A creditor’s statutory demand for payment must be made in the prescribed form and must be accompanied by an affidavit from or on behalf of the creditor stating that the judgment debt is owing. On service of the demand the options for the judgment debtor company are as follows:
- Pay the creditor the judgment debt; or
- Bring an application in the Supreme Court of New South Wales to have the demand set aside.
If the judgment debtor company does not respond to a statutory demand within 21 days of service, it is deemed to be insolvent under the Corporations Act. After expiry of the 21 days an application can be made for the winding up of that company in the Supreme Court of New South Wales.
When a company is deemed insolvent and an order is made for its winding up, the Court appoints a Liquidator to undertake investigations into the affairs, books and conduct of the company, and potentially its directors. From this the creditors are to be paid depending on other debts of the company.
For a debtor company to set aside a creditor’s statutory demand it must raise that there is a genuine dispute in relation to the debt which is the subject of the statutory demand. The test for a genuine dispute is not a high one for the debtor company to meet. Because of this it is advised that only uncontroversial debts or judgments be the subject of any creditor’s statutory demand.
This is an efficient and effective way to pursue a debt against a company. Any Company served with a creditor’s statutory demand should take it seriously due to the ramifications of a winding up order.
From experience it is the leverage of a creditor’s statutory demand that can yield results in a creditor receiving monies owed under a judgment by a company.
As with any litigation the enforcement of judgments should be taken with a commercial view. You may well not receive all or any of the monies owed to you under a judgment.
If you hold a judgment against a company or your company has received a creditor’s statutory demand for payment, you should contact a solicitor for advice.
At Everingham Solomons, our dispute resolution team is committed to providing the most time and cost efficient outcome when pursuing enforcement of judgments because Helping You is Our Business.
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