A recent decision of the Chief Justice of Queensland illustrates
how statutory demands can be set aside for what might seem to be
relatively minor errors.
In Rapcivic Contractors Pty Ltd v Mapol Industries Pty
Ltd  QSC 310, Mapol allegedly provided painting services
to Rapcivic valued at over $1.8 million. Mapol served a statutory
demand under the Corporations Act 2001 (Cth) demanding
payment of this money.
Rapcivic asked the Court to set aside the demand because it did
not comply with the requirements of the Corporations Act
As there was no judgment, the statutory demand needed to be
accompanied by an affidavit stating that the amount claimed in the
demand was due and payable by the debtor company. Rule 5.2 of the
Corporations Proceedings Rules requires the accompanying affidavit
to be in accordance with the prescribed form 7 and state the
matters mentioned in the form.
One requirement is that the person swearing the affidavit (known
as the "deponent") must state the facts which entitle
them to make the affidavit on behalf of the creditor. If the
creditor is a company, the statutory form suggests that the
deponent state that he or she is authorised to make the affidavit
on the company's behalf.
The affidavit also needs to set out the source of the
deponent's knowledge about the debt. The form suggests that the
deponent say that they were the person who had the dealings which
gave rise to the debt or that they have inspected the records of
the company in relation to the debtor's company's account
with the creditor.
In the Rapcivic case, a director of Mapol swore an
affidavit which basically stated that:
she was a director of the company making the demand,
painting services had been provided to the debtor company,
invoices had been delivered, and
these invoices were not paid.
Rapcivic argued that the accompanying affidavit should have
spelt out all of the details required by the approved form. Mapol
argued that the details required by the form were implicit from the
matters that had been stated in its director's affidavit.
The Chief Justice held that the affidavit was defective and
therefore the demand should be set aside under section 459J(1)(b)
of the Corporations Act 2001 (Cth). In the course of his
judgment, his Honour said:
This is an area of the law where, as is well known, there is
need for substantial compliance with a raft of plain statutory
requirements, if some of them are rather technical in
His Honour's reference to "substantial compliance"
brings up two provisions which can assist creditors seeking to rely
on a technically deficient demand.
The first is section 25C of the Acts Interpretation Act
1901 (Cth), which provides that "substantial
compliance" with a prescribed form is sufficient.
The second is section 459J(1)(a) of the Corporations Act
2001 (Cth) which says that a defect will only invalidate a
statutory demand if "substantial injustice will be caused
unless the demand is set aside".
In relation to section 25C, his Honour found that the defects
were substantial because the form 7 required identification of the
source of the deponent's knowledge, and because merely saying
that a person is a director of a company does not necessarily mean
that the person is authorized to swear an affidavit on behalf of
The Chief Justice appeared to take the view that section
459J(1)(a) was not relevant in this particular case, presumably
because the defects were in the affidavit rather than the statutory
demand itself. However, his Honour seems to have dealt with the
possibility that section 459J(a) might have applied by stating:
... should the consideration be relevant, it would be unjust
to oblige Rapcivic to face the consequences of non-compliance with
a demand as inadequately verified as this one was.
The message for creditors is simple: be careful when issuing a
statutory demand. The accompanying affidavit is not an
inconsequential document. Defects which might seem to be minor can
lead to the demand being set aside.
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.
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Businesses should review their standard form contracts for unfair terms to ensure they do not fall foul of the new laws.
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