On 11 August 2014, the Court of Appeal handed down its
decision in Kisimul Holdings Pty Ltd v Clear Position Pty
Ltd  NSWCA 262, confirming that a statutory demand is
liable to be set aside, pursuant to s 459J(1)(b) of the
Corporations Act, if the accompanying affidavit does not state that
the deponent believes that there is no genuine dispute about the
existence or amount of debt.
WHAT DOES SECTION 459J SAY?
Section 459J(1)(b) of the Corporations Act provides that
"the Court may by order set aside the demand if it is
satisfied that there is some other reason why the demand should be
WHAT HAPPENED IN THIS CASE?
Kisimul Holdings Pty Ltd applied under s 459G of the
Corporations Act for orders setting aside two statutory demands
served on it by Clear Position Pty Ltd. In each of the affidavits
accompanying the statutory demands, the deponent did not state that
she believed there to be no genuine dispute about the existence or
amount of the debt. One argument advanced by Kisimul was that the
absence of this statement constituted "some other
reason", within the meaning of s 459J(1)(b), such that the
demand should be set aside.
At first instance, Justice Stevenson concluded that, in this
case, the ground of "some other reason" was not made out
by the absence of a "no genuine dispute clause" in the
affidavit accompanying the statutory demand.
WHAT HAPPENED ON APPEAL?
On appeal, Barrett JA (with Beazley P and Gleeson JA agreeing)
ordered that the demand be set aside. The Court found that:
the combined effect of s 459E of the Corporations Act and r 5.2
of the Supreme Court (Corporations) Rules 1999 (NSW)
(Rules) is to require the affidavit accompanying a
demand to comply with Form 7 in Schedule 1 of the Rule;
clause 5 of Form 7 requires a deponent to state his or her
belief that there is no genuine dispute about the existence or
amount of the debt; and
the failure to include this statement constituted "some
other reason" in s 459J(1)(b), enabling the Court to set aside
Before dealing with the matter, the Court made some preliminary
comments about the nature of the power in s 459J(1)(b). It found
that "some other reason" means a reason other than those
specified in ss 459H and s 459J(1)(a) of the Corporations Act and
that those reasons should not be confined to established
Rather, the Court considered that the section is a remedial
provision under which it may deal with cases not within s 459H or s
459J(1)(a) in a way that is just, having regard to the purpose of
the legislation. It found that the section applies whenever there
is a need to counter some attempted subversion of the intended
operation of Part 5.4.
The operation of Part 5.4 is to allow a presumption of
insolvency to arise through non-compliance with a demand for
payment of a debt, but only if it is uncontroversial that the debt
is due and payable. The Court held that a company served with a
demand has a right to be assured that the demanding creditor
recognises that responsibility and has conscientiously formed a
belief that the responsibility has been discharged.
By failing to include a statement about the deponent's
belief as to the absence of a genuine dispute, Clear Position did
not establish that the debt was undisputed; a requirement that is
central to the proper working of Part 5.4. As such, it was open to
the Court to set aside the demands under s 459J(1)(b).
This case serves as a reminder to creditors that the process
provided for in Part 5.4 of the Act must be strictly adhered to in
order to take advantage of the presumption of insolvency where
there has been non-compliance with a demand for payment of a
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Most awarded firm and Australian deal of
Australasian Legal Business Awards
Employer of Choice for
Equal Opportunity for Women
in the Workplace (EOWA)
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
In the years following the global financial crisis of 2008 many Australian investors lost their life savings as financial products failed and the Australian Stock Exchange shed over 3,000 points.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).