In the recent Supreme Court of New South Wales decision of PostNet Australia Pty Ltd [2017] NSWSC 160, PostNet Australia Pty Ltd (PostNet) applied under section s 459G (and ultimately 459J) of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand served on it by a former director who lent money to PostNet in the sum of $442,732.56 (the Loan).

The question before Justice Barrett was whether to set aside the statutory demand, not on the basis that there was a genuine dispute regarding the amount of the Loan but rather, whether a genuine dispute existed as to when the Loan was due and payable.

Background

The current sole director and secretary of PostNet accepted that the Loan was made by the former director and remained owing, however, he asserted that by virtue of a meeting that occurred on 24 May 2016 (the Meeting), before the statutory demand was issued, PostNet’s obligations in respect of the Loan were altered.

There was conflicting evidence as to what occurred during that Meeting, however, email correspondence between the parties in the lead up to the meeting indicated that there was at least a contemplation of a re-structure of the Loan.

PostNet asserted that the Meeting resulted in a varying of PostNet’s debt obligations to the former director or at a minimum, varied the former director’s freedom to enforce those rights.

PostNet pointed to section 459J(1)(b) of the Corporations Act that there is ‘some other reason’ why the demand should be set aside and in support of this contention referred Barrett J to paragraph [13] of Black J’s judgment in Tuffrock Pty Ltd [2015] NSWSC 738 which provided a summary of relevant authorities and concluded that the Court could set aside a demand if it was satisfied that a genuine dispute existed as to whether the debt to which the demand relates was due or payable.

Decision

Ultimately, Barrett J found that there were significant questions in need of investigation and determination as to the legal effect of the Meeting on the terms and conditions of the Loan and as such, the statutory demand could not stand.

This case provides a useful example of the application of s 459J and the potential circumstances in which a Court may be satisfied that there is “some other reason” to set aside a statutory demand.

For further information, please contact ERA Legal.