COVID-19 ALTERED COURT ARRANGEMENTS - NO EXCUSE FOR FAILING TO APPLY FOR STATUTORY DEMAND TO BE SET ASIDE

A poignant reminder this week that during this COVID period, the Courts will still strictly apply the time limits and requirements for applying to have a statutory demand set aside.

In CPR Solutions Mackay Pty Ltd v Zammit Earthmoving Pty Ltd, the respondent served a creditor’s statutory demand pursuant to section 559E of the Corporations Act 2001 (Corporations Act) demanding payment of $244,824.04.

Pursuant to section 459G of the Corporations Act, a company may apply to the Court for an order setting aside a statutory demand. However, the application must be made within 21 days of the demand being served.

Section 459G(3)(b) of the Corporations Act provides an application to set aside the demand is made only if within the 21 days statutory period, a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company.

Unfortunately for the applicant, whilst the application and supporting affidavits had been filed within the 21-day statutory period (having been filed on the twentieth day), the acting registrar could not set a return date for the hearing due to the altered Court arrangements as a consequence of COVID-19.

The applicant’s solicitor served an unsealed copy of the application and supporting affidavit along with a receipt from the Court confirming the documents had been filed on the twentieth day following service of the statutory demand. The respondent’s solicitors refused to accept that formal service had been effected until they received sealed copies of the application with the Court number and return date for the hearing to set aside the demand.

The Supreme Court had to determine whether service of the application was effected for the purposes of section 459(3(b) of the Corporations Act when the application did not have the date of filing stamp and the receipt stamp, did not contain a Court number, a Court seal or a return date. Justice Crow determined that the document served was not a sufficient copy of what was filed for the purpose of section 459G(3) because the document omitted the date stamp and the receipt stamp.

Accordingly, the application to set aside the statutory demand was dismissed. The consequence is that the Applicant failed to comply with the statutory demand, the Applicant is deemed insolvent and the Respondent is entitled to apply for the Applicant to be wound up in insolvency.

Whilst the decision is harsh, it is an important reminder to be vigilant in ensuring that you strictly comply with the requirements of the Corporations Act when applying to have a statutory demand set aside.

If you have been served with a statutory demand, make sure you seek expert legal advice regarding your options early. Speak to the team at Axia Litigation Lawyers today because – Every move matters!

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