of his diary records.
Davies’s employee was successful in locating a page in his diary marked “ORIGINAL 18” with the script appearing on the first ten lines in the hand of an employee which indicated that a meeting had been arranged for 11am with Doug Spence’s name mentioned for Friday. On the next eight lines, the script is in Davies’ own hand, “Doug Spence @ 11am 22nd floor Nat. Bank. Build John Tilbrook Nev Clarke.” In a side box, also in Davies’ hand, appears, “255 Adelaide and Creek [Streets]”.
Readers can draw their own conclusions as to the veracity of the Somersets’ Toowoomba solicitor’s memory failure. In early 1986 this solicitor was of the view that his clients should instigate legal action against both vendor Cardell and the NAB and sought an opinion from the highly regarded Queensland QC, Tony Fitzgerald. Contents of this opinion confirmed the solicitor’s thoughts that joint legal action against Cardell and the NAB should be instigated by his clients. It was mutually agreed between the parties that the brief should be transferred to his Brisbane town agents, the more experienced Cranston McEachern. This was done and legal proceedings commenced in the Federal Court of Australia on 17 June 1986.
The Somersets' Toowoomba solicitor had a professional obligation to compile a detailed report of the meeting at NAB headquarters in Brisbane on 23 August 1986 which he attended and to forward a copy of same under advice to Cranston McEachern.
In the second and final bankruptcy hearing conducted in the Federal Court on 13 November 1991, Salmon had filed affidavits to the effect that the Somersets should not be made bankrupt because they were victims of fraud. However, Salmon’s evidence was determined as not new – it had been available for the Trial and Appeal hearings, but most left unused by the Somersets’ solicitors. Spender thus declared the Somersets’ bankrupt. As an aside, he offered the opinion that the Somersets should sue their instructing solicitors for the state they found themselves in.
At this hearing, the Somersets were represented by Queensland Legal Aid barrister, Mike Battle. Joy Somerset had previously obtained approval from Justice Spender in Directions that she could call Salmon to the witness box and respond to her questioning. Salmon had deposed in affidavit form what he considered to be the salient features of the case and highlighting the fact that the respondents were the victims of his former employer's treacherous conduct. This information was made known to barrister Battle,
However Battle closed off his clients' defence , did not call Salmon to the witness box, thereby ignoring her instructions. The barrister's actions in contravening his clients' instructions breached his sworn oath pursuant to bar association rules.
In the early months of the Somersets’ bankruptcy it was ascertained by Joy Somerset that barrister Mike Battle researched his clients’ case out of the chambers of George Fryberg QC who represented the NAB in the FCA G65 Trial hearing and subsequent appeals. Fryberg also represented the NAB in the initial bankruptcy hearings, together with the defence pursuant to Section 41 sub-section 7of the Bankruptcy Act (pertaining to overturning a bankruptcy judgement on new evidence) which was filed by the Somersets. It was also discovered by Joy Somerset that both Fryberg and Battle were members of the Citizens Military Forces.
Fryberg did not represent the NAB in the final two bankruptcy hearings. For reasons unknown, Thynne & Macartney dispensed with the services of their regular barrister Fryberg QC and replaced him with a junior barrister by name of Appelgarth. Appelgarth had been a barrister member of the Bar Association of Queensland for a very short time; his previous status of employment being the associate of Justice Spender who was the presiding judge. The NAB's solicitors relinquished the services of one of the most senior counsels in Queensland and replaced him with the most junior counsel registered with the Bar Association of Queensland. The inference is that the Somersets had lost their battle to gain justice before they started.
Chapter 12 Kabwand Bankruptcy and Aftermath
Following Justice Spender's Declaration that the Somersets were bankrupt pursuant to his Minutes of Order handed down on 13 November 1991, the Somersets accelerated their aim to seek justice. They both strongly believed that they were not only the victims of bank treachery but that they had also been gazumped by the legal profession.
Joy and Ned Somerset had always subscribed to trust and honest application to the cause all their married life and always respected the many professional people they had come in contact with. As soon as Salmon informed the Somersets how bank manager Cannon had perpetrated the fraud, the Somersets set about contacting anyone in authority who might be able to help them.
A rare individual to take notice of the Somersets’ plight was former Australian Democrat Senator Paul McLean who addressed the Senate in a speech (‘Adjournment: Banking Industry’, 12 November 1990) relating to the behaviour of the NAB and the bank’s Toowoomba branch manager Cannon.
McLean summarised the Somersets’ plight, concluding with the following remarks:
“In both instances the bank has used its privileged position of trust to protect its own financial interests against, and to the detriment of, the interests of its customers. By its fraud, deceit and greed the National Australia Bank has reduced previously wealth customers to penury. To add insult to injury the National Australia Bank is now attempting to force Mr and Mrs Somerset into bankruptcy. It is doing this, well aware that they have no assets left, with the sole intention of further discrediting their previously unblemished reputation and preventing any further legal action against the bank. This type of financial thuggery must be resisted by all fair minded Australians.”
Queensland Liberal Senator Warwick Parer replied to McLean on 11 December, in defense of Cannon. Cannon claimed to Parer that he was ‘in a state of great distress’. The McLean speech had gained coverage in the Toowoomba local media. Parer claimed:
“Senators can imagine the grievous, possibly irreparable, damage done to a person's reputation by this type of publicity.”
Cannon’s letter to the Senate, accepted into Hansard, included the claim:
“I believe that as a result of the Senator's comments my reputation, which has been faultless all my life, has suffered irreparable damage.”
Parer claimed that McLean had abused the precious procedure of Parliamentary Privilege, and called McLean’s own integrity into doubt, and the veracity of McLean’s myriad reportage of other bank victim stories in addition. Parer was here playing representative of the besieged banking sector as a whole.
Parer based his defense of Cannon on the two judgments which opted for Cannon’s (and his co-workers’) view of events while condemning the hapless Somersets as liars. Parer claimed to have delved into the details of the case. McLean subsequently went to the Table Office to inquire whether Parer had come to inspect any of the documents that McLean had tabled to accompany his speech. The Office replied that Parer had not done so.
The incident highlights the significant influence that a corrupt court judgment can have – no-one looks behind the veneer of the myth of judicial non-partisanry.
Following the Bankruptcy Declaration, the Somersets were required to submit an account of their personal and financial affairs to their Bankruptcy Trustee, ITSA. This document disclosed that the bankrupts had served Writ No 69 of 1989 on the National Australia Bank and bank manager Colin Herbert Cannon alleging ‘Breach of Contract and/or Negligence and/or Misrepresentation and/or Negligent Misstatement, Wilful Destruction of Bank Documents, Withholding back documents, Fraudulent Intent, Deceit and Altering Clients, and Bank documents with the intention to deceive.’ This writ was served on the NAB on 6 February 1990.
ITSA showed no inclination to proceed with this action and, following litigation proceedings, this action was reassigned to the Somersets for $10.00. This action eventually lapsed due to the Somersets' impecuniosity.
Joy Somerset impressed on ITSA that their experience was one of extreme public interest. Salmon accompanied the Somersets in their meetings with ITSA. Salmon decided to raise a brief containing all relevant material and forward same to the Australian Government Solicitor for advice. At this time, ITSA was aware that the Queensland Police Service was undertaking on-going investigations concerning the allegations made against NAB personnel.
The then Australian Government solicitor was Richard Heap. He authorised barrister Stephen Elefteriou (ironically, the former ITSA Trustee) to raise a Memorandum of Advice pursuant to the briefing material, dated 26 August 1993. This memorandum recommended that bank manager Cannon, Regional Manager Arkell and Manager’s Clerk Greaves be subject to examination pursuant to Section 81 of the Bankruptcy Act of 1966. The AGS’s estimate of cost of these examinations under oath was anticipated to be $10 – 15,000.
ITSA immediately sought funding from the Inspector General in Bankruptcy but its application was declined. A friendly benefactor who was aware of the Somersets’ predicament made available the sum of $15,000 to carry out the examination. ITSA then required an indemnity to cover costs that may arise exceeding $15,000 and this requirement was not possible to achieve. The pending Section 81 examination then lapsed. It was obvious to the Somersets that ITSA had no desire whatsoever to enter into any proceedings involving the NAB or any of their employees.
Given ITSA's failure to pursue its obligations, and that the Queensland Police Service had instructed its investigating detective to close the Somerset file, further action was terminated.
The Somersets were devastated with the DPP's decision. Joy Somerset arranged a meeting with then DPP Director, N Millar QC. This meeting took place in the Director's office on 23 February 1993, with Salmon in attendance.
Millar gave the Somersets a good hearing which lasted just on 80 minutes. Towards the end of this meeting, Salmon asked the Director, 'Do you consider bank employees to be immune to criminal prosecution as a result of their actions in banking matters'. The Director's response was:
“Where bank fraud is condoned by the bank’s administration, it is impossible to prosecute bank employees unless the bank employee admitted his guilt in the particular transaction and pleads guilty.”
On that note, the meeting terminated, and nothing came of it.
During the next few years, Joy Somerset wrote to many federal politicians, including the then Attorney General, Duncan Kerr, and Shadow Attorney General, Amanda Vanstone. Vanstone, in particular, expressed sympathy for their predicament, but the Government declined to investigate. Joy Somerset also directed letters of complaint to the NAB’s Managing Director Don Argus and to the NAB’s Queensland State Manager D W King – to no avail. The thread of response: ‘we rely on the court’s decision'.
In January 1995, Joy Somerset made contact with the editor of a then Victorian monthly publication, The Strategy. The editor informed Joy Somerset that he was aware of her and her husband’s battle with the NAB. He had read the speech delivered by Senator Paul McLean on 12 November 1990 concerning their predicament. He agreed to publish their story.
Thus the Somersets' involvement with the NAB was given comprehensive coverage in the March 1995 issue of The Strategy. The front page display was titled, “BANKS GUILTY OF FRAUD”. The account covered a three page spread with the sub-headings: ‘Deceit, fraud and conspiracy; Corruption Fraudulent Intent Conspiracy to Deceive Perjury; Never discovered; False words; Blatant fraud and deception and Lies and deceit’.
The outcome of this exposure was absolutely nil, despite the fact that the Somersets and friends handed out copies of The Strategy outside the NAB branch in Toowoomba on many days.
At about the same time as The Strategy exposure, a similar article was published in the Lock Stock and Barrel member newsletter wherein the editor Ron Owen titled his article ‘BANK ROBBERS’. Again no active response eventuated and it became obvious that the NAB was adopting a ‘lie low mode’. In August 1995, a Foreign Currency Borrowers Association newsletter was extensively distributed which re-published the Lock Stock and Barrel story. A similar result eventuated. This fraud and conspiracy to defraud had to be permanently concealed.
During Salmon's discussions with Joy Somerset in 1995, he mentioned that he had previously worked at the same branch as one Alan Diplock, who had since become the national Chief General Manager of the NAB. Salmon agreed that he would write to see whether Diplock could offer advice on how to proceed. Salmon did so and Diplock responded some three months later, noting that his former employer was aware of what he, Salmon, was doing and that he could be subject to future legal action if he persisted.
December 1996 saw the NAB telling the public in The Weekend Australian that the bank's new logo would incorporate the wording, ‘WINNING TOGETHER, WIN, WIN, WIN’. Joy Somerset immediately wrote a letter to W R M Irvine, then NAB Board Chairman, advising him that the logo wording was incorrect and should read, ‘WIN, WIN, WIN at all costs by fair means or foul’. Joy Somerset informed Irvine that they were the victims of bank-perpetrated fraud and deceit. No acknowledgement was forthcoming.
In the late 1980s, Ned and Joy Somerset were forced to apply for the Aged Pension and they remained in a state of impoverishment until their deaths.
Following the Somersets’ discharge from bankruptcy in early 1995 (the conventional time lapse of three years), their former instructing solicitors Cranston McEachern handed over to them 56 cartons of documents relevant to all their litigation. Joy Somerset closely examined this voluminous quantity of documents and in 2003 discovered the document titled, ‘Notes For Address First Draft’, clearly prepared by the NAB’s legal team. The court transcript indicated that this document was handed to Justice Neaves, as noted above. No member of the Somersets’ legal team could recall ever sighting this document. Joy wrote to the Registrar of the Federal Court in Brisbane asking them to search their G65 Trial Hearing document box to ascertain if it contained a copy of the document. Their search proved negative.
Key decisions in Neaves’ judgement parallel claims made in this document. The court process involving ‘Notes For Address’ provided powerful evidence that there was collusion between the NAB’s legal team and Neaves J. The inference of apprehended bias was further confirmed.
From 2000 onwards there was a gradual deterioration in Ned and Joy Somerset’s health. Their daughter admitted both parents into assisted living before they both took up residency in a nursing home in Toowoomba. Ned died in July 2013 and Joy in April 2014, having obtained no redress from any authority for the fraud perpetuated against them.
Chapter 13 Kabwand as legal precedent
The Kabwand v National Australia Bank litigation instigated by Ned and Joy Somerset in the various jurisdictions (FCA Primary, FCA Appeal and High Court of Australia Leave to Appeal, FCA Bankruptcy) retains substantial significance in today’s court proceedings in Australia.
A plethora of reference material to the Kabwand v NAB litigation exists in subsequent litigation. If one inputs the name Kabwand v National Australia Bank into a Google search and/or Austlii, the name will appear on myriad occasions. For those with institutional connections, the authority is (subscriber only) Halsbury's Laws of Australia. Halsbury has raised special articles dealing with the subjects, Unfair Conduct and Misleading Conduct, with respect to the cases where Kabwand v NAB is mentioned as precedent.
Some judgments reference Kabwand as precedent with respect to bank discretion in the variation of interest rates on customer loans. This issue, albeit of legal significance, is a red herring as far as the Somersets are concerned. The Somersets’ counsel insisted on emphasising this irrelevant issue in the plea to the High Court, over the Somersets’ protests.
Of relevance in the citing of Kabwand as precedent are three key issues – duty to disclose, inducement (or reliance), and non pleading of reliance.
For example, the bank’s (non) duty to disclose is cited in Ferrinda v CBA (1991), Winterton Constructions v Hambros (1992), Warner v Elders Rural Finance (1993), CBA v Finding (1998), Rafferty v Madgwicks (2012).
Bank inducement and customer reliance on such inducement is cited in Rollond v Bank of Western Australia (1998), Verandah Café Northbridge v Morgan (2008), Green v AMP (2008), Norcast v Bradken (2013).
Non-pleading of reliance is cited in Perpetual Trustees v OneSteel (2007).
None of the litigating counsel nor judges citing Kabwand in these instances would have the faintest idea what transpired in the Somersets’ experience with the Toowoomba branch of the NAB. No-one amongst those citing Kabwand has sought to source the unavailable Neaves’ Trial judgment, relying solely on the derivative Appeal judgment.
Neaves asserted the right of non-disclosure, he denied inducement and he denied that the Somersets complained of their situation. All three decisions were palpably heinous. Subsequent legal references to the Kabwand ‘precedent’ are thus ill-informed and misplaced, including the reproduction of the ‘well-established’ but unethical precedent that banks have no duty to disclose.
On 16 September 2002 Salmon wrote to the Hon M. E. Black AC, then Chief Justice of the FCA, recommending that all records of the FCA G65 primary trial and the G355 appeal be expunged from the records because the primary trial was flawed from beginning to end and that it had been manipulated through the system. Salmon’s letter was acknowledged by the Deputy Registrar Philip Kellow who advised that it was not possible to accede to Salmon’s recommendation.
Chapter 14 Conclusion
The Somersets were the victims of a series of tragic and contrived set of circumstances. They were fraudulent by design and the intention is clear. Admittedly, the Somersets should have been more astute when considering the purchase of the strawberry farm. The consideration represented a little over half of their net worth. When strawberry farm vendor Cardell insisted on a $500,000 deposit, on the strength of inconsistent extravagant claims, the Somersets should have been alarmed and stepped back. Ned Somerset was seduced by the fraudulent figures, while his more astute wife was then engaged in resolving problems with the building of her strata units.
The Somersets were the victims of a 'sting' operation by Cardell who perfected the original sin. Cannon committed the second sin when he aided his friend Cardell by making false representations to the Somersets (and to superiors) that the strawberry farm was a good business with an excellent cash flow so that the contracts of sale would proceed to settlement – thereby repaying the bridging loan debt to Cardell and avoiding an NAB mortgagee sale.
From 8 November 1984 onwards, Cannon’s had to ensure that the fraudulent inducement of the Somersets was concealed, even if this meant implicating the most senior employees of the NAB’s State Administration. However, once a member of the bank's administration becomes aware that subordinate employees have participated in acts of dishonesty and may have breached statutes of either the State or Federal Criminal Codes, the bank's standard procedure was to proceed to a cover-up mode.
To ensure that the ‘good name’ of the National Australia Bank is protected from adverse publicity, it appears that the bank was able to induce the Queensland Police Commissioner and/or a very senior police officer to authorise discontinuance of a serious complaint against senior employees of the bank in highly unusual circumstances. This gives rise to the fact that bank employees are a protected species where there is no complaint lodged by the bank itself to the police with respect to their own employees’ corrupt conduct.
The National Australia Bank has never resiled from the mentality it displayed in the victimisation of the hapless Somersets. With rare exceptions in court decisions, the bank (and the industry in general) continues to enjoy immunity in the unconscionable and/or fraudulent treatment of its borrowing customers.