This article is from the Australian Property Journal archive
COLLAPSED builder Porter Davis could be facing heavy penalties if it left customers uninsured before going bust, Victorian Premier Dan Andrews has warned.
There were 779 customers who had paid a deposit but whose project had not yet started work when the builder collapsed, with 1,700 homes unfinished, and making more than 400 staff redundant.
Said Johani of liquidator Grant Thornton told a packed webinar with distressed customers last week homebuyers who paid deposits without a permit being granted and construction starting on their home may have lost their hard-earned savings.
“You are required to lodge those insurance premiums and there are very significant penalties if you choose not to,” Andrews said.
“Your customers are not there to provide you with an interest-free overdraft. They are there to be insured. So we’re looking at both of those matters very, very carefully.”
The Victorian Managed Insurance Authority (VMIA) has said that customers who paid a 5% deposit and with work yet to start would get their money back if they had VMIA building insurance.
Works valued at more than $16,000 require compulsory domestic building insurance.
Andrews said regulators were investigating reports Porter Davis lopped $50,000 off the price of its signature Grange-style houses early in February, while other homes in its range were discounted by between $20,000 and $40,000, in a desperate attempt to attract customers while possibly not expecting they would fulfil the contract.
“We are very, very concerned about…this notion of the price of baiting (by) a business that had no reasonable expectation that they’d be able to build those homes, doing cut-price deals to get contracts signed and deposits in the bank,” he said.
“I caveat all this by saying it’s all to be proven, but there’s enough evidence of that seems real.
“We are looking at that actively.”
Government refuses bailout
Andrews also confirmed that Porter Davis had approached Treasurer Tim Pallas for a bailout, which was refused. Porter Davis’ largest secured creditor, the Commonwealth Bank, had already knocked it back.
Andrews said there was a due diligence process done by the Commonwealth Bank that included external consultants.
“The size of the problem got bigger, not smaller, when the externals had a close look at it,” he said.
“Where a bank refuses to prop up a business, that’s exactly the place where I don’t think we should be stepping in.
“To go without an administration, to go straight to a liquidation phase, tells you that the fundamentals of that business were not strong.”
Opposition Leader John Pesutto queried the decision.
“If Daniel Andrews had acted when Porter Davis came to his government, isn’t it possible that some deposits from home buyers might have been protected?”
“It’s always easier and better to deal with a company in a state of distress before it goes into liquidation.”
Resolution possible this week
Johani has said there is strong interest from multiple companies keen to take over Porter Davis’ contracts, and that clarity on the outcome of the sales process could be expected this week.
