Financial Statements Don’t Lie (Even If You Wish They Did): A Statutory Demand Case Study
Our firm recently acted for the administrator of a deceased estate in two Supreme Court proceedings where we successfully resisted applications to set aside statutory demands (Re Robloi Pty Ltd [2026] VSC 141).
When most lawyers hear “setting aside a statutory demand”, the instinct is to ask whether there is a genuine dispute. But in this case what really carried the day was the evidence used to prove the existence of the debt.
Good old financial statements.
Yes, we relied heavily on section 1305 of the Corporations Act 2001 (Cth) (Act).
Section 1305 provides that a company’s books and records are admissible as prima facie evidence of the matters recorded in them.
And even with detailed affidavits from the very accountants who prepared those financial statements, the companies could not rebut that presumption.
Background
For many accountants (and lawyers), this scenario will sound very familiar.
A director had, over many years:
moved money in and out of various entities
operated without formal loan agreements
charged no interest
imposed no fixed repayment terms
Funds moved freely between entities.
Those amounts were consistently recorded as current liabilities in the companies’ financial statements year after year, prepared and signed off by the companies’ accountants.
Following the director’s passing, our client was appointed as administrator of the estate by the Court. In discharging his obligations as administrator, he called in the amounts owed to the estate namely, the “loans” recorded in the financial statements.
When payment was not made to the estate by the companies, the administrator issued statutory demands.
Pursuant to sections 459G, 459J and 459N of the Act, the companies applied to set them aside, arguing:
there was a genuine dispute; and
there was “some other reason” the demands should be set aside.
The Arguments
Our case was straightforward: the financial statements spoke for themselves.
The companies, however, sought to recharacterise the position entirely. They argued that, despite being recorded as current liabilities:
the amounts were not loans
they were equity contributions
or gifts
or funds held on resulting trust
or amounts never intended to be repayable on demand
In substance, their position was that the financial statements did not reflect the true position.
The Court approached the issue in the orthodox way looking at substance, records and conduct, not after the fact labels.
Importantly, the evidence relied upon by the companies was largely retrospective and explanatory:
affidavits from two accountants
evidence from the director (the deceased’s son)
extensive commentary about how the deceased “operated” and moved money informally
What was missing was critical…contemporaneous evidence.
There were no:
loan agreements
shareholder resolutions
trust documents supporting alternative characterisation
consistent historical reclassification entries
Instead, the explanations boiled down to:
“That’s just how he operated”
“He moved money around informally”
Moving money “in and out freely” does not assist, it actually reinforces that the amounts are a loan and not a gift or equity contribution.
To make matters more interesting, those same financial statements had been relied upon by third parties (including valuers) in assessing the companies’ positions.
At no point were concerns raised about any alleged mischaracterisation of the “loans”.
It was only once statutory demands were issued that the characterisation of those amounts was challenged.
What did the Court say?
Despite overwhelming assertions from the companies’ lawyers and detailed affidavits from the accountants, the Court wasn’t persuaded that the amounts claimed in the statutory demands were not loans due and payable.
The key findings were:
financial statements recording loans are prima facie evidence of debt
you need real evidence to displace that, not just explanations after the fact
informal conduct and intention are not enough without supporting records
you can’t retrospectively recharacterise transactions years after the financial statements have been finalised and signed off.
The applications to set aside the statutory demands were dismissed.
The statutory demands stood.
Why does this matter (particularly for Accountants?)
This case isn’t really about what happens in statutory demand litigation… it’s about how financial statements and records get used when things go wrong.
When relationships breakdown between family members, shareholders, executors, directors, financial statements often become the starting point for asserting legal rights.
Not the story, not the intention, not the “understanding”, but actual profit and loss, balance sheets and income statements.
Practical Takeaways
Labels matter
Calling something a loan (even informally) can have legal consequences.
Informality does not neutralise liability
No interest, no terms, no paperwork doesn’t nullify the existence of a loan. Legally if a payment term is void for uncertainty, a loan will be repayable on demand.
You cannot rewrite history
You cannot just say financial statements are wrong once a dispute arises. The Court will look for contemporaneous evidence, not reconstructed intention.
Final Thought
For many companies, the accounts are almost always treated as compliance exercise. This case is a reminder that the financial statements are:
Not just for tax purposes,
They are a legal record.
And when a dispute arises, they can be the difference between:
successfully resisting a claim, or
having a statutory demand upheld against the company.
In this case, the administrator’s success turned largely on the Court’s acceptance of the financial statements as prima facie evidence of indebtedness under section 1305, evidence the companies were unable to successfully rebut.
If this is something you’re seeing in your client base... or you’d like to sense check how financial statements may be viewed in a dispute, we’re always happy to have a conversation.
This article was co-authored with Tanya Menon, lawyer, during her time at Hicks Oakley Chessell Williams.
