Ben Hills investigates
Susan Gallagher finds it hard to choke back the tears as she shows us around her modest brick veneer house south of Wollongong, pointing out the missing guttering, the leaking roof, the carport where the bedroom should have been built. “All I tried to do was provide a safe place and a nice home for my children,” she says. “Now my money has gone and I have nothing to show for it. I’m a Christian person but I can tell you I don’t feel very Christian towards the people who did this – I could rip their faces off.”
Gallagher, a single mother, discovered last year that her house had asbestos in the roof. Worried it might cause a health hazard, she called a building company recommended by a friend – Prouds Home Improvements.
A salesman came, and she decided to do more work – a patio, some cladding, and walling in the carport to provide an extra bedroom for one of her two boys. In December she agreed to pay $36,000, expecting the job to take a few months. Almost a year later, having paid $23,000 of the money, none of the work has been done, apart from the roof which was such a shoddy job that the rain pours in. Gallagher still has her bank debt and somehow must pay to repair the damage Prouds did to her home. She is one of the 541 customers Prouds left in the lurch when it went into receivership in August leaving debts of $5 million – one of the largest home building collapses in the state’s history.
But Prouds for months – if not years – made a mockery of just about every state and federal law to protect consumers and safeguard building standards, and had failed to ensure sound corporate practice.
The company had a history of breaking the home-building laws for three years which its customers knew nothing about, it operated without the correct insurance and, so its receiver told the Australian Securities and Investments Commission, it traded while insolvent.
Prouds had its headquarters in the Sydney suburb of Wetherill Park and was owned by Thomas Pobjie, 64, and his wife Leila, who live in a $2 million home in Dural in Leila Pobjie’s name. Their son Kevin, a former Penrith Panthers footballer, was a commission salesman; another son, Michael (also a former first-grade league player, for Souths and the Balmain Tigers) had been a manager and director.
The company had operated since 1967 as a house-cladding business until, several years ago, it began an aggressive drive into the home-improvements market, with television advertising and a team of commission salesmen. Sales doubled, then doubled again, to more than $2 million a month.
Its principal product was a prefabricated wall panel which it used to build home additions called “Queensland rooms”. But Prouds also tackled decks, bathrooms, in fact any home extension or repair job.
There are many heartbreak stories. Peter Crowe lives on an allocated pension after a terrible road accident. Last September he withdrew $7000 from his fund to pay for a sunroom. That was the last he saw of his money, or Prouds. “I am really surprised there was not violence at the creditors meeting,” he says. “We have nicknamed them Dodjie Brothers – Proud to Unimprove Your Home.”
The workmanship – where any was done at all – is a source of anger among Prouds’s customers. The company used teams of sub-contractors, some of the jobs were done without council permits, and some of the workmanship is so substandard that the company liquidator, Murray Godfrey, says that at least three will have to be demolished.
Jill Piggott, a 69-year-old widow from Avalon, is one of the unluckiest. She signed up in February for $54,000 to have a sundeck built and a veranda enclosed so that she could use it for meditation classes. The builder downed tools in August when the company went into receivership – as well as the $50,000 she has handed over (part of her retirement savings). Piggott says she will have to pay $4000 to have the work demolished because of shoddy materials, and lack of council permission.
It has emerged since the company’s collapse that the Office of Fair Trading has known of serious complaints against Prouds for a number of years. Brad Wicks, who for 13 years was the company’s general manager, says he knew of more than 50 serious complaints about workmanship. “I didn’t say to Fair Trading, ‘You are toothless tigers, you should have got him then’, but I was thinking it,” Wicks says. “They [Prouds] should have been stopped three or four years ago.”
In fact, had any of its customers known how and where to look*, the department’s website carried a notation that in 2001 the company had been fined $10,000 for shoddy workmanship.
In December last year, with Prouds signing up more than $50,000 worth of business a day, the department became aware of a deluge of complaints to the Consumer, Trader and Tenancy Tribunal and that some of its work was uninsured.
It took until May for the proceedings to be completed, and the company was fined $34,500 – but Prouds was allowed to continue trading, providing it supplied monthly reports to the department on the contracts it signed and their insurance.
The company simply ignored this, says a spokesman for the Fair Trading Minister, Reba Meagher. This was hardly surprising: the liquidator discovered Prouds had signed up nearly $10 million worth of work, but its insurance was capped at $1 million.
Vero Insurance had repeatedly refused to increase Prouds’s insurance cover unless it provided a bank guarantee of $800,000. When Godfrey put this to Tom Pobjie, Pobjie said, “How was I possibly going to provide that?”
There was no way at all, because according to Godfrey’s report, the directors (Thomas, Leila and Michael Pobjie) “from January 2004 traded the company recklessly” and “traded whilst insolvent from at least 1 January 2004″. The directors deny this, claiming it was the suspension of their licence that plunged them into bankruptcy.
It took until August 9 – eight months – for Fair Trading to suspend Prouds’s building licence. But that had no effect – the company continued operating until it placed itself in receivership on August 27. During that 18-day period, when it was illegal for the company to sign new contracts, and when its tradesmen had downed tools, Prouds continued advertising and took tens of thousands of dollars from unsuspecting customers.
Jason Smith, for instance, had signed up on July 23 to have a glass-walled rumpus room built at his home at St Clair, at $25,000. On August 13, a week after its licence was suspended, he paid over a progress payment of $6355 to Prouds. No work was ever done. “I really do think Fair Trading should have stepped in and stopped them,” he says.
When the company went under, it had 20 consumer tribunal judgements totalling $149,000 against it but the claimants, like other creditors, can only hope for a few cents in the dollar.
Temperatures reached boiling point at the two creditors’ meetings in September when Godfrey – who has received dozens of abusive phone calls – said that if the company was wound up debts would be between $4.2 million and $5 million, and the best Prouds’s customers (and suppliers) could hope for was 9.3 cents in the dollar.
There was more outrage when it was revealed that the company’s biggest secured creditors – with priority over the victims – are Thomas and Leila Pobjie. When the company’s biggest asset, its headquarters, was sold, the net proceeds of $1.35 million were initially frozen by the Supreme Court, then last month handed over to the Pobjies.
Creditors angrily rejected the Pobjies offer to return $750,000 of this to them. “They were baying for blood,” said Godfrey, who is looking for funding to pursue Tom, Leila and Michael Pobjie through the courts. “I believe that at the end of the day the creditors will look back on that [rejecting the offer] as an extremely poor decision. I had my foot on the money. Now I don’t. Most of it will be eaten up in legal costs.”
Even more galling for the creditors is the fact that Thomas, Michael and Kevin Pobjie are back in the building game, operating under personal licences, rather than the Prouds licence, which has been cancelled. Kevin Pobjie (through a new business, Wizard Home Improvements) has even offered to finish Prouds’s unfinished work – for a price.
Meagher introduced legislation earlier this month to prevent so-called phoenix builders rising from the ruins of one company to operate new businesses. But for now there is nothing Fair Trading can do, other than go to court.
On December 10, the Supreme Court will hear an application by the department to have Thomas and Michael Pobjie banned from the building industry, and to force them to contribute $1.4 million to a fund to be established to finish off or rectify Prouds’s jobs.
Thomas and Michael Pobjie refused to comment, beyond saying (through their lawyer) they intended to defend the action, they denied having ever done sub-standard work, and said they had not breached the Fair Trading Act.
Kevin Pobjie at first denied that he had ever worked for Prouds, then admitted that he had signed up about 50 customers. As a commission salesman, he felt no responsibility for ensuring the work was satisfactorily completed, and he had no idea how to contact his father or his brother.
Gallagher is now trapped with no money to fix her roof, let alone complete the extensions. And she cannot sell the house because it does not have the required council and building permits.
“I am not going to rest until I see them homeless and punished by the courts,” she says.
Pub: Sydney Morning Herald
Pu bdate: Thursday 2 December 2004
Section: News and Features
Sub section: Insight
Word count: 1731
Classification: Industry/Construction Property/Renovations
Geographic area: Australia
Photo: Adam McLean
Caption: Still in the building trade … Thomas Pobjie.