It is vital that creditors sufficiently identify and particularise the debt they are seeking payment of in a statutory demand. Failure to do so may lead to a Court setting the statutory demand aside.
This article is the third instalment of our four-part Focus on Statutory Demands article series, and considers the requirement to adequately particularise debt and the consequences of failing to do so.
For more information on statutory demands, see our previous insights in this article series on how to effect service and the requirement to provide a current accompanying affidavit.
What are the requirements?
Section 459E of the Corporation Act 2001 (the Act) relevantly provides that a statutory demand:
- if it relates to a single debt – must specify the debt and its amount; and
- if it relates to 2 or more debts – must specify the total of the amounts of the debts.
Where a statutory demand relates to 2 or more debts, the statutory demand form requires that a creditor complete a schedule providing a description of the debt and the amount of the debt.
The Courts have confirmed that a statutory demand must clearly and unambiguously put the debtor on notice of the debt(s) claimed.[1] Although a debtor may be presumed to have some familiarity with the subject matter of the statutory demand, they are not obliged to speculate upon what it is the creditor is demanding.[2]
Consequences of insufficiently particularising debt
The ramification for insufficiently particularising debt in a statutory demand is that a debtor may seek to have it set aside by a Court on the basis that there is a defect in the statutory demand.
Section 459J of the Act provides that upon application by a debtor, the Court may order that a statutory demand be set aside if the Court is satisfied that:
- because of a defect in the demand, substantial injustice will be caused unless the demand is set aside. Although the Court cannot set aside a statutory demand merely because of a defect.
- there is some other reason why the demand should be set aside.
Section 9 of the Act defines ‘defect’ as including:
- an irregularity; and
- a misstatement of an amount or total; and
- a misdescription of a debt or other matter; and
- a misdescription of a person or entity.
The Supreme Court of NSW has previously set aside a statutory demand which related to two or more debts on the basis that:[3]
- the statutory demand appeared to indicate that a single debt existed rather than multiple debts, and failed to provide a separate description and separate amount for each of the debts, only providing an aggregate amount.
- in this case, the failure to provide details of the individual debts meant that the debtor could not clearly understand the intended meaning of the statutory demand, causing them severe prejudice and injustice.
What next?
If you are a creditor seeking to recover a debt, or debtor who has been served with a statutory demand, you should seek advice from a debt recovery or insolvency expert as soon as possible.
At Hunt & Hunt, we have a specialist debt recovery and insolvency team who can assist you with anything debt recovery related, including advising and acting for you throughout the process of issuing or responding to a statutory demand.
Our considerable experience across all jurisdictions within Australia can provide you with the comfort to know you are being looked after by the best during this stressful time.
If you require advice on your specific circumstances, please don’t hesitate to get in touch.
by Matt Gauci, Partner, Stephanie Luong, Lawyer and Dallas Torresan, Paralegal
[1] LSI Australia v LSI Holdings [2007] NSWSC 1406; Re Simmoll Pty Ltd [2021] VSC 698 (Re Simmoll).
[2] Re Simmoll.
[3] Condor Asset Management Ltd v Excelsior Eastern Ltd [2005] NSWSC 1139.
