The Scales of Justice are Broken in Rural Australia.

I must make a few things absolutely clear. Contracts should be honoured; debts should be paid as and when they fall due. For every willing borrower there has to be a willing lender. Prior to the Global Financial Crisis (GFC), Australia, like most of the developed world was awash with money. The Global Farmer explored the rise and rise in land prices in a previous article, ‘Self Inflicted Injury’.

The crucial difference in the philosophy of lending today compared to when I was a young man , over fifty years ago, is that these days there seems to be a complete lack of understanding with so many bankers that agriculture is a risky business. Their public face, which no doubt senior management and their boards see, is different to what happens in the real world. At least that has been the experience of the subjects of this story and I believe many more.

Many years ago, when agriculture was Australia’s biggest exporter and we had learned some bitter lessons from the evictions of the Great Depression, banks were set up in all states and federally, to cater for the special needs of primary producers, they understood risk.

It was recognised at that time by governments and the banking industry, that when all is said and done, farmers have different banking needs to the businesses on the high street. Put simply farmers, those who make a living from agricultural enterprises, from million acre stations to relatively few acres of horticulture, are different because they have no alternative but to gamble huge amounts of money on the weather and as exporters, put their faith and their produce on fickle international markets, which can be and are manipulated by the strong nations. Most of the world pays subsidies to farmers so they can manage the bad seasons and prices. Australia does not believe in subsidies.

When Australia entered the modern era of bank deregulation, rural banks disappeared and with them a culture of an understanding of agriculture formed by generations of experience in the bank and in government, but there was no room for that thinking any more.

Bob Hawke and Paul Keating are credited with moving Australian banking into what was at that time the modern Thatcher and Reagan theory of economics, which made rural banks and special purpose banks like the Commonwealth Development Bank (CDB) an anachronism in the face of what they believed to be progress.

In March of this year, several years work on behalf of a few dedicated farmers, academics and politicians failed to convince the Senate Economics Legislation Committee of the merits of a bill described as: The bill is a private senators’ bill co-sponsored by Senators John Madigan and Nick Xenophon. It proposes to amend the Reserve Bank Act 1959 to establish an Australian Reconstruction and Development Board (ARDB) of the Reserve Bank of Australia (RBA). The ARDB would have the task of forming and implementing a rural reconstruction and development policy. For the full report here.

If we had a bank similar to that proposed in the ARDB. A bank philosophy that recognised the special needs of farmers – that recognised there is a difference between running a business on the high street and one hundreds of kilometres in the bush that relies on the fickleness of ‘Mother Nature’, there would have been no need for this article.

Pain, distress, trauma.

There can be few among us who have not witnessed the distress and trauma in the eyes, demeanour and behaviour of relations, friends and associates when they are confronted with the awful news that their creditors have appointed receiver managers.

They stumble and fall as they search for a quiet place to go through all the emotions that well up inside of them. Fear, resentment, shame, humiliation, panic, anger, rage, embarrassment and guilt. For far too many, it is more than they can endure and they withdraw from family and friends and the society in which they live.

Some have a breakdown from which they never really recover. Some, unable to cope, take their own lives.

Taking children out of a school in the city and having to explain that it is because there is no money leaves young minds confused, anxious and scarred.

When families are evicted from a farm, men, organised to accompany the receivers, sometimes escorted by the police, turn up to change the locks, photograph the assets and escort the family from their land and home. Often those being evicted can take with them no more than they can jam onto a truck and a ute. I know of one farmer who was made to unpack his car, because it didn’t belong to him, they said!

It’s brutal. It’s barbaric. It demeans us as a society. If animals were turned out on the road to ostensibly starve, then a prosecution from the RSPCA would follow. But farmers and their families are not animals, so they have no protection except from charity. To access charity means traveling to ‘town’ where everybody knows you.

You may think that is dramatic, unnecessarily dramatic – well it isn’t. I know two families, personally, who, following the appointment of receivers and managers by their bank,  had all their access to money, to cash, frozen and then they were evicted. That meant a visit to join the queue at Centre Link in the nearest town, in one case four hours drive away, which for many can be just too much to handle after an eviction – so it’s down the Anglicare and Good Sammys and sometimes Foodbank and then finding somewhere to hide.

One family too far from friends and relatives and too proud to ask for help, camped on the side of the road for several days. Mum had had the foresight to pack a gas ring and a few pans,  a tucker box,  blankets and sleeping bags. They say that night they felt like refugees in their own country.

Farmers and their families have a tangible, umbilical attachment to the land they farm, which is something, perhaps, only farmers understand? In this case I am investigating, the cord stretches back over fifty years to when the land was virgin bush and the axe was sharp.

In the Beginning.

Their first farm was a CP block. In 1959 two brothers and a friend, all from Merriwa in the Hunter, were each allocated a CP block. Together they came to WA with little more than an old vehicle, axes, a tent, youth and boundless energy.

Over fifty years later, one of the brothers, together with his family, owned six farms, all over 1000 hectares each. Like everyone in their district, they were recovering from two disastrous seasons of frost and summer rain.

They admit they were temporarily highly geared, but so were many in their district. After two bad seasons they had taken sensible measures to minimise their exposure to their bank; that meant selling land, so several farms were on the market.

At the time of foreclosure their bank knew they had had farms on the market for months, but the time of year, coupled with two years of poor district harvests had slowed interest in land sales. Again, the bank knew that.

Every year the bank accepted the budgets that the business submitted. The budgets included land valuations. They had good lines of communication with their bank until the branch got a new and somewhat inexperienced manager.

A couple of years before the foreclosure the bank had willingly funded the purchase of another farm, making it six farms in total. They offered more money than was applied for. Such was the bank’s confidence not only in the applicants but also in the district in which they farmed.

The records show that as the district recovered, land sales took place and contrary to the rumours put about by land agents and others with a vested interest in lower land prices, there was little if any discount from previous values. At the same time rumour had it that overseas interests were buying and leasing vast tracts of land in the district. The rumours were right and some high profile deals were done. The receiver managers in this case were in contact with the agents for overseas investors before foreclosure. Why was that I wonder?

We have all seen ‘Mortgagee Sale’ notices in the press and on big signs in paddocks. Few of us have had the experience and the real life energy draining trauma and punishing stress of being on the wrong side of the sign, the side of the mortgagor, it’s the worst feeling in the world.

How many times have we bothered to look behind the sign and find out the reason why? Bad management or bad luck? If we are honest how many times have we thought there might be a bargain or two behind the sign when they sell up? How many times have we been right?

This is a copy of a letter I have sent to the Farm Weekly, the WA arm of the most powerful agricultural press in the country, Fairfax.

There are too many stories about banks and receiver managers; true, false, anecdotal, I don’t know. All I know is I have never heard a good story only bad ones. Often from quite reasonable people, made bitter by their experience.

It’s a long letter and I don’t know if Fairfax will print it in its entirety, in part or not at all. I hope they do print something as I have a feeling there are distressed farming families all over the country who are going through what my friends, call them the Browns, have gone through for nearly three years.

This letter is not about revenge, it is about fair play and decency and a plea for understanding from the banking industry that the final determinants of whether farmers succeed or fail is a mixture of what they can control, their own management and what they cannot control – the weather and prices.

I have made a few changes to the letter I sent to the Farm Weekly. Just tidied up my grammar a little. With my writing there is always room for improvement. My biggest failing is why use two words when twenty will do?

The letter to the press.

Sir,

I am currently researching the fine detail of the circumstances of a family with a major grain growing enterprise consisting of six farms all close together and in some cases adjacent, which were quite unnecessarily put into receivership by a major Australian bank. The action of the bank was brutal and as we shall show, unnecessary.

At first I thought my investigations would result in an article or two on my web site ‘Global Farmer’, now months into my research, I am sure there is a book in it, albeit a small book – it will be my fourth but my first non-fiction. If the book sells all of the proceeds will go to the family at the heart of the story, because they have spent their last borrowed dollar on legal advice.

That advice, which has examined the circumstances of the appointment of a receiver manager in detail, believes there is a strong case against the bank. To take their case to court. The family, the mortgagors, need $250,000, and they have been warned that the bank have bottomless legal pockets.

Justice is the domain of the rich, whether the rich are right or wrong is of little consequence in the real world. Our legal system is adversarial. That means the best at arguing, win. Money rules. That’s Australian justice today.If you want your day in court you need a lot of money.

The banks take all your money off you, so you have nothing to fight with – so they win – no contest.

From personal experience I know there is nothing more demoralising than being told you need to be rich to go to seek the opinion of the court if you believe you have been wronged. I grew up with the notion that everyone could have his or her day in court. That is not true any more. Maybe it never was and I was brought up under the delusion that British Law was available to all? I once believed in Robin Hood too.

The deeper I get into this investigation the more I realise there must be others who have had similar experiences to those I am currently investigating. A thought that is appalling to me.

Some, I cannot and will not claim all, in the banking/receiver manager eviction business, pursue a practice, which is unconscionable, unprincipled, unreasonably, excessive, brutal and unwarranted, even worse many fail to meet their obligations under the law. It reminds me of the Highland Clearances of the 18th century. To make matters worse the fees they charge, as we shall show in future editions and in the book, are excessive, beyond belief.

In the case I am investigating the family have suffered massive trauma and distress, depression and physical illness as a result of the actions of the bank and the receiver managers. Even if they, the family, were in the wrong, which they were not, they should not have been made to suffer in the way they have. Draconian is not too strong a word to describe the behaviour of one of the pillars of Australian banking.

As an example, all of the family’s bank accounts and credit cards were frozen when the receivers were appointed. The family did not have the money to buy even the vital necessities of life, like food. When a consultant wrote to the bank on their behalf asking for the family to be given a living allowance, a banker (and you know what that rhymes with?) said he would consider it.

Arrogance knows no bounds. For some time the banker consciously, deliberately, left the family to suffer the humiliation of being without money.

The bank and or the receiver manager deliberately refused to provide funds for early summer weed spraying. This affected how the farms presented for sale. Did the bank influence their value? We shall see. Eventually the weeds were sprayed and you won’t believe when and with what, all on the recommendation of the receiver manager and paid for by the mortgagor. It’s a wonder the paddocks didn’t glow at night.

I will show, conclusively, that the bank manufactured, concocted, fabricated the need to appoint a receiver manager by reducing their clients overdraft by a massive amount in the middle of harvest and in the full knowledge that their client had for many months had several farms on the market as a sensible measure to reduce their exposure to the bank.

As was intended the bank’s by the bank, their behaviour by reducing the overdraft forced a default. The family was then overwhelmed by what can only be called tsunami of events and the indecent speed of the appointment of the receivers and managers.

To add insult to injury, had the family been able to put a crop in in the year of their default, their consultant has shown they would have easily satisfied their creditors and more than met their obligations to their bank. The bank denied them that chance. We will propose that the bank might have had another plan. Maybe it was coincidence, but foreign investors were stalking the district buying and leasing farms.

Nearly thirty months have elapsed since the receiver managers were appointed. In that time neither the bank nor the receivers have been in contact with the family with regard to the sale of their assets. They know that their farms have been sold but we don’t know for what price. We shall know soon. Rumour has it that one farm was sold for less than half the value the bank accepted at their last budget review. There has been a clearing sale; the receivers have not reported the proceeds of that sale to the previous owners.

I have written to the receivers and managers and so far they have not replied to any of my question regarding their behaviour. It will be interesting to see if they do.

How many who have been unfortunate to go through this traumatic experience know this? It is an extract from the Australian Ombudsman’s publication : ABIO Special Bulletin. Mortgagee Sales. Bulletin number 38 – June 2003. Page 11. Duty to Account, which states: 

(2)  It is clear law that a mortgagee in possession owes a duty to account to the mortgagor.34 Despite this we often receive complaints that a mortgagee has not notified the mortgagor that a property has been sold. It is not uncommon for the mortgagor to receive none or little information about the costs associated with the sale for which the mortgagor has been charged. ABIO regards the provision of this information promptly and in sufficient detail for the mortgagor to identify and understand all costs to be consistent with the law and good industry practice.

What could be clearer? The mortgagors in this case have still not been officially informed by the bank or the receivers of any land sales and the costs of those sales.

Lawyer, Tom Darbyshire from Kott Gunning reveals even more:  (1)  The Corporations Act obliges receivers to keep financial records that “correctly record and explain” transactions they enter into while they are controlling a company. Directors and shareholders of the company have the right to inspect those records. These provisions appear in section 421 of the Act.

And again this from Kott Gunning: Although such receivers are appointed by the lender, the loan contract almost always states that they act as the agent of the borrower. It is an odd sort of agency. Normally agents have to act in the best interests of their principal, but that is definitely not the case with receivers. The borrower pays the receiver’s fees and expenses, but the receiver’s main job is to get in and sell the assets of the borrower so that the money can be repaid to the lender. It is a little like having to engage a tax agent to ensure that you pay as much as possible to the ATO.

Few if any realise today that the receiver manager is actually the agent of and responsible to the mortgagor, even though they were appointed by the mortgagee, in this case the bank. There are also heavy penalties if any assets are sold below ‘market value’. We are going to have some fun.

If there is anybody out there who has experienced what they consider to be unfair or any other euphemism to describe the treatment from their bank and/or receivers and managers, I would like to hear from them.  My email is  roger.rankin.crook@bigpond.com  What I have in mind are additions or vignettes of others experiences that drive home the points in the main story.

Of course everything is in the strictest confidence if required and I will give a written assurance to that effect. If you don’t mind going public, tell me.

Roger Crook.

I have visited the site http://www.bankvictims.com.au so I know we are not on our own.

I have received a reply.

I have now had a letter from the receiver managers. They have refused to answer any of the questions I put to them, that is a shame. I gave them the opportunity to answer some questions which the evicted family, their consultant and I have been unable to answer. They have refused.

They did tell me that I was wrong with some of the information I provided to back up my questions. Why on earth then, would they not put their version of events to set the record straight? Is it a secret society?

They did tell me that they signed off on the case in mid September this year. How extraordinary, if only for the sake of common human decency, neither the bank nor the receiver managers bothered to inform the family affected, the one time mortgagors. The family, have no idea what the receiver manager has achieved. Doesn’t that show that the receiver manager has no regard, no respect, no feelings of common decency towards what were by law, their clients. Just gutless.

If the behaviour of the bank managers involved in this sordid affair is approved by their senior management and by the board of the bank, if it is the policy of the bank to behave in the way that it has in this case, then Australian banking has a problem with morality and decency. This is the new ‘Australian way’.

If the CEO of the bank in question, who we know gets paid many millions of dollars a year, approves of the policies employed in this case, then he/she is a disciple of Shylock, when he said in reply to Portia as he demanded his pound of flesh, ‘Ay, his breast: So says the bond; – doth it not, noble judge? – Nearest his heart: those are the very words.

If the law allows banks and their agents the receivers and managers, to behave in the manner in which they have, taking nearly three years to wind up what was not a complicated business, then they have had their pound of flesh and more – but unlike Shylock, they have, metaphorically, spilled much blood in the process, and like Shylock they should suffer the consequences for pursuing their debtor in the manner in which they have.

One hears stories that the receiver managers always ensure that there is nothing left for the mortgagor at the end of one of these events. We will be able to forensically examine their costs and the returns they managed to achieve. We shall be able to see and publish what the receiver managers paid themselves. We shall be able to see what they did for their money. That is the law that nobody knows about.

It will be interesting to compare the prices they received for the six farms with prices received for other properties sold in the district and there have been other sales. There is little to no evidence that land prices have gone down by any substantial amount. Last year was a good year for the district and this year will be average.

And now for something completely different.

Where should we look for beef markets?

I read the other day that the UK is not producing enough beef. Just a sentence in a daily meat news service, which relates that demand is outstripping supply in spite of supply increasing – this in turn has pushed prices up.

Australia could do worse than watch Europe, because the EU seem to be putting disincentives into high production systems and paying farmers to go ‘green’ by planting or re-planting hedges and increasing areas of grassland. That might mean more beef off grass and less off feedlots.

The effect, over the last fifty years that ‘intensive’ farming, that is pulling out hedges and small areas of woodland, has had on the flora and fauna of not only the UK but also of Europe, has been quite devastating. Again, I read the other day that birds that were common when I was a boy are now either endangered or, for heavens sake, all but extinct. I was a keen birdwatcher (feathered) as a child and young man. There were few birds of the countryside, which I couldn’t name. It’s hard to believe that some may now be endangered or, heaven forbid, extinct.

I heard the other day that in these days of FTAs we should be looking to the EU or even the UK for the next one. I for one would be happier if we were spread around and don’t for instance, build up our herd on the prospect of big exports to China.

Reading the international press it seems to me that China is doing ‘food’ deals with whomever it can, Wales the UK and Ireland to name just three that spring to mind. She, China, has also been searching the world for pig meat and now owns something like 20% of the American production and processing industry through a company (that was) called Smithfield. China, is also doing deals all over the world on pig meat.  Often what the Chinese require are those cuts which are not wanted by others so previously they finished up as either pet food or just waste. Talk about a silk purse from a sows ear.

As far as beef goes we could do worse than follow the example of Argentina and Brazil and that is keep some Bos Taurus blood in all our northern cattle herd. If we do it will mean, as the South Americans have found, that markets in Europe remain open to us. I know I have written it before, but we should take note that South America still provides some of Britain’s top restaurants and hotels with prime beef. Not because it is cheap, but because the prime cuts they produce are what the customer wants.

I am a Nervous Nellie when it comes to committing an industry to one or a couple of customers. We are told the world is short of animal protein. If we are sensible we will breed cattle and maybe sheep, but certainly cattle, that are suitable for a range of markets. Pure Bos Indicus limits our markets.

I get very uncomfortable when there are signs of panic in the northern beef industry when Indonesia coughs. We should be in a position to ignore their shenanigans and simply divert cattle to another market.

China, Indonesia and Viet Nam all have self-sufficiency in beef as a national objective. It’s easy to say they will never do it. It would be prudent, I believe, to keep the doors open to those markets in the Gulf and that region who will never be able to become self sufficient simply because of their climate and shortage of arable land.

Last but not Least.

Can I ask that everyone who reads the article on receiver managers, eviction and senior bank officials behaving badly pass it on to those who may not know about the Global Farmer? I need this article spreading far and wide, to as many people as possible. Anyone who kicks a dog (figuratively)  often finishes up on social media and known to thousands if not millions. I do not seek that kind of fame or notoriety – what I do seek is information and experience from anyone who has been involved foreclosure and eviction, because the story must be told.

Can we change anything? The story of Charlie Phillpott should give us all hope. This was the beginning. Now there is movement on the station, even the CEO of the bank has visited Charlie. The media got on the side of Charlie and things started to happen.

There is a bank account number somewhere on this site. Any help with costs as we embark on this project will be really appreciated.

Regards

Roger