In so far as they relates to creditor's statutory demands, the provisions of the Corporations Act 2001 (Cth) are construed by the courts particularly prescriptively.
On 5 June 2015, His Honour Justice Brereton delivered judgment in In the matter of Unity Resources Group Australia Pty Limited  NSWSC 1174. This is another example of the technical application of these sections by the court.
The plaintiff, Unity Resources Group Australia Pty Ltd (Unity) had been served with a creditor's statutory demand by SV Partners Advisory (NSW) Pty Ltd (SV Partners). The creditor's statutory demand was dated 28 October 2014. The affidavit in support was sworn on 27 October 2014.
Unity applied to set aside the creditor's statutory demand on two bases: firstly, that there was genuine dispute as to the existence of the debt; and, secondly, that the affidavit was not contemporaneous with the demand, having been sworn one day before the date of the demand.
His Honour's judgment focused on the second basis propounded by Unity.
Section 459E(3) of the Corporations Act 2001 provides:
"(3) Unless the debt ... is a judgment debt, the demand must be accompanied by an affidavit that:
- verifies that the debt, or the total of the amounts of the debts, is due and payable by the company; and
- complies with the rules."
His Honour held that it is implicit in section 459E(3) that that the affidavit must refer to the alleged debt as at the date of the creditor's statutory demand. This reasoning is a new line of authority in New South Wales. Brereton J held that an affidavit in support of a creditor's statutory demand sworn one day before the date of the creditor's statutory demand is ineffective as it does not verify the existence of the debt as at the date of the demand:
"If an affidavit sworn one day early were held to be compliant, then what is there to distinguish that from one two days early, as was held non-compliant in Wildtown Holdings, or four days early, as was held non-compliant in Technology Licensing, other than some approach akin to the length of the chancellor's foot".
Two days before the hearing, SV Partners sought to cure the defect, presumably without admission, by serving an affidavit which deposed that the debt was due and payable as at the date of the creditor's statutory demand and remained so. His Honour held that the updating affidavit did not meet the requirement that the demand was accompanied by an affidavit that verified the debt. His Honour noted, in obiter, that if an updating affidavit was served at the same time as the creditor's statutory demand, or within the 21 day period from compliance with the creditor's statutory demand, the uncompliant affidavit may not be a basis to set aside the creditor's statutory demand.
Similarly strict time frames apply for:
- the filing and service of applications to set aside creditor's statutory demands. The courts do not have any discretion to extend the time for filing or service of such applications beyond the 21 days provided in the legislation.
- the presumption of insolvency that arises by reason of a failure to respond a creditor's statutory demand. Wind up proceedings must be commenced with three months of the expiration of the time frame to respond to the statutory demand.