Suncorp has admitted it has failed to complete a review of its standard small business contracts to see if they comply with new unfair contract laws, despite a request from the corporate regulator to do so in 2016.

It also conceded it has failed to tell its small business customers that their contracts may be subject to the new laws and that their contracts may contain potentially non-compliant terms.

The banking royal commission focused its attention on Thursday on small business contracts being offered by Australia’s banks.

The commission was reminded that, in November 2016, the federal government had extended unfair contract terms provisions applying to consumers under Australian Consumer Law to cover “standard form” small business contracts, covering small business loans of up to $1m.

The government had changed the law because Australia’s small businesses were being offered contracts by major banks on a “take it or leave it” basis – known as “standard form” contracts – with limited opportunity to negotiate the terms.

Following the law change, the corporate regulator became concerned that Australia’s major banks were not doing enough to bring their small business contracts into compliance with the new law, so it began reviewing the contracts offered by the big four banks.

On Thursday, the royal commission heard Suncorp had still not reviewed all of its small business loan contracts to see if they were complying with the new laws – despite it being two-and-a-half years since the laws were introduced.

The commission heard the Australian Securities and Investments Commission had told Suncorp in late 2016 that some of its contract terms ought to be changed, and that Suncorp only made changes to some of its contract terms in May and August 2017.

Steven Kluss, Suncorp’s executive general manager of lending, then told the commission that other clauses in Suncorp’s small business contracts could probably be improved.

“Our intention is to make the changes but that’s not to say the existing clause that is there is unfair,” he said.

The National Australia Bank also admitted it had no legal right to demand funds from the sale of a musical instrument importer’s home be used to pay his business loans.

Witness Ross Dillon told the commission on Thursday he would not have sold his home and broodmare farm in the New South Wales Hunter Valley if he knew he would end up with nothing.



NAB executive Ross McNaughton conceded NAB had no legal entitlement to use the proceeds of the 2015 sale of the property named Goanna Downs towards the loans for Dillon’s National Music business.

That was only revealed when McNaughton appeared at the royal commission on Thursday.

Senior counsel assisting the commission Michael Hodge QC asked: “Is it fair to say you now understand that NAB had no lawful entitlement to insist on the full proceeds of Goanna Downs being used to pay down the debts of National Music?”

McNaughton said that was correct.



The general manager of NAB’s strategic business services division said he had only realised that when reviewing his evidence for the royal commission.



NAB held security over Goanna Downs for Dillon and his wife’s mortgage and personal borrowings, but not for National Music’s business facilities.



Dillon told the inquiry he planned to use some of the money from selling Goanna Downs to reduce the business debts, but would not have gone ahead if he had realised “we weren’t going to get a penny”.



He was surprised when the bank told him it would take all the funds from the sale.



NAB’s barrister Wendy Harris QC spent some time questioning Dillon, including about his claim that he felt under pressure from the bank to sell the property.



She suggested NAB in fact supported National Music through some pretty difficult times and continued to do so.



Dillon said the bank had been amazing, with the exception of the bankers around the time of the Goanna Downs sale.