Why the Andrews government declined to bail out Porter Davis

Premier Daniel Andrews said a bailout plea by collapsed home builder Porter Davis was refused because the business was not worth saving.

He also said that the company could face significant penalties if it turns out that its customers were left uninsured, as Opposition Leader John Pesutto asked why the government had not acted earlier.

Victorian Premier Daniel Andrews.Credit: Jason South

Liquidators on Tuesday said some customers could have lost their entire deposit because the company did not take out insurance for new builds until planning permits were obtained, sometimes weeks or months after customers had signed a contract.

James Collier, from the Victorian Managed Insurance Authority on Wednesday said customers who gave a 5 per cent deposit but were yet to see work start would get their money back if they had VMIA building insurance.

But Andrews said on Thursday he was “very, very concerned” that Porter Davis may not have sought that insurance.

“[There are] at least some doubts and maybe worse that those insurance premiums and therefore policy haven’t been forwarded on to the VMIA, both for deposits, and it would seem even for builds,” Andrews said.

“I just want to remind everybody in this industry ... your customers are not there to provide you with an interest-free overdraft.

“It’s not a matter of choosing to launch those insurance premiums. You are required to launch those insurance premiums and there are very significant penalties if you choose not to.”

Domestic building insurance is compulsory in Victoria for work valued at more than $16,000.

Andrews said regulators needed to first investigate how widespread the issue was, if genuine, before considering what support was required for affected people.

Porter Davis went into liquidation on Friday, affecting 1700 customers with homes under construction in Victoria and Queensland and a further 779 who held contracts with the failed builder.

The business had approached Treasurer Tim Pallas for a bailout, but Andrews said it was right not to do so because the business was not viable. The Commonwealth Bank, the group’s largest secured creditor, had already declined to step in.

“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.”

Pesutto on Thursday said Andrews needed to explain what actions he took when the government first learned Porter Davis was in trouble and questioned whether VMIA had been enforcing the law.

“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 asked.

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

Andrews said regulators were also investigating whether Porter Davis was slashing prices of new homes by up to $50,000 until the day it went into liquidation, luring in buyers who could struggle to get their money back.

“Again, I caveat all this saying this is all to be proven. But there’s enough evidence that that seems real. We are looking at that actively,” the premier said.

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