A business owner who banked with NAB was left without money to buy a new house, despite the bank having no legal right to take the funds he had planned to use and instead reduce his business debts.
The owner of musical instrument importer and wholesaler National Music, Ross Dillon, told the royal commission he believed his home was used to secure his business debts with NAB.
The property in the New South Wales Hunter Valley is known as Goanna Downs and included his family home and a horse stud farm.
He told the commission that, when he sold the farm, NAB forced him to put all the available proceeds towards his business debts, leaving him without funds to buy a new home in Melbourne, where he planned to move with his wife to be closer to family.
In a first for the royal commission, the bank's counsel launched a lengthy and at times heated attack on the credibility of a customer's evidence.
NAB's barrister Wendy Harris QC challenged Mr Dillon's recollection of events and his assertion that he was "shocked" when NAB told him it would be taking all the proceeds from the Goanna Downs sale, as he had intended to buy another home.
Ms Harris questioned Mr Dillon over a series of notes made by his NAB banker at the time, Shaun Bassett.
"[The note] correctly reflects, does it not, that you told Mr Bassett that you wanted to move to Melbourne and rent?" asked Ms Harris.
Mr Dillion forcefully denied that was the case.
The attempts to cast doubt on Mr Dillon's version of events were rendered largely fruitless when Mr Bassett took the stand and confirmed parts of Mr Dillon's account.
"I certainly have never communicated what bank's expectations would be upon sale of Goanna Downs," Mr Bassett admitted writing in an email to another NAB banker at the time.
"Ross had told us before that upon sale of the property he intended upon putting $200,000 in funds into National Music but at that time we did not talk about debt reduction.
"Not at any stage have I discussed what the bank will require as debt reduction."
NAB admits 'no lawful entitlement' to Goanna Downs for business debts
When NAB executive Ross McNaughton entered the witness box, counsel assisting the inquiry Michael Hodge QC quickly dismantled assertions that Mr Dillon's business debts were secured by his home.
"Is it your understanding that Goanna Downs secured the borrowings of National Music?" asked Mr Hodge.
"Supporting the guarantee that Mr Dillon had given, yes," said Mr McNaughton.
Under questioning, Mr McNaughton was forced to admit Goanna Downs in fact only secured the personal mortgage Mr Dillon and his wife had on the property.
While the Dillons had provided personal guarantees and indemnities for the National Music business loans and facilities, Goanna Downs did not directly secure those business debts.
"NAB had no lawful entitlement to insist on the full proceeds of Goanna Downs being used to pay down the debts of National Music?" pressed Mr Hodge.
"That's correct," Mr McNaughton conceded.
"And you discovered that in the course of preparing to give evidence?"
"Yes, I did, because I didn't have any awareness of this prior," said Mr McNaughton.
Mr McNaughton later argued that it did not make a difference whether the house was directly or indirectly used as security for the business loans.
NAB defends its conduct despite customer left in the dark
Ross Dillon's evidence that he had been shocked to discover that the bank would insist on taking all the proceeds of the Goanna Downs sale was supported by email exchanges between former NAB banker Shaun Bassett and another bank employee.
The emails showed Mr Bassett telling his colleague he hadn't discussed debt reduction with Mr Dillon and asking how he should inform him of the bank's plan.
"Does that trouble you when you go back and look at the file, that Mr Dillon, your customer, would be surprised to discover that he was going to have to put all of the money in?" asked Mr Hodge
"Yes, I think it — it's certainly not ideal that Mr Dillon was taken by surprise and shocked at that," said Mr McNaughton.
However, the NAB executive maintained that the bank's communications with Mr Dillon were honest and in good faith.This article was first published by https://www.abc.net.au/Author: Business reporters Stephanie Chalmers and Michael Janda