A statutory demand 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 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.
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.
If there is a genuine dispute over the existence or amount of debt demanded, 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;
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.
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;
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.
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.
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.
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