TGIF 27 March 2026 – No approval? No problem: absence of section 477(2B) approval no bar to liquidator claim

This week’s TGIF considers the recent decision of the Queensland Supreme Court in Blue Star Care Pty Ltd (in liq) v Rimcroft Pty Ltd [2026] QSC 50 where the Court rejected the argument that liquidators could not bring proceedings in a company’s name without first having obtained approval of their solicitor’s costs agreement under section 477(2B) of the Corporations Act 2001 (Cth).

Key takeaways

• Liquidators should consider whether to seek and obtain approval of a solicitor’s costs agreement under section 477(2B) before commencing proceedings in a company’s name. 

• A failure to obtain the required creditor or court approval is unlikely to invalidate any proceedings filed but could leave the liquidator personally exposed to legal costs, or unable to recover those costs from the company’s assets.  

• A company’s financial records can be a powerful evidential tool. If a debt is recorded in the company’s books, that is prima facie proof that the money is owed. Simply saying, “I disagree” is not enough to refute it. 

Background

Blue Star Care Pty Ltd (in liquidation) (Blue Star) and Rimcroft Pty Ltd (Rimcroft), as trustee of the Heymann Family Trust, were both companies forming part of a group used by Mr Heymann to conduct his business affairs. On 15 September 2023, liquidators were appointed to Blue Star on application of the ATO. 

Blue Star commenced proceedings against Rimcroft in May 2023, claiming $846,834 in unpaid present entitlements (UPEs) said to be owed under the Heymann Family Trust deed. The UPEs were recorded in both Blue Star’s and Rimcroft’s financial statements as liabilities. 

Rimcroft did not file a defence. Default judgment was entered against it on 23 October 2025. Rimcroft subsequently applied to have the default judgment set aside under rule 290 of the Uniform Civil Procedure Rules 1999 (Qld). 

The Issues

Justice Smith was required to determine whether the default judgment should be set aside, having regard to two key questions: 

1. Whether the liquidators’ alleged non-compliance with section 477(2B) of the Corporations Act rendered the proceedings invalid or otherwise excused Rimcroft from filing a defence. 
    

2. Whether Rimcroft had an arguable case, particularly in light of the evidentiary effect of the financial statements under section 1305 of the Corporations Act. 

Section 477(2B) no barrier to proceedings

Rimcroft argued because liquidators had not obtained approval from the court or creditors under section 477(2B) before retaining solicitors, the proceedings were invalid and should not have been commenced. 

Justice Smith rejected this argument. His Honour held section 477(2B) is concerned with a liquidator’s power to enter into long-term agreements on a company’s behalf. It does not bear on the liquidator’s power to commence proceedings in the name of the company. The purpose of section 477(2B) is to avoid long-term contracts which are inconsistent with the general expectation that a winding up will proceed in an expeditious fashion. 

Justice Smith did warn, however, that section 477(2B) may invalidate a costs agreement entered into without prior approval, potentially leaving the liquidator personally exposed to legal costs, or unable to recover those costs from the company’s assets. 

Section 1305 – Books of Account as Evidence

Justice Smith held, under section 1305 of the Corporations Act, the financial statements of both Blue Star and Rimcroft constituted evidence of the amounts owing. The recording of the UPEs in Rimcroft’s financial statements amounted to an admission of the debt’s existence. 

Rimcroft’s proposed defence was little more than a bare denial that the UPEs were ‘loans’. There were no detailed grounds or factual pleadings to displace the presumption established by the financial records. 

The only discrepancy Rimcroft was able to establish related to pre-16 December 2009 UPEs, which the trust’s own financial statements recorded at $22,744, rather than the $137,702 claimed. As a result, Justice Smith varied the judgment from $846,834 to $731,876 to account for this discrepancy, but otherwise dismissed the application to set aside the default judgment. 

Comment

This decision provides helpful guidance for liquidators on two fronts. 

It confirms that section 477(2B) of the Corporations Act is directed at long-term commercial agreements, and does not restrict a liquidator's power to commence court proceedings. Even where an underlying costs agreement may not have been properly approved, the proceedings themselves will not be invalidated, though the prudent course remains to obtain all necessary approvals promptly to avoid any personal exposure. 

The case is also a reminder of the significant evidentiary weight carried by a company's financial records. Under section 1305, entries in the books of account are proof of the amounts owing, and a bare denial, without detailed grounds or supporting evidence, will not be sufficient to displace them. Liquidators should ensure financial statements are carefully reviewed and preserved, as they can form a powerful foundation for recovery actions.