In March last year,  Faji (Australia) Constructions Pty Limited v AC Professional Accounting Pty Ltd [2009] NSWSC 180,  Barrett J said that solicitors must not swear Affidavits in support of Statutory Demands on the basis of information and belief. If they do, the statutory demand is liable to be set aside with costs without the court even bothering to look at whether there might be a genuine dispute or offsetting claim – all you need for the Affidavit to be sworn by the solicitor and you’re home free (and the same presumably applies to Affidavits sworn by the staff debt-collection agencies and anybody else who makes an Affidavit based solely on instructions).

This decision has recently been affirmed by Palmer J in Austech Institute for Further Education Pty Ltd v Britt [2010] NSWSC 56 (4 February 2010), in which his Honour said (emphasis added): –

13 It is clear from Mr Groundwater’s affidavit that he has not investigated any records which could inform him as to whether a genuine dispute exists which arises outside the terms of the lease and by reason, for example, of representations said to have been made which induced the entering into of the lease. Accordingly, Mr Groundwater’s averment that there is no genuine dispute as to the existence of the debt must be founded either on a complete absence of knowledge of the circumstances which would justify such an assertion, or else must be based on hearsay from a source not identified. In my opinion, for the reasons advanced in the authorities to which Barrett J refers in Faji, the affidavit of Mr Groundwater in this regard is glaringly deficient.

…

17 As is clear from the decision of Barrett J in Faji, with which I respectfully agree, failure to comply with the requirement to state in the affidavit supporting the Statutory Demand the source of knowledge or the basis of information for the belief that there is no genuine dispute as to the existence of the debt is fatal to the Statutory Demand by virtue of s 459J(1)(b). I do not think that the strict application of that principle should be diluted by creating any exceptions.

…

20 For these reasons, the Statutory Demand in the present case must be set aside pursuant to s 459J(1)(b) without consideration as to whether or not there is in fact there a genuine dispute as to the existence of the debt or as to whether it is now presently payable. That much was made clear by the decision of Barrett J in Faji at [31], and I propose to apply that decision in this case.

That would appear to be a sensible and helpful decision that makes the law clear and leaves us all knowing where we stand, so we can all thank Palmer J for his decision on 4 February 2010.

The next day, however, was a different story.

In Mangraviti Pty Ltd, Joe v Lumley Finance Ltd [2010] NSWSC 61 (5 February 2010), handed down the following day, Palmer J decided that it is now possible (in certain circumstances) to have a Statutory Demand set aside even if the Originating Process was filed after the 21 day period expired.

In reaching that decision his Honour noted (emphasis added): –

6 These proceedings were commenced on 6 August 2009. If service of the Statutory Demand was validly effected on the Plaintiff on 26 June 2009 then the commencement of these proceedings was well outside the limitation period for the commencement of proceedings provided by s 459G(2) of the Corporations Act and the application will have to be dismissed out of hand without consideration of whether or not there was a genuine dispute.

10 I am satisfied that service of the Statutory Demand was validly effected at the then registered office of the Plaintiff on 29 June 2009. Equally, however, I am satisfied that it was not until after the s 459G(2) period for filing an Originating Process had expired that the Plaintiff first became aware of the service of the Statutory Demand….

However, notwithstanding those matters, his Honour concluded: –

19 In my view, it is far too high a price to pay for an innocent, if neglectful, failure to notify a change of registered office promptly that the Plaintiff be precluded from opposing the Statutory Demand pursuant to s 459G by reason of the expiry of the s 459G(2) limitation period.

20 I take all those circumstances into account in arriving at the conclusion that there is “some other reason” to set aside the Demand under s 459J(1)(b). I order that the Statutory Demand be set aside.

This represents a radical departure from the existing law, and where it leaves us is unclear. The decision would seem to be appealable, as the Court’s purported exercise of the statutory power to set aside Statutory Demands would appear to be well outside the power of sections 459C and 459H of the Act in this instance. However, at the moment, the decision stands – it will be interesting to see how the other judges deal with it.