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  • Harry Chen

Statutory Demands: An Introduction

Updated: Feb 7


A statutory demand is a document that can be lodged and relied on as part of the process to apply for the winding up of a company. Statutory demands are made under section 459E of the Corporations Act 2001 (Cth) (‘CA’) when a company owes a single debt or multiple debts to a legal person.


However, it is well established that statutory demands ‘should not be used to coerce a person to pay a dispute amount. A statutory demand is not an instrument of debt collection’: Moutere Pty Ltd v Deputy Commissioner of Taxation [2000] NSWSC 379.


It may be tempting to use statutory demands to chase your debts but unless the strict procedural requirements and legal tests for making statutory demands are met, you could be liable to pay legal costs if there is a successful application to set aside the statutory demand under CA s 459G. Equally, these procedures and legal tests could help you successfully set aside your statutory demand and have your legal costs paid.  


We outline the requirements of a statutory demand and the principles that apply to an application to set aside a statutory demand.


Lodging a Statutory Demand


For a creditor to issue a statutory demand:

  • The debtor must be a “company registered under this Act”: CA ss 9, 459E(1)

  • The statutory debt can comprise of a single or multiple debt: CA s 459E(1)

  • The total amount of the statutory debt must be due and payable: CA s 459E(1)

  • The total amount of the statutory debt exceeds the statutory minimum: CA s 459E(1)

The statutory minimum is $4000, except in relation to a company eligible for temporary restructuring relief where the statutory minimum is $20,000: CA s 9; Corporations Regulations 2001 (Cth) (‘CR’) reg 5.4.01AAA(1)

Form Requirements

The demand must:

  • Specify and particularise the total amount(s) of debt: CA s 459E(2)(a)-(b)

  • Require the company to pay the debt(s), or to secure or compound that amount to the creditor’s reasonable satisfaction, within the statutory period after the demand is served on the company: CA s 459E(2)(c)

  • The statutory period is 21 days, except in relation to a company eligible for temporary restructuring relief where the statutory period is 6 months: CA s 9; CR reg 5.4.01AAA(2)

  • Be in writing: CA s 459E(2)(d)

  • Be in the prescribed form (i.e. in compliance with CR Form 509H): CA s 459E(2)(e)

  • Be signed by or on behalf of the creditor: CA s 459E(2)(e)

  • As stated on CR Form 509H, the signer may be a director, secretary or an executive officer of the creditor corporation, or the creditor’s solicitor.

CR Form 509H requires:

  • The signer to attest to knowledge that the debt is due and payable and their belief that there is no genuine dispute about the existence or amount of the debt;

  • The provision of an address by the creditor for service or payment that is in the same State as the address of the registered office of the debtor company;

  • Correct identification of the name, ABN and address of the registered office of the creditor (i.e. the legal entity that was contracted with and to which is owed the debt)

Accompanying Affidavit

Unless the debt is a judgment claim, the statutory demand must be accompanied by an affidavit (Federal Court of Australia Form 7) verifying that the debt or the total of the amounts of debts is due and payable buy the company and complies with the rules: CA s 459E(3)


An affidavit or statement in writing on behalf of a corporation must be sworn or made by a director or a secretary of the corporation: CR reg 1.0.14(1)


The affidavit must:

  • Indicate how the deponent knows the debt was due and payable;

  • Indicate the deponent’s belief that there was no genuine dispute about the existence or amount of debt;

  • Be sworn at the same time as, and not prior to, the making of the statutory demand: Re Nanevski Developments Pty Ltd (No 2) [2019] NSWSC 1217

  • Be sworn by an individual who has first-hand knowledge of the quantum and history of the debt, which is generally the creditor or a qualified officer of a creditor who is a corporation: Rapcivic Contractors Pty Ltd v Mapol Industries Pty Ltd [2008] QSC 310

Service of a Statutory Demand

Under CA s 109X, service of the statutory demand, along with the accompanying affidavit can be by either:

  • Leaving them, or posting them, to the company’s registered office;

  • Delivering a copy of the documents personally to a director of the company, provided that they reside in Australia or in an external territory of Australia;  

  • If a liquidator/administrator/restructuring practitioner of the company has been appointed, leaving it at, or posting it to, the address of the liquidator’s/administrator’s/restructuring practitioner’s office in the most recent notice of that address lodged with ASIC

When serving the statutory demand by post, the statutory demand and the accompanying affidavit, it should be mailed to the registered office of the company by pre-paid post, and proof of delivery should be retained and annexed to the affidavit. Alternatively, the creditor could rely on the ‘postal rule’, which states that a postage article sent by pre-paid post to an address in Australia or in an external territory of Australia is presumed to have been received on the seventh working day after having been posted, unless evidence sufficient to raise doubt about the presumption is adduced: Evidence Act 1995 (Cth) s 160(1).


Responding to a Statutory Demand

There are four avenues open to a debtor in the statutory period (usually 21 days, as above) following service of a statutory demand:

  • Pay the specified debt(s), or secure or compound for the debt(s);

  • Negotiate a settlement and withdrawal of the statutory demand with the creditor;

  • Apply to the Court to commence proceedings to set aside the demand;

  • Ignore the statutory demand, upon which the company is presumed insolvent after the expiration of the period of compliance, which is the end of the statutory period (usually 21 days, as above): CA s 459F(1)

Setting Aside a Statutory Demand

The company, within the statutory period (usually 21 days, as above) of being served with the statutory demand, may apply to the Court to commence proceedings to set it aside. The application is only valid if it is filed with an affidavit supporting the application and identifying the grounds on which the statutory demand should be set aside, and copy of the application and the supporting affidavit are served on the person who served the demand on the company: CA s 459G(3)


A statutory demand can be set aside for one of the following reasons:

  • There is a defect that will cause substantial injustice, such as a failure to attach a supporting affidavit to the application to set aside the statutory demand, or the supporting affidavit was sworn prior to the date of the statutory demand: CA s 459J(1)(a).

  • There is a genuine dispute with regards to the debt: CA s 459H(1)(a)

  • There is a genuine offsetting claim, which reduces the total amount of debts claimed to less than the statutory minimum (which, as mentioned above, is usually $4000): CA s 459H; CR reg 5.4.01AAA

  • There is some ‘other reason’ why the demand should be set aside: CA s 459J(1)(b).

Material Defect

‘Defect’ is given the follow definition in the CA s 9:

defect, in relation to a statutory demand, includes:

(a)  an irregularity; and

(b)  a misstatement of an amount or total; and

(c)  a misdescription of a debt or other matter; and

(d)  a misdescription of a person or entity.’

However, the mere existence of a defect is not sufficient to give rise to grounds to set aside a statutory demand: CA s 459J(2). The defect must cause substantial injustice unless that demand is set aside: CA s 459J(1)(a)


Some examples of where a demand has been set aside due to a defect causing substantial injustice include:

  1. Where a creditor has not substantially complied with the prescribed Form 509H, resulting in a defect by operation of the Acts Interpretation Act 1901 (Cth) s 25C: Quitstar Pty Ltd v Cooline Pacific Pty Ltd [2003] NSWCA 359. In such circumstances, the demand should be so fundamentally defective that it would not be treated as a statutory demand: Inter Mining Pty Ltd v Lake Johnston Pty Ltd re Lake Johnston Pty Ltd [2013] FCA 915.

  2. Where the description of the debt (or debts), “because of its form and phraseology”, is misleading, vague or ambiguous such that the debtor company is unable to determine the existence or amount of the debt: Main Camp Tea Tree Oil Ltd v Australian Rural Group Ltd [2002] NSWSC 219 [37]; LSI Australia v LSI Holdings; LSI Australia v LSI Consulting [2007] NSWSC 1406; Chippendale Printing Co Pty Ltd v Deputy Commissioner of Taxation (1995) 55 FCR 562. This also extends to interest payable: Topfelt Pty Limited v State Bank of New South Wales Limited [1993] FCA 589.

  3. Where the claimed debt is not actually due and payable within the period available for compliance: Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd; Olan Mills Studio v Kodak (Australasia) Pty Ltd [1996] NSWSC 199.

However, minor errors have generally been held to not constitute defects which would cause substantial injustice. Some examples of minor errors include:

  1. Omission of a signature from the demand: Noy's Works Pty Ltd v Allcast Pty Ltd [2005] WASC 185

  2. Omission of the four notes which appear at the bottom of CR Form 509H: Kalamunda Meat Wholesalers Pty Ltd v Reg Russell & Sons Pty Ltd (1994) 51 FCR 446

  3. Omitting or failing to specify a proper address for service: Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452

  4. Minor misdescriptions of the names of persons or entities, addresses or dates: Plate Impressions Pty Ltd v JRL Consortium Group Pty Ltd [2016] QSC 274

  5. Misdescription of the debt, provided that the amount is set out and, from the dealings between the parties, the company was aware as to what the debt was related to: Lemar Nominees Pty Ltd t/a GJ Gardner Homes (Mackay) v Shuttlewood [2000] QSC 142

The sum specified in the statutory demand does not need to be in Australian dollars. If the debt is specified in currency other than Australian dollars, the amount owing may be paid in other currency, and no issues relating to conversion or injustice would result: Vehicle Wash Systems Pty Ltd v Mark VII Equipment Inc (1997) 150 ALR 261. In Daewoo Australia Pty Ltd v Suncorp Metway Ltd [2000] NSWSC 35, the Court agreed with this position, holding that the payment could be in foreign currency despite the prescribed form requiring conversion into Australian dollars because strict compliance was not required and substantial compliance was sufficient. The Court held that even if the demand was defective as it specified payment of a sum in foreign currency, no substantial injustice would have occurred if it were not set aside.

The overall trend from the authorities is that greater emphasis is placed on ‘substantial injustice’ rather than the existence of a defect itself, although it is critical to examine the facts of every particular case.

The position is well summarised in Re Macro Constructions Pty Ltd [1994] 2 Qd R 31 by Derrington J:

‘There is abundant authority that … the courts will require strict compliance by an alleged creditor with the technical formal requirements of a notice of this kind. The reason is the draconian consequences to the company because default of compliance with the notice will render it vulnerable to a winding-up … However the quality of strictness of compliance has been the subject of discussion in various authorities … Not every error will attract invalidity … [I]f the error is slight and does not in any substantial way frustrate the statutory provisions relating to this procedure or deprive the company of a right, the notice will not be held to be invalid.’

Genuine Dispute

There may be a dispute as to either the existence or the quantum of the debt (or both) which warrants the setting aside of the statutory demand.


Other less common disputes may involve:

  • The existence of a concluded agreement forming the basis of the claimed debt;

  • Whether the debt is based on a judgement from which an appeal is pending; or

  • Whether the debt is subject to a binding tax assessment or statutory adjudication.

The debtor company bears the onus of proving, on the balance of probabilities, the existence of the dispute.


Although there is ample authority on what is required of the debtor company in relying on this ground for setting aside a statutory demand, this is best summarised by McKerracher J in Citation Resources Ltd v IBT Holdings Pty Ltd [2016] FCA 1265 [17]:


'(a)   For there to be a genuine dispute, there must be a ‘plausible contention requiring investigation’.  It raises the same sort of considerations as the ‘serious question to be tried’ criterion applicable to interlocutory injunctions.

(b)    The company will fail in that task only if it is found upon the hearing of its s 459G application that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted.  Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow.

(c)     The Court is not called on to determine the merits of, or to resolve, the dispute.

(d)    The threshold is not high or demanding; however the claim must have some merit and be genuine.  That requirement has been described variously as the claim must be ‘real and not spurious’, the claim must have ‘a real chance of success’, there must be ‘a serious question to be tried’.

(e)    The Court does not engage in any form of balancing exercise between the strengths of competing contentions.

(f)      The essential task is relatively simple - to identify the genuine level of a claim (not the likely result of it).

(g)    A mere assertion of an oral agreement will not necessarily suffice.'


Another way to characterise the requirements for the dispute is that it must be bona fide and truly exist in fact, and the grounds for alleging the dispute must be real and not spurious, hypothetical, illusory or misconceived: Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 15 ACLC 1001.


The facts showing the existence of a genuine dispute between the parties must be contained in the supporting affidavit to the statutory demand: Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund (1996) 70 FCR 452 (Graywinter). This means that a party cannot rely on a ground to set aside a statutory demand in a later affidavit or in proceedings which was not disclosed in the supporting affidavit. The Court in Graywinter also emphasised the fact that a mere assertion of a genuine dispute is not enough, nor is a bare claim that the debt is disputed. As the affidavit must be filed hastily, within the statutory period (usually 21 days, as above), the applicant is not required to set out in admissible form the evidence by which the "material facts" are to be proved in the supporting affidavit: Graywinter.   


While the principle in Graywinter has persisted, some believe that Graywinter should now be avoided and have suggested refinements to the underlying principle. Most notably, the Victorian Court of Appeal in Sceam Constructions Pty Ltd v Clyne [2021] VSCA 270 believed that the true principle is:


‘the particular “genuine dispute” on which an applicant seeks to rely must be identified in the supporting affidavit filed within time; it is not sufficient to identify one genuine dispute in the supporting affidavit, and then to identify a different genuine dispute in later affidavits filed out of time and at the hearing of the application’


Offsetting Claim

An offsetting claim is a genuine claim that the company has against the respondent by way of counterclaim, set-off or cross-demand, even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates: CA s 459H(5).


1. Genuine Claim

An offsetting claim is genuine when there is a serious question to be tried that the person on whom the demand has been served has an offsetting claim, or that the claim is not frivolous or vexatious, or that it is not fictitious or merely colourable: Ozone Manufacturing Pty Ltd v Deputy Commissioner of Taxation (2006) 94 SASR 269, approved in Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd (2019) 99 NSWLR 397 (Grandview).


The test is the same as for the existence of a genuine dispute, which is that the claim must be bona fide, that it truly exists and that the grounds for alleging the existence of the dispute are real and not spurious, hypothetical, illusory or misconceived: Grandview; Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601; Ozone Manufacturing Pty Ltd v Deputy Commissioner of Taxation [2006] SASC 91.


This threshold is not high or demanding but the applicant must show 'plausible contention requiring investigation': First Equilibrium Pty Ltd v Bluestone Property Services Pty Ltd (in liq) [2013] FCAFC 108.


2. Counterclaim, Set-Off or Cross-Demand

A counterclaim is a proceeding which the debtor company may have against the creditor. A set-off is a defence which the debtor company may have which partially or wholly absolves the creditor’s claim. A cross-demand refers to any claim which cannot be categorised as a counterclaim or set-off, which can be specified, and which is of such a nature that it equals or exceeds the amount of the judgment debt: In re a Bankruptcy Notice [1934] 1 Ch 431  


3. Other Requirements

The offsetting claim must be a monetary sum i.e. quantifiable in money terms, whether liquidated or unliquidated: 96 Factory Bargains Pty Ltd v Kershel Pty Ltd [2003] NSWSC 146; Ozone Manufacturing Pty Ltd v Deputy Commissioner of Taxation (2006) 94 SASR 269. Such claim must be against the debtor company itself, not another entity: Canpoint International Pty Ltd v Anar International Pvt Ltd [2008] FCA 4. The offsetting claim must exist at the time of the hearing of the application but need not exist at the time of the alleged debt or the date of the demand: Re Riva NSW Proprietary Limited [2016] NSWSC 1954.


Other Reason

Generally, a statutory demand cannot be set aside on this ground unless there is some ‘sound or positive ground or good reason’, which is ‘consistent with … legislative intent’: Meehan & v Glazier Holdings Pty Ltd [2005] NSWCA 24. The ground can ‘take account of matters such as improper or invalid service and mistakes or misstatements in the notice of demand, in circumstances where this would significantly prejudice any party”: Explanatory Memorandum, Corporate Law Reform Bill 1992 (Cth)


Examples of ‘some other reason’ for setting aside a statutory demand include:

  • Omission of an accompanying affidavit: Victor Tunevitsch Pty Ltd v Farrow Mortgage Services Pty Ltd (in liq) (1994) 117 FLR 330

  • Errors in the accompanying affidavit, including:

    • Lack of signature by witness on accompanying affidavit: Carb Royale Pty Ltd v Tonkin [2000] VSC 399

    • Omission of statement that there is no genuine dispute in accompanying affidavit: Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd [2001] WASCA 299

    • Omission of statement that the debt is due and payable: Main Camp v Australian Rural [2002] NSWSC 219

    • Affidavit which is sworn before the statutory demand itself: Ri-Co Holdings (Australia) Pty Ltd v Allied Sandblasters Pty Ltd; Ri-Co Holdings (Australia) Pty Ltd v Beutel [2009] QSC 122; Re Nanevski Developments Pty Ltd (No 2) [2019] NSWSC 1217

    • Omission of the source of knowledge of the relevant facts: Print Mail Logistics Ltd v Warratah Investments Pty Ltd (2018) 131 ACSR 559.

  • Other matters which could cause injustice to the debtor company, including:

    • Where there is an arguable appeal against judgment debt forming the basis of the demand: Quarter Enterprises Pty Ltd v Allardyce Lumber Co Ltd [2011] NSWSC 1031

    • Where the lodgement of the demand constitutes an abuse of process or the demand is lodged for an improper purpose: Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85; Grocon Constructors (Vic) Pty Ltd v Dexus Funds Management Ltd (No 2) [2019] FCA 1283

    • Where the claimed debt is 'grossly inflated': First State Computing Pty Ltd v Kyling (1995) 13 ACLC 939.

Consequences of Failure to Comply with Statutory Demands

A debtor company fails to comply with a statutory demand if:  

  • The company fails to respond within the statutory period after the demand is served (usually 21 days, as above): CA s 459F(2)(b)

  • Where there is an application to set aside the statutory demand, the company fails to respond within the time set by an order extending the time for compliance or, if there is no such order, within 7 days of the final determination or disposition of the application: CA s 459F(2)(a)

If the company fails to comply with a statutory demand, the company is presumed to be insolvent in for 3 months, during which a creditor may lodge a winding up in insolvency claim relying on the demand: CA s 459C(2)(a).



Navigating the field of statutory demands is a complicated process. Various pitfalls exist as a result of strict procedural requirements and the limited time for response.


If you wish to issue or respond to a statutory demand, it is crucial to seek expert legal advice to best prepare you for success in your matter. If you require any advice on statutory demands, please do not hesitate to contact us at or Our expert commercial lawyers will be on hand to assist you.


The information contained in this article is general information only and not legal advice. The currency, accuracy and completeness of this article (and its contents) should be checked by obtaining independent legal advice before you take any action or otherwise rely upon its contents in any way.

Contributors: Harry Chen, Valentina O'Regan

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