In Garuda Aviation Pty Ltd v Commonwealth Bank of
Australia  WASC 115, Master Sanderson set aside a
statutory demand on the basis that it was issued for only part of a
debt due and owing to the Commonwealth Bank, even though that
portion of the debt was undisputed, and was well above the
The Commonwealth Bank claimed to be owed in excess of
US$6,896,535.05 under a commercial loan facility, and this amount
was claimed in (yet to be determined) summary judgment proceedings.
Having regard to the evidence and submissions in those proceedings,
the Commonwealth Bank formed the view that a portion of the debt
($2,099,047.13) was undisputed, and issued a statutory demand for
Garuda argued that it was not permissible to issue a statutory
demand for part of a debt. It relied solely on the recent decision
of Blue J in the Supreme Court of South Australia in Candetti
Constructions Pty Ltd v M&I Samaras (No 1) Pty Ltd 
In Candetti, the creditor issued a statutory demand for
an "undissected portion" of a single debt. Justice Blue
found that the "text and purpose" of section 459E of the
Corporations Act 2001 (Cth) did not permit a demand for an
"undissected portion" of a debt. His Honour found that
not only did section 459E not refer to, nor explicitly contemplate,
a demand for part of a debt, it was preferable to set such a demand
aside for reasons of simplicity, expediency and efficiency.
Master Sanderson noted the conflict in the authorities as to
whether a creditor is bound to issue a single demand for multiple
debts, but found that those authorities were not directly relevant
to the question of whether it was permissible to issue a demand for
a portion of a single debt.
Ultimately, Master Sanderson felt bound to follow the decision
in Candetti for reasons of consistency, and the Commonwealth
Bank's demand was set aside. Master Sanderson did, however,
observe that but for the decision in Candetti, the case would have
been decided differently. With respect, Master Sanderson's
reasoning was compelling: if a company is unable to pay a portion
of a debt which is above the statutory minimum, why should the
company not be presumed insolvent?
The current state of play
For the time being, the law is that a statutory demand may not
be made for part of a single debt, even if that portion is
undisputed and above the statutory minimum. This aspect of the law
of statutory demands is ripe for consideration at the appellate
level. Given the overarching philosophy that corporations that are
unable to pay their debts as and when they fall due ought be
subject to external administration, one has reason to expect that
an appellate court might take a different view to the prevailing
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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