By Jen Singh, Solicitor – [SOURCE]
Key Takeaways
- An affidavit verifying a Statutory Demand cannot pre-date the demand as if it does, it cannot verify that the debt is due and payable as at the date of the demand.
- If an affidavit verifying a Statutory Demand pre-dates the demand, the Statutory Demand can be set aside by the Court.
Overview
The Corporations Act 2001 (Cth) outlines clear procedure on how to effectively draft and serve a Statutory Demand on a debtor company. Relevantly, s459E(3) provides that, unless the debt (or debts) is a judgment debt, the Statutory Demand must be accompanied by an affidavit which verifies that the debt (or debts) is due and payable by the debtor company. Section 459J goes on to provide that the Court may set aside a demand if it is satisfied that because of a defect in the demand, substantial injustice will be caused unless the demand is set aside, or there is some other reason why the demand should be set aside.
On 22 December 2022, the Applicant received a Statutory Demand, seeking repayment of $1.2million, from the Respondent to its Post Office Box (Demand). The Demand was accompanied by an affidavit verifying the Demand sworn by Mr Paul Wilson, the sole director of the Respondent, and witnessed by Mr Corey Radcliff, his solicitor (Affidavit) and a covering letter (Letter). Despite being delivered on 22 December 2022, the Demand was not brought to the Applicant’s attention until 9 January 2023.
The Demand was dated 21 December 2022, and made reference to the Affidavit, noting within the Demand that the Affidavit was dated 21 December 2022. However, the Affidavit and the Letter were both dated 20 December 2022. Thus, on the face of the documents, the Affidavit pre-dated the Demand by 1 day.
On 10 January 2023, the solicitors for the Applicant wrote to the solicitors for the Respondent requesting that the Demand be withdrawn on various ground. This request observed that there appeared to be a defect in the Demand, being that the Affidavit pre-dated the Demand (amongst other alleged deficiencies and inaccuracies). Mr Radcliff wrote back denying that the Demand was defective.
On 12 January 2023, the Applicant filed and served the present application. The Respondent was also served with an affidavit accompanying the application which annexed the correspondence between the two sets of solicitors regarding the defects in the Demand (outlined above).
Despite being made aware of the Demand appeared to be defective on 10 January 2023, and being ‘reminded’ on 12 January 2023 by way of the affidavit served upon them, solicitors for the Respondent did not until February 2023 attempt to address and correct the defective Demand.
In affidavits affirmed 6 February 2023, Mr Wilson and Mr Radcliff addressed the Demand’s defect – being that it was not accompanied by an affidavit made as at the time the demand was made – and claimed that this was an error. Both maintained that the Affidavit had in fact been sworn on 21 December 2022 and did not pre-date the Demand as it appeared. The Court observed that these affidavits were attempts to correct the previously held position that the Demand was not defective.
Consideration of the Court
After consideration of a number of authorities, the Court came to the following conclusions:
- Disputes regarding Statutory Demands are to be resolved on the basis of commercial justice rather than technical difficulties;
- Statutory Demand may be set aside if there is a defect in a demand or a defect in relation to a demand – though defects alone will not result in invalidity. It must be shown that there is some reason why a Statutory Demand should be set aside;
- A defect in the affidavit accompanying the Statutory Demand is a defect for the purposes of section 459(2) of the Act, and a defect in an affidavit has a higher order of importance than a Statutory Demand which is incorrect;
- The intention behind section 459E(3) of the Act is that a debtor company receive in the accompanying affidavit a clear and unmistakeable assertation that there is a present and unconditional obligation to pay the debt demanded, and that intention is satisfied so long as the Statutory Demand and affidavit are sworn contemporaneously. As such, the affidavit cannot pre-date the Statutory Demand by any length of time;
- An affidavit pre-dating the Statutory Demand is no mere defect, as the affidavit is, in form and substance, ineffective in verifying the Statutory Demand.
Decision
The Court held that the Statutory Demand be set aside.
This decision was made as an affidavit which predates a Statutory Demand, even by one day as in this instance, cannot verify that the debt is due and payable as at the date of the demand, as required under law.
