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The National Australia Bank Takedown of Wide Bay Brickworks

The National Australia Bank Takedown of Wide Bay Brickworks

Any broad account of bank malpractice in Australia would be seriously remiss if it neglected to document the saga of the destruction of Queensland brickmaker Wide Bay Brickworks (WBB) and the destitution of its principal, Sante Troiani, and his wife Rita.

Evan Jones and John Salmon
[This article has been written at the initiative of its authors. It is 17,000 words long]

I      The singular crime of the NAB’s destruction of Wide Bay Brickworks

In terms of scale, the takedown by the Commonwealth Bank of over 900 Bankwest commercial borrowers after the CBA purchase of Bankwest in December 2008 would rank as one of the most significant banking crimes in Australian history. However, in terms of strategic intent, complexity of manoeuvres and sheer mendacity the WBB takedown would surely deserve the number one spot.

Sante Troiani was Managing Director and, with his wife Rita, majority owner of their Bundaberg-based company, Wide Bay Brickworks Pty Ltd. Troiani had reconstructed a defunct brickworks after 1975, turning it into a successful and innovative enterprise during the 1980s. In the financial year before the move to the National Australia Bank in late 1993, WBB had a revenue of $12.5 million and almost $1.2 million net profit, employed 130 people and was recognised as a major industrial concern in Queensland. Troiani had tens of patents to his name, clay reserves in quality and quantity to die for and was selling bricks into Asia and New Zealand.

The business was foreclosed by the NAB and receivers sent in in 1999. We have inferred from documentary evidence (discovered after foreclosure and bankruptcy, and incomplete) that the Troianis have been the victim of an engineered defalcation of their business before and from the outset of their banking relationship with the National Australia Bank in 1993.

Document discovery during litigation was derisory. The NAB successfully sought Summary Judgment against Sante & Rita Troiani as Third Party Guarantors in the Supreme Court of Queensland. The NAB was awarded judgment in its favour on 19 March 2001, formalised on 22 March, without the NAB being compelled to discover its WBB file documents. WBB records were in the hands of the receivers, unavailable to the Troianis. The transcript of the 19 March 2001 hearings was withheld, with its existence subsequently denied. The NAB had the Troianis declared bankrupt in May 2003 after a September 2002 hearing.

II      The Boral factor

Why was the hitherto successful and seemingly innocuous Bundaberg-based WBB a target of the NAB? Because the giant building products manufacturer Boral was envious of WBB’s regional significance and Boral wanted in on the action.

Boral started life in 1946 as Bitumen and Oil Refineries Australia Ltd, remaining insignificant for several decades until planned expansion as a diversified company during the 1970s – especially under astute and ambitious CEO Eric Neal. It then moved to become an aggressive takeover merchant. By the early 1980s it employed then sophisticated computer technology in analysing the financials of potential targets. Boral moved into the US brickmaking market in the US in the late 1970s, and its local brickmaking footprint grew substantially with the acquisition of Pacific Brick P/L from BHP in 1980. Brickmaking competitors were in its sights. (1)

In the early 1990s, Boral and the NAB had cross shareholdings and several Directors in common, including Bruce Watson, then Chairman of Boral’s Gas Corporation, P J W Cottrell and ex-NAB CEO Nobby Clark. As noted below, new NAB CEO Don Argus had been earlier presented to Troiani during his contaminated gas dispute as a Boral employee.

Troiani had been using LPG from Boral’s new Gladstone supply depot (at that stage the only supplier) to fire his kilns when he switched from diesel in 1984. From 1985, the gas supplied was persistently contaminated or inappropriate, dramatically impeding production of quality bricks. This problem was especially a concern for bricks produced from a new imported Spanish kiln, with production beginning in early 1986. Troiani had the gas tested anonymously in Boral’s Brisbane laboratory, the tests confirming his suspicions. Complaints to Boral went nowhere. In 1987 Troiani enlisted then Premier Joe Bjelke-Petersen as a mediator and Boral subsequently paid WBB compensation of $98,000 in 1989, acknowledging culpability. Troiani claims that WBB lost 15 months of effective production with the new kiln, with the loss of an unrecoverable $10 million in revenue as a consequence.

Boral continued with this means of undermining its competitor. Boral benefited directly from WBB’s bricks quality problem by selling bricks to WBB clients. With Troiani experiencing unusual on-and-off relations with clients of brick sales, he concluded that someone within his staff was tipping off Boral regarding his contracted sales and prices paid. Evidently, Troiani did not at that time pursue the source of the leaks – to his cost.

In the process of Troiani seeking redress over the gas problem, Troiani twice found himself in the company of a man presented as a Boral employee. The first was at a Boral’s Gas Corporation 1984 opening at Gladstone of an LPG storage and supply depot; the second, 7 April 1987, at a meeting in Bjelke-Petersen’s office. The person turned out to be Don Argus, a rising NAB staffer in Queensland rapidly promoted to ‘Executive Director Banking’ and soon to become the NAB’s CEO in October 1990.

When Troiani joined the NAB, the bank demanded that WBB remain with Boral’s gas subsidiary, in spite of the fact that a new competitor (Elgas) had appeared and was offering cheaper rates. According to Troiani, the gas problems returned. The local NAB manager who had been cold-calling Troiani to win his business (see below) told the naive Troiani that no relationship existed between the NAB and Boral, when Troiani noted to the manager that any such connection would mean no deal.

In mid-1996 Boral, through the NAB, offered to buy WBB. (2) Troiani rejected the proposition. Ray Pridmore, head of NAB Asset Structuring, was at the same time threatening Troiani with the claim that Troiani will end up with nothing (as it transpired). (3)

Boral has long had form in disliking the phenomenon of competition. Greatest publicity has been afforded the events of the early 1990s’ recession which led to vicious price competition in Melbourne in concrete masonry products. The Australian Competition and Consumer Commission (ACCC) brought a case of misuse of market power (s46, Trade Practices Act) against Boral. The ACCC’s suit was denied by the Trial judge, reversed on Appeal in favour of the ACCC and ultimately denied by the Gleeson High Court, which equated competition to the law of the jungle (Boral Besser Masonry v ACCC, HCA 5, 7 February 2003).

The facts are that Boral escalated existing price discounting in early 1993, facing the prospects of new entrant C&M soon to be producing from a more efficient plant, with the strategic intent to eliminate competitors (especially C&M) so that when the market returned to normal, stability would prevail. Boral’s substantial scale in the market (market power?) enabled that strategy to be pursued and to succeed.

Simultaneously, Boral had been participating in a Brisbane-based concrete cartel, which was successfully prosecuted in 1995. ACCC Chairman Allan Fels called this market fixing “… a particularly blatant cartel in which the suppliers met regularly to share out tenders, to collude on prices for tenders and to ensure that each participant achieved an agreed market share.” (‘Issues in Competition Law’, Speech to the Queensland Press Forum, 12 June 2003.)

In 2009 it came to light that Boral subsidiary Midland Brick tried to prevent competitor brickmaker BGC from gaining approval for a brickworks on Perth airport land via ‘an ugly and defamatory’ campaign (Simon Canning, ‘Brickbat for ‘dirty tricks’ PR firm’, The Australian, 1 December 2009). Andrew Burrell (‘Boral’s brickbats backfire’, Australian Financial Review, 30 November 2009) notes:

‘Boral managing director Rod Pearse lobbied the federal government to block a rival $110 million brick-making operation in Perth … Boral has now admitted it helped generated the community backlash by covertly funding defamatory DVDs and leaflets aimed at stopping the rival brickworks and protecting its status as WA’s largest brick manufacturer. The material falsely warned the plant would damage the health of local schoolchildren due to its high level of carcinogens, increase local death rates and become a target for terrorists due to its proximity to Perth Airport, including the phrase “remember 9/11”’.

Later, Boral purchased the largest privately-owned construction materials business in Queensland (analysts thought the price excessive). Significantly, ‘The purchase eliminates a cost-cutting competitor and increases Boral's market share in the state’ (Philip Wen, ‘Boral gets set in Queensland with $173m buy’, Sydney Morning Herald, 16 April 2011). In short, Boral didn’t like effective competition.

If the well-meaning reader finds themselves in disbelief that a bank of such good repute (sic) as the NAB could pursue such a stunt (dismantling a family company in competition with a related corporate giant), there is a precedent. (4) In the late 1980s, the NAB took down brutally a small pioneering mobile phone equipment firm, Brendan Communications, starting up in Melbourne and Sydney. Its principal, John Carroll, was in on the ground floor of mobile telephony. (5) Carroll believed that the destruction of his business by NAB was in the interests of Telecom (now Telstra), a major NAB customer. Carroll’s life was threatened, and his outer Melbourne installation was trashed by the local sheriff using conscripted prison labour.

The ‘reputable’ law firm Mallesons Stephen Jaques acted for the NAB in the takedown of both Carroll’s Brendan Communications and Troiani’s WBB. Mallesons also acted for Ferrier Hodgson, WBB receiver. They don’t teach ethics in law school.

III      The seduction of Troiani and the booby-trapped facilities

Sante Troiani moved his business to the NAB in late 1993 after much importuning by the NAB’s then Bundaberg manager Pat Freney. (6)  In April 1993, NAB Bundaberg manager Freney made the first of five ‘cold calls’ to Trioani to attempt to have Troiani shift his business to the NAB from ANZ Bundaberg.

In June, Freney induced Troiani to apply for the NAB-sponsored State and National Ethnic [Small Business] Awards. According to Troiani, Freney claimed that Head Office was behind his suggestion (why would Head Office know about WBB Bundaberg?). The Freney documentation (24 June) claims:

‘Sante Troiani represents a truly fitting example of the contribution made to the Australian economy by an ethnic person. Beside Sante’s business activities, he is well known as a supporter of various sporting and charitable organisations and Rotary.’

Troiani was subsequently granted both the Queensland and National Ethnic Awards.

At the same time, Freney initiated a loan application process for Troiani at the NAB. In August, Freney told Troiani that NAB Head Office had had the acquisition of WBB’s business on its list for some time (why?). At one stage, Bundaberg manager Freney had claimed to Sante, “Sante, you can borrow as much money as you want”.

Troiani’s move to the NAB was made more attractive to him by the fact that his earlier submission of a loan application to the ANZ (his bankers since 1978) for the substantial sum of $11,850,000 had been rejected by ANZ in a letter 2 September 1993. The ANZ declined the application, noting that “We would envisage that an equity contribution of about $5 million would be needed to make the project viable for a lender”.

Troiani had become convinced of the merits of a ‘state of the art’ kiln that he had observed during an August 1992 trip to an industry conference in his home country of Italy, but the kiln came with an expensive price tag. Hence the ANZ loan application. It appears that Troiani became obsessed with the Mori kiln and its possibilities. WBB then possessed three smaller kilns and was struggling to meet demand. The Mori kiln formally promised much faster baking. The Mori kiln was the key factor that led Troiani to be readily seduced by the NAB’s importuning and which ultimately led to his family’s and his firm’s undoing.

In November 1993, the NAB approved a welter of facilities for WBB – a ‘multi option facility’ at $7,450,000, a $1.2 million bill facility, a 10-year leasing facility at $8,400,000 (grossed up to almost $13,600,000 with upfront interest and monthly repayments of $106,900), and a $500,000 overdraft. The leasing facility was to finance the purchase of the Mori kiln. The rest of the facilities were essentially for the preparation, installation and employment of the kiln itself. Although the $1.2 million bill facility was included in stamp duty costs, it was evidently never offered to Troiani – an unexplained anomaly.

The Multi Option Facility offered as alternatives a Bill Facility expiring 31/12/2003, a Fully Drawn Advance (annual repayments of $827,778 p.a. commencing 31/12/1995 and expiring 31/12/2003, or an Interest Only loan expiring 31/12/2003. It appears that the Bill Facility option was taken up. The multi option facility was a minefield of complexity and was the key means by which Troiani was defaulted and defrauded. Salmon showed the NAB’s ‘master approval’ letter to three other retired NAB managers and they all could make no sense of it.

Thus did the NAB offer a loan package in excess of that which the ANZ had only recently declined. In banking terms, the package was not a viable proposition. But then, the NAB was, as it transpired, not interested in viability – on the contrary.

One has to confront immediately that Sante Troiani was an easy catch for the bait. Troiani was a master craftsman, with multiple patents to his name (Troiani was still, naively, taking out patents only months before he was foreclosed). His brick and block types were revolutionary – in lightness, noise reduction or in being more cyclone and earthquake resistant. His bricks and blocks sold in Darwin and in Asia for the latter reason.

He had also astutely acquired (following the research and advice of geologist Jim Sawyers) clay reserves on several sites that provided WBB with clay of high quality, in quantity and of varying character – unmatchable. The Italian Mori kiln manufacturers themselves tested WBB’s Bundaberg clay deposits and advised Troiani that the quality of some was unsurpassed, even in Europe.

However, if Troiani had a keen eye for property investment opportunities, his financial nous was limited. He was dependent on WBB staff and hired consultants, not least his inhouse accountant Kerry Lavering and external accountant and auditor Daryl Corpe (who became a friend). Corpe would have prepared the applications for both the rejected ANZ loan and the NAB loan, and thus would have known that the NAB loan package was not a viable proposition. The loan application took atypically almost three months to be processed, and it was atypically approved at Head Office Melbourne, as it was clearly above the Delegated Lending Authority of Branch manager Freney and of State Administration. The length of time taken highlights that there must have been extended discussion at Head Office regarding the character of this loan package.

It appears that Lavering and Corpe, by virtue of them being privy to some documentation of the NAB’s financial machinations and apparently not keeping Troiani closely informed and advised, became accessories (unwitting?) to the NAB’s ambitions to destroy WBB. NAB sent documents to Lavering at a fax number (4151 3827); it is possible, indeed likely, that Sante Troiani was never made aware of this fax line or the existence of such documents sent in this manner.

Thus was Troiani extremely vulnerable. English was his second language, and he apparently remained lacking in confidence in it. Others were used to write his business correspondence. He was naïve and neglectful on financial matters. He would not admit to not understanding matters told to him, because of pride for fear of being seen a fool. In any case, he had no reason to date to mistrust a bank lender and its seeming professionalism (he had been well treated at ANZ and other financial institutions), and he was obsessed with the Mori kiln.

At the meeting for the signing of loan and related documents presided over by Freney and another bank officer, which took place in the WBB boardroom, Daryl Corpe was present, but Sante and Rita Troiani had no legal representation nor any immediate legal advice. Troiani later claimed ‘No one explained the documents to me. Even today I do not understand bank bills’. All that Sante knew was that the NAB manager came to see him every 90 days to sign a document to facilitate the bill rollover. (7)  At the meeting Sante & Rita were also induced to sign documents acknowledging that the terms and conditions of the facilities and their obligations as guarantors had been fully explained.

At this meeting, Sante & Rita were also required to offer a list of properties as security for the loans. Rita asked, to the effect, ‘Why are we the only people giving security?’. Sante recalls that someone said that the reason was because the other members of the Board did not have enough security.

Thus did Sante and Rita Troiani become ready victims of what was to follow.


(1) See John Alexander, ‘Boral’s Tough Task Master’, Australian Business, 8 October 1981.

(2) Roger Walker, Ernst & Young, to Sante Troiani, 19 July 1996, following Walker’s exchange with Pridmore, 6 June, as below.

(3) Ray Pridmore was an ex-British policeman before his employment at the NAB.

(4) A small business NAB customer in Western Australia also believed that his business was destroyed in the interests of a major food manufacturer but he could not find decisive proof for his belief.

(5) Carroll had reception towers strategically installed on the prominent Tooheys brewery building (now Kennards Storage) on Parramatta Road at Taverner’s Hill in Sydney. Latter day mobile towers are firmly ensconced on the ideal site. Jones thinks of Carroll, now deceased, every time he drives past the site.

(6) Freney subsequently moved to Suncorp, as did other NAB operatives.

(7) Therein is an inkling of the utter inappropriateness of the bill facility for small business and farmer capital requirements.


IV     The takedown of Wide Bay Brickworks

The new kiln began operation only in early December 1994, eleven months after the loan approval. The immediate results were excellent, but the kiln was closed down for the Christmas break (the Italian installers returned to Italy). After the kiln was re-started on 11 January 1995, with commissioning still incomplete, problems with brick production immediately arose, severely damaging the kiln itself, with substantial subsequent costs involved in remediation. Repair of kiln rollers was botched (Sante suspected wilful sabotage, including from his own staff), lacking identical replacements from Italy, and costs escalated.

WBB’s overdraft had already blown out over the $500,000 limit. In January 1995, Troiani met Barry Byrne, NAB Bundaberg manager (he had replaced Freney in that position). Troiani sought an extension of the overdraft to allow the complete commissioning of the kiln. Byrne replied that WBB couldn’t pay its bills, threatened to bounce WBB cheques, and claimed that any increase in the overdraft limit would require more security. Troiani, evidently desperate, offered security over the family ‘farm home’ on Moore Park Road Bundaberg, then unencumbered, and security over industrial land at Yatala on the Gold Coast – the latter in the name of the WBB Directors’ super fund. (8) The new deal was finalised in March 1995 and the overdraft limit lifted by $600,000 to $1.1 million. Nevertheless, by April, WBB could not pay the monthly kiln lease payment due, and the liquidity impasse continued.

WBB went from a net profit of $1.24 million in 1993-94 to a net loss of $1.012 million in 1994-95.

By mid-1995, at the very least, WBB was being prepared for the knackery. This was done at the instigation of Ray Pridmore, Global Head, NAB’s Asset Restructuring Unit at Head Office. Pridmore’s involvement means that WBB was already in Asset Restructuring (i.e., default mode) a mere nineteen months into the loan package. The fix is in. Indeed, it is likely that WBB was put into default mode immediately after the loans drawdown.

The first outward sign of the takedown plan was in July 1995. The NAB sent in to WBB a Victorian investigative consulting firm, Invetech. The consultancy was sent in by the NAB, ostensibly to investigate teething problems with the Mori kiln, but Invetech personnel knew nothing about brickmaking. The firm’s principal arrived unannounced on 28 July with a Brisbane NAB employee. Sante, suspecting nothing, did not accompany them in their tour of the plant, and he was not questioned by the visitors.

Invetech’s report, dated 24 August 1995, is sub-titled ‘Protect Peep’ (!), and is a sketchy affair (though apparently not its cost, attributed to WBB). The Introduction notes:

‘This report is a summary of the first impressions … It is important to note that Invetech has not sighted aby financial data or statistics and has verbally received only indicative estimates of [cost of goods sold] and other data. In no way are any comments here the result of a detailed analysis or an audit to any degree. This report is based on impressions gained on a one-day visit lasting five hours, during which Sante Troiani himself was not interrogated.’

The report appears to be useful in querying the extent of inventory of unsold production and for the necessity in managing the production/sales nexus, and in claiming that the different schedules and scale involved with the new kiln demands a wholesale restructuring of the logistics of WBB’s manufacturing and marketing processes.

In a throwaway line, the Invetech report claimed that WBB had several months to fix the problems – ludicrous, given the problem of embedding the dysfunctional kiln – and that it would check back again in several months. Invetech does a second report, dated 22 November 1995, claiming that “WBB has been struggling for some time to be profitable and financially sound …”. This claim is simply inaccurate, as the 1993-94 figures (as noted above) were very healthy indeed. Invetech’s lack of objectivity is transparent.

Regarding the Mori kiln, Troiani initially inferred that the problem with the kiln was due to internal dysfunction. He initially thought to sue the manufacturers for damages, to the tune of $3.2 million. Pridmore claimed that the bank was the leaseholder and thus it was the bank’s place to sue the manufacturer but, predictably, no such action took place. It was only subsequently that Troiani again put the blame on the character and quality and of Boral’s gas supply. More, the volume of gas consumed (and thus expense), necessary to run the kiln, was extremely high. The NAB had dictated to Troiani, following loan approval that WBB must return to Boral for its gas supply.

Tragically, the Mori kiln was only ever used intermittently until the foreclosure of WBB in 1999, not least because the character, volume and cost of gas consumed which Troiani was not able to counter because he was constrained to source it from Boral.

In the meantime, a September 1995 NAB letter advises WBB that the repayment program was not being adhered to, company liquidity was insufficient, and that the company must give bank repayment priority at all times.

At an early February 1996 conference called by Pridmore, Pridmore states that WBB’s financial problems are such that its principals can’t get out of the company’s financial problems by themselves. Pridmore demands that WBB must appoint KPMG to find a partner, emphasising again the need to reduce debt. Pridmore demanded $500,000 from the Troianis’ personal resources by April 1996.

Demands on WBB and Troiani were persistent.

As noted above, in mid-1996 the NAB made an offer to Troiani to sell WBB to Boral – for $18 million. A telephone exchange between Pridmore and Roger Walker of Ernst & Young (representing WBB) on 6 June 1996 is instructive. Walker jotted down fragments of the exchange under ‘Discussion Notes’: ‘not subtle man, 1 syllable words’; ‘not brook any messing around’; ‘good offer; get the buck out’’ ‘will bankrupt him’; ‘I want Sante to give a price to walk away. Not above $2-3m.’ [i.e., over and above the seeming $18 million offer]; ‘wont (sic) get out without Boral’; ‘playing games with us, need something back tomorrow’; etc. (9) It appears that the NAB originally wanted to force Troiani to hand over WBB to Boral but, at some stage (rather than

Boral being readily exposed as a predator), the strategy moved to destroying WBB as a genuine competitor. Sadism from then on was to be the order of the day.

In September 1996, WBB’s auditors (Corpe), probably acting under NAB pressure, advised WBB to seek re-financing to the tune of $12 million from the Queensland Industry Development Corporation. As the prospect of such re-financing was out of the question, such demands constitute harassment pure and simple. The QIDC application was rejected (predictably) in October, which enhanced the NAB’s leverage. The NAB simultaneously demanded of WBB that it needed an immediate injection of $5 million in equity – precisely the demand implied by the ANZ in WBB’s 1993 loan application, failing which the ANZ loan could not be approved.

By October 1996, the NAB was pushing Troiani relentlessly to sell business and personal assets. At a meeting on 10 October 1996 forced on Troiani, the Troianis were given a brief period to sell assets ‘voluntarily’. The pressure placed on Troiani to sell the WBB business or refinance its standing indebtedness was simply a ruse to enable NAB to accelerate the appointment of Receivers/Managers to WBB in due course. KPMG was enlisted as an outside vehicle for the push. The NAB instructed WBB to sign a periodical payment order for $10,000 per week (preposterous) to KPMG, for services ill-defined. Troiani, predictably, refused to sign. However, Troiani failed to see the significance of the imposition. Common sense should have alerted him, but the strategy directed against him and his company was unprecedented. In December 1996, KPMG brought on board a real estate agency to direct the sales of WBB assets and Troiani family assets.

In April 1997, the NAB again presses WBB to refinance or find equity at a level acceptable to the bank. WBB’s asset sales must be on KPMG’s pricing terms. And the overdraft limit is arbitrarily drastically reduced to $312,000. Comparable demands continue through 1997.

In mid-1997, Sante met Tim Fischer, National Party leader and Deputy Prime Minister, in Brisbane when Fischer was there on political business. Sante claimed later that Fischer had told him that Don Argus, then NAB CEO, had indicated to him that Boral ‘wanted your Italian kiln and your product patents’. It is consistent with Fischer’s remarkable disclosure that the NAB demanded that any new brick designs had to be given to them and that Pridmore, in the last meeting with Troiani in July 1999 before foreclosure, claimed that all of Troiani’s design patents would henceforth belong to the bank if he didn’t agree to their terms.

On 29 August 1997, Troiani met with Pridmore and other NAB staff. The bank is demanding strategic plans and budgets, and faster asset sales. Also present is yet another consultant, a representative of consultants Saracen, who is to ‘take on a management role at the company’ (it didn’t happen).

On 24 September 1997, Troiani met again with Pridmore at WBB. Pridmore demanded a greater effort to sell ‘non-core’ assets. Noteworthy is that Troiani used the occasion to claim that a major contributing reason for the Mori kiln’s ongoing dysfunctionality was that Boral, to which the NAB had again committed him, continued to deliver the wrong gas to WBB. The claim was ignored by the bank.

By December 1997, the NAB was demanding comprehensive financial data from WBB. This included a NAB letter requiring WBB to provide sales analysis, a detailed debtors/creditors listing and update on property sales.

On 23 January 1998 a NAB to WBB letter threatens formal demand if total refinancing of $15.5 million is not achieved by 20 February. WBB is losing money every month, and the bank acknowledges that its extraction of $45,000 per week is being partly funded by WBB’s rundown of stock and the non-payment of creditors. The NAB is bleeding WBB dry.

Sometime in late January or early February 1998, Troiani met NAB’s Asset Structuring Global Ray Pridmore at Head Office in Melbourne. At this meeting, Pridmore threatened Troiani (as related subsequently to Salmon) with: “I’ll take every cent you own”.

In May 1998, WBB executed a Bill of Sale in favour of Queensland Rail. Queensland Rail had demanded the Bill, given an accumulated debt of WBB to QR of roughly $300,000. As guarantee for regular payment of invoices for brick transportation, WBB gave Queensland Rail security over its bricks. This step would have been unnecessary if WBB was not constantly being deprived of working capital via the compulsory appropriations into the ‘Cash Management Account’ (see below). Troiani was misadvised by WBB's then advisers, solicitors Bedford and Associates, as to the legitimacy of the execution of this Bill of Sale. Formally, consent would have been required from the NAB for this manoeuvre, and the NAB subsequently leveraged this mistake to its advantage.

In February 1999, the NAB advised WBB that the payout figure for the kiln leasing facility was $7,609,000. In the face of ongoing Troiani complaints, the NAB denied that it had prevented WBB from taking legal action against the Mori kiln manufacturer.

In April 1999, the bank engaged Peter Geroff of Ferrier Hodgson (the company soon to be appointed as receivers) as a ‘Nominee Consultant’, to be given free access to WBB's premises and records – and at WBB’s expense. Troiani objected to this imposition, so the NAB appointed Geroff as an authorised officer of the bank under Clause 8 of the Mortgage Debenture. The motivation for this move is manifold – to obtain up-to-date fine details of WBB’s situation, both operational and financial; to further drain the WBB kitty; and to further harass and divert Troiani and loyal staff from running the business. Geroff was subsequently appointed as Ferrier Hodgson’s receiver agent.

On 13 August 1999, the bank finally made demand on the bill facility (withdrawn in February/March 1996), misleadingly called the ‘Overdraft in Reduction’ account. Salmon, product of a long banking career at the NAB, noted that the accurate label (never employed) should have been ‘Matured Bills’ account. The sum claimed (of the $7,450,000 original loan) was $6,278,936.40. The NAB sent in receivers Ferrier Hodgson.

Ferrier Hodgson lodged details of the company under receivership with ASIC, 5 January 2000. Ferrier Hodgson’s Adrian Furby apparently claimed that Sante Troiani was involved in preparation of the report, which includes eleven of Sante’s purported signatures. Sante claims that he had never seen the report until late 2002 (when fighting bankruptcy) and that the signatures purporting to be his were forged – suspecting his relatives as co-directors of WBB. (10)

WBB’s then lawyers (Peter Tobin) wrote to the NAB’s lawyers (Mallesons) on 17 August 1999, noting that the bank had discovered no relevant documentation to date, after months of requests. Mallesons advised WBB’s new lawyers (Rod Suthers of Maryborough) on 25 January 2001 (two months before the Summary Judgment hearing against the Troianis as guarantors) that discovery will take place in due course. It never happened. Only two to three weeks before the Summary Judgment hearing in March 2001, Troiani’s solicitor Suthers was sent mainframe account statements for the defaulted bill facility (see below), clearly intended to purposely confuse the situation. The courts are implicated in failing to enforce appropriate discovery.

V      Bank structuring of the WBB accounts

The most distinctive feature of the Troiani/WBB case is that the NAB implemented a de facto default structure in February 1996, unbeknown to Troiani as managing director who was never informed. Formal demand was not issued until August 1999, 42 months later. During that time the NAB ran parallel mainframe accounts and shadow ledger records (11) for WBB’s two main loan facilities, a period unprecedented in length for bank default cases.

The extended period between the de facto default in February/March 1996 (see below) and formal default in August 1999 is unprecedented and extraordinary. The resources committed (at Head Office, State and Bundaberg levels) to keeping this charade going must have been considerable. We surmise that an early formal default would have too readily exposed the bank’s malintent. Of crucial importance, the Troianis’ considerable personal assets had to be drained before formal default, not least to prevent the Troianis having resources to devote to impending litigation. At some point, the NAB’s agenda acquired some hangers-on who realised that they could be in pole position to acquire WBB and/or Troiani assets on the ultra cheap.

The complex loan facility began life as a bill facility, commencing with loan approval in November 1993 and becoming fully drawn by end of 1994 at $7,450,000. The bank subsequently converted the bill into two 30-day bills, for $3,450,000 and $4,000,000. The bank declined to roll over the two bills in early 1996. Instead, the sums were debited in February and March 1996 to a new account labelled ‘Wide Bay Brickworks Pty Ltd No 2 Account’. The crude title of the account was purposely misleading. The correct title of this account should have been ‘Matured Bills Account’ or ‘Past Due Bills Account’.

This change meant that previous contractual arrangements had been voided unilaterally by the bank, without Troiani’s knowledge. (12) It was not until December 2004 (long after the Troianis had lost everything) that the Troianis were informed through the NAB’s solicitors of the details of these events. The bank had determined long before February 1996 to foreclose on WBB, a little over two years into a formal long term lending commitment by the NAB.

After February 1996, the NAB moved immediately to force the Troianis to begin divesting WBB assets and personal assets – with particular pressure on the latter. Thus the NAB sent Ernst & Young into WBB, demanding valuation of a number of Troiani assets. WBB’s auditor comes up with market valuations from Madderns and Herron Todd White totalling $5,531,000 for 27 Troiani properties – from huge holdings to subdivided lots for housing. (13)

Following the February/March bill facility denouement, WBB’s accounts subsequently become chaotic. The chaos was linked to the fact that the NAB had put WBB into default while maintaining a façade of business as usual. The accounts are structured as if the customer has been defaulted (hence the shadow ledger), but the business remains in operation and is paying interest (for a time) and reducing debt.

The bank had established a Cash Management Account (CMA), compulsorily funded by regular deposits from WBB’s operating account, as a pool from which bank officers could draw irregular transfer sums at their discretion. (14) The CMA was set up immediately, in conjunction with the loan facilities, in November 1993 – a prime indication of malintent from the start. The CMA was first used for transfer purposes in April 1996, immediately after the de facto default of the bill facility. In May 1996, the NAB instructed WBB that $45,000 per week is to be transferred into the CMA. The CMA became the means by which the bank drained WBB of working capital. More, indebtedness in the No 2 Account faced an interest rate charge in excess of 10 % whereas interest on CMA balances was no higher than 3 %.

From February/March 1996 the NAB is in complete financial control of WBB.

In October 1996 (as noted above), the NAB instructed WBB to sign a periodical payment order for $10,000 per week to KPMG, for services unknown. Troiani refused to sign. What sum in total the NAB extracted at its discretion in the name of or to the benefit of KPMG is unknown. However, one such extraction occurred on 24 April 1997 to the tune of $28,794.24. This act constitutes pure theft and was performed in total secrecy.

The character of the No 2 account indicates that the customer has been determined as non-accrual. The space intended for direction of dispatch indicates ‘DO NOT MAIL REFER MANAGER’. These mainframe statements also record a ‘Z’ indicator in the top righthand corner, which conventionally means that the account ceases to attract interest and fees. Subsequent financial events, real and virtual, are recorded on the shadow ledger accounts.

Unusually, contrary to the ‘Z’ indicator, interest was charged and drawn from the WBB operating account from March 1996 to June 1997. As per non-accrual convention, the interest paid is not recorded on the No 2 account statements. The account’s principal function was to log transfers from the company’s CMA for the reduction of the No 2 account’s outstanding principal (pending the formal issue of default).

In May 1998 NAB sent to WBB transaction details of WBB No 2 Account, with one series from Feb 1996 to April 1998 and another series from Feb 1997 to June 1998. The recipient is unknown but it is certain that Managing Director Sante Troiani was not alerted to their existence or to their character. Some same-month statements across the two sets have varied details in the two documents for the same entries. These are minor discrepancies, but they highlight the arbitrariness of the entries on these statements.

These statements were shadow ledgers, the parallel record created for the No 2 account. Nobody in WBB would have realised the nature of these statements. Indeed, nobody outside the banking system was then aware of the ‘shadow ledger’ system (which the NAB labelled a ‘red ink account’), and many contemporary bank staff themselves were ignorant of it. (15) The existence of shadow ledger records from February 1996 show indubitably that the NAB had put WBB into default (illegally) at that time.

After WBB was put into receivership in August 1999 these statements (as part of all WBB documentation) would have been in the hands of the receivers, and thus inaccessible to Troiani and his lawyers. However, such statement pages, with entries from February 1996 to February 1999, were made available to Troiani’s solicitor in early 2000, for account ‘reconciliation’ purposes. This is when Troiani and his solicitor first sighted the shadow ledger statements. It is noteworthy that the pages carry no institutional identification. The background of the earliest page is merely a blank sheet. Because the pages were faxed (to a WBB staffer), the pages bear the fax imprint ‘FROM NAB BUNDABERG BBC’ or ‘Bundaberg BBC 4-368’. The subsequent two shadow ledger pages are of a standard NAB format, typically used for issue of emergency statements.

Troiani would have depended upon Salmon to interpret the meaning and significance of these statements after Troiani’s lawyers had hired Salmon belatedly as a banking consultant in 2003. This was after the Troianis had lost in the Appeal Court and during bankruptcy proceedings in the Federal Court. This was too late. At the time, Troiani and his solicitor had no-one they could consult with who could explain the WBB No 2 Account statement pages which had only recently come into their possession.

Formally, a shadow ledger record logs virtual interest (interest foregone) on a debt incurred by a business no longer generating revenue. But WBB in operation was paying real interest for 16 months on the No 2 account debt; ‘appropriately’ the real interest payments for the first 13 months of interest payments are not recorded on the shadow ledger statement. Three months of real interest payments are recorded on the shadow ledger statement for April to June 1997. This phase was possibly due to a mistake by a bank officer not apprised of the inconsistent status of the WBB account.

From July 1997 until the August 1999 foreclosure, ‘interest’ (amounts ranging over $38,000-42,000 per month) continue to be debited to the shadow ledger record, but no corresponding withdrawals from a mainframe account exist. Thus, interest payments are real for 16 months (with the last three recorded ‘inappropriately’ on the shadow ledger statement), transferred via the Cash Management Account, but from July 1997 until foreclosure, interest is notional, as is appropriate for a business subject to non-accrual status. (16) WBB, however, remained in operation. This is a unique situation, never before witnessed by Salmon as long-time bank officer then consultant.


(8) ne would have thought that Troiani had no prerogative to offer the Yatala property as security, nor did the NAB have prerogative to take it as security.

(9) Apparently Troiani only learnt of the tenor of this 6 June 1996 telephone exchange between Pridmore and Walker in late 2000 after he obtained material from Ernst & Young. Roger Walker died not long after his involvement with Troiani and WBB in their dispute with the NAB. His death was officially recorded as a suicide (the family disputed the verdict).

(10) Sante Troiani, Statutory Declaration, 3 November 2005, 1p.

(11) On the parallel ‘shadow ledger’ record system, see Salmon & Jones, ‘Shadow Ledgers and the Default Process in the Australian Banking Sector’,, June 2010.

(12) The character of the new account bears no relation to any standard bank facility. The ambiguous character of this account is reflected in its chameleonic titling – in correspondence, variously labeled ‘Overdraft No 2 and/or Bills’, ‘Bank Bills’, and, upon final demand, an ‘Overdraft in Reduction Account’. The fundamental divergence between a bill facility and an overdraft in reduction account implies that, if the mislabeling is due to incompetence, it is incompetence on a substantial scale. Clearly the mislabeling is no accident.

(13) Hancock Sawyer & Corpe, Chartered Accountants, to Ernst & Young, 22 April 1996.

(14) C/f Barry T Byrne, Bundaberg manager, NAB, to Troiani and others, 16 October 1996.

(15) General ignorance of its existence prevailed before CBA victim Bruce Ford took the seeming anomaly of parallel accounts (mainframe and shadow ledger) to ASIC (without success) and then pressured to have a Parliamentary inquiry into the phenomenon, which took place in 2000.

(16) A letter from the NAB Asset Structuring Unit Queensland to ‘The Directors, WBB’, 3 September 1997, notes the bank’s ongoing demands (albeit with a temporary respite) “for the company to pay $45,000 each week for application towards interest on the bank’s debt, lease payments and amortisation of the bank’s facilities”. Yet the bank had ceased to charge interest in July 1997, reflective of the February/March 1996 secret de facto default. The misleading claimed reason for the demanded weekly payments to the CMA was repeated in a letter from the same source on 30 April 1998. Bank bill facilities are not formally subject to amortisation, so the bank is making up the rules at its discretion.


The shadow ledger statements are also useful to discern asset sale rorts. On 9 April 1997 the shadow ledger statement is credited with a sum of almost $645,000 (coupled with a later $20,000 credit) arising from the forced sale of a WBB property. This credit evidently refers to the sale of WBB’s engineering shop on Enterprise Street across the road from the brickworks.

However, the 1.4 hectare property sold for $760,000 on 4 March 1997. Salmon, in a title search, confirmed this sale price. The remaining $95,000 is formally unaccounted for (has someone been paid off?). Moreover, the certified valuation of the property was $1,100,000. (17) What purchaser got the bargain with a $440,000 discount? This forced sale, not of a ‘non-core’ but an integral WBB asset, is indicative of NAB’s entire operation – destined to simultaneously destroy WBB and appropriate the Troianis’ assets.

The same statement page shows a debit on 24 April 1997 of $28,704 (as noted above), described as a ‘KPMG fee’, yet KPMG delivered no services to the company. The same entries (for the engineering shop sale and the KPMG fee) are also made on the mainframe No 2 Account statement itself, albeit merely as ‘transfer’ (8 April) and ‘miscellaneous debit’ (24 April) respectively. The shadow ledger is evidently taken as the defining record for discretionary entries.

Again, contrary to convention, the No 2 account shadow ledger displays a series of credit entries, labeled ‘Repayment’. The irregular transfers from the CMA to the No 2 account, to reduce its principal (as noted above), have also been credited to the shadow ledger record.

In a January 1998 NAB letter to WBB, the no 2 account is described as a ‘Fully Drawn Advance’ (FDA). This label is another vehicle of deception. An FDA account was an option for the November 1993 $7,450,000 loan but that loan took the form of a bill facility instead. The ploy in using the FDA label was that this form of facility required a yearly reduction in principal and regular interest payments. The NAB was implicitly pushing the additional claim that WBB was in breach of its loan commitments. The NAB pushed the same lying misrepresentation of the facility as an FDA in a letter of June 1999, and to the same effect. The letter wrongly claimed: “WBB failed to make any of the annual repayments under this facility. .... if it had made annual repayments the principal balance would currently be $4,138,888.00.” Yet the loan, as bill facility, had already been defaulted by the NAB in February/March 1996.

Calculated confusion reigns. On several occasions the bank also refers to the withdrawn bill facility as the ‘Overdraft No 2’ (fax, 3 April 1996; letter, 25 June 1996), the ‘Overdraft Reduction’ account (letter, 16 March 1999) and the ‘Overdraft in Reduction’ account (formal demand, 4 August 1999).

In March 1998, the NAB cancelled WBB’s (real) overdraft account completely, even though WBB was then operating within its $500,000 limit. (18)

The NAB issued its Formal Demand Notice dated 4th August 1999 for the sum claimed due on the No 2 account, $6,278,936.40, formally transposed from the shadow ledger record. The final shadow ledger statement was never discovered. However, the balance recorded on the final mainframe statement of the No 2 account as at 4 August 1999 is $3,160,673.76, some $3,118,000 less than that shown on the Formal Demand Notice. A discretionary partial bad debt write-off of $2 million was credited to the No 2 account on 29 March 1999, which leaves $1,118,000 unaccounted for.

The mainframe leasing statements (for the kiln purchase) were included in an affidavit filed on 2 March 2001 by the David Waters, NAB Queensland Asset Structuring Manager, for the Troiani Summary Judgment hearing. The most striking disclosure was that the NAB had credited the WBB leasing account on 22 May 1996 with $3,984,550.90, marked as a ‘Rebate’. This credit reduced the balance from $11,759,320.04 to $7,774,769.14. The bank reversed the ‘Rebate’ three years later on 28 May 1999 (labelled ‘RVSL Rebate’), with foreclosure imminent. This reversal increased the balance outstanding from $4,060,425.79 to $8,044,976.69.

When Salmon brought the rebate to Troiani’s notice in late 2004, Troiani surmised that the sum probably represented the proceeds from a federal government development grant associated with the ultra-modern Mori kiln. Troiani had given the paperwork to his auditor for completion and submission and had heard nothing further. In June 2005, Troiani made a formal complaint to the Queensland Police alleging that the NAB had misappropriated the rebate sum (as above). The bank replied to the Police, with a statement of pure gobbledegook, as follows: (19)

‘By May 1996 the lease facility was classified as “non-performing”. As a result the bank would normally apply an internal entry to the facility representing the future net income we expected to forgo if the realisation of the facility was to occur. … It is important to note that the customer has no entitlement to any such reduction in the facility balance and it represents a purely internal entry in the financial accounts of the bank. … By 28 May 1999, after extensive negotiations, the facility had been receiving regular payments. The entry on 28 May 1999 simply reversed the early entry …’

The bank’s ludicrous explanation of the rebate and rebate reversal is more than curious. The timing of these two entries is incompatible with the explanation. It highlights again that the bank has absolute discretion over a customer account and can do what it likes, that it is knowing and arrogant in this discretion, and that the supposedly reputable bank solicitors are prepared to do anything for the filthy lucre.

The bank had also brought a parallel shadow ledger record into play for the leasing contract. On 1st April 1999, the NAB faxed (to a WBB staffer) a one-page statement with respect to the leasing facility from commencement to 31 March 1999. There is no identification on the statement (save for the NAB fax imprint).

The leasing shadow ledger statement has no entries pertaining to the rebate and rebate reversal. The balances on the mainframe leasing statements and the shadow ledger statement thus diverge by almost $4 million over a three-year period. The ‘Current Arrears’ column is also instructive. It indicates that an expanding arrears (due to the kiln installation delays and production malfunction) was rectified by April 1996, and that regular repayments (with one exception) were made from that time.

The mainframe statement pages also highlight that the bank brought the kiln leasing account to a ‘zero’ balance by recording a write-off amounting to $4,775,540.30 on 15 August 2000. (20) (21)The write-off, as per banking convention, does not appear on the shadow ledger statement. Which is the ‘true’ record?

VI      Court proceedings

Summary judgment over WBB

The NAB achieved summary judgment against WBB in the Supreme Court of Queensland (QSC) on 3 September 1999 after a Interlocutory hearing on 6 August, John Byrne J presiding.

The bank claimed that WBB had defaulted on a number of fronts, thus using a pot pourri of options from the various agreements that the bank had foisted on WBB since the facilities were drawn down. Leader on the list was the bank’s claim of a hard and fast agreement that WBB pay $40,000 a week into the designated CMA account. The bank couldn’t readily prioritise default on the bill facility because it had illicitly defaulted the facility itself in early 1996, whereas the facility had been formally available until 31 December 1999.

Byrne initially found that, due to the WBB/Troiani defence in querying some of the bank’s claims, there were triable issues. However, the breach of contract associated with WBB’s granting a bill of sale to Queensland Rail in May 1988 was more clear-cut, compounded by Sante Troiani’s inconsistent accounts of how the making of the bill of sale related to components of the bank debt. The case then de facto was resolved on the bill of sale breach. Byrne claimed:

‘On the whole of the material before me, there is no prospect that the defendant could succeed at a trial … There is no reason to suppose that disclosure could possibly matter to the bill of sale point. No triable issue is shown, and there is not otherwise reason disclosed. The applicant has established an entitlement to summary judgment declaring for the validity of the appointment of the receivers and managers.’

In doing so, Byrne implicitly legitimised the claimed debt quantum without once querying the bases of such calculation or once concerning himself with adequate discovery. Byrne finished by providing the receivers with an interim order to bar Sante Troiani from entering the premises to which he had devoted his last twenty plus years.

In practice, Byrne implicitly confronted the complexity of the issue. However, assisted by bank non-discovery, ultimately, in declining to delve further, he has put the background to and essence of the dispute into the ‘too hard basket’. Byrne has plumped for the easy option – summary judgment for the bank and problem solved.

Spare a sympathetic thought for Byrne. The most detached of judges, and those who have been around the block many times, would have had no idea of the meaning of the takedown (to re-emphasise, with minimal discovery) opaquely displayed before them.

Complaint to the ACCC ignored

A diversion is necessary regarding Troiani’s attempt to get satisfaction from the Australian Consumer & Competition Commission. In November and December 2000, Troiani sent numerous letters to the ACCC, seeking aid. He had previously sought assistance but was fobbed off. In response, John Cream of ACCC Queensland wrote:

‘I regret to advise that, whilst I understand your concerns and acknowledge the distress that the forced sale of your business must have caused you and your family, the alleged conduct does not appear to indicate a breach of the Trade Practices Act.’

The ACCC dissembled. The Trade Practices Act had been amended in 1998, adding s51AC – effectively a ‘business to business unconscionability’ provision. The amendment (along with the addition of a Small Business Commissioner on the ACCC’s senior staff) was the result of a landmark Parliamentary inquiry and March 1997 report, Finding a Balance: Towards Fair Trading in Australia. The report documented systematic predation by corporates against small business in key sectors. The ACCC took no action against banks under this section before responsibility for financial sector business to business unconscionability was moved to ASIC in late 2001 (which then became a dead letter under ASIC). It is clear that the ACCC deceived Troiani in that it made no effort whatsoever to investigate the complaint.

Summary judgment against Sante and Rita Troiani as guarantors

On 19 March 2001, Chief Justice Paul de Jersey presided over a summary judgment hearing against five members of the Troiani family as joint guarantors – Sante and Rita Troiani, Luigi (Sante’s brother) and Emilia Troiani, and Enio Troiani (Sante’s nephew). de Jersey decided for the bank on 22 March. Peculiarly, only Sante & Rita were pursued for the debt. (22) The sum granted as owing as third party guarantors on the bill facility was $5,333,452.24 (the bank had written off part of the debt). Also peculiarly, the bank affidavit of David Waters (State Credit Recovery manager, 2 March) privileged default under the kiln leasing facility but did not sue for the recovery of amount outstanding under the bill facility. Were the inconsistent details regarding the crucial bill facility too embarrassing for the bank to base its case on, even before a biased court system?

The substantive text of the de Jersey summary judgment (surprisingly publicly available) is a mere 1400 words. de Jersey lists a mere two precedent cases for citation, exposing a quick and dirty judgment, barely going through the motions. de Jersey leverages the Byrne judgment arguing default being triggered by the Queensland Rail bill of sale, accepts the quantum of debt claim, and proceeds to bat away the Troianis’ defence.

The defence held that if WBB and Troiani assets had been sold at market value, there would be no residual debt to be owed. This claim is correct. Assets were sold dramatically under value, in particular the brickworks itself.

However, de Jersey held that the asset sales were processed by the receivers, and receivers are held by law to be agents of the company. This sleight of hand is employed regularly against foreclosed bank victims. Discussion of this issue is relegated to the next section.

The Troiani defence in NAB v Troiani also argued that the maturing bill facility was not turned over as is customary, and thus the guarantee on the 1993 debt was therefore void. However, de Jersey readily finds (at [9]) a rebuttal in clause 13.2(f) of the WBB/Troiani guarantee: the guarantee holds irregardless of any "stopping ... or refusal of any credit, banking facility or other arrangement ... given to the (company) ... whether with or without (the respondents’) consent or knowledge". de Jersey reinforces this carte blanche freedom of the bank by claiming (at [14]) that, in response to Troiani’s complaint regarding the bank calling in all customer debt, “This is immaterial. It was not necessary for the company to have been in default. See clause 6.3 of the guarantee”. The same total flexibility applies regarding the cancellation of the overdraft (as above), also highlighted by de Jersey.

Thus the bank has it all covered in its documentation, the adverse implications of which few borrowers would understand as it gives the bank lender absolute discretion over the lender-borrower relationship.

The Troiani Appeals

The Troianis’ appeal against the de Jersey Summary Judgment was first heard in November 2001 before James Thomas, Richard Chesterman and Roslyn Atkinson JJ. However, the Troianis had lost legal representation ‘on the evening of the hearing’, and it was adjourned.

The only matter of relevance in the brief statement by Thomas J is that Troiani’s ongoing questioning of the bank’s claimed debt quantum and his demand for appropriate discovery is met with no sympathy from the judge:

‘I can not see how this Court could or should assist the appellants in what would seem to be a fishing expedition. Accordingly the Court intimated to the appellants that orders for further discovery would not be made at this stage of proceedings.’

This is the same judge who presided over the Trial hearing and judgment of CBA v Muirhead (1995) (of which more below), who there opined:

‘Clause 15 of the relevant mortgage documents provides that a statement signed by an authorised officer shall be prima facie evidence of the amount owing, without the necessity of producing or vouchers to verify the same. In the absence of evidence to the contrary Mr Stone's [CBA officer] statement exhibited to Ms Crowther's [CBA officer] affidavit is sufficient evidence of the present state of the account.’

In short, it is presumed a priori that banks are institutions of integrity and competence and that their word is honest gospel. Yet here is Troiani defying NAB indebtedness claims – unthinkable!

There is another matter of relevance. indirect, of the truncated November 2001 Appeal hearing. Chesterman J deferred to Thomas J and was silent. Yet only several years later, Chesterman presides over at least three summary judgment hearings in the Trial Court and dismisses them all as inappropriate. Chesterman claims, in AVC Catering v Brisbane Broncos (2005):

‘[14] The only safe principle to apply when dealing with applications by defendants for summary judgment is that which I expressed in Gray v Morris [2004] QCA 5; [2004] 2 Qd R 118 at 126: ‘[A] claim ... which has "no real prospect of succeeding" is one which is "hopeless" or one which is "bound to fail".’ Any other approach runs the risk that judgment will be given undeservedly, as a trial would have demonstrated. Those who see in the terminology of the rule ‘a new philosophy’ have yet to give content to it, and to explain why it values expedition more highly than justice. Likewise, those who profess to be able to determine, summarily, whether a claim has a real prospect of success, or only a fanciful one, have yet to describe how they do so.’

Chesterman continues this stance a few months later in Jessup v Lawyers Private Mortgages (2006):

‘[15] … Nothing in the UCPR [Uniform Civil Procedure Rules], however, detracts from the well established general principle that issues raised in proceedings will be determined summarily only in the clearest of cases.’

Note the ‘well established general principle’. This strong stance on Chesterman’s part was several years too late for the Troianis, for which the ‘well established general principle’ was swept aside by Chief Justice Paul de Jersey’s deft hand. Why did not Chesterman speak up regarding the scandalous summary judgment against the Troianis on 22 March 2001? Had the silence anything to do with the fact that Chief Justice de Jersey, the prince of the Queensland judiciary, wrote that judgment?

The Troiani appeal was substantively heard on 10 April 2002 before Bruce McPherson, Henry Fryberg and John Helman JJ. Salmon had never before encountered a procedure of this nature. When Salmon inquired of the Court Registrar of the reason for the substitution of judges, the Registrar claimed that the earlier hearing was a Directions Hearing. Given the falsity of that claim (self-evident from reading the brief transcript), Salmon inferred that the Registrar’s office was itself implicated in judicial complicity with the foreclosure of WBB and the legal pursuit of the Troianis as guarantors. The reasons for the complete disconnect between the first and second Appeals remains a mystery. (23)


(17) The property is one of 27 subject to certified valuations by either Maddern Valuation Services or Herron Todd White (Hancock Sawyer Corpe to Ernst & Young, acting for WBB, dated 22 April 1996), with a market valuation of $1,100,000 and ‘forced sale valuation’ of $1,000,000.

(18) The overdraft facility, fundamental to small business operations, is cancellable at bank discretion – a fact unknown to the general public and, indeed, to the political class. The cancellable overdraft facility is thus ‘Exhibit A’ for the asymmetrical relationship between bank lender and business borrower.

(19) Arthur Stalley, Major Fraud Investigation Group, Queensland Police Service, to Troiani, n.d. (August 2005).

(20) The effected write-off is some $60,000 in excess of the (contrived) final debit balance of $4,715,000.

(21) Two entries arising during the period of receiver/manager control after August 1999 conclude the statement – an unexplained credit of over $1,900,000 labeled ‘termination’ appears in April 2000, and a credit arising from asset sales of almost $1 million appears in July 2000. No detail of receiver/manager activity, in disposing of the Wide Bay Bricks business and assets and the bulk of the Troianis’ other properties, was ever advised to the former Managing Director.

(22) Sante Troiani wrote a letter to his brother Luigi, 5 February 2002, asking, in effect, ‘why have you forsaken me?’.

(23) Albeit James Thomas retired from the bench a month previously in March 2002, and Richard Chesterman had been elevated from the Trial Court for the occasion. Chesterman had previously acted for a long time as barrister for Westpac in bank litigation cases, including against Potts (Trial and Appeal), Thannhauser, Porter/Drambo and Cockerill & Dingle (Trial and Appeal) – all foreign currency loan borrowers – between 1990 and 1998. Chesterman would thus have observed bank skulduggery at close quarters.


On the first day of the Appeal hearing, 10 April, McPherson J bullied the Troianis mercilessly. The Troianis complained again of lack of adequate and timely discovery.

McPherson: ‘Now how are you going to pay for a trial and for all the things that have to happen before it in in order to make out your case, like paying for copies of documents, if you have no money now? You just can’t do it. [Interrupts Rita Troiani] It’s no good saying that you won’t get justice. You won’t get justice unless you’re able to pay for the people who can bring it to you, and that’s barristers and solicitors.’

Rita Troiani: ‘Your Honour, in the beginning we had Maurice Blackburn and Cashman in Sydney who took the case on, no win no fee, and they couldn’t help us …’

McPherson: ‘… if barristers and solicitors did all their work for nothing, they would be in exactly the same position as a brick making company that isn’t able to pay for things that it needs. It just is part of the law of the market.’

Rita Troiani: ‘[SK], a lawyer from that company in Sydney, said that she couldn’t continue with the case because the receivers wouldn’t give her any information. [McPherson: ‘All right.’] That was the reason why she stopped, not because it was a hopeless case.’ …

Fryberg J carried the judgment. (24) On all but one (ultimately marginal) matter, Fryberg agreed with de Jersey’s Trial judgment. The receiver is again held to be the agent of the mortgagor, so considerations of assets sale under value have nothing to do with the bank (as below). The bank was in its right to cut off any of the facilities at any time, etc. Fryberg let through a marginal reduction in the quantum of debt owed but, as the Troianis were now penniless, the adjudged debt owing was moot.

Before the Byrne WBB Summary Judgment hearing, WBB’s solicitors sought discovery of all documents relating to the bill facility but were given only marginally relevant documents pertaining to the period before the cancellation of the bills in February and March 1996. Comparable non-discovery of vital documents was in place prior to and during the Summary Judgment hearing and the long period of the Appeals.

No judge presiding over this litigation saw fit to order appropriate discovery. (25) The odds on this issue were significant and enormous. Appropriate discovery would have involved documentation held at branch, State and Head Office levels, with the entire machinations of the contrived takedown exposed. There was no way that the bank was going to subscribe to discovery, and there was no way that any of the complicit judges were going to order it. Summary judgments neatly precluded the prospect of it happening.

The Troianis also persisted in requesting from the court an account from the bank as to the basis for the amount claimed owing. No judge acceded to their requests. In December 2004 Troiani was still seeking discovery of statements for the No 2 Account. Mallesons replied (letter, 13 December 2004) that account is ‘in non-accrual status’ (it has been since February/March 1996, never disclosed). Emma Costello of Mallesons continues:

‘As such, any Bank statements generated do not accurately record all the interest that has accrued and are generated for internal Bank purposes only. Accordingly, we are instructed that the Bank does not intend to provide the requested documents to yourself.’

Here is the dual mainframe ledger / shadow ledger system in operation, albeit displayed obliquely. Mallesons and the NAB had blithely neglected to notice that the 2000 Parliamentary Inquiry into the Shadow Ledger account system had condemned the system, not least the strategic absence of transparency to the borrowing customer.


Sante and Rita Troiani (though not Luigi, Emilia and Eoni Troiani) were served with bankruptcy petitions. They failed to set aside the petition before Baumann FM on 13 September 2002, with the bankruptcy judgment handed down by Baumann on 16 May 2003. Baumann claimed that any substantive claims by the respondents before him had already been dealt with and dismissed in the Trial hearing before de Jersey (more on bankruptcy below).

VIa      Responsibility for sale of customer assets under value

The Troianis, as part of their defence, claimed that their assets, business and personal, had been sold by the receiver under value. As noted above, de Jersey claims that the Troianis as defendants have no claim against the bank as mortgagee. de Jersey cites the Appeal Court Commonwealth Bank of Australia v Muirhead [1997] 1 Qd R 567, singly, as authoritative.

In this Muirhead appeal, McPherson J diverts to explicitly consider the Muirhead’s sale under value claims. McPherson cites a seasoned auctioneer to the effect that the Muirhead’s view of their property’s value might be inflated but nevertheless he concedes momentarily that the Muirheads might have a triable issue on the sale price and its impact on the Muirheads’ residual indebtedness.

But then McPherson pulls the much-used rabbit out of his judicial sleeve:

‘What is more important for present purposes is that in conferring on the Bank as mortgagee the right to appoint a receiver with power to sell, cl.4 of the registered bills of mortgage pursuant to which Mr Harris was appointed, contains an express proviso that every such receiver: "... shall be the agent of the mortgagor and the mortgagor alone shall be responsible for his acts and defaults ...".’

Thomas J, as the CBA v Muirhead Trial judge, had already relied upon this position to give his summary judgment for the bank (as below).

However, McPherson has another hurdle of conscience to mount, that of the Queensland Property Law Act 1974. McPherson again:

‘Section 85(1) of the Act provides that in exercising a power of sale conferred by the instrument of mortgage or by the Act, it is the duty of a mortgagee "to take reasonable care to ensure that the property is sold at market value". By s.85(3) a person damnified by the breach of that duty has a remedy in damages against the mortgagee exercising power of sale. Section 85(5) provides that an agreement or stipulation is void to the extent that it purports to relieve, or might have the effect of relieving, a mortgagee from the duty imposed by the section.’

Then McPherson notes that s.92(2) of the Property Law Act also defers to the convention that the receiver is the agent of the mortgagor. After further logic chopping, McPherson arrives triumphantly at the desired outcome:

‘For these reasons I have come to the conclusion that the prospective claim of the appellant Muirheads as mortgagors against the respondent Bank as mortgagee for damages for alleged breach by Harris of the duty imposed by s.85(1) of the Property Act (if that is what is intended to be pleaded) is not one that is in law capable of prevailing over the express provisions of cl.4 of the bills of mortgage that the receiver "shall be the agent of the mortgagor, and the mortgagor alone shall be responsible for his acts and defaults". The learned judge [Thomas] was therefore correct in holding that no triable defence or issue was disclosed on the application for summary judgment.’

Returning to NAB v Troiani, thus de Jersey CJ has it that “the applicant [the bank] therefore bears no consequent liability”. Naturally, de Jersey bypassed the sophistry (deeply disturbing to any disinterested observer) of Thomas J in the Trial court and McPherson J on Appeal regarding Muirhead. The stark reality, of which the judiciary in its entirety would be well aware, is that the receiver is manifestly appointed by and under the control of the bank. The lie is embedded in the mortgage debenture wording itself, to which de Jersey also readily points as definitive.

Some judicial commentary on this matter admits implicitly to an underlying anomaly. The 1995 CBA v Muirhead Trial hearing, upon which Thomas J gave summary judgment to the bank, hints at the sleight of hand before moving quickly on (our italics):

‘The bank is entitled to take advantage of the somewhat artificial, but well-known legal consequence that a receiver pursuant to instruments such as those signed in this case must be treated as the agent of the defendants (Visbord v. F.C.T. (1943) 68 C.L.R. 354, 376).’

Queensland Justice Jeffrey Spender is atypically upfront and long-winded about the ongoing farce. In NAB v Freeman (FCA 244, 12 March 2002), the bank seeks and is granted a sequestration order against Lyn Freeman’s rural property. Freeman cries foul, claiming that the property has been sold dramatically under value, leaving him with a debt to the bank that has been thus manufactured (at 20). Spender Notes (our italics):

‘[20 cont.] That involves a consideration of the efficacy of the term of the mortgage by which the parties agreed (using the somewhat artificial meaning of agreement when a mortgagor is presented by a mortgagee with a mortgage to sign) which provides that the receiver appointed by the mortgagee is the agent of the mortgagor.

‘21 The unreality of that situation in fact is a matter which has troubled me on a number of occasions, but the authorities to which I will refer make it plain that I ought to accept that the contractual term is effective, so that the receiver appointed by the mortgagee, exercising the power expressed in the bill of mortgage, is acting as agent for the mortgagor. Not withstanding what might be thought the unreality of the situation, the legal position is that, if there was negligence in the conduct of the sale, Mr Freeman would have an action against the receiver. Almost certainly, the receiver will have received an indemnity from the bank, but the legal characterisation of his rights in respect of any claimed sale at an undervalue is legally a claim against the receiver and not against the bank.’

Spender take us through a brief but substantive background to this anomaly, including precedents and legal commentary. In spite of admitting to ‘the unreality’ of the situation which has ‘troubled me on a number of occasions’, Spender ultimately sticks with legal precedent.

However, Spender also cites Commonwealth Bank of Australia v Muirhead [1997] 1 Qd R 567 (as above) as authoritative. Spender thus defers to McPherson’s claim that the 1974 Queensland Property Law Act is subordinated to the ‘receiver as agent to the mortgagor’ rule. He also presumes that the 1980 NSW Contracts Review Act and various Fair Contracts Acts are equally so subordinated.

Spender also cites, as added support, the very NAB v Troiani, 22 March 2001, presided over by de Jersey. de Jersey relies entirely on Commonwealth Bank v Muirhead 1997, without elaboration, meaning that the de Jersey judgment carries no independent status whatsoever. The de Jersey judgment carries independent status insofar as it is delivered by Queensland boss man de Jersey.

Peculiarly, a month after, in Freeman v NAB, FCA, 9 April 2002, Spender grants a stay of sequesterisation by the bank (which ultimately fails). He returns to the sale under value issue and his personal ambivalence (our italics):

‘[4 cont.] The primary ground of appeal which is arguable in my opinion is the applicability of the ratio of the judgment in Commonwealth Bank of Australia v Muirhead [1997] 1 Qd R 567 in the circumstances of this case.

‘5 Whether in fact any default by the Receiver in the sale of the property of Mr Freeman can be sheeted home to the National Australia Bank, the petitioning creditor, notwithstanding the contractual provision which asserts that the Receiver is the agent of the mortgagor, is a contentious point in the appeal and is a matter of quite considerable practical importance. I am not to be taken as indicating any view as to the strength of this point, but I am not prepared to say that it is unarguable, given that the property was sold at a figure which was considerably less than the valuation which the National Australia Bank's valuer had placed on the property at a not irrelevant time. On the question of the balance of convenience, no prejudice has been asserted as flowing to National Australia Bank in the event that a stay is granted. ‘

This long saga in diverting culpability for the crimes of the receiver sector is a blatant legalistic racket.

De Jersey is no legal slouch (note his endless public presentations, listed on Austlii), and would be well familiar with Standard Chartered Bank Ltd v Walker and another (All England Law Reports, [1982] 3 All ER, p.938ff.). This judgment, involving the legendary Lord Denning no less, provides well known precedent regarding a receiver’s obligation.

Standard Chartered demanded a debenture from the borrowers. It ‘gave the bank power to appoint a receiver who was to have power to take possession of the assets and to sell them’. The debenture also included the ‘express provision’:

‘Any receiver or receivers so appointed shall be deemed to be the agent or the agents of the Company and the Company shall be solely responsible for his or their acts or defaults and for his or their remuneration.’

It is transparently a con job, but borrowers persist in trusting bank lenders to exhibit professional integrity. Admittedly this is the early 1980s.

Business went bad, the bank installed a receiver, who told the Walkers: ‘As from now, you are out of business. My instructions are to be out of here as quickly as possible’. And thus it proved, with the hurried unprofessional auction of the business’ assets a fiasco, and the sale prices dramatically under value. Citing precedent, the judges opine:

‘If a mortgagee [the bank lender] enters into possession and realises a mortgaged property, it is his duty to use reasonable care to obtain the best possible price which the circumstances of the case permit. … This duty is only a particular application of the general duty of care to your neighbour …

‘The receiver is the agent of the company … He owes a duty to use reasonable care to obtain the best possible price which the circumstances of the case permit. He owes this duty not only to the company … but he also owes a duty to the guarantor. …

‘If it should appear that the mortgagee or the receiver have not used reasonable care to realise the assets to the best advantage, then the mortgagor, the company, and the guarantor are entitled in equity to an allowance.’

In short, on the crucial matter of legitimising a receiver’s insouciant sale under value, de Jersey and his fellow judges speciously ignore Standard Charter Bank v Walker and become knowing participants in the racket.

In his brief Summary Judgment, de Jersey also derided Troianis’ claims to assets sold under value because Troiani was claimed as lacking the relevant expertise – “Mr Troiani is not shown to have any expertise in valuation”. On the contrary, the Troianis’ ample personal property portfolio by 1993 showed them to be astute property investors – a portfolio that had the NAB licking its corporate lips to purloin in due course. Moreover, de Jersey would have to have known that property valuation by ‘specialist’ valuers for the purpose of establishing and claiming on bank security is itself another racket.

Remarkable is the fact that our learned bench is regularly confronted with defaulted customer allegations regarding customer assets sold under value but the said judiciary has never asked the questions – what is going on here; is this a systemic practice and why? That would prove a troublesome line of inquiry to the present near certainty of bank lender prerogatives.

More, what is the ‘the receiver is the agent of the mortgagor’ rule doing embodied in the typical mortgage debenture? Is this clause not a transparent proof that said mortgage documentation is knowingly intrinsically unfair, indeed unconscionable, in turn providing ready temptation to fraudulent action on the part of the bank lender?

VII      Legal and judicial complicity

The litigation experience of the Troianis shows at close hand the ugly face of the Australian judiciary and the attendant legal ‘profession’.

In a previous life, Chief Justice Paul de Jersey as barrister had been on a retainer from Westpac bank. de Jersey paid back Westpac for their generosity in spades when he dictated a putrid judgment for Westpac in its Appeal against foreign currency borrower Lionel Potts. At some stage, de Jersey becomes a customer of the NAB, and strangely finds himself presiding over and/or meddling in litigation involving that bank. Foremost in this list is the Troiani/WBB litigation.

The 19 March 2001 hearing presided over by de Jersey, at which Troiani and his barrister Tony Morris were present, took place over a mere one and a half hours, before it was adjourned at midday, with de Jersey reserving judgment. A J H Morris was handed to the Troianis at the last minute after the previous appointed barrister, one Philip McMurdo, accepted the brief on 12 March then overnight withdrew, citing an overlooked previous engagement. McMurdo’s wife Margaret was then President of the Court of Appeal of the Queensland Supreme Court and thus a colleague of (and formally subordinate to) de Jersey. Pillow talk? Moreover, de Jersey and Morris were close friends, a fact unbeknown to the Troianis. Philip McMurdo had recommended Morris to the Troianis’ solicitor, and Morris was appointed on 13 March.

Troiani was in this last-minute predicament because in early March he had let go Michael Aremena, his December 2000 appointment as counsel. Aremena, in his Memorandum of Advice of 26 February 2021, claimed that Troiani’s accusation of a conspiracy between the NAB and Boral to destroy his business could almost certainly not stand up in court given the extremely high burden of proof required. Given fragmented discovery and lack of advice from banking expertise, Aremena claimed that Troiani could not meet such standard. Aremena also erected a shield that his professional standing would be at risk if he pursued such claims on Troiani’s behalf.

On 21 March Troiani’s solicitor Suthers referred to Troiani a message from Morris’ office the information that the decision will be handed down at 10.00 a.m., 22 March. Morris also instructed, via the solicitor, that "There is nothing you can do in attending the hearing yourself." Nevertheless, Troiani and his two advisers motored to Brisbane to be present. The 10 a.m. meeting was immediately adjourned by de Jersey.

Outside the courtroom, Morris told Troiani and friends that their presence in any future hearings would not be necessary. The Troiani group got in the car and returned to Bundaberg. Stopping at the solicitors in Maryborough on the way, Rod Suthers told them that he held in his hands the judgment, faxed by Morris. With the defendant out of the way, de Jersey immediately reconvened the court and handed down the judgment. Curiously, Morris’ fax cover contained several statements regarding the event that were transparently untrue – for example, the statement: "I had a short discussion with Mr Troiani following the handing down of the judgement."

Thus, in the afternoon of 22 March, the Troianis were flabbergasted to discover that the litigation that they believed was still in play was already done and dusted. The Troianis immediately sought the transcript of the 19 March hearing, were initially promised it by the Court Registry office but, in turning up the next day to retrieve it, were told that the hearing had not been recorded. The officer on the Registry desk the second day had in his hands what he called a blank tape and also a single piece of paper. Troiani snatched the paper and kept it, which outlined a conventional chronology of recording, transcription, correction, etc. (26) Jersey himself was behind the retraction and the denial.

de Jersey’s contempt for appropriate court procedures is outlined in Jones’ July 2013 ‘The Sliding Scales of Justice in Queensland’, outlining Salmon’s long involvement in the issue. Chris Foley, Independent Member for Maryborough, delivered speeches in the Queensland Parliament regarding the Troiani affair (material supplied by Salmon) on 22 November 2005 and 8 March 2006. Salmon sent documents to then Attorney General Linda Lavarch on 6 and 24 February 2006. On 31 March 2006, Lavarch delivered a speech in Parliament defending de Jersey, tabling a letter from de Jersey (dated 23 March), in response to Foley’s claims.

The de Jersey letter states:

‘It is not necessary to record a court hearing in the 'Applications' [i.e. Summary as opposed to Trial] Jurisdiction unless oral evidence is given, which was not the case here. … It is wasteful of the resources of the State Reporting Bureau if proceedings in the Summary jurisdiction are unnecessarily recorded. I cannot now recall whether or not I specifically indicated that the proceedings not to be recorded. If I did, it would have been for that reason.’

de Jersey is here dissembling. Salmon himself later went to the State Reporting Bureau and was told that the hearing had been transcribed but that the transcript was no longer available. Ah, the power of the summary judgment, aided by censorship, which wipes the slate clean – the crime, the scene of the crime, what took place, and the guilty parties – without trace.

At some stage, certainly belatedly, Troiani obtained copy of a 4 + 1 page document titled ‘National Australia Bank -v- Troiani – First and Second Defendants’ Outline of Submissions’. Evidently Morris submitted this document to de Jersey. Of relevance is that it was not given to the Troianis’ solicitor (and thus not to the Troianis), and the document has not been filed in the Supreme Court registry for the litigation (#7759/2000). More, it had not been made available to the Troianis at the time of their litigation in the Appeal Court in November 2001.

Also coming into Salmon’s hands belatedly was correspondence from Morris to the Troianis, dated 19 August 2004. A letter from the Troianis dated 18 August had evidently claimed that they had been ‘denied natural justice’, with the Summary Judgment hearings having the characteristics of having been ‘prearranged’, implying complicity on Morris’ part. Morris replied, taking umbrage – nothing of the sort. Morris claimed that ‘The truth of the matter’ is that ‘your business failed … you owed money to the [NAB] which you could not pay … [and] that you had no arguable defence whatsoever in respect to your liability to the bank …’.

As noted above, Troiani had been trying for some years to gain discovery from the bank so that they could fight the bank with substantive material at their disposal. Morris appears to have been missing in action on that front. Well that he should express umbrage that anything in the Queensland legal system should be ‘prearranged’.

Soon after Morris advised the Troianis of their loss in March 2001, Morris reputedly claimed that if they, the Troianis, wanted he, Morris, to oversee an Appeal they should deposit $400,000 in his account. Now that’s chutzpah!

It comes to bankruptcy proceedings and the Troianis find themselves before Magistrate Michael Baumann for a second time in the federal court, 6 July 2004. The Troianis have been bankrupted and the Troianis are facing the Bankruptcy Trustee representative Michael Peldan in court. Rita Troiani is stroppy, having been denied justice in any court to date, as reflected in the court system’s refusal to demand an accounting from the NAB for its claimed debt.

‘His Honour: Mrs Troiani, I understand the history of this matter. I dealt with your application to set aside the bankruptcy notice. … I was the person whom had to make – perhaps regrettable, but for the reasons I have already circulated – I was the person who had to make the order that you were bankrupted.

Mrs Troiani: Can I ask one question of you? Are you a client of National Australia Bank?

His Honour: I am not going to answer that sort of question.

Mrs Troiani: Well, it does make a difference.

His Honour: It doesn’t make any difference.

Mrs Troiani: It does.

His Honour: Well, it may make a difference to you.

Mrs Troiani: It does.

His Honour: But since you have asked me, I will tell you; yes, I have an account with the National Australia Bank.

Mrs Troiani: Well, I think that is a conflict of interest.

His Honour: And I have an account with other banks, and I do not regard that as a base upon which you could suggest that I am biased. I have answered your question. Sit down, please. Sit down, please.’

Such is the integrity of the court system that this transparent conflict of interest, widespread (and strategically fostered by the NAB), can be readily dismissed by its practitioners. What is surprising is that this exchange and admission by Baumann could have remained in the transcript whereas other transcripts are known to have been cleansed of such admissions.

VIII     Sale of assets under value and refinancing denial

 No comprehensive account can be given of the bank/receiver sell-off of WBB and Troiani properties because no sales details were given to Troiani and a full documentation of sales was denied to the Troianis under claim of ‘confidentiality’. After Ferrier Hodgson had renounced its receivership, in January 2005 it returned over 300 boxes of material to the Troianis. However, 30 of these boxes had been emptied of their contents. A so-called ‘index of contents’ bore no relation to the contents of boxes received, indicating that it too had been doctored. So much for the receiver being the agent of the borrower.

WBB’s assets relevant to brick manufacturing comprised at least six properties in Bundaberg. Moreover, the Troianis, as astute investors, were the registered proprietors of some twenty other properties throughout Queensland, comprising commercial, residential and broadacre blocks. Some of these properties had been subdivided into an aggregate of over 40 allotments intended for individual sale in the future.

Troiani was forced to sell these properties on an ongoing basis, albeit the most significant property disposal (apart from WBB’s engineering premises) was overseen by the receivers Ferrier Hodgson. Ultimately, tens of millions of dollars of personal and business assets disappeared into thin air – or rather as virtual capital gains for fortunate purchasers.

The NAB foreclosed on the Troiani brickworks at Bundaberg in August 1999. The brickworks and related properties were sold on 31 March 2000 by the receivers for $3.132 million. (27) The bank’s lawyers Mallesons advised Troiani’s then lawyers that “… it is expected that the unsecured shortfall of the Bank will be in excess of $10 million. The Bank will pursue the guarantors to the extent of the shortfall …”. This is a manufactured debt, not least because of the dramatic sale under value of the brickworks site itself.


(24) George Fryberg sat on the Supreme Court between 1994 and 2013. He acted for the NAB during 1988-89 in the bank’s litigation against the Somersets and their company Kabwand. The Trial court judgment against the Somersets was a masterpiece of corruption.

(25) Byrne J admitted the need for discovery (‘In any event, the defendant ought to have disclosure of the bank's documents.’, p.12) but did nothing about it.

(26) Sante Troiani, Statutory Declaration, 27 May 2005, 3p.

(27) Mallesons Stephen Jaques, NAB solicitors, to Redchip Lawyers, 4 April 2000.


Peculiarly, the Mori kiln was sold separately in July 2000 for $968,896 (figure extracted from the kiln Finance Lease Statements). It cost WBB over $20 million in purchase and installation costs. Why it was sold separately, and to what entity?

It appears that the brickworks itself, on a 13.67 hectare site, comprised a mere $400,000 of that aggregated sale figure of $3.132 million. The 1996-97 financial accounts (the last audited accounts) have ‘property, plant and equipment’ alone of the brickworks valued at just under $27.5 million. In 1998, under pressure, Sante considered a subdivision of part of the brickworks site and sought a valuation towards that end. The 3 April 1998 valuation estimated that the valuation of the proposed 3.12 ha spinoff itself was $6.3 million. Sante had previously sought an estimate of the value of the entire brickworks in late 1996. Alexelen Pty Ltd (‘Technical Services to the Clay Industry’) responded 15 November 1996, the report concluding:

‘The total cost therefore to replace all the equipment and plant on the Bundaberg site is estimated at a minimum of $46,593,000. The above estimated cost takes no account whatsoever of the costs of research and development of the special products which are produced at Bundaberg.’

The forced sale of the 1.4 hectare property (WBB’s engineering shop on Enterprise Street across the road from the brickworks) sold for $760,000 on 4 March 1997. Even then only $665,000 was credited to WBB’s account (recorded on the No.2 Account’s shadow ledger), with the remaining $95,000 disappeared. The certified valuation of the property was then $1,100,000. Apart from the fraudulent sale price and theft, the forced early sale of this works, integral to the business, could only have severely impacted on WBB’s viability.

Another extensive property of 73.8 hectares, abutting the Isis Highway (renamed Childers Road) just out of Bundaberg owned by WBB, held some of the company's prized clay reserves. This was freehold and was bought as late as September 1993. It is possible that WBB’s previous and ongoing other sources of clay deposits were from mining leases on crown land. The Isis Highway property was sold by the receiver to QC Bricks on the 22 March 2000 in a job lot with 8 minor properties (7 of which were an urban subdivision in Aldershot, Maryborough) for $797,500 in total. (28) The sale of this incoherent job lot strategically obscures the handling of the invaluable clay reserves land. The Sales Data Listing of the Queensland Department of Natural Resources, Mines and Water lists the clay reserves site (Isis Highway, Takalvan Parish) as having an October 1999 valuation (under receiver control) of $150,000! The April 1996 valuations have this property valued at $1.5 million, with the possibility that the $150,000 figure is a misprint. A misprint or not (unlikely), the sale constitutes a giveaway to QC Bricks. Clay reserves had been included in the company’s accounts under a 1987 valuation of $1,142,000 (i.e., prior to the freehold acquisition in 1993). In April 1998, the freehold site had been valued at $2.5 million, but purely for development purposes. In the 1996-97 accounts, the clay reserves were inspected and valued at $42,941,000. This revaluation followed a valuation report by J. E. Siemon Pty Ltd, Coal, Industrial and Gemstone Valuation, 9 April 1997. The sheer scale of the reserves underpinned the significant value attribution. Apparently, at one stage, the receiver claimed that the clay reserves had minimal value.

Sante Troiani also highlighted in filed material before de Jersey that the receiver/managers had sold two properties for $380,000 (1,364 ha, Old Byfield Road, Cooberry, Yeppoon) and $145,000 (186 ha, Lot 2278 Dowlings Road, Yeppoon) on 14 September 2000 and 7 November 2000 respectively. Department of Mineral Resources sales listings confirm the sales. It was Sante Troiani's view that a fair market value assessment at the time of sale would have been $1 million and $480,000 respectively.

There is also the peculiar case of a 1548 sqm investment block bought by the Troianis at 230 Bargara Rd Kalkie (East Bundaberg). They bought it for $33,000 in March 1990. Troiani subdivided it and built on one half of the allotment a display home of Wide Bay bricks. It cost $300,000 to build. The NAB, through forced sale on Troiani, sold the house for $185,000 in December 1996. Department of Mineral Resources sales listing confirms the price. (29) The unbuilt portion of the subdivision was sold at the same time for $27,000.

We have no record of the sale of the Troiani’s farm home on Moore Park Road on two allotments, nor of the sale of the industrial land at Yatala – the two assets offered for extra security in January 1995. Ditto the unit at Miller Road Bargara. There is speculation that the Moore Park Road property sold (date unknown) for $900,000, though it was worth millions.

Sale of Troiani personal assets under value also came up at the Appeal hearing, 10 April 2002, before McPherson/Fryberg/Helman JJ (at 15). There is mentioned the disputed sale of seven Troiani assets. Quoting Fryberg: “In Mr Troiani’s opinion, the total value of the seven blocks of land was $1.75 million. The amount obtained for them by the bank was $668,500.” The bank doesn’t question Troiani’s claim, and Fryberg admits that it might have merit. However, Fryberg notes that the $1 million plus difference would still leave the Troianis underwater, so it cannot detract from Fryberg deciding against the Troianis’ Appeal. Fryberg, however, conveniently neglects to inquire of the fact and the significance of the systematic sale under value of WBB and Troiani personal assets.

Sale under value is a perennial feature of bank foreclosure of customer assets, but this divergence between sale price and substantive value in the WBB/Troiani case is unprecedented. It is pure theft on a grand scale and an outrage. The receivers, acting as per usual on bank instructions, are directly implicated in the crime. Ditto the bank’s lawyers Mallesons in persistently covering for the crime. It is noteworthy that a company called PGH Holdings offered to buy WBB in 1981 (five years after Troiani began his resurrection of the firm and years before Troiani built it to its substantial scale by 1993) for $4.4 million.

The gap between the market value of WBB and Troiani assets and total sales revenue far outweighs the debt claimed by the NAB, on the basis of which Sante and Rita were bankrupted. Clearly, the default, foreclosure and litigation process were never about the recovery of the loan sum that the bank extended in November 1993.

Peculiarities surround the process and timing of the sale. The Troiani brickworks was purchased by a consortium of individuals intimately associated with the brickworks, renamed Q. C. Bricks Pty Ltd. The consortium comprised Iain Smith, latterly WBB General Manager, Kerry Lavering, former WBB financial accountant, David Green, former WBB transport contractor and Ivan Parker (and his wife) former WBB Brisbane/Gold Coast sales agent. (30)

Former General Manager Iain Smith is reported as confirming the sale in the Bundaberg News Mail on 24 March (employees were then informed). Q. C. Bricks was registered 7 March 2000, with Tobin Lawyers Brisbane as the registered office. Mallesons informed the Troianis that the sale was finalised on 31 March 2000. WBB’s former lawyer, Peter Tobin, was added to the consortium as a Director the next day. By June 2001, the ownership had devolved to Tobin and Parker (and wives). Tobin had represented Wide Bay Brickworks before the court in the Byrne J decision in 1999, and subsequently when WBB was taken into receivership. The Troianis and their then solicitor were denied all information on the sale details on grounds of ‘confidentiality’.

It appears that the sale was a stitch up job. Bundaberg-based business consultant Michael Bailey met Sante Troiani in April 1998, in the context of intentions to organise sources of refinancing WBB. Interest was forthcoming and proposals were put to the NAB during 1998 but they were met consistently with silence. (31) Of these proposals, Bailey had put together an $1l million refinancing proposal in January 1999, but Bailey claimed it was blocked by Tobin, then Troiani’s solicitor. (32) When WBB was forced into administration, Bailey thought that it would be propitious conditions to foster another proposal. However, Bailey claimed that Tobin told him that no proposal involving Sante Troiani aiming to retain or regain WBB would be acceptable to the receivers. A group centred on local businessman Tony Green were prepared to put up $4 million to refinance WBB. They did get to examine the brickworks, but then manager Iain Smith suggested that Green join a consortium of his own, to which Green took exception. (33) A potential purchase offer by Bundaberg businessman Paul Formosa and partner Bob James for over $6 million was also impeded by the receivers in March 2000. (34)

IX      Post-bankruptcy

Sante and Rita Troiani were left with nothing. Literally nothing. They had lost millions in assets, acquired from a lifetime of hard work and astute investment, and, of course, had lost their family home.

The immediate family experienced trauma. The extended family fell apart, not least because some of Sante’s relatives were directly involved in WBB (as shareholders, directors and guarantors, and employees) and yet were not pursued by the NAB in the foreclosure of the business and for partial responsibility for the claimed debt owing.

The takedown of WBB and the Troianis was publicly aired (along with two other NAB takedowns) on an extended Channel 7 Today Tonight program in South Australia, courtesy of local producer Frank Pangallo, 5 April 2006. The NAB went into control mode, threatening Channel 7 with a withdrawal of advertising to the tune of millions of dollars and trying to prevent further showing of the program. The program belatedly went to air on the East Coast on 4 January 2007. Ahmed Fahour, then head of NAB business banking, had made several public announcements admitting that NAB culture was derelict, that it had to lift its game and set things right to customers who had been mis-treated. (35) Sante and Rita thus wrote a letter to Fahour, 12 May 2006, asking him why his promises to set things right, making a personal commitment to Pangallo on camera, had not resulted in any action. NAB lawyers Mallesons responded to the Troianis, telling them to buggar off. There was no reply from Fahour. (36)

At one stage Sante confided to friends Col and Margaret Walker that he had left Italy as a young bloke to get away from the far-reaching tentacles of the Mafia but became a victim of a worse form of mafia in Australia. People in Italy at least knew where they stood with the Mafia. Here, the Australian mafia acted and proclaimed to be your ‘friend’ but were working behind the scenes to take everything you had, bring you down and kill you off financially. 

Sante’s pride was destroyed. Sante and Rita were reduced to menial tasks to survive. Sante died as a result of a massive stroke on 8 October 2007, aged 73.

After a long process of mediation (in which Salmon was directly involved) during which bank spokespersons dissembled over what WBB documents they retained, Rita Troiani received a sum of money from the NAB. With the money (a fraction of the tens of millions of dollars lost through involvement with the NAB), the bank denied any responsibility for the failure of Wide Bay Brickworks and the Troianis’ impoverishment.


(28) Icing on the cake, 3 of the Aldershot lots, sold for an average of $6,000 each in March 2000 as part of the job lot, were re-sold in December 2003 for $144,000.

(29) Ditto re the price. The real estate listing for the house offers a display of WBB bricks in situ.

(30) Michael Bailey, consultant and then friend of Sante Troiani, claimed that WWB had previously been subject to ongoing theft of bricks by a WBB transport contractor. If Troiani was oblivious, it was known to the industry as another brick company (PGH Bricks) also used the same transport company.

(31) Michael John Bailey, Statutory Declaration, 18 November 2005, reproduction of signed statement of 16 October 2000, 3p.

(32) Michael John Bailey, Statutory Declaration, 2 November 2005, 1p. Bailey claims that, some time prior to this blocking Tobin referred to WBB as ‘one of the best business prospects I have ever seen’. Bailey claimed that “I recall Tobin’s enthusiasm on this point, vividly”. Also Bailey, Stat. Dec, 18 November 2005. Bailey claimed that “Tobin then offered me a $30,000 fee which he said he would pay me when he placed a finance deal through his company …”.

(33) Bailey, Stat. Dec., 18 November 2005. Bailey claimed that “I firmly believe that the details as set our herein, and the activities and comments as reported to me by Mr TONY Green, clearly point to an element of collusion between the receiver/managers Ferrier Hodgson and the SMITH/Lavering/Tobin consortium which subsequently (some four/five months later) became the new owners of the Wide Bay Bricks operation. I believe that this represents evidence of what could be terms ‘insider trading’ insofar as the receivers and the present management of W.B.B. (Now Q.C. Bricks) are concerned”.

(34) Sante Troiani, Statutory Declaration, 21 November 2005, 1p.

(35) See Jones’ ‘Illusion and Reality at the National Australia Bank’, October 2010.

(36) How was it that this man for whom ‘corporate social responsibility’ is an alien concept came to be hired as CEO of the public authority Australia Post, and on a super-inflated salary?


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