How to Respond to a Statutory Demand From an Interstate Creditor

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Table of Contents

• Address for Service
• Application in a State Supreme Court
• Application in the Federal Court
• Key Takeaways

In previous articles, we have explained the nature of a creditor’s statutory demand and how your company should respond. Below, we will set out a scenario in which an interstate creditor serves a statutory demand (‘demand’) on your company, as there are some technical matters which you must comply with to ensure that the demand can be set aside.

Address for Service

Firstly, a valid demand must contain an address for service of copies of any “application and affidavit” in the state or territory in which the demand is served on the company. The “application and affidavit” referred to is one to set aside the demand.

Under section 459G of the Corporations Act 2001 (Cth) (‘the Corporations Act’), to make an effective application to set aside a statutory demand, a copy of the application and supporting affidavit must be served “on the person [or company] who served the demand”. Here, things can get a little confusing because an application to set aside a statutory demand can be brought in either the Federal Court of Australia or a State Supreme Court.

Under the common law, an originating process (being the document which commences a court proceeding) filed with a State Supreme Court cannot be served outside of that court’s territorial jurisdiction. Therefore, to effectively serve an originating process interstate, it must be done in accordance with the Service and Execution of Process Act 1992 (Cth) (‘the Act’).

Per section 9 of the Act, service on a company is effected by the following:

• Leaving it at, or sending it by post to the company’s registered office; or
• Personally delivering a copy of it to a director of the company who resides in Australia.

This section prevails over section 109X of the Corporations Act, which also deals with service of documents on companies. Under section 16 of the Act, a notice in the prescribed form must accompany service of the application to set aside the demand. 

Application in a State Supreme Court

If a company elects to make an application to set aside the demand in a State Supreme Court, it will need to comply with the requirements for service contained in the Act. This means that simply serving the application and affidavit in support on the address for service contained in the creditor’s statutory demand will not be effective to meet the requirements contained in section 459G of the Corporations Act.

Application in the Federal Court

By contrast, if the company instead elects to make its application to set aside the demand in the Federal Court – it will not need to comply with the requirements of the Act. In this scenario, it would only be required to meet the requirements for service contained in the Federal Court Rules. This is because the territorial jurisdiction of the Federal Court is Australia-wide.

Key Takeaways

A failure to comply with the provisions of the Act (if applicable) will be fatal to the application to set aside the demand and therefore result in the company being presumed insolvent.

For further information on how to serve a statutory demand or an application to set aside a statutory demand, get in touch with our specialist disputes lawyers on 1300 544 755.