BankWest’s move to arbitrarily cut the term of a 13-year loan to one year kicked off a chain of events that ultimately ended in receivership for a NSW publican, the financial services royal commission has heard.

Stephen Weller and his wife bought the Nambucca Hotel at Macksville, NSW in 2005 using a loan from BankWest, which is now owned by the Commonwealth Bank. In 2008 they bought out their partner in the business using a new $3.72 million Bankwest loan that had a term of 15 years.

The bank had the business valued at $4.53 million in 2009, but the global financial crisis hit around then and began to affect the business revenues.

A year on, the bank informed Mr Weller that things had changed and the cost of the loan was greatly increased.

The initial agreement set interest rates at a margin of between 2.24 and 2.27 percentage points above the bank bill swap rate (the rate of interest that banks charge to lend money to each other). But the margin was then boosted to 3.95 per cent and a higher level of principal repayment.

“I wanted to negotiate a lower amount as the principle repayments they were proposing were higher than I thought we could manage at the time,” Mr Weller said.

So he contacted the bank and made some headway in loan costs but was up for another shock.

“Hi Stephen, my apologies for not getting back to you sooner … I would like to cover off a few points with you. As discussed the loan would be amortised … however with a term of two years,” the bank told him in a shock email.

There were some cuts in principal and interest but when the deal was actually signed the term had plummeted again, to only 12 months.

So the Wellers had gone from the security of a 13-year loan to the insecurity of having to renegotiate their financing every year.

By September 2012 the bank again contacted him claiming the value of the business and the property had deteriorated without giving him any evidence.

The bank demanded more collateral so the Wellers agreed to sell the rights to three poker machines and ultimately their Sydney home. A further valuation was done but the bank would not tell him the outcome, saying only the business was valued around the $3.6 million level of the mortgage.

When the poker machine rights were sold, the funds were paid to a NSW government authority that was slow in disbursing them to the bank, meaning they had run over a bank-imposed time limit. The bank, meanwhile, had said the loans were now due but created a document to hold off forcing repayment, which it said the Wellers had breached over the poker machine deal.

Mr Weller said he was now working “from 3am to 9.30 at night” to keep the business going and, despite the problems, said he was meeting his payment commitments.

By November 2013 BankWest demanded he sell the hotel by February 28, 2014, an impossible deadline since the estate agent had told him it was useless to market the property in December.

In the meantime Mr Weller had complained to the Financial Ombudsman Service to prevent the bank calling in receivers. The couple sold their house, which had not been security for the business loan.

In July 2014 receivers were called in and the bank called in personal guarantees he had given. Those issues “were resolved” with BankWest in the Supreme Court in 2016, the commission heard.

Commonwealth Bank had taken over BankWest in 2008 during the height of the GFC when regulators feared a banking collapse. It discovered soon after that more than 51 per cent of its loan book consisted of risky commercial lending. It moved to cut commercial exposures back to 45 per cent.