NAB in illegal cash grab

Inquiry told customer lied to about loan security

NATIONAL Australia Bank did not have a lawful entitlement to take the sale proceeds of a business customer’s house but took the money anyway, the banking royal commission has heard.

NAB executive Ross McNaughton said the customer’s home and horse stud were never secured against the business loan and the bank had no right to the proceeds when it was sold.

The bombshell evidence of Mr McNaughton, who is general manager of NAB’s strategic business services division, contrasted with the line of questioning only minutes earlier by NAB’s own cross-examination of the customer, Ross Dillon.

The cross-examination of Mr Dillon, who operated a business called National Music, focused on the bank’s right to take the money from the house sale and Mr Dillon’s future plans for the money.

However, almost immediately after Mr McNaughton took the witness chair, counsel assisting the commission Michael Hodge, QC, asked if the bank had directly secured the business loan against Mr Dillon’s property, known as Goanna Downs.

“No,” said Mr McNaughton. Mr Hodge asked: “You now understand that NAB had no legal entitlement to insist on the full proceeds of Goanna Downs being used to pay down the debts of National Music?”

“That’s correct,” Mr McNaughton said.

In further examination yesterday, Mr McNaughton also confirmed that the bank repeatedly told Mr Dillon that it had the right to block the home’s sale and the right to insist the proceeds be used to reduce the business loan.

Under further questioning on the issue, Mr McNaughton also said that the bank failed to inform Mr Dillon that it did not have the legal right to make the demands on the money or stop the house sale.

Earlier yesterday, Mr Dillon told the banking royal commission he was “too angry” to give full evidence during crossexamination by the bank’s lawyer, Wendy Harris QC.

Ms Harris repeatedly asked about Mr Dillon’s agreement and intention for the house sale proceeds and the bank’s right to use the money to reduce the business loan.

But Mr Dillon, despite becoming increasingly exasperated with the questioning, refused to back down and maintained the money from the house was taken without his agreement.