Service of Statutory Demands

Service Requirements for Statutory Demands

As stated in our previous article, a statutory demand must be addressed to the proper entity (including the correct ACN number) at the registered office address of the debtor company (which can be searched by an ASIC search of the debtor company) in order for it to be considered valid.

This statutory demand can be left at or posted to the debtor company’s registered office address or delivered personally to a director of the debtor company who resides in Australia: see section 109X(1) of the Corporations Act 2001 (Cth) in this regard.

By virtue of section 160 of the Evidence Act 1995 (Cth), the statutory demand is presumed to be served by way of post (unless there is evidence to the contrary) on the seventh working day after it was posted.

Service by Prepaid Post

Where the statutory demand is served by prepaid post on the debtor company, section 29 of the Acts Interpretation Act 1901 (Cth) states that:

• where there is direct and admissible proof that the statutory demand was posted in an envelope with the correct details for the debtor company,
• where there is some evidence that this envelope contained the statutory demand,
• where there is evidence that the envelope was pre-paid and included the cost of postage, and
• where there is proof that this envelope was sealed and posted,

then the statutory demand was served effectively on the debtor company.

These requirements can be proved to be complied with by way of affidavit evidence in any future proceedings.

Informal Service: Recent Movement in the Courts

There has been some movement recently where the Court has deemed service to be effected by way of “informal service” in circumstances where the Court was satisfied that the statutory demand did in fact come to the attention of the officer of the debtor company who is either expressly or implicitly authorised to deal directly or responsively with the statutory demand: see Kookaburra Educational Resources Pty Limited v MacGear Limited Partnership trading as MacGear Australia [2021] FCA 797 in this regard.

This will however require substantial and clear evidence surrounding service of the statutory demand, including evidence of receipt such as:

• file notes
• emails
• text messages
• other acknowledgement records

The Court will closely scrutinise such evidence. There is great value however in ensuring that service has been effected properly through the standard means.

Consequences of Defective Service

It is important to remember that if service of a statutory demand is not properly effected in accordance with the proper requirements, there is a risk that:

• the Court may set it aside, and
• the Court may enter an adverse costs order against the creditor.

For instance, if the statutory demand is being served interstate, such service must be conducted in accordance with sections 9 and 15 of the Service and Execution of Process Act 1992 (Cth).

It is also worth noting that a statutory demand must also specify an address for payment that is in the same jurisdiction in which it was served.

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This article was prepared with the assistance of Neil Bookseller.