JM Kelly plan to pay “select” creditors

THE failed JM Kelly Group planned to pay a select group of subcontractors and suppliers $3 million while leaving others unpaid, a court has heard.

The Federal Court was today told that after several JM 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.

Barrister Craig Wilkins, acting for the liquidator, said as part of that arrangement a select list of creditors of those failed firms was prepared to determine who would be paid.

The revelation came as the group's financial controller Elizabeth Murphy, the daughter of company founder Geoff Murphy, gave evidence about the $50 million collapse of the entire group last year.

"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.