How to Set Aside a Statutory Demand: A Queensland Guide

For more information about how Boss Lawyers can assist with debt recovery matters, visit our Debt Collection Lawyers Brisbane page or call Mark Harley on 1300 267 711.

Your company has received a statutory demand. You believe the debt is disputed, or that you have a counterclaim, or that the demand itself is defective. You want to fight it. The mechanism for doing so is an application to set aside the statutory demand under the Corporations Act 2001 (Cth).

This guide explains the process, the grounds, the evidence required, and the critical deadlines you must meet. If you’re in Queensland and facing a statutory demand, this is your roadmap.

The Starting Point: Section 459G

Section 459G of the Corporations Act is the gateway provision. It allows a company to apply to the court for an order setting aside a statutory demand. To use it, you must:

1. File an application with the court
2. File a supporting affidavit with the court
3. Serve copies of the application and affidavit on the creditor

All three steps must be completed within 21 days of service of the statutory demand on the company. There is no room for error here.

The 21-Day Absolute Deadline

We cannot overstate the importance of this deadline. Under section 459G(2) and (3), the application and supporting affidavit must be filed with the court and served on the creditor within 21 calendar days after the demand is served.

This deadline is non-negotiable. The courts have no power to extend it. The High Court made this clear in David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265, holding that the 21-day period is a strict time limit that cannot be extended under any circumstances.

If you miss the deadline — even by one day — your application will be dismissed. No exceptions.

This is why engaging a statutory demand lawyer at the earliest opportunity is essential.

Grounds for Setting Aside a Statutory Demand

There are three main grounds for setting aside a statutory demand:

1. Genuine Dispute: Section 459H(1)(a)

The most common ground. You must demonstrate that there is a genuine dispute about the existence or amount of the debt. The court applies a relatively low threshold — you don’t need to prove your case on the merits. You just need to show the dispute is “real and not spurious, hypothetical, illusory or misconceived” (Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785).

A genuine dispute might arise where:

• You dispute that the debt is owed at all (for example, the goods were never delivered or the services were defective)
• You dispute the amount (for example, you’ve already made partial payments that haven’t been credited)
• There’s an unresolved contractual dispute about whether the debt has crystallised
• You have a defence to the underlying claim (for example, limitation, estoppel, or accord and satisfaction)

The court is not trying to resolve the underlying dispute at this stage. It’s simply asking: is there a plausible basis for saying this debt is contested?

2. Offsetting Claim: Section 459H(1)(b)

You can also have a statutory demand set aside if the company has an offsetting claim against the creditor. An offsetting claim is a genuine claim that the company has against the creditor, whether by way of counterclaim, set-off, or cross-demand.

If the offsetting claim equals or exceeds the amount of the statutory demand, the demand will be set aside entirely. If the offsetting claim is less than the demanded amount, the court may vary the demand to reflect the net balance.

For example, if a creditor serves a statutory demand for $100,000 but the company has a genuine claim against the creditor for $80,000, the court may vary the demand to $20,000 — which, if below the statutory minimum of $4,000, would result in the demand being set aside.

3. Defect in the Demand: Section 459J

Under section 459J(1)(a), the court may set aside a statutory demand if there is a defect in the demand and substantial injustice will be caused unless the demand is set aside.

Under section 459J(1)(b), the court may also set aside a demand if there is “some other reason” why the demand should be set aside. This is a broader discretionary ground.

Common defects include:

• The demand not complying with the prescribed form
• An incorrect description of the debt
• Ambiguity in the demand that makes it unclear what debt is being claimed
• Service of the demand at the wrong address
• The demand being signed by someone without authority

Note that not every defect will be sufficient. The court must be satisfied that the defect would cause “substantial injustice” if the demand were not set aside.

What Evidence Do You Need?

Your application must be supported by an affidavit setting out the facts and matters relied upon. The affidavit is critical — it’s the foundation of your case.

For a genuine dispute, your affidavit should:

• Set out the background to the debt in sufficient detail
• Explain why the debt is disputed, with specificity
• Exhibit any relevant documents (contracts, invoices, correspondence, payment records)
• Be sworn or affirmed by a person with direct knowledge of the facts

For an offsetting claim, your affidavit should:

• Identify the nature and basis of the claim
• Quantify the claim (or explain why quantification is not possible at this stage)
• Exhibit supporting documents

A critical rule: you generally cannot rely on evidence that is not in your supporting affidavit filed within the 21-day period. The court in Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 21 ACSR 581 held that the grounds relied upon must be raised in the affidavit accompanying the application. You can supplement the evidence later, but you cannot raise entirely new grounds.

This makes it essential to get your affidavit right the first time. A statutory demand lawyer experienced in these applications can ensure your affidavit covers all necessary grounds.

What Happens at the Hearing?

After your application is filed, the matter will be listed for hearing before a judge or registrar. In Queensland, these applications are typically heard in the Federal Court of Australia (Brisbane Registry) or the Supreme Court of Queensland.

At the hearing:

• Both parties will have the opportunity to make submissions
• The court will consider the affidavit evidence (these applications are decided on the papers — there is typically no cross-examination)
• The court will determine whether the grounds for setting aside the demand have been made out

If the court is satisfied that a genuine dispute exists or that there is an offsetting claim, it will set the demand aside (or vary it). If the court finds no genuine dispute and no other ground, the application will be dismissed.

If your application is dismissed, the creditor can then proceed with a winding up application. The presumption of insolvency under section 459C(2)(a) will apply.

What Happens If You Miss the 21-Day Deadline?

If you miss the deadline, your options narrow significantly:

• You cannot apply to set aside the statutory demand
• The creditor can file a winding up application based on the presumption of insolvency
• You will need to rebut the presumption of insolvency at the winding up hearing — typically by demonstrating that the company is solvent
• You may be able to apply to have the winding up application dismissed or stayed on other grounds, but this is a much more difficult and expensive process

Missing the deadline is not a death sentence for the company, but it puts you in a significantly weaker position. Prevention — by acting within the 21 days — is far better than cure.

Costs

If your application to set aside the statutory demand is successful, the court will typically order that the creditor pay your legal costs. If your application is dismissed, you may be ordered to pay the creditor’s costs.

The cost of bringing a section 459G application varies depending on the complexity of the matter. Simple applications may be resolved relatively quickly, while complex disputes involving significant evidence can be more involved. At Boss Lawyers, we provide transparent cost estimates at the outset so you can make an informed decision.

How Boss Lawyers Can Help

At Boss Lawyers, we have extensive experience in setting aside statutory demands in Queensland. Our team can:

• Assess your position within 24 hours of receiving instructions
• Prepare and file your s459G application and supporting affidavit within the 21-day deadline
• Represent you at the hearing
• Negotiate with the creditor in parallel with court preparations
• Advise on downstream insolvency implications if the demand is not set aside

If you’ve received a statutory demand and want to explore setting it aside, contact Boss Lawyers on 1300 267 711 or visit us at Level 27, Santos Place, 32 Turbot Street, Brisbane QLD 4000.

This is general information only and is not legal advice. You should obtain legal advice specific to your circumstances.