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A Timely Reminder About Statutory Demands

If your company has been served with a statutory demand, this should not be taken lightly. It would be a mistake to confuse this demand, which is a creature of the Corporations Act 2001 (Act) with a letter of demand – simply a letter from a creditor “demanding” that you pay a debt, failing which they will commence proceedings to recover the debt.  

A statutory demand means the company will have 21 days from service (formal receipt of the statutory demand) in which to either pay the debt, the subject of the demand, enter into a payment arrangement or file and serve an application to the Court to have the demand set aside under section 459G of the Act.

The period of 21 days is strict.

If you fail to do any of these things within the time limit, an application can be made to wind up your company.

In Sheraz Pty Ltd v Rumsley [2019] FCA 493, Rumsley served a statutory demand on Sheraz Pty Ltd on 24 January 2019. Sheraz had until 14 February 2019 in which to file and serve an application to set aside the demand.

Sheraz filed its application on 7 February 2019, but for whatever reason it did not take immediate steps to serve the application on Rumsley. It served the application by email on the last day of service (14 February 2019) at 4:59pm. Rumsley did not see the email until 25 February 2019.

While Sheraz may have had grounds to set aside the statutory demand on the basis that there was a genuine dispute on foot in relation to the existence of the debt, it was unsuccessful in having the demand set aside.

The Court considered that service by email prior to the deadline, albeit by one minute, was insufficient in the circumstances. Service under section 459G means personal service so the application needed to have come to the attention of Rumsley prior to the deadline. The case may have yielded a different result if the email address of the creditor had been included in the statutory demand.

Not only was Sheraz’s application to set aside the statutory demand dismissed but it was ordered to pay Rumsley’s costs in the proceedings.

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