Geoff Porz savours taste of vindication as appeal clears air

IT was last week, after a four-year fog of litigation lifted, that Geoff Porz began to savour the sweet smell of vindication.

Former DFO shopping centres chief executive Geoff Porz in Melbourne. ‘Ultimately the legal system got it right’. Picture: Stuart McEvoy

IT was last week, after a four-year fog of litigation abruptly lifted, that Geoff Porz began to savour the sweet smell of vindication and a reputation restored.

The Victorian Court of Appeal’s ruling that he had not engaged in misleading and deceptive conduct while chief executive of the DFO discount shopping centre empire was extraordinary because of its emphatic, almost brutal, rejection of the trial judge’s decision.

Perhaps even more astonishing, given the toxic relations between foundation DFO shareholders David Goldberger and former ACCC chairman Graeme Samuel, is that Porz remains in charge of three DFO outlets — two in Brisbane and one in Cairns — in the same corporate structure.

Despite years of bloodletting — mostly between Goldberger and his long-time business partner David Wieland, on one side, and Samuel on the other — the original team remains intact, still going about its business in a much slimmed down and less ambitious way.

Porz says he hasn’t spoken to the two Davids or Samuel for years. The shareholders, he says, have essentially resolved their differences and “moved on”, even though they retain rights to the DFO name outside Victoria and NSW and still own three Queensland outlets.

Despite his bruising legal battles, the former Minter Ellison lawyer surprisingly affirms his complete faith in a system that’s widely acknowledged to be far from perfect.

“It’s administered by human beings,” Porz says, ensconced in his favourite cafe in Melbourne’s edgy Chapel Street. “We all make mistakes; I’ve made a few. But ultimately the legal system got it right.”

The allegation against Porz, as well as former rich-listers Goldberger and Wieland, was that they engaged in misleading and deceptive conduct to secure a $14 million loan in 2008 as the GFC closed in. Samuel, a fellow but “passive” DFO shareholder, was not targeted or accused. Porz, Wieland and Golberger, however, were alleged to have known the loan — for the $550m South Wharf DFO development in Melbourne — was “at call”, or repayable immediately on demand.

For judges, red lights start flashing when an appeal court prefaces a ruling with: “With all respect to the judge ...”

Trial judge Jennifer Davies, who has since moved to the Federal Court, found Porz had agreed in a meeting with South Wharf builder and Texxcon boss Simon Gray that the loan was at call.

The appeal judges were scathing, saying Texxcon had waited until its third amended statement of claim, four years after the events in question, to allege Porz had orally agreed to an at-call loan. They also noted there was no written record of the alleged conversations. It was “remarkable to the point of incredible”, they said, that the claimed representations could be remembered with such precision so long after the meetings. “And, with all respect to the judge, it is even more remarkable that, despite extensive submissions as to the improbability of Mr Gray (and others) having that degree of recollection, the judge did not refer to those submissions in her reasons, still less reveal (her) process of reasoning,” they said. Ouch.

Goldberger and Wieland were similarly exonerated, with Samuel no more than an interested bystander.

The DFO chain, housed in the Austexx group, once promised to deliver so much.

As the first shockwaves of the GFC hit the group was well established along the eastern seaboard but precariously funded. While bank valuations suggested Austexx had $1.8 billion in total assets, it carried a heavy $1.2bn in debt, with its expansion totally funded by borrowings — not surprising given its shareholders were private individuals, not institutions.

Arguably, Austexx could have survived the crisis if it had been able to present a united front to its lending syndicate.

However, relations between Goldberger and Samuel were not just toxic but had blown up amid bitter recrimination as far back as 2003.

As chairman of the Australian Competition & Consumer Commission, Samuel had invited the two Davids, owners of the independent Liberty Oil group, to brief his commissioners on the petrol industry. They accepted the invitation from their DFO business partner and Toorak neighbour, only to have the ACCC subsequently launch a price-fixing case against eight independent retailers, including Liberty.

To describe relations as toxic would be a massive understatement. As the GFC came to a head, Austexx management’s relations with Goldberger and Wieland were also cooling, leaving the bank syndicate with little choice but to dispatch the group into the dreaded workout area. Samuel, sensing a fortune worth up to $50m could have been lost, piped up, telling The Australian: “This is most distressing indeed because it affects the interests of my children and grandchildren as beneficiaries of my estate.”

Goldberger and Wieland sensed the start of a blame game, and countered that Samuel had been kept in the loop about Austexx and DFO despite the then ACCC chief’s often-repeated assertions that his Austexx stake was held in a blind trust.

Ultimately, Austexx’s key assets were sold to clear its debts, with CFS Retail Property Trust stumping up almost $500m for four DFO outlets and Samuel controversially securing $5m in surplus funds.

Despite the dismantling of the DFO empire by its banks, the original business, in its various bits and pieces, continues to trade. There was no receivership, and no bankruptcy for the shareholders, despite the inevitable personal guarantees.

Porz looks back and says the partners worked incredibly hard and built a successful business. “But circumstances changed overnight, and we weren’t alone in experiencing that,” he says. “The DFOs bought by CFS are doing incredibly well.”

Porz, who is now in a relationship with the partner of the late Demons star and AFL Brownlow Medallist Jim Stynes, had the choice of exhausting his funds to defend allegations of misleading and deceptive conduct, or rolling over and accepting his fate.

“If people make false allegations of misleading and deceptive conduct against you, there’s really no option but to defend them vigorously,” he says.

“You can’t just fold.”

Financially, he says, there is a “massive” impact, and he had to spend “every spare cent” on a legal team headed by Rodney Garratt QC.

However he was able to compartmentalise the legal case so it had minimal impact on his personal life.

“You’ve got to be resilient,” he says. “I’m used to it. I’m a Demons supporter.”