Victoria Government Will Not Bail Out Collapsed Builder Porter Davis

A partially finished Porter Davis home is seen in Rochedale, south of Brisbane, Australia on March 31, 2023. Building works will stop immediately on more than 1,700 properties in Victoria and Queensland as a result of the collapse of Porter Davis. AAP Image/Jono Searle

Victorian Premier Daniel Andrews is not bailing out collapsed major builder Porter Davis saying it is the “right call.”

Porter Davis went into liquidation on March 31, affecting over 1,500 homes in Victoria and 200 in Queensland. An additional 779 signed contracts were in the pipeline but are yet to commence.

“If the bank is not prepared to fund you because your fundamentals are just not there, then I don’t know that would be a business that the Victorian government would want to bail out,” Andrews said on April 6.

At the same time, the premier has not ruled out supporting affected customers revealing while the government continues its investigation into whether the Porter Davis Homes Group (PDH Group) illegally left customers uninsured after taking their deposit.

Under the Domestic Building Insurance Ministerial Order, builders in Victoria are required to purchase domestic insurance policies on behalf of homeowners if the project is worth more than $16,000—this is before deposits are taken.

Some customers may have lost their deposit given Porter Davis did not take out insurance. The new builds were also in stasis awaiting planning permits, which could take weeks or months after their contracts were signed.

The Victorian Managed Insurance Authority (VMIA) said on April 5 that customers who gave a five percent deposit, but have yet to see construction begin, could get their money back if they had VMIA building insurance.

However, Andrews said there were “some doubts” that paid insurance premiums had not been forwarded to VMIA.

“I just want to remind everybody in this industry, the law applies to everyone. It’s not a matter of choosing to lodge those insurance premiums,” Andrews said.

“You are required to launch those insurance premiums and there are very significant penalties if you choose not to.”

The collapse of Porter Davis comes as another building company—PBS Building—was found owing around $60 million to more than 400 creditors across Queensland, NSW, and the ACT after it folded.

Some Good News But …

Liquidators at Grant Thornton confirmed on April 6 that construction of over 250 homes could be completed given how close they were to be finished.

Discussions are underway with 20 builders that have offered to assist with completing the outstanding homes.

“The PDH Group Board of Directors stated they regret the current circumstances and that their efforts to secure a funding solution for the Group could not be achieved,” Grant Thornton said in a statement on March 31.

“The extremely challenging environment for residential home building has directly contributed to the PDH Group’s financial position, with rising input costs, supply chain delays, labour shortages, and a drop in demand for new homes in 2023 impacting the Group’s liquidity.

“Notwithstanding the financial support from shareholders and lenders, the Group has exhausted options to secure the further funding required to allow Porter Davis to continue to operate viably, and the directors were left with no option but to place the companies into liquidation.”

Porter Davis has reportedly approached the state’s Treasurer Tim Pallas with a request for a bailout.

Meanwhile, the Commonwealth Bank of Australia (CBA)—Porter House’s largest secured creditor—refused to intervene, reported The Age.

“There was a due diligence process done by the Commonwealth Bank, they got external consultants ... the size of the problem got bigger, not smaller when the externals had a close look at it,” Andrews 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 Criticises Premier For Not Acting Sooner

Victoria’s opposition leader John Pesutto criticised the Andrews government for not preventing the building group’s collapse.

“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?” Pesutto said on April 6.

“It’s always easier and better to deal with a company in a state of distress before it goes into liquidation.”

Andrews did say there was “enough evidence” that the builder was in trouble when it began slashing $50,000 off the price of new homes.

“Again, I caveat all this by saying this is all to be proven,” Andrews said. “We are looking at that actively.”

Melbourne Customer Says Many Risk Being Left in Limbo

Melbourne resident Eric Poon, 33, who is among Porter Davis’ uninsured customers said some had fallen through the gap.

Poon and his wife paid the deposit for their Porter Davis home at Lilydale in outer Melbourne in December 2020 but the land was only titled last week because of delays by a developer in handing over the property.

Poon said that Porter Davis told the couple it would arrange for insurance but upon contacting the builder after its collapse, they were told there was no policy. The VMIA has confirmed this.

“This has put a considerable financial strain on us,” Poon told AAP.

“We were hoping to complete the construction of our new home as soon as possible so that we could rent out our current apartment and generate some cash flow.

“We are already dealing with a rental and building shortage crisis and now consumers don’t feel protected and are afraid to build.”

Poon said that the government should assist those who have been affected by the collapse.

“We appreciate this is a stressful time for all PDH stakeholders and we thank you for your continued patience while we work to find alternative options and possible solutions for customers,” a Grant Thornton spokesperson said in a statement.

“For those customers where PDH is unable to offer handover under the current contract, we expect to be in a position to introduce them to replacement builders within the coming week to discuss how their home build may be completed.”

What to Do If You Are Affected?

Affected customers in Victoria who are unsure whether they have domestic building insurance can contact the VMIA.

Queensland customers can contact the Queensland Building and Construction Commission, which is also dealing with claims.

Those without a certificate of insurance should contact liquidators Grant Thornton.

Porter Davis has about 470 employees and forecasted revenue of $555 million for the 2023 financial year.

Grant Thornton and the VMIA have been approached for further comment.