Blue Star Care Pty Ltd (in liq) v Rimcroft Pty Ltd as trustee for the Heymann Family Trust [2026] QSC 50

CIVIL PROCEDURE - DEFAULT JUDGMENT - SETTING ASIDE DEFAULT JUDGMENT - WHETHER DEFENCE ON THE MERITS - where the plaintiff claims that the defendant trustee owed it unpaid entitlements under a Trust Deed - where the evidence of the entitlements is contained in the books of account - whether this is prima facie evidence of entitlement - whether the plaintiff had available an action for money had and received - whether there is a defence to the action

CORPORATIONS LAW - action by liquidator - whether leave was necessary under section 477(2B) of the Corporations Act 2001 (Qld) before the liquidators commenced the action - whether retrospective approval valid - whether proceedings were invalid

EVIDENCE - BOOKS OF ACCOUNT - financial statements of a company - whether constituted prima facie evidence of the matters stated therein

TRUSTS - power of trustee to pay monies of the trust fund - whether entry in book of account created an admission of liability to the beneficiary such that a debt was created

Corporations Act 2001 (Cth) ss 247A, 477(2B), 1305

Evidence Act 1977 (Qld) s 84

Income Tax Assessment Act 1936 (Cth) ss 109D, 109XA, 109XB

Uniform Civil Procedure Rules 1999 (Qld) r 290

Cameron v National Mutual Life Association of Australasia Ltd (No 2) [1992] 1 Qd R 133, cited

Chianti Pty Ltd v Leume Pty Ltd [2007] WASCA 270; (2007) 35 WAR 488, applied

Coburn v Brotchie [1890] VicLawRp 8; (1890) 16 VLR 6, cited

Commissioner of Taxation v Bendel [2025] FCAFC 15; (2025) 307 FCR 544, distinguished

Cook v DA Manufacturing Co Pty Ltd [2004] QCA 52, applied

De Castro v Burtenshaw Super Pty Ltd [2023] QCA 218, applied

Empire (Aust) Nominees Pty Ltd v Vince [2000] VSC 324; (2000) 35 ASCR 167, considered

Fischer & Ors v Nemeke Pty Ltd & Ors [2016] HCA 11; (2016) 257 CLR 615, applied

Generate Group Pty Ltd v Harris [2023] FCA 605, considered

Mountain Creek Markets Pty Ltd v Peter Le Compte Developments Pty Ltd [2003] QSC 72, considered

Re ACN 101 634 146 Pty Ltd (in liq) [2014] FCA 687, considered

Re AJW Interiors and Constructions Pty Ltd [2024] FCA 25, considered

Re Kimberley Diamonds Ltd (in liq) [2021] NSWSC 432, considered

Re Octaviar Ltd (in liq) [2015] NSWSC 1621; (2015) 110 ACSR 72, considered

Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516, cited

Warwick Entertainment Centre Pty Ltd v Silkchime Pty Ltd (No 2) [2012] WASC 275, applied

[1] This is an application by the defendant pursuant to r 290 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR) to set aside a default judgment entered against the defendant on 23 October 2025 for the sum of $846,834.

[2] The plaintiff and the defendant are both companies which formed part of a group of companies used by Mr Richard Heymann to conduct his own and his family's business and financial affairs.

[3] Mr Heymann had been a director of the plaintiff company since 24 July 2006.

[4] On 15 September 2023 Brett Kijurina and Richard Albarran were appointed as joint and several liquidators of the plaintiff on the application of the Australian Taxation Office (ATO). The defendant and Mr Heymann personally are both creditors of the plaintiff in the amounts of $16,000 and $42,000 respectively. The only other substantial creditor is the ATO in the amount of $240,970.12.

[5] Mr Heymann had been a director of the defendant since 18 August 1998. The defendant is the trustee of the Heymann Family Trust pursuant to a trust deed dated 13 August 2002.

[6] This proceeding commenced on 22 May 2024. The statement of claim alleges that the defendant was appointed and continues to act as trustee of the Heymann Family Trust. Richard Heymann at all material times was a director, a beneficiary of the trust and had control of the defendant.

[7] It is alleged that a term of the trust deed (clause 3(a)) was that any income received by the trust must be distributed in whole to the income beneficiaries in proportions at the discretion of the trustee of the trust.

[8] Under Schedule 2 of the trust deed, income beneficiaries included, but were not limited to, "any company in which a share is held for the time being by Mr and Mrs Heymann."

[9] On or around 24 July 2006 the plaintiff was incorporated, and Mr Heymann was appointed as director and sole shareholder. By virtue of his shareholding in the plaintiff, the plaintiff became eligible as an income beneficiary of the trust. It alleged the trustee distributed income from the trust to plaintiff from time to time. It is further alleged according to the plaintiff's books and records that the plaintiff was due to be paid distributions by the trust as an income beneficiary.

[10] It is alleged in paragraph 12 that the plaintiff accrued Unpaid Present Entitlements (UPE) in the amount of $846,834 in accordance with s 109XA of the Income Tax Assessment Act 1936 (Cth). The particulars are:

UPE Convert to Div 7A Loan - Heymann Family Trust (2018 Share Profit)

UPE Convert to Div 7A Loan - Heymann Family Trust (2019 Share Profit)

UPE Convert to Div 7A Loan - Heymann Family Trust (2020 Share Profit)

UPE Convert to Div 7A Loan - Heymann Family Trust (2021 Share Profit)

UPE Convert to Div 7A Loan - Heymann Family Trust (2022 Share Profit)

[11] It is alleged that the amounts particularised in paragraph 12 are recorded on the trust balance sheet as a liability and an amount due and payable to the plaintiff.

[12] The following has occurred since the issue of the proceedings:

(a) The defendant filed a notice of address for service on 12 July 2024.

(b) The defendant sought further and better particulars of the plaintiff's claim on 22 July 2024.

(c) On 16 August 2024, Mr Litster the solicitor for the defendant wrote to the plaintiff's lawyers stating that he considered the liquidators had not complied with s 477(2B) of the Corporations Act 2001 (Cth) (CA).

(d) The plaintiff provided the further and better particulars on 30 September 2024.

(e) On 15 October 2024 the defendant requested documents under r 222 of the UCPR.

(f) On 11 December 2024 a response was received to the r 222 request.

(g) On 29 January 2025, the plaintiff's lawyers advised that if a defence was not filed within 14 days instructions would be sought concerning a default judgment.

(h) On 30 January 2025 Mr Litster again raised the s 477(2B) issue.

(i) On 27 May 2025, the plaintiff's lawyers wrote to Mr Litster advising that there was no need to obtain s 477(2B) approval and advising that unless a defence was filed within two weeks summary judgment would be sought.[1]

(j) The defendant failed to file a defence and as a result default judgment was entered against the defendant on 23 October 2025.

(k) On 12 January 2026, at a creditor's meeting the liquidators were authorised to enter into a costs agreement with the solicitors.

[13] It is submitted that the liquidators commenced the proceeding without first obtaining approval to retain legal representatives pursuant to s 477(2B) of the CA. It is submitted the liquidators still have not obtained a valid approval. The liquidators have not complied with s 477(2B) and have failed to provide an appropriate explanation for this.

[14] This explains why the defendant has not yet filed a notice of intention to defend in the proceedings. The defendant's solicitors first raised this issue in correspondence on 15 August 2024 and again on 30 January 2025. It is submitted that no substantive response has been received from the plaintiff.

[15] It is submitted the default judgment should be set aside as the defendant has provided a satisfactory explanation for not filing a defence; there is a prima facie defence to the plaintiff's claim as the judgment is for an erroneous amount and the claim pleaded is legally flawed.

[16] The submission is that the statement of claim alleges that the UPE were in accordance with s 109XA of the Income Tax Assessment Act 1936 (Cth) (ITAA) and by reason of this are owed to the plaintiff by the trust for unpaid distributions of trust income.

[17] It is submitted that s 109 XA of the ITAA has no effect as the plaintiff contends. The alleged UPE are not loaned by the defendant as alleged by the plaintiff and to the extent that there are UPE for the period before 16 December 2009, the quantum is $22,744 rather than the $137,702 as alleged.

[18] It is said that the plaintiff's claim is misconceived as s 109XA of the ITAA has no such effect. The section is merely concerned with the determination of assessable income for taxation purposes.

[19] Further, the plaintiff claims the defendant is liable to repay the alleged UPE on the basis the amounts are loaned which is not accepted by the defendant. It relies on Commissioner of Taxation v Bendel[2] in this regard.

[20] It is further alleged the defendant and Mr Heymann no longer have access to the books and records and are unable to fully verify the allegations. It is submitted it would be unjust to refuse the defendant the opportunity to plead a defence at this point in time.

[21] It is submitted the defendant has given a satisfactory explanation for why the defence has not been filed, namely the s 477(2B) issue. It is further submitted the defendant has not delayed in making the application to set aside the default judgment particularly bearing in mind that the plaintiff's solicitors did not advise the defendant's solicitors of their intention to apply for the default judgment.

[22] The plaintiff submits that the defendant has not given a satisfactory explanation for its failure to file a defence and the defendant does not have a prima facie defence on the merits. The defendant does not adduce evidence it laboured under the assumption it was excused from filing a defence. It is submitted that s 477(2B) of the CA is concerned with a liquidator's power to enter into long term agreements. It has no bearing on the liquidator's power to commence proceedings in the name of the company. At most non-compliance might affect the validity of the costs agreement.

[23] With respect to the defence on the merits, it is submitted that the amounts claimed by the plaintiff are recorded in the plaintiff's financial statements for the 2023 financial year. Section 1305 of the CA provides that a book of account is admissible on evidence in any proceeding and is prima facie evidence of any matter stated or recorded in the book. It is submitted that the financial statements are prima facie evidence of the amounts owing by the defendant unless there is evidence of the contrary.

[24] The only evidence adduced by the defendant to contradict the prima facie evidence are the 2023 trust financial statements which state that an amount of $22,744 was owing in respect of the pre-16 December 2009 UPE. If the Court is satisfied of this discrepancy, the judgment can be amended to $731,876 rather than $846,834.

[25] Contrary to the defendant's submissions, the statement of claim does not allege that s 109XA of the ITAA has the effect of causing the UPE to be amounts owing in debt by the defendant to the plaintiff. The reference to s 109XA is perhaps superfluous in paragraph 12.

[26] The amounts claimed by the plaintiff are owed by the defendant because of the recording of the amounts in the defendant's financial statements which amounts to an admission by the defendant of a debt which gives rise to an action for money had and received.[3]

[27] It is submitted that the decision of the Full Court of the Federal Court in Bendel has no bearing on the plaintiff's claim in this proceeding. The defendant does not submit it does not owe the amounts - only that they are not loans within the meaning of s 109XA of the ITAA.

[28] The fact there is no access to books of account is not a matter of defence. The defendant has not identified any books and records which might disclose an additional ground of defence.

[29] The plaintiff's solicitor informed the defendant's solicitor on 25 May 2025 that if the defendant did not file a defence by the close of business on 10 June 2025, they were instructed to proceed with an application for summary judgment. The defendant's solicitor did not reply to that correspondence.

(a) The relevance of s 109AX of the ITAA.

(b) Whether the defendant owed the plaintiff the amount claimed.

(c) The relevance of Commissioner of Taxation v Bendel.[4]

(d) Whether any failure by the liquidators to obtain approval to issue the proceedings has caused invalidity in the action.

(e) Whether a failure to inspect the books of account provides a defence.

(f) Whether the defendant was notified as to the plaintiff's intention to seek default judgment.

[31] Rule 290 of the UCPR confers on the court a discretion to set aside or amend a judgment by default on terms including terms about costs and the giving of security as the court considers appropriate.

[32] The discretion to set aside a default judgment is wide and unconditional.[5]

(a) Whether the defendant has given a satisfactory explanation of the failure to defend within time.

(b) Whether any delay by the defendant in making the application to set aside the judgment precludes it from obtaining relief.

(c) Whether the defendant has a prima facie defence on the merits.

[34] Although it is borderline, I consider the defendants have explained their delay with reference to the ongoing discussions between the parties.

[35] The real question here is whether there is a prima facie defence on the merits.

[36] In De Castro v Burtenshaw Super Pty Ltd,[6] the Court of Appeal noted that the defendant must make more than a bare allegation. The allegation must be supported by some reference to evidence to suggest the defence is plausible and not just raised for the purpose of having the default judgement set aside. It is the judge's duty to consider whether the defendant has a prima facie defence on the merits by reference to the evidence put forward on the application.

Section 109XA of the ITAA

[37] Section 109XA of the ITAA provides that s 109XB of the ITAA applies if certain preconditions are met concerning payments, loans and debt forgiveness by a trustee in favour of a shareholder of a private company with a UPE. Section 109XB of the ITAA provides as to the amounts to be included in assessable income.

[38] Whilst I accept that the effect of s 109XA of the ITAA is not such as to create an obligation as between the plaintiff and the defendant, I accept the plaintiff's submissions regarding the pleading. Whilst s 109XA of the ITAA is pleaded, it seems superfluous. Otherwise, the pleading alleges that the trust deed required payment to the income beneficiaries; the plaintiff was incorporated and Mr Heymann was a director and sole shareholder; the plaintiff was due to be paid distributions by the trust as an income beneficiary and there were UPE totalling $846,834 which was an amount due and payable to the plaintiff. In those circumstances, I consider the pleading adequately sets out a cause of action for a liquidated amount.[7]

Is a debt owed by the defendant to the plaintiff?

[39] The next issue is whether there is a debt owed by the defendant to the plaintiff.

3. (a) Subject to paragraph 5 and to this paragraph, the Trustee shall each financial year (or within two months thereafter) distribute the whole of the Income of the Trust Fund to the Income Beneficiaries, but the Trustee in its absolute discretion shall determine the proportion or amount of the Income of the Trust Fund for that financial year to be paid between the Income Beneficiaries.

(b) Prior to the close of any financial year (or within two months thereafter) the Trustee may:

(i) determine that the whole or part of the Income of the Trust Fund from a specific investment ("the attributable income") may be distributed to any one or more of the Income Beneficiaries to the exclusion of the other or others, or accumulated (to the extent permitted by this Deed), to the intent that such income is distributed in specie and in the event that the Trustee so determines the attributable income may be so distributed and the books of account of the Trust Fund may be made up to reflect the income from the specific investment and so that the expenses attributable to the gaining or producing of that income are appropriately charged against that income and generally so that it is possible to trace the source of such attributable income to the particular Beneficiary or Beneficiaries and the list provided by sub‑paragraph (g) shall be made up to reflect that determination.

(ii) determine that the whole or any part of the income of the Trust from a particular category as provided in sub-paragraph (c) may be distributed to any one or more of the Income Beneficiaries to the exclusion of any other or others or accumulated, (to the extent permitted by this Deed) and become part of the Corpus of the Trust Fund, and so that, subject to the Trustee otherwise determining, the expenses attributable to the gaining or producing of that income are appropriately charged against that income and generally so that it is possible to trace the source of such distribution to the particular Beneficiary or Beneficiaries and the fist provided by sub paragraph (g) shall be made up to reflect that determination. The whole or any part of the Corpus of a category may at the discretion of the Trustee be distributed in accordance paragraph 4.

(c) The Trustee may in the books of account and records of the Trust separately record each of the following categories of income received, into the Trust Fund:

(iv) any other separately identifiable taxation consequences or benefit is attached or arises.

(B) income, including capital gains, which under the Act:

(iv) has or gives rise to any other separately identifiable taxation consequences or benefit.

(d) The Trustee may identify and separately record and maintain in the books of account and records of the Trust, Income or Corpus having, or in respect of which there is attached, individual or unique characteristics other than as referred to in the preceding sub-paragraph as the Trustee determines.

(e) Expenses and outgoings of the Trust Fund may at the discretion of the Trustee be allocated against and deducted from the Income or Corpus of any one or more categories in such manner as the Trustee sees fit.

(f) The Trustee may at any time during a financial year distribute income to any Income Beneficiary in such amount as it thinks fit. The Trustee shall keep a record of payments made in accordance with this paragraph and the time of making payment to Income Beneficiaries and at the end of each financial year take into account such payments as the Trustee sees fit.

(g) The Trustee shall in respect of each financial year prepare a list which shall provide as follows:-

(ii) the proportion of income and/or amount of income and/or the amount of attributable income, and/or the amount or proportion of income from a category, if any, which the Trustee in its absolute discretion decides to distribute to each or any Income Beneficiary. The Trustee may express each proportion as a percentage of the total income and the percentage may include the figure 100% or 0% and such proportion of income and/or amount of income and/or amount of attributable income and/or income from a particular category, shall be listed against the name of each Income Beneficiary;

(iii) the list shall specify the financial year to which it applies;

(iv) the list shall be signed and dated by the Trustee;

(v) the list shall apportion and dispose of all of the income of the financial year which is not being accumulated.

(h) (i) The Trustee shall enter particulars of any list prepared pursuant to this paragraph in the Minute Book of the Trust;

(ii) in the event of the Trustee failing to enter particulars in the Minute Book the entries in the books of account of the Trust shall be sufficient.

(i) In the event of a Trustee failing to prepare the list or to distribute the whole of the income (less any income to be accumulated in accordance with paragraph 5) of the Trust to the Income Beneficiaries then no Income Beneficiary shall be entitled to any of the said income by way of such failure and the rights of Income Beneficiaries shall be limited to the commencement of legal proceedings to compel the Trustee to comply with the provisions of this paragraph.

(j) Where the Trustee is required by law to pay tax in respect of Income of the Trust distributed to a Beneficiary the Trustee may pay the same out of Income or Corpus to which the Beneficiary is presently entitled or may deduct the same out of moneys which may then or thereafter come into the hands of the Trustee or over which the Trustee has control and to which the Beneficiary is or becomes entitled. Tax on accumulation of income may be paid from Income or from Corpus as the Trustee decides."

[41] The schedule of the trust deed provided that any company in which a share is held for the time being by inter alia Mr Heymann, was an income beneficiary.

[42] The balance sheet as at 30 June 2023 for the plaintiff noted the following:

UPE Convert to Div 7A loan - Heymman Family Trust (2018 share of profit)

UPE Convert to Div 7A loan - Heymman Family Trust (2019 share of profit)

UPE Convert to Div 7A loan - Heymman Family Trust (2020 share of profit)

UPE Convert to Div 7A loan - Heymman Family Trust (2021 share of profit)

UPE Convert to Div 7A loan - Heymman Family Trust (2022 share of profit)

[43] The defendant in its proposed defence admits that the UPE as particularised are as recorded on the trust's balance sheet as a liability. Also see the financial records of the trust,[8] although the pre-16 December 2009 UPE is said to be $22,744[9] rather than the $137,702 as claimed.

(1) 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.

(2) A document purporting to be a book kept by a body corporate is, unless the contrary is proved, taken to be a book kept as mentioned in subsection (1)."

[45] It may be accepted that financial statements of a company that record amounts owing by or owed to the company are prima facie evidence that those amounts are owed by the defendant unless there is evidence to counter that prima facie evidence.[10]

[46] The only evidence adduced by the defendant to contradict this prima facie evidence are the trust's 2023 financial statements which state that an amount of $22,744 was owing in respect of the UPE pre-16 Dec 2009. The plaintiff's financial statements record an amount of $137,702.

[47] The amounts claimed by the plaintiff were owed by the defendant because the recording of the amounts in the defendant's financial statements constitute an admission by the defendant of a debt which gives rise to an action for money had and received.

[48] In Chianti Pty Ltd v Leume Pty Ltd,[11] Leume had commenced proceedings against Chianti as trustee of a trust claiming it was owed $175,519. Leume applied successfully for summary judgment and Chianti appealed. Chianti's appeal was dismissed by the Western Australian Court of Appeal. Like in the present case the statement of claim alleged that the trustee had failed to pay distributions recorded in the financial statements as UPE. No funds had been paid by the trustee.

[49] Buss JA referred to Roxborough v Rothmans of Pall Mall Australia Ltd,[12] and noted:

(a) If a trustee admits to a beneficiary he owes the money, he is debarred from setting up a defence.

(b) There are cases where liability is simply on the basis of the admission of debt.

(c) If the trustee admits that he holds money to be paid to the beneficiary, the beneficiary may have an action for money had and received to the plaintiff's use.

(d) On the appellant resolving to distribute a specified amount of the trust income to the respondent, the appellant held the amount on trust for the respondent absolutely.

(e) The relevant amounts were recorded in the balance sheets as liabilities.

(f) The respondent was entitled to recover the amounts by an action for money had and received.

(g) Entries in financial statements can constitute an acknowledgement of debt and a creditor may sue in reliance on them.

[50] Similar issues were discussed by the High Court in Fischer & Ors v Nemeke Pty Ltd & Ors.[13] In that case Mr Fischer and others sued the trustee. They claimed that the trustee was not indebted to another party and the distribution to them was void. The beneficiaries of the trust were Mr Nemes and his wife. The trustee had resolved to distribute $3,904,300 to the Nemes. The books of account showed a "capital distribution" of this amount. The issue was whether this was a valid debt due and whether the resolution and the recording in the books of account were such that the Nemes had an action for money had and received available. The trustee succeeded in a 3 to 2 decision.

(a) If a trustee admits he holds a sum to be paid to a beneficiary, then he holds it for the plaintiff's use.

(b) In such a situation the trustee is liable at law to the beneficiary for money had and received.

(c) Chianti was referred to and the judges held that the resolution showed a clear intention to create a debt due by the trustee to the Nemes.

(d) The entry in the accounts was an action by the trustee to give effect to this intention.

(e) The resolution and the entry created an advance under the trust deed.

(a) A trustee can apply trust property to a specified beneficiary by resolving to allocate trust property unconditionally.

(b) There is no dispute that a trustee who admits having an unconditional obligation to pay a specified amount becomes liable in an action for money had and received. The common law action is available if the trustee makes such an admission.

[53] In this matter the trust deed provides that the trustee had the power to distribute income to the beneficiaries. The plaintiff was a beneficiary. By the entry into the book of account an admission of this debt occurred and the plaintiff in this matter has available an action for money had and received.

[54] In response to the allegations by the plaintiff the bare defence is that "the alleged Unpaid Present Entitlements are not loans by the defendant to the plaintiff as alleged" there is no factual pleading which justifies this allegation. There are no detailed grounds of defence pleaded. I gave the defendant the opportunity of investigating this point further, but that invitation was not taken up.

[55] I am not satisfied that the defendant has established it has a prima facie defence to this action aside from with respect to the pre-December 2009 amount.

[56] In Commissioner of Taxation v Bendel,[14] Gleewin Pty Ltd was the trustee of a 2005 trust. Gleewin Investments and Mr Bendel were beneficiaries. Resolutions were passed which resulted in the beneficiaries becoming entitled to the income of the trust. The AAT found that Gleewin did not recognise any separation of assets in its accounts. Gleewin Investments and Mr Bendel were issued amended tax assessments on the basis there were UPE owing to Gleewin Investments and Mr Bendel. The trustee found that the trustee had passed resolutions resulting in the corporate beneficiary becoming entitled to part of the income of the trust, but this entitlement had not been paid. The Full Court of Federal Court held that a "loan" for the purpose of s109D of the ITAA requires a transaction which creates an obligation to repay an amount and the creation an obligation to pay an amount is not sufficient.

[57] I did not consider this case to be of assistance in the present matter as the case was concerned with an interpretation of s 109D of the ITAA, and further at [92] it was noted that the respondents accepted based on Chianti and Fischer that there existed a debtor-creditor relationship between the trustee and Gleewin Investments. This admission arose from both the resolution and the way in which the items were recorded in the financial statements.

[58] Section 477(2B) of the CA provides as follows:

"(2B) Except with the approval of the Court, of the committee of inspection or of a resolution of the creditors, a liquidator of a company must not enter into an agreement on the company's behalf (for example, but without limitation, a lease or an agreement under which a security interest arises or is created) if:

(a) without limiting paragraph (b), the term of the agreement may end; or

(b) obligations of a party to the agreement may, according to the terms of the agreement, be discharged by performance;

more than 3 months after the agreement is entered into, even if the term may end, or the obligations may be discharged, within those 3 months."

[59] As may be seen this section relates to longer term agreements. In Re Kimberley Diamonds Ltd (in liq),[15] Williams J noted that this section focusses attention on the need to ensure contractual provisions do not "cut across the general expectation that a winding up will proceed in an expeditious a fashion as circumstances allow."

[60] This section is concerned with a liquidator's power to enter into long term agreements. I do not consider it bears on the liquidator's power to commence proceedings in the name of the company. I do not consider that there was a requirement for the liquidator to seek the court's approval before the commencement of this action.

[61] There is also some doubt as to whether the section applies to liquidators entering into a costs agreement with solicitors.[16] Assuming it does, it is important to note that there has now been approval by the creditors. Despite what Kerr J said in Re ACN 101 634 146 Pty Ltd (in liq),[17] I consider there is an argument that the approval may well act retrospectively. There is an argument that the failure to obtain consent under s 477(2B) of the CA was an irregularity only and did not cause the agreement to become a nullity.[18]

[62] However, even if that view is not correct, at most, the costs agreement may be invalid. This may mean the liquidators may stand to be personally liable to the contractual counterparty for breach of warranty of authority and may lose their right of indemnity from the company's assets, but it does not render the proceedings invalid.[19]

[63] Alleged noncompliance with the section did not excuse the defendant from filing a defence.

[64] The absence of access to the books of account does not provide the defendant a defence to the action. In any event the defendant has had much opportunity to seek an order for inspection since the action commenced. Mr Heymann was a director and shareholder of the plaintiff. He could have sought orders for example under s 247A of the CA.

[65] The affidavit of Mr Litster shows that it has relevant financial statements and the trust deed. The defendant's solicitors had sufficient information to take instructions on whether there is a defence on the merits.

[66] It may be accepted that it is proper practice for a plaintiff's lawyers to contact a defendant's lawyers before obtaining default judgment.[20]

[67] In this case I am satisfied there was adequate notice given to the defendant's lawyers in the following context:

(a) The plaintiff's lawyers on 11 December 2024 asked when they could expect a defence.

(b) On 29 January 2025 the plaintiff's lawyers advised that if a defence was not filed within 14 days instructions would be sought concerning a default judgment.

(c) On 27 May 2025 the plaintiff's lawyers advised[21] that if the defendant did not file a defence at the close of business on 10 June 2025 the plaintiff was instructed to proceed with an application for summary judgment on the basis that the defendant had no reasonable prospect of successfully defending the claim.

[68] For the reasons given I make the following orders:

1. I vary the judgment ordered in favour of the plaintiff against the defendant to the amount of $731,876 in lieu of $846,834.
2. I otherwise dismiss the defendant's application.
3. I will hear the parties on the questions of costs.

[1] Mr Litster states he did not receive this letter but exhibit 1 is an email which tends to show it was sent to his email address.

[2] [2025] FCAFC 15; (2025) 307 FCR 577 at 544 at [77]-[79].

[3] Chianti Pty Ltd v Leume Pty Ltd [2007] WASCA 270; (2007) 35 WAR 488.

[4] Commissioner of Taxation v Bendel [2025] FCAFC 15; (2025) 307 FCR 544 at [77]- [79].

[5] Cook v DA Manufacturing Co Pty Ltd [2004] QCA 52 at [16] and [18].

[6] [2023] QCA 218 at [10]- [12].

[7] See e.g. Chianti Pty Ltd v Leume Pty Ltd [2007] WASCA 270; (2007) 35 WAR 488 at [78].

[10] Warwick Entertainment Centre Pty Ltd v Silkchime Pty Ltd (No 2) [2012] WASC 275 at [20]- [23]. Also see section 84 of the Evidence Act 1977 (Qld).

[11] [2007] WASCA 270; (2007) 35 WAR 488 at [59]- [68], [76].

[12] [2001] HCA 68; (2001) 208 CLR 516.

[13] [2016] HCA 11; (2016) 257 CLR 615 at [16], [26], [32], [96], [105], [109].

[14] [2025] FCAFC 15; (2025) 307 FCR 544.

[15] [2021] NSWSC 432 at [19].

[16] Re AJW Interiors and Constructions Pty Ltd [2024] FCA 25 at [93].

[17] [2014] FCA 687 at [8].

[18] Generate Group Pty Ltd v Harris [2023] FCA 605 at [65]- [73]; Cameron v National Mutual Life Association of Australasia Ltd (No 2) [1992] 1 Qd R 133 at pp 137-138.

[19] Empire (Aust) Nominees Pty Ltd v Vince [2000] VSC 324; (2000) 35 ASCR 167; Re Octaviar Ltd (in liq) [2015] NSWSC 1621; (2015) 110 ACSR 72.

[20] Mountain Creek Markets Pty Ltd v Peter Le Compte Developments Pty Ltd [2003] QSC 72; Coburn v Brotchie [1890] VicLawRp 8; (1890) 16 VLR 6.

[21] I infer from exhibit 1 this was sent. But if for some reason it was not received, this does not alter the finding that there is no defence on the merits.