J.M. Kelly underestimated debt to watchdog, court hears

THE boss of collapsed J.M. Kelly Builders underestimated its debt by almost $2 million dollars in documents sent to the construction watchdog as the company struggled to maintain its building licence, a court has heard.

Lawyers acting for liquidators said figures provided by company director John Murphy to the Queensland Building and Construction Commission (QBCC) showed debts owed to J.M. Kelly Builders from other firms in the group as totalling only $253,000 in 2017 when in fact it was $2.15 million.

Barrister Craig Wilkins, acting for J.M. Kelly liquidator Derrick Vickers, questioned Mr Murphy as part of a public examination proceeding in the Federal Court in Brisbane into the $50 million collapse of the group last year.

Mr Wilkins said that if the true inter-company debt level of the group was known the company would not have qualified to hold a building licence.

"The information you provided was inaccurate," Mr Wilkins said. "It was not just a little inaccurate but a lot. How is it you didn't know they (the figures) were wrong?"

Mr Murphy told the court he never prepared the report, which carried his electronic signature, for the QBCC and it had been done by the company's accounting department.

He denied a suggestion by Mr Wilkins that he had asked someone in the accounts department to "concoct" financial data given to the QBCC.

Mr Murphy also was questioned by Mr Wilkins on a $720,000 transfer from the group cabinet making business Kawana Joinery to J.M. Kelly Pastoral, a cattle business of which his father Geoff Murphy was a director.

Geoff Murphy
Geoff Murphy

"Kawana Joinery had it own external creditors and you would have to accept that they would not be happy if $720,000 was just given away," said Mr Wilkins.

Mr Murphy said the transfer was to "tidy up inter-company loans" and was in the the best interests of the group.

The court also heard Mr Murphy set up a separate company outside the group in case "everything went pear shaped."

Mr Wilkins said Mr Murphy instructed his sister Elizabeth, who was the group's financial controller, to register the company called Murphy Brothers Group in 2016.

At the time, the Queensland Building and Construction Commission was asking the group to provide updated financial data to determine if it could keep its building licence.

Mr Wilkins said Mr Murphy in an email to his sister the registration was "insurance in case everything went pear shaped." Mr Murphy told the court the company had been set up to a particular project for the group's locksmith business but it was never started.

The hearing continues.