Disputing rejection of a proof of debt
A creditor whose proof of debt has been rejected (in whole or in part) has strict appeal rights. The rejection notice starts a limitation clock; missing it means the rejection stands and the creditor is excluded from distribution.
This is an 8-step workflow for disputing a liquidator's rejection of a proof of debt under the Corporations Act 2001 (Cth) Pt 5.6 and IPR 75-265, covering notice of appeal, evidence, and Federal Court review.
Before you start
- Notice of rejection of proof of debt received with reasons
- Original proof of debt and supporting documents available
- Source contracts, invoices, and correspondence preserved
- Ledger reconciliation between creditor and company’s books
The workflow
Read the notice of rejection carefully
Read the notice of rejection, identify the stated reasons, and diarise the 14-day appeal window under IPR 75-265 (or the extended period allowed by the Court).
Reconcile the debt
Reconcile the creditor's ledger with invoices, purchase orders, and remittances. Identify any credits, set-offs, or rebates that may explain the rejection.
Engage with the liquidator for additional information
Write to the liquidator seeking the documents relied on for the rejection and offering further evidence. A revised proof may resolve the issue without court.
Assess set-off under s 553C
Assess whether mutual credits, debts, or dealings engage s 553C set-off. If so, the net position may alter the quantum admitted.
Prepare notice of appeal
Prepare the originating application or interlocutory application to the Federal Court or Supreme Court reviewing the liquidator's decision, with supporting affidavit.
File and serve appeal within time
File and serve the appeal within 14 days of the rejection notice (or seek an extension) on the liquidator and any affected creditors with leave where required.
Manage interlocutory steps
Manage case management orders, discovery of ledger and contract documents, and exchange of affidavit evidence with the liquidator. Consider mediation.
Final hearing and post-decision steps
Attend the final hearing, and following judgment, lodge the admitted proof with the liquidator to share in any interim or final distribution.
What you will have at the end
A proof of debt reviewed and, where appropriate, reinstated or varied, so that the creditor shares in any distribution consistent with its true legal position.
Common issues
- Notice of appeal filed out of time
- Insufficient primary evidence (invoices, delivery notes, signed contracts) to prove the debt
- Failure to identify s 553C set-off before framing the appeal
- Appeal framed as a de novo inquiry rather than review of the rejection
- Costs not properly addressed where the rejection was partly justified
Run this workflow on a real matter
Quillio reconciles ledger data, maps each rejected item to source documents, and drafts the affidavit and appeal application within the 14-day window. See /practice-areas/commercial-lawyers or start a free trial.
This workflow is a general guide. Proof of debt appeals can engage substantial costs risk and should be case-managed carefully.
Try this workflow with Quillio.
Quillio can run this workflow on a real matter, with citations to current AU authority on every step. The free trial requires no credit card.
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