The Commonwealth Bank has admitted its subsidiary BankWest acted wrongly as it moved to seize and sell a pub belonging to brothers Brendan and Michael Stanford.

The banking royal commission heard that some of BankWest’s actions were unfair and outside community standards as it took control of and sold the hotel in Portland in the NSW Western Plains region.

While the Stanfords owed the bank over $1 million and the business was struggling, they had not missed any of the loan repayments.

CBA chief risk officer David Cohen admitted a number of the bank’s actions from 2010 in its dealings with the brothers, Brendan and Michael Stanford, would not be allowed under the bank’s current rules.

Despite the fact the brothers were meeting their commitments on loans, in June 2011 the bank called investigating accountants into the pub at Portland because it was concerned about falling cashflows.

The consultants arrived unannounced despite the fact the manager with responsibility for the Stanfords thought Michael Stanford in particular was upset and difficult to deal with because he feared the bank was moving to sell them up.

Mr Cohen agreed that was unfair and said: “Since 2016 we would have to consult with the borrower before appointing investigating accountants.”

Even at the time it was accepted practice in the bank to pay the courtesy to clients of informing them of such a decision.

“I think there should have been more transparent communication with the customer,” Mr Cohen said.

After the report was completed the bank refused to discuss its contents with the Stanfords but soon after sent them an invoice for the $9900 cost of the work, demanding they pay it in seven days.

Mr Cohen agreed that action was unfair.

“It’s unfair to demand a borrower pay for a report they have not reviewed.”

The review called for the brothers to sell the hotel and repay the bank despite the fact they were still making payments. It referred to a debt they had to the ATO but neglected to say this was being paid off on agreed terms.

Eventually the bank called receivers in and the pub was sold for $525,000 in 2015, less than one-third of the $1.6 million they had paid for it in 2006.

Just prior to the receivership and sale the brothers approached BankWest with a proposal to refinance backed by Michael Stanford’s partner, who would invest $400,000 of her own money. In return they asked the bank to refinance the loan over 15 years with an outstanding debt of $700,000.

The offer hinged on the bank guaranteeing to extend the new loan before the payment was made.

That was rejected by the bank but an alternative offer was made. It involved the Stanfords paying in the $400,000 in the next two days, following which the bank would consider offering a further eight weeks before foreclosing to allow the Stanfords to seek finance elsewhere.

Mr Hodge pointed out it would have been a dangerous course of action for the Stanfords because the bank could keep their money and foreclose any way.

“The bank debt would have been nearly cleared, the Stanfords would have lost the hotel and the partner would have lost their $400,000.” Mr Cohen agreed that offer was unreasonable.

“I tend to think it should not have been done,” he said.