In the case of Grow Surge Pty Ltd (in liq) v Riverida Pty Ltd (in liq) [2026] FCA 974, the Federal Court upheld proofs of debts submitted with respect to a series of earlier payments from the plaintiff to the defendant without any explanation.
While the defendants argued they were payments for services rendered, neither party was able to provide any documentation of these services, and as such the Federal Court concluded that on the balance of probabilities, the payments gave rise to an obligation to repay.
Background
In late 2025, the company Videriva Pty Ltd was placed into liquidation.
The liquidators of Grow Surge Pty Ltd, Highpoint Pty Ltd, Touchline Pty Ltd, and SSG NSW Pty Ltd (all in liquidation) (Plaintiff Companies), lodged a series of proofs of debt shortly thereafter.
The proofs related to a series of transactions made by the Plaintiff Companies to Videriva between 2020 and 2022 which totalled to $272,976.90. As became evident throughout the proceedings, the record keeping with respect to these payments was essentially non-existent from all parties, and it was not clear what the reason for these transactions were.
The Plaintiff Companies alleged that each of these payments gave rise to an obligation to repay. The liquidator for Videriva rejected the proofs, claiming that these transfers represented payments for services rendered by Videriva to the Plaintiff Companies.
The Plaintiff Companies then appealed the liquidator’s rejection of the proofs to the Federal Court.
Issue
Was the existence of the payments sufficient to establish that Videriva owed liabilities to the Plaintiff Companies and therefore render their rejection of the proof of debts unjustified.
Ruling
Evidence as to services provided
Soon after proceedings were commenced, the liquidator of Videriva sought further details regarding these payments from Mr Kotevski, the sole director and company secretary of Videriva.
While Mr Kotevski initially claimed over email that he had no recollection of the transactions, he sent a more detailed email 2 weeks later (the Kotevski Email) claiming that the payments were in exchange for services Videriva rendered, including submitting workers compensation claims, obtaining insurance quotations, obtaining finance and lending quotations, and general ad-hoc administrative and operational assistance.
It was said that these services were performed at the direction of a previous associate known as Ian, who “[d]espite reasonable efforts, cannot be contacted”. This email also stated that at the time, company records such as invoices, agreements and working documents would have been stored on a company laptop. It was said that this laptop and any records stored on it were no longer readily accessible, no reason was given as to why this was the case.
In response, the Plaintiff Companies undertook what was described as a “thorough review” of all internal documents and files. Ultimately, they could not find any record of Videriva providing any services to any of the Plaintiff Companies.
Thus the Court concluded that neither side had access to any documents that could substantiate the work done or provide any basis for the payments.
Principles
The Court stressed that it was the burden of the Plaintiff Companies to prove that the amounts were owed to the civil standard, otherwise known as the balance of probabilities. Thus, it would not be sufficient for Videriva to defend the claim by saying that the payments were in exchange for services without further evidence.
The Court had to decide based on its assessment of the evidence before it, which alleged scenario was objectively more likely.
Orders made
The Court sided with the Plaintiff Companies. It concluded that payments were substantially more likely to be characterised as either unsecured advances repayable on demand, or restitutionary liabilities arising from receipt of monies without consideration. It did not matter which of the two characterisations of the payments were to be taken, as either would lead to the same result of establishing a liability owed from Videriva to the Plaintiff Companies equivalent to the value of the payments.
In doing so, the Court rejected the likelihood of the explanation offered in the Kotevski Email for several reasons:
The explanations given for the exact nature of Videriva’s business kept shifting in the course of proceedings without any apparent reason or explanation given as to why. In early correspondence between the parties, the description of Videriva’s business was that operated as a consulting firm to finance and construction companies. It was only later into the proceedings that the initially rather cryptic description of Videriva’s business activities gradually crystalised, culminating in the Kotevski Email in which specific activities were described.
Mr Kotevski was initially unable to provide any details whatsoever regarding the payments, and, by the time of trial had provided no information beyond the sparse and unsupported assertions in the Kotevski Email. The Court questioned the plausibility of this, given the expectation that a sole director should be reasonably familiar with the affairs of their company.
Videriva was not able to provide any method of charging, such as an hourly rate or commission arrangements. This was important given the significant variation in the value of the payments, variations which were unable to be explained without reference to any method of charging.
There was no explanation given as to why the records said to have been stored on the company laptop were no longer accessible, nor was there any explanation as to what efforts, if any, had been made to access such records.
There was a lack of any information regarding the individual identified in the Kotevski Email as “Ian”. No information regarding his role, background, contact details or even his last name was provided.
Key takeaways
In establishing a proof of debt, the plaintiff need only prove that it is likely that the debts are owed based on the balance of probabilities;
Companies should keep and maintain records of transactions and work done, ideally in a manner with reliable back-ups.
If you would like to discuss this article further, please contact Alicia Hill or Amy Green.
This article was prepared with the assistance of Tony Huang, Paralegal.
