Has your company been served with a statutory demand? Or would you like to serve a statutory demand on a company? Read on to understand exactly what a statutory demand is:
What is a Statutory Demand
A statutory demand is a document which requests payment of a debt. If a company is served with a statutory demand and fails to respond, the company may be wound up.
There are certain laws which govern when statutory demands can be used, what they must contain, and how they may be served.
If a statutory demand is not consistent with these laws, the company may make an application to the court to set aside the statutory demand. If the company is successful in its application to set aside the statutory demand, the court may order the creditor to pay the company’s legal costs in relation to the application.
Serving a Company with a Statutory Demand
Is the debt a liquidated debt? Statutory demands can only be used for liquidated debts.
A debt is a liquidated debt if it is for a clearly defined amount. This will be the case where goods or services have been supplied but have not been paid for. The amount will often be reflected in a tax invoice. A statutory demand cannot be used for unliquidated damages. These are payments which require quantification; for example, loss arising from personal injury or damage to property.
A statutory demand can only be used where the amount owed is $4,000 or more. There may be multiple debts against the same company which add to $4,000 or more.
It helps if you have a judgment debt against the company owing you money but these are not required to serve a statutory demand. A judgment debt gives more weight to a statutory demand and makes it more difficult to set aside.
My Company Has Been Served with a Statutory Demand
If your company has been served with a statutory demand and you agree that you owe the money stated in the statutory demand;
- If the debt is not disputed, you should simply pay the debt amount, inform the creditor that you have paid the debt, and ask for the creditor’s written confirmation that the debt has been settled.
- If you are unable to pay the debt, you may be able to negotiate with the creditor to pay by instalments.
- If the statutory demand complies with the relevant legal requirements, and you fail to respond to the demand within 21 days, then your company will be presumed to be insolvent and the creditor can make an application to the court to wind up your company.
If your company has been served with a statutory demand and you don’t agree that you owe the money stated in the statutory demand;
Statutory demands cannot be served where there is a ‘genuine dispute’ about the debt. If there is a genuine about the debt, you may make an application to the court to have the statutory demand set aside. This must be done within 21 days after the statutory demand has been served.
If the statutory demand relates to a judgment debt, it may be more difficult to show there is a ‘genuine dispute’ about the debt.
The Big Pineapple Statutory Demand Dispute
The Big Pineapple is a national tourism and food icon based on Queensland’s Sunshine Coast. Featuring a 16m fibreglass pineapple structure, historically the Big Pineapple drew over a million visits a year, being the most popular tourism attraction in Australia.
Last year in 2023, “The Big Pineapple” won the latest round in a $5.5 million legal battle that could liquidate the business behind the tourist attraction.
The Brisbane Supreme Court granted an application by Big Pineapple Corp to set aside a statutory demand that the company repay a disputed debt of $5,533,000 including interest.
The demand was filed by Brad Rankin and his Brisbane companies Rankin Investments and Rankin Super, which entered into a joint venture with Big Pineapple Corp in 2011 for the development of land around the attraction at Woombye, about 10km west of the Sunshine Coast.
Mr Rankin demanded in April 2022 that his investment be repaid after his partners in the joint venture, Peter Kendall and CMC Property, refused to support his plan to sell the tourist attraction to national property developer Scott PDI for $35 million.
Mr Kendall, of Brisbane, said his position was “the Pineapple is not for sale”.
Justice Soraya Ryan ruled that there was a “genuine dispute” over the $5.5 million.
“I find that there exists a plausible contention, which requires investigation, that the debt was not due and payable on 30 June 2022,” Justice Ryan said.
