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Manufactured insolvency

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Former NAB bank manager Rob Hutchinson considers whether some bank defaults are manufactured by banks holding a safe level of security.
By forensic analyst Rob Hutchinson

In the past five years, I have had my eyes opened to the world of litigation through repeated requests to review discovered documents attached to recent and current loan default litigations.

From each corner of our nation, three cases that I have been presented with contained a recurrent and disturbing theme: Tess Lawrence v NAB, Rosie Cornell v NAB and a “third” v NAB, which cannot be named.

From my observations, all have followed the same path — literally manufactured by the financier.

The key to my observations comes from the bank’s own submission for credit, authored by their agents and representatives, located in business banking centres in different states, which may suggest that this problem is widespread rather than isolated.

These three examples of credit submissions, prepared and subsequently approved by the bank exhibited the following issues:

  • The credit submission did not reflect the transaction. The transaction as described by the applicants was inconsistent with what was described in the submission.

  • The credit submission was based on overstated incomes by the bank. No evidence of the usual supporting documentation to support the submission was found in the discovery documents.

  • The credit submissions lacked the due diligence expected in such circumstances, which is designed to protect the bank and its customer.

  • Two of the credit submissions stated that the applicants did not demonstrate the capacity to meet their financial obligations. The mitigation put forward by the authors to justify approval of the submissions appears to be either unrealistic, misleading or fabricated.

  • The credit submissions were favoured by the bank due to strong security positions, rather than the applicants ability or capacity to service the loan

  • All loan applicants defaulted on the approved advances.

  • All loan applicants found themselves immerged in litigation by the bank.

  • All loan applicants had substantial financial positions prior to entering transactions with the bank.



  • Whilst the credit submissions were penned for approval or overview by higher authorities, the compilation of the credit submission was by an agent and representative of the bank and the bank cannot separate itself from their actions.

    Two of the authors have left the employ of the bank and the third received an offshore posting — later to be repatriated home with an advancing career.

    Of the three examples referred to above, two are found on both ends of the scale. The “third” was scheduled for trial and prepared for by an extremely competent legal force. That matter was settled at mediation just prior to trial with the bank swallowing a seven figure pill.

    On the other end of the scale Lawrence v NAB has been a classic David & Goliath battle that has been waged for the past five years. A self-representing litigant with a genuine cause has been treated as the leather on the soles of the fancy shoes worn by Collins Street criminals.

    In these past years, banks and regulators have worked to improve procedures and systems that would further protect banks and hopefully their employees, consumers and shareholders going forward. But what of the sins of the past? What about applicants that have their dreams turned into nightmares as the result of dereliction of duty?

    It makes you wonder, of all the loans advanced, of all the default cases in all courts nationwide past and present, is there a connection? Was the appropriate due diligence applied at the outset?

    Was the default manufactured on the back of the bank holding a safe level of security?



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