The Commonwealth Parliament passed the Coronavirus Economic Response Package Omnibus Act 2020 yesterday.  It introduced the Bill yesterday as well.

It is a wide ranging Act but to the extent that it relates to those practicing commercial law the relevant provisions are amendments to section 9 and 459E – G for the statutory demand and 588Eff. The statutory minimum has been raised from $2,000 to $20,000.  That is significant but what will have a bigger impact on the use of statutory demands is the statutory period being increased from 21 days to 6 months.  These amendments are to last for 6 months from date of proclamation unless otherwise modified by regulation.  Accordingly, from now until about 24/25 September 2020 at least the new regime regarding the use of statutory demands will be in place.  The statutory period of a statutory demand served tomorrow would not  expire until around 25 September.  As such applications to set aside the statutory demand can be filed any time up to that date.

Given this is a significant area of my practice it is important to be on top of these changes.

The Act provides:

Part 2—Amendments relating to businesses in financial distress

Corporations Act 2001

21  Section 9

Insert:

statutory period means:

                     (a)  if a period longer than 21 days is prescribed—the prescribed period; or

                     (b)  otherwise—21 days.

22  Paragraphs 459E(2)(c) and 459F(2)(b)

Omit “21 days”, substitute “the statutory period”.

23  Subsection 459G(2)

Omit “21 days”, substitute “the statutory period”.

24  Subsection 459G(3)

Omit “those 21 days”, substitute “that period”.

25  In the appropriate position in Chapter 10

Insert:

Part 10.42—Transitional provisions relating to the Coronavirus Economic Response Package Omnibus Act 2020

1669  Application of amendments made by Schedule 12 to the Coronavirus Economic Response Package Omnibus Act 2020

 The amendments made by Part 2 of Schedule 12 to the Coronavirus Economic Response Package Omnibus Act 2020 apply to statutory demands that are served on or after the commencement of that Schedule.

Corporations Regulations 2001

26  Before regulation 5.4.01

Insert:

5.4.01AA  Temporary increase to the statutory minimum and statutory period

 (1)  For the purposes of paragraph (a) of the definition of statutory minimum in section 9 of the Act, the amount prescribed is $20,000.

 (2)  For the purposes of paragraph (a) of the definition of statutory period in section 9 of the Act, the period prescribed is 6 months.

 (3)  This regulation is repealed at the end of the period of 6 months starting on the day this regulation commences.

27  Paragraphs 3 and 5 of Form 509H of Schedule 2

Omit “21 days”, substitute “the statutory period”.

28  Form 509H (note 2) of Schedule 2

Omit “minimum of $2,000.”, substitute “minimum. The statutory minimum is $2,000 or a greater amount prescribed by the regulations. For a 6?month period in 2020, a greater amount of $20,000 is prescribed (see the Coronavirus Economic Response Package Omnibus Act 2020).”.

29  Form 509H (note 5) of Schedule 2

Repeal the note, substitute:

1. 5. The statutory period is 21 days or a longer period prescribed by the regulations. For a 6?month period in 2020, a longer period of 6 months is prescribed (see the Coronavirus Economic Response Package Omnibus Act 2020).

The second amendment to the Corporations Act is to provide temporary relief for directors who may engage in insolvent trading for the next 6 months or any longer time prescribed by regulations.  The amendments are to sections 588E and 588GA and the insertion of 588GAAA.

Part 3—Temporary relief for directors from duty to prevent insolvent trading

Corporations Act 2001

30  Paragraph 588E(8A)(a)

After “subsection 588GA(1)”, insert “or 588GAAA(1)”.

31  After section 588GA

Insert:

588GAAA  Safe harbour—temporary relief in response to the coronavirus

Safe harbour

(1)  Subsection 588G(2) does not apply in relation to a person and a debt incurred by a company if the debt is incurred:

            (a)  in the ordinary course of the company’s business; and

            (b)  during:

                         (i)  the 6?month period starting on the day this section commences; or

                        (ii)  any longer period that starts on the day this section commences and that is prescribed by the regulations for the purposes of this subparagraph; and

 (c)  before any appointment during that period of an administrator, or liquidator, of the company.

  (2)  A person who wishes to rely on subsection (1) in a proceeding for, or relating to, a contravention of subsection 588G(2) bears an evidential burden in relation to that matter.

When the safe harbour does not apply

 (3)  Subsection (1) is taken never to have applied in relation to a person and a debt in the circumstances prescribed by the regulations for the purposes of this subsection.

Definitions

 (4)  In this section:

evidential burden, in relation to a matter, means the burden of adducing or pointing to evidence that suggests a reasonable possibility that the matter exists or does not exist.

32  Subsection 588GB(7) (paragraph (b) of the definition of relevant proceeding)

After “subsection 588GA(1)”, insert “or 588GAAA(1)”.

33  Paragraph 588HA(1)(a)

After “safe harbour”, insert “described in subsection 588GA(1)”.

34  Subsection 588WA(1)

Repeal the subsection, substitute:

 (1)  Subsection 588V(1) does not apply in relation to a corporation that is the holding company of a company, and to a debt, if:

        (a)  the corporation takes reasonable steps to ensure that either subsection 588GA(1) or 588GAAA(1) (the safe harbour provision) applies in relation to:

                    (i)  each of the directors of the company; and

                    (ii)  the debt; and

       (b)  the safe harbour provision does so apply in relation to each of those directors and to the debt.

The Explanatory Memorandum relevantly Read the rest of this entry »

As part of the Government’s second stage relief package it has announced that it will amend the Corporations Act 2001 to:

• increase the threshold for issuing a statutory demand from $2,000 to $20,000; and
• extend the time within which to apply to set aside a statutory demand from 21` days to 6 months.

The Prime Minister’s media statement of earlier today relevantly provides:

The Government is temporarily increasing the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive. The package also includes temporary relief for directors from any personal liability for trading while insolvent.  The Corporations Act 2001 will be amended to provide temporary and targeted relief for companies to deal with unforeseen events that arise as a result of the Coronavirus.

(Emphasis added_

No details have been provided as to what is meant by relief from liability of directors who may trade while insolvent.  It is too cryptic at this stage.  

The pressure of receiving a statutory demand for relatively small debts is lifted, for the time being.  The threshold of $ 20,000 remains within the scope of many existing statutory demands.  Statutory demands for sums a little over $2,000 are issued but they do not make up the majority of statutory demands. 

The sting of statutory demands has been dulled by the long period within which an application to set it aside can be made, Read the rest of this entry »

The Defamation Act 2005 was due for a review in 2010.  Five years late the Council of Attorney Generals released, late last week a Model Defamation amendment.  The consolidated Act, if the amendments are implemented, are found here.  The New South Wales Attorney General has taken the lead in drafting the Bill.  That is not surprising given Read the rest of this entry »

In A’la Carte Homes Pty Ltd v AAPD CO P/L [2019] VSC 108 the Supreme Court, per Randall AsJ, set aside a statutory demand. The key issue was the failure of the assignment of a debt being described in the statutory demand or accompanying affidavit.

FACTS

The application was made under ss 459G, 459H and 459J of the Corporations Act 2001 (Cth). The orders sought were Read the rest of this entry »

It is something of an understatement that the last few years have been busy in the defamation space.  And generally uncomfortable for the defendants with big awards in the Rebel Wilson (after reduction by the Court of Appeal) and Chris Gale cases.  As significantly has been the proliferation of cases arising out of commentary on line, often through social media.  Another interesting development is the growing preference for plaintiffs to issue proceedings in the Federal Court rather than in the state courts.  This obviates the need for a jury trial, often times a comfort for defendants.  This has resulted in significant comment and calls for reform by news outlets.   

The Council of Attorneys General are in the process of undertaking a review of defamation law. 

On 26 February 2019 the Council released a 43 page discussion paper titled “Review of Model Defamation Provisions.”    The NSW Attorney General also issued a media release.

There are 18 questions posed Read the rest of this entry »

In C Tina Pty Ltd v Warners Electroplating Pty Ltd [2019] VSC 66 Associate Justice Gardiner set aside a statutory demand.

FACTS

On 1 October 2018, the defendant (‘Warners’) served on the plaintiff (‘C Tina’):

• a creditors statutory demand for payment of debt; and
• an affidavit in support sworn by Grant Warner on 26 September 2018 [1].

The Demand related to two invoices totalling $166,332.10 for work and labour done and materials supplied [2].

On 19 October 2018, C Tina made application by originating process to set aside the Demand [3].

The application is based on the ground that C Tina has a genuine dispute in relation to the debt in that it never contracted with Warners and that Read the rest of this entry »

Judicial Registrar considered an application to wind up a company when administrators had been appointed shortly before the hearing In the matter of Polar Agencies Pty Ltd [2019] VSC 43.

FACTS

The plaintiff  a statutory demand served on the defendant by the plaintiff by post sent on 18 October 2018 [4].  The demand is in respect of debts totalling $558,508.56 for goods supplied by the plaintiff to the defendant and invoiced in the period March to August 2018. The defendant failed to comply with it [4] and made no application to set aside the statutory demand [5] thereby failing to comply with the demand in about midNovember 2018 which gave rise to a statutory presumption of insolvency under s 459C(2)(a) of the Corporations Act (the Act).

By an originating process filed on 16 November 2018 [3] the plaintiff applied for the defendant be wound up in insolvency pursuant to s 459P and s 459Q of the Act [1].

The proceeding first came on for hearing on 19 December 2018 where:

• the plaintiff appeared and the defendant did not.
• the Court was informed that negotiations were underway. Directions were made that any request for a further adjournment was to be supported by an affidavit to be filed and served by 4 February 2019,
• the hearing was adjourned to 6 February 2019 [6].

Read the rest of this entry »

The Federal Court, per Markovic, set aside a statutory demand in Print Mail Logistics Limited v Warratah Investments Pty Ltd [2018] FCA 1618.  It was a very hard fought fight which involved a complex factual situation and difficult legal issues.  Unusually it involved a cross examination of a deponent.  The demand was set aside because of a technical error by the respondent.

FACTS

The parties  were:

• Nigel Benjamin Elias (“Elias”),  director of Print Mail and the sole director of Print Mail Logistics (International) Pty Ltd (PMLI).
• Jennifer Joan Hutson (“Hutson”),  director and secretary of Warratah and sole director of Wellington Capital Pty Ltd (now called Southland Stokers Pty Ltd) (Wellington);
• Mark John Halle (“Halle”), director of Warratah and the chief financial officer of Wellington; and
• Wellcap Holdings Pty Ltd the ultimate holding company of Warratah and  sole shareholder of Wellington [4].

On 5 February 2013 PMLI and MMB entered into a commercial facilities agreement with  MMB makiung a facility of $312,000 available to PMLI to assist with the purchase of a property in 11 McRorie Court, Cambridge, Tasmania (Property) [5].  On 28 October 2013  PMLI and MMB entered into a commercial facilities agreement pursuant to Read the rest of this entry »

The Victorian Supreme Court, per Matthews JR, considered an application to set aside a statutory demand in  Jolimont Heights Pty Ltd v Ryan [2018] VSC 678.

FACTS

Jolimont Heights Pty Ltd (‘JH’), made an application pursuant to s 459G of the Corporations Act 2001 (Cth) (‘Act’) by originating process dated 9 July 2018 to set aside a statutory demand dated 19 June 2018 (‘Statutory Demand’)  [1].

The application was made under s 459H &/or s 459J on the basis:

• there was a genuine dispute as to the existence of the debt
• due to some other reason, being that the Statutory Demand was defective  [2].

In support of its application, JH relied on Read the rest of this entry »

The Victorian Supreme Court in Re Ad Astra Institute Pty Ltd [2018] VSC 563 considered an application to set aside a statutory demand.  In dismissing the application the court undertook a useful analysis of both genuine dispute but more particularly the approach to be taken in preparing an offsetting claim.

FACTS

The defendant was engaged to develop QMS and other documentation (‘Training Documentation’) to meet the requirements of being a Registered Training Organisation (‘RTO’) and on the Commonwealth Register of Institutions and Courses for Overseas Students (‘CRICOS’) [4].

In July of 2016, the plaintiff offered the defendant a contract for services, [4], with consultancy fees at:

• • an hourly rate (minimum of 3 hours) $575 per hour + GST

• daily rate (maximum of 8 hours) $2,800 per day + GST [5].

The note at the bottom of the consultancy fees provides:

Please note:The terms of all invoices are 14 days and all invoices will be charged according to the hourly rate plus GST (Goods and Services Tax). These rates are reviewed from time to time and may change. We will tell you of any changes as soon as practicable after a change occurs [6].

with a further stipulation :

As negotiated:It is agreed that IRM [the Defendant] will cap its fees payable for initial registration and CRICOS registration at AUD$100,000 inclusive of required ASQA fees.

The Agreement was set out to have been made on 25 July 2016 and executed by James Sackl on behalf of the plaintiff. At all material times Read the rest of this entry »