Statutory demands set aside for ‘some other reason’

Subscribe
4 November 2011

In the recent decision of Radiomio Pty Ltd v Kendell; SISS Business Systems Limited v Kendell [2011] VSC 511 the Victorian Supreme Court considered when a statutory demand will be set aside for ‘some other reason’.

Facts

Over a relatively short period of time Mr Kendell served a series of statutory demands both signed and unsigned, which varied on each occasion as to the amounts demanded. 

Radiomio Pty Ltd (Radiomio) and SISS Business Systems Limited (SISS) applied to have several statutory demands set aside under s 459G of the Corporations Act 2001 on the traditional grounds of there being a genuine dispute as to the debt and having offsetting claims, but also relied on the demand being set aside ‘for some other reason’ pursuant to s 459J.

Radiomio and SISS submitted that it was not safe for the court to rely on Mr Kendall’s affidavits in support of the statutory demands, in circumstances where Mr Kendell had previously served demands for significantly different amounts. Radiomio also submitted that Mr Kendall had previously sworn that there was no genuine dispute as to the debt, however, had subsequently varied the sums demanded in affidavits he swore later.

Decision

The court set aside the statutory demands.  

When deciding whether the statutory demands should be set aside ‘for some other reason’, the court noted that the serious consequences associated with the service of statutory demands meant that the accompanying affidavits must be taken seriously. 

The court found that it was an abuse of process to serve a series of differing demands, each of which asserted that the sum claimed was due and payable, accompanied by affidavits on each such occasion averring that there was no genuine dispute in respect of those debts.

The statements in the supporting affidavits could not be sound when the amounts were then varied in subsequent demands.

The court held that Mr Kendell’s conduct amounted to reckless, careless and vexatious use of the demand regime, and it was appropriate to set aside the demands on this basis alone.

What does this mean for you?

This decision is a reminder that the statutory demand regime is a serious one that should not be abused.  Creditors should seriously consider on a case-by-case basis whether the issue of a statutory demand is an appropriate mechanism in the circumstances. 

Creditors should ensure that demands issued are correct at first instance, as service of multiple demands with accompanying affidavits may amount to an abuse of process.

Creditors should generally keep in mind the court’s discretion to set aside a demand for ‘some other reason,’ and the reputational and costs implications such a decision may have.

Related Content

Contacts

James Whittaker

Partner. Sydney
+61 2 9210 6667

Profile

John Stragalinos

Partner. Melbourne
+61 3 9672 3238

Profile

Kirsty Sutherland

Partner. Perth
+61 8 9460 1620

Profile

Mark Wilks

Partner. Sydney
+61 2 9210 6159

Profile

Megan O'Rourke

Partner. Perth
+61 8 9460 1712

Profile

Michael Kimmins

Partner. Brisbane
+61 7 3228 9377

Profile