Two recent cases in NSW illustrates how the failure to comply with legislative requirements when issuing a statutory demand means that you, as a creditor, are highly unlikely to be able to get a winding up order against a debtor company.
In both cases of Kisimul Holdings Pty Ltd v Clear Position Pty Ltd  NSWCA 262 (11 August 2014) (Kisimul) and In the matter of Ege Foods Australia Pty Ltd  NSWSC 983 (24 July 2014) (Ege Foods) the creditor’s failure to comply with these requirements meant:
Background & Issues
In Kisimul, the creditor had sent two statutory demands to the debtor company. The central issue in the case was that the affidavit accompanying these demands did not include a statement to the effect:
I believe that there is no genuine dispute about the existence or amount of the debt.
The debtor company applied, on three alternative grounds, for the statutory demands to be set aside pursuant to section 459G of the Corporations Act 2001 (Cth):
In Ege Foods, the creditor had sent one document titled ‘Creditor’s Statutory Demand for Non Payment of Settlement Cheque for Sale of Business’. The affidavit accompanying this demand did not:
The debtor company did not make an application under section 459G for the demand to be set aside. As such the Court was required to use its discretion under section 467A to dismiss the winding up application.
In both cases, the statutory demand was set aside and, in the absence of a valid statutory demand or other proof of insolvency, the creditors were prevented from proceeding with winding up the debtor companies.
In Kisimul the Court held the failure to include a statement to the effect that there was no genuine dispute about the debt constituted ‘some other reason why the demand should be set aside’.
In Ege Foods, the Court held that a statutory demand that did not comply with section 459E(3) could not take effect for the purposes of section 459F. The Court further observed, in line with Kisimul, that the debtor may have been able to rely upon the creditor’s failure to comply with section 459E(3) to set aside the demand under section 459G.
If you require legal advice in relation to a statutory demands, or court documents more generally, then we advise that you seek advice from the Chamberlains Law Firm Litigation, Insolvency and Reconstruction Team:
Stipe Vuleta – Practice Leader Litigation, Insolvency & Litigation Team
P 02 6215 9100