Statutory Demands – Why time is of the essence

By Anil Herat

If you are a company director, your company may at sometime be served with a Statutory Demand under Section 459E of the Corporations Act. The purpose of utilising this section of the Corporations Act is to recover monies due and owing by the company.

The Statutory Demand is usually served on the registered office of the company. Once served with the Statutory Demand, you are required to comply with the demand to pay the money claimed within 21 days of receipt of the Statutory Demand.

Failure to comply with the time limit may result in winding up proceedings being initiated by the creditor against your company.

A recent case High Court Aussie Vic Plant Hire Pty Ltd v Esanda Finance
Corporation Ltd [2008] High Court Appeals (26 March 2008), shed light on the popular misconception that once served with a Statutory Demand, the time limit of 21 days can be extended by the parties to the proceedings in an attempt to negotiate the matter.

The High Court in this case clearly confirmed that the time limit of 21 days could not be extended by the parties to the proceedings. If you do not pay the outstanding sum within 21 days, then there is a presumption that your company is insolvent.

The only basis that you can seek to set aside a Statutory Demand is –

  1. if there is a genuine dispute;
  2. if you have an offsetting claim;
  3. the Statutory Demand is defective; or
  4. any other reason the court can be convinced of to set it aside.

Where you do not have grounds to have the Statutory Demand set aside, then time is of the essence in that you will have to pay the debt within 21 days.

Should you require further information on Statutory Demands, please do not hesitate to contact Anil Herat on (02) 4751 4743.



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