Be aware of the strict time limits if your client receives a Creditor’s Statutory Demand and wants to make an application to have it set aside – practitioners should also be aware of their obligations under the Civil Procedure Act 2010 (Vic) (the CPA) when acting for parties in these applications.

Creditors may exercise their rights to pursue recovery of an outstanding debt, which is more than the prescribed statutory minimum of $4,000.00, by issuing a Creditor’s Statutory Demand (Statutory Demand). 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.

Recently, there have been two decisions of Justice Delany in the Supreme Court of Victoria which had two different outcomes, but in one of the cases,the Judge issued stern reminders to practitioners of their obligations under the CPA when involved in these applications:

1. The first case was Re Zenith Vinyl Pty Ltd [2025] VSC 274 (16 May 2025);
   1. A Statutory Demand was issued by a solicitor for unpaid costs in the sum of $21,612.20. The grounds which were relied upon by the company in its application seeking orders that the Statutory Demand be set aside included that there was (a) genuine dispute; (b) an offsetting claim and (c) some other reason as a result of conduct by the solicitor such that he had not complied with the costs disclosure requirements and that a costs assessment had not been made by the solicitor as required by the Legal Profession Uniform Law;
   2. Justice Delany identified significant issues for the solicitor in this case because the actual costs significantly exceeded the costs’ estimates and the company disputed receiving a second costs estimate. As a result of those issues concerning the required disclosures under the Legal Profession Uniform Law, Justice Delany was satisfied that there was a genuine dispute under section 459H(1)(a) of the Act about the existence or the amount of the debt (and as a result, he was not required to consider the other grounds which were relied upon by the company);
   3. Specifically, having regard to the obligation under section 24 of the CPA, Justice Delany did not consider that the costs of both parties (with the company’s exceeding the amount of the debt as a result of voluminous Affidavit material filed by both parties) which were of “this magnitude to be reasonable and proportionate to the amount in dispute” ;
   4. There was one key issue, being the breaches of the costs disclosure requirements, and the parties failed to turn their minds to this critical issue and the existence of a genuine dispute – this could have avoided the significant costs which were subsequently incurred in the application;
   5. Justice Delany considered the written submissions on costs, including offers of settlement and the inability of the solicitor being entitled to recover his costs of representing himself, and determined that there should be no order as to costs.
2. The second case was Re Tarrawarra Yarra Valley Holding Pty Ltd [2025] VSC 293 (20 May 2025):
   1. A Statutory Demand was issued for $3,855,420.47 upon the basis of a default judgment obtained in the County Court. The company agreed that it could not rely upon a genuine dispute because the creditor had obtained default judgment – instead it relied upon the ground that it had an offsetting claim and some other reason why the demand should be set aside. The offsetting claim relied upon an argument that if the County Court judgment was set aside, its claim would be reduced to zero. However, the application to the County Court to set aside the judgment was filed far too late – it was filed four months after the application to aside the Statutory Demand and the day before the hearing. Attempts by the company to rely on Affidavit material out of time and significantly late, and to exhibit the application to the County Court, was refused. A further attempt by the company to adjourn the hearing, until after the County Court hearing, was also refused;
   2. As part of its application, the company also sought to rely on the creditor’s contraventions of the Farm Debt Mediation Act 2001 (Vic) (the FDMA) which required the company to demonstrate that it was a “farmer” within the meaning of the FDMA but there was no evidence on this point before the Court;
   3. Justice Delany also reminded the practitioners of their obligations under the CPA and specifically as a result of previous Court timetabling orders not being complied with as required;
   4. The Statutory Demand was not set aside and instead, Justice Delany ordered the company to pay the creditor’s costs of the application on a solicitor-client basis and relying on two key factors:
      1. “the inordinate delay and repeated failure to comply with orders of the Court on the part of Tarrawarra…and
      2. on 6 February 2025, prior to the commencement of this proceeding, YYW Financial foreshadowed making an application for indemnity costs.”

   Catherine and her team at FCW Lawyers have considerable experience in this area.  Having acted for companies who are served with a Statutory Demand and issuing applications to have the Statutory Demand set aside, 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.  Ensuring compliance with the numerous obligations under the CPA are paramount and Judges in this area are consistently reminding parties about these important obligations.  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.