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Setting aside statutory demand can be a very complicated procedure.
If you have been served with a statutory demand with an affidavit, then it is very important that you seek legal advice as soon as possible to try to get it set aside.
You will need to prove one or more of the following:
- There are formal defects in the statutory demand;
- There is a genuine dispute about the existence or quantum of the debt;
- You have any offsetting claims;
- Another reason allowed by the precedent cases.
If you can provide evidence of any of these, then you may have grounds to set aside the statutory demand.
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If you have been served with a statutory demand with a judgment, then you must apply to set aside the judgment, and probably apply to the Court to extend the time form compliance with the demand.
If you have been served a statutory demand with an affidavit in support, please read below.
Time is very much of the essence! The 21 day time for compliance has been interpreted very strictly by the Courts. Do not delay, contact our statutory demand lawyers NOW.
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Setting Aside Statutory Demand – Formal Defects
If there are formal defects in the statutory demand, that is, defects in the form of the demand, then the Court may order that it be set aside.
The prescribed form of a statutory demand is statutory demand form 509h outlined in schedule 2 of the Corporations Regulations 2001 (Cth).
Setting aside statutory demand on the basis of formal defects in the demand is prescribed in section 459J(1)(a) of the Corporations Act 2001 (Cth) has been discussed in various cases in Australia and Queensland.
459J(1) says:
(1) On an application under section 459G, the Court may by order set aside the demand if it is satisfied that:
(a) because of a defect in the demand, substantial injustice will be caused unless the demand is set aside…
So the threshold issue is that “substantial injustice will be caused” if the demand is not set aside.
What is Substantial Injustice
Substantial injustice can include:
- The mis-identification of parties;
- Problems with the particulars of the debt or debts;
- Incorrect interest calculations in the demand;
- The debts must actually be due and payable;
- The statutory minimum of $2,000.00 must have been reached;
- Insufficient affidavit in support of your statutory demand; and/or
- Defects in the names of creditors or the debtors.
The incorrect service of the demand may also be grounds for setting aside statutory demand. You must be certain that correct service has been made to your company. If you have not been served correctly, then we can attempt to set the demand aside.
Genuine Dispute
You may also set aside a statutory demand, without a judgment, if you have a genuine dispute about the existence of the debt or amount of a debt.
Section 459H(1)(a) of the Corporations Act 2001 (Cth) says:
(1) This section applies where, on an application under section 459G, the Court is satisfied…
(a) that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates…
You will need to adduce affidavit evidence that there is a genuine dispute that the debt exists at all, or if you agree that there is a debt, that you dispute the amount of the debt.
Once this affidavit is sworn/affirmed, then you will need to comply with the rules for setting aside the demand. See below for more on this.
Offsetting Claim
You may also set aside a statutory demand if you have an offsetting claim.
Section 459H(1)(b) of the Corporations Act 2001 (Cth) says:
(1) This section applies where, on an application under section 459G, the Court is satisfied…
(b) that the company has an offsetting claim.
Then goes on to define an offsetting claim to mean:
“offsetting claim ” means a genuine claim that the company has against the respondent by way of counterclaim, set-off or cross-demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates).
This means that any claim that you have against the person/company issuing the demand, can be used to set aside the demand. Especially if the offsetting claim means that the offset total of the demand drops below the statutory minimum.
Setting Aside Statutory Demand
Section 459G of the Corporations Act 2001 (Cth) says:
(1) A company may apply to the Court for an order setting aside a statutory demand served on the company.
(2) An application may only be made within 21 days after the demand is so served.
(3) An application is made in accordance with this section only if, within those 21 days:
(a) an affidavit supporting the application is filed with the Court; and
(b) a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company.
This means that you have a strict 21 days in which to draft, swear/affirm, file and serve a sealed copy on the issuing party, or you may be unable to set aside the statutory demand.
If you miss the deadline then you will be presumed to be insolvent for three (3) months. During that 3 month period, the creditor can apply to the Federal Court or the Supreme Court to wind your company up in insolvency.
A legal presumption shifts the burden of proof, for example in criminal law there is a presumption of innocence, so the burden of proof lies with the prosecution to prove guilt.
Same in civil cases, where there is a legal presumption of insolvency, the burden of proof is on the debtor to rebut that presumption. This can be a very complicated and expensive process – read our article on rebutting the presumption of insolvency.
Before you are presumed to be insolvent, it is vital that you contact our dedicated insolvency lawyers to commence setting aside statutory demand for payment.
Time is very much of the essence! The 21 day time for compliance has been interpreted very strictly by the Courts. Do not delay, contact our statutory demand lawyers NOW.
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