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Statutory Demands – A Demanding Timeframe

when 3:00pm on Tuesday the 6th of November comes the great race will begin and my horse (and the other two horses in my box trifecta) will hopefully streak to the front of the field and remain there for another 3 kilometres or so.
The Melbourne Cup is the race that stops the nation; although I can think of a couple of circumstances that would keep lawyers away from the celebrations – one being a response to a Statutory Demand.
The Statutory Demand is a document familiar to many companies; whether as a creditor or a debtor. They essentially provide the debtor with 21 days to respond to a demand; the debtor will be presumed insolvent if the demand is not properly dealt with within that timeframe.
The consequence of been presumed insolvent is that proceedings may then be commenced to wind up your company. You will also be burdened with proving that you are not insolvent in Court, and if you are unable to do so the Court will likely order that the company be placed into liquidation.
The relatively short time frame together with the critical consequence of non-compliance obviously means that it is imperative for a response to be prepared as soon as possible. It is also true that dealing quickly with a Statutory Demand may save money.
It is not unusual for the parties to agree to resolve the dispute (or at least, withdraw the Statutory Demand) after entering into negotiations. This is a cheaper (not to mention less-stressful) way of dealing with the issue. It is also being encouraged by state and federal governments, with recent laws imposing requirements for parties to take ‘genuine steps’ to resolve their differences before the commencement of proceedings.
While it seems logical for the cost to be lower if the dispute is resolved before it goes to Court, we find that some disputes end up in Court nonetheless. More often than not this happens unnecessarily because not enough time was given to negotiate a resolution before the 21 days expired.
It is therefore very important that if you are served with a Creditor’s Statutory Demand you deal with it as soon as practical. Any delay will increase your likely costs of resolving the dispute.
Watkins Tapsell is experienced in responding to Statutory Demands and resolving their underlying disputes. We would be happy to assist you if a Statutory Demand has recently been received (and the sooner the better).

For further information contact our Commercial Litigation Team