LIQUIDATORS of failed building firm JM Kelly Group have successfully applied to freeze the assets of the 80-year-old dementia suffering wife of the company founder because of concerns they could be siphoned off by her family members.

PwC liquidators Derrick Vickers and Michael Owen applied to the Supreme Court for a freezing order over Noreen Murphy's assets citing concerns they may be divested and frustrate efforts to recover money for creditors.

Noreen Murphy is the wife of company founder Geoff Murphy and mother of Elizabeth and John Murphy, who both held senior roles in JM Kelly before it collapsed last year owing an estimated $50 million. The order not to divest or dispose of Mrs Murphy's assets also applies to Geoff, John and Elizabeth Murphy.

Court documents filed by the liquidators state that Mrs Murphy granted an enduring power of attorney in October 2018 with her husband as her first attorney. But when Mr Murphy became a bankrupt in July this year her children, Elizabeth and John, took on the role.

Both Elizabeth and John's assets have already frozen by the Supreme Court following a public examination in the Federal Court into the circumstances surrounding the collapse of the Rockhampton-based building group.

The liquidators are seeking damages of $2.94 million from Noreen Murphy in her capacity as a director of GJ Murphy Holdings, one of the firms in the construction group. They claim she caused, or acquiesced in causing, the company to purchase loans from other firms in the group that were highly unlikely to repay the loan

"Given that John and Elizabeth have control of the defendant's assets, the liquidators are concerned that if John and Elizabeth learn that this proceeding has commended they will take steps to divest the defendants assets to frustrate the plaintiff's [liquidator] ability to recover on its claims," according to the documents. According to the liquidators' filing, Noreen Murphy has assets of about $1.2 million, including $318,000 cash in the bank and a $400,000 share in a Rockhampton property. The court documents lodged by the liquidators claim that their public examinations had revealed that John and Elizabeth Murphy "had engaged in dishonest conduct and have been dissipating their assets" including making misleading disclosures to the Queensland Building and Construction Commission.

Both John and Elizabeth in evidence to the public examination have denied misleading the QBCC and rejected claims they acted dishonesty.

The public examination is continuing in the Federal Court in Sydney this week.