Being aware of the factors and available options in order to deal a Statutory Demand within the 21 day timeframe is critical – if there are grounds to make an application to Court to set aside the Statutory Demand under section 459G of the Corporations Act 2001 (Cth) (the Act), this must be done before the 21 day time limit expires with a supporting Affidavit setting out all of the relevant facts. Once the Statutory Demand expires, there is no ability to have the Statutory Demand set aside.

A Statutory Demand can be set aside if a debtor maintains that there is a genuine dispute about the existence or the amount of the debt or that it has an offsetting claim against the creditor (section 459H of the Act) or if there is a defect in the Statutory Demand or for some other reason (section 459J of the Act). There are numerous cases in respect of applications to set aside a Statutory Demand and the relevant criteria that must be satisfied.

The following facts relate to a Statutory Demand which was served before Christmas:

• A client was served with a Statutory Demand in early December and which unfortunately required any application to set it aside to be issued within 21 days and this fell on 2 January – despite a vacation period being adopted by the Court Rules in litigation matters (usually between 24 December and 9 January) which means that the steps in the matter do not apply during the vacation period, the same indulgence is not applied for Statutory Demands. As Court proceedings are not on foot yet, the 21 day time limit for compliance (and therefore, any application to be made to set the Statutory Demand aside) does not stop running over the Christmas and New Year period. Upon review of the Statutory Demand which had been served upon a client, we determined that (a) there were several defects in the Statutory Demand (including the failure to refer to the foreign debt in the foreign currency and AUD dollars; issues with the calculation of interest under the relevant contract; and defects in the Affidavit in Support); (b) a genuine dispute existed in respect of the debt; and (c) the debtor had an offsetting claim.
• On 21 December, we immediately sent a letter to the creditor’s solicitor raising all of those issues and seeking that the Statutory Demand be withdrawn. To our relief, we received a letter on that same day stating that the Statutory Demand would be withdrawn but that the creditor would issue a further Statutory Demand upon rectification of the defects. In those circumstances, if we were acting for the creditor and we had received a letter which stated that there was a genuine dispute about the debt (and that an offsetting claim existed), we would be reluctant to recommend to the creditor that another Statutory Demand should be issued.
• On 22 December, which was the last day on which offices were open before closing for the Christmas break, we received a copy of the new Statutory Demand which had been served by post on our client’s registered office that same day (which meant that our client would receive it over the weekend). What a Christmas present our client was about to receive – one that certainly would not bring it any joy or cheer!! This meant that the application to set aside the Statutory Demand with preparation of substantial Affidavit material had to be prepared and lodged with the Court no later than 12 January. Our staff had to work promptly with our client who was based in Bangladesh over a range of video calls to obtain all relevant evidence to support the genuine dispute and the offsetting claim.

There is a range of case law in relation to Statutory Demands which are served in December and particularly where the 21 days would run into the Christmas and New Year periods. In the decision of Re Pierotte & Fanani Pty Ltd¹ in which Black J in the Supreme Court of New South Wales stated:

“While the Courts have expressed a distinct lack of enthusiasm for the service of creditor’s statutory demands which are calculated to arrive after parties or their legal representatives are on Christmas leave, there is no general principle that creditor’s statutory demands cannot be served in December, … The timing of service of the demands is nonetheless relevant, because the fact that the 21 day period in which they could be set aside ran into the Christmas and New Year period reduced the opportunity that would otherwise have been available to the Plaintiffs to explore the relevant issues in correspondence, before filing an application to set aside the demands”.

Furthermore, in Three Pillars Lynbrook Pty Ltd v Three Pillars Development Management Pty Ltd², Associate Justice Matthews indicated that it is reasonable to be somewhat cynical as to the purpose behind the timing of the service of a statutory demand (noting that one was issued on 24 December); those that are issued where the 21 days runs into the Christmas and New Year period, she indicated that as with other judicial officers she is unenthused by statutory demands being served at a time designed to coincide with the Christmas/New Year period when many offices are unattended.

Despite sending a further letter to the creditor’s solicitor setting out in significant detail the basis of the genuine dispute about the debt and the offsetting claim, a request was made that the new Statutory Demand be immediately withdrawn, failing which an application to set the Statutory Demand would be required to be issued no later than 12 January. The response in return from the creditor’s solicitor was perplexing: (a) we reject the assertion that we have engaged in sharp practice by issuing a further Statutory Demand on 22 December; (b) your client has until 29 January to comply with the Statutory Demand; and (c) us and our client are now away until 11 January. We will provide a substantive response upon our return to our office. Essentially, the creditor’s solicitors had issued the new Statutory Demand and then left the office to enjoy their Christmas holidays, leaving several people in our office to prepare voluminous Affidavit material over the Christmas and New Year holiday period.

In circumstances such as these, it is critical that the solicitor acting for a creditor served with a Statutory Demand is aware that the vacation period does not apply to Statutory Demands (and not just accept another solicitor’s indication that the debtor had until the end of January to comply with the Statutory Demand) and that the time for compliance and the time limit for filing the application to set aside the Statutory Demand was on 12 January as we had calculated. This would have had serious ramifications for our client if we missed the deadline to lodge the application to set aside the Statutory Demand, simply by accepting what the creditor’s solicitor had said about the date for compliance (which, in fact, was incorrect).

Catherine Pulverman of FCW Lawyers has considerable experience in this area. Having acted for debtors who are served with Statutory Demands and issuing applications to set aside a Statutory Demand, it is a complex area of law and steps must be taken promptly if an application is required to be made to Court within the 21 day timeframe. She would be happy to provide any necessary advice or act in relation to service of a Statutory Demand or what to do when served with one to ensure that the most cost-effective outcome is achieved.