Banking royal commission: receivers appointed by CBA engaged in ‘bizarre’ hotel rip-up

A former pub baron has told the bank inquiry how receivers appointed by CBA ripped out $180,000 worth of chandeliers.

Receivers appointed by the CBA over an unfinished hotel took “bizarre” action including ripping out $180,000 of chandeliers and trashing most of a $450,000 cafe fit-out, former pub baron Michael Doherty has told the financial services royal commission.

Mr Doherty was giving evidence this morning as part of the commission’s examination of how CBA treated people who had taken out business loans from Bankwest, which it took over from stricken UK bank HBOS during the global financial crisis.

The commission has been probing CBA’s conduct in calling in loans as part of Project Magellan, its attempt to clean up a loan book laden with commercial property that it inherited from Bankwest.

Counsel assisting the commission, Albert Dinelli, this morning questioned Mr Doherty about a $29m loan he took out from Bankwest and the redevelopment of Hobart’s Hadley’s Hotel.

Mr Doherty accepted that in mid-2011 his company was having cash flow difficulties and owed the Australian Taxation Office $1.2m.

He said hotel operator Mantra had agreed to run Hadley’s under its Peppers brand and pay $3m as “key money” when it took over.

However, Mantra wanted an agreement signed by the bank before it took over.

“So the hotel was sitting there ready to trade,” he said.

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“We are coming up to Christmas, which is the peak trading time for Tasmania. We were desperate to get it open and get some revenue stream coming into it.”

He said he wanted to refinance with another bank but “out of the blue” the bank wanted a $980,000 break fee, which he could not afford.

The bank appointed receiver David Winterbottom of KordaMentha in February 2012.

“Well that’s where it even gets more bizarre, if you can say that,” Mr Doherty said.

“The building was built to a Peppers standard, there was over $180,000 worth of chandeliers … They pulled all the chandeliers out and embarked on a refurbishing campaign.

“The hotel had been built to Peppers standard and for some reason the receivers decided they didn’t like the decor.

“The chandeliers came out, the cafe had a fit out of approximately $450,000 which was largely altered and thrown out.

“The hotel had not traded yet but it was already going through a major refurbish.”

He said Mr Winterbottom rejected his proposals to rescue the project.

“David Winterbottom barred me from the hotel, he said I was a distraction and critical of him,” he said.

The bank then moved to enforce its security against his other hotel property in Ross, in Tasmania’s midlands, and him personally.

“We were totally bankrupted and lost houses, the whole scenario,” he said.