National Australia Bank has admitted to the financial services royal commission that it had “no lawful entitlement” to seize the full sale proceeds of a customer’s home.
Fronting the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry on Thursday (31 May), NAB’s general manager of strategic business services, Ross McNaughton, conceded that the major bank “had no lawful entitlement” when it claimed the full proceeds of business customer Ross Dillon’s home to pay down his business debt, despite initiating denying the allegation.
The commission heard from director of National Music and former NAB business customer Ross Dillon, who, in 2015, was stripped of the sale proceeds of his Goanna Downs family home in Scone, NSW.
Mr Dillon’s home was offered as a security for a business loan from NAB, used to finance National Music, a wholesale business that sells imported musical instruments to domestic retailers.
The commission heard that the business faced financial difficulty during the global financial crisis, which prompted the director to sell his family home to invest $300,000 into the company and move to a smaller home in Melbourne.
However, Mr Dillon’s plans were curtailed when NAB claimed the full sale proceeds of his Goanna Downs property, which it used to pay down his business debt.
NAB general manager of strategic business services Ross McNaughton initially denied that the bank had acted unlawfully in a statement he provided to the commission, but he admitted to a change in stance upon questioning from counsel assisting the commission Michael Hodge.
Mr Hodge asked: “Is it fair to say you now understand that NAB had no lawful entitlement to insist on the full proceeds of Goanna Downs being used to pay down the debts of National Music?”
Mr McNaughton replied: “That’s correct.”
Mr Hodge continued: “And you discovered that in the course of preparing to give evidence?”
In response, Mr McNaughton said: “Yes, I did, because I didn’t have awareness of this prior.”
Mr McNaughton apologised for the conflicting evidence.
Mr Hodge added: “So, the answer you gave a moment ago, which I understood to be that… you had never understood that NAB had a lawful entitlement to insist on all of the proceeds being used. That answer was incorrect?”
Mr McNaughton replied: “Yes, sorry, yes.”
The commission continues.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.