Jacobs calls for insolvency process inquiry

Jo FulwoodCountryman

Eyre MLA Graham Jacobs has called for a State parliamentary inquiry into the conduct of banks, lawyers and receivers who participate in the insolvency process of a farm business.

Dr Jacobs said farmers needed to be protected from predatory and bullying behaviour from these institutions, particularly during poor seasons and in receivership situations.

During grievance time in Parliament last week, Dr Jacobs said it appeared the receivership process was not just about recouping debts, but also making huge amounts of money for the banks, lawyers and anointed receivers.

He said the downward spiral of equity in a farming business affected by poor seasons and regular bank re-valuations meant farmers had almost no rights, and some were forced to walk off their land with no remaining equity.

Dr Jacobs has called on Small Business Minister Liza Harvey to support a standing committee parliamentary inquiry to ensure "accountability, transparency and fairness" in the insolvency and re-valuing process.

"What checks and balances are there in this receivership process either in corporate legislation, regulation or code of conduct in the scale of fees and charges here?," Dr Jacobs said.

"What could we do as a government to prevent open slather in this process and ensure farmers have access to the right advice and can be protected from any predatory or bullying behaviour?"

Dr Jacobs said major insolvency and law firms preferred by the banks had cost structures and charge-out rates mainly geared towards big corporate groups and listed companies.

"Yet they are appointed to small family farms by the bank," Dr Jacobs said.

"One could almost suggest that by the time the receivership machinery is put in motion the remaining equity is known and the process works backwards in calculating fees and charges."

Southern Cross farmer Paul Della Bosca said, while he was not in receivership, he had experienced the tactics of financial institutions first hand, being forced to pay for revaluations which he did not request or instigate.

Mr Della Bosca said his property had been revalued twice in 18 months, costing him nearly $18,000 in valuation fees.

He said when he had changed banks in 2011 he believed he would be financially better off due to lower interest rates at the time, and while he expected his property to be revalued, he did not expect it to cost him $11,550.

Mr Della Bosca said what he could not stomach was the second valuation only 18 months later that the bank then on-charged to him at a cost of almost $6000.

"I told them that nothing had changed, our land and infrastructure were still the same, we had just been through some very bad seasons," he said.

"I asked them why we were getting revalued. They said it was because there had been farms sold in the district and they needed a comparison on these land sales.

"The second valuation downgraded our land price once again.

"So we've had our property de-valued twice within 18 months, so we've lost substantial equity out of our business, through no fault of our own, at a cost to us of $18,000.

"This is something that we couldn't afford. This money could almost have put one of our children through boarding school for a year."

Mr Della Bosca said an independent valuer had travelled to his property north of Southern Cross from Bunbury, had been on the property for the day, stayed the night in Merredin to return the next day for an hour or so.

For the second valuation only 18 months later, the independent valuer was only on the property for two to three hours.

"We were fortunate enough to find a buyer for some of our land this year to finance a crop and try to keep the wolves from the door," Mr Della Bosca said.

"Interest on interest is crippling the future of family farming businesses.

"With our equity position where it is now, we weren't eligible for the State Government assistance grant, and it's likely we won't meet the criteria for the Federal loan either."

Australian Banking Association spokesman Stephen Carroll said it was not common practice for a bank randomly to request a valuation on a property purely based on land sales among neighbouring properties.

"I would be surprised if the bank revalued this land unless the customer initiated some request to the bank, or unless there was a default of some sort," he said.

Mr Della Bosca said he supported the call by Dr Jacobs to make the financial industry more accountable, and to reduce the bullying tactics on farmers who were in stressful financial and emotional situations.

Dr Jacobs said it was a tragic situation when a farmer was forced to leave the industry.

"What is even more tragic is that when they do finally exit the industry they leave with absolutely nothing as all the remaining equity has been eroded and for all intents and purposes, that equity transfused into the St Georges Terrace accountant and legal offices," Dr Jacobs said.

Responding during grievance time, Ms Harvey said it was for the Parliament to decide whether or not to hold a parliamentary inquiry.

She said the Small Business Development Corporation received and investigated claims on unfair market practices.

Ms Harvey said the SBDC would attempt to resolve these complaints on behalf of small business owners.

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