Applications to set aside statutory demands under s 459G of the Corporations Act 2001 bases of genuine disputes and offsetting claims & “for some other reason” pursuant to s 459J: Radiomio Pty Ltd v Kendell; SISS Business Systems Limited v Kendell [2011] VSC 511 (12 October 2011)

October 28, 2011 |

In Radiomio Pty Ltd v Kendell; SISS Business Systems Limited v Kendell [2011] VSC 511 Gardiner AsJ set aside statutory demands under 459J of the Act, where there is some other reason, in addition to the claim there was a genuine dispute and offsetting claim, section 459G and H.


The Defendant, Kendell, issued three statutory demands for $28,477.04 (182 demand) and $18,694.97 (184 demand) for fees and $93,349 (953 demand) pursuant to an incentive plan.

The factual matrix is quite complex and involved (see [17][23]). In short compass, prior to the service of the 182 and 184 demands Kendall served unsigned statutory demands and unsigned draft affidavits.  On 14 December 2010 Kendell served statutory demands claiming $54,868.94 and $46,741.10.  After these demands were served  a payment of $30,000 was made by the plaintiff.  On 25 December 2010 Kendell wrote to the plaintiff’s solicitor confirming that he had withdrawn previous statutory demands and that he had independently reviewed his invoices, arriving at different figures. On 30 December 2010 the 182 and 184 demands were served.  The plaintiff submitted that it was not safe for the Court to rely on Kendall’s affidavits because, inter alia, no explanation was given as to why the demands varied so much as to the amount demanded and that Kendall had previously sworn there was no genuine dispute as to the debt but had varied the sums demanded under subsequently sworn affidavits.


Set aside for some other reason – Section 459J

Gardiner AsJ stated that because of the serious consequences associated with the service of statutory demands the accompanying affidavits have a real purpose in providing safeguards to the person serving the statutory demands which are potentially controversial.  He quoted Four Seasons Construction v Eastern Metropolitan Council regarding the purpose of affidavits, providing:

First, the corporation is advised that the debt is outstanding and is assured that the party serving the demand has no doubts that the debt is owed. Secondly, and perhaps more importantly, when the matter comes before the Court, either on an application to set aside a statutory demand or on a winding up application, the Court, by reference to the accompanying affidavit can be sure the party issuing the demand has taken steps to satisfy themselves that the debt is outstanding.

(emphasis added)

The Court also quoted Barrett J in Yoogalu Pty Ltd v Intentia Australia Pty Ltd that the rationale for the statutory demand regime was:

The [court’s] sole function is to determine whether or not the state of account between the parties is (as to the particular matters referred to in s 459H(1)) so clear cut and uncontroversial that nonpayment of the sum demanded by the defendant should, entirely of itself and without further enquiry, mean that the plaintiff must, in a subsequent winding up proceeding, be regarded as insolvent unless it can itself affirmatively prove its solvency

Given Kendall had sworn within a 11 day period multiple affidavits that there was no genuine dispute as to differing sums due and payable Gardiner AsJ found he could not be satisfied that there was a sound basis on which to begin consideration of the demands.

His Honour also considered that the service of a series of demands, signed and unsigned, amounted to reckless, careless and vexatious use of the demand regime ([31] & [36])) and based his methodology on the reasoning by the Full Court of the Federal Court in Equus Corp Pty Ltd v Perpetual Trustees WA Limited where the court stated:

If a notice of demand has been drawn with a view to damaging the alleged debtor by wilfully claiming an amount substantially higher than that known to be due or recklessly demanding such a sum, then that would be tantamount to a fraudulent or abusive use of the process and would ordinarily require the notice to be set aside in the public interest to maintain confidence in the law and the administration of justice. There may be other cases in which a demand is made in excess of any admitted sum and for such collateral purposes or with such carelessness as to be frivolous or vexatious or an abuse of process. These could all constitute “some other reason” for setting aside the notice under s 459J(1)(b).

(emphasis added)

Genuine dispute

At [37][44] & [49] [50] his Honour  summarised the the principles to be applied when considering an application under section 459G of the Act.  In this proceeding the volume of material, much of it contentious between the parties on issues of rates charged and quantum, resulted in his Honour finding that the evidence was not clear cut or devoid of matters requiring investigation and as a consequence the application of the case law necessitated the demands being set aside.  The demands were also defective because they did not inform the recipient in unambiguous terms how the amount is to be made up or calculated (see [56] and principles to be applied at [55]).  The 953 demand was set aside as there were matters which gave rise to a dispute.  The underlying basis for the demand was a claim for shares.  The question of when the claim for shares could be made and the quantum was in dispute (see [66]).


In this proceeding the court considered the unusual situation where demands were set aside as the use of multiple and varying demands constituted an abuse of process, essentially on public interest grounds.  The defendant by use of multiple demands, signed and unsigned, undermined the basis of the ultimate 182 and 184 demands.  It is a salutary warning against using draft demands and swearing to various sums preliminary to relying upon a “final” statutory demand. In such a situation, based on this decision, those inconsistencies can arm a party with a powerful argument in favour of setting aside the demand.  It should be borne in mind that the circumstances of this case were quite unusual, with the hearing of the application extending over 3 days.

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