Subcontractors, customers to miss out in $147.2m Porter Davis collapse

Subbies and customers owed more than $71m are unlikely to see a cent from the liquidation of the Melbourne-based builder but the Commonwealth Bank will get its $33m.

The liquidators of collapsed builder Porter Davis Homes Group say that struggling subbies and other unsecured creditors owed more than $71m are unlikely to be paid in a fresh blow for the sector, but the Commonwealth Bank will get back almost all the $33m it is owed.

The findings mean that subbies that were hit by the company failure will be left empty-handed and not all customers will be covered as most of the funds in the $147.2m collapse are not likely to be recovered.

The Melbourne-based home builder fell into the hands of liquidators Grant Thornton in March, leaving about 1700 projects in limbo in Victoria and Queensland, with another 779 contracts signed.

The Porter Davis home building empire is now being broken up, with builders taking on jobs they believe can be turned into profitable work at a time when the industry faces a crisis from rising costs and financial pressure.

Grant Thornton recorded customers with incomplete home builds as being “contingent” creditors but warned that a portion of these customers would ultimately not be creditors of the liquidations.

It said that customers who were at the pre-site stage of their builds may be eligible to claim a refund of their deposit under the home warranty scheme in Queensland or Victoria, or otherwise under the Victorian government compensation scheme.

The listed Simonds Group has emerged as another saviour for some Porter Davis customers left with unfinished homes. The company said it had kicked off completion and rectification works for domestic building insurance claimants. The first wave of customers early in this process are former customers of Porter Davis Homes and it could take up to 500 jobs, with industry giant Metricon to also finish off a parcel of homes.

Crown Cabinetry director Wayne Speijers said his Queensland small business lost about half a million dollars after Porter Davis went under earlier this year.

Mr Speijers, who employs about 12 people at the Beenleigh business, said Porter Davis made up about 60 per cent of the company’s business and he had been left with numerous prebuilt kitchens that he has since tried to get into the homes of Porter Davis customers.
He said there was little inkling Porter Davis was in trouble until the end of last year when payments stared to slow. Subbies United spokesman John Goddard said that as usual subbies would not see a cent of their money from the liquidation.

“How is it possible for a builder to lose almost one fifth of a billion dollars?” Mr Goddard said. “I will tell you how. Most switched-on suppliers would have had them on stop credit long before but subbies ‘contractually’ cannot do that quickly. They keep building and working away, getting strung along with payment delays, being asked and coerced to ramp up production and when they ask why their payment claims are late, they are given excuses. The builder just doesn’t pay them.”

Mr Goddard said that if subbies do stop work, the builder simply hires a new crew because other than “the forum on our website, subbies don’t know the misery each other are going through with various builders.”

Porter Davis customers Sukhjit Kaur, Taran Kaur and Simerpal Singh with baby Nabab in their home under construction in Hillcrest. Picture: Richard Walker

The Queensland Building and Construction Commission (QBCC) this week said it had approved 71 return of deposit claims from Porter Davis customers worth $2.065m under the Queensland Home Warranty Scheme. The QBCC is currently assessing another 24 return of deposit claims. In addition to these claims, the QBCC is assessing 126 non-completion claims for customers in Queensland.

Some customers that had substantial works undertaken on their homes had been invoiced for work, but had not paid for this building. Others may have a genuine claim to be a creditor, as they engaged new builders and may be required to pay extra to finish their homes.

“We will assess these claims on a case-by-case basis in due course, but it is worth noting that any formal adjudication of creditor claims is subject to sufficient funds being made available to enable a distribution to ordinary unsecured creditors,” the report said.

The company founder, Anthony Roberts, pumped more than $20m of his own money into the company before it became Australia’s largest construction company failure this year.

The report said the total amount owed to the CBA, across all entities in the group, was $32,939,409, and Mr Roberts’ Chesapeake Holdings is owed $24.6m and likely to get a partial dividend as the builder’s assets are sold off.

The founder’s well-known Chesapeake thoroughbred breeding business is held at arm’s length to the building company and is not related to the collapse. Mr Roberts was putting funds into the building operation as he attempted to keep the business afloat.

Staff owed about $18.09m will receive a partial dividend, but unsecured creditors like subbies who are owed about $71.55m are not likely to be paid.

Grant Thornton said it had identified more than 20 discrete classes or subclasses of assets that may be recoverable in the liquidations.

This includes completing the sale of the Porter Davis Homes multiple dwelling business to the Nostra Property Group, which will complete 375 homes. The company’s intellectual property is also being sold, and it is in talks to sell the Englehart business.

Grant Thornton said its preliminary finding was that there was not compelling evidence that the Porter Davis companies were insolvent before February this year.

“Whilst there were indicators of insolvency earlier than February 2023, there were mitigating factors impacting a conclusion of insolvency, including the availability of funding from the Group’s lender (CBA), and the support of a key shareholder who injected funds to assist the Group in meeting its obligations in the period up to the end of January 2023,” the report said.

They added the directors could defend any insolvent trading claim using a “Safe Harbour” defence. “Our investigations are ongoing in this regard,” Grant Thornton said.

Creditors will meet on June 28.