Surviving a Statutory Demand - How to Set One Aside
Author:
Rockliffs Solicitors and IP Lawyers
Publish Date: February 25, 2010
A company served with a formal demand for payment of a debt, known as a statutory demand, has three options to avert bankruptcy action being taken.
The first thing a company can do is to pay the amount demanded or give security for the debt "to the reasonable satisfaction of the creditor".
The second is to reach a compromise with the person making the demand.
The third is to apply to have the demand set aside.
There are four grounds for the courts to set aside a statutory demand:
- if there is a genuine dispute between the company and the person serving the demand about the existence or amount of the debt involved,
- if the company has an offsetting claim,
- if, because of a defect in the demand, substantial injustice would be caused, or for "some other reason".
By far the most common ground for seeking to have a demand set aside is genuine dispute. The genuine dispute must relate to the existence or amount of debt.
The court's task is simply to determine the genuine level of a claim, not its likely result. Where the claim contains misleading or ambiguous descriptions of the debt claimed, the court will intervene to set it aside. Whether a company is solvent or not is irrelevant.
Some "other reasons" the courts have set aside a statutory demand include failure to accompany a statutory demand with an affidavit as required by law, and failure by the creditor to provide proper evidence of such basic matters as, for example, that a debt is due and payable. Where the accompanying affidavit is not sworn at the same time as the statutory demand, even if it it¿s sworn just a few days before, the statutory demand will be liable to be set aside for "some other reason".
Reproduced with the permission of the Law Society of New South Wales.
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