The recent decision of the Federal Court in Wollongong Coal Limited v Gujarat NRE India Pty Ltd [2015] FCA 221  (Wollongong Coal v Gujurat) serves as a reminder that attention to detail is imperative in the context of Statutory Demands and that the strict, technical requirements of Div 2, Pt 5.4 of the Corporations Act 2001 (Cth) (the Act) must be observed.

In Wollongong Coal v Gujurat, Gujarat served a statutory demand on Wollongong Coal. The Affidavit verifying the Demand was sworn the day before the Demand was signed.

One of the grounds on which the demand was challenged was that it was defective because the verifying Affidavit predated the Demand.  Wollongong Coal submitted that this gave rise to ‘some other reason’ to set aside the Demand under s 459J(1)(b) of the Act.

The basis of Wollongong Coal’s submission was that s 459E(3) of the Act  provides that a statutory demand must be ‘accompanied’ by an affidavit that ‘verifies that the debt…is due and payable by the [debtor ] company‘. It was contended that an affidavit that pre-dates a demand cannot verify the demand because of the possibility that the debt has been repaid in the intervening period.

The court noted that while this was a ‘highly technical point’, especially given the intervening period was only 13 hours, it was nevertheless a good one. The court accepted the following principles, established in a line of decisions following Wildtown Holdings Pty Ltd v Rural Traders Co Ltd (2002) 172 FLR 35 (‘Wildtown‘) in respect of s 459E(3) of the Act:

1. An accompanying affidavit that predates a demand does not or cannot verify the demand;
2. Such an affidavit does not satisfy the requirement in s 459E(3) of the Act;
3. The requirement in s 459E(3) of the Act is an important safeguard in the statutory scheme and is therefore mandatory; and
4. Except perhaps in one situation, non-compliance with s 459E(3) of the Act will justify, if not compel, the setting aside of the demand under s 459J(1)(b) of the Act. It is not necessary to point to any substantial injustice.

The exception noted at 4 was a relevant factor in Wildtown, which held that an updating affidavit which verified that the debt referred to in the demand remained due and payable on the date the demand was made may cure a defective accompanying affidavit.  Such an affidavit would however, need to be served either with the demand or within a reasonable time before the expiration of the 21 days available to the debtor to apply to set aside the demand (see Chadmar Enterprises Pty Ltd v IGA Distribution Pty Ltd [2005] ACTSC 39).

The exception did not apply in Wollongong Coal v Gujurat, and as a result, the non-compliance could not be cured and Wollongong Coal was successful in its application to have the Demand set aside.

The decision highlights the importance of strict compliance with the statutory regime in order to ensure that a Statutory Demand is not vulnerable to an application to have it set aside on a technical basis only.