The bank accounts of devastated Porter Davis customers who have lost thousands of dollars to the company have received a lifeline thanks to the Victorian government.
On Wednesday, Matt Byrnes, the national head of restructuring advisory at Grant Thornton. confirmed rumours that those who paid a deposit to the builder wouldn’t receive their money back due to there being no Domestic Building Insurance (DBI).
“Unfortunately for those customers who paid a deposit, they were paid to Porter Davis and they were used by Porter Davis as part of its day-to-day operations,” he told 3AW Drive host Tom Elliot.
“So those moneys on appointment – when we were appointed – were not there and so we won’t be able to refund those customers unfortunately who are in that situation.”
However, the Andrews government has since provided a glimmer of hope, announcing on Thursday a new compensation scheme will come into effect to support impacted Porter Davis customers.
About 500 families who paid a deposit and signed a contract with the company will receive up to 5 per cent of their deposit back under the Domestic Building Contracts Act to help them get back onto their feet.
A website will be established over the next 48 hours to allow impacted customers to register for the one-off payment which will work as if the customer had the DBI Porter Davis would have been obliged to take out on their behalf.
“This one-off scheme is about making sure that hard-earned money of Porter Davis customers is refunded as quickly as possible and we’ll keep investigating the actions of Porter Davis to ensure this can’t happen again,” Victorian Premier Daniel Andrews said.
The announcement comes after liquidator Mr Byrnes shed some light on the bust company’s fate, saying there’s no “holistic” approach to saving the entire group.
Mr Byrnes – who is in charge of the collapsed builder’s case – revealed a company-wide takeover is not on the cards.
Rather, he said his team will continue to work on smaller parts of the company to assist customers where possible.
“There won’t be a holistic solution for the whole of the Porter Davis Group,” Mr Byrnes said.
“Certainly we’ve had some success … with the Nostra transaction and we’ve got a couple of other packages … that we’re working on the moment but there won’t be a holistic solution … no.”
Mr Byrnes’ comments come after the liquidators entered an agreement with Nostra Property Group on Monday, which agreed to finish the construction of 126 Porter Davis townhouses started by the company.
Additionally, 169 yet to be developed townhouses will commence construction using Porter Davis designs and 16 employees of the failed company will be offered ongoing employment with Nostra.
Said Jahani, joint and several liquidator from Grant Thornton, said in a statement all parties “worked tirelessly” to come to reach a solution for families suffering “enormous stress” from the collapse.
“All parties worked tirelessly to achieve a positive outcome in an extremely short period of time which will see a number of jobs preserved, disruption minimised for several existing and future projects, and critically up to 375 homes built for families,” he said.
Despite this transaction, Mr Byrnes said there are still “in excess of 1000 homes in the middle where Porter Davis can’t complete the build”.
Consequently, customers who have fallen under this banner have since been provided with a shortlist of builders who are “willing and able” to take over the construction of their homes.
“The decision to proceed from here will be one for the customers, so they have to agree, they have to engage with the builder and sign up if they wish,” he said.
Mr Byrnes warned this option could come with further costs as the liquidator can’t guarantee whether a new builder would be willing to complete the job for the same price as quoted by Porter Davis.
“In some cases … the pricing will be very similar to what Porter Davis had agreed to with the customer, but in many cases, this won’t be the case,” he said.
“So we certainly expect there will be a higher price for some customers to pay to complete their build.”
Keep the conversation going. Get in touch – rebecca.borg@news.com.au
Collapsed builder’s multimillion dollar debt
The news that devastated customers won’t get their money back comes as documents filed to the corporate regulator indicate the failed construction company owes the Commonwealth Bank just shy of $33 million.
“We have been advised that the total amount owing to the major secured creditor, the Commonwealth Bank of Australia (CBA), across all entities in the group is $32,939,409,” Grant Thornton said in a document filed with the Australian Securities and Investments Commission (ASIC).
“Our investigations are ongoing to determine if these debts are cross-collateralised across the group.”
While deposit-paying customers aren’t as lucky, the CBA will be at the front of the queue when it comes to receiving its money back due to being a secured creditor.
The documents also reveal the Porter Davis Group had a cash deficit of about $533,000 in the bank at the time of its collapse, the Canberra Times reports.
Additionally a Deloitte adviser to the company first contacted Grant Thornton about the company going into liquidation on March 23, a week prior to reports the company was broke.
At the time, 1500 properties were under construction in Victoria and an additional 200 in Queensland, while a further 779 customers had signed contracts with the home developers with those builds yet to start.
An in-depth report into the collapse of Porter Davis by the liquidator is expected to be handed down to the regulator and creditors by June 30.