A company that is served with a statutory demand must either pay the amount referred to in the demand or apply to set aside the demand under s.459G of the Corporations Act 2001 (Cth) within 21 days of service of the demand if it wishes to avoid a presumed insolvency and face the possibility of winding-up proceedings being brought against the company.

In bringing an application to set aside a creditors statutory demand, s.459G(3)(b) requires that the plaintiff must not only file and serve the originating process seeking orders to set aside the demand within 21 days, but all evidence supporting the originating process must be served within that time.

In In the Matter of Prime City Investments Pty Ltd the plaintiff’s very short affidavit which stated:

I refer to and rely upon my affidavit…filed in proceedings number 2012/00089058, a copy of which has been served on the first defendant in those proceedings.

There was nothing else of substance in the affidavit to support the application.  If the earlier affidavit was not admitted into evidence, the plaintiff would be doomed to failure (and presumed to be insolvent).

The court considered two ways that the earlier affidavit could be relied upon by the plaintiff:

1. By being incorporated into the affidavit by reference; or
2. Under rule 31.9 of the Uniform Civil Procedure Rules (2005) NSW, which permits when an affidavit filed in other proceedings may be used in evidence.

The court found against the plaintiff on both grounds, noting:

1. Compliance with s.459G(3) must be ‘strict and precise’ as stated in David Grant and Co Pty Limited v Westpac Banking Corporation [1995] HCA 43 particularly as the section requires that a complete copy of the supporting affidavit be served within the 21 day period following service;
2. Simply stating ‘I refer to and rely on’ does not operate to put a document into evidence.  While the document can be separately tendered, that does not make the document part of the evidence.  Only annexing or exhibiting the document would make it part of the affidavit; and
3. Rule 31.9 permits an affidavit or evidence from earlier proceedings to be used with leave only and such evidence can only be used in relation to the proof of particular facts.  The court held that the plaintiff failed to identify the particular facts which the earlier affidavit would be said to prove.

While not referred to in this case, it is worth considering the Greywinter principle set out in Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 21 ACSR 581.  This decision permitted a plaintiff to lead further evidence on an application to set aside a statutory demand, if the affidavit filed within the 21 day period in support of the application in some way advanced the application.  While the affidavit need not detail, in admissible form, all evidence that supports a contention of a genuine dispute, it must disclose facts showing there is a genuine dispute, if that is the ground relied upon in the application.  A bare denial of the debt is not enough.  The affidavit relied upon in Prime City appears to have not met this threshold, but the court did not refer to Greywinter.

As always, applications to set aside statutory demand must be prepared with great care, and a company that has been served with such a demand and wishes to apply to set aside that demand should seek competent and specialised legal advice without delay.