The Federal Court of Australia has affirmed that the existence of technical defect in a Statutory Demand will not automatically entitle its recipient to an order setting the demand aside.

In the recent decision of Pluton Resources Limited (Receivers and Managers Appointed) v Lefty Resources Pty. Limited [2015] FCA 894, Siopsis J of the Federal Court of Australia was asked to consider an application to set aside a Creditor’s Statutory Demand for Payment of Debt that had been issued by Lefty to Pluton in connection with two invoices relating to consultancy fees.

His Honour held that the Statutory Demand was defective as despite the fact that it set out the total amount of the debt owing, it failed to specify the specific amounts due in respect of each of the separate invoices. In this regard, Siposis J followed the reasoning of Lindgren J in Chippendale Printing Co Pty Limited v Deputy Commissioner of Taxation, in which his Honour held that where a statutory demand was issued for a total amount comprised of two separate debts, then the debts should be individually identified and the amount separated and the total amount then given.

In his evidence, the Receiver of Pluton (who had been served with the Statutory Demand) established that a review of Pluton’s records had failed to identify the second of the two invoices, and that therefore the Receiver was unable to verify the legitimacy of the total debt claimed in the demand. The Receiver contended that if the demand was not set aside, a substantial injustice would result.

Unfortunately for the Receiver, Lefty’s evidence established that the invoices had indeed both been provided to Pluton and acknowledgement of their receipt had been given.  As a result, it was Pluton’s record keeping that might more accurately be described as defective. His Honour, in dismissing the Receiver’s application with costs, opined at [17]:

“the plaintiff cannot rely upon its own default to allege that it is the subject of a substantial injustice by reason that it does not know the amount claimed in each of the two invoices comprising the total debt claimed in the statutory demand.”

The decision highlights two important matters with regard to Statutory Demands:

1. It is best practice when issuing a Demand to properly set out, in circumstances where the debt claimed is made up of two or more smaller debts, the precise amounts of each separate debt and how they arise; and
2. In circumstances where a technical defect in relation to the identification of a compound debt exists in a Demand, if the recipient’s own record keeping is the true cause of its inability to verify the legitimacy of the debt, it is unlikely that a sufficiently substantial injustice will be caused to entitle the recipient to an order setting the demand aside.

For more information contact ERA Legal.