JM Kelly directors may be questioned under oath
PEOPLE involved in the running of failed CQ builder JM Kelly may be summoned to produce materials and examined under oath as a newly appointed Liquidator investigates possible breaches of director duties.
Creditors today voted to wind up JM Kelly at a tense second creditors' meeting in Rockhampton.
Administrators PWC say significant work undertaken to date has uncovered a number of complex issues that require further investigation.
The Liquidators will now focus on continuing its investigations into potential voidable transactions, intercompany loans and possible breaches of director duties.
During the course of these ongoing investigations, the Liquidators may be funded to undertake a public examination which will allow us to use our powers to issue summons to individuals to produce materials and conduct examinations under oath.
Meanwhile, subcontractors failed in a bid to replace PwC as administrator of JM Kelly Builders.
It was understood PwC held sufficient JM Kelly employee proxies with the National Australia Bank also providing a proxy for its secured exposure of more than $9 million.
The vote came at the start of the second Creditors' Meeting of JM Kelly Builders which went into administration in mid October with debts estimated by PwC to be more than $21 million.
The Morning Bulletin understands that the bid to unseat PwC was lost on both votes and debt value.
Creditors voted to put JM Kelly Builders into liquidation with PwC to run that process.
A statement from PWC said this outcome followed investigations conducted by voluntary administrators, Derrick Vickers and Michael Owen of PwC Australia, into the affairs of the JM Kelly Group entities that confirmed that, with no other options available, placing the company into liquidation was in the best interest of creditors.
"At the meeting, PwC Australia Partners, Derrick Vickers and Michael Owen, were appointed liquidators of the company," the statement said.
Mr Vickers said the significant work undertaken by PwC Australia to date has uncovered a number of complex issues that require further investigation.
"Having been appointed as Liquidators, we now possess the requisite powers to pursue these matters to the full extent," he said.
"We will now focus on continuing our investigations into potential voidable transactions, intercompany loans and possible breaches of director duties.
"During the course of these ongoing investigations, the Liquidators may be funded to undertake a public examination which will allow us to use our powers to issue summons to individuals to produce materials and conduct examinations under oath.
"With creditors having voted to wind up the company, the Liquidators will move quickly to assist employees in accessing the Fair Entitlements Guarantee (FEG) scheme to ensure that claims for outstanding entitlements are processed efficiently.
"The Liquidators also continue to conduct a sales program to realise value from the company's assets, and this process is already well advanced."
The latest bid to unseat it came after PwC's appointment by the company and a failed attempt by creditors at the first creditors meeting which was won on a show of hands 18-8 but lost on value due to the weight of the NAB debt.
Subcontractors represented by the Subcontractors Alliance had hoped to replace PwC with Jirsch Sutherland and had written to both the Australian Restructuring Insolvency and Turnaround Association and the Australian Securities and Investments Commission complaining about use of special proxies, invalid proxies and meeting practices.
The meeting started at 10.15am at the Leichhardt Hotel after a short delay signing in the high number of creditors present.
A vote was expected to decide if the Rockhampton-based company should be placed in liquidation.
Creditor Michael Barfield, director of Mackay Labour Hire, said he has been fighting since 2013 for $350,000 plus legal fees owed to him by JM Kelly.
The company went into voluntary liquidation during the Supreme Court case in June 2016.
In the judgment, handed down on May 2, 2017, Judge Leanne Clare found that according to Mr Murphy's own Form 509 summarising the company's affairs, JM Kelly Project Builders was "hopelessly insolvent" on June 20, 2016.
She found that "such a serious insolvency was unlikely to arise overnight" and the strong inference was that "the defendant was insolvent for a significant time before the trial".
Mr Barfield says since then he's been paid $48,000.
His business is still registered, though not trading, and he hoped that today's meeting would vote to have JM Kelly appointed liquidators, Price Waterhouse Cooper, removed and replaced by Jirsch Sutherland.
He claims preferential payments had been made to subcontractors vital to the company's continuing operations and questioned why the Queensland Building and Construction Commission allowed the company to operate when people weren't being paid.
"This needs to be investigated and that's why we need to get these liquidators out," he said.
In a statement, PwC Australia said it was aware that an alternative liquidator has been proposed should JM Kelly creditors vote to wind up the company at today's meeting.
"PwC firmly believes it is an independent and suitable candidate to act as liquidator, particularly in light of the significant work already undertaken to date, and the potential duplication of costs and any delay in the process should another liquidator be appointed," the statement said.
"Ultimately, this will be a decision for creditors."
PwC Australia said it has only been made aware of alleged complaints submitted to ASIC and ARITA following recent media reporting to that effect, and has not been contacted by either organisation.
"In addition, the first meeting of creditors was conducted in strict adherence with the Corporations Act," it said.
The practice of unsecured creditors replacing company-appointed administrators, who eventually become its liquidators, is increasingly being used in Queensland.
In January, 2017, subcontractors replaced Pearce and Heers partners Mark Pearce and Michael Dullaway with Michael Caspaney of Menzies Advisory as liquidator of the Cullen Group.
They used their combined strength in April that year to install Mr Caspaney over Morgan Lane and Chris Cook of Worrells and again in July, 2017, when Anne-Marie Barley stood aside as liquidator of Queensland One Homes ahead of a vote to replace her.
Mr Caspaney was subsequently responsible for securing State Government financial backing of $200,000 through the Queensland Building and Construction Commission for a public examination in the federal court into Cullen and a further $100,000 for similar action in relation to Queensland One Homes.
Wood and Wood Sign Systems of Caboolture finance manager Margaret Catterall said JM Kelly Builders had used purchase orders for signage in September-October of this year.
She said the company usually installed signs itself but in this case had sent the goods as requested.
"We're the last in so we'll always get done when a builder goes bust," she said.
"We try to be careful but you can't really tell. You just never know and run the gauntlet."
It was the fourth time the business had been caught in the past six months.
The company has given its proxy to support removal of PwC, Ms Catterall saying she had received no formal notification of the administration until contacted by the Subcontractors' Alliance.
"We only submitted our proof of debt this week," she said.
Ms Catterall said proposed legislation could not come soon enough.
"We've lost a lot of money but have been able to sustain it. I like the new Project Bank Account idea. Builders now will have to fund their own cash flow, not us."