You’ve received a statutory demand, but you don’t believe there is a proper basis for it. If you decide to contest a statutory demand, then you should be aware that the legal avenues for doing so are limited and strict. This article sets out the most commonly recognised bases for setting aside statutory demands.
The Court has the power to set aside a statutory demand if it is satisfied of the following:
- There is a genuine dispute between the parties about the existence of the debt, or amount of the debt purportedly owing;
- The company that issued the statutory demand also owes money to your company (an offsetting claim);
- There is a defect in the statutory demand that would result in significant injustice unless the statutory demand is set aside;
- Any other reason why the demand should be set aside needs to be highly relevant and persuasive (ie unconscionable conduct, abuse of process or substantial injustice).
A company served with a statutory demand can alternatively rely upon a formal defect in the service of the statutory demand. For example, if the statutory demand is served on the business address as opposed to the registered office, there may be a defect in the service of the statutory demand.
If you have received a statutory demand, then you should seek legal advice immediately. There is a strict 21 day period from the date of service in which you can apply to the Court to have a statutory demand set aside. If you fail to respond, your company may be presumed insolvent and a winding up application is likely to be made against your company.
This article is provided to the reader for general information. It is not legal advice. It was written by Alec Tonkin and edited by Robert Webb, Senior Associate.
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