The ALDI construction site was bare today after tradespeople walked off the job after JMK Kelly went into liquidation.
The ALDI construction site was bare today after tradespeople walked off the job after JMK Kelly went into liquidation. Shayla Bulloch

JM Kelly business failure questioned by administrators

ADMINISTRATORS of failed CQ builder JM Kelly have dismissed a director's explanation over the reasons for the business's failure.

The director advised that key factors contributing to the failure of the company were the QCAT proceeding initiated by QBCC for cancellation of QBCC licences against the company, the company being precluded from tendering for BAS (Building and Asset Services) projects since July 2016 as a result of the QCAT proceeding, and the significant cost of defending in the QCAT proceeding.

In its Second Report to Creditors, the administrators dismissed some of those reasons.

It said while BAS had traditionally been a source of work for the company, it was not the only source.

It also said it was unable to comment on whether the company would have been successful when tendering for new work with BAS, even if it had the ability to do so.

The administrators' have recommended winding up the company, saying it's in the best interest of creditors.

Preliminary investigations have so far revealed:

Significant inter-company loans totalling $8.6m are owing within JM Kelly Group.

JMK management provided a treasury function on behalf of JM Kelly Group, meaning that all receipts and payments were processed through this company by way of inter-company loans (43,000 transactions in the past year on behalf of 13 companies).

A number of creditors have been identified as not being paid despite stating otherwise in statutory declarations. Should the administrators have sufficient evidence supporting this matter, they say they will report this offence to the relevant authorities.

The director may have traded the company whilst insolvent from January 2017.

Investigation in relation to any voidable transactions is ongoing.

The director may have breached directors' duties.

JM Kelly director Geoff Murphy said he refuted many of the report's findings.

"The report only deals with one side of the issue of intercompany loans as they generally go both ways across the companies," he said.

"We dispute the comments about statutory declarations as it is obvious that PWC do not understand how these are implemented and have not looked into the subcontract conditions of payment.

"A detailed audit of the company was carried out by an independent auditor which proved that the company was solvent at June 30 and we again reject PWC's comment.

"We do not agree that the director has breached the director's duties

"There are many other statements which we do not agree and it is obvious that PWC have not had sufficient time or desire to seek proper clarification."

The administrators have started a sale campaign for the company's businesses.

At this stage, 19 expressions of interest have been received including 17 for Pink Lily Sands and two for Metal Accessories.

The administrators have now started the process of realising company assets.

Hangar lease at Rockhampton airport - two expressions of interest received.

Plant and equipment including motor vehicles - PwC will consider auctioning the assets in due course.

Cessna aircraft - currently grounded due to maintenance issues.

Real properties - PwC currently seeking marketing submissions from agents.

To date, the administrators say they have secured all assets of the company, including those on various job sites; reviewed all work in progress and contracts on foot; and traded Pink Lily Sands.

They have also started a campaign for sale of the businesses and assets, liaised with QBCC regarding proposed cancellation of the builder licence, and continued to pursue debtor collections, including recovery of bank guarantees.

A second meetings of creditors will be held at the Leichhardt Hotel next Wednesday at 10am.

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