Difficult Days for Bathurst Diocese

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The Diocese of Bathurst here in Australia is in a financial mess. It’s not easy for any group of churches in numerical decline but it’s pretty common knowledge now that there is a real problem with the (now frozen) bank balances.

The background is well worth recounting, although there is no pleasure to be taken in it (and if there are inaccuracies here I would be pleased to be corrected).

The diocese took out a line of credit with the Commonwealth Bank of Australia for a figure reported to be up to A$38m. The loan was arranged between the then bishop, Richard Hurford, and a bank manager. While the loan is not secured on any specific assets, Hurford wrote to the bank on diocesan letterhead in his role as bishop and under seal to essentially guarantee the loan on behalf of the diocese.

The bank is now in the process of calling in the loan after the diocese was unable to make an interim payment and has begun legal proceedings to recover the debt, its argument resting at least in part upon Hurford’s letter.

At court in April the bank claimed the outstanding debt was approx. $25m which represents a massive millstone around the diocese’s neck. There are only 33 parishes which now share the burden to the sum of approx. $750,000 each. Selling of parish property has been contemplated but up till now rejected. Besides, I understand the market for old rundown church buildings in the west of New South Wales is not exactly liquid.

There have been some attempts to raise funds, 2 schools being sold to the Sydney Anglican Schools Corporation, but the debts still remain practically insurmountable.

But at the diocese won’t go down with a fight.

Earlier this week the current diocesan, Bishop Ian Palmer, wrote the following letter to his clergy and other interested parties (including other bishops in Australia)

This must be very frustrating for the bank. It’s claim is over the assets of the Diocesan Property Trust but the court has given the diocese permission to sell assets in order to fight them in court over their right to the rest of the Trust assets. Either way the Property Trust is highly likely to be empty at the end of the matter, but this way the bank may get less money.

As far as this is a winning solution for the diocese, one well-placed senior source said to me “Bishop Palmer has landed on Mayfair with a hotel on it and he’s desperately trying to mortgage Old Kent Road to see if he can pay the bill”. Don’t get me wrong here, you do have to have a large amount of sympathy for Palmer – landing on Mayfair is bad enough, but it’s much worse if somebody else rolled the dice to get you there.

All of this raises the important question of what can be done to help the diocese. Obviously there’s plenty of talk including at the Standing Committee of the General Synod. Sources tell me that they have concluded that there is no possible rescue that is viable.

Which means the diocese’s lawyers will have their day in court with the bank. And it’s hard to see them winning. What happens after that will be fascinating.

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This Post Has 17 Comments

  1. Tim Patrick

    Sad, sad stuff. Two questions: 1. Why was such a huge loan taken out in the first place? 2. Can we foresee any other Aus dioceses heading down a similar path?

  2. Terry Gallagher

    Sounds like a very sad situation. The obvious question from the outside is: "What happened to the borrowed money?"

  3. Andrew Reid

    I do feel great sympathy for the Diocese of Bathurst, as I do for other country dioceses with dwindling and ageing congregations. As you say, it seems the current bishop has been dropped in the situation by the actions of others. I have no previous knowledge of any of these events, so what I’m trying to understand is 2 things:
    1) Why did they need a $38m line of credit in the first place? Was it to pay down other debts? Surely the operating costs of the diocese wouldn’t justify that size of financing? The Diocese of Melbourne’s budget in 2014 is $12m and I imagine Bathurst diocese is significantly smaller. How could they need $38m?
    2) How was this not anticipated? The diocese has to report on accounts every year to Synod. I imagine Diocesan Council must have been aware of the situation for a long time also. As you say, they have taken steps to sell assets and reduce costs. But a default of this magnitude must have been years in the making. Were there governance failures that action wasn’t taken more quickly or that permitted the taking out of a line of credit without hope of repaying it?
    A very unfortunate situation and no doubt a real concern for parishes in Bathurst trying to focus on ministry.

    1. David Ould

      hi Andrew. I’ll do my best to answer.

      The money was, I think, originally intended to help investment in schools – that’s a pretty capital-intensive work.
      As for anticipating it, can’t tell you.

      1. Andrew Reid

        Wouldn’t the schools be separate legal entities? Owned by the diocese but required to raise capital themselves using tuition fees to repay loans?

        1. David Ould

          yes, quite possibly. However, the bishop made a guarantee to the bank (effectively on behalf of the diocese) and there lies the rub.

  4. Daniel Armishaw

    I remember being faced with a decision as warden to go to a bank, cap in hand, to borrow money. It was one of the hardest things I ever did as warden and there was always the worry of 'what will the bank do if we could not repay the loan'.

    I really feel for that Diocese and pray that they will find a way to work it out…

  5. John

    The previous Bishop came to the Canberra/Goulburn Synod to appeal for help a few years back. As far as I understood it they were in a bad way and saw building schools as a way to work their way out. However, the schools over invested and through mismanagement and other circumstances (such as drought) were not able to grow enough to return on the investment. Effectively this made a big problem into a massive problem. C/G agreed to consider ways to help but once the accountants had a good look over it they thought better of it.

    Andrew – Some Anglican schools are legally separate and some are backed by the diocese. We have both types in Canberra.

  6. Ian Palmer

    Dear David, If your article encourages people to pray – thank you.
    I am not writing an obituary for the Diocese of Bathurst. In the Central West of NSW the Anglican Church is proclaiming Jesus Christ as Lord, discipling sisters and brothers in Christ, caring for the needy, standing for justice and caring for God's creation. We are building for the future – and that is the Kingdom of God. Life is very tough. The gods of this world (of which money is one) always demand their "pound of flesh" but Jesus Christ is Lord and he is risen and ascended. Therefore we live with hope. +Ian

    1. David Ould

      Dear bishop Ian, many thanks for commenting. Yes – I certainly hope this will encourage people to pray; I would hate for any gospel work to be compromised by these massive problems.

      I wonder gently, however, if it’s right to describe the bank’s request for repayment as a “demand for a pound of flesh”? Aren’t they simply calling in a loan that is due? I understand you may not be able to comment on this given that the matter is before the court.

  7. Ian Palmer

    Dear David, I cannot comment directly given that this matter is before the court. However, imagine a situation: Your son (I don’t know if you have one) is 18 years old. You loan him money to buy a car with the agreement that he will repay it three years after he starts his first full-time job. But long before the date you agreed, you demand the full payment from him immediately. How might your son feel? Who has broken the agreement? …. These and many other questions are worth pondering. +Ian

    1. David Ould

      Thanks Ian. Appreciate you filling in our readers a little more (and especially given the restrictions you’re under). If there’s a repayment schedule agreed then you’re totally right. But if there wasn’t one and the bank (sensibly, one must concede, in the situation) was concerned the principal of the loan was at risk then I think it’s understandable they called the loan.

      At least that’s how it looks to this former chartered accountant. Either way, it’s an unenviable position and I readily repeat your request that we all pray for you and the diocese.

  8. Ian Palmer

    Dear David, If you, as a father, thought that your son could not repay the loan; might it not be better to sit down with him and persist in working towards an agreement rather than making a non-negotiable demand? It might actually be to the father’s benefit to do this!

    1. David Ould

      No doubt! My experience is that banks will do whatever they think gives them the best chance to recover the loan. We’ll watch with interest and concern.

  9. Leanne Hawkins

    Funny that it all comes in place coinciding with the Supreme court hearing for all the abused children in it's care at St Michael's Children Home Kelso. No sympathy from us!!! Hiding the funds are we????? crying poor after millions spent on Bell tower and Bishops quarters?? I'm sure your sleeping peacefully???

  10. cheryl roest

    This is the Church that abused children in 50s to 70s and now looking for a loop hole cowards……Stop and think of the scares you left on young children to carry for all their lifes…..They will never forget

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