Enforcement Law

Can you Serve a Bankruptcy Notice by Email?

12/10/2019 By // by Wayne Davis

Can you serve a bankruptcy notice by email?

If a creditor has received a final judgment or final order the execution of which has not been stayed, and that judgment or order is more than the statutory minimum ($5,000.00), then the creditor can apply to the Australian Financial Security Authority for a bankruptcy notice.

Once the judgment creditor has the bankruptcy notice it needs to be served on the judgment debtor.

There are a number of different ways to serve a judgment debtor with the bankruptcy notice in the Bankruptcy Act 1966 (CTH) (“the Act”) and the Bankruptcy Regulations 1996 (CTH) (“the Regs”).

One question we get asked is “can you serve a bankruptcy notice by email?”

This article will explain if a bankruptcy notice can be served by email.

If you need to serve a bankruptcy notice then it is important to get it right and you should contact a lawyer

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What is a Bankruptcy Notice?

A bankruptcy notice is a formal notice issued by the Australian Financial Security Authority (“AFSA”).

It is a formal demand for payment:

From a human debtor (not a company);
Based upon a final judgment or final order of more than the statutory minimum ($5,000.00);
The final judgment or final order must not have been stayed; and
The final judgment or final order must not be more than 6 (six) years old.

A bankruptcy notice states that the judgment debtor must either pay, enter into an arrangement for payment, or apply to set the bankruptcy notice aside – all within 21 days after being served.

If they don’t do any of these things then they have committed an act of bankruptcy, allowing the judgment creditor to file creditor’s petition in the Federal Circuit Court.

Because the act of bankruptcy is calculated upon the date of service, it is important to get this date correct, and to be able to prove service.

How to Serve a Bankruptcy Notice

Regulation 4.02A of the Regs – Service of bankruptcy notices – says:

A bankruptcy notice may be served by any of the methods mentioned in regulation 16.01.

Regulation 16.01(1) of the Regs says:

(1) Unless the contrary intention appears, where a document is required or permitted by the Act or these Regulations to be given or sent to, or served on, a person (other than a person mentioned in regulation 16.02), the document may be:
(a) sent by post, or by a courier service, to the person at his or her last-known address; or
(b) left, in an envelope or similar packaging marked with the person’s name and any relevant document exchange number, at a document exchange where the person maintains a document exchange facility; or
(c) left, in an envelope or similar packaging marked with the person’s name, at the last-known address of the person; or
(d) personally delivered to the person; or
(e) sent by facsimile transmission or another mode of electronic transmission:
(i) to a facility maintained by the person for receipt of electronically transmitted documents; or
(ii) in such a manner (for example, by electronic mail) that the document should, in the ordinary course of events, be received by the person.

Regulation 16.01(1)(e)(ii) says that a bankruptcy notice can be served by another mode of electronic transmission in such a manner (for example, by electronic mail) that the document should, in the ordinary course of events, be received by the person.

Obviously, the main thing to consider in this section, is when an email is received by the person and what does that mean?

Regulation 16.01(2)(b) says:

(2) A document given or sent to, or served on, a person in accordance with subregulation (1) is taken, in the absence of proof to the contrary, to have been received by, or served on, the person …
(b) in the case of service in accordance with paragraph (1)(c), (d) or (e)–when the document is left, delivered or transmitted, as the case requires.

The cases on this point have discussed what this means.

When is an Email Received by a Judgment Debtor?

Regulation 16.01(1)(e)(ii) expressly states that a bankruptcy notice can be served by electronic mail (email). However, service is effected when the document is delivered or transmitted.

Obviously, these words have different meanings, so how have the authorities decided what “received” means in the context of service of a bankruptcy notice?

The main case on this point is American Express Australia Limited v Michaels [2010] FMCA 103 where Smith FM provides commentary on the authorities and says at [23]:

The specific provisions in Bankruptcy Regulations regs.16.01(1)(e) and (2)(b) appear to be self-supporting, and appear intended to identify a deemed time of receipt of service which is simple to establish, and which is rebuttable by the recipient. In my opinion, these provisions implicitly exclude the application of ss.14(3) and (4) of the Electronic Transactions Act in relation to findings as to receipt and time of receipt.

Smith FM then went on to say at [24]:

This conclusion still leaves the possible ambiguity of the word ‘transmitted’ in reg.16.01(2)(b), which must be solved by a consideration of the context and objects of the provision. Clearly, it is intended to assist the making of findings as to receipt of an emailed document, and to dispense with proof of actual receipt of the email, “in the absence of proof to the contrary”. It takes its flavour from the language of reg.16.01(1)(e), which it is intended to assist. That provision refers to a document “sent by” electronic transmission, referring to a mode of dispatch by a sender. Regulation 16.01(2)(b) appears to make an understandable assumption that electronic transmissions will normally reach the intended destination almost instantaneously. Considering all these points, and the general context of the regulation, I accept the submission of counsel for AMEX that reg.16.01(2)(b) raises a rebuttable presumption of receipt and time of receipt occurring when the email is transmitted by its sender, being when it is irretrievably sent by the electronic mail facility used by the person serving the electronic document.

American Express Australia Limited v Michaels [2010] FMCA 103 therefore says that in relation to regulation 16.01 of the Regs, an email is presumed to be received by the judgment debtor when it is transmitted by the judgment creditor, being when it is irretrievably sent by the email facility used by the person sending the bankruptcy notice.

This was followed in Noonan v BMW Australia Finance Limited [2013] FCCA 2222 when Judge Whelan said:

With respect to the provisions of Reg.16.01(1)(e) of the Regulations, Smith FM (as he then was) considered … that the provision was intended to identify a time of receipt which is simple to establish. It raises a rebuttable presumption that receipt, and time of receipt, occurred when the email is transmitted by its sender, being when it is irretrievably sent by the electronic mail facility used by the person serving the electronic document.

It was also followed in The Council Of The New South Wales Bar Association v Archer [2012] FMCA 81 Lloyd-Jones FM said:

In American Express Australia v Michaels [2010] FMCA 103 … [H]is Honour says that the presumption arises when the notice is transmitted, not when it is received.

The legal presumption that the bankruptcy notice has been served by email when it is transmitted or sent by the person sending is rebuttable. The judgment debtor will need to provide evidence that the bankruptcy notice was not delivered by email.

Regulation 16.01(2)(b) states that the bankruptcy notice is taken to have been served “absence of proof to the contrary”, meaning that the onus in on the judgment debtor to prove that he/she was not served by email.

The judgment debtor will need to adduce evidence of non-delivery and not non-receipt.

Proof of Non-Delivery or Non-Receipt

The authority case on this point is the Hight Court case of Fancourt v Mercantile Credits Ltd [1983] HCA 25. In Fancourt the High Court said:

Despite remarks in the judgments about non-receipt, it was non-delivery which was significant because the second limb of s. 26 of the Interpretation Act refers to proof of the contrary of delivery. As the present case shows, delivery may be different from receipt by the intended recipient and, provided that delivery is not disproved, the fact of non-receipt does not displace the result that delivery is deemed to have been effected at the time at which it would have taken place in the ordinary course of the post.

Fancourt was followed in relation to a bankruptcy notice and regulation 16.01(2) in Skalkos v T & S Recoveries Pty Ltd [2004] FCAFC 321 where Sundberg, Finkelstein & Hely JJ said:

If, on the proper construction of reg 16.01(2), the words “proof to the contrary” permit proof that the document was not delivered, there is no such proof in the present case. It is clear from Fancourt that proof of non-receipt as opposed to non-delivery is not permitted … Thus on either view of reg 16.01(2), the primary judge correctly said there was no point in the appellant filing an affidavit of non-receipt.

Practically this makes a lot of sense. Debtors always say things like “we didn’t get the email” or “we didn’t get the invoice” or “we didn’t get the letter”.

So, to rebut the presumption that service was made, the judgment debtor will need to adduce evidence of non-delivery and not non-receipt of the bankruptcy notice.

Can we Serve a Bankruptcy Notice by Email?

Yes, we can serve a bankruptcy notice by email.

A bankruptcy notice is deemed served when it is transmitted by the sender, being when it is irretrievably sent by email, and proof of non-delivery is not adduced to rebut that presumption.

Best practice when serving a bankruptcy notice by email is to get a delivery and read receipt.

Delivery and Read Receipts

To get a delivery receipt or a read receipt you need to go to options in your Outlook, then tick the “request a delivery receipt” box and the “request a read receipt box”.

For a delivery Receipt you will either get a relayed response or a delivered response.

Relayed – Delivery to these recipients or groups is complete, but no delivery notification was sent by the destination server.
Delivered – Your message has been delivered to the following recipients.

Either way, you can annex these receipts to your affidavit as evidence of delivery.

You may not get a read receipt as it requires the judgment debtor to click to send the read receipt, but it does happen sometimes, so it is worth a go.

Serving a Bankruptcy Notice by Email

This article explains how to serve a bankruptcy notice by email.

Don’t just serve by email if there are other avenues open to you. If you can fax, then fax too. If you can get the judgment debtor personally served, or you know where the judgment debtor lives, then serve him or her there too.

A judgment creditor will need to prove service of the bankruptcy notice in order to establish that the judgment debtor committed an act of bankruptcy. Failure to properly serve the bankruptcy notice can be a costly mistake – for this reason we always advise seeking legal advice.

If you need to serve a bankruptcy notice then it is important to get it right and you should contact a lawyer

DEDICATED TEAM – COMMERCIALLY MINDED – PROVEN RESULTS

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Wayne Davis

Wayne Davis, LLB, GDLP – Commercial litigation solicitor and legal practice director at Stonegate Legal Pty Ltd. Stonegate Legal focus on commercial litigation, debt disputes, the enforcement of money orders, and insolvency. Committee member of the Sunshine Coast Law Association. Committee member and volunteer lawyer with the Sunshine Coast Community Legal Service.

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Enforcement Warrant for Redirection of Debts

29/01/2019 By // by Wayne Davis

An enforcement warrant for redirection of debts is an enforcement option pursuant to the Uniform Civil Procedure Rules 1999 (QLD) (“UCPR”).

An enforcement warrant for redirection of debts is a way of enforcing a judgment, enforcing a registered QCAT decision or enforcing a registered adjudication decision.

A warrant for redirection of debts allows the creditor to enforce an enforceable money order over any debts owed to the judgment debtor by a third person.

The redirection warrant confers the obligation on the third person to pay the debt to the creditor rather than the debtor.

Just like other enforcement warrants, a warrant for redirection of debts is obtained by making an application to the Court. The application consists of:

The application;
A statement in support of the application; and
A draft enforcement warrant.

When the Court issues the UCPR enforcement warrant for redirection of debts, it then needs to be served on the third person who owes the debt to the judgment debtor.

This article will give you all the information needed to apply for an enforcement warrant for redirection of debts, and give you hints and tips to avoid pitfalls.

There are a number of difficult steps that need to happen before the third person must comply with an enforcement warrant for redirection of debts. We strongly recommend engaging a qualified legal professional

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Enforcement Warrant for Redirection of Debts

Rule 840(1) of the UCPR says:

A court may issue an enforcement warrant authorising redirection to an enforcement creditor of specified debts certainly payable, belonging to an enforcement debtor, from a third person.

For the Court to issue an enforcement warrant for redirection of debts the creditor will need:

An enforceable money order;
An application – Form 9;
A draft warrant – Form 76;
A statement in support of the application – Form 74; and
To serve the debtor and the third person.

We will give you more information on each of these steps below.

What is an Enforceable Money Order?

Rule 793 of the UCPR says:

“enforceable money order” of a court, means – a money order of the court; or a money order of another court or tribunal filed or registered under an Act in the court for enforcement.

Schedule 3 of the UCPR defines an order to mean:

“order” … includes a judgment, direction, decision or determination of a court whether final or otherwise.

An enforceable money order is a money judgment from the Court, or a decision in QCAT or an adjudication decision registered in the Magistrates Court.

A QCAT decision or an adjudication decision that has not been registered in the Court is not an enforceable money order.

Rule 793 of the UCPR says:

“enforcement creditor” means – a person entitled to enforce an order for the payment of money; or a person to whom the benefit of part of the order has passed by way of assignment or in another way.

If an enforcement creditor has an enforceable money order, then to issue the warrant the enforcement creditor will need to ensure that they are eligible.

Eligibility Requirements

The eligibility requirements to be granted an enforcement warrant for redirection of debts include:

There must be a debt owed;
The debt must be an actual debt presently due; and
The debt must be owed by a third person.

We will discuss these eligibility requirements in more detail below.

There must be a Debt Owed

Rule 839 says that the payment of earnings or payment into Court are not debts which can be directed under this warrant. These debts are dealt with in their own enforcement warrants.

As stated above, rule 840(1) of the UCPR says “specified debts certainly payable”. The UCPR is silent on what constitutes a “specified debt”.

The debt must be owed to the judgment debtor in his/her/its own right. The debt cannot be owed in its capacity as trustee for example.

The debt also cannot be an unliquidated debt but must be a liquidated amount.

The most common scenario is instalment payments or debts owed under credit agreements for example.

The Debt must be Presently Due

The debt must be presently due and cannot be the mere possibility or probability of a future debt.

Rule 840(3) of the UCPR says:

A debt may be redirected only if the debt, or the part of the debt belonging to the enforcement debtor, is payable to the enforcement debtor from the third person on the date the enforcement warrant is served on the third person.

In Jackson & Chenoweth v Marsh & Webster Ltd [1924] QWN 51 McCawley CJ, Lukin J, Macnaughton J said:

[The] rule … should be read as restricted to debts existing, whether payable in present or in future, and did not include the money which C., on the transactions with B., might ultimately become possessed of on behalf of B. That there was no debt “owing or accruing” by B. to C. at the time the Magistrate made the garnishee order that could be attached.

A conditional debt payable upon a certain event occurring cannot be redirected until the condition has been satisfied.

In Queensland Carriage Waggon and Tramcar Co Ltd v Somerville (1890) 4 QLJ 10 following a long line of precedents Lilley CJ said:

This was not a perfected, absolute debt; it was not due or accruing due, because defendant had not done work, and might never finish it. It depended on a condition—that was, the architect’s certificate … I cannot deal with the money until Campbell has got what is owing him; and, at present, there is no debt, legal or equitable, nor is there a prospect of any. The rule nisi must be dismissed, with costs of all parties, to be paid by the judgment creditors.

So, the debt must be a present debt and not a debt future or contingent debt.

The Debt must be Owed by a Third Person

The debt must be owed by a third person, which means any person and includes the State.

Rule 793 of the UCPR says:

“third person” means – a person (including the State) from whom a debt is payable to the enforcement debtor; or is likely to become payable to the enforcement debtor

The State Can owe Debts

Section 95 of the Civil Proceedings Act 2011 (QLD) deals with debts owed by the State.

The third person must be within Australia.

The third person must be within Australia. In Suzlon Energy Ltd v Bangad [2011] FCA 1152 applying obiter dicta from Société Eram Shipping Co Ltd v Cie Internationale de Navigation [ 2004] 1 AC 260 Rares J said:

In principle and on authority it seems to me that the court should not, save in exceptional circumstances, impose such a requirement upon a foreigner …

The debt can be from a Bank

The debt can be from a financial institution to the credit of an enforcement debtor.

Section 97 of the Civil Proceedings Act 2011 (QLD) says:

An amount standing to the credit of an enforcement debtor in an account in a financial institution is, for enforcing a money order, a debt payable to the enforcement debtor

This means that any money held in a bank account can be used to enforce the judgment debt, even if the conditions under 97(1)(a) to (d) have not been met.

This bank account can include a joint bank account.

Joint Fund

The debt can be owed from a joint fund, a joint bank account in the name of husband and wife for example, where only one is the enforcement debtor.

Section 94 of the Civil Proceedings Act 2011 (QLD) says:

(1) This section applies if the debt belonging to the enforcement debtor is a fund of money owned by the enforcement debtor and others (a “joint fund”).
(2) An enforcement warrant may authorise redirection to an enforcement creditor of a joint fund to the extent of the enforcement debtor’s entitlement.
(3) It is presumed a joint fund is owned by the fund owners in equal shares unless, on application of a fund owner or enforcement creditor, the court decides the actual beneficial entitlement of each fund owner.

Partnership Debts

The debts owing to the enforcement debtor can also be partnership debts.

Section 96 of the Civil Proceedings Act 2011 (QLD) says:

A court may issue an enforcement warrant authorising redirection to an enforcement creditor of particular debts, belonging to an enforcement debtor, from a partnership carrying on business in Queensland even if a partner resides outside Queensland.

If the Third Person is a Company

If the third person is a company then the company is subject to section 440D and 471B of the Corporations Act 2001 (CTH).

Section 440D of the Corporations Act 2001 (CTH) says:

During the administration of a company, a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with, except with the administrator’s written consent; or with the leave of the Court …

Section 471B of the Corporations Act 2001 (CTH) says:

While a company is being wound up in insolvency … a person cannot begin or proceed with … enforcement process in relation to such property

So, unless leave is granted by the Court, a warrant directed at a corporate third person under administration or in liquidation cannot be made. Best to check on the ASIC website beforehand.

So, if a judgment creditor is eligible and it can provide an eligible third person, then the judgment creditor can make the application for a warrant for redirection of debts.

Application for a Warrant for Redirection of Debts

The application for an enforcement warrant for redirection of debts – Form 9 – outlines the order (or orders) that the plaintiff is asking the Court to make.

The costs of the warrant are fixed at Schedule 2 of the UCPR depending on the amount of the claim – see item 15.

The application for an enforcement warrant for redirection of debts also needs to state who the third person is namely who the warrant needs to be served on.

The Draft Warrant

The form of the draft enforcement warrant for redirection of debts is Form 76.

The draft enforcement warrant needs to include:

Enforcement Creditor name and address
Enforcement Debtor name and address
Third Person name and address

It also needs to include:

Judgment amount;
Less payments;
Plus interest;
Plus costs; and
Total owing.

The application for an enforcement warrant for redirection of debts and the draft warrant need to be accompanied by a statement in support of the application.

Statement in Support of the Application

The statement in support of the application must be in the approved form – Form 74.

The statement in support of the application should be sworn not earlier than two business days before the date of the application.

Rule 817(1)(b) of the UCPR says:

A person applying for an enforcement warrant must file … a statement in the approved form sworn by the enforcement creditor, or the enforcement creditor’s agent or solicitor, not earlier than 2 business days before the date of the application.

The statement in support of the application for an enforcement warrant for redirection of debts must include the following:

The date the money order was made;
The amount for which the order was made;
The date and amount of any payment made under the order;
The costs incurred in previous enforcement proceedings in relation to the order debt;
Any interest due at the date the statement is sworn;
Any other details necessary to calculate the amount payable under the order at the date the statement is sworn and how the amount is calculated;
Any daily amount of any interest that, subject to any future payment under the order, will accrue after the date the statement is sworn;
Any other information necessary for the warrant being sought.

It is likely that the registrar will require an amended form to specifically identify the debt sought to be redirected by the third person.

The Court will consider a number of factors identified in rule 840(2) of the UCPR .

Factors the Court will Consider

Rule 840(2) of the UCPR says:

In deciding whether to issue an enforcement warrant authorising redirection, including regular redirection under division 2, the court must have regard to the following—
(a) whether the enforcement debtor has adequate means of satisfying the order after deducting—
(i) the necessary living expenses of the enforcement debtor and the enforcement debtor’s dependants; and
(ii) any other known liabilities of the enforcement debtor;
(b) whether the amount of regular debt to be redirected would impose unreasonable hardship on the enforcement debtor;
(c) if the applicant is the enforcement debtor—whether, having regard to the availability of other enforcement means, the issue of the warrant would be consistent with the public interest in enforcing orders efficiently and expeditiously;
(d) whether, having regard to the nature of the debt (belonging to the enforcement debtor from the financial institution) and the type of redirection, a regular redirection or otherwise, is appropriate.

If the Court and/or the Registrar is satisfied of the above, then it will issue the enforcement warrant.

The next step in the process is to serve the enforcement warrant for redirection of debts on the third person.

Service of Enforcement Warrant for Redirection of Debts

Once the Court has granted the warrant and provided the judgment creditor with a sealed copy, the judgment creditor must serve the warrant on the third person.

Rule 842(1) of the UCPR says:

An enforcement warrant authorising redirection of a debt belonging to an enforcement debtor from a third person must be served on the third person to have effect.

There is no mention in the UCPR that a judgment creditor must serve the warrant on the judgment debtor. However, there is a notice to the enforcement debtor on the draft warrant which says:

You may apply to the court to set this warrant aside or to stay its enforcement at any time.

It seems that it is implied in the Form 76 that the enforcement debtor be served a copy of the warrant.

Best practice – serve a copy on the enforcement debtor as soon as practicable after serving the third person.

Ordinary Service of Enforcement Warrant for Redirection of Debts

An enforcement warrant is not an originating application and so ordinary service is the mode of service.

Ordinary service is prescribed at rule 112 of the UCPR and can be performed by:

Posting the warrant to the address of the third person;
Leaving it with a person who looks over sixteen (16) years old;
Leaving it at the address in a position where it is reasonably likely to come to the third person’s attention;
Facsimile of email if permissible.

Best case, unless you can deliver it to the third person personally, express post to the address contained in the enforcement warrant.

Once served the third person has to comply with the warrant using reasonable diligence to give effect to the redirection.

If complied with, the warrant is valid for one (1) year after it was issued.

Section 91 of the Civil Proceedings Act 2011 (QLD) says:

An enforcement warrant ends 1 year after it issues unless the warrant states that it ends at an earlier time.

Failure to Comply with the Warrant

If the third person fails to act using reasonable diligence to comply with the enforcement warrant for redirection of debts, then there are a number of serious consequences.

Section 98 of the Civil Proceedings Act 2011 (QLD) says:

If a third person – does not comply with an enforcement warrant authorising redirection of a debt from the third person; and does not file a notice of objection; and fails to dispute the third person’s liability to pay the debt; the enforcement creditor has the same entitlement to enforce the debt as the enforcement debtor had.

There is also a notice to the third person on the Form 76 which says:

Failure to comply with this warrant may be contempt of court and may entitle the enforcement creditor to obtain an order against you.

So, it is very important that the third party comply with the enforcement warrant.

If the third person objects to the warrant, then it can make an application to set it aside.

Set Aside Enforcement Warrant for redirection of debts

Rule 819(1) of the UCPR says:

An enforcement debtor or another person affected by an enforcement warrant may apply to the court to set it aside or to stay enforcement at any time.

The application should be made by adapting the Form 9 application and providing supporting evidence by way of affidavit Form 46.

Once sealed, a copy of the documents will need to be served on the enforcement creditor and the enforcement debtor.

Rule 31(5) of the UCPR says:

An application must be filed and then served on each respondent at least 2 business days before the day set for hearing the application.

Claim by Other Person

The court may consider that another person claiming the benefit of the debt should be given the opportunity to be heard.

Rule 845 of the UCPR says:

This rule applies if a court considers that another interested person, including, for example, a person other than an enforcement debtor who may be entitled to all or a part of a redirected debt or to a charge or lien on it, should be given the opportunity to be heard.
The court may – order that notice of the hearing of the notice of objection be given to the other person; and at the hearing, decide the other person’s entitlement or give directions as to how the entitlement is to be decided.

Discharge of the Third Person

A payment to an enforcement creditor made by a third person in compliance with an enforcement warrant is a valid discharge of the third person’s liability to the enforcement debtor to the extent of the amount paid.

There is another similar warrant available under this Part, being a warrant for regular redirection from financial institutions, being Division 2 of Part 5.

Regular Redirection from Financial Institutions

A warrant for regular redirection from financial institutions is a warrant directed toward a third person (the financial institution) for a redirection of a regular deposit paid by a fourth person.

The Form for this warrant is Form 77.

Rule 847 of the UCPR says:

This division applies if – an enforcement debtor has an account with a financial institution (the “third person“); and a fourth person (the “fourth person“) regularly deposits earnings into the account (a “regular deposit“).

Rule 848 of the UCPR says:

“regular debt” means a debt, belonging to the enforcement debtor, from the third person because of a regular deposit by the fourth person.

The application is made in the same way as an application for a warrant for redirection of debts, except for the amendments required to ensure that it is an application made under this division.

Content of Enforcement Warrant for Regular Redirection

As well as the provisions outlined above the enforcement warrant for regular redirection must also include:

The name of the financial institution;
Details of the enforcement debtor’s account;
The amount of the deduction to be made; and
The name and address of the enforcement creditor.

See Rule 849 of the UCPR for more.

Once drafted correctly, filed and sealed with the Court’s seal, the enforcement creditor must serve the enforcement debtor and the financial institution.

Service of the Warrant for Regular Redirection

For the warrant to take effect, the enforcement creditor must serve the enforcement debtor and the financial institution.

Rule 850 of the UCPR says:

An enforcement warrant for regular redirection must be served personally or by post on the enforcement debtor and the financial institution.

Sending the warrant by express post with a delivery receipt should suffice, but to be 100% sure, then an enforcement creditor can engage a process server to personally serve the warrant.

Once served, the warrant comes into force after the seventh (7th) day after service is effected.

Complying with the Warrant for Regular Redirection

After that date, the financial institution must deduct from the account the amount specified in the warrant and pay it to the enforcement creditor within two (2) business days.

The enforcement debtor must keep enough funds in its account to pay the amount specified in the warrant.

The obligation under the warrant is discharged upon the total amount specified in the warrant being paid or the enforcement warrant is set aside, varied or expires.

Enforcement Warrant for Redirection of Debts

We strongly suggest that you engage a suitable qualified legal practitioner who specialises in the enforcement of money orders.

If you have a QCAT decision or adjudication decision which need to be registered in the Magistrates Court and enforced, or a judgment, direction, decision or determination of the Court to be enforced then contact our dedicated enforcement lawyers today.

There are a number of complicated steps that need to happen before a Court will issue an enforcement warrant for redirection of debts or an enforcement warrant for regular redirection from financial institutions. We strongly recommend engaging a legal professional.

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Wayne Davis

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Statutory Demand – Complete Guide

20/01/2019 By // by Wayne Davis

A statutory demand is a written request for the payment of debts that are owed by an insolvent company, under section 459E of the Corporations Act 2001 (Cth).

This complete guide to statutory demands is one of the most comprehensive free guides to statutory demands in Australia.

This guide will look at how statutory demands work and when it’s appropriate to use these demands – how to draft a statutory demand – how to serve a statutory demand – how to withdraw a statutory demand – and more.

We offer professional advice and assistance in all things related to statutory demands


Issuing Statutory Demands	Setting Aside Statutory Demands

You should always use a dedicated, professional statutory demand lawyer for advice and assistance.

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What is a Statutory Demand?

As mentioned above, a statutory demand is a demand for payment, issued by a creditor to a company debtor.

The statutory demand requires the debtor to do one of the following:

Pay the debt; or
Secure or compound for the debt; or
Apply to set the statutory demand aside.

The debtor company has strictly 21 days to do the above. Failure to do one of these things raises the legal presumption that the company is insolvent.

With the legal presumption raised the creditor can apply to the Federal Court or the Supreme Court for an order that the company be wound up in insolvency.

What is the Statutory Demand Process?

This complete guide will outline the formal requirements and the process of issuing a statutory demand including how to draft a statutory demand.

We will show you how to comply with the statutory demand if you have been served and the consequences of non-compliance with the demand.

We will also show you how to correctly serve the statutory demand, and how to request that the statutory demand be withdrawn.

This guide will not talk about setting aside a statutory demand, which has been addressed in our complete guide to setting aside statutory demands.

Before we start, we must first consider the elements of eligibility to issue a statutory demand.

We offer professional advice and assistance in all things related to statutory demands


Issuing Statutory Demands	Setting Aside Statutory Demands

Eligibility Requirements of a Statutory Demand

If you intend to send a statutory demand in Queensland, there are some requirement that must be met before you do so. These include:

The debtor must be a company;
The debt(s) must be equal to, or greater than $2,000.00;
The debts must due and payable; and
There is no genuine dispute about the existence or amount of the debt.

If you fit these criteria, then you may be entitled to serve the debtor company with a demand.

The Debtor must be a Company

Section 9 of the Corporations Act defines a company as:

“company” means a company registered under this Act

So, a creditor may serve a statutory demand on a registered company.

A company is usually characterised by the use of Pty Ltd – for example Debtor Company Pty Ltd.

A company is a separate entity in law to its directors, secretary, and shareholders.

Given this unique legal status, a company has some of the same rights as natural persons. This means that a company can incur debt, sue, be sued and be issued with a statutory demand.

The Debt(s) must be Equal to, or Greater than $2,000.00

There is a statutory minimum amount of debt which must be owed before a creditor is eligible to issue a creditor’s statutory demand for payment of debt.

Section 9 of the Corporations Act defines a statutory minimum as:

“statutory minimum” means: (a) if an amount greater than $2,000 is prescribed – the prescribed amount; or (b) otherwise–$2,000.

A creditor must have a debt, or debts, equalling $2,000.00 or more to be able to issue a statutory demand.

The Debts must Due and Payable

The debts must be due and payable at the time of drafting the statutory demand Form 509H, and the Form 7 affidavit accompanying the statutory demand.

This may sound obvious, but a creditor must ensure that the time for payment has expired.

For example, if a creditor gave thirty (30) days payment terms, then those thirty (30) days need to have expired.

If you satisfy the requirements above, then you can issue the debtor company with a creditor’s statutory demand for payment of debt.

We offer professional advice and assistance in all things related to statutory demands


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Formal Requirements of a Statutory Demand

We would always recommend using a suitably qualified legal practitioner to draft your statutory demand.

However, if you are planning on drafting and serving creditor’s statutory demands yourself, then there are several statutory demand formal requirements that you must comply with.

This part dovetails with our guide relating to formal defects in a statutory demand causing substantial injustice.

If you do not get some of these formal requirements correct, then it could be a reason for the debtor company to set the statutory demands aside.

The statutory demand formal requirements include:

It must be in writing and use the correct form – Form 509H;
It must correctly identify the debtor and the creditor or creditors;
It must require the debtor company to pay, secure, or compound for the debt within 21 days;
It must correctly and sufficiently identify and particularise the debt or debts owing by the debtor company; and
It must be signed by the creditor.

We will expand on each of these requirements below.

Must be in Writing and use the Correct Form – Form 509H

Form 509H is located at schedule 2 of the Corporations Regulations 2001 (CTH). If you are drafting a statutory demand yourself then you need to get a copy from there.

A statutory demand contains a header, six (6) paragraphs, a schedule, a signing section, and some notes.

These need to be correctly edited or face an application to set it aside, or a request that you withdraw the demand.

The Header

The header of a statutory demand contains the name of the form, the section of the Corporations Act applicable, the title, and the name and registered office of the debtor company.

Just leave all of this in the demand.

The most important thing to get the name, ACN, and address of the registered office correct.

You can order a company current extract from ASIC which contains all of this information. Best practice is to simply copy (ctrl + c) and paste (ctrl + v) onto the demand.

Correctly Identify the Creditor

Paragraph 1 identifies the creditor. It is important that you get this correct.

This seems like it should be easy. However, you might be a director of several different companies, with maybe a dozen business names, etc.

You must ensure that the legal entity that you add to part 1, is the same legal entity that you contracted with, and is the legal entity that is owed the debt.

If you are owed one amount (an unpaid invoice for example) then you can use the first option and delete the second.

If you are owed more than one debt (several invoices for different work) then you can use the second option and delete the first.

It is important that you get this right as misidentification of parties, and misdescription of the debt (or debts) have been found to be a defect causing substantial injustice.

In Scandon Pty Ltd v Dome Supplies Pty Ltd (1995) 17 ACSR 662 the statutory demand did not have the correct name of the creditor, did not include the ABN of the creditor; and did not include an address for service in the same State in which the statutory demand was served.

In this case, the demand was set aside with Senior Master Mahony saying:

[T]he statutory demand the subject of this proceeding will be set aside under s459j(1)(b) because of the significance of the defects in the demand, albeit not productive in this case of “substantial injustice” to the applicant to which s 459j(1)(a) could apply.

So, it important that you correctly identify your company if you want to successfully serve a compliant statutory demand.

Debt is Due and Payable by the Company

Paragraph 2 gives you options to inform the debtor that the amount of the debt is due and payable by the debtor company.

If you are serving the debtor company with a statutory demand and supporting affidavit, then you complete the second option and delete the first.

Tip – best practice is for the date of the affidavit accompanying a statutory demand, and the date of the statutory demand should be the same.

The debt(s) must be due and payable by the debtor company. You cannot include debts which are not due and payable (invoices with 30-day payment terms, before the expiry of 30 days, for example).

Failure to declare that the debt or debts are due and payable has been met with mixed case law, and there have been various interpretations as to whether this omission caused substantial injustice.

There have been cases where the inclusion of invoices with the words “amount due” was enough to not cause substantial injustice.

There have been cases where the inclusion of the debt being “due and payable” on the demand, but omitted from the affidavit in support, was enough to set the demand aside.

Best Practice – make sure that paragraph 2 is included in the statutory demand. Failure to do so and the debtor company may attempt to set it aside, creating more costs for you.

Pay, Secure, or Compound for the Debt Within 21 Days

Paragraph 3 puts the debtor company on notice that they have 21 days to pay, secure, or compound for the debt.

Payment of the debt means that the total amount of the debt contained in the statutory demand is paid in-full.

To secure for the debt means to accept security for the debt.

To compound for the debt means to accept an arrangement for payment of the debt amount, or some other amount.

The use of the word “reasonable” is an objective test rather than a subjective test, so care should be taken when negotiating offers.

Company can be Wound Up in Insolvency

Paragraph 4 of the demand lets the debtor know that failure to comply with the statutory demand allows the creditor to make an application to the Court to wind the debtor company up in insolvency.

Non-compliance with a statutory demand raises the legal presumption of insolvency. It is with the assistance of that legal presumption that a creditor of an insolvent company can apply to wind it up.

Just leave paragraph 4 in the statutory demand and make no amendments.

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Application to Set the Demand Aside

Paragraph 5 lets the debtor company know that they can make an application to the Court for an order setting aside the statutory demand (if they have sufficient grounds).

If the debtor company wants to set the demand aside, then strictly within the 21-day period, they must apply to the Court, and the sealed application and supporting affidavit be served on the creditor.

Just leave paragraph 5 in the statutory demand and make no amendments.

The Warning Box

There is a requirement for the warning box to be included in the statutory demand. This warning box puts the debtor company on notice that they could be placed into liquidation.

The omission of the warning box in a demand was discussed in McElligott v Boyce & Ors [2011] QCA 117 following New South Wales Court of Appeal case Randall v Chepan [2009] NSWSC 783 where Muir J said:

The absence of the warning statement has been held not to require the setting aside of a statutory demand.

Again, best practice is to simply leave it in.

Address for Service of the Application

Paragraph 6 states that the creditor company is also required to provide an address for service of the application to set the demand aside.

The address for service must be in the same State as the address of the registered office of the debtor company. This means that if a debtor is in Western Australia and you are in Queensland, then you must have an address for service in WA.

An address in a different state as the debtor company has been deemed not to be a defect causing substantial injustice, allowing the company to set the demand aside. In Daewoo v Suncorp-Metway [2000] NSWSC 35 Austin J cited a number of authorities and said:

In the present case there is the clearest basis for concluding that no substantial injustice would arise from the failure to specify an address in New South Wales. The proceedings have been brought in New South Wales and the plaintiff appeared before me at the hearing with New South Wales counsel and solicitors. I therefore reject the contention that a failure to specify an address in New South Wales in the demand justifies the setting aside of the demand.

Again, not grounds for setting the demand aside, but it is just good practice to ensure that the Form 509H is complied with correctly.

The Debt Schedule

The debt schedule must identify with precision the debt or debts upon which a statutory demand is based. This is a statutory demand formal requirement.

It is vital that this section is completed correctly, as failure to correctly, or sufficiently particularise the debt or debts, is a defect which will allow a debtor to set the demand aside.

Section 9 of the Corporations Act 2001 (CTH) defines a defect in a demand to mean:

“defect “, in relation to a statutory demand, includes:
(b) a misstatement of an amount or total; and
(c) a misdescription of a debt or other matter …

The defect must also cause substantial injustice.

In Topfelt Pty Ltd v State Bank of NSW Ltd [1993] FCA 589 Lockhart J said:

According to its ordinary usage a ‘defect’ means a lack or absence of something necessary or essential for completeness; a shortcoming or deficiency; an imperfection.

In LSI Australia v LSI Holdings; LSI Australia v LSI Consulting [2007] NSWSC 1406, when talking about the debt in a statutory demand, Austin J said:

If the demand is so vague or ambiguous that it fails to identify, to a reasonable person in the shoes of a director of the debtor company, the general nature of the debt to a sufficient degree that the director can assess whether there is a genuine dispute as to the existence or amount of the debt, then there is a lack of something necessary for completeness, and therefore a defect in the demand.

Whether this defect will cause substantial injustice will turn on the facts of each matter. Again, to be sure that the demand is not set aside for this reason, you must sufficiently particularise the debt so that the director of the debtor knows (or is deemed to know) what it relates to.

It Must Be Signed

The signing section is important because the demand must be dated and signed, with the person signing to print their name, and state in what capacity they are signing.

Again, there are various cases which discuss what a person is, whether that person has capacity to sign on behalf of the creditor, and more.

Tip – to save any difficulties, a solicitor for the creditor is an agent of the creditor, and as such it has been deemed that they can sign on behalf of the creditor.

In Collins Bros Stationers Pty Ltd v Zebra Graphics Pty Ltd (1985) 10 ACLR 267 Gobbo J said:

It would seem to me that the document, where it is signed by a person describing himself as the solicitor of the creditor, carries with it an assertion of agency. It would not seem necessary to have explicit evidence of authority which is, as it were, claimed and prima facie made out on the face of the document.

Otherwise, a sole director of the company can sign with authority of the creditor company

Alternatively, if there are more than one director, a director with a minute of a resolution giving him/her authority to sign on behalf of the creditor company.

An omission of a signature has not been found not to be a defect which would cause substantial injustice.

However, again it is better that the statutory demand formal requirements are adhered to, as this will save the costs of having to defend an application to set the demand aside.

The Notes

The final part of the demand is the notes. The notes provide some further information for the debtor company.

An omission of the notes has been found to be a defect in the demand which does not cause substantial injustice, and so does not allow the demand to be set aside.

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Statutory Demand Formal Requirements

Although statutory demand formal requirements are important, strict compliance with the form of the statutory demand is not required.

In Quitstar Pty Ltd v Cooline Pacific Pty Ltd [2003] NSWCA 359 Sheller JA Hodgson JA McColl JA said:

Although s.459E says that the demand must be in the form prescribed by the regulations, s.25C of the Acts Interpretation Act indicates that substantial compliance is sufficient, at least unless the contrary intention appears. It could be argued that the word “must” indicates a contrary intention; but when one has regard to s.459J of the Corporations Act, it does in my opinion follow that the legislation was not making strict compliance with the form a prerequisite for validity

This has been followed in cases such as In the matter of Ege Foods Australia Pty Ltd [2014] NSWSC 983 and Inter Mining Pty Ltd v Lake Johnston Pty Ltd, in the matter of Lake Johnston Pty Ltd [2013] FCA 915 amongst others.

Even though substantial compliance is enough, it is best practice to ensure that the statutory demand formal requirements are 100% complied with.

Defective Requirements allowing for Setting Aside

As outlined above, some defects in the formal requirements of the demand will not allow the demand to be set aside, but some will. They are:

The correct identification of the debtor and the creditor;
The correctness of the amount of the debt; and
Sufficiently described debt allowing the debtor to know what it relates to.

Otherwise, failure to comply with the statutory demand formal requirements may not be fatal to the statutory demand, but they may cause you unnecessary costs and stress having to appear at the hearing of the application to set the demand aside.

As you are attempting to wind a debtor company up in liquidation if they do not comply with your demand, then this is a very serious action and should be treated as such.

In Topfelt Pty Limited v The State Bank of New South Wales Limited [1993] FCA 589 Lockhart J, in the Federal Court of Australia, said:

It is not asking too much that creditors who issue statutory demands under the Corporations Law should ensure that the demands are expressed in clear, correct and unambiguous terms. If the creditors wish to have the benefit of the presumption of insolvency, the least they can do is to tell the debtor companies in clear terms what amounts are due, whether they include interest or not, and, if so, the amount.

So, once a statutory demand is correctly drafted and signed, the creditor has to then serve the demand on the debtor company.

How to Serve a Statutory Demand

The service of a statutory demand is a vital step in the proceeding because if you incorrectly serve the demand, the court may determine that service has not been effected, and the consequences of this could be very serious, including a costs order may be made against you.

Service of a Statutory Demand

You have met the eligibility requirements to be able to serve a debtor company with a statutory demand, and you have correctly completed the form of the demand. You are now ready to serve the demand on the debtor company.

A stat demand is a creature of the Corporations Act 2001 (“the Act”) and so service of the demand is prescribed in that act. Section 109X of the Act says:

(1) For the purposes of any law, a document may be served on a company by:
(a) leaving it at, or posting it to, the company’s registered office; or
(b) delivering a copy of the document personally to a director of the company who resides in Australia or in an external Territory.

Simple right?

Serving a statutory demand by post means that you simple post it to the company’s registered office, or personal service on a director of the company.

Well, there are a number of pitfalls to navigate around, especially if you are dealing with a skilled debtor, who may be taking steps to avoid service.

In some instances, a creditor may be ordered to pay the costs of the debtor company! We advise contacting a dedicated, professional statutory demand lawyer for advice and assistance with serving a statutory demand by post.

Leaving it at, or Posting it to, the Company’s Registered Office

The first thing that you need to do is order a current extract from the Australian Securities and Investment Commission (“ASIC”).

A current extract will provide you with all of the information you will need to serve a company.

A company’s registered office is an address on the extract under the heading Registered Office.

A registered office might be an accountant’s office, or a lawyer’s office.

Ensure that the address on the envelope is identical to the address on the extract. Once posted, when is service deemed to have happened?

The Postal Rule

Section 160(1) of the Evidence Act 1995 (CTH) states that:

It is presumed (unless evidence sufficient to raise doubt about the presumption is adduced) that a postal article sent by prepaid post addressed to a person at a specified address in Australia or in an external Territory was received at that address on the seventh working day after having been posted.

So, the presumption is that the seventh (7^th) working day after the statutory demand was posted it is presumed to be served.

For example, if you posted the statutory demand on a Monday, the date of service (if no public holidays) would be seven (7) clear days thereafter, and the twenty-one (21) day countdown begins from that date.

However, like all presumptions in law, they are rebuttable.

For example, if the debtor company can adduce evidence which proves non-delivery.

There is a distinction to be drawn here between non-delivery and non-receipt. The rebuttal relies on the debtor company adducing evidence of non-delivery and not non-receipt.

The High Court of Australia said in Fancourt v Mercantile Credits Ltd [1983] 154 CLR 87:

Despite remarks in the judgments about non-receipt, it was non-delivery which was significant because the second limb of s. 26 of the Interpretation Act refers to proof of the contrary of delivery. As the present case shows, delivery may be different from receipt by the intended recipient and, provided that delivery is not disproved, the fact of non-receipt does not displace the result that delivery is deemed to have been effected at the time at which it would have taken place in the ordinary course of the post.

This might be relevant to the service of a statutory demand for a number of different reasons:

The debtor company may have changed its registered office in an attempt to defeat creditors, and lodged an incorrect address with ASIC which may not exist;
The debtor company may have a forwarding service attached to the address for service to a post office box. Scope Data Systems Pty Ltd v Goman [2007] NSWSC 278 said “delivery to the post office box cannot be equated with delivery to a company’s registered office”;
If the letter is returned to sender unopened – this may be enough to rebut the presumption of delivery, especially if it is returned by the post office confirming delivery could not be made.

In any case, best practice when serving a statutory demand by post is to serve the statutory demand by express prepaid post with a tracking identification number.

Proof of Delivery

That way you are able to prove delivery, and it is irrelevant if the debtor company attempts to adduce evidence amounting to non-receipt of your demand.

If there is direct evidence to show that delivery was made correctly, then there is no need to worry about whether service has been effected or not.

Alternatively, or as well as express post, attempt to get the debtor to confirm receipt (and therefore delivery) of the demand.

Follow up with an email or a telephone call (if possible and/or reasonable) and you can annex evidence of actual confirmation of delivery from the debtor to your affidavit.

Further in the alternative, although more expensive than a prepaid express post envelope, you could also get your process server to deliver the letter to the address of the registered office.

You should always use a dedicated, professional statutory demand lawyer for advice and assistance

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Personal Service of the Statutory Demand

If you are unable to be sure that service will be effected by post, or there are some problems with the address for the registered office on the ASIC current extract, then you will need to engage a process server to personally serve the director of the debtor company with the statutory demand.

The current extract has the names, addresses, date of birth of the company office holders, and so you are able to personally serve the director (or directors) of the company personally at their home address.

However, this becomes more complicated if the director has moved and not updated their details with ASIC.

Your process server will be trained and experienced in the service of documents and will know exactly how to serve a statutory demand personally on the director of the debtor company.

Interstate Service of Statutory Demand on Company

If you need to know how to perform service of a statutory demand on a company interstate, for example the registered office in interstate, or the director of the debtor company lives in another state, then you will need to rely on the provisions of the Service and Execution of Process Act 1992 (CTH) (“SEPA”).

Section 9 of SEPA says:

(1) Service of a process, order or document under this Act on a company is to be effected by leaving it at, or by sending it by post to, the company’s registered office.
(2) Without limiting the operation of subsection (1), a process, order or document may be served on a company by delivering a copy of it personally to a director of the company who resides in Australia.

Note that a statutory demand is not an initiating process and so does not need to comply with section 16 of SEPA which says:

Service is effective only if copies of such notices as are prescribed are attached to the process, or the copy of the process, served.

Substituted Service of a Statutory Demand

Rule 10.24 of the Federal Court Rules 2011 (CTH) says:

If it is not practicable to serve a document on a person in a way required by these Rules, a party may apply to the Court without notice for an order:
(a) substituting another method of service; or
(b) specifying that, instead of being served, certain steps be taken to bring the document to the attention of the person; or
(c) specifying that the document is taken to have been served:
(i) on the happening of a specified event; or
(ii) at the end of a specified time.

This means that there are other avenues open to effect service if the debtor company or the director of the debtor company have taken evasive measures to not be served with your demand. Read our article on Substituted Service.

In some instances, a creditor may be ordered to pay the costs of the debtor company!

We advise contacting a dedicated, professional statutory demand lawyer for advice and assistance.

Affidavit of Service of the Statutory Demand

Once you have completed the steps above, you (or your process server) will need to provide evidence that service of the statutory demand has been effected.

More than likely the debtor will pay, or you may agree to settle or “secure or compound for that amount or total to the creditor’s reasonable satisfaction, within 21 days after the demand is served on the company” as per section 459E(2)(c) of the Act. Commonwealth Bank of Australia v Parform Pty Ltd [1995] FCA 1445 said:

To “compound” for a debt is to accept an arrangement for payment of the amount of the debt or of a different amount

However, if the debtor company does nothing, then the company is presumed to be insolvent and you can take steps to wind the debtor company up in insolvency.

In this instance then you will need to provide an affidavit of service of the creditor’s statutory demand with the application to the Federal Court or Supreme Court of Queensland.

In your affidavit of service you will need to prove:

Evidence of the registered office (the extract);
Evidence of the address on the envelope;
Evidence of the tracking identification number on the envelope;
Evidence of the letter serving the documents;
Evidence of the documents served;
Evidence when and where the letter containing the documents was posted;
Evidence of delivery of the letter.
How to Serve a Statutory Demand

Even though you now know how to serve a statutory demand it is a complicated process which must be conducted correctly or there could be very dire consequences.

It is vital that you get a professional solicitor with experience of service of documents to perform service of a statutory demand.

Once served the debtor company will need to comply with the statutory demand.

We offer professional advice and assistance in all things related to statutory demands


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How to Comply with a Statutory Demand

A debtor must comply with a statutory demand if they are not going to attempt to set the statutory demand aside, or ask the issuer to withdraw the demand.

To comply with a statutory demand is to either:

To pay to the creditor the amount of the debt or total of the amounts of the debts; or
To secure or compound for the amount of the debt or total of the amounts of the debts, to the creditor’s reasonable satisfaction.

This section will discuss what these points mean, and how they have been dealt with by the Courts, to ensure that a debtor and creditor know how to comply with a statutory demand.

Complying with a Statutory Demand

The Form of a statutory demand is Form 509H contained in Schedule 2 of the Corporations Regulations 2001 (CTH).

The Form says:

The creditor requires the company, within 21 days after service on the company of this demand:
(a) to pay to the creditor the * amount of the debt/ * total of the amounts of the debts; or
(b) to secure or compound for the * amount of the debt/ * total of the amounts of the debts, to the creditor’s reasonable satisfaction.

The salient issues when thinking about how to comply with a statutory demand are:

Within 21 days after service on the company;
Pay to the creditor the amount of the debt;
Secure or compound for the debt;
To the creditor’s reasonable satisfaction.

This article will discuss these matters further below.

Within 21 Days after Service on the Company

The Courts have interpreted compliance with the 21-day time limit very strictly when discussing how to comply with a statutory demand.

The only way that a debtor company can extend the time for compliance is if within the 21-day period for compliance, the debtor company applies to the Court for an order setting aside the demand, and the Court makes an order extending the time for compliance.

In all other cases, the Court has said that the 21-day time limit is strictly 21 days.

In Australian Mid-Eastern Club Ltd v Yassim (1989) 1 ACSR 399 payment of the demanded amount was made after the expiration of the 21 day limit. At this point the winding up application had already been made.

The creditor’s solicitor was instructed to return the money and continue on with the winding up application. The creditor refused to accept the payment.

The creditor company had a good reason not to accept this payment, as there were other creditors of the debtor company, and the payment may have been deemed a preference payment by any future liquidator.

Meagher JA dismissed the appeal with costs.

Australian Mid-Eastern Club Ltd v Yassim (1989) 1 ACSR 399 has been followed in a number of more recent cases.

In the matter of JKAM Investments Pty Limited [2016] NSWSC 1955 Brereton J said:

[t]he tender of payment of a debt underlying a demand, when refused, does not eliminate the debt, and is no answer to a claim for it; at least unless there is a continued readiness to pay the debt, coupled with an actual payment into court … a creditor may have a good reason for refusing a tender where there is a likelihood of having to return the amount paid if a winding up order is subsequently made.

In the matter of Gladstone Mortgagee No 1 Pty Ltd [2015] NSWSC 1551 Black J said:

Mr Spencer submits that GI and Mr Amargianitakis would have sound reasons for rejecting the tender of monies that would probably have to be returned as a preference, implicitly on the basis that GM1 is insolvent and may be wound up within the relation-back period for a preference … [t]here is some force in that submission.

In Deputy Commissioner of Taxation v BK Ganter Holdings Pty Ltd [2008] FCA 1730 Logan J said:

When the history of [the debtor] to pay the debt after the filing of the winding up application is recalled and that the company was … presumed to be insolvent the Deputy Commissioner would have been entitled not to accept the cheque. A refusal to accept the cheque would not have eliminated the debt in question.

In Deputy Commissioner of Taxation v Visidet Pty Ltd ACN 003 743 986, in the matter of Visidet Pty Ltd [2005] FCA 830 Gyles J said:

The opinion of Meagher JA (at 403) indicates that the refusal to accept a tender, even a refusal without justification, does not eliminate the debt in question. The relationship of creditor and debtor still subsists and the tender is no answer, unless there is a continued readiness to pay coupled with actual payment into court.

A creditor will also have a right to wind up the debtor company, after the application is filed, even if payment is subsequently made to the creditor.

In Deputy Commissioner of Taxation v Complete Liquid Transport Pty Ltd [2010] FCA 1067 Collier J said:

The authorities are clear that the status of an applicant to seek a winding up order is determined as at the time when the application was filed, and is unaffected by the subsequent payment of the debt identified in the statutory demand to the creditor … The plaintiff therefore retains standing to press for a winding up order, in relation to the defendant.

So, strict compliance with the 21-day time limit is required to pay, secure or compound for the debt.

Failure to adhere to this strict 21-day time limit raises the presumption that a debtor company is insolvent.

Any attempts at payment after the presumption has been raised and a winding up application has been made may be rejected by the creditor.

This is because if another creditor successfully winds up the debtor company, or a creditor is substituted on the original winding up application, then that payment may be deemed to be a preference payment.

Pay to the Creditor the Amount of the Debt

This sounds pretty self-explanatory right?

Simply pay the amount of the debt mentioned in the demand.

If the demanded debt amount in the schedule is $50,251.39 then pay $50,251.39.

The Securing of the Debt

The securing of the debt means that the debtor company offers some security to the creditor for the amount of the debt in the statutory demand.

This offer will usually be made to secure the compounding of the debt.

A creditor does not need to accept the proposed security, however if the creditor does not accept the security, it has to do so reasonably and objectively.

A Court can determine that it was either reasonable or unreasonable to not accept security for the debt contained in the statutory demand.

To Compound for the Debt

To compound for a debt is to accept some other form of payment of the debt.

In Commonwealth Bank of Australia v Parform Pty Ltd [1995] FCA 1445 Sundberg J said:

To “compound” for a debt is to accept an arrangement for payment of the amount of the debt or of a different amount.

An “arrangement” has been defined to mean something falling short of an agreement.

In Commissioner of Taxation (Cth) v Lutovi Investments Pty Ltd (1978) 140 CLR 434 Gibbs and Mason JJ said:

It is … necessary that an arrangement should be consensual, and that there should be some adoption of it. But in our view it is not essential that the parties are committed to it or are bound to support it. An arrangement may be informal as well as unenforceable and the parties may be free to withdraw from it or to act inconsistently with it, notwithstanding their adoption of it.

So, essentially to compound for a debt means to accept an arrangement for payment, a meeting of the minds between the debtor and the creditor.

A creditor does not need to accept the proposed arrangement, however if the creditor does not accept the arrangement for payment, it has to do so reasonably and objectively.

A Court can determine that it was either reasonable or unreasonable to not accept an arrangement for payment (or compounding) of the debt contained in the statutory demand.

To the Creditor’s Reasonable Satisfaction

The use of the word “Reasonable” has meant that the Creditor’s Reasonable Satisfaction is an objective test, as opposed to “Creditor’s Satisfaction” potentially being a subjective test.

In Commonwealth Bank of Australia v Parform Pty Ltd [1995] FCA 1445 Sundberg J said:

I was referred to no authority on the phrase “to the creditor’s reasonable satisfaction”, and my own researches have disclosed none. But I do not think the phrase is intended to enable the creditor to be the sole judge of his satisfaction. The words “to the creditor’s reasonable satisfaction” seem to me to posit an objective test. In other words, where the debtor puts up a proposal which the creditor rejects, it is for the court to decide whether in rejecting it the creditor was acting reasonably in all the circumstances. If the test were wholly subjective, the legislature would have employed the phrase “to the creditor’s satisfaction”.

This has been followed in more recent cases.

In the matter of Gladstone Mortgagee No 1 Pty Ltd [2015] NSWSC 1551 Black J followed the Parform case by confirming:

The question whether the debt was secured or compounded to GI’s and Mr Amargianitakis’ reasonable satisfaction is determined on an objective test.

In Frontlink Pty Ltd v The Commissioner of State Revenue, Victoria [2015] VSC 329 Efthim AsJ cites the Parform case and makes an objective determination by saying:

Here, the Commissioner does not want the security that is being offered, and one can presume that is because he has sufficient security. Objectively it would be reasonable for him not to accept the security, as it appears to add little if nothing at all to the security he already has.

In South East Asia v It and Law [2000] NSWSC 1036 Master Macready decided that:

There is no offer of security and there is no suggestion that there is cash available now by way of bank cheque for instance to make the first payment. All it says is pay it immediately. That has to be seen in the light of the history of the matter where, prior to the issue of the first demand there were promises of payment which were not honoured. Accordingly, having regard to the history, I would have thought it was not unreasonable to refuse the offer to compound.

How to Comply with a Statutory Demand

If a debtor company does not comply with a statutory demand, apply to set the demand aside, request that the issuer withdraws the demand, within the strict 21-day time limit, then the company will be presumed to be insolvent.

It is based upon that presumption of insolvency that a creditor can apply to wind the debtor company up.

It is vital that you get legal advice from a suitably qualified statutory demand solicitor as soon as you receive the demand. Time is very much of the essence, as 21-days means 21-days!

We offer professional advice and assistance in all things related to statutory demands


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Compliance with 21 Day Time Limit on Statutory Demands

The 21-day time limit for Statutory demands means that you must apply to set the demand aside or comply with the demand within 21 days.

The Courts have interpreted compliance with the 21-day time limit very strictly.

Failure to comply with the 21-day time limit for compliance for statutory demands can have very serious consequences for the debtor company.

Failure to apply to set aside statutory demands and serve the documents can mean that your application is void.

This part of this guide explains all you need to know about the 21-day time limit for a statutory demand and how the Courts have decided this issue since David Grant.

21-day time limit for Compliance with Statutory Demands

If a company has been served with a statutory demand then the company has 21 days after the statutory demands are served to either:

Pay the debt (or debts) on the demand; or
Apply for the demand to be set aside; or
Ask the issuer to withdraw the demand; or
Secure or compound for that amount or total to the creditor’s reasonable satisfaction.

To “compound” for the debt means:

To “compound” for a debt is to accept an arrangement for payment of the amount of the debt or of a different amount – Commonwealth Bank of Australia v Parform Pty Ltd [1995] FCA 1445.

Section 459F of the Corporations Act says:

(2) The period for compliance with a statutory demand is:
(a) if the company applies in accordance with section 459G for an order setting aside the demand:
(i) if, on hearing the application under section 459G, or on an application by the company under this paragraph, the Court makes an order that extends the period for compliance with the demand–the period specified in the order, or in the last such order, as the case requires, as the period for such compliance; or
(ii) otherwise–the period beginning on the day when the demand is served and ending 7 days after the application under section 459G is finally determined or otherwise disposed of; or
(b) otherwise–21 days after the demand is served.

The Courts are unable to extend time for compliance with statutory demands, absent an order contained in the decision upon the hearing of an application to set aside a statutory demand pursuant to section 459G of the Corporations Act.

This was the decision of the High Court in Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Limited [2008] HCA 9 where the Court said:

Unless the contrary intention appears in the Act, the power to extend the period for compliance is to be understood as including power to extend it even if the period has ended. But there are several features of Pt 5.4 of the Act which lead to the conclusion that a contrary intention does appear.

Broadly, the Corporations Act allows for the Court to extend the period for compliance with a time requirement under the Corporations Act.

Section 9 of the Corporations Act says:

Unless the contrary intention appears … “extend” in relation to a period … includes further extend; and has a meaning affected by section 70.

Section 70 of the Corporations Act says:

Where this Act confers power to extend the period for doing an act, an application for the exercise of the power may be made, and the power may be exercised, even if the period, or the period as last extended, as the case requires, has ended.

However, what the High Court said in Aussie Vic Plant Hire was that Part 5.4 of the Corporations Act, being the part that deals with statutory demands (amongst other things), a contrary intention did in fact appear.

In the joint judgment of Gleeson CJ, Hayne, Crennan and Kiefel JJ the High Court said:

If the period for compliance with a statutory demand has expired, the Act does not permit the making of an order extending the period for compliance.

This decision has been followed in the Queensland Court of Appeal.

In Palmer Petroleum Pty Ltd v BGP Geoexplorer Pty Ltd [2016] QCA 149 the Queensland Court of Appeal said:

If the company applies in accordance with s 459G for an order setting aside the demand, there are then two possible periods for compliance. One possibility results from an order by the court for the extension of the period for compliance. The other possibility is where the period is not extended by the court, in which case, the period for compliance ends seven days after the application to set aside the demand is finally determined or otherwise disposed of.

McMurdo JA then went on to say (with Fraser JA, Philippides JA agreeing):

There is no power to extend the period for compliance once that period has expired. The High Court so held in Aussie Vic Plant Hire Proprietary Limited v Esanda Finance Corporation Limited [2008] HCA 9. Clearly then, the period for compliance expired … at which point, the demand was still in effect and the appellant had not complied with it, with the consequence that the appellant is taken to have failed to comply with the demand.

21-day time limit for Setting aside Statutory Demands

Section 459G of the Corporations Act 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.

Section 58AA of the Corporations Act defines Court to mean:

“Court” means any of the following courts:
(a) the Federal Court;
(b) the Supreme Court of a State or Territory …

If a company has been served with statutory demands with an affidavit in support (not a judgment in support), then the company has 21 days to:

Apply to the Federal Court or the Supreme Court for an order setting the statutory demand aside; and
Serve a sealed copy of the application and the supporting affidavit on the person who served the statutory demand.

Does the Court have Discretion?

In David Grant the High Court noted that the phrase “may only” was not used in a discretionary sense but was used in a “facultative and permissive sense“. The Court said (at 28):

… the use in s 459G(2) of the term “may” does not give rise to the considerations which apply where legislation confers upon a decision-maker an authority of a discretionary kind and the issue is whether “may” is used in a facultative and permissive sense or an imperative sense (13). Here, the phrase “(a)n application may only be made within 21 days” should be read as a whole. The force of the term “may only” is to define the jurisdiction of the court by imposing a requirement as to time as an essential condition of the new right conferred by s 459G.

The Court decided that a Court will only have jurisdiction to hear an application pursuant to 459G if it is made and served within the 21 day time-frame.

The 21-day time limit to apply to set aside a statutory demand has been interpreted very strictly. If you have been served with a demand and need to set it aside, it is vital that you engage a suitably qualified professional

21 Day Time Limit to Set Aside Statutory Demands

A good place to start when looking at the 21 day time limit to set aside a statutory demand is the High Court of Australia case of David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43 who said:

The court may make an order extending the period for compliance with the statutory demand. If the company applies “in accordance with section 459G” to set aside the demand, then an order extending the time for compliance may be made.

And then went on to say:

The requirement in s 459G that the application to the court for which it provides be made only within 21 days after service of the demand … These reasons lead also to the rejection of the reliance by the appellants upon s 70 … However, the Law does not confer a power to extend the period within which an application may be made under s 459G.

The reason for the strictness of the interpretation of the legislation is because of the intention of the legislature when drafting the Corporate Law Reform Act 1992 (CTH). David Grant said that:

The provisions of the new Pt 5.4 constitute a legislative scheme for quick resolution of the issue of solvency and the determination of whether the company should be wound up without the interposition of disputes about debts, unless they are raised promptly.

The Court in David Grant decided that one of the purposes of the amendments which evolved into what we use today was for the quick resolution of solvency issues, unless disputes are promptly raised.

The High Court in David Grant also specified the manner in which a 459G application is to be made. The Court said:

… an application is made in accordance with s 459G only if, within those 21 days, a supporting affidavit is filed and a copy thereof and of the applications are served

So, this essentially means that if a debtor company wants to apply to set a statutory demand aside, the application and supporting affidavit must be filed in the Court, and a sealed copy of both must be served on the creditor within 21-days after being served with the statutory demand.

21-Days means 21-Days

If a company is served with a statutory demand, then the only power that the Court has to extend the time for compliance is pursuant to a validly filed and served application to set aside the statutory demand.

In all other cases, the Courts have held that a company must adhere strictly with the 21-day time for compliance with statutory demands.

So, this means that from the day that a company is served with a statutory demand, the company must, within 21 days do one of the following:

Pay the amount on the statutory demand or demands; or
Compound for that amount to the creditor’s reasonable satisfaction; or
Get in writing from the issuer, a notice that they withdraw the demand; or
Apply to the Court for an order setting aside the statutory demand.

Care must be taken. For example, if a company has requested that the issuer withdraws the demand, and the issuer does nothing for two weeks, then the company will only have one (1) week to make the application to set the demand aside.

The application to set a statutory demand aside must be drafted, filed and a sealed copy served before the expiration of the 21-day time limit.

Does this Part Operate Harshly?

In Obiter in David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43, quoting Sheller JA in Re J and E Holdings Pty Ltd (1995) 17 ACSR 319, Gummow J said:

No doubt, in some circumstances, the new Pt 5.4 may appear to operate harshly … In particular … the drastic commercial consequences which may follow the issue of process for winding up and to the inability of a company, which for good reason had been late in filing or serving an application, to set aside the statutory demand.

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Service of Statutory Demands over the Christmas Period

Arguably, a good example of this can be seen in J & K Homes Pty Ltd v Evans Lawyers [2017] QSC 24 where Evans Lawyers issued J & K Homes Pty Ltd with a statutory demand on 19 December 2016, meaning that the time for compliance, or the time to file and serve an application and affidavit to set aside the demand, was 9 January 2017.

The defendant argued that they were disadvantaged because over the Christmas period the Courts were closed.

Citing David Grant & Co Pty Ltd the Supreme Court of Queensland said:

As the applicant did not file and serve its application within the 21-day period required, the Court has no power to make an order setting aside the statutory demand.

The serving, and subsequent compliance with statutory demands, over the Christmas period has been discussed in a number of different cases.

Service to an Office Closed over Christmas

In SV Steel Supplies Pty Ltd v. Palwizat [2007] QSC 24 service of the statutory demand was made by placing the documents under the door of the registered office of the debtor company on Friday 22 December 2006.

The office was closed for Christmas between 12 p.m. on 22 December 2006 until 8.30 a.m. on Monday 8 January 2007, being 17 days, in which notice was given by a sign on the door of the office.

The applicants made an application to set aside the statutory demand alleging that service was not affected on the registered office until the document was brought to the attention of the applicant.

After reviewing the authorities, following Fancourt v Mercantile Credits Ltd [1983] HCA 25 amongst others, the Court decided that delivery had been made to the registered office, and dismissed the application to set the demand aside. The Court said:

There can be no doubt that the notice has been served in accordance with s.109X of the Corporations Law. Nor can there be any doubt that the notice came to the company’s notice although some significant time after the service was effected in accordance with s.109X. Nor in my view is there anything in what the respondent did in giving the notice nor in her dealings with the applicant which could support a claim that service of the statutory notice in the way and at the time that it was effected constitutes an abuse of process.

In Bluechip Development Corporation (Cairns) Pty Ltd v PNP Realty Pty Ltd [2009] ACTSC 33 the application to set aside a statutory demand and supporting affidavit was rejected by the registry for non-compliance.

By the time the registry sent a requisition setting out the respects in which they did not comply with the Rules, the 21-day time for compliance had passed.

The demand was served on 18 December 2008, but the application was not filed until 5 January 2009.

The respondents filed an application for an order that the applicants be wound up for failure to comply with the statutory demand.

The applicants lodged an application for an injunction restraining the respondents from relying on the statutory demand, on the ground of abuse of process.

The Court said:

I am satisfied on the facts that the statutory demand was validly served. It was suggested by counsel that PNP or its solicitors deliberately delayed serving the statutory demand until just before Christmas, so as to make it practically difficult or perhaps impossible for BDC to make an application to set it aside in time. I am not satisfied that there was any deliberate plan to that effect in the minds of those giving instructions on behalf of PNP, or its solicitors.

Master Harper then ruled that:

In those circumstances the application … by interlocutory process … in the winding-up proceedings will be dismissed with costs

In Career Training on Line Pty Ltd v B E S Training Solutions Pty Ltd; v Buckland [2010] NSWSC 460 the issuer of the statutory demand had personally served the demand on 23 December 2009 by sliding it under the door of the registered office (identified by the ASIC current extract).

The registered office was an accountant’s office. The accountant had left for the day and was not back at work until 29 December 2009, being the first business day after the Christmas break.

The question for the Court was whether the demand was served on 23 December or on 29 December. Barrett J held that:

Service of each statutory demand occurred on 23 December 2009 … The filing of each originating process and supporting affidavit on 19 January 2010 (and subsequent service thereof) therefore occurred outside (and not “within”) the period of 21 days referred to in s 459G(2) and s 459G(3) … Consistently with David Grant & Co Pty Ltd v Westpac Banking Corporation Ltd, the originating process in each proceeding must be dismissed. It will also be ordered, in each case, that the plaintiff pay the defendant’s costs of the proceedings.

So even if nobody is in the office of the accountant, or the solicitor, at the address for service, if service has been performed correctly, and it is not deemed to be an abuse of process, then service is deemed to have occurred on the date of delivery, not the date of receipt of statutory demands.

Even if the office is closed over Christmas!

The 21-day time limit to apply to set aside a statutory demand has been interpreted very strictly.

If you have been served with a demand and need to set it aside, it is vital that you engage a suitably qualified professional

Weekends or Public Holidays

Section 36(2) of the Acts Interpretation Act 1901 (Cth) says:

If (a) an Act requires or allows a thing to be done; and (b) the last day for doing the thing is a Saturday, a Sunday or a holiday; then the thing may be done on the next day that is not a Saturday, a Sunday or a holiday.

In Kanwa Nominees Pty Ltd v ATO [2001] ACTSC 30 said:

It seems to me that it must follow that, for the purposes of determining whether this application was filed within time, the effect of s36 of the Acts Interpretation Act must be taken into account. The effect of s36 of that Act is that, although a count of 21 days from the date of service, being 19 February 2001, would indicate that the deadline for filing the application and affidavit was 12 March 2001, because that date was a public holiday in the Australian Capital Territory, the expiry of 21 days must be taken to the next working day, being 13 March 2001.

Setting Aside Statutory Demands

For an application setting aside statutory demands, the application and supporting affidavit must be filed in the Court, and then a sealed version is to be served.

In Cooloola Dairys Pty Ltd v National Foods Milk Ltd and Alait Pty Ltd v National Foods Milk Ltd [2004] QSC 308 the Supreme Court of Queensland said:

The authorities establish that the copy of the application served on the respondent must be such as to show that it is a replication of the application which has been filed in the court. To do that it must show the action number given it by the court and it must show the return date for the hearing of the application. It must, also, I think, show the seal of the court to indicate that there are curial proceedings on foot.

In Dominion Capital Pty Limited v Pico Holdings Inc [2001] VSC 458 the Court said:

In my opinion, the Court has no jurisdiction to hear the application when it and the supporting affidavit have not been effectively served “in accordance with” the requirements of s.459G(2) and (3)

In Complete Windscreen Service Nominees Pty Ltd v Nielsen and Moller Windscreens Pty Ltd (1995) 121 FLR 178 the Court decided that an application to set a statutory demand aside filed and served within 21 days, but the affidavits filed and served outside the 21 days, was not valid. They said:

If the steps contemplated by s 459G are not taken within the 21-day time period, it may be said that there is no application under Pt 5.4a, and accordingly no question of defect or irregularity falls for consideration.

The authorities show that an application to set aside statutory demands, and accompanying affidavit must be filed in the Court, sealed with the Courts seal, show the matter number given it by the Court, and include the return date for the hearing.

Then, this version is to be properly served on the issuer of the statutory demands – all within the 21-day time limit for it to be effective.

Failure to do so within 21 days, and the company will be presumed to be insolvent.

If the application to set aside is filed and served before the 21-day time limit, the clock stops running until the Court gives its judgment.

Abuse of Process and Failure to Comply with Statutory Demand

In some instances, the Courts have allowed injunctive relief if the debtor company can successfully prove that the issuance of statutory demands was for an improper purpose and is an abuse of process.

This still does not allow the company to file an application to set aside a demand after the 21-day period but may allow the company to avoid the consequences of the statutory demand.

However, the authorities say that this is very difficult to do.

In House of Tan Pty Ltd v Beachiris Pty Ltd (1996) 14 ACLC 1536 Brownie J said:

(i) A court has power to dismiss or stay winding up proceedings as an abuse of process in appropriate cases … (ii) The effect of the enactment of CL Pt 5.4 is to limit the exercise of that power in cases to which CL Pt 5.4 applies … (iii) In a small number of cases, the power will still exist – although the factual matrix would need to make it clear that CL s 459S has no operation.

This guide does not focus on winding up applications, however examples of cases where a winding-up application based upon non-compliance with statutory demands have been held to be an abuse of process include:

Victorian Workcover Authority v Barroaghan Pty Ltd [2001] VSC 413;

Pacific Communication Rentals Pty Ltd v Walker (1993) 12 ACSR 287; and

Roberts v Wayne Roberts Concrete Constructions Pty Ltd [2004] NSWSC 734.

Failure to Comply with a Statutory Demand or Set it Aside

As you can see above, the Courts have interpreted the time limit for compliance with statutory demands, or the time to file and serve an application to set a statutory demand aside, very strictly.

If you have been served with statutory demands, it is vital that you seek legal advice and assistance as soon as possible, as time is very much of the essence.

Withdraw the Statutory Demand

A company served with a statutory demand in Queensland can write to the issuer of statutory demands and request that they withdraw the statutory demand.

The issue as to whether a statutory demands can be withdrawn was settled in Australia in the case of Cempro Pty Ltd v Dennis M Brown Pty Ltd (1994) ACSR 628 and then affirmed In the matter of Chameleon Mining NL; Chameleon Mining NL v Atanaskovic Hartnell [2009] NSWSC 602.

However, whatever a company chooses to do with the statutory demands, it must adhere to the strict 21 day time limit given in the Corporations Act.

If the issuer of statutory demands do not respond to the request for withdrawal, then the statutory demands remain on-foot, and the debtor company still needs to do whatever they intend to do before the 21 day limit.

A debtor may not need to comply with a statutory demand if the demand is withdrawn by the creditor issuing a statutory demand.

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How to Withdraw a Statutory Demand

Have you ever wondered how to withdraw a statutory demand or if a statutory demand can be withdrawn?

What is the process in withdrawing a statutory demand? Why require the issuer to withdraw rather than set it aside?

This section of the guide will explain everything you need to know about withdrawing statutory demands, when you should do it (or request it) and why you should do it (or request that it be done).

Withdrawing a Statutory Demand

The issue as to whether a statutory demand can be withdrawn was settled in Cempro Pty Ltd v Dennis M Brown Pty Ltd (1994) ACSR 628 where Von Doussa J said:

In my view if the party serving a notice of statutory demand under s 459E, within the time limited by the notice for compliance therewith, arms the recipient company with a document in writing saying that the statutory demand is unequivocally withdrawn, the notice thereafter has no further force or effect, and it is not necessary to prevent presumed insolvency arising at the expiration of the period for compliance to obtain an order of the court formally setting aside the notice. I consider that the unconditional withdrawal of the notice of statutory demand means that there is no longer a demand to be complied with, and at the expiration of the time limited for compliance, there can be no failure to comply with the demand. The fact that the withdrawal is evidenced by a document in writing given to the recipient company ensures that the company is in possession of proof of the withdrawal should any question thereafter arise as to the fate of the statutory demand.

You must be mindful however that the recipient of a statutory demand only has twenty one (21) days in which to apply to set the demand aside. Section 459G of the Corporations Act states that:

(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.

So, while waiting for the sender or the sender’s solicitors to agree to withdraw the statutory demand, a debtor company must yourself time to draft, file and serve a copy of your application and supporting affidavit on the issuer.

If you fail to get this application filed and served on time, you may be facing the presumption of insolvency, which could have very serious consequences.

In Chameleon Mining NL v Atanaskovic Hartnell [2009] NSWSC 602 the Court considered Cempro above and asked if a withdrawal of a statutory demand must be made in writing, or can an oral withdrawal suffice. Austin J said:

Although Von Doussa J envisaged withdrawal in writing, it appears from his observations that he regarded writing as desirable for the purpose of proving the withdrawal, rather than necessary for the validity of the withdrawal. I can see no reason for insisting upon writing as a prerequisite to validity. In my view, if the court is satisfied, on the evidence, that a statutory demand has been unequivocally withdrawn within the notice period, the withdrawal is valid and effective notwithstanding the absence of any document, and it is unnecessary for the company to apply for an order setting the demand aside.

A statutory demand can be withdrawn orally; however you will need to be able to prove that this withdrawal was made.

It is good to know that you may be able to rely on Chameleon Mining if you need to, but more importantly, it shows that it is best practice to get the “unequivocal withdrawal in writing” so you are able to tender this as evidence if needed, especially as the consequences of not responding to the statutory demand are so high.

Why can a Statutory Demand be Withdrawn

How a Statutory Demand can be withdrawn is based upon the same factors for setting aside a stat demand.

If the demand was made with an affidavit in support, and you can raise a good argument that the demand can be set-aside then you can write to the issuer of the demand prior to the application setting it aside.

To get a demand set-aside, you will need to prove one or more of the following:

There are formal defects in the statutory demand; and/or
There is/are a genuine dispute(s) about the existence or quantum of the debt; and/or
You have any offsetting claims; and/or
There is some other reason, like the demand was not served correctly.

When considering how to withdraw a statutory demand, if you can successfully argue one or more of these factors above, then prior to making the application to set the demand aside, write without prejudice save as to Costs to the issuer of the demand, state the reasons why this application will be successful, and demand that the statutory demand be withdrawn.

Costs of the Application to Set-Aside

In relation to how to withdraw a statutory demand, the purpose of this letter is to give the issuer notice of the intended application and to invite them to agree in writing to unequivocally withdraw the statutory demand.

If they do not agree to withdraw the stat demand, then put them on notice that you will be put to the substantial expense of preparing and arguing the application on a contested basis (including Counsel’s fees), in which case, you should reserve your right to tender this letter to the court at the hearing of that application, in support of a submission that the issuer of the statutory demand be ordered to pay the costs of the application on an indemnity basis.

Considering how to Withdraw a Statutory Demand

If you are considering applying to set aside statutory demand or more than one statutory demands, it is vitally important that you engage a professional statutory demand solicitor.

Time is very much of the essence and it is very important that you engage someone who knows exactly what they are doing.

Failure to take a step correctly could leave you in a far worse position, costing thousands of dollars, for example attempting to rebut the presumption of insolvency or being put into liquidation.

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Other Issues to Consider

There are a number of other issues to consider when a party is considering serving a creditor’s statutory demand for payment of debt, or if a party has been served with a statutory demand.

What Are the Risks of a Statutory Demand?

One of the main risks of a statutory demand is the potential exposure to a costs order if the debtor company is successful in setting the stat demand aside.

If the debtor company asks the issuer to withdraw the demand, and the issuer does not, then the debtor company may apply to the Court for an order that the demand be set aside. If they are successful, then the Court may order the issuer to pay the costs of the application.

Failure to comply with statutory demand is the most common cause of presumption of insolvency.

So, another risk is that liquidation may not be the best option for creditors to get paid. There may be other options which would potentially have more benefit to creditors.

Reducing Risk of Statutory Demand Qld

You can reduce the risk of a costs order being made against you by simply asking the issuer to withdraw the statutory demand. This will also save you a lot of money in legal fees.

The creditor can reduce risk further by getting a court judgement against the company initially to obtain payment for the debt before they issue a demand.

It can be costly and lengthy during the civil litigation process, so this is a consideration. A creditor can sometimes end up paying more than the debt is actually worth trying to recover it.

Creditors should usually not use a creditor’s stat demand for the payment of debt where there’s a dispute about the amount of money owed to them and try to avoid court proceedings.

An alternative to enforcing a judgment against a company using a statutory demand is to attempt to get an enforcement warrant.

Weighing Up the Risk v Reward

In some cases, a creditor’s statutory demand for the payment of money may not be the best option.

You should seek legal advice as to whether your statutory demand is right for your particular circumstances.

Weighing up the risk v the reward, it may be better in your matter to get a judgment in the Court first before issuing the statutory demand.

Trying to Settle with your Debtor Company

Companies and creditors have risks when dealing with debts. This is why it is usually a good idea to enter into negotiation for a payment of the debt or a portion of the debt.

This is what is meant for compound for the debt.

This can result in the withdrawal of the statutory demand, and a deed for the acknowledgement of debt with a repayment plan and some security – for example.

If a creditor does accept a payment plan, or compounds for the debt, then this can satisfy the requirements of the statutory demand, so care should be taken while negotiating within the 21-day time period.

Careful consideration needs to be taken when issuing a statutory demand against any company without a judgement. Creditors must assess their risk of added costs and that they have a legitimate claim for debt owed to them. They must also make sure that the claim cannot be disputed by the company.

Statutory Demand FAQ Questions

How long does a statutory demand last?

Once served a debtor company has 21-days to comply, set aside, or request a withdrawal of the demand. If they fail to do so then this raises the legal presumption that they are insolvent.

There is a three-month time limit to presumption of insolvency. This means that the presumption of insolvency last for three months, starting on the 22^nd day.

A creditor can apply to wind up the company within that three-month period and gain the benefit of that legal presumption. The most common reason for company liquidation is insolvency.

Can you Withdraw a Statutory Demand?

Yes, a statutory demand can be withdrawn.

As above, a statutory demand can be withdrawn both orally and in writing, however a debtor must always ensure that they have it in writing in case they need to rely on the withdrawal.

All you have to do is ask the issuer to withdraw the statutory demand, explain why the debtor wants it withdrawn (usually a genuine dispute), and the issuer should withdraw the statutory demand.

If there is a real reason for the demand to be set aside, and the issuer is told about that reason and asked to withdraw the demand – if they do not, then they could be ordered to pay the costs of the debtor’s application to set the demand aside.

Can a statutory demand be withdrawn?

Yes. If a debtor company has grounds to set a statutory demand aside then they can request that the demand be withdrawn.

If the issuer does not withdraw the demand, and the debtor company is successful in obtaining an order setting it aside, then the issuer may be ordered to pay the costs of the application.

An issuer should give serious consideration to withdrawing the demand if there are reasonable grounds.

What do I do if I receive a statutory demand?

As quickly as possible you should contact a statutory demand lawyer.

You can do any of the following:

Pay the total amount of the debt(s);
Secure or compound for the debt to the creditor’s reasonable satisfaction;
Ask the issuer to withdraw the demand; or
Apply to the Court for an order setting the demand aside.

If you fail to do these things within 21 days, then it could have very serious consequences.

How Do You Serve a Statutory Demand?

A statutory demand is not an originating document and so there is no need for personal service.

A demand is served correctly if served in accordance with section 109X of the Corporations Act.

The most common way that service of a demand is effected is by mailing it to the registered office of the debtor company by pre-paid post.

However, a demand can also be served by leaving it at the registered office, or personally delivering it on the director of the company.

Can a Statutory Demand be Served by Post?

Yes, a statutory demand is usually served by post. It is the most common way to serve a stat demand.

Section 109X of the Corporations Act says that “… a document may be served on a company by … posting it to, the company’s registered office”.

As mentioned above, obtain a company extract from ASIC and send all of the documents by express post to the registered office. Once delivered, annex the delivery receipt to your affidavit.

Alternatively, a creditor can rely of the Postal Rule contained in section 160(1) of the Evidence Act 1995 (CTH) which states that a postal article sent by prepaid post is deemed received at that address on the seventh working day after having been posted.

Can you Serve a Statutory Demand on a Company?

You can only serve a statutory demand on a company.

If you have a human debtor, then you will need to obtain a judgment and issue the debtor with a bankruptcy notice.

A bankruptcy notice is essentially the human version of a statutory demand. Statutory demands can only be served on companies to recover debts owed by a company.

What is the Meaning of Deemed Service?

Deemed service occurs when service is made in accordance with section 109X of the Corporations Act and/or section 9 of the Service and Execution of Process Act 1992.

Deemed essentially means “regarded” or “considered”. So, a statutory demand is regarded as served, or considered served, when it is effectively served as outlined above.

Can a Statutory Demand be Served by Email?

No, a statutory demand cannot be served by email.

Service of a statutory demand must be in accordance with section 109X of the Corporations Act and/or section 9 of the Service and Execution of Process Act 1992.

Service is usually effected by posting the documents to the registered office of the company or delivering a copy of it personally to a director of the company who resides in Australia.

How can I get money owed to me?

After service of a statutory demand on the debtor company they only have 21 days to pay the debt or secure or compound for the debt.

In our experience a debtor company that can raise funds will usually do so rather than the risk of being wound up and a liquidator appointed.

So, they will either pay, or attempt to compound for the debt with some security. Either way this is the way that a creditor will get paid.

What is a winding up order?

A winding up order is an order from the Court that the debtor company we wound up in insolvency.

A winding up order will appoint a liquidator and make an order as to costs of the winding up application.

Can I issue a statutory demand?

To be eligible to issue a statutory demand you must satisfy the requirements below:

You must be a creditor of the company;
The debt must be $2,000.00 or more;
The debt must be due and payable at the time of issue; and
There should not be any genuine dispute.

If you tick “yes” to the above, then you are eligible to issue a statutory demand.

What is Considered a Debt?

A debt for a statutory demand is most commonly a liquidated amount that is presently due and payable by the debtor to the creditor.

In most cases this is a debt relating to goods and/or services provided to the debtor company by the creditor and not paid for.

Unliquidated debts, prospective or contingent debts are not debts which allow a creditor to issue a statutory demand.

What is the Amount of Debt Being Claimed?

The minimum debt amount of $2,000.00 is required for a creditor to be eligible to issue a statutory demand for payment.

So if a creditor has a debt equal to or more than $2,000.00, or has a number of debts equal to or more than $2,000.00 then a creditor can issue a statutory demand.

What is the Statutory Demand Limit?

The statutory demand limit is $2,000.00.

This is a minimum threshold, there is no maximum amount that can be claimed in a statutory demand.

Section 9 of the Corporations Act defines a statutory minimum as:

“statutory minimum” means: (a) if an amount greater than $2,000 is prescribed – the prescribed amount; or (b) otherwise–$2,000.

What Form Should a Statutory Demand Take?

A statutory demand must comply substantially with the form 509H.

Although there is extensive case law allowing demands which are not exactly in the correct form, best practice is to ensure that it is in the correct form.

It is very simple to simply edit the Form 509H or the Form 7 Affidavit.

It is important to ensure that it is all correctly complied with. However, a creditor must ensure that the following requirements for a valid statutory demand are completed correctly:

The debtor and creditor details including ACN;
The registered office and address of the debtor company;
Correct and sufficient particularisation of the debt;
The statement that the debt is due and payable; and
The statement that the debt remains outstanding.

Who can Sign Statutory Demand?

A statutory demand should be signed by a creditor, a director or CFO of a creditor company, or the solicitor of the creditor.

Section 459E(2)(f) of the Corporations Act says that the demand is to “be signed by or on behalf of the creditor”.

Further, the person signing must know that the debt is due and payable and their belief that there is no genuine dispute about the existence or amount of the debt.

Therefore, it is not likely to be accepted if signed by a low-level employee.

Best practice – get the statutory demand signed by the solicitor or by a director of the company. If there is more than 1 director, ensure that there is a meeting and a minute giving authority to the signing director to sign on behalf of the company.

What are the Implications of Ignoring a Statutory Demand?

If a debtor company ignores the statutory demand, then there are two main implications:

The debtor company is presumed to be insolvent which assists the creditor in the winding up application, or will put the debtor company to considerable costs attempting to resist the winding up application; and
Section 549S says that the company is likely unable to rely on the matter it could have relied on if setting aside the demand, when resisting the winding up application.

If there was a genuine dispute, etc. then the company may not be given leave to raise it.

Can the 21 days in which to comply with a Statutory Demand be extended?

If the 21-day time for compliance with the demand has passed the Courts have been very clear that the Court cannot extend the time for compliance.

If an application to set the demand aside has been correctly drafted, filed, sealed, and served in time, then the Courts can order that the debtor company have some more time to comply with the demand.

In all other instances the Courts have ruled that strict compliance with the 21-day time limit is required or it is unable to be extended.

Do I need a Judgment or Affidavit to make a Statutory Demand?

A creditor can issue a statutory demand with either a judgment in support or an affidavit in support.

If you have been through the Courts and obtained a judgment; or you have been through QCAT or adjudication, and the QCAT decision or adjudication decision has been registered in the Court; then you can issue a statutory demand.

However, you can also serve a statutory demand with an affidavit in support.

The affidavit must be in the required Form 7 and swear/affirm to all of the requirements needed.

Can a Statutory Demand be used for Part of a Debt?

In the decision of Commonwealth Bank of Australia v Garuda Aviation Pty Ltd [2013] WASCA 61 the Western Australia Court of Appeal found that a statutory demand could be issued for an undisputed portion of a debt, so long as the undisputed portion exceeds the statutory minimum.

The Court of Appeal did however caution that it may be an abuse of process to serve multiple statutory demands for various parts of a single debt in the absence of good reasons for doing so.

What is the Presumption of Insolvency if Demand is Unpaid?

A legal presumption shifts the burden of proof.

The legal presumption of insolvency means that a creditor does not have to prove that the debtor is insolvent. It becomes the job of the debtor company to prove solvency.

How Long is a Statutory Demand Valid For?

A statutory demand is valid for three (3) months.

Once served the debtor company has 21 days to do what is required of them, pay the debt, secure or compound for the debt, or apply to set it aside. They can also ask for it to be withdrawn.

If they do none of these things, then they are presumed to be insolvent. It is with this legal presumption of insolvency assisting that the creditor can take steps to wind them up in insolvency.

This presumption of insolvency lasts for three (3) months. If the creditor does not take steps to wind the debtor company up in insolvency within this three (3) month period, then they are unable to rely on the legal presumption of insolvency raised by non-compliance with the demand.

How long does a Creditor have to Lodge a Winding up Application?

One of the only requirements to make an application for a winding up order is that the issuer be a creditor of the debtor company.

Section 462(2)(b) of the Corporations Act 2001 says:

Any one or more of the following may apply for an order to wind up a company: (b) a creditor … of the company

However, without the presumption of insolvency to assist, it may be more difficult and more expensive to get the Court to make the order.

If the debtor does not comply with the statutory demand, then they are presumed to be insolvent.

This presumption of insolvency lasts for three (3) months in which time the creditor can apply to wind the company up.

We offer professional advice and assistance in all things related to statutory demands


Issuing Statutory Demands	Setting Aside Statutory Demands

Statutory Demand Example

The form of a statutory demand can be found at schedule 2 of the Corporations Regulations. We suggest that you get it directly from the source. We have extracted it below for you.

Form 509H

(paragraph 459E(2)(e))

Corporations Act 2001

CREDITOR’S STATUTORY DEMAND FOR PAYMENT OF DEBT

To ( name and A.C.N. or A.R.B.N. of debtor company) of (address of the company’s registered office)

1. The company owes ( name) of ( address) ( “the creditor”)

* the amount of $( insert amount), being the amount of the debt described in the Schedule.
* the amount of $( insert total amount), being the total of the amounts of the debts described in the Schedule.

* 2. The amount is due and payable by the company.
* 2. Attached is the affidavit of ( insert name of deponent of the affidavit) , dated ( insert date of affidavit), verifying that the amount is due and payable by the company

3. The creditor requires the company, within 21 days after service on the company of this demand:

(a) to pay to the creditor the * amount of the debt/ * total of the amounts of the debts; or
(b) to secure or compound for the * amount of the debt/ * total of the amounts of the debts, to the creditor’s reasonable satisfaction.

4. The creditor may rely on a failure to comply with this demand within the period for compliance set out in subsection 459F(2) as grounds for an application to a court having jurisdiction under the Corporations Act 2001 for the winding up of the company.

5. Section 459G of the Corporations Act 2001 provides that a company served with a demand may apply to a court having jurisdiction under the Corporations Act 2001 for an order setting the demand aside. An application must be made within 21 days after the demand is served and, within the same period:

(a) an affidavit supporting the application must be filed with the court; and
(b) a copy of the application and a copy of the affidavit must be served on the person who served the demand.

A failure to respond to a statutory demand can have very serious consequences for a company. In particular, it may result in the company being placed in liquidation and control of the company passing to the liquidator of the company.

6. The address of the creditor for service of copies of any application and affidavit is (insert the address for service of the documents in the State or Territory in which the demand is served on the company, being, if solicitors are acting for the creditor, the address of the solicitors).

SCHEDULE

Description of the debt Amount of the debt

(indicate if it is a judgment debt, giving the name of the court and the date of the order)

* Total Amount

Dated:

signed:

Print name: capacity:

Corporation or partnership name (if applicable):

NOTES:

1. The form must be signed by the creditor or the creditor’s solicitor. It may be signed on behalf of a partnership by a partner, and on behalf of a corporation by a director or by the secretary or an executive officer of the corporation.

2. The amount of the debt or, if there is more than one debt, the total of the amounts of the debts, must exceed the statutory minimum of $2,000.

3. Unless the debt, or each of the debts, is a judgment debt, the demand must be accompanied by an affidavit that:

(a) verifies that the debt, or the total of the amounts of the debts, is due and payable by the company; and

(b) complies with the rules.

4. A person may make a demand relating to a debt that is owed to the person as assignee.

5. This form was amended in 2006 as part of amendments of the Corporations Regulations 2001 . For the period of 12 months after the commencement of those amendments a person may comply with paragraph 459E(2)(e) of the Corporations Act 2001 in relation to a statutory demand for payment of debt by using:

(a) the version of this form that was in force immediately before the commencement of the amendments; or

(b) this version of the form.

* Omit if inapplicable

Affidavit Form 7 Example

The Form 7 Affidavit can be found here. We suggest that you get it directly from the source. We have extracted it below for you.

Form 7 Affidavit accompanying statutory demand

(rule 5.2)

[Name of creditor(s)]

Creditor(s)

[Name of debtor company]

Debtor company

I, [name] of [address and occupation], *say on oath/*affirm [or *make oath and say/*solemnly and sincerely declare and affirm]:

1 I am [state deponent’s relationship to the creditor(s), eg, ‘the creditor’, ‘(name), one of the creditors’, ‘a director of the creditor’, ‘a director of (name), one of the creditors’] in respect of *a debt of $[amount]/*debts totalling $[amount] owed by [name of debtor company] to *it/*them relating to [state nature of debt, or debts, ensuring that what is stated corresponds with the description of the debt, or debts, to be given in the proposed statutory demand, with which this affidavit is to be served on the debtor company].

2 [If the deponent is not the creditor, state the facts entitling the deponent to make the affidavit, eg ‘I am authorised by the creditor(s) to make this affidavit on its/their behalf].

3 [State the source of the deponent’s knowledge of the matters stated in the affidavit in relation to the debt or each of the debts, eg ‘I am the person who, on behalf of the creditor(s), had the dealings with the debtor company that gave rise to the debt’, ‘I have inspected the business records of the creditor in relation to the debtor company’s account with the creditor’].

4 *The debt/*The total of the amounts of the debts, mentioned in paragraph 1 of this affidavit, is due and payable by the debtor company.

5 I believe that there is no genuine dispute about the existence or amount of the *debt/*any of the debts.

*Sworn/*affirmed at: [place of swearing or affirmation] on [date]

*Sworn/*affirmed by the above‑named deponent at: [place of swearing or affirmation] this day of [month] [year]

Signature of deponent

Before me:

……………………………………

Signature and designation of

person before whom deponent

swears or affirms affidavit

* Omit if not applicable

Note The form of the opening words and the jurat of this affidavit may be changed to conform to the form of affidavit used in a particular State or Territory — see rule 2.6.

You should always use a dedicated, professional statutory demand lawyer for advice and assistance.

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Wayne Davis

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Enforcement Hearing & Statement of Financial Position

31/12/2018 By // by Wayne Davis

An enforcement hearing and statement of financial position are ways that provide the judgment creditor with the required information to request an enforcement warrant pursuant to Chapter 19 Part 2 of the Uniform Civil Procedure Rules 1999 (QLD) (“UCPR”).

If a creditor has received an enforceable money order and they want to attempt to enforce the judgment or enforce the QCAT decision, then the judgment creditor is expected to have a certain level of proof or evidence of certain requirements for the warrant.

For example – an application for an enforcement warrant for seizure and sale of property requires the registrar to be satisfied that the judgment debtor owns that property.

Or, an application for an enforcement warrant for redirection of earnings requires the registrar to be satisfied that the judgment debtor is employed, has the ability to satisfy the warrant, and that the debtor will not suffer hardship.

Usually, a creditor will not know this information and will need to rely on the content of the statement of financial position, the documents provided by the debtor, and what is said and provided at the enforcement hearing.

An enforcement hearing and completed statement of financial position is not necessary to be given an enforcement warrant, but it is needed in most cases.

This article will explain the enforcement hearing process and the statement of financial position.

There are a number of steps that need to be taken to successfully apply for an enforcement hearing. We strongly recommend engaging a suitably qualified legal professional

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The Purpose of an Enforcement Hearing

As mentioned above, an enforcement hearing is basically an information gathering exercise.

Rule 803 of the UCPR says:

The purpose of an enforcement hearing is to obtain information to facilitate the enforcement of a money order.

The debtor is summoned to appear in the Court to answer questions about their financial position under oath, and also to produce whatever documents the creditor requires to enforce the money order.

In Remely v. O’Shea & Ors (No. 3) [2009] QSC 110 McMeekin J said:

The information referred to in the rule is that information which will enable a judgment creditor to best secure payment of the monies owed and so satisfy the judgment debt

The Enforcement Hearing Process

The enforcement hearing process is set out in the UCPR. A creditor must take the following steps to be given an enforcement hearing summons by the Court:

Obtain an enforceable money order;
Serve the debtor with a statement of financial position;
Wait for the required time to receive the completed statement of financial position;
Make an application for an enforcement hearing to the Court;
Serve the enforcement hearing summons on the debtor;
Be given documents and a completed statement of financial position;
Attend at the enforcement hearing and question the debtor.

I will address these steps in more detail below.

Letter of Demand

Once a creditor has received the sealed judgment from the Court, or the registered QCAT decision, a creditor may initially attempt to send this enforceable money order with a letter of demand.

If the debtor pays the judgment debt, then you will not be put to the costs of the enforcement hearing process.

We have more information on the letter of demand process here.

Obtain an Enforceable Money Order

Any of the enforcement options in Chapter 19 of the UCPR requires the creditor to have an enforceable money order.

Rule 793 of the UCPR says:

“enforceable money order” of a court, means—
(a) a money order of the court; or
(b) a money order of another court or tribunal filed or registered under an Act in the court for enforcement.

Schedule 3 of the UCPR says:

“order” … includes a judgment, direction, decision or determination of a court whether final or otherwise.

An enforceable money order is a money judgment from the Court, or a decision in QCAT registered in the Magistrates Court.

A QCAT decision which has not been registered in the Court is not an enforceable money.

Once a creditor has an enforceable money order, then they are able to serve the debtor with a statement of financial position.

Serve the Debtor with a Statement of Financial Position

A statement of financial position is an approved form:

Form 71 – if the enforcement debtor is a person; or
Form 71a – if the enforcement debtor is a company.

Rule 807 of the UCPR details the requirements for a statement of financial position.

Rule 807(1) of the UCPR says:

At any time after a money order is made, an enforcement creditor may, by written notice, require an enforcement debtor to complete and return to the enforcement creditor a statement of financial position of an enforcement debtor in the approved form.

The statement of financial position is a detailed document which requires the judgment debtor to complete and return to the creditor.

The statement of financial position includes the following very detailed sections:

Part 1 – Income
Part 2 – Expenses
Part 3 – Assets
Part 4 – Liabilities
Part 5 – Proposal for Payment
Part 6 – Verification of Statement

Rule 807(2) of the UCPR says:

The written notice must be given or sent by post to the enforcement debtor together with a blank statement of financial position.

A blank statement of financial position must be given personally if possible or can be sent by post.

However, the blank statement of financial position is given to the debtor, the creditor must keep a receipt as evidence to use in the application for an enforcement hearing.

TIP – We suggest sending the notice and the blank statement of financial position by express post. You can then check the tracking identification number to prove that it was delivered.

If the Debtor Returns the Statement of Financial Position

It might be possible that if the debtor returns a detailed statement of financial position that it will include all the information that the creditor may require to obtain an enforcement warrant.

This will mean that there is no need for an enforcement hearing.

However, it is more common than not that the debtor will simply ignore the statement of financial position or omit large details of their financial position.

If this happens then the creditor can apply for an enforcement hearing.

If the Enforcement Debtor is a Company

Rule 807(4) of the UCPR says:

If the enforcement debtor is a corporation, an officer of the corporation must complete the statement of financial position.

This means that if the debtor is a company (Debtor Company Pty Ltd – for example) then the Form 71a must be completed by a director, secretary or a very senior manager of the company.

Section 9 of the Corporations Act 2001 (CTH) outlines exactly who is an officer of a company.

Best practice is to send the statement of financial position on a company to the registered office contained in the ASIC current extract.

The debtor must then complete the statement of financial position and return it to the debtor within the prescribed time.

The Required Time to Complete the Statement of Financial Position

The completed statement of financial position must be returned to the creditor on or before fourteen (14) days after receiving it.

Rule 807(3) of the UCPR says:

The enforcement debtor must complete and return the statement of financial position to the enforcement creditor within 14 days after receiving the statement.

The debtor must also provide evidence of the last four (4) payments made to it with the completed statement of financial position.

Rule 807(6) of the UCPR says:

If the enforcement debtor receives regular payments including, for example, wages or social security benefits, the person completing the statement of financial position must include in the statement (a) the date of receipt of the last 4 payments; and (b) if the payments were paid to the enforcement debtor by payment into an account with a financial institution, the account number and any other details necessary to identify the account.

If the debtor does not provide a completed statement of financial position, or if the creditor is not satisfied with the information given in the statement, then the creditor can apply for an enforcement hearing.

Make an Application for an Enforcement Hearing to the Court

Like any other application, an application for an enforcement hearing contains:

The application – Form 9;
The draft enforcement hearing summons – Form 70;
The affidavit in support of the application – Form 46.

We will explain the application process in more detail below.

The Application – Form 9

Like any other application, an application for an enforcement hearing is a document asking the Court to do certain things.

The application for an enforcement hearing usually consists of something like:

TAKE NOTICE that the plaintiff applying to the Court for the following orders:
1.       That the defendant be summoned to an enforcement hearing; and
2.       That the defendant provides the plaintiff with documents and things relating to their finances and complete a statement of financial position; and
3.       That the defendant pays the costs of the plaintiff of the application.

The application is supported by a draft summons (order) and an affidavit in support of the application.

The Draft Enforcement Hearing Summons – Form 70

The enforcement hearing summons is a summons from the Court summoning the debtor to attend at the enforcement hearing on a date and time set by the Court.

It also requires the debtor to produce at the hearing certain documents and things.

These documents and things may include (by way of example only):

Details of the debtor’s employment, including payslips;
Details of the debtor’s bank accounts, bank statements, bank account numbers and account balances;
Details of any government benefits the debtor receives, including Centrelink payments;
Details of any additional sources of income the debtor receives, such as interest, trust account monies, court awards, or benefits;
Details of any financial support the debtor receives;
Details of the debtor’s assets, including cars, motorcycles, boats;
Details of the debtor’s weekly expenses, including rent.

The Affidavit in Support of the Application – Form 46

Rule 808(3) of the UCPR says:

The application must be supported by an affidavit that states the following—
(a) the unpaid amount of the money order;
(b) whether the enforcement creditor has received a completed statement of financial position from the enforcement debtor;
(c) if the enforcement creditor has received a completed statement of financial position from the enforcement debtor, why the enforcement creditor is not satisfied with the information given in the statement.

It may be a good idea to also annex evidence that the statement of financial position was sent to the debtor, the time and date that the debtor received the statement of financial position – to prove that the fourteen (14) days have elapsed.

It is also important to include a statement from the creditor that as at the day of swearing/affirming the affidavit, no payments have been made against the judgment debt.

If everything is completed correctly, then the Court will issue an enforcement hearing summons.

There are a number of steps that need to be taken to successfully apply for an enforcement hearing. We strongly recommend engaging a suitably qualified legal professional

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Serve the Enforcement Hearing Summons on the Debtor

After being issued with the sealed enforcement hearing summons the creditor must attend to serving the summons on the judgement debtor.

Rule 809(2) of the UCPR says:

An enforcement hearing summons may be served on the person to whom it is directed personally or by prepaid ordinary post.

A creditor can pay for a process server to personally serve the enforcement hearing summons on the debtor or post the summons by express post – as above.

Service of the enforcement hearing summons is very important. Ultimately, correctly served increases the chances that the debtor will show up to the enforcement hearing. But if the debtor does not attend at the hearing, unless the registrar can be 100% sure that service was made, they will not likely issue an enforcement hearing warrant (warrant for their arrest).

Rule 809(4) of the UCPR says:

Any other enforcement hearing summons must be served at least 14 days before the day set for the enforcement hearing.

When the enforcement hearing summons is returned from the Court it will include a date, time and place for the enforcement hearing. The summons must be served at least 14 days before that date.

Completed Statement of Financial Position

If the debtor did not provide the completed statement of financial position initially, then the summons can require that the debtor provide one before the enforcement hearing.

Rule 808(7) of the UCPR says:

The enforcement hearing summons may require the enforcement debtor to complete and return a statement of financial position in the approved form at least 4 business days before the date of the enforcement hearing.

It is well-worth adding this order to the application and the draft summons.

If the debtor turns up to the enforcement hearing, then they may have a completed statement of financial position and some documents at that time.

Attend at the Enforcement Hearing and Question the Debtor

Hopefully the enforcement debtor will attend at the enforcement hearing.

The debtor will swear an oath or affirmation and then answer questions about their financial position.

The combination of the documents provided, and the information provided in the statement of financial position and the enforcement hearing, should be enough to obtain an enforcement warrant.

Location for Enforcement Hearing

Rule 810 of the UCPR says:

If practicable, an enforcement hearing … must be held in a district in which the person to whom the enforcement hearing summons is directed resides or carries on business.

This means that the hearing must be heard in the Court closest to where the debtor lives or carries on business. In a lot of cases this will be the Court in which the judgment or money order was made.

However, it is quite common for debtors to move. If this happens then the application for an enforcement hearing can be made in another Court.

If the enforcement hearing is in a district in which the debtor does not live or conduct business, then the creditor must provide the debtor with some money to attend the enforcement hearing. This is called conduct money.

Conduct Money

Quite possibly one of the most difficult things that we have to try to explain to our creditor clients is the payment of conduct money to the debtor to attend at an enforcement hearing.

Rule 811 of the UCPR prescribes the requirements for conduct money. It says:

If a person is required by summons to attend an enforcement hearing in a district other than a district in which the person resides or carries on business … conduct money must be offered to the person when the person is served with the summons

Conduct money is to be calculated in accordance with rule 419 of the UCPR and Part 4 of the Uniform Civil Procedure (Fees) Regulation 2009 (QLD) (“Regs”).

The main monies to be paid are to cover the travel expenses.

Conduct Money for Travel Allowance

Section 14 of the Regs says:

The amount of the travelling allowance that is to be paid to a relevant person is (a) the amount actually and properly paid for fares for public transport; or (b) if there is no public transport available—the amount calculated at the rate per kilometre

So, if a creditor is able to calculate the fare for public transport, then that amount. If no public transport is available, then an amount calculated per kilometre.

The amount per kilometre is calculated in accordance with Public Service Act 2008 to a public service employee required to use the employee’s private motor vehicle for official purposes, taken to the nearest whole cent – currently 30c per kilometre (adjusted pursuant to the Eight Capitals Consumer Price Index for the Private motoring sub-group most recently published by the Australian Bureau of Statistics starting from an initial ‘adjustment date’ of 1 September 2014).

See the Minister for Employment and Industrial Relations Directive: Motor Vehicle Allowances for more.

If you are to summon the debtor to a district other than a district in which the debtor resides or carries on business then the creditor will need to provide a cheque when service of the summons is made.

Enforcement Hearing FAQ

See below for some frequently asked questions regarding the enforcement of money orders, issuance of the statement of financial position, making the application for an enforcement hearing, summoning the debtor to Court, and attendance at the enforcement hearing.

What Happens if the Enforcement Debtor does not Attend?

If the debtor does not attend at the enforcement hearing, then rule 815 of the UCPR says that the court may treat the person’s refusal … as a contempt of court.

If the Court is satisfied that the debtor was served with the enforcement hearing summons; and it considers the person failed to attend the enforcement hearing without sufficient cause; then the court may issue a warrant ordering the enforcement officer (Bailiff) to arrest the debtor and bring the debtor to court.

The enforcement officer can attend at the address of the debtor with the police and bring the debtor to the watch house until the next Court date.

The approved form for an enforcement hearing warrant is Form 73.

What Happens if the Debtor Does Nothing?

The Court may also treat as contempt if the debtor does not provide a statement of financial position when summoned; failed or refuses to produce the documents or things stated in the summons; refuses to be sworn or to affirmed; and refuses to answer a question.

Remely v. Vandenberg & Ors [2010] QCA 214 is a Queensland Court of Appeal case where the appellant appealed against a six (6) month prison sentence for failing to produce documents and refusing to answer relevant questions.

In the judgment dismissing the appeal with costs Muir JA said:

In my view, the penalty imposed has not been shown to be arrived at in error. The offending conduct was engaged in with a view to frustrating the second respondents’ attempts to recover moneys lawfully due to them under court orders. The conduct was deliberate and protracted.

There are serious consequences for not doing what is required by the Court order or enforcement hearing summons.

How much does an Enforcement Hearing Cost?

There are no filing fees for an application for an enforcement hearing.

The only costs that a creditor will incur are solicitors’ professional fees and any third-party costs such as bailiff fees, process server fees, express postage, etc.

Can I claim my Costs for the Enforcement Hearing?

Yes you can!

Item 14 of Schedule 2 of the UCPR outlines the standard costs that you are able to claim in relation to the enforcement hearing.

Is there a Time Limit for Enforcement Hearings?

A creditor has six (6) years in which to enforce their money order without permission of the Court.

Rule 799(1) of the UCPR says:

An enforcement creditor may start enforcement proceedings without leave at any time within 6 years after the day the money order was made.

Permission (or leave) of the Court is required if it is more than 6 years since the money order was made; or (b) there has been a change in an enforcement creditor or enforcement debtor.

Moving Forward

We strongly suggest that you engage a suitable qualified legal practitioner who specialises in the enforcement of money orders to issue the statement of financial position, make the application for an enforcement hearing and summon the debtor to Court.

If you have a QCAT decision which needs to be registered in the Magistrates Court and enforced, or a judgment, direction, decision or determination of the Court to be enforced then contact our dedicated enforcement lawyers today.

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Enforcement Warrant for Redirection of Earnings

27/12/2018 By // by Wayne Davis

A warrant for redirection of earnings is an enforcement option pursuant to the Uniform Civil Procedure Rules 1999 (QLD) (“UCPR”).

An enforcement warrant for redirection of earnings is a way of enforcing a judgment or enforcing a registered QCAT decision.

A warrant for redirection of earnings allows the creditor to enforce an enforceable money order over the wages or salary earned by the debtor.

A warrant for redirection of earnings is a warrant directed at both the debtor and the debtor’s employer, directing the debtor’s employer to pay part of the debtor’s wages or salary directly to the creditor.

Just like a the warrant for seizure and sale of property, a warrant for redirection of earnings is obtained by making an application to the Court. The application consists of:

The application;
A statement in support of the application; and
A draft enforcement warrant.

When the Court issues the UCPR enforcement warrant for redirection of earnings, it then needs to be served on the debtor and the debtor’s employer.

This article will give you all the information needed to apply for an enforcement warrant for redirection of earnings, and give you hints and tips to avoid pitfalls.

There are a number of difficult steps that need to happen before an employer must comply with an enforcement warrant for redirection of earnings. We strongly recommend engaging a legal professional

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Enforcement Warrant for Redirection of Earnings

Rule 855(1) of the UCPR says:

A court may issue an enforcement warrant authorising redirection to an enforcement creditor of particular earnings of an enforcement debtor from a third person.

For the Court to issue an enforcement warrant for redirection of earnings the creditor will need:

An enforceable money order;
An application – Form 9;
A draft warrant – Form 78;
A statement in support of the application – Form 74;
A notice to employer for redirection of earnings – Form 79;
A notice that debtor is not an employee – Form 80; and
To serve the debtor and the debtor’s employer.

We will break each of these steps down in more detail below.

An Enforceable Money Order

Rule 793 of the UCPR says:

“enforceable money order” of a court, means—
(a) a money order of the court; or
(b) a money order of another court or tribunal filed or registered under an Act in the court for enforcement.

Schedule 3 of the UCPR defines an order to mean:

“order” … includes a judgment, direction, decision or determination of a court whether final or otherwise.

An enforceable money order is a money judgment from the Court, or a decision in QCAT registered in the Magistrates Court. A QCAT decision which has not been registered in the Court is not an enforceable money order.

The Application

The application for an enforcement warrant for redirection of earnings – Form 9 – outlines the order (or orders) that the plaintiff is asking the Court to make.

The application will say something like:

TAKE NOTICE that the plaintiff is applying to the Court for the following orders
That pursuant to rules 855 and 856 of the UCPR an enforcement warrant for redirection to the plaintiff of earnings of the defendant from the defendant’s employer to satisfy the judgment amount.
That the defendant pay the costs of the plaintiff for issuing the enforcement warrant fixed in the sum of $XXX.

The costs of the warrant are fixed at Schedule 2 of the UCPR depending on the amount of the claim – see item 15.

The application for an enforcement warrant for redirection of earnings also needs to state who the warrant needs to be served on – the debtor and the debtor’s employer.

What are “Earnings”?

It is also necessary to understand how “Earnings” have been defined. This is in order to know what funds are available to the creditor from the debtor’s employer.

Rule 793 of the UCPR says:

“earnings” of an enforcement debtor, means any of the following that are owing or accruing to the enforcement debtor—
(a) wages, salary, fees, bonuses, commission, overtime pay or other compensation for services or profit arising from office or employment;
(b) pension, benefit or similar payment;
(c) annuity;
(d) an amount payable instead of leave;
(e) retirement benefit.

As you can see, the types of earnings that can attach are quite broad.

The Draft Warrant

The draft enforcement warrant for redirection of earnings has to be in the correct form – Form 78. The draft Form 78 must contain the following information:

Name and address of the enforcement creditor;
Name and address of the enforcement debtor;
Name and address of the employer of enforcement debtor;
The judgment amount;
Less – any payments made;
Plus – interest; and
Plus – costs of the enforcement warrant.

Rule 858 of the UCPR also says that the draft warrant will also need to specify the following:

The total amount the enforcement debtor’s employer must deduct from the earnings of the enforcement debtor; and
The amount the enforcement debtor’s employer must deduct each pay day from the earnings of the enforcement debtor.

The judgment amount – is the amount on the judgment, default judgment, summary judgment or registered QCAT decision.

Less any payments made – means that any payments that have already been made as against the judgment debt are to be deducted on the date that payment was made.

Plus interest – means the amount prescribed in section 59 of the Civil Proceedings Act 2011 (QLD) and at paragraph 4 of the Supreme Court of Queensland Practice Direction Number 7 of 2013 – being 6% per annum above the cash rate at the Reserve Bank of Australia.

Plus costs of the enforcement warrant – means the amount fixed at Schedule 2 of the UCPR depending on the amount of the claim – see item 15.

A notice in Form 79 and a copy of Form 80 must also be served on the enforcement debtor’s employer.

Form 79 Notice to Employer

A Form 79 notice is a notice to employer for redirection of earnings. It is essentially a notice which gives the debtor’s employer detailed instructions on how to comply with the warrant, and what to do if the enforcement debtor ceases working for the employer.

The Form 79 notice must be filed and a sealed copy served with the warrant to the debtor’s employer.

Form 80 Notice that Debtor is not Employee

A Form 80 notice is a notice that debtor is not an employee. The Form 80 is a draft form which the employer can use to tell the creditor that the enforcement has never worked for the employer.

The employer must also serve a Form 81 if the debtor has ceased working for the employer at a certain date. The Form 81 is called a notice of cessation of employment.

The creditor must serve a draft copy with the rest of the warrant documents on the employer.

The Court’s Discretion to Issue the Warrant

The issuance of the enforcement warrant for redirection of earnings is discretionary and in some instances the Court may not issue the warrant.

In ML Ubase Holdings Co Ltd v Trigem Computer Inc [2007] NSWSC 859 Brereton J said:

The making of a garnishee order absolute is discretionary …

The creditor must prove the particulars set out in rule 856(3) of the UCPR are satisfactorily met.

Rule 856(3) of the UCPR says that:

In deciding whether to issue an enforcement warrant authorising the redirection to the enforcement creditor of the enforcement debtor’s earnings, the court must have regard to the following—
(a) whether the enforcement debtor is employed and the enforcement debtor’s employer has been identified;
(b) whether the enforcement debtor has sufficient means of satisfying the order after deducting—
(i) the necessary living expenses of the enforcement debtor and the enforcement debtor’s dependants; and
(ii) any other known liabilities of the enforcement debtor;
(c) whether the amount of earnings to be redirected would impose unreasonable hardship on the enforcement debtor

Therefore, in the statement in support of the application, the creditor must show evidence of the above, and show that the debtor has sufficient means of satisfying the order.

A creditor will usually get this information at an enforcement hearing and/or the completed statement of financial position – as well as by independent enquiry.

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The Statement in Support of the Application

The statement in support of an application for an enforcement warrant for redirection of earnings will need to provide the Court with evidence of what is required for the Court to issue the enforcement warrant for redirection of earnings.

Rule 817 of the UCPR outlines the other things that need to be included in the statement, being:

the date the money order was made;
the amount for which the order was made;
the date and amount of any payment made under the order;
the costs incurred in previous enforcement proceedings in relation to the order debt;
any interest due at the date the statement is sworn;
any other details necessary to calculate the amount payable under the order at the date the statement is sworn and how the amount is calculated;
the daily amount of any interest that, subject to any future payment under the order, will accrue after the date the statement is sworn; and
any other information necessary for the warrant being sought.

It is also a good idea to include the following:

The person making the statement and the authority they have (solicitor for the judgment creditor, judgment creditor, director of the judgment creditor);
Annex evidence of the judgment, decision, or enforceable money order;
Annex evidence of any payments made as against the judgment debt, or a statement that no payments have been made against the judgment debt;
Annex evidence and a statement supporting the calculation of costs and interest; and
Annex evidence and statements in support of the matters outlined in rule 856(3).

The evidence particularised at number 5 above will be gained by receiving the information needed in the statement of financial position, the enforcement hearing, and independent enquiry.

Statement of Financial Position & Enforcement Hearing

The enforcement hearing and the completed statement of financial position are ways of gathering the information required to enable the Court to exercise its discretion and issue the enforcement warrant for redirection of earnings.

The debtor is required to complete a statement of financial position is Form 71 for a person; or Form 71a for a company. The statement of financial position is a document where the debtor has to provide detailed information about their assets and liabilities.

The debtor is supposed to provide the debtor with the completed statement of financial position within fourteen (14) days. If they do not (and they usually do not) then this is the condition precedent for requesting that the Court summon them to an enforcement hearing.

The enforcement hearing is a hearing in open Court in which the debtor has to take the stand, under oath, and answer questions about the debtor’s financial position. They are also required to provide the debtor with a completed statement of financial position.

The purpose of the enforcement hearing and the completed statement of financial position is to get information from the debtor, to provide to the Court, so that the Court will issue a warrant – in this case a warrant for redirection of earnings. This information will often include payslips and bank account statements.

If the creditor is successful and has been issued with the enforcement warrant for redirection of earnings you then will need to serve the debtor and the debtor’s employer.

Service on the Debtor and the Employer

Rule 859 of the UCPR says that the enforcement warrant for redirection of earnings must be served on the enforcement debtor and the enforcement debtor’s employer.

The creditor must also serve on the enforcement debtor’s employer a notice in Form 79 and a copy of Form 80 as mentioned above.

An enforcement warrant for redirection of earnings is not an originating process and so personal service is not required. Rule 112 prescribes how ordinary service is performed. Ordinary service is most commonly performed by posting it to the relevant address, faxing the document to the person; or emailing the document to the person (if applicable).

Of course, to be 100% sure then you can always personally serve the documents.

Enforcement Warrant for Redirection of Earnings

If a creditor does everything correctly then the Court will issue the enforcement warrant for redirection of earnings. Once properly served on the debtor and the debtor’s employer then the employer will start making payments from the first payday after seven (7) days of being served.

FAQ – Redirection of Earnings

See below for some frequently asked questions regarding an enforcement warrant for redirection of earnings.

Does this Apply to Independent Contractors?

Probably not! It really depends if the way that the contractor is paid by the employer and whether that is caught by the definitions of “employer” and “earnings”.

Probably an enforcement warrant for redirection of debts might be a better option.

How long does the enforcement warrant for redirection of earnings last?

Rule 855(2) says that an enforcement warrant for redirection of earnings continues in force until:

(a) the total amount specified in the warrant is paid; or
(b) the warrant is set aside or expires according to its conditions.

What is an Employer?

An employer is defined in rule 793 of the UCPR and says:

“employer” of an enforcement debtor means a person (including the State) who, as principal, rather than as a servant or agent, pays, or is likely to pay, earnings to the enforcement debtor.

Can I Recover the Debt from the Employer?

There is a long line of authorities which say that there is no transfer of security from the debtor to the employer.

In Chatterton v Watney (1881) 17 Ch D 259 Cotton LJ said:

The effect of a garnishee order is to bind the debt attached and to prevent the creditor from receiving it; and when it is made absolute it gives the judgment creditor a right to recover payment from the garnishee…[i]t has not the effect of transferring the security, nor does it give the person who obtained the garnishee order any right to the security or any claim against the land comprised in it.

Cotton LJ repeated this in Re Combined Weighing and Advertising Machine Company (1889) 43 Ch D 99.

What Happens if the Debtor Leave his Employment?

If the enforcement debtor leaves that place of employment then the warrant expires.

The employer is required to give notice to the registrar of the Court and to the creditor. The creditor will then need to request another warrant by starting the process over.

Rule 866(2) says when the debtor ceases the employment:

The person must, immediately after ceasing to be the enforcement debtor’s employer, give notice in the approved form mentioned in rule 859 (2) (b) to the registrar and the enforcement creditor.

The employer must serve a Form 81 – notice of cessation of employment – if the debtor has ceased working for the employer at a certain date.

Moving Forward

We strongly suggest that you engage a suitable qualified legal practitioner who specialises in the enforcement of money orders.

DEDICATED TEAM – FAST RECOVERY – PROVEN RESULTS

GET A FREE FEE ESTIMATE TODAY

OR CALL: 1300 545 133 AND CHAT TO OUR LAWYERS

Wayne Davis

stonegatelegal.com.au/