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Yara Murray-Atfield and Dan Oakes

Porter Davis clients left without homes or insurance to have deposit repaid by Victorian government

The collapse of Porter Davis left hundreds of people in limbo. (AAP: Jono Searle)

The Victorian government has said it will reimburse deposits paid to builder Porter Davis by hundreds of families who were left without a home or insurance when the company collapsed.

But hundreds of other creditors, who are collectively owed tens of millions of dollars, are unlikely to see any of their money salvaged from the home builder's wreckage. These include employees, suppliers and sub-contractors.

Porter Davis went into liquidation in late March, leaving about 1,700 home building projects in limbo, with the majority of those in Victoria and about 200 in Queensland.

Hundreds of those families found that despite paying a deposit, which included an insurance premium, the company had not lodged the insurance policies with the state's Victorian Managed Insurance Authority (VMIA).

On Monday, liquidator Grant Thornton said it had reached an agreement for Nostra Property Group to take over the multiple-dwelling arm, allowing up to 375 townhouses to be built.

On Thursday morning, Victorian Premier Daniel Andrews said his government had identified about 560 families whose homes had not yet begun being built and who were not covered by the compulsory VMIA insurance.

"For some reason, quite shamefully actually, Porter Davis have not forwarded on that insurance policy," he said.

The government will set up a website with the VMIA for those 560 families to register. Once assessed, Mr Andrews said "we will treat them as if they were insured".

The insurance will cover deposits of up to 5 per cent. Mr Andrews said it was believed that would result in an average payout of about $25,000 per client.

Mr Andrews said the government estimated the scheme would cost about $15 million and the website would be live in the next two days.

Client Richard Williams was one of dozens of people who protested on the steps of Parliament House at the weekend calling for help from the state.

He and his wife paid $38,000 for their deposit, which he said "is worth eight rounds of IVF to my wife and I, which is about how many we need to do at the moment to have a second child".

"So it's huge for us," he told ABC Radio Melbourne.

Former Porter Davis client Richard Williams has been calling for action from the government. (ABC News)

He said the news was "incredibly overwhelming and just such a huge relief" and would mean his family would be able to afford to find a new builder.

"I'll be able to sleep tonight for the first time in three weeks," he said.

He said he hoped the experience of his family and others like them would lead to lasting changes for the sector.

"There clearly needs to be legislative change to ensure that customers like myself and the 560 other families are not tricked by these incredibly wealthy developers and builders who have the means to deceive us if they want to," he said.

Shadow Minister for Home Ownership Jess Wilson said the building insurance scheme was in need of a comprehensive review, saying the situation could have been avoided.

Investigations continue into company's collapse

Mr Andrews said the government was still working with liquidator Grant Thornton to determine how to deal with the remainder of fallout of the company's collapse.

"There are reports ... [of people] who have paid a deposit, they have started the house, they will have made progress payments ... and they don't seem to have insurance," he said.

"And we've just got to get to the bottom of how that's happened, what's happened there."

Some clients have been left without a builder midway through construction. (Supplied)

Reports of Porter Davis's financial woes in the weeks since its collapse have suggested the company could owe millions of dollars to creditors.

"I'm not pleased to say this, but I think if you're a realist, we're very unlikely to get anything out of Porter Davis," Mr Andrews said.

A wider investigation is expected to be conducted, with Mr Andrews suggesting federal regulator ASIC may become involved.

"They've had such little regard, such contempt for their customers, that they've left them in this situation. It's shameful," he said.

The premier also suggested there may need to be changes to legislation once investigations are complete.

Unsecured creditors owed millions

Documents filed by the liquidators with the corporate regulator over the last 48 hours appear to show that various Porter Davis companies owed tens of millions of dollars to hundreds of creditors when it went in liquidation.

Secured creditors — such as the Commonwealth Bank, which is owed $32 million — will be first in line to claw back money from the failed business.

However, hundreds of employees, collectively owed $16 million, face an anxious wait to find out whether they will receive outstanding wages. Although they are referred to as"priority creditors" they are still unsecured.

Dozens of suppliers, sub-contractors and other businesses are owed more than $20 million by Porter Davis and its web of subsidiary companies. As unsecured creditors, they are unlikely to see any of that money.

According to the liquidators' report, some of those businesses are alone owed more than $1 million by the failed home builder.

Subcontractor owed payments fears for business's future

Sendi Chen's Melbourne-based steel framing company is owed almost $900,000 by Porter Davis.

He said the builder's size and reputation lulled him into a false sense of security even as it fell behind on payments.

Sendi Chen's company is owed almost $900,000 by Porter Davis. He has stood down staff and might need to close his business entirely as a result. (ABC News: Jesse Thompson)

"I don't feel confident to get the money back. Until now nobody has contacted us to tell us what we should do next," he said.

"It's a lot of money. Porter Davis didn't pay us money, but we still need to borrow money to pay my workers' wages, because they're not working for Porter Davis, they're working for me.

"If I didn't pay them all their family will get into trouble."

Mr Chen said he had already had to stand workers down and might have to close his business entirely if he did not receive any money from the remnants of Porter Davis.

Peak building group 'appalled' by failure to lodge insurance

Interim chief executive of Master Builders Victoria, Michaela Lihou, said she was "appalled" by the actions of Porter Davis, which she said "unfairly taints our hard-working industry".

"As a registered builder Porter Davis was aware of their obligations to lodge those insurance documents, which their customers had paid for in good faith, with the VMIA," she said in a statement.

"For them not to follow such a basic procedure and leave hundreds of trusting families in the lurch is absolutely reprehensible."

The state opposition this week accused the government of failing to act on advice about potential building industry insolvencies.

Documents obtained through Freedom of Information laws earlier in the week listed titles of briefing notes presented to former housing minister Danny Pearson in July last year.

The opposition said the titles indicated the minister was advised about the potential for insolvencies and inadequate consumer protections.

However, the government accused the opposition of "playing political games", saying it was not unusual for ministers to receive briefings on industry challenges.

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