J.M. Kelly planned to pay $3m to select creditors, court hears

The financial controller of collapsed J.M. Kelly Group has been under fire in the Federal Court over allegedly misleading financial data provided to the building watchdog.

THE financial controller of failed J.M. Kelly Group allegedly lied to the building watchdog about its debt levels in an audit into whether the firm could retain its building licence.

Barrister Craig Wilkins, acting for liquidator Derrick Vickers of PwC, told the Federal Court that Elizabeth Murphy was told by the company’s external accountant that figures she planned to provide to the Queensland Building and Construction Commission (QBCC) on inter-company debt were wrong and should be increased from only $2.4 million to over $7 million.

Instead Mr Wilkins told the court Ms Murphy, the daughter of company founder Geoff Murphy, lowered the amount owed by a $1 million.

“I put it to you that you lied to the QBCC and you did so deliberately,” said Mr Wilkins. “You did not want the QBCC to know the real figure so you changed the 2 (million) to a 1 (million). You were told in no uncertain terms that you would need to increase the figure.”

Ms Murphy denied she had misled or lied to the QBCC and did not recall changing the financial information provided to the QBCC.

“We were all under the pump trying to get the figures out to the QBCC,” Ms Murphy said.

She said the company’s accounting team was working to meet an unreasonable deadline to provide the figures to the watchdog and had warned mistakes could be made. Ms Murphy was giving evidence into the $50 million collapse of the Rockhampton-based firm last year.

J.M. Kelly financial controller Elizabeth Murphy leaves Federal Court. (AAP Image - Richard Waugh)

The court also heard J.M. Kelly Group planned to pay a select group of subcontractors and suppliers $3 million while leaving others unpaid.

After several J.M. Kelly companies were forced into liquidation in 2016 a surviving firm in the group decided to take on loss-making projects including a new facility at the Rockhampton Hospital. Mr Wilkins said as part of that arrangement a select list of creditors to be paid was drawn up. “There was a selection process was there not which determined that not all creditors would be paid out?” Mr Wilkins asked Ms Murphy

Ms Murphy said the list was drawn up by the accounting staff after they were bombarded by phone calls from unpaid suppliers.

She denied her father Geoff Murphy and brother John, the group managing director, made the decision about who would be paid and who would not.

“John and Geoff wanted creditors to be paid so they indirectly agreed with paying creditors and suppliers,” she said.

“We needed to maintain relationships with clients and suppliers.”

Ms Murphy also was asked whether she was aware of Queensland Building and Construction Commission policy requirements that building firms hold a certain level of net assets in order to keep their licence.

“As the financial controller was it not incumbent on you to go through these policy requirements with a fine tooth comb?” Mr Wilkins asked.

Ms Murphy said that while she was aware of the policy as it applied to the company, going through it with a “fine tooth comb would be like going through the Income Tax Assessment Act with a fine tooth comb.”

The hearing continues.