Nanevski Developments Pty Limited (No 2)  NSWSC 1217 concerned a Creditor’s Statutory Demand for Payment of Debt (statutory demand) being set aside pursuant to section 459J(1)(b) of the Corporations Act 2001 (the Act). This subsection confers power to the court to set aside a statutory demand if ‘there is some other reason why the demand should be set aside’. In this matter Justice Rees explored what can constitute ‘some other reason’.
The affidavit verifying the statutory demand that was the subject of this case was sworn two days before the demand was issued. The plaintiff, relying on the fact that the verifying affidavit was sworn before the statutory demand was issued, sought to set aside the statutory demand on the basis of ‘some other reason’ under section 459J(1)(b) of the Act.
Section 459E(3) of the Act provides a verifying affidavit must comply with the rules of the Federal Court of Australia or the rules of a Supreme Court of a State. It is not explicitly required in legislation that the supporting affidavit be sworn on the date in which the demand is issued, however if an affidavit is not so sworn, either because it is sworn before or after, this raises the question of whether such an affidavit properly supports and verifies the statutory demand.
Justice Rees relied on an abundance of authority in ultimately concluding that that the statutory demand in this case must be set aside.
One authority which her Honour relied upon was Wollongong Coal Limited v Gujarat NRE India Pty Limited (2015) 104 ACSR 425 which stands for the proposition that an accompanying affidavit that predates a demand does not or cannot verify the demand.
Her Honour set out some notable passages from Wollongong Coal including that “such an affidavit does not satisfy the requirement in s 459E(3)… the requirement in s 459E(3) is an important safeguard in the statutory scheme and is therefore mandatory” and further that “except perhaps in one situation, non-compliance with s 459E(3) will justify, if not compel, the setting aside of the demand under s 459J(1)(b) of the Act”. The one situation which was being referred to in Wollongong Coal was where an updated affidavit is served within a reasonable time before the expiration of the 21 days available to the debtor to apply to set aside the demand.
The case highlights the power of the court to set aside statutory demands and most importantly is a timely reminder of how statutory demands and supporting affidavits can easily be attacked for seemingly innocuous technical irregularities.