Have you ever wondered how to withdraw a statutory demand?
- If you have wondered how to withdraw a statutory demand?
- Or can a statutory demand be withdrawn?
- What is the process in withdrawing a statutory demand?
- Why require the issuer to withdraw rather than set it aside?
This article will explain everything you need to know about withdrawing statutory demands, when you should do it (or request it) and why you should do it (or request that it be done).
How to Withdraw a Statutory Demand
The issue as to whether a statutory demand can be withdrawn was settled in Cempro Pty Ltd v Dennis M Brown Pty Ltd (1994) ACSR 628 where Von Doussa J said:
In my view if the party serving a notice of statutory demand under s 459E, within the time limited by the notice for compliance therewith, arms the recipient company with a document in writing saying that the statutory demand is unequivocally withdrawn, the notice thereafter has no further force or effect, and it is not necessary to prevent presumed insolvency arising at the expiration of the period for compliance to obtain an order of the court formally setting aside the notice. I consider that the unconditional withdrawal of the notice of statutory demand means that there is no longer a demand to be complied with, and at the expiration of the time limited for compliance, there can be no failure to comply with the demand. The fact that the withdrawal is evidenced by a document in writing given to the recipient company ensures that the company is in possession of proof of the withdrawal should any question thereafter arise as to the fate of the statutory demand.
You must be mindful however that the recipient of a statutory demand only has twenty one (21) days in which to apply to set the demand aside. Section 459G of the Corporations Act states that:
(1) A company may apply to the Court for an order setting aside a statutory demand served on the company.
(2) An application may only be made within 21 days after the demand is so served.
(3) An application is made in accordance with this section only if, within those 21 days:
(a) an affidavit supporting the application is filed with the Court; and
(b) a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company.
So while waiting for the sender or the sender’s solicitors to agree to withdraw the statutory demand, you must leave yourself time to draft, file and serve a copy of your application and supporting affidavit on the issuer. If you fail to get this application filed and served on time, you may be facing the presumption of insolvency, which could have very serious consequences.
In Chameleon Mining NL v Atanaskovic Hartnell  NSWSC 602 the Court considered Cempro above and asked if a withdrawal of a statutory demand must be made in writing, or can an oral withdrawal suffice. Austin J said:
Although Von Doussa J envisaged withdrawal in writing, it appears from his observations that he regarded writing as desirable for the purpose of proving the withdrawal, rather than necessary for the validity of the withdrawal. I can see no reason for insisting upon writing as a prerequisite to validity. In my view, if the court is satisfied, on the evidence, that a statutory demand has been unequivocally withdrawn within the notice period, the withdrawal is valid and effective notwithstanding the absence of any document, and it is unnecessary for the company to apply for an order setting the demand aside.
A statutory demand can be withdrawn orally, however you will need to be able to prove that this withdrawal was made. It is good to know that you may be able to rely on Chameleon Mining if you need to, but more importantly, it shows that it is best practice to get the “unequivocal withdrawal in writing” so you are able to tender this as evidence if needed, especially as the consequences of not responding to the statutory demand are so high.
Why can a Statutory Demand be Withdrawn
How a Statutory Demand can be withdrawn is based upon the same factors for setting aside a stat demand. If the demand was only made with a affidavit in support and not a judgment, and you can raise a good argument that the demand can be set-aside then you can write to the issuer of the demand prior to the application setting it aside. To get a demand set-aside, you will need to prove one or more of the following:
- There are formal defects in the statutory demand; and/or
- There is/are a genuine dispute(s) about the existence or quantum of the debt; and/or
- You have any offsetting claims; and/or
- The demand was not served correctly.
When considering how to withdraw a statutory demand, if you can successfully argue one or more of these factors above, then prior to making the application to set the demand aside, write without prejudice save as to Costs to the issuer of the demand, state the reasons why this application will be successful, and demand that the statutory demand be withdrawn.
Costs of the Application to Set-Aside
In relation to how to withdraw a statutory demand, the purpose of this letter is to give the issuer notice of the intended application and to invite them to agree in writing to unequivocally withdraw the statutory demand.
If they do not agree to withdraw the stat demand, then put them on notice that you will be put to the substantial expense of preparing and arguing the application on a contested basis (including Counsel’s fees), in which case, you should reserve your right to tender this letter to the court at the hearing of that application, in support of a submission that the issuer of the statutory demand be ordered to pay the costs of the application on an indemnity basis.
Considering how to Withdraw a Statutory Demand
If you are considering applying to set aside statutory demand or more than one statutory demands, it is vitally important that you engage a professional statutory demand solicitor. Time is very much of the essence and it is very important that you engage someone who knows exactly what they are doing. Failure to take a step correctly could leave you in a far worse position, costing thousands of dollars, for example attempting to rebut the presumption of insolvency or being forced into liquidation.
We offer professional advice and assistance in all things related to statutory demands
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