These Aussies were growing a family business amid 1990s economic turmoil – then the bank came for their house

This couple lost almost everything to their bank 30 years ago – and similar warning signs are appearing in the economy today. This is how they rebounded.

Richard and Carol Walker's home and cars, which were taken by the bank in the 1990s. Supplied

This is what it’s like when you lose everything, not just the home you built and the cars you cherished, but the livelihood you created and the machinery and trucks that sustained it; when all that you considered yours is seized and sold, and you are on solid ground but are sure you are drowning.

One sleep ago you owned a business and a house, and life had a reassuring predictability. Today you can’t even score a job making sandwiches. Bewildered and humiliated as your world fractures on the eve of Easter, and all your bank accounts are frozen, you only just get through that worst long weekend thanks to a hard-won cheque from the local social security office – the very place where one of you was once employed to dispense help.

With no work and no money, your parents-in-law decamp to a caravan, so that your young family can have their roof over your heads, and the only reason you retain your furniture is ­because your concerned mother signs a statutory declaration claiming that your chattels are actually hers, and on loan to you. By the time the door to your past is locked and its other contents hastily sold, only weeks from now, your only other remaining possessions will be your clothes.

And then one day, decades later, you sit in the living room of the light-filled home you have managed to acquire in the new life you have managed to forge, and declare that you carry no malice for this part of your past. You say this calmly and with conviction. But even with the luxury of retrospect, the sting endures.

Thirty years on, the tail of what befell Richard and Carol Walker and their family in the early 1990s is doggedly long. Now, as the economy prepares to face another reckoning, their story of loss, and of rebirth, sounds a salutary warning of what the future may yet offer.

Richard and Carol Walker in the 1990s. Picture: Supplied

“When it happened it was just like a bulldozer. It was like having your hands zip-tied ­together and a piece of plaster put on your mouth, and you’re put in a corner and told you have no seat at the table. When everything you have worked for for 20 years is being disposed of, it’s got nothing to do with you: ‘We’ll let you know when this is over.’”

A generation has passed since Richard Walker lost everything. In that time he has inched and then marched his way back to a life of greater certainty, establishing and selling other businesses, reclaiming joy, finding God, becoming a grandfather. The past, these days, is carefully secreted, and on the rare occasions that he revisits it, he sounds calm. But he also seems ever so slightly rattled.

Trained as a teacher in Newcastle, he spent his early career instructing in woodwork. In the mid 1980s, while he was a thirtysomething employed at Grafton High school on the NSW north coast, he developed a sideline building wooden windows and doors. Within 12 months this was his full-time job.

With customers from Coffs Harbour to the Sunshine Coast, by the late 1980s he and Carol employed eight people at their north coast factory. “The business was super successful,” Richard says now. Almost 70, he speaks softly and with a relaxed ease. “There were some tough times in the first year or two until we started to get some traction.”

But by the time the final decade of the 20th century dawned, they were living in a custom built home in a nice area, driving a pair of European cars, “really doing very well and people were starting to take notice of us”. So when they secured a contract to supply an interstate builder with two houses’ worth of windows every week, they realised they needed to expand.

To accommodate the new contract, and with close to $100,000 of upcoming orders, the couple decided to double the size of the factory and to buy a second-hand machine to help with the manufacture of window frames. While not entirely debt free – “the business didn’t owe any money but Carol and I personally owed money for our house” – they borrowed from the Commonwealth Development Bank in Grafton: $250,000 for the factory expansion and $40,000 for the double-end tenoner machine.

Established in 1959, the CDB was a specialist lender. “It was a really significant institution and it has disappeared into history,” says ­retired political economist Evan Jones, who has written extensively on the institution. “It was a bank specifically devoted to the needs of small business and of family farmers. Historically and globally it has always been difficult to get finance from the little guy [to] build a business… Because the work is more labour intensive, the typical banks say, ‘Oh bugger them’.”

The CDB was profitable but not hugely so. Importantly, as Jones noted in a 2001 opinion piece in The Canberra Times, a decade after the Walkers approached the bank for extra money, “there was flexibility in loan arrangements during hard times”.

In the Walkers’ case, to accommodate their request the bank imposed a fixed and floating charge on their business. “That meant if we default on the loan they could come and get a lot more than just their one machine and one shed,” Richard says now. “They put an umbrella over every single thing including our clothing and said, ‘If this turns bad we have the policy to take over everything that’s yours’.”

In retrospect you can almost hear an alarm clanging. But at the time Richard was told this was current practice. “And I can remember not being too fazed about it because the way we were going I thought we were going to have that paid off in the next couple of years.”

The front page of The Australian on November 30, 1990.

By the early 1990s, like almost every other similar sized OECD country, Australia was in recession. The economy was overstretched, thanks in part to the relentless pressure of high interest rates on businesses, many of which had borrowed excessively. There was also the preceding boom that had been built on inflated prices propped up by increased borrowing, and that was bound to end. As former Reserve Bank governor Ian Macfarlane said in his 2006 Boyer lecture: “The situation is usually made worse by banks wishing to call in loans, or ­refusing to roll them over, as they react to ­falling collateral values.”

That federal treasurer Paul Keating famously deemed this a recession that Australia “had to have” was little comfort at a window factory in Grafton, where an expanding business was feeling the impacts of the economic contraction in increasing ways. As the 1990s gathered pace, the interest rate on the second-hand tenoner, alone, leapt beyond 20 per cent, and then two customers went bust, owing the Walkers’ company more than $30,000.

With their cash flow interrupted, they missed a repayment on the tenoner, part paid it, and then missed a few more. By October 1992 the recession was officially over but they were still facing financial strain when the bank sent an auditor to check their books. “He spent a day going right through our business,” says Richard. “I remember when he left he said, ‘It’s very clear to me that you have made a lot of ground and you have got all this work on. I reckon you would make it [financially] but you’ve got this close-down period over Christmas. I reckon you need another $30,000 to get through that trajectory.’ Because over the Christmas period we made no money.” The bank, however, would not loan them $30,000.

“A lot of people would say, ‘Oh, you shouldn’t be running a business that tight’,” he concedes now, “but at the time it was because of the credit squeeze and the high interest rates.” They scraped through Christmas, but the hits continued. In the new year the bank stopped ­allowing them to draw on uncleared cheques.

Still waiting on their cash flow to recover, they were a month late paying one of their suppliers $20,000 – a sum that would have been covered by the extra $30,000 the auditor had advised the company would need to survive these months. Then in March 1993, in an advertisement in the NSW Government gazette, the supplier sought to wind up the couple’s company and have a liquidator appointed.

“I was punch drunk,” says Richard, who is no longer sure that what he did next is what he would do now. He secured the assurance of other creditors that they would not join the ­action. On legal advice, he also visited his bank manager, “to get his assurance of their support”, happy for the bank to appoint an administrator, if necessary, to get through the following weeks, confident that, with $95,000 of upcoming orders, they would be financially upright by late April.

“The terminology I was to use was to say, ‘Can the bank support me through this? It will be over in a few weeks time, and, if not, I am prepared for the bank to appoint an administrator to help me manage through this.’ And that’s when all hell broke loose.”

The bank, meanwhile, was also enduring ­turmoil. In the wake of the recession, high ­interest rates and a fractious economy, it had been made a subsidiary of the Commonwealth Bank. As Evan Jones wrote in his 2001 opinion piece: “The CDB was seen [by the Commonwealth Bank] as an unwelcome accessory to a glorious commercial future. The representation of the Development Bank in the parent bank’s annual reports shifted from a celebration of new loan approvals to hand-wringing about the CDB’s viability without government subsidy.”

In that environment, the Walkers’ financial world began to unravel. Within hours of his April 1993 meeting with his bank manager, Richard Walker received a call from one of the bank’s risk specialists, who said there would there be no more help forthcoming. “He said, ‘We will be calling in all of your debts and want them paid within 21 days’. And he said, ‘If you don’t think that you can do that, you need to close the ­business because you will be acting as a director of a company that is insolvent’.”

While Richard had visions of the company being steadied over the next few weeks, a course of action was already in place to dismantle it, as he presumably would not be able to summon the money to clear the debt just like that. The factory and machinery would be sold in a fortnight, the risk specialist told him, with other sales to follow. “‘And at the end of that time we would be prepared, off the record, to write off any residual debt if we have your full cooperation.’ And I said there would not be any residual debt because our assets are worth a lot more than the debt,” he recalls now, still ­aggrieved by that long-ago conversation.

“Naively I went there thinking that they were on my side… that they wouldn’t stand by and watch the demise of the business, and us losing everything, surely?” But there was more, as the call continued. “He said, ‘No one in ­Grafton is to know that the bank is taking this action. You are to say that you have decided to liquidate your assets… If you mention anything about the bank during this six-week period we will pursue you to personal bankruptcy.” At 39 and 36 respectively, the parents of three young children were about to lose their professional world. Under the terms of the loan, however, everything they owned, including their cherished home, could also be swept away.

Already bewildered and humiliated, they now also felt keely isolated. “What he was saying to me was, ‘Don’t even talk to your best friend about what’s happening because we will find out’,” says Richard, whose silence would be interpreted by some as a sign that their business had failed. “He said, ‘It’s very important to us that the name of the bank is preserved through this process’.”

Carol, a pragmatist, took the news more evenly. “We knew our assets far outweighed the debt… Even if the business was closed we would still have money left over,” she says now. “But that’s not what [happened].”

Two days later, on the eve of Good Friday and the seventh birthday of their youngest child, she went to withdraw money for the long weekend and discovered that their personal ­accounts, and not just their business accounts, had been frozen.

The reality of their radically altered lives was shocking, with worse still to come. “It was like we were on a train that we couldn’t get off and when it pulled into the next station we would have nothing,” says Richard. “There was nothing we could do about it. And not only would we have no assets left, we would have no reputation. ”

In a good place: Richard and Carol Walker today.

Less than three weeks after Richard’s ­pre-Easter visit to the bank, the Supreme Court ordered that the company be wound up and a liquidator appointed. The terms of the loan meant the bank could call on all of their assets, and their prized home was also on the market.

With no money, there was little chance of amassing the deposit to rent a property, and the family moved into Carol’s parents’ home. Her father bought her an old car so she could drive the children to school, and a bicycle replaced a BMW as Richard’s mode of transport to his new job; in the wake of his own company’s ­demise, some associates had started a similar woodworking business, managing to snag some of his machinery cheaply.

With Carol on the dole, and rejected for a succession of positions, including a stint as a sandwich maker, Richard was the only ­income earner. For months he brought home just $100 a week.

Meanwhile, in a process that seemed more like a fire sale, virtually everything they had so recently owned was traded away. Their home, valued at $174,000 earlier in the year, went for $140,000; the factory machinery went for a fraction of its value, as did both their European cars. Having calculated that they would still have around $100,000 when everything was sold, they were instead presented with a residual debt of tens of thousands of dollars – which they then had to pay off.

“We walked out of this whole scenario with our furniture and our clothes and that’s it,” says Carol, who remains remarkably even through hours of conversation. As their world shrank, and their children were taunted at school that perhaps their father should have stuck to teaching, she made a conscious decision to look ahead. “If we dwell on this it will kill us.” Still, she failed to land a job for more than a year. “I hit it every time I applied,” she says sadly. “At interviews, you could tell what they were thinking: ‘We’re not going to employ this person, her and her husband’s business has gone broke.” By the time they paid off that residual debt a year later, Carol had completed a computer course, and was finally employed.

Then Richard received a call from the CDB’s recoveries officer, advising that their letter of release was in the mail. “He said, ‘We were under instructions because there was a bit of a pinch… There was a line below which everybody was acted against, and you unfortunately just fell below that line’.” The bank, it seemed, had also been facing a financial squeeze. “He [the bank officer] said, ‘This will make you laugh. If your figures came up in front of me today, the bank would support you.’”

Their misery endured. Contemporaneous notes by Richard from later that year mention that a bank representative “has approached me twice concerned that there were rumours around town that the bank had sold us up”.

But that terrible time was also littered with acts of kindness. A friend gave them free use of a shed for six months. After they moved out of Carol’s parents’ home, a mate provided them with another roof where they paid minimal rent, which in turn meant that eventually they were able to buy a cheap piece of land.

“I borrowed enough money from a credit union to lay the cement slab,” says Richard of the outpouring of kindness that ensued, “and the rest of the [new] house was built on a barter basis.” One friend provided free bricks. Another, a builder, worked alongside Richard during construction. But it was only months later that they were able to even glimpse their situation in another light. A businessman contacted Richard about a potential class action against the bank, which did not eventuate, but which led him to a Coffs Harbour meeting where he met close to a dozen other business owners. All of them, he heard, had endured ­almost the same treatment.

“Everyone in the room had been smashed by the bank,” says Richard, who listened to ­recounts of a familiar scenario. “The [same] process that Carol and I had been through: ‘We’re going to sell off your assets at auction, we don’t care what it is. If you don’t cooperate with us we will pursue you to personal bankruptcy. We will do it over six weeks. We have already organised it with a real estate agent in your town. Just keep your mouth shut and in six weeks you will be able to get on with your life’.”

Having been isolated in their misery for so long, suddenly he was agog: “The same phrases being used, the same systems being used, the same clandestine operations.” But the individual consequences that flowed shocked him even more.

“I was told stories about suicides. I was told stories about peoples’ marriages breaking up. I remember driving home thinking, ‘Gee, I am pretty fortunate. There are so many people who are worse off than we are. We lost everything, but no one died and our family is intact’.”

Bruce Ford and Wendy Murray’s company Traztea Services Pty Ltd had also been dealing with the Commonwealth Development Bank, but their relationship went back to 1979. They were running a palm plantation at Sawtell, near Coffs Harbour, and had even received a government interest subsidy “as the company had been assessed long-term viable”, Murray told a federal parliamentary inquiry in 2000.

In 1993, the CDB confirmed in writing that it would refinance the couple’s company for ­another 15 years. “The company was not in ­default, no letter of demand was issued, and the company’s assets far exceeded the bank’s ­lending. However, the bank requested repayment of the loan in full within eight weeks,” Murray told the Joint Committee on Corporations and Securities of a process that also jeopardised their livelihoods.

“To this day the bank insists our selling of ­assets and subsequently closing of our business was voluntary, which is untrue. We were told if we did not repay the money in eight weeks the bank would sell us up. We agreed to pay the bank because it was our belief that if the bank took possession we would end up with nothing, even though our assets were many times greater than our debt.”

Murray and Ford would not be interviewed for this story, citing a desire to look forward after a very difficult time. Other former CDB customers facing similar scenarios, who also declined to speak, remain deeply traumatised, with ongoing nightmares and depression among the legacies that endure long after the CDB was effectively abolished in 1994. Some have never recovered financially. As one ­former customer says: “It tipped a lot of people over the edge.”

Richard Walker stresses that he is not bitter about what happened to his family 30 years ago. “I am not vengeful in any way and maybe that’s because we made a conscious decision to look forward.”

Still, a sense of injustice lingers. “They stole five years of our life and stole all the things we ever worked for because of some policy in the bank, and we put our hands up and let them take it because we didn’t have any alternative,” he says. “We went from being successful to being nothing in probably a couple of months.”

But it was the callousness with which he feels he was dealt that still troubles him. “The more important story that needs to be told is how those actions affected so many families and how brutal it was,” he says. “I have no emotional hangover from what happened to us. But it’s so relevant to the times we’re in.”