Setting aside statutory demands

What is a statutory demand?

A company that is unable to pay its debts should be aware they can be served with a statutory demand for payment. This is simply a requirement that the company formally responds to the creditor within 21 days from receiving this demand in one of the following ways:

1. Paying the full amount owed to the creditor (at least $2,000 must be due)
2. Secure or compound for the amount of debt to the creditor’s satisfaction
3. File to have the statutory demand set aside.

In spite of this, it is not as simple as picking any that suits you best. When it comes to statutory demands, deadlines are strict and can have serious consequences, or companies can face winding up on the grounds of insolvency.

Here is what you need to know about setting aside statutory demands.

How can you set a statutory demand aside?

The law surrounding statutory demands can be quite complex. To set a statutory demand aside, you need to first demonstrate in your application before the court that:

• A genuine dispute between the company and the creditor about the existence or amount of a debt to which the statutory demand relates;
• The company has an offset claim;
• There is a defect in the statutory demand which could cause substantial injustice; and
• There is some “other” reason, such as, but not limited to:
  • the conduct of the creditor in issuing the statutory demand is an abuse of process
  • there are problems relating to the affidavit
  • a judgment debt is subject to an appeal, stay or has been set aside.

While the ‘genuine dispute’ claim is certainly the most common reason for setting aside a statutory demand, what constitutes a genuine dispute is not as straightforward as one might think. 

For this to be successful, the company must provide specific factual evidence that may require further investigation to better determine the truth. This is very different to simply disagreeing with the statutory demand and its particulars.  These types of facts might include correspondence between the parties prior to the statutory demand being served, the contract between the parties, or even reasonable contention (supported by photos) that the work was performed or supplied incorrectly.

If the statutory demand is successfully set aside due as a result of a genuine dispute, mediation might follow for the parties to resolve. Should this be unsuccessful, this is likely to then be heard by the court – a much more expensive alternative.

More information on the law and statutory demands

If you have been served with a statutory demand, you need to act fast – you only have 21 days to respond in full. You should seek immediate legal advice to understand exactly what this demand is for and whether you have any suitable ground to set it aside. Our team of qualified lawyers are highly experienced in the area of insolvency litigation and if suitable, can help you make an application to the Court within the required 21 days.