Is it OK if you’re just a bit late applying to set aside a statutory demand? Which case won?
Creditor serves statutory demand on company owing substantial sum
In late June 2017, a government department (the ‘creditor’) instructed a process server to serve a statutory demand on a company (the ‘debtor company’). The creditor alleged that the debtor company owed it nearly half a million dollars.
A statutory demand is a formal demand for payment of outstanding debts of $2000 or more made under Section 459G of the Corporations Act 2001 (Cth). The Act prescribes that a debtor company has 21 days to comply with the demand or apply to the court for an order that the demand be set aside. Failure to do either of those things creates a legal presumption that the company is insolvent and means that the creditor can apply to wind the debtor company up in insolvency.
Statutory demand served, followed by application to set aside
According to the documentation provided by the process server, the statutory demand was personally served on the debtor company on 27 June 2017 by delivering it to the company’s registered offices. The demand was left with an employee of the company, who informed the process server that he was authorised to accept legal documents.
The debtor company filed and served an application to set aside the statutory demand on 20 July 2017.
Dispute over the date on which statutory demand was served
Notwithstanding the evidence of the process server that the statutory demand was served on 27 June 2017, the debtor company claimed that it was not served until 29 June 2017, two days later.
The date of service of the statutory demand was important. If the debtor company was correct, then its application to set aside would have been made within the 21-day time period and was valid. If the creditor was correct, then the application would have been made outside the time allowed and was potentially invalid, leaving the debtor company exposed to being wound up.
It was up to the court to determine whether the debtor company’s application to set aside the statutory demand was valid.