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Setting Aside Statutory Demands

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Applying to set aside a statutory demand

What is a Creditors Statutory demand for payment of a debt?

A form 509h creditors statutory demand for payment of a debt is a written demand for payment served by a creditor on a company. The Corporations Act 2001 (Cth) outlines the circumstances in which a statutory demand can be made and set aside.

If you have been served with a statutory demand and there is a defect in the demand causing substantial injustice, a genuine dispute about the debt claimed, or a counter claim against the person who served the statutory demand, then you can apply to the Supreme Court or Federal Court to set aside the statutory demand.

Under the Corporations Act an application to set aside a statutory demand may only be made within 21 days after the demand is served. S459G(3) provides that an application must have an affidavit supporting it filed with the court, and that a copy of the application and supporting affidavit are served on the person who served the demand on the company.

Defect in the demand and substantial injustice

Any formal defects in the statutory demand could form the basis of an application to set it aside. However S459J(2) provides that a court must not set aside a statutory demand merely because of a defect. This application can be made if there is a defect in the demand and substantial injustice will be caused by that defect under s549G for an order pursuant to s549G(1)(a).

Successful applications might arise where, if the demand claims interest but does not specify how the interest is to be calculated, or if the demand fails to separately particularise multiple debts that you do not have sufficient information to do.

Genuine dispute about the debt claimed

If there is a genuine dispute over the existence or amount of debt demanded in the creditors statutory demand, pursuant to s459H(1)(a) you can apply to set aside the statutory demand. When deciding if you could satisfy the court that a genuine dispute exists it is important to consider;

• What evidence supports the existence and amount of debt?
• Was a demand for payment made before the statutory demand was served? Did the terms on earlier demands differ from the statutory demand?
• What was your response to the initial demand? Did you acknowledge the debt, ask for more time to pay or dispute the debt?
• What was promised in exchange for an alleged promise to pay? Did you receive your side of the bargain?
• Were you the correct debtor or should another entity have been served with the demand?
• Was the amount incorrect because it was not what you agreed to pay or it was calculated incorrectly?
• Have you paid all or part of the debt?

If you can establish a genuine dispute consider whether it relates to the whole debt or all the debts, if more than one. If after deducting the amount in dispute, a balance remains which does not equal or exceed the statutory minimum, you can apply to set aside the demand. The evidence needed for the demand to be set aside needs to be detailed enough to substantiate the submission of genuine dispute.

Offsetting Claim

Pursuant to 459H(1)(b) you can apply to set aside the statutory demand if it has an offsetting claim which, when deducted from the amount demanded by the creditor which is not in genuine dispute, results in an amount less than the statutory minimum. An offsetting claim is defined in 459H(5) and is a genuine claim against the creditor by way of counter-claim, set-off or cross-demand, even if not arising out of the same transaction or circumstances. When deciding if you have a genuine offsetting claim it is important to consider;

• The facts and circumstances behind your claim? Is there any evidence supporting these?
• How long have you asserted a claim against the creditor? If it was only when the creditor sought payment this gives rise to an inference that the claim will not be genuine, and you will need to closely examine the evidence.
• Was there a delay between when the claim was made and when you raised it with the creditor or sought legal advice?
• What is the amount of the offsetting claim and what evidence is there to support it?
• Did the creditor breach the agreement under which payment is sought?
• Is the claim a genuine claim stemming from unrelated facts?

If you decide that there is a genuine offsetting claim, deduct the offsetting claim from the undisputed debt. If this balance does not equal or exceed the statutory minimum you can apply to set aside the demand. The evidence filed in support of the application should be detailed, preferably by first hand witnesses and supported by relevant and admissible documents.

Other reason

By reason of s459J(1)(b) the court has a general discretion to set aside a demand. This section details that a court may set aside a statutory demand if it is satisfied there is some other reason why it should be set aside.

Voluntary withdrawal of demand

Subject to the 21day time limit, you should write to the creditor informing them that you will apply to set aside the statutory demand and outline the supporting evidence. Invite the creditor to voluntarily withdraw the demand prior to filing and serving the application in order to save costs.

Office Location and Contact Details

Brisbane

Aitken Whyte Lawyers Brisbane
2/414 Upper Roma Street
Brisbane QLD 4000

Ph: 07 3229 4459
Fax: +617 3211 9311
E: enquiries@awbrisbanelawyers.com.au