Witness quizzed as NAB hits back

NAB has become the first bank at the financial services royal commission to seriously question the evidence given by a customer.

NAB has become the first bank at the financial services royal commission to seriously question the evidence given by a customer, embarking yesterday afternoon on a lengthy cross-examination of borrower Ross Dillon.

The scrutiny will continue this morning, with NAB counsel Wendy Harris expecting to spend at least another three-quarters of an hour disputing Mr Dillon’s version of events.

Bank lawyers have so far mostly decided not to cross-examine customer witnesses who have told their stories of losing homes, getting loans they could not repay, or receiving poor financial advice.

But a new strategy was on display yesterday after the testimony of Mr Dillon, who runs a business that imports musical instruments and sells them to retailers, and has credit facilities with NAB.

His business National Music was hit by the global financial crisis as shoppers cut back on discretionary items, so he and his wife ­planned to sell their family home, inject up to $300,000 into the business and move to a smaller home, he told the commission.

Once the property sold, NAB announced it was seizing the whole proceeds of the sale to pay down his business debts, Mr Dillon said. NAB also reduced his lines of credit, which made it hard for the business to pay its suppliers.

“It was a disaster,” Mr Dillon said. “Our ordering patterns dropped dramatically and when you are out of stock, you can’t ­supply.”

He said he didn’t sleep for two years, and his wife had severe depression which accelerated the onset of dementia. “She struggled, really hard,” Mr Dillon said.

He made a public submission to the royal commission “because I felt it might be cathartic to get it off my chest”.

NAB’s Ms Harris queried the motivation for Mr Dillon and his wife to sell their family home in regional NSW, which they had turned into a brood mare property.

She suggested the couple actually put their home on the market a year earlier than Mr Dillon said and had planned to spend nearly all the proceeds on reducing debt.

To support her case, she produced an internal NAB review of the business by banker Kevin Matthews, from 2010, that said the owner was likely to contribute capital of up to $800,000 into the business. A written reply from Mr Dillon said the extra cash would depend on the sale of the family home.

Mr Dillon said he did not remember planning to sell the home this early.

Another bank form — with an application to waive repayments due — said the principals of National Music had committed all funds from the sale of their family home to debt reduction, save for $100,000 for personal expenses.

However, Mr Dillon insisted he never said he would spend all the sale proceeds on slashing debt.

This morning Mr Dillon will return to the witness stand.