Identifying a defect in a statutory demand for payment of debt

Identifying a defect in a statutory demand for payment of debt is an important process to undertake before contesting a statutory demand served upon you. By way of overview, the Corporations Act 2001 (Cth) (Act) provides two main avenues for a Court to set aside a statutory demand.

The first, pursuant to Section 459H of the Act, is setting aside the demand based on a genuine dispute or an offsetting claim.

The second, pursuant to Section 459J of the Act, is setting aside the demand based on the demand being defective or for “some other reason”.

The recent New South Wales case of In the matter of Nanevski Developments Pty Limited (No 2) [2019] NSWSC 1217 reaffirmed what the Court will consider to be valid as “some other reason” why a demand should be set aside.

In this case, the affidavit accompanying the creditor’s statutory demand for payment of debt was sworn two days before the demand was signed. Section 459E(3) of the Act requires that a demand must be accompanied by an affidavit that verifies the debt(s) is due and payable, and complies with the rules.

The Court held that this was serious and material breach of Section 459E(3) as the affidavit could not possibly verify that the debt, upon which the demand was based, was still due and owing at the time the demand was signed because it was sworn before the date of the statutory demand.

The Court noted that such non-compliance with Section 459E(3) of the Act may be remedied by drafting and serving a further affidavit, prior to the expiration of the 21-day compliance period, confirming that at the date the demand was signed, the debt was still due and payable. However, this remedy was not available in the Nanevski Developments case as the creditor swore a further affidavit a month after proceedings to set aside the statutory demand had commenced.

This case is a reminder that when issuing a demand, the affidavit must be signed at the same time as the demand so that no misstep occurs resulting in the demand being set aside. Should you wish to discuss a statutory demand received by your company, please contact the DSS Law team on (07) 3210 2373 for an initial consultation today.

Robert Carter & Amy Weiner 26/11/2019

Disclaimer

DSS Law insight articles are intended to provide commentary and general information. They should not be relied upon as formal legal advice. If you would like specific advice relating to this topic, please contact DSS Law on 1300 DSS LAW or epost@dsslaw.com.au.