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The Victorian Government will compensate customers who were left without insurance as building giant Porter Davis collapsed and otherwise would have had no recourse to recoup deposits paid on builds that never commenced.
Having collapsed in late-March, Porter Davis appointed Grant Thornton Australia as liquidator for 14 group companies that were building 1,500 homes in Victoria and 200 in Queensland.
However, some Porter Davis customers were left high and dry due to a common practice for the builder whereby it failed to lodge for Victoria's compulsory warranty insurance on behalf of customers until after work began, even though deposits had been paid.
This procedural delay meant that at the time of the collapse, many Porter Davis clients had no way to see their funds returned under warranty insurance schemes administered by the Victorian Managed Insurance Authority (VMIA) or the Queensland Building and Construction Commission (QBCC).
To address this shortfall, the Victorian Government today announced compensation payments for about 560 Porter Davis customers who signed their contracts and paid their deposits, but where Porter Davis did not take out Domestic Building Insurance (DBI), in breach of its obligations.
Refunds will be paid up to the legal maximum deposit payment under the Domestic Building Contracts Act of 5 per cent.
“More than 500 families discovered their deposits had been lost due to the failure of the company to take out insurance cover on their behalf,” the Victorian Government said.
“The one-off relief scheme means compensation will be paid, with a website to be established within the next 48 hours to allow customers to register.
“Customers without domestic building insurance cover will now be treated as if they had the cover Porter Davis had been obliged to take out on their behalf.”
The announcement comes as authorities investigate the actions of Porter Davis before its collapse to establish what happened and to guide potential future reforms to protect consumers.
“While that important work continues, through information provided by the liquidator, we have established that the company did not take out mandatory domestic building insurance on behalf of about 560 customers when accepting deposits for projects that had not started at the time the company entered liquidation,” the Victorian Government said.
“The Department of Government Services will work with the VMIA to verify and approve claims and deliver compensation for deposits as soon as possible. These claims will be processed as if these customers had DBI.”
The state government added that the responsibility to ensure domestic building insurance was obtained for its customers was wholly Porter Davis’, and that the Victorian Building Authority was investigating the company for potential breaches of the law.
“Hundreds of Victorians who paid a deposit in good faith to their builder have faced the prospect of losing their money cold, through no fault of their own – that’s why we’re stepping in to help,” Victorian Assistant Treasurer Danny Pearson said.
The news comes after liquidators of the construction firm secured a buyer for the collapsed company’s multiple dwelling business.
Nostra, known for brands like Homes by Nostra and Banksia Homes, will take responsibility for up to 15 per cent of Porter Davis contracts that have been in limbo since the builder fell into liquidation.
The multiple dwelling business includes some of the largest developers in Australia and Victoria as its customers, focused mainly on townhouses that are sold off the plan by these developers.
The deal means Nostra will employ 16 Porter Davis staff and will step in to complete 126 townhouses currently in various stages of construction, using the same PDH designs for homes that have been pre-sold to end customers off the plan.
Nostra will also have the option to start building up to 169 townhouses, many of which have also been pre-sold, using the same PDH designs for various developers.
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