How can I set aside a Statutory Demand?

A Creditor’s Statutory Demand (“Statutory Demand”) is a document issued by a creditor on a debtor (or alleged debtor) company. If that company does not comply with the Statutory Demand or apply to the Court to set the Statutory Demand aside within 21 days then the company is deemed to be insolvent.

An application to set aside a Statutory Demand must be made with a court that has appropriate jurisdiction – being a state’s Supreme Court or the Federal Court.

The application must be made using the Court’s appropriate originating process form and must be accompanied by an affidavit that sets out the grounds upon which the demand is sought to be set aside.

The grounds upon which a Statutory Demand can be set aside are:-

1. Genuine Dispute: if you receive a Statutory Demand that alleges a debt that you believe is not owed or is otherwise disputed, this is a basis upon which to set a Statutory Demand aside. The threshold for genuine dispute is not particularly high – often being satisfied by simply demonstrating to the Court that there as aspects of the claimed debt that ought to be decided upon by a Court in proceeding seeking recovery of that debt.

2. Offsetting Claim: if you receive a Statutory Demand for a debt that you do owe the creditor, but that you also have a claim against the creditor, this can be either a basis to set the demand aside or to have it amended to include a reduced amount. If your offsetting claim, when set off against the sum claimed in the demand, results in you in balance being owed money by the creditor, or reduces the amount that you owe the creditor to below $2,000.00 the demand can be set aside. If not, but the offsetting claim reduces the debt owed, then payment of that reduced sum will satisfy the Statutory Demand.

3. Defect in the demand causing substantial injustice/some other reason why the demand should be set aside: if, upon analysis of the Statutory Demand, it is apparent that the Statutory Demand does not comply with the requirements set out in the Corporations Act or if the Court finds that there is some other reason why the demand should be set aside, the Court has the power to do so. Examples of setting a demand aside on these grounds include where the affidavit in support of the Statutory Demand (that is, the affidavit served with the Statutory Demand by the creditor) does not state that there is no genuine dispute regarding the debt, or where the Statutory Demand is being used by the creditor in a manner that is unconscionable or amounts to an abuse of process.

Prime Lawyers have conducted hundreds of winding up applications in the Supreme Court and have advised and represented clients in all matters relating to the conduct of those proceedings, including setting aside statutory demands. We have appeared both for and against creditor companies.

If you would like assistance from one of our corporate insolvency lawyers then get in touch with your nearest Prime Lawyers office.

We have debt recovery and litigation lawyers located at Sydney, Parramatta, Chatswood, Sutherland and Wollongong.