In round four of the banking royal commission, Commissioner Kenneth Hayne heard that Janine and Stephen Harley, a Western Australian couple that ran a sheep farm 230 kilometres south of Perth, had to sell their sheep, farm and home to repay the debts they owed to ANZ.
Case study background
The Harleys had loans with Landmark Financial Services before it was acquired by ANZ in 2010. But by the time of the acquisition, they had experienced five consecutive years of losses.
As such, in 2011, ANZ offered a $2.3 million loan to the Harleys that was set to expire in 10 months, and an overdraft of $250,000 that would expire in nine months, according to senior counsel assisting the commission Rowena Orr. The loans were secured against the couple’s McAlinden property, which the Harley family owned for more than a century.
The commission heard that the couple were sent a default letter on their debt weeks after Mr Harley had suffered a heart attack, and were given an additional six months to pay off their loan or told they would have to vacate their property within one day.
The Harleys subdivided their property and sold five lots of land to alleviate financial pressures. However, the sale of the lots did not cover the full amount they owed ANZ and they were unable to sell the remaining four in time.
The bank had rejected the Harleys’ request for a nine-month extension, which they said would have allowed them to target a stronger spring sale period when property prices and demand are typically higher.
In addition to rejecting the extension request, ANZ reportedly “threatened” the Harleys with bankruptcy proceedings if they did not pay the leftover debt in a little over a week.
ANZ appointed insolvency agents to sell the last of the land with no input from the Harleys — who were charged more than $59,000 for the appointments — on who was chosen to do so.
The four parcels of land were then sold by the agents in 2013 at $570,000 less than the valuations recorded a year earlier.
Ms Orr said that, based on the valuations, there should have been a surplus from the sales.
Given the property was sold at a significantly discounted price, the Harleys had requested an exemption from paying the amount outstanding, which ANZ declined.
ANZ defends its “right to get paid”
ANZ Bank’s head of lending services, corporate and commercial, Benjamin Steinberg, argued that valuations fluctuate and differ based on a range of factors, such as the physical condition of the property.
The executive denied that the bank’s actions fell below community standards and expectations and disagreed with Ms Orr’s claim that it had breached the Code of Banking Practice to “act fairly and reasonably towards the Harleys in a consistent and ethical manner”.
He repeatedly pointed out that the Harleys had years to pay.
Mr Steinberg also said that while the Harleys’ story is a “sad one”, the bank had the “right to get paid”.
“I agree the story is a sad one, but nonetheless what we were doing here is pursuing our contractual rights to get paid, managing money that belongs to our depositors,” the ANZ head of lending services for corporate and commercial told Ms Orr.
“While it’s a very sad list of events to read out and listen to, I think the community would expect us to do whatever we can to recover the money that’s owed.”
On the other hand, the ANZ executive admitted that the Harleys’ requests for extensions would have been granted today, or the bank would have considered options such as debt restructuring.
In July 2017, three years after rejecting the Harleys’ request for relief from the outstanding debt, ANZ decided to stop chasing the family for money but did not notify them until February 2018.
With none of their century-old property under their ownership, the Harleys no longer farm today.
The hearings continue.