Setting aside a statutory demand – 'genuine
A company may apply to set aside a statutory demand where there
is a 'genuine dispute' about the existence or amount of the
debt. Numerous cases have considered the meaning of 'genuine
dispute' and the issue is not always clear.
At the hearing of an application to set aside a statutory demand
on the ground that there is a genuine dispute, a court will not
typically embark upon an extended enquiry as to why the debt is
disputed. Rather, the court will usually seek only to satisfy
itself that there is a dispute and that it is genuine.
If the court concludes that there is a genuine dispute, it will
usually set aside the statutory demand and order that the creditor
pay the company's costs.
For this reason, issuing a statutory demand against a company in
circumstances where the company is likely to challenge the demand
on the basis of a 'genuine dispute' involves a risk of
further expense and delay, even though the creditor may actually
have a good underlying debt claim against the company.
An exception – Lodge Partners Pty Limited
In a recent decision of the Federal Court, Lindgren J held (in
dealing with an application to set aside a statutory demand) that
it was appropriate for the court to determine the proper
construction of the contract at the heart of the so-called
Ordinarily, questions of disputed fact will not be determined on
an application to set aside a statutory demand. However, his Honour
made an exception to this general rule in circumstances where:
the dispute related to a simple question of the construction of
a document (or a 'short point of law') that can readily be
there was no factual issue that needed to be resolved
neither party proposed to rely on pre or post contract conduct
to support their argument as to the proper construction of the
Why is this helpful?
Deciding whether to issue a statutory demand may have become a
Debtors who raise a questionable 'genuine dispute' based
on the construction of the documents, risk having the legal issue
determined and, if it goes against them, their application
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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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