What Options Do Survivors Have to Reopen Historic Child Sexual Abuse Settlements?

Survivors of historic child sexual abuse have the ability to seek redress through a civil law claim against their abuser or negligent institutions for the pain and suffering they have faced. However, these proceedings do not always lead to just outcomes, with many victims receiving far less compensation than they would ordinarily be entitled to.

To rectify these injustices and to allow these victims a second chance to receive greater compensation, many jurisdictions have introduced legislation which give avenues to re-open matters that were settled in various unfair circumstances.

What Legislation Allows Historic Sexual Abuse Settlements to Be Reopened?

Many states have passed legislation which allow Courts to overturn a settlement deed in a historic sexual abuse matter.

Notably, the State New South Wales has enacted the Civil Liability Amendment (Child Abuse) Bill 2021 which allows courts the power to overturn a settlement deed where it is found to be reasonable and just to do so.

How Does Section 50X Work?

Section 50X of the Act allows settlement deeds restricting victims of childhood abuse from seeking further compensation to be withdrawn. To determine whether this is suitable, a Court may consider:

• the amount paid to the applicant under the agreement;
• the bargaining position of the parties to the agreement;
• the conduct in relation to the agreement of:
  • the parties other than the applicant, or
  • the legal representatives of the parties other than the application; and
• any other matter the Court considers relevant.

What About the ‘Ellis Defence’?

The States of Victoria and New South Wales have also passed legislation regarding the ‘Ellis Defence’, a legal loophole used by the Catholic Church that protected them from legal action. The Church had previously successfully argued that they did not legally exist, as their assets were held in trust. Until the overturning of the defence, survivors had to rely on the Church to nominate a legal entity such as a bishop to be sued, a practice which saved the Church millions in payable damages. These changes leave the door open for Courts to decide cases settled under the use of this defence should be reopened.

What Are Some Examples of Historic Abuse Settlements Being Reopened?

In Victoria and New South Wales, settled matters which involved the Catholic Church paying victims relatively small sums of money in exchange for silence have also been permitted to be overturned. Additionally, various settlements that were reached prior to the abolishment of the statute of limitations, where victims were forced to settle their matters before their time run out have allowed to be reopened under recent legislation Australia wide.

What Happened in JAS v The Trustees of the Christian Brothers?

In Western Australia, under Section 92 of the Limitations of Actions Act 2005 (WA), amended by the Civil Liability Legislation Amendment (Child Sexual Abuse Actions) Bill (WA) 2017, the matter of JAS v The Trustees of the Christian Brothers [2018] WADC 169 (“JAS”) demonstrates how these pieces of legislation can work in practice.

The plaintiff had settled their matter for $100,000 in 2015, prior to the abolishment of the statute of limitations for historic sexual abuse. In analysing the circumstances of the matter, the Court noted the amendment to the Limitations of Actions Act 2005 (WA) to remove limitation periods was both prospective and retrospective. At the time the initial settlement was reached, JAS’s claim was statute barred, which the Court noted as severely reducing the plaintiff’s bargaining position. At the time, the Plaintiff held no prospects of success through litigation, and were forced to accept the settlement. These circumstances were sufficient for the Court to grant leave for the case to be reopened.

Although the circumstance of every case is different, the matter of JAS shows the potential to reopen previously settled matters under new legislation, giving survivors greater options in their pursuit of justice.

How Can Survivors Get Help?

If you or a loved one have suffered from historic sexual abuse, it’s crucial to understand your legal rights and options for compensation. Chamberlains Law Firm is here to help you navigate this complex and sensitive area of law. Our experienced team of lawyers can provide you with the guidance and support you need to seek justice and secure the compensation you deserve. Contact our abuse compensation claims team to schedule a confidential consultation and take the first step towards healing and recovery.

Over the weekend I watched a Netflix movie called ‘Dark Waters’, based on a true story about an unassuming corporate lawyer who ends up fighting for ‘the little people’ in a class action against a behemoth American chemical company, Du Pont. It took over 15 years to bring Du Pont to the table to eventually settle over 3,500 claims for debilitating and life threating injuries.

The underlying point of this tale is that it also took a toll on the lawyers’ family life and his own physical and mental health. This is only touched on in the movie when he is eventually hospitalised for a period of time and there is a scene where he sits at the kitchen table and is completely unresponsive to his wife. It would appear he no longer feels or cares for anything going on around him.

As lawyers we are caring, hard working and dedicated to seeking just outcomes for our clients. This is particularly so in personal injury law where we are often exposed to the severe human frailties and traumas of our clients. We often forget to take care of our own health.

Compassion trauma or compassion fatigue is caused by empathy. Sometimes it is called empathy fatigue. It is the feeling of stress that you take on mentally and physically through caring and helping people that are suffering or traumatised. After a while you start to feel indifferent and emotionally numb as a result of the compounding effect of so many of these interactions with people suffering from trauma. Some symptoms of compassion fatigue are disrupted sleep, anxiety, headaches, numbness, emotional disconnection, decreased sense of purpose and difficulties with personal relationships.

As lawyers we are stoic and often do not like to admit that we are struggling with the work we do.

As an abuse lawyer I have experienced compassion trauma or fatigue. I certainly recognised the symptoms at the time. I felt emotionally numb and non-responsive to things in my personal and family life that I should care about. I did not want to take a simple walk in my neighbourhood because I did not want to let my clients down. I struggled with sleep and felt emotionally disconnected in my relationships.

Fortunately, I was able to recognise the symptoms and overcome them.

How do we help manage compassion fatigue? The first thing is to recognise it. Taking decisive action to look after your personal health and relationships can be difficult but it is key to managing compassion fatigue. It is also essential to have a supportive working team environment. Compassion fatigue is not something that someone should go through alone. It is something that your team should be aware of and something that we all can work on together in managing the risk of it occurring. A great supportive team at work listens to eachother and communicates concerns in an empathic and respectful way. Another simple measure might be to take more physical breaks or exercise or take a planned break or holiday, to focus on something positive to look forward to.

At Chamberlains law firm we care about the work we do for our clients. Sometimes to our own detriment. We have to remember that we are human and have our frailties too. It is not weakness but strength to recognise when you need help and there is no shame in seeking this out. Contact our injury & compensation team today.

Have you been appointed as the executor of an estate – but there is another person appointed as “literary executor”?

Are you appointed as literary executor under a will and want to know what to do?

How do you deal with your family member or friends best-selling novel now that they have passed?

 

Probate law deals with property. Most people accept that will cover real estate, money, shares, investments of various kinds, even superannuation in the right circumstances. What about the fruits of your creative labours in your lifetime – artistic works, a best-selling novel, sculptures, letters between you and your muse? Often, the creator of the works wants to see their work promoted and their legacy maintained after their death – but wants to exert control about how that is done, who can exploit their works for profit and who shares in the profits that flow.

This is the second part of a three-part series looking at the concept of “literary executors” – in this part we examine what it means to act as, or with, a literary executor. The ‘Lifecycle of the Literary Estate: Planning for and appointing a literary executor‘ looked at appointing a literary executor under your will. In the final part we will look at what kinds of issues and disputes can arise.

 

How do you take up the appointment?

The appointment of a literary executor requires that the person appointed be recognised by the Court. In an ordinary estate, the usual course is that the will of the deceased person is submitted to the Court, along with other required papers, for a grant of Probate to issue. This is the official and legal recognition by the Court that the executor has the power to administer the estate.

The effect of appointing a literary executor (at least when prepared correctly) is to divide that role into two separate parts. Therefore, as literary executor you must also be granted a separate power by the Court to deal with the specific property the subject of your appointment.

The power of the literary executor is always “subject to” the appointment of the ‘ordinary’ executor – and it goes the other way too, as the ‘ordinary’ executor’s power is limited to all property except what is under the control of the literary executor.

 

What does it cover?

The first question when examining the appointment of a literary executor is what is the scope of the role – what are the creative works, or endeavours that are being captured by the appointment.

This, naturally, relies upon the precision and care with which the original clause was drafted – and also the extent to which the deceased has left the works in a state to be discovered or recovered.

It may be that in order to determine what is within the responsibility of the ‘ordinary executor’ and the literary executor that an application to the Court must be made – not just for Probate, but for a binding determination of the meaning and interpretation of the clause making the appointment.

 

Access to the materials

In times past, a persons literary estate might have been restricted to physical files in order to take control of the estate – personal papers, drafts, working copies, published books and the like. These days many creative works exist only in digital form – for example, the drafts of the novel or the various original voice memos of recordings on a phone that became a hit song.

The property of the literary executor may be limited only to the works themselves, and not the device in which they are stored, or the account on a cloud storage service in which they remain. Therefore, it is important that access be given to the literary executor to retrieve or access the works that their responsibility covers.

Again, in the absence of cooperation by the ‘ordinary executor’ or the cooperation of the holder of the property, it may be necessary to seek the direction, advice or compulsive power of the Court. The interaction between the different types of executors, and of service providers, will likely only increase in complexity as technology continues to advance.

 

What to do next?

Literary estates can be a complex affair and we encourage anyone who is appointed as a literary executor – or even just as ‘regular’ executor of an estate that includes creative endeavours – to get in touch with our expert solicitors to discuss the situation further so that it can be dealt with correctly and efficiently from the outset.

 

For expert legal representation in estate litigation, contact our team today.

“People disappear – maybe as a result of a tragedy, maybe for other reasons, or, sometimes, for reasons unknown. It may be impossible, at a particular time, to say, with certainty, in relation to a particular person, that she or he, is, in fact, no longer alive.”[1]

This remark from the Supreme Court in NSW captures a tragic reality. People do indeed disappear, leaving heartache and uncertainty in their wake. This uncertainty can extend to estate administration and result in the potential for an estate dispute.

So what does the law have to say if a beneficiary of an estate disappears?

 

Estate litigation examples – Missing beneficiaries

Two recent cases handed down by the Court this year confirm the law’s position with respect to missing beneficiaries. They are Application of Roberts (“the Roberts case”)[2] and Application of Jordan; Estate of Michael Galanis (aka Michael Galanakis) (“the Jordan case”).[3]

Both the Roberts and Jordan cases involved applications being made to the Court by the administrators of the estates. The administrators were granted Letters of Administration after both deceased persons died intestate – that is, without leaving a Will. These applications sought that the Court release the administrators from their undertakings to distribute a share of the estate to beneficiaries who had been missing for decades.

 

Circumstances in the Roberts and Jordan cases

In the Roberts case, per section 127(1) Succession Act 2006 (NSW) (“the Act”), the deceased’s five children were entitled to equal shares of their mother’s estate. One of these children was Mr Fox, who had not been seen nor heard from in over 44 years. He and his fiancée had disappeared on a trip to northern New South Wales to inspect a property they were considering purchasing. After a lengthy inquest, two decades later, the Deputy State Coroner determined that while he could not say for certain, he was satisfied the couple were deceased, and issued death certificates accordingly.

In the Jordan case, the deceased’s sole surviving sibling was entitled to half of his estate, and his two nephews to one quarter, per section 129 of the Act. One of these nephews was Mr Galanakis, who had not been seen nor heard from in 38 years. He had disappeared during a trip to Greece with his father. He was last seen leaving his hotel for recreational purposes. Similarly, he had no reason to disappear. Two decades later, in an extensive judgment, a Greek Court declared Mr Galanakis was, in all likelihood, deceased.

 

The Court’s Decision – Benjamin Orders

In both cases, the Court affirmed that in situations of missing beneficiaries, the Court may make an order that the executor or administrator is at liberty to distribute the estate on a particular factual basis.

This type of order has been coined a ‘Benjamin Order’, deriving from the 1902 English case of Re Benjamin.[4] A Benjamin Order is likely to be issued where there is “practical impossibility” of proving a missing beneficiary is in fact alive, and every reasonable step has been taken to trace the person.

In such circumstances, in the words of Justice Hallen of the NSW Supreme Court, “the time has come to end the administration of the deceased’s estate.”[5] The effect of a Benjamin Order is to protect an executor or administrator and permit distribution “without having to wait until what might be unprovable can be proved.”[6]

In both of these cases, the Court was satisfied that all reasonable steps had been taken and Benjamin Orders were made to allow the administrators to distribute the estates on the presumption the missing beneficiaries were deceased.

 

How We Can Help

Estate administration can be an emotional and challenging exercise in the best of situations, let alone when faced with missing beneficiaries, particularly when they result in estate contests and challenging Wills. Our estate lawyer experts in the Private Wealth Law team are here to assist you.

 

[1] Guo v Gao [2021] NSWSC 1059.

[2] [2023] NSWSC 342.

[3] [2023] NSWSC 221.

[4] [1902] 1 Ch 723.

[5] The Roberts case [33]; The Jordan case [44].

[6] The Jordan case at [29] quoting from Yu Yee Luen v So Yu Lung [2022] HKCFI 2403 at [6] (Deputy High Court Judge Jonathan Chang SC).

If you experienced sexual abuse as a child in an institution you may have a claim in negligence against that institution.

An institution takes many forms. It could be a school, a sports club, a children’s home, a juvenile justice detention centre or a foster care placement where the child is placed as a ward of the State.

If a person is considering taking action against the institution he or she has to prove that the institution owed a duty of care and that duty was breached by the institution.

More specifically, the person bringing the action has to show there was a breach of the duty of care to ensure he or she was not sexually abused.

A person may be able to establish there was a breach if their circumstances would lead a Court to consider there was a concern and that the concerning circumstances would have or should have led to the conclusion the child was exposed to the risk of being sexually abused.

Lastly, the breach must have caused damage to the child, usually psychiatric harm.

All of these issues involve a deep dive into the facts of each case.

Further, each case may be impacted by different legislation depending on which State the abuse took place.

At Chamberlains we help survivors of institutional child sexual abuse navigate the complex world of court litigation. Contact our Abuse Compensation Claims team.

This article was prepared with the assistance of Keziah Holdsworth.

If you have been left out of a Will, or have been given a smaller provision than what you thought, you may be able to challenge the Will by what is known as a family provision claim. The basis for this claim is that the Will-maker did not adequately provide for a person, for whom they had a moral obligation to make proper provision.

There are limitations on who can apply and the timeframes that they have to make a claim. Sometimes, there are good reasons for the delay and the Court will grant leave to permit the claim even though a person has missed the deadline for these Will disputes. You should consult a specialist estate dispute lawyer to discuss whether it is likely the Court will reach that conclusion.

 

Who can apply?

One of the limitations on family provision claims is that the applicant must be considered an ‘eligible person’. Determining who is eligible will depend on the law of the State of Territory where the claim is considered, for example:

• Sections 57 and 59 of the Succession Act 2006 for NSW
• Sections 7 and 8 of the Family Provision Act 1969 for the ACT
• Section 91, Administration and Probate Act 1958 for Victoria

Generally, eligible people include partners and children. This can sometimes include dependant grandchildren or stepchildren.

 

What factors does the Court consider?

In a family provision claim the Court considers different factors to establish if the deceased had a moral obligation to provide for the person making the claim (known as the applicant). Common factors that the Court may consider include:

• the relationship between the deceased and the applicant
• the extent and nature of any obligation or responsibilities owed to the applicant
• the nature of the estate
• the financial circumstances of the applicant and other beneficiaries
• any disabilities or health needs of the applicant
• any contribution made to the deceased’s estate
• the adequacy of any provision that was made in the will for the applicant
• the testamentary intentions of the deceased

 

When can you apply?

The limitation period for when a person may make a claim on an estate is determined by relevant State or Territory law. In New South Wales, this claim must be filed within twelve moths from the death of the deceased. In Queensland an application must be made within nine months from the deceased’s death. In the Australian Capital Territory, Victoria, South Australia, and Western Australia an application must be made within six months of the date a Grant of Probate or Letters of Administration is made.

 

Extension of time

There are some circumstances where a person may be able to contest a Will after the time limit has been reached. The Court has the power to grant an extension of time for applications to be made, where they find there is a reason to do so. They may consider a variety of factors, including the circumstances on the applicant, the length of delay, the effect of granting or not granting an extension may have on beneficiaries such as whether it would be unfairly beneficial, particularly if distribution of the estate has occurred, and whether any parties have acted unfairly or dishonestly.

 

Case Study: Tam v Chen [2023] VSC 12

The recent Victorian estate dispute case of Tam v Chen [2023] SDC 12 involved the Court considering an applicant’s claim for an extension to make a family provision claim over her mother’s estate. At the time of the application, it was 13 months past the expiration of the limitation period under Victorian law. The applicant suffered a mild intellectual disability and disabling mental illness. Her two cousins, who were the applicant’s only living relatives in Australia, were the executors of the estate. In coming to a decision, the Court considered applicant’s eligibility to bring a claim, the strength of the case and the impact that granting an extension would have on the other beneficiaries. The executors did not oppose the granting of an extension of time.

The Court ultimately granted the extension of time on the basis that the applicant was certainly an eligible person and had a disability, that the delay was not inordinate or inexcusable, and an extension would have no unfair impact on the other beneficiaries. This was because the majority of the estate (being a property) remained intact, as the income of the property was held on trust to provide for the applicant during her lifetime under the Will. Further, it was appropriate to grant an extension as the applicant was, due to her disability and mental illness, unaware of her rights and was not in a position to give explanation for the delay.

 

What this means for you

If you think you might be eligible to make a family provision claim to challenge a Will, but are concerned about the amount of time that has passed, our estate dispute specialists in the Private Wealth Law team at Chamberlains can assist you.

Having a fall in a supermarket and suffering injures is probably the last thing on your mind when you head off to the supermarket for your weekly shop. Unfortunately this does occur, leaving many with serious injuries and the need for time off work and extensive treatment.

In Strong v Woolworths [2012] HCA 5, the High Court set out the responsibilities of owners to keep their stores, and the footpaths within their land, free of hazards. The precedent placed responsibility on store owners to adopt systems of regular inspection and cleaning of their premises.

The ACT Court of Appeal recently expanded on Strong v Woolworths in Buljat v Coles Supermarkets Australia Pty Ltd [2022] ACTCA 71.

 

Background

In 2017, Ms Buljat slipped on a grape in a Coles supermarket while viewing displayed food. She suffered injury to her right leg and developed chronic pain syndrome and a psychological injury. Ms Buljat commenced proceedings against Coles, arguing their negligence in maintaining the store caused her injuries.

 

Decision in the First Instance

At the initial trial, the ACT Supreme Court ruled against Ms Buljat. Her Honour Balla AJ held that the Coles ‘clean as you go’ system, which instructed employees to amend any food or spillages they saw throughout the store during their shifts, was sufficient to meet Coles’ standard of care. Balla AJ cited Woolworths Ltd v McQuillan [2017] NSWCA 202 in holding that an employee failing to observe and clean a single grape in the store did not amount to negligence.

 

Decision at the Court of Appeal

Ms Buljat appealed the Supreme Court’s decision to the ACT Court of Appeal.

The Court of Appeal found the ‘clean as you go’ approach did not meet Coles’ standard of care. In reaching this decision, the Court held the system neither ensured sufficient personnel were available to identify hazards, nor guaranteed inspections would be held at frequent intervals. The Court referred to evidence that grapes were commonly dropped in supermarkets, and that Coles did not task any employee to monitor for hazards or have responsibility for areas within the store.

The Court of Appeal found Coles breached their duty of care to Ms Buljat, and that breach caused her injuries.

 

Significance of Buljat v Coles Supermarkets Australia Pty Ltd

The Court of Appeal held stores should have systems in place where staff would inspect potential slipping hazards at least once an hour. If this standard is not upkept, injuries of patrons of a store that are caused by the failure to maintain adequate and effective cleaning systems can lead to entitlement to compensation.

The injury and compensation team at Chamberlains are experienced in slip and fall matters, and can assist you in achieving fair compensation for injuries suffered due to the negligence of store owners and their employees.

The Australian government introduced two significant new insolvency solutions following the enactment of the Corporations Amendment (Corporate Insolvency Reforms) Act 2020 (Cth), as part of the federal government’s JobMaker Plan in response to the COVID-19 pandemic. The second of these solutions is the Small Business Debt Restructure Process (SBDRP).

The benefits of entering a SBDRP include:

1. Reduced costs;
2. Shortened turn-around times;
3. Increased and easier access; and
4. Retained control by business owners/directors (through the debtor-in-possession model).

The process is available to incorporated companies if its liabilities are less than $1,000,000.00 (excluding employee entitlements) and all of its tax lodgements are up to date. Under the process, all employee entitlements that are due and payable must be paid before the plan can be put to creditors. Additionally, the process can only be used once in a seven-year window, by both the company and its directors, including former directors who resigned in the 12 months prior.

Within 5 business days after the restructuring process beginning (or longer if approved by the restructuring practitioner) directors must provide the restructuring practitioner with a signed declaration stating that:

• The company is eligible;
• Whether the company has entered into any voidable transactions; and
• The director(s) believe on reasonable grounds that the company meets the eligibility criteria, and state the grounds of that belief.

If you are unsure about whether particular transactions are voidable, you should seek legal advice before making the declaration.

Under a SBDRP, directors are allowed to continue to trade in their company’s normal course of business (subject to certain control and restrictions) while undergoing the restructuring process. The process can take up to 35 business days and can be generally divided into two phases:

1. The proposal phase, where directors and external practitioner work on a plan for up to 20 business days (highlighted in green below); and
2. The acceptance phase, where creditors have up to 15 business days to vote to approve or reject the plan (highlighted in orange below).

A SBDRP can be contingent on a future event, such as a sale of property/asset after a certain period following the creditors accepting the plan. Additionally, all restructuring plans must include several prescribed terms and conditions, including that:

• A creditor cannot receive a transfer of property other than money;
• Admissible debts and claims must rank equally and receive a pro-rata share of the funds for distribution; and
• The SBDRP must be limited to 3 years.

The SBDRP is also available to other incorporated entities such as registered clubs and cooperatives. Sole traders do not have an equivalent option under the personal insolvency regime, although a part 10 agreement under part X of the Bankruptcy Act 1966 (Cth) may produce a similar outcome.

A SBDRP will be terminated if one of the following occur:

1. The SBDRP is completed by virtue of all the terms of the process being satisfied;
2. A creditor obtains a court order terminating the SBDRP;
3. The plan is conditional on a specific event occurring, and that event does not occur;
4. There is a breach of the SBDRP that remains unremedied for a period of 30 days; or
5. An administrator, liquidator, or provisional liquidator is appointed to the company.

Approved plans can also be varied via court order, however you should consider the relevant commercial implications before taking such action.

For personalized and results-driven legal representation in Litigation and Dispute Resolution, contact us now.

 

This article was prepared with the assistance of Matthew Theophile.

As discussed in the previous article, there are various grounds which a debtor company can rely upon in order to seek to set aside a statutory demand issued upon it.

Offsetting Claim

Pursuant to section 459H(1)(b) of the Corporations Act 2001 (Cth) (Act), if the debtor company has an offsetting claim, being a ‘genuine claim’ that it has against the creditor by way of a counterclaim, set-off or a cross-demand, then it can seek to have the statutory demand set aside. Such an offsetting claim must arise between the exact same entities and must be in relation to a debt, damages or other monetary disputes (see No 96 Factory Bargains Pty Ltd v Kershel Pty Ltd [2003] NSWSC 146 in this regard), however it does not have to be related to the debt which forms the basis of the statutory demand. In the case of In the matter of BMG Poseidon Corp Pty Ltd (No 2) [2009] FCA 404, it was held that whilst an offsetting claim may include an unliquidated claim, the claim must be capable of being quantified as an amount of money. Here, the offsetting claim must be bona fide and truly exist in fact and must be brought in good faith, meaning that the debtor company should have prospects of success in bringing such a real claim and it cannot be spurious, hypothetical, illusory or misconceived: see Re Macro Constructions Pty Ltd [1994] 2 Qd R 31 in this regard.

It is important to note that the Court will set aside the statutory demand where after deducting the value of the offsetting claim, the balance of the sum claimed by the creditor under the statutory demand falls below the current statutory threshold of $4,000. On the other hand, where this sum continues to remain above $4,000, the Court can simply make an order to vary the amount of the debt under the statutory demand that will remain outstanding and due and payable by the debtor company.

Other Reasons

The Court may set aside a statutory demand if a defect in that statutory demand was significant enough to cause substantial injustice to the debtor company unless it is set aside. Such defects can include irregularities such as a missing signature on the statutory demand and/or the supporting affidavit, errors with sufficiently involving the entities involved or the amounts claimable, mistakes with service and so on. In such instances, this may also form grounds for the application to wind up the debtor company to be dismissed with costs against the creditor.

This article was prepared with the assistance of Neil Bookseller.

 

For reliable legal guidance in Litigation and Dispute Resolution, contact us now.

If a debtor company receives a statutory demand, it has 21 days to file an application (along with a supporting affidavit) with the Court to set aside that statutory demand. The Court may set aside this statutory demand if:

1. There is a genuine dispute with respect to the debt: see section 459H(1)(a) of the Corporations Act 2001 (Cth) (Act);
2. The debtor company has an offsetting claim: see section 459H(1)(b) of the Act;
3. There is a defect in the statutory demand that will cause substantial injustice unless the statutory demand is set aside: see section 459J(1)(a) of the Act; or
4. Another reason applies: see section 459J(1)(b) of the Act.

If the debtor company has filed an application with the Court to set aside the statutory demand, the time for the debtor company to comply with the statutory demand is automatically extended until the Court has decided on the debtor company’s application: see section 459F(2) of the Act. If this application is however dismissed, the debtor company will have until 7 days after the date of the Court’s order to comply with the statutory demand.

This article will be part 1 to the various grounds based on which a debtor company can seek to have a statutory demand set aside.

 

Genuine Dispute

If the debtor company can prove to the Court that there is a genuine dispute as to the existence of the debtor that the creditor seeks under the statutory demand, then this can form grounds for the statutory demand to be set aside pursuant to section 459H(1)(a) of the Act. The standard test for what is meant by “genuine dispute” was laid out in Eyota Pty Ltd v Hanave Pty Limited (1994) 12 ACSR 785 where McLelland CJ stated:

A genuine dispute connotes a plausible contention requiring investigation and raises much the same sort of consideration as the “serious questions to be tried” criterion … It requires that the dispute be bona fide and truly exist in fact … and the grounds for alleging the existence of a dispute are real and not spurious, hypothetical, illusory or misconceived.

This ground needs to be supported by evidence which outlines the facts on which the dispute is raised and that this material indicates an arguable case. The Court in Beauty Health Group Limited v Wendy Scholl [2011] NSWSC 77 considered factors such as whether there was a ‘plausible contention requiring investigation’ or a claim of ‘some substance’ that is not ‘plainly vexatious or frivolous’. It was important to note that the debtor company is not requires to establish the merits of any claim, meaning that the threshold for what constitutes a “genuine dispute” is lower than what is required to successfully defend a claim: see Turner Corporation (WA) Pty Ltd v Blackburne & Dixon Pty Ltd [1999] WASC 294 in this regard.

If the debtor company is successful in proving the existence of a genuine dispute and sets aside the statutory demand, the Court may order the creditor to pay the debtor company’s costs in relation to the litigation surrounding the application pursuant to section 459N of the Act.

This article was prepared with the assistance of Neil Bookseller.

 

Get the legal representation you deserve – contact our litigation and dispute resolution team today.