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Lending to Primary Production Customers
11/09/2017

WALLACE, Mr Charlie (Lee), Private capacity

Committee met at 18:10

CHAIR ( Senator Roberts ): I declare open this hearing of the Senate Select Committee on Lending to Primary Production Customers. I welcome you all here today. This is a public hearing and a Hansard transcript of the proceedings is being made. The hearing is also being broadcast via the Australian Parliament House website. Before the committee starts taking evidence, I remind all witnesses that in giving evidence to the committee they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee and such action may be treated by the Senate as a contempt. It is also a contempt to give false or misleading evidence to a committee.

The committee generally prefers evidence to be given in public, but under the Senate's resolutions witnesses have the right to request to be heard in private session. If a witness objects to answering a question, the witness should state the ground upon which the objection is taken and the committee will determine whether it will insist on an answer, having regard to the ground on which it is claimed. If the committee determines to insist on an answer, a witness may request that the answer be given in camera. Such a request may, of course, also be made at any other time. I would also ask witnesses to remain behind for a few minutes at the conclusion of their evidence in case the secretariat staff need to clarify any terms or references.

I now welcome Mr Charlie Wallace. I understand that information on parliamentary privilege and the protection of witnesses and evidence has been provided to you?

Mr Wallace : Yes.

CHAIR: For the Hansard record, would you please state the capacity in which you appear today.

Mr Wallace : I am an ex-farmer.

CHAIR: I now invite you to make a short opening statement. At the conclusion of your remarks I will invite members of the committee to ask questions. As we discussed earlier, it does not have to be short. Just make it clear so that we can understand the full scope of what your situation is.

Mr Wallace : Righto. In 2005, I went to an auction in Charters Towers to buy a property called 'Coronation'.

CHAIR: At the time, did you own another property.

Mr Wallace : I did own another property.

CHAIR: What was that?

Mr Wallace : Newburgh Station.

CHAIR: Where is Newburgh?

Mr Wallace : Newburgh is about 260 kilometres north west of Charters Towers.

CHAIR: So you went to an auction to buy Coronation.

Mr Wallace : Yes, to relocate our stud. We had a very successful red and grey Brahman stud. Coronation came on the market and it just suited us down to the ground. It was 27 kilometres from the Dalrymple Saleyards, which is the main selling complex in Charters Towers. So we went to the auction. The Dalrymple Shire and the Charters Tower Shire were in drought at the time, but the cattle were fine. There were no poor cattle on our properties. Coronation was owned by a mining company at the time and there were no cattle on there. So, as you can imagine, the grass was unbelievable.

Before the auction started, the agent selling the property, Jim Geaney, at the mining company's request, made five announcements. The major announcement was that whoever bought the property did not have to wait for settlement. They could put cattle on the property the following day, if so be. We took that option up once the property was knocked down to us. We won the contract and paid the deposit thinking we had bought it. We then went to Townsville, paid the stamp duty and all of the other costs. We then thought we would take up that option that was offered to us and we relocated our stud down to Coronation. In doing that, we then shifted our cattle around Newburgh to lighten them off a little bit because there was a drought and we just put them into the empty paddocks that we created by shifting the stud cattle.

CHAIR: What did you pay for Coronation?

Mr Wallace : Coronation was knocked down to us for $1.8 million. The problem is that it did not sell. It just went on for five years. The minister gave consent—

CHAIR: What was your loan? What did you owe the bank at the time?

Mr Wallace : At the time it was $3.2 million.

Senator WILLIAMS: Including the $1.8 million?

Mr Wallace : The loan at the time of the Coronation auction was around $1 million, sorry.

Senator WILLIAMS: So you had to borrow $1 million to buy Coronation?

Mr Wallace : No, that was the debt we had at the time with the Rural Bank. It was around $1 million, give or take.

Senator WILLIAMS: Right, that was before you bought Coronation. And you bought it for $1.8 million?

Mr Wallace : That is what we bid at auction.

Senator WILLIAMS: So you owed $1 million.

Mr Wallace : Yes.

Senator WILLIAMS: You had one property?

Mr Wallace : That is correct. It was 97,500 acres.

Senator WILLIAMS: Right. Then you borrowed another $1.8 million, which the bank approved, to buy Coronation?

Mr Wallace : That is right. But it goes on from there. Because there was a dispute between the mining company and the Queensland Department of Transport and Main Roads, the property did not settle. The minister gave his consent and then Main Roads got it revoked. The minister revoked his consent. The argument went on for about five years. What caused the problem for the minister to revoke consent was that when the mining company closed the mine they had a container of detonators they let go down the bottom of the mine. I believe they let off about 55 tonnes of detonators. The mine was situated right beside the main highway between Charters Tower and Clermont. When they let them off, they put cracks in the highway. To make it simple, they damaged the main road. No-one knew about it before the auction. There was no notification at the auction that there was damage to the highway.

Senator WILLIAMS: Did they do the explosion before the auction?

Mr Wallace : That is correct. I didn't find out until after the auction. That is when they said, 'It's not settling and the minister's consent has been revoked.' Anyhow, we stayed on there and it didn't settle. We just stayed there. Because we were in a bit of a sticky spot, we then couldn't take our cattle back to the main property, Newburgh, because we had filled those paddocks up with other cattle and the numbers had bred up with progeny over those five years. Eventually, Coronation settled—

CHAIR: In five years time?

Mr Wallace : Nearly five years—not quite but close enough. Off the top of my head, the original auction was on 26 August 2005. It settled on 20 May 2010. So it was not quite five years. It might have been four years and nine months. Legal costs accrued because I got dragged into it and they tried to sue me for trespass.

CHAIR: Who?

Mr Wallace : The mining company.

Senator WILLIAMS: Just hang on, Mr Wallace. You had the property for nearly five years and you hadn't had to pay for it?

Mr Wallace : That is correct.

Senator WILLIAMS: Did you have to pay rent or a lease?

Mr Wallace : We did not pay rent. But what you are missing is that we paid a deposit. When you say we didn't pay for it, we paid a deposit of $180,000. We paid stamp duty of $84,000. So that is a quarter of a million dollars there. That is a pretty fair cop.

Senator WILLIAMS: But hang on. It is a $1.8 million block and you put up a quarter of a million and you had access to the income from that $1.8 million block for five years.

Mr Wallace : Yes, but there is more to the story.

Senator WILLIAMS: But the point I am making is this: if you put up the $1.8 million and paid for the lot, you would have owed a lot more money.

Mr Wallace : Yes.

Senator WILLIAMS: You would have had a bigger interest bill to finance.

Mr Wallace : I'm hearing you.

Senator WILLIAMS: So you have had access to property that is worth $1.8 million, but you have not had to borrow $1.8 million to pay the bank. You have only had to borrow a quarter of a million from the bank, correct?

Mr Wallace : That is correct.

Senator WILLIAMS: Therefore, the interest bill is a lot lower because you are paying interest on a quarter of a million for Coronation, not interest on $1.8 million, and yet you've got access to the full grazing capacity of the property.

Mr Wallace : No, that is the part we haven't got to.

Senator WILLIAMS: Okay, go on.

Mr Wallace : I am hearing what you are saying. It's right and they have tried to use that against me.

Senator WILLIAMS: I mean, I would do that every day of the week, if I could get access to a $1.8 million property and only borrow a quarter of a million.

Mr Wallace : I just wish it would have settled, because we could get on with living. Our stud had been a very successful stud before we went to Coronation. We were selling bulls for $20,000 and constantly in the 10s and 15s of thousands. So it was a successful stud. When we moved to Coronation. As the mining company owned it, there was water running down and all the fences had been run over with their machinery. So there were no fences. They were nonexistent.

Senator WILLIAMS: Did you know that before you bought it?

Mr Wallace : Yes, but we also knew before we bought it that the bank had offered us more money than that $1.8 million. They said we could borrow $2.3 million to build a house there and improve everything that had fallen down.

Senator WILLIAMS: You had to fix the fence up straight away. You are running a stud, so your fencing is essential. Otherwise you have this bull getting out with that cow and that bull shouldn't be with that cow. That bull should be in the other paddock with the other cow.

Mr Wallace : At Newburgh we had nine single-sire paddocks. That means one bull with 40 or 50 cows. You dead-set know that the progeny in that paddock is by that bull. With Coronation we could not do that, so we had a loss of income. We were selling 200-plus bulls a year for $1,500 to two grand, plus all the high-priced ones in the sale ring. We no longer had that.

Senator WILLIAMS: Whose fault is that? Is that the bank's fault?

Mr Wallace : In this situation, I would say, no, it is not the bank's fault. I got tangled up between a mining company and the Queensland government.

CHAIR: So the cost to you was that you could only get $2,000 for a bull instead of $15,000?

Mr Wallace : No, we couldn't get anything because we couldn't run it as nine single-sire paddocks. Every time we went to pull up a fence, put up a new fence or do any improvements, a mining company representative would call and say, 'You can't.' Or we would get a letter from their lawyers saying: 'Don't do anything. You can't touch anything because it hasn't settled.'

Senator WILLIAMS: You couldn't run tape or electrical wires out? Or put up two wire electrics?

Mr Wallace : Not when you have a lot of regrowth, no. It would not work in regrowth country. It would be a nightmare. You would fix it in the morning and the roos would hop through it that afternoon. You would just be creating more work for yourself.

But back to the situation. Is it the bank's fault? The mining company and Main Roads were at loggerheads. Would it be the bank's duty, as the debts and legal costs were going up a bit, to talk to me and say: 'Look, Mr Wallace, do you think we should forget about this property and maybe go and look at another property? We will lend you the same amount of money to go and buy another property.' Would that be a fair assumption?

Senator WILLIAMS: It would be, wouldn't it? It would be fair to say, 'Instead of running stud on this property, why don't you run commercial cattle on it?'

Mr Wallace : What are we going to do with the cattle we have already got there? We are going to have to pay an astronomical freight bill to shift them back to the other property.

Senator WILLIAMS: Well, you had bred up the other property. Perhaps you could have sold some on the other property and returned the stud cattle back there.

Mr Wallace : But it's at a cost, isn't it?

Senator WILLIAMS: Of course it's a cost.

Mr Wallace : You don't get anything done for free.

Senator WILLIAMS: But you still have access to that property of $1.8 million for a quarter of a million dollars. That is a saving.

Mr Wallace : I disagree, because of the loss of income.

Senator WILLIAMS: You are saying that your loss was because you didn't have your stud performing at peak.

Mr Wallace : At peak. We were doing embryo and IVF programs—all of that—at the other place.

Senator WILLIAMS: What did you expect to pay for Coronation when you went to the auction?

Mr Wallace : We thought we might have got $2 million.

Senator WILLIAMS: So you were pretty happy about $1.8 million.

Mr Wallace : But as it goes on it costs more because—

Senator WILLIAMS: Yes, I'm talking about auction day. Were there people bidding against you the day you bought it?

Mr Wallace : Yes, there were.

Senator WILLIAMS: And were they going to run commercial cattle on it? They wouldn't be running stud cattle on it, I wouldn't think.

Mr Wallace : No, it was a very highly regarded stud place. As a matter of fact, a stud breeder has it now and he actually was at the auction that day when I bought it. So, yes, I outbid him that day.

CHAIR: So it is a successful stud now?

Mr Wallace : No, it's gone. It just about makes me cry. What was a highly successful stud, once they came in they just put them on the boat, chopped their heads off. All those beautiful bulls.

Senator WILLIAMS: I have seen that before—

Mr Wallace : For no reason.

Senator WILLIAMS: with stud breeders where they had stock horses with years and even decades of stock breeding and they send the stud horses to the knackery. They send the stud bulls to the abattoir. I have seen that before with the Wright family up at Armidale.

Mr Wallace : They are disgraceful. But going on, the property did finally settle.

Senator WILLIAMS: But it was in the hands of receivers.

Mr Wallace : That is who sold the lease, the receivers. The bank appointed the receivers without a default occurring, which it says in all their mortgages—and which I was going to get to later—

Senator WILLIAMS: Let me interrupt you again, Mr Wallace. Are you telling me that the receivers were sent in, and they sent your stud bulls and stud cattle to the abattoirs?

Mr Wallace : Yes—feedlots, abattoirs and export boats.

Senator WILLIAMS: Well, you can understand the export boats. They sent them live? As long as they are going over there for stud breeding and not for meat.

Mr Wallace : No.

Senator WILLIAMS: They went over there for meat?

Mr Wallace : They went over there for meat.

Senator WILLIAMS: That is appalling.

CHAIR: Was it Ferrier Hodgson?

Senator WILLIAMS: It was Ferrier Hodgson. Will Colwell and Timothy Michael were the two partners that were jointly appointed by the bank. The property finally did settle on 20 May 2010. The debt at the time of settlement, because of legal costs and loss of income, was $3.2 million, which was still only 26 per cent of our debt to equity.

CHAIR: So the debt at settlement was what?

Mr Wallace : Not at settlement. This is before settlement. The day before settlement it was 26 per cent.

CHAIR: What was the debt up to?

Mr Wallace : The debt was up to $3.2 million.

CHAIR: Because of legal costs?

Mr Wallace : Legal costs and loss of production, yes. Running back and forwards, you are too busy spending time at court and that sort of thing.

Senator WILLIAMS: With all of these legal costs, you were fighting the mining company, were you?

Mr Wallace : I got dragged into it. Yes, I did. Originally I was just there, I suppose, as an innocent party—the person who thought he bought the property. But the Queensland government at the time took the mining company on. The longer I was there, I got dragged into it. They tried to hit me with trespassing charges, and I don't know what year that was. We beat them, because I said that you announced at the auction that we could pasture cattle there the following day. I took that option up. There was no agreement at the auction referring back to living there and not being charged for it. There was no agreement entered into where I had to pay rent or agistment or anything at the fall of the hammer. So it is a hard one to swallow when you say that I was living there for free. I wasn't. I was losing income.

Anyhow, it settled on 20 May 2010. The bank valued my assets at around $14.4 million, off the top of my head. At settlement they loaned another $2.4 million to buy Coronation because the mining company wanted more money to settle.

CHAIR: Hang on, what was the $14 million?

Mr Wallace : Approximately $14.4 million was what the bank valued the assets at.

CHAIR: Newburgh and Coronation?

Mr Wallace : They valued Coronation in the assets as well—and the cattle and that.

Senator WILLIAMS: So how much were the two properties valued at?

Mr Wallace : Newburgh, which is the big property with 97,500 acres, was valued at $6.125 million. Coronation was 13,500 acres. It was valued at $2.54 million by Peter Bartels from Collins and Eales Valuers.

Senator WILLIAMS: So we've got $8.5 million in valuation.

Mr Wallace : Then the cattle and equipment.

CHAIR: That made it up to $14.4 million?

Mr Wallace : Close enough to $14.4 million.

Senator WILLIAMS: Did you have $6 million worth of cattle and equipment?

Mr Wallace : Yes. That is the bank's evaluation, not mine. They did it.

Senator WILLIAMS: How many cattle did you have?

Mr Wallace : Close enough to 7,000.

Senator WILLIAMS: Right. What sort of equipment?

Mr Wallace : A bulldozer, a loader, a grader, trucks, Toyotas, four wheel motorbikes, hay-making gear, a harvester and tractors—and I could go on. So the debt then settled and it became $5.6 million.

Senator WILLIAMS: Hang on, you went to settle and you had $14.4 million worth of assets, including livestock and machinery. How much did you have to borrow?

Mr Wallace : It was $2.4 million.

Senator WILLIAMS: And how much did you owe from other debts?

Mr Wallace : Three point two million dollars. So it then became $5.6 million. That is about a 39 per cent debt-to-equity ratio. That was between my partner at the time, Michele Lamb, who had been with me since 2001, because my first wife died of cancer in 1999. I have all of the documents here. In the letter of offer—and it is very hard to read—we came up with that we had to make a repayment of $250,000 on 7 November 2011. That is the way we read it. On 30 November 2011 we had two separate term accounts. We had to make a payment of $300,000.

CHAIR: So what was the total that you had to repay?

Mr Wallace : It was $550,000—that is, $250,000 on 7 November 2011 and $300,000 on 30 November 2011. Before, we were only paying interest until the property settled. With that in mind, we were up to about 7,500 head of cattle on the two properties. It had built up again. My brother had beautiful feed out in the Ewan and Richmond district. That is a separate property. It was Walkedge. It is totally different from me. He is not a partner. He is just my brother. Walkedge was 34,000 acres and he had 600 to 800 head of cattle on it. So you can imagine the feed that was on there. I have photographic evidence. The property had been in the Wallace family since 1973, so we had a fair understanding of the property. We knew what it could do and the capabilities of it. So my partner and I decided we were going to make one of those payments and in the following year we spoke to my brother, Johnny, and he said that, yes, we could agist cattle there. It started with 1,500 and then we could increase it as we went, depending on the season, up to 2,000. We sent 1,476 head of cattle out there between April 2011 and July 2011. To make those payments, there were 662 bullocks and 560 cows. Those cows were mainly all pregnant and if they were not pregnant they had calves afoot. So they were not all dry cows. It is important to tell you that and you will see why later. There were 234 weaners around 14 to 16 months of age. They were heifers and steers. That is what went out there to make payments for running costs and interest.

Senator WILLIAMS: A 16-month-old weaner is a pretty old weaner.

Mr Wallace : They weren't on their mothers. They were weaned.

Senator WILLIAMS: That is 350 kilos by that stage.

Mr Wallace : They were 350 to 400, yes. So they were not weaners off the cows. They had been weaned. It is just that some people use different terminology. So we sent them out there. The bank was aware of that. We were in discussion with the bank manager, Garry Luff in Townsville. A bloke called Philip Furnham Luck from Brisbane came to Coronation on 4 July, and that was the first time I had met the man. We kind of fell out a little bit on the day, I suppose you could say, because he is an arrogant sort of a person. He didn't like to be corrected when he was wrong. I like to tell the truth, if possible, if someone is mistaken. He was quoting a figure that was way out. It was wrong. I said what the right figure was. Anyhow, I believe we fell out that day. I don't know. I am only guessing. We had a discussion and nothing came out of it. There was no indication of what was to follow—nothing at all. It was just about the cattle going on agistment and a few other things.

CHAIR: They pretty much condoned your plan?

Mr Wallace : No. They agreed with it.

CHAIR: In the meeting, I mean.

Mr Wallace : Yes, to pay the payments. My brother John was struggling because he had been through drought. He had them all at agistment and lost cattle. He was struggling. The agistment was going to give him an income. There was, say, 1,500 that went out originally at two bucks-fifty a week. He had an income.

Senator WILLIAMS: Did the bank have a stock mortgage on your cattle?

Mr Wallace : The bank had a stock mortgage on the cattle and it had a property mortgage on my two places.

Senator WILLIAMS: When did they take the stock mortgage? Was it when they settled the second property, Coronation?

Mr Wallace : No, they never renewed it. They took it out on 2 April 2001.

Senator WILLIAMS: And they just kept it all of the time?

Mr Wallace : It was the same stock mortgage. They never upgraded it. The numbers at the time of the mortgage in 2001 were 5,800. Don’t quote me, but off of the top of my head I think it was 5,800. That is the only one they did. They didn’t upgrade it when we got the new property. We had 7,500 then.

Senator WILLIAMS: I ask that questions because in my life I have seen that livestock and machinery means nothing to a bank because they can be shifted. Usually a stock firm will take a stock mortgage, sell you stock and take their slice. Banks like the land, the fixed asset. You can't tow the land or a house away with a bulldozer. The cattle you can shift. You can sell them to another agent, or whatever.

Mr Wallace : Which I got accused of, but I didn't.

Senator WILLIAMS: I am surprised that the bank payed so much attention to the stock mortgage, but obviously they did.

Mr Wallace : Yes. We don't understand why because, as I said, we had that meeting on 4 July and they went away. Then they sent some emails asking if there were any more cattle to go to mortgage the agistment block and could we discuss it at the time when they met us on 4 July. We had more cattle ready to go and I sent those cattle. I can't remember the numbers off the top of my head. We sent those and eventually he asked me and in the end I said, 'No more cattle to go to Walkedge.' Then, bang! Within a week the receivership was appointed over those cattle only. It was strange.

CHAIR: So you sold cattle to pay the repayments?

Mr Wallace : No, we haven't got to that yet. That is what those cattle were there for. What I am talking about now was in July. They were there to be sold in October. We did a cash flow forecast program with the bank manager, Garry Luff. He was sitting in the accountants office with us, doing it, to make those payments. We were going to sell them from October through to March when the price premium is good and the cattle are fat. There was no drama.

CHAIR: So as far as you know, you disclosed to the bank your plan. They pretty much nodded. They certainly didn’t disagree. And then, with no warning, the receivers were sent in?

Mr Wallace : In the bank's submission here, on the last page, point 3, it says that they have to serve notice under state legislation. Also, under the Property Law Act, section 84,they have to serve a notice of default. We did not get a notice of default because we were not in default. When they put the receivership over those cattle, I was given advice that it was illegal to put a receivership over a small portion of your assets. It has to be a large part of your assets or all of your assets. They can't put it over just a small part.

Senator MOORE: But they did.

Mr Wallace : Yes, they did. Without a reason. We were not in default, as shown by not having a default notice.

CHAIR: Isn’t that just an abuse of power?

Mr Wallace : At the same time that they put the cattle on my brother’s property under receivership, they put his property and his cattle under receivership.

CHAIR: On what grounds?

Senator WILLIAMS: Hang on a minute. They send the receivers in to you, right?

Mr Wallace : Only on the cattle in agistment—the 1,476 cattle pastured on agistment at Walkedge.

Senator WILLIAMS: So they had a stock mortgage on the cattle you put on your brother’s place for agistment?

Mr Wallace : Yes. All of the cattle were contained in that one stock mortgage, if they were agisted or wherever they were.

Senator WILLIAMS: There is nothing wrong with that. They can legally do that.

Mr Wallace : Yes.

Senator WILLIAMS: They took the cattle and sold them up?

Mr Wallace : Eventually. There is a bit more to fill in before we get there. So at the same time they put my brother's cattle and his property under receivership. Ferrier Hodgson were the receivers.

Senator WILLIAMS: How could they put your brother’s property under receivership? Is he with the same bank?

Mr Wallace : He was with the same bank—Rural Bank.

CHAIR: Was he in default?

Mr Wallace : Well, his debt to equity was not 20 per cent but it was not 21 percent. It was in between.

Senator WILLIAMS: Had he missed payments?

Mr Wallace : We never had payments. It was interest only.

Senator WILLIAMS: You still have to pay your interest. The interest is payments.

Mr Wallace : That is correct. I was paying them. I can’t speak for my brother, but I am helping him at the moment.

Senator WILLIAMS: I have had a lot to with banks in the last nine years, but a bank is not going to send receivers into your brother’s property and sell it up if he hadn’t missed a payment. They simply can’t put you into receivership if they haven't got any cause. If they did, I would find it very strange.

Mr Wallace : I'm hearing you.

Senator WILLIAMS: I owe money to the NAB. If I haven't missed a payment, then what right does NAB have to send receivers in and sell my place up? On what grounds? They would have to send you something in writing saying, 'You are in arears. This is a 28-day notice.' Your brother must have had them. For sure. He never had any of those?

Mr Wallace : He never did.

Senator WILLIAMS: Did you have any?

Mr Wallace : No. I had no notice. It just came out of the blue.

Senator WILLIAMS: No written notice saying that you were in arrears?

Mr Wallace : Nope. The bank manager, Mr Luck—

Senator WILLIAMS: This is Rural Bank, right? It is owned by Bendigo Bank.

Mr Wallace : Yes. It is owned by Bendigo Bank and the Bank of Adelaide.

Senator WILLIAMS: Chair, can I suggest we write to Rural Bank and ask them if they gave any notice of default letters to Mr Wallace and/or his brother? It sounds strange to me that they sent the receivers in on you. They have not said that you are in default of your interest payments or that you were late with your interest payments?

Mr Wallace : Nope. There was nothing. As contained in the their mortgages, they have the notices in there. It says that, if applicable, by law they have to send you a notice of default. It has to say what the default is, how much, the remedy, how many days—

Senator WILLIAMS: You are saying that your brother and you never got notices from the bank saying that you were in default.

Mr Wallace : Nope.

Senator WILLIAMS: Well, we need to write to the bank and ask them to clarify that. If they say yes, they did send letters to the Wallaces about this, the committee should ask for copies.

Mr Wallace : Exactly. I have asked them and I can't get it.

Senator MOORE: Chair, I suggest we ask for all correspondence, including that, just in case there is something else lurking in there.

Senator WILLIAMS: Senator Moore, if you ask for all correspondence you could be asking for a big stack of paper.

Mr Wallace : I have a list of documents that I would like, and I can't get them.

Senator MOORE: We can compare that to what we get.

Senator WILLIAMS: What sort of documents would you like to get, Mr Wallace?

Mr Wallace : I have a list of them. One is a notice of default. But you have put me on short notice, sorry.

Senator MOORE: Just give it to us on notice.

CHAIR: Can you give us the list on notice, and we can ask them?

Senator WILLIAMS: Why don't you take a week or so to take the question on notice and come back to the committee with the documents you would like to see? Because you only have another 10 minutes left.

Mr Wallace : Jesus Christ! I’ve got another six hours of my story yet. I had better rattle a bit. The receivers were appointed, so I got on the phone and asked the bank manager, Mr Luck, why I didn’t know anything about it. It came as a shock. I’ve got to be honest, I had no idea receivers—

Senator WILLIAMS: You showed up for work and they just rolled in one day? You were living at Coronation?

Mr Wallace : No, my partner, Michelle, was at Coronation. I was at Newburgh. I remember the day clearly. I finished cattle work out there late in the afternoon. I got in the vehicle just before dark—six o’clock—and I drove to Coronation. We were mustering a paddock called 'valley dam' the next day. When I got to Coronation that night, Michelle said I had a phone call from a bloke called Will Colwell from Ferrier Hodgson and that he is a receiver. I said, 'What the hell is that?' I thought it must have been a bloody salesman trying to sell Tupperware or something. I had no idea. That is how naive I was. Then she said that he is going to Walkedge tomorrow. He and Warwick Yates and Timothy Michael had been appointed receiver managers over Johnny's cattle and property at Walkedge. I don't know if you wanted to go. I said, 'No, I'm not going. We have to muster these cattle.' We were sending them to AMH in Townsville and I said that we have them booked in. So we didn't go. We knew nothing about it.

We didn't hear anything from the bank manager. He disappeared until 25 August. He left us for a while and then he sent an email to Michelle saying, 'I would like to speak to Lee, if possible, to make him aware of what has happened at Walkedge, but I am guessing you already know.' That is the sort of bloke he was. A bank manager that you put your trust in. I then spoke to him, and on numerous occasions I said, 'Why are we in default, Phil? Is it financial? What is it?' He would not answer. There was no default. I didn’t want to stay there with the bank anymore. I also asked the bank manager, 'How come you put the receivership only over those cattle, because I believe it to be unlawful. You can't do it.’ His reply was, 'Just think yourself lucky, Lee.'

I then went to Ruralco finance brokers, because we used to sell all of our cattle through Queensland Rural in Charters Towers. They are a livestock agent. As the cattle were sold, Queensland Rural would send the proceeds to the bank. It never came to us. We engaged their broker to look around for another bank and Suncorp were willing to take us on. ANZ and NAB looked at it, but Suncorp were the ones we chose.

CHAIR: So you didn't get any notification that the receivers were in?

Mr Wallace : Sorry, I skipped that point. On 8 August we did.

Senator WILLIAMS: What year was this?

Mr Wallace : The receivers were appointed on 8 August 2011. When the appointment came, there was a covering letter and my brother's deed of appointment and my deed of appointment were all in the one email to us. Now, I think that that is a breach of confidentiality. My brother is my brother; we are not business partners. So why they sent his deed of appointment to me I do not know. It seems strange.

CHAIR: Did they send it to him?

Mr Wallace : Not that I am aware of. He said that they didn't. It came to me.

Senator WILLIAMS: Sloppy banking, by the sounds of it.

Mr Wallace : The interesting thing is—and I can pull it out and show you—that on the covering letter of that deed of appointment, there is no mention of a default. I was not in default. I never got the required notice. On the covering letter it says that the basis, more or less, of our appointment was to do with fences, water and that sort of thing—operational issues. That was absolute rubbish, because, once again, I asked the bank manager, 'Who did the inspection?' No-one did an inspection.

CHAIR: You were not aware of anyone going out to your property?

Mr Wallace : They visited on 5 July 2011. They went out and visited my brother after they were at Coronation the day before on a routine visit. But he said they did not do an inspection. They drove into the house, drove out to one watering point and then went. That is not an inspection. If they were concerned about the cattle, their security or my assets straying from the property, no-one did an inspection. There are 89 kays of boundary fence. It had been repaired or was new in the last 10 years. Cattle weren't going to wander. There was no threat at all. I have photographic evidence, if anyone wants to see it, of the grass. I did not know at the time that an agent took the photos for me.

CHAIR: These are the photos you gave me an hour ago.

Mr Wallace : Yes.

CHAIR: They look like pretty healthy cattle.

Mr Wallace : They were pretty healthy. The grass was two or three foot high. There was plenty of water. I think I might have said to Phil Luck at the time that a bank can’t adjudicate on animal welfare issues. I believe that it has to be done by biosecurity, the RSPCA or the DPI. A bank can't just sit in their air-conditioned office in Brisbane or Townsville and say, 'We have concerns for the livestock.' You have to get out and actually do an inspection, and I do not believe they can do it. I think it has to be done by the relevant body.

Suncorp tried to pay my debt out on 11 January 2012.

CHAIR: Suncorp were happy to take over your debt?

Mr Wallace : Take over the debt. They were prepared to buy his property, which would have paid his debt out with the bank.

Senator WILLIAMS: Who was going to buy it?

Mr Wallace : Me. In the letter of offer, Suncorp were going to redeem my mortgage, pay Rural Bank the money I owed to them, buy Walkedge off my brother plus put a $350,000 overdraft in there for stamp duty and whatever else it was needed for. We don't know what happened. It was never accepted. Michael Gorogo was the Suncorp bank manager for eastern Townsville. We met on a couple of occasions. He had a lot of correspondence with Rural Bank trying to settle and trying to get the deal to go through. I think it was mid April 2012—

Senator WILLIAMS: How much money are we talking about?

Mr Wallace : It was $7.35 million.

Senator WILLIAMS: That included paying your brother’s debt as well?

Mr Wallace : Buying the property.

Senator WILLIAMS: How much was your brother’s property worth?

Mr Wallace : I can't tell you off the top of my head but I think we only payed $1.2 million to buy into it. It was more than that, but it was a family agreement to get rid of his debt and to get rid of Rural Bank, because we had had enough of them by that stage. It’s funny that they were concerned about their security all of a sudden. They hadn't visited Newburgh, the big, main property where I started, which is where they originally got their security from. They hadn't visited it since 2006. We are now talking 2011 and 2012. They never actually visited the property until 2014 when they took possession of it. So there is an eight-year period where no bank manager put foot on the place. They must have thought I was doing a pretty good job not to come and do their securities, wouldn't you agree, Senators?

Senator WILLIAMS: I think I would probably view the securities if the debt was going up or you were missing payments or something. Then they say, 'Hang on, we better check out our security.' I think that would be the main the reason they would check out their security. But they should have had valuations done on it. Even when you bought the first place, they should have done an evaluation and they would have known what the value was. The further they sweetly go along, if your debt was going down, then they would have no reason to ever visit you. They would say that this is not a problem. But if your debt starts to go up, they would say, 'Hang on. If we are going to set this bloke up, we better check out our assets.'

Mr Wallace : Valuations were done. They did a valuation just before the last property, Coronation, settled. That was on 19 February 2010. They are the figure I gave you earlier from Peter Bartels.

They then rejected that offer. For what reason, we don't know. The following week, exactly seven days later, on 18 January 2012, I got the first letter of demand wanting their payment. Well, hang on; we offered it a week earlier. Something is strange.

Senator WILLIAMS: They had already sent the receivers in?

Mr Wallace : Yes.

Senator WILLIAMS: They have a letter of demand after they sent the receivers in?

Mr Wallace : It was 5½ months after that I got the letter of demand. No notice of default.

Senator WILLIAMS: For the whole debt?

Mr Wallace : For the whole debt. In their mortgage, it says they can appoint a receiver—and as every mortgage document I have of the bank’s says—after an event of default occurs. No event of default occurred. That is why they didn’t give me a notice of default.

Senator WILLIAMS: Were you a company?

Mr Wallace : No, I was a sole trader.

Senator WILLIAMS: It is legal for banks to send receivers into sole traders and partnerships that are not companies.

Mr Wallace : No. I have contacted ASIC and I have written and verbal confirmation from them. The bank cannot appoint a receiver over a sole trader or partnership. They can only appoint a receiver over a company.

Senator WILLIAMS: That is the question I was asking. So, Chair, perhaps we might ask that of ARITA when they are in front of us. Or to ASIC. Can you appoint receivers to a family farm that is not a company and that does not have an ACN if it is a sole trader, a family partnership or even a trust?

Mr Wallace : They can appoint a trusteeship through the Bankruptcy Act over a sole trader or a partnership, not a receiver. That has come from ASIC. I have verbal and written evidence. It has also come from a lawyer I regard highly. I have written and verbal evidence from him saying the same thing. I kept annoying him and he got sick of me in the end, but he actually went on to say to me, 'Lee, I must have been on drugs the whole time I went through law school. There is one thing I do know that I learnt in law school: they can't appoint a receiver over a sole trader or a partnership.'

CHAIR: You only have a minute left, Mr Wallace.

Mr Wallace : The first written reason for the receivership for the agisted cattle at Walkedge came on 19 March 2012 from the bank manager, Glen Teakle, in Brisbane. It was requested by Michael Gorogo, the Suncorp manager. It said that there were operational issues, that they were worried about the poor infrastructure and the wellbeing of the cattle on grass two foot six high.

CHAIR: That was to you?

Mr Wallace : That was to me on Michael Gorogo's request. He wanted to know why, because since August 2011 I couldn’t get a reason why the receivers were appointed on those cattle.

Senator WILLIAMS: Mr Wallace, did you go to court at any time pursuing the bank or the receivers to have them stopped?

Mr Wallace : Yes, we went to court. We had no money, because I didn't hide anything. All the cattle proceeds were sold. The livestock agent—or whatever you call it—sent it to the bank, including the GST. I got into trouble about later on. We had no money to get good lawyers.

Senator WILLIAMS: Did the receiver or the bank pay the GST?

Mr Wallace : I can't comment on that.

Senator WILLIAMS: They were running the book. They sold your cattle, so you wouldn't have known.

Mr Wallace : I can't get any documentation from the bank or the receivers for all the stuff that has happened.

Senator WILLIAMS: You went to court.

Mr Wallace : We lost, because the lawyers—

Senator WILLIAMS: How many times did you go to court?

Mr Wallace : Three or four times.

Senator WILLIAMS: You lost every time?

Mr Wallace : Yes, but the lawyers I had would not go to the area of not receiving a notice of default. They wouldn't question whether the receivership was valid. In October 2012 we went to the Financial Ombudsman Service for help. That was the file was opened. It didn't close until 24 December 2013, at 4.30 pm on Christmas Eve. Under FOS's terms of reference 13.1, while there is a file open with FOS no further legal action can be commenced and if legal action is happening, it can't proceed. Rural Bank’s lawyer Martin Byres purportedly tried to serve a stated claim, which I knew nothing about, on 31 August 2012. He sent it to the Pentland Police Station.

The officer there was Josh Agnew, and I happened to be in there the day he had this document. We went in for different reasons. The bloke who worked for me wanted a heavy vehicle truck licence. The police officer had that letter and never said a word to me. It was late in the week. I got an email on Friday afternoon from the bank's lawyer saying that I was evading service. I went to the police station and wouldn't accept the letter he had there. I knew nothing about it. It was after hours, as usual.

I got on the phone first thing Monday morning at a quarter to nine. I phoned the police officer and I said, 'Have you got a document there for me?' He said, 'Yes, I have, Lee.' I read out the email and I asked if he tried to serve it on me. He said, 'No. I did not tell you about it. They are putting words in my mouth.' They were the exact words of the police officer. I knew nothing about it.

A disbarred lawyer—and this is shows how bad it was for lawyer's advice—told me to go and get that statement of claim. I don't know why I went to him; I suppose we had no money. I travelled down to the Pentland police station, which was 262 kays. The police officer wasn't in his office in the station. I rang him and he was over at the local school. I said, 'I've come to pick up that document you have for me.' He said, 'I've sent it back to the sender.' I have never been served that document. We requested it. We went to Corrs Chamber's office in Brisbane and asked for the statement of claim, but we never got it. We got, 'We have to seek our client's advice.' Eventually I got them to email it to us. Not the original, just to email us one.

Back to what I was saying before, that was served on 31 August 2012. A claim under UCPR rule 24 has a lifespan of 12 months. After 12 months you have to renew it. So that would have taken us through to 31 August 2013, if I was now to close the file until 24 December 2013. They got a default judgement against me with an expired statement of claim on 10 January 2014. Now, to get that claim they also had a request for judgement and a supporting affidavit that went with it. That was supposed to be served on me. I got this out of the Supreme Court. I have rung them on four occasions for advice—not legal advice, just opinions on the procedure. I never got that request. I couldn't defend it because I didn't even now that it was happening.

Then they proceeded, on 23 January 2014, to get a warrant for possession. The same thing. I never got the request for the warrant, the request for the application or the supporting affidavits. I didn't get those. One was from Mark Curry, another bank manager, and one was from Martin Byres, a lawyer. I didn't see them until just recently when the court sent them to me. When we went to court in April, I told Martin Byres that because the case has been idle for over 12 months he needs to send me, under UCPR rule 3891, a note of intention to proceed. He came back to me and said, 'I emailed it to you.' I said that we asked for a copy and the covering letter that went with that notice. He said, 'I can't find it on my emails. I must have posted it to you.' He never sent it. He couldn't send it, because we are still under the FOS, and FOS's terms of reference 13.1, says they can't take further legal action. Rural Bank is a member of FOS, so they have to abide by their laws. So that is a document that he forged, on the 14 April 2014. I can sit here and tell you that he forged it. I have written evidence from FOS. We engaged a company called Dispute Assist. I have written evidence from Wendy Murray. There is no possible way he could have sent that document on November 2013 as he says. And I am out of time. I have a lot more to say.

CHAIR: Senator Williams, do you have any advice about what we can do from here? Because this has gone on beyond banks and receivers. It has gone to the courts.

Mr Wallace : There are cops and stocks. You’d need about six hours to hear it.

CHAIR: Is there anything we can do to go further with this? Senator Moore?

Senator MOORE: What are you after, Mr Wallace? What do you want?

Senator WILLIAMS: Have you been to Kate Carnell, the Australian Small Business and Family Enterprise Ombudsman? It would probably be well worth it.

Mr Wallace : No, I haven't, because we are just out in the Bush. I have no money. I got accused of hiding stuff and threatened by the lawyers to get the police on to me. I've had all of that.

CHAIR: You raised privately with me some issues with the police.

Senator MOORE: You can ask questions through the state minister.

Mr Wallace : Senator Moore, you asked what I wanted. I want to be restored to my original position of 8 August 2011. I believe that the receivership was invalid, as I have explained. There was no notice of default. We were not in default. We couldn't get a reason until 19 March 2012. That is a fair indication. Why did they decline Suncorp's offer? Why did they just want to get rid of me? As the story goes on, it gets pretty despicable.

Senator WILLIAMS: Do you know how much they sold the places for?

Mr Wallace : Yes, they sold Coronation to my sister, Laura Wallace.

Senator WILLIAMS: To your sister?

Mr Wallace : Yes. I was staying with friends and at times I would get depressed and go to sleep at the side of the road. I didn’t think this would happen to me.

CHAIR: It's alright. It happens to a lot of people. You have been through a hell of a lot.

Mr Wallace : I asked her if she could buy Coronation. I really wanted her to buy the big place, but she couldn't afford that. So she bought the little place for $1.58 million. When it was knocked down to her, she got upset because the receivers—

CHAIR: Its all right. Take your time. Acknowledge your pain, mate. Just take it easy.

Senator WILLIAMS: We can give you a bit of Scotch to put in that water.

Mr Wallace : I told myself I wouldn't do this.

Senator WILLIAMS: Don't worry about it, mate. You are not embarrassing yourself one bit. You have been through a tough time.

Mr Wallace : I am not embarrassed, Senator. The one thing is that I have done nothing. I can walk down the street anywhere and hold my head high. I have plenty of support.

Senator WILLIAMS: Exactly. So the $2.4 million Coronation, they sold to your sister for 1.58 million. She could not afford to get the big place, the 97,000 acres?

Mr Wallace : No.

Senator WILLIAMS: Go on.

Mr Wallace : I was in contact with the Queensland government at the time, Minister Andrew Cripps. I explained that I never got a notice of default, and all of that. He said that you have to. It is the law. You have to get a notice of default. He rung up 20 minutes after the place was sold and said, 'Lee, they can't sell it.’ I said, 'It’s too late, it has just been sold.' He told me that you can go to dispute but I said that I won't because I now have somewhere to sleep.

Senator WILLIAMS: So your sister bought the place. Is she still on the place?

Mr Wallace : No, she sold it again. The other property, which was valued at $6.125, was sold with a minimum of 4,200 head of cattle, including a lot of my stud cattle and a cow that I had paid $40,000 for. It was progeny of a bull that I bought in partnership with Michelle Lamb's father. He was a top-priced red bull. He's not now. I think one sold for $150,000. We paid $145,000 for him in 2006. They were sold with that place.

Senator WILLIAMS: How much for?

Mr Wallace : Well, it was passed in at Townsville for $4.7 million. They negotiated and sold it for $5 million.

Senator WILLIAMS: What year was this?

Mr Wallace : It was 2014.

Senator WILLIAMS: With 4,000 head of cattle given in.

Mr Wallace : It was a minimum of 4,200 head of cattle. There was more than that, plus the property was sold for a negotiated $5 million. So they valued the place at $6.125 million. What's the cattle?

Senator WILLIAMS: This $140,000 bull you bought in 2006 would be nearly burnt out by 2014, wouldn't he?

Mr Wallace : Yes. Well, he is a stud bull, so you look after him. But, still, the progeny he produced in the first three years through embryo and AI programs and natural servicing meant there were a lot of calves.

Senator WILLIAMS: How did they sell the place?

Mr Wallace : Newburgh was a public auction in Townsville.

CHAIR: It got knocked down, didn't it?

Mr Wallace : It got knocked down for $4.7 million and then the buyers negotiated to $5 million. There was an agent there—and I'm not going to disclose his name because he has been very good and I have disclosed just about everybody else's names—who told me that when Newburgh was knocked down the buyers wanted clauses added in the contract. One of them was that they don't pay for the cattle until the drought breaks. When does the drought break?

Senator WILLIAMS: The cattle were given in with the property?

Mr Wallace : They were sold with the property.

Senator WILLIAMS: It was walk in, walk out? When you buy the property, the cattle are given in.

Mr Wallace : We don't know what the added clauses were. Maybe they divided it and came to a decision. We don't know. We need that contract. We need the settlement statement for Newburgh to see.

Senator WILLIAMS: The point is this: it looks like the receivers have not done anything wrong under section 428 because they actually advertised and put it up for public auction, which gives them a bit of relief.

Mr Wallace : You are correct there, but they should never have been there in the first place.

Senator WILLIAMS: We have seen so many properties go on a fire sale for little of their value. With this one, at least it was advertised clearly and put to public auction.

Mr Wallace : Yes, but, you know, even the judge said in one of the hearings—

Senator WILLIAMS: It was still drought, was it?

Mr Wallace : Yes. There was plenty of grass. Even the contracted livestock came from far away because we looked after it. We managed our properties spick and span. It was 100 per cent. We did not run them down. When the receivers came, the first letter they wrote said that everything was run down. That is a load of crap. It runs down after they take possession. That is when everything falls down, because they do nothing. Cattle perished on Newburgh. The big mob perished at Newburgh. They were too lazy to go and start pumps. I have photographic evidence.

Senator WILLIAMS: Are you saying they literally died of thirst?

Mr Wallace : Yes. There was no water in the troughs.

Senator WILLIAMS: What?

Mr Wallace : When potential buyers of Newburgh did an inspection, they rang me and said that they were horrified. They said: 'Lee, there are cattle dead around the troughs. There was no water.'

Senator WILLIAMS: That is disgraceful.

Mr Wallace : It is disgraceful. When you go to court, the judge listens to these so-called experts that sit in a Ferrier Hodgson office in Brisbane. They are experts. They have no idea how to get out and do things.

Senator WILLIAMS: You had diesel pumps? You had to crank up pump jacks?

Mr Wallace : We had diesel pumps, solar pumps, submersibles—

Senator WILLIAMS: They would pump into a holding tank, which gravity fed to your troughs?

Mr Wallace : We built troughs and turkey nests. We never lost cattle. What is the difference when they came in? We had the best grass we had had. We had been through a drought. We had been through a BJD quarantine where we couldn't sell cattle. We nursed all of that. We never lost cattle.

Senator WILLIAMS: If you are grassing and have water, you are a fair way to keeping your stock in pretty good shape.

Mr Wallace : Definitely. When you handle your cattle properly and you have quiet cattle, it makes a difference. They are not stressed at all.

Back to the selling of the property. With the accountant's help, that $5 million, less costs—$5 million is what they negotiated and I don't know what the extra clauses are in the contract—has all gone to the account. According to me, it is about $830,000 out of $5 million, less costs. When they tried to bankrupt me, I saw where they said it was about $4,830,000. So there is a neat $4 million missing somewhere that has not gone to my account.

CHAIR: Hang on. Explain that again.

Mr Wallace : The accountant in Townsville, Sonia Viero-Malone from Crowe Horwath, sent me a bill for $102. I had no money, so I said to her: 'Sonia, how am I going to pay this? What is this bill?' She said, 'Lee, that is for BankLink.'

Senator WILLIAMS: What?

Mr Wallace : We set that up in the early days—BankLink for the bank straight to our account. That's legal. That is all good. But the thing is, I hadn't seen a bank statement since December 2013. The bank stopped sending my bank statements. When she said to me in 2015 that the bill is for BankLink, I said: 'Beauty! Do you have the bank statements?' She said, 'No, we don't have bank statements, but we have all of the incomings and outgoings.' So she sent me a ledger report and a reconciliation.

Coronation, the property my sister bought, was sold on 12 August 2014. It settled on 11 September 2014. The deposit that was paid on the day, which was $158,000, and the remainder of about $1.3 million went in on the same day—that is, on settlement day. So both of those figures there are for Coronation, paid in full, even though it is undervalued. Newburgh was sold on 5 December 2014. The settlement date was 16 January 2015. The report from the accountant says that, out of the $5 million, $830,000 has went in on 16 January 2015. There is no more money. There is no other identifiable money.

Senator WILLIAMS: Wouldn't the receivers have taken that?

Mr Wallace : Hang on, Senator. They took over 9,000 head of cattle, too. Maybe that is part of the cattle they took from Newburgh. I don't know, because I was only paid $426,001. They were very generous to give me the one dollar! That was in October 2012. They paid that for the cattle on agistment. They gave me 42 per cent of the proceeds. Where has the rest gone? Receivers?

CHAIR: So there has been no reconciliation and no explanation?

Mr Wallace : No. Back to Senator Moore's question. I want to be fully restored back to my original position, because the receivership that caused all of the problems in August 2011 was, in my opinion, invalid. I want my debt back at the day of that receivership. Whatever that debt was. I want my properties back. I want my cattle back. I want back everything that I had. Put it this way, what would you say, Senator, if those receivers were not appointed? I would still be there, wouldn't I? If they were not there to sell those cattle, I would still be in possession of everything.

Senator WILLIAMS: That is a big call to ask a senator to say that, because we have not been to your property.

Mr Wallace : That's okay. She asked me what I wanted. Sorry, Senator, to put you under that.

Senator MOORE: That's okay.

Mr Wallace : That is what I want.

CHAIR: Anything more?

Mr Wallace : No, that is it. I have plenty more but this is against the federal government.

Senator WILLIAMS: You are twenty minutes over your quota. It was good to hear, Mr Wallace, and good luck.

Mr Wallace : If you want to hear more, I have plenty more. I haven't even got to the part that upset me before.

CHAIR: You are allowed to make a further submission in writing if you want to clarify and add to this.

Mr Wallace : As I said, my partner, Michelle Lamb, had a 50 per cent equity share and helped me build Newburgh, purchase Coronation and build the herd numbers up. They knew that. They drafted her off. I will put it in writing.

CHAIR: Yes, in an additional supplementary submission. Thank you very much, Mr Wallace.

Mr Wallace : Thank you.

CHAIR: Where are you living now?

Mr Wallace : Since Coronation was sold we are living halfway between there and Charters Towers. Some people we know were kind enough to rent us a 100-acre block. It has a house and shed on it. They are renting that to us and we are very appreciative of it.

CHAIR: It is a long way to come. Thank you very much.