You’ve been served with a statutory demand. You have 21 days to respond — and if you believe the debt is wrong, disputed, or the demand itself is defective, you may be able to have it set aside. Here’s what Queensland businesses need to know about the process of challenging a statutory demand under the Corporations Act 2001 and why acting immediately is non-negotiable.
A statutory demand is one of the most powerful debt recovery tools in Australian corporate law. Do nothing, and your company is presumed insolvent — opening the door to a winding-up application. But the law also gives you a mechanism to fight back. That mechanism has a strict time limit, and it must be used correctly.
What Does “Setting Aside” a Statutory Demand Mean?
To “set aside” a statutory demand is to obtain a court order cancelling it — treating the demand as if it was never served. If the court grants the order, the presumption of insolvency disappears, and the creditor cannot use that demand as the foundation for winding-up proceedings.
The application is made under section 459G of the Corporations Act 2001 (Cth). The rules are technical, and the courts apply them strictly. This is not a process to attempt without experienced statutory demand lawyers in Queensland.
The 21-Day Deadline — There Is No Extension
You have exactly 21 days from the date of service to file and serve your application to set aside the demand. This is a jurisdictional requirement — the court has no discretion to extend the time, regardless of the circumstances.
- Day 1 begins the day after service (or deemed service)
- Both the originating process and the supporting affidavit must be filed and served within 21 days
- If you miss the deadline, the right to dispute the demand is permanently lost
If you have received a statutory demand today, contact a lawyer today.
Grounds for Setting Aside a Statutory Demand in Queensland
The Corporations Act provides four main grounds on which a court can set aside a statutory demand:
1. Genuine Dispute About the Debt
The most commonly used ground is that there is a genuine dispute about the existence or amount of the debt (s 459H(1)(a)). The threshold is deliberately low — you don’t need to prove the debt doesn’t exist. You simply need to establish that there is a real, arguable dispute deserving of resolution in proper proceedings.
Courts have found genuine disputes where:
- There is a contractual question about whether the debt is legally owed
- The amount claimed differs from what the company believes is outstanding
- The goods or services that formed the basis of the debt were not delivered or were defective
- There is a related counterclaim or cross-claim against the creditor
2. Offsetting Claim
Even where a debt is admitted, the company may have an offsetting claim — a sum owed by the creditor to the company — that equals or exceeds the demand amount (s 459H(1)(b)). Where the net balance falls below the statutory minimum (currently $4,000), the demand can be set aside or varied.
3. Defect in the Demand
A statutory demand can be set aside because of a formal defect in the document (s 459J(1)(a)). Common defects include:
- Non-compliance with the prescribed form (Form 509H)
- Incorrect or ambiguous identification of the debt amount
- The creditor is incorrectly named or identified
- Multiple separate debts are grouped without sufficient particulars
The court will only set aside a demand on this ground if “substantial injustice would be caused” if the demand were to stand. Minor technical errors will not automatically void a demand, but material defects will.
4. Some Other Reason
Section 459J(1)(b) gives the court a residual discretion to set aside a demand for “some other reason.” This has been applied where the demand was issued as an abuse of process — for example, used as a debt collection mechanism rather than a genuine step towards winding up — or where service of the demand was itself defective.
The Application Process
An application to set aside a statutory demand involves:
- Preparing the originating process — filed in the Federal Court of Australia or the Queensland Supreme Court
- Preparing the supporting affidavit — this is critical. The affidavit must set out all grounds for the application. Evidence not included in the affidavit at filing generally cannot be relied upon at the hearing.
- Filing and serving within 21 days — both documents must be filed with the court and served on the creditor within the 21-day window
- Court hearing — the court determines whether to set aside, vary, or uphold the demand based on the affidavit evidence and legal submissions
The supporting affidavit is your one opportunity to put your best case before the court. It needs to be right the first time.
What Happens If You Don’t Respond?
If the 21-day period expires without an application, the company is deemed unable to pay its debts under section 459C of the Corporations Act. The creditor can then file a winding-up application. At that point, the options available to the company narrow significantly, and the costs of defending the proceedings escalate.
For companies already facing a winding-up application, our Brisbane insolvency lawyers can advise on available options including opposing the application, negotiating a resolution, or exploring voluntary administration.
Can the Demand Be Varied Rather Than Set Aside Entirely?
Yes. Where the court is satisfied that the admitted debt — the portion the company does not genuinely dispute — is less than the amount claimed, the court can vary the demand to reflect that lesser amount rather than setting it aside entirely (s 459H(2) and s 459H(4)). This is relevant where the dispute relates to part, but not all, of the claimed sum.
How Boss Lawyers Can Help
Boss Lawyers acts for Queensland companies that have received statutory demands and need to respond quickly and effectively. We understand the technical requirements, the affidavit evidence needed, and how to put your strongest case before the court.
We also act for creditors who have issued statutory demands and need to defend a set-aside application or advance to winding-up proceedings.
If your company has received a statutory demand, time is critical. Call Boss Lawyers now on 1300 267 711 or visit our statutory demand and debt recovery service page for more information.
Disclaimer: This article provides general information only and does not constitute legal advice. You should obtain specific legal advice relevant to your circumstances before taking any action.
