Proof of Debt Claims in Liquidation: What Creditors and Directors Must Know After Grow Surge v Videriva [2026] FCA 974

What Happened in Grow Surge Pty Ltd (in liq) v Videriva Pty Ltd (in liq) [2026] FCA 974

When a company goes into liquidation in Queensland, unsecured creditors do not simply walk into court and demand payment. They submit a proof of debt, a formal claim under Schedule 8A of the Corporations Regulations 2001 (Cth), and the liquidator adjudicates it. If the liquidator rejects the claim, the creditor’s options are limited: appeal under Division 90 of the Insolvency Practice Schedule (Corporations) (Sch 2 of the Corporations Act) or wait.

In August 2026, the Federal Court handed down an important decision on how that process works, and when a court will overturn a liquidator’s rejection. The case has direct practical consequences for creditors, directors, and insolvency practitioners dealing with Queensland liquidations.

Background: A $273,000 Dispute Over the Character of Payments

Videriva Pty Ltd was in liquidation. Four related companies, themselves in liquidation (with Grow Surge as lead claimant), lodged proofs of debt claiming an aggregate of approximately $273,000. The creditors said the amounts were loans or advances made to Videriva over a two-year period that remained repayable.

The liquidator rejected the proofs. The available material, the liquidator decided, did not sufficiently establish that the payments created enforceable debts.

Videriva’s position was different: the payments were fees for consultancy services provided by Videriva, and therefore not repayable at all.

The creditors appealed to the Federal Court.

The Court’s Analysis: When Company Books Are Decisive Evidence

Section 1305 of the Corporations Act 2001 (Cth)

The critical legal foundation of the decision is s 1305 of the Corporations Act, which provides:

“A book kept by a body corporate under a requirement of this Act is admissible in evidence in any proceeding and is prima facie evidence of any matter stated or recorded in the book.”

The creditors’ financial records, general ledgers, loan accounts, and financial statements, consistently recorded the amounts as loans, advances, or inter-company receivables. Every entry told the same story: money went out as a loan; it was still owed back.

The Court found that this consistent, contemporaneous record-keeping carried substantial evidentiary weight. Where records are regularly maintained and internally consistent, they can be more persuasive than oral evidence or explanations offered after the fact.

Why the Alternative Explanation Failed

Videriva argued the payments were consultancy fees. The Court rejected that explanation for two interconnected reasons.

First, there was no documentary support for a consultancy arrangement of this kind. A genuine commercial consultancy relationship would ordinarily produce engagement letters, invoices, written instructions, or at minimum an exchange of correspondence describing the scope of services. None of that existed.

Second, and tellingly, aspects of the consultancy explanation emerged only after the dispute commenced. The Court applied ordinary evidentiary reasoning: an explanation that crystallises in the context of litigation and is unsupported by contemporaneous records is inherently less persuasive than records created at the time of the transactions.

Applying the balance of probabilities, the Court concluded the payments were intended to be loans. The proofs were admitted.

The Liquidator Was Not Criticised

A particularly important feature of the decision is that the Federal Court did not criticise the liquidator for rejecting the proofs in the first instance. At the time of adjudication, based on the material then available, the liquidator’s decision was reasonable. No adverse costs order was made against the liquidator personally.

This reflects the established principle that liquidators must make pragmatic, timely decisions about proofs of debt, often with incomplete information. A liquidator who acts reasonably on the material before them is not penalised simply because a court later reaches a different conclusion on fuller evidence.

This protection is important for the administration of liquidations: if liquidators faced personal costs exposure every time a creditor successfully appealed, the incentive to take a careful, conservative approach to proofs would be undermined.

Five Practical Implications for Queensland Creditors

1. Your Records Are Your Claim

In a liquidation, you will not be in the room to explain your relationship with the insolvent company. Your proof of debt will be assessed on paper. If your financial records show the money as a loan, that is powerful evidence. If they are silent, inconsistent, or created after the fact, your claim is weak regardless of what actually happened.

For creditors, particularly those in related-party or inter-company situations, this means: maintain loan ledgers, have formal loan agreements, issue repayment demands in writing, and reconcile your accounts regularly. These are not just good business practices; they are the difference between a provable debt and a rejected proof.

2. You Have a Right to Appeal a Liquidator’s Rejection

Under Division 90 of the Insolvency Practice Schedule (Sch 2 to the Corporations Act), a creditor whose proof of debt is rejected can appeal to a court. The Grow Surge decision confirms that courts will independently assess the evidence and will not simply defer to the liquidator’s original decision if better evidence is available on appeal.

Time limits apply. If you receive notice that your proof of debt has been rejected, you must act quickly. In Queensland, this typically means filing in the Federal Court (for proofs rejected in federal insolvency proceedings) or the Supreme Court of Queensland. Get advice as soon as you receive the rejection notice.

3. The Creditor Bears the Burden

The creditor who submits a proof of debt bears the burden of establishing, on the balance of probabilities, that the debt is owed. A liquidator is not required to prove the debt does not exist, the creditor must prove it does.

This means: do not assume that because money changed hands, the debt is self-evident. The liquidator will ask: was this a loan or a payment for services? Was it a gift? Was it already repaid? Your answer must be supported by records, not just your word.

4. Related-Party Creditors Face Greater Scrutiny

Where the creditor and the company in liquidation are related, directors, shareholders, associated entities, family members, liquidators will apply heightened scrutiny. Related-party transactions are a known fraud and phoenix risk, and liquidators are required to investigate them under s 533 of the Corporations Act.

The Grow Surge creditors were related entities, themselves in liquidation. The Court still admitted their proofs, but only because their records were consistently maintained and their claim was credible. Related-party creditors with good records can succeed; those with poor records face a very high bar.

5. Voidable Transaction Risk Sits Alongside Proof of Debt

A creditor who succeeds in proving a debt is not necessarily in the clear. Where the company made payments to that creditor in the four years before liquidation, the liquidator may pursue a voidable transaction claim, an unfair preference under s 588FA, or an unreasonable director-related transaction under s 588FDA of the Corporations Act, to claw back those payments.

Creditors in this position face a two-front problem: proving the remaining debt while defending against clawback of amounts already received. In complex inter-company insolvencies, the two issues will often overlap. Obtaining legal advice at the earliest stage is essential.

What This Means for Queensland Directors

Directors of companies in liquidation, particularly where they have advanced money to the company as a loan, need to understand that their ability to recover those advances as a creditor depends on the same rules.

A director loan that is properly documented, recorded consistently in the company’s books, and supported by a written loan agreement is a provable debt. An advance that was never formally documented, was recorded as equity or contributed capital, or is contradicted by the company’s books, is not provable, and may not be recoverable at all.

Directors who have made advances to their companies and are now facing liquidation should:

• Locate all loan agreements, board minutes authorising the advance, and financial statements recording the liability
• Identify any repayments made and confirm these are correctly recorded
• Consider whether the advance was on commercial terms (interest rate, repayment schedule), related-party loans without commercial terms attract closer scrutiny
• Obtain legal advice before submitting a proof of debt to ensure the claim is presented in the strongest possible form

How to Submit a Proof of Debt in Queensland

The formal process for submitting a proof of debt in a Queensland liquidation is governed by Schedule 8A of the Corporations Regulations 2001 (Cth) (Form 535). Key steps:

1. Obtain Form 535, the liquidator will typically send this with the notice of appointment or creditors’ meeting notice
2. Complete the form accurately, describe the nature of the debt, the amount, and the basis on which it is owed
3. Attach supporting documents, loan agreements, invoices, financial records, correspondence, bank statements evidencing the transfer
4. Submit before the deadline, the liquidator will set a bar date after which late proofs are typically excluded from distribution
5. Follow up, if you do not receive a notice of adjudication, contact the liquidator. If rejected, seek legal advice immediately

The quality of the proof of debt you submit is often the determining factor in whether your claim is admitted, or whether you need to pursue a costly court appeal.

Six-Step Action Guide for Creditors

1. Act immediately on appointment notice, the moment a liquidator is appointed, begin gathering your evidence: contracts, ledgers, bank statements, correspondence
2. Calculate your claim precisely, identify the total amount advanced, amounts already repaid, and the net figure you are claiming
3. Audit your records, do they consistently record the amount as a debt owed? Are there gaps or inconsistencies? Resolve these before submitting
4. Submit a complete proof of debt, with all supporting documents attached; a bare form without evidence is at risk of rejection
5. Note the bar date, late proofs are not admitted to interim distributions; confirm the deadline and comply with it
6. If rejected, appeal promptly, the Federal Court or Supreme Court of Queensland can review a liquidator’s rejection; time limits are strict

Frequently Asked Questions

What is a proof of debt in a liquidation?

A proof of debt is a formal claim submitted by a creditor to a liquidator under Schedule 8A of the Corporations Regulations 2001 (Cth). It sets out the nature and amount of the debt the creditor says is owed by the company in liquidation. The liquidator adjudicates the claim and either admits or rejects it. Admitted creditors participate in the distribution of the company’s assets.

Can I appeal if the liquidator rejects my proof of debt?

Yes. Under Division 90 of the Insolvency Practice Schedule (Corporations) (Sch 2 to the Corporations Act 2001), a creditor whose proof is rejected can apply to a court for review. The court will independently assess the evidence and is not bound by the liquidator’s original decision. Time limits apply, act immediately on receiving a rejection.

What evidence does a proof of debt need?

The creditor must establish, on the balance of probabilities, that the debt is owed. The best evidence is contemporaneous documentation: loan agreements, financial statements consistently recording the debt, ledger entries, bank records, correspondence. In Grow Surge v Videriva [2026] FCA 974, the Federal Court found that consistently maintained books were prima facie evidence of a loan under s 1305 of the Corporations Act.

Will the liquidator be personally liable if my proof of debt is wrongly rejected?

Not automatically. The Federal Court in Grow Surge v Videriva [2026] FCA 974 confirmed that a liquidator who makes a reasonable decision on the available material will not face adverse costs consequences simply because a court later reaches a different conclusion. Liquidators are protected where they act reasonably on the evidence before them.

What is the difference between a proof of debt and a voidable transaction claim?

A proof of debt is a creditor’s claim for money owed at the time of liquidation. A voidable transaction claim is a liquidator’s claim against a creditor (or director) to recover money that was paid by the company before liquidation, unfair preferences (s 588FA), uncommercial transactions (s 588FB), or unreasonable director-related transactions (s 588FDA) of the Corporations Act. The two can operate simultaneously: a creditor may have a provable debt and also face a clawback claim.

If you are a creditor dealing with a proof of debt rejection or a disputed proof in a Queensland liquidation, Boss Lawyers’ experienced insolvency lawyers in Brisbane can advise you on your legal rights and options for recovery. Creditors who are also pursuing the debt through a letter of demand or statutory demand before a company enters liquidation should review our debt recovery services. Directors who have advanced loans to a company now facing winding up may also have questions about personal liability, our director disputes practice covers the intersection of director loans, proofs of debt, and personal liability claims.

This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.