INSOLVENCY LAW
Statutory Demands
1.
Who can serve a statutory demand?
As well as the ordinary individual creditor to whom the company has become
indebted, the following may serve a statutory demand:
2.

secured creditors;

assignees — see s 459E(4);

joint creditors — all must join in the demand for it to be valid;

corporate creditor in liquidation — the demand must be made in the name of the
company.
When can a statutory demand be served?
A creditor owed at least $2000 due and payable may serve on the company a Form
509H demand specifying the debt (or the total debts) and requiring the company to
pay or to secure or compound for the amount due to the creditor’s reasonable
satisfaction within 21 days after service: s 459E.
A statutory demand is defined in section 9 definition: See section 459E(2) and Form
509H of Corporations Regulations 2001 (Sch 2).
The statutory definition is broad and includes documents which “purport” to be a
statutory demand and could include photocopied documents, unsigned documents
and documents not containing an address in the State: R & R Consultants Pty Ltd v
Deputy Commissioner of Taxation [2006] NSWSC 1152. Indeed, courts have held that
the legislation has not made compliance with the form a pre-requisite of validity:
Quitstar Pty Ltd v Cooline Pacific Pty Ltd (2003) 22 ACLC 15; 48 ACSR 222; [2003]
NSWCA 359.
3.
The following issues arise in relation to the issue of a statutory demand:
(a) Section 459E – refers to a “debt” whose amount is at least equivalent to the
“statutory minimum”: see section 9 which refers to $2000;
(b) Where the debt is a non-judgment debt, the statutory demand must be
accompanied by an affidavit that complies with the rules of the Court (section
459E(3)). The rules differ as to the person who can make the affidavit. Where the
creditor is a company in liquidation, the affidavit is made by the liquidator.
Defects in the affidavit that cause it to fail to verify the debt can lead to the
demand being set aside: Zhen Yun (Aust) Pty Ltd v State Bank of South
Australia (1994) 13 ACSR 801. If it is made by a person other than one prescribed,
the demand may be set aside: B & M Quality Constructions Pty Ltd v Buyrite
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Steel Supplies Pty Ltd (1994) 15 ACSR 433. However, the failure to provide an
affidavit in support does not prevent the characterisation of the document as a
statutory demand although it may provide grounds to set the demand aside:
Radiancy (Sales) Pty Ltd v Bimat Pty Ltd (2007) 25 ACLC 1216; [2007] NSWSC
962 at [46]. It should be noted that an affidavit executed before a statutory
demand cannot verify the demand: Wildtown Holdings Pty Ltd v Rural Traders
Co Ltd (2002) 172 FLR 35; [2002] WASC 196.
(c) The amount claimed in the statutory demand must be the amount due by the
company to the creditor as at the date of the demand: Topfelt Pty Ltd v State
bank of New South Wales Ltd (1993) 47 FCR 226; 12 ACLC 15; 12 ACSR 381.
(d) Further, the creditor’s claim must be a “debt”. The question therefore is, what is
a “debt”?
A. In Reinsurance Australia Corporation Ltd v Odyssey Re (Bermuda) Ltd
(2001) 36 ACSR 348; [2000] NSWSC 1118 it was held that a debt needed to be a
liquidated sum in money presently due owing and payable by one person to
another. In that case Macready M referred to McPherson J’s remarks in
Rothwells Ltd v Nonmark (No 100) Pty Ltd [1990] 2 Qd R 85; (1988) 13 ACLR
421 where his Honour stated that there were three ways in which a debt could
arise: (i) by judgement; (ii) by deed under seal; and (iii) as the quid pro quo for
a consideration that was executed.
B. A claim for an liquidated damages is not a “debt” for the purposes of section
459E. Nor is a costs order prior to final assessment and, at common law, an
unascertained balance due on termination of a partnership, is not a debt.
C. however, a right to recover sums in restitution may be a debt to the purposes
of section 459E: HL Diagnostics Pty Ltd v Psycadian Ltd [2005] WASC 234.
D. If there are multiple debts, there must be one demand for all debts claimed to
be owing by the company to a creditor.
4.
When will a company be taken to fail to comply with a statutory demand?
Section 459F where a company has failed to comply with a statutory demand at the
end of the period of compliance, the company is taken to fail to comply with the
demand at the end of the period. The compliance period is 21 days after the demand is
served unless the court makes an order extending the period of compliance or the
period ending seven days after any application under section 459G is finally
determined or otherwise disposed of.
If the company does not pay and does not move to have the demand set aside, the
creditor not having unequivocally withdrawn the demand, the company will have the
burden of proving that it is solvent when the application is heard.
2
5.
Applications to set aside statutory demands - formalities
[24.77]
Objections by a company to a statutory demand served on it may be made by way of
an application (section 459G) to have the demand set aside by the Court (see section
58AA ie Federal Court or Supreme Court or Family Court). When an application
under section 459G is filed in the Supreme Court, the court is exercising federal
jurisdiction that is conferred by section 1337B(2)(b) of the Corporations Act. In
consequence, where the court exercises the jurisdiction conferred by section 1337B(2),
then section 79 of the Judiciary Act 1903 (Cth) is relevant1. Section 79 of the Judiciary
Act 1903 (Cth) states:
“the laws of each State or Territory, including the laws relating to procedure,
evidence, and the competency of witnesses, shall, except as otherwise provided by the
Constitution or the laws of the Commonwealth, be binding on all courts exercising
federal jurisdiction in that State or Territory in all cases to which the applicable.”
This means that where an application is brought in New South Wales, and where the
Corporations Act does not indicate any intention to exclude, modify or limit the
“picking up” through section 79 of the Judiciary Act, of the rules and requirements of
the law of New South Wales, then New South Wales law may have bearing on matters
before the court. This was illustrated in Fastlink Calling Pty Ltd (2008) 217 FLR 366;
26 ACLC 374 where the court had to determine the requirements of a valid affidavit in
the context of a statutory demand.
These Courts have statutory jurisdiction under Pt 5.4 Div 3 of the Corporations Law to
set aside a statutory demand on certain grounds. Their statutory jurisdiction is given
by sections 459H and 459J. However, there are important principles that apply in
relation to setting aside statutory demands generally. These principles include:
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(a)
the application to set aside the demand can only be made within 21 days after
the demand is served: section 459G(2) and David Grant & Co Pty Ltd v Westpac
(1995) 184 CLR 265; 13 ACLC 1572; 18 ACSR 225 which held that these time limits
must be strictly complied with as the underlying purpose of section 459G is to
require an alleged debtor company to move quickly to dispute the statutory
demand: Aussie Plant hire Pty Ltd v Esanda Finance Corp Ltd (2008) 232 CLR
314. There is no statutory extension or jurisdiction in a Court to extend that
period if the company does not apply under section 459G for an order setting
aside the demand.
(b)
an application to set aside the demand can only be made in accordance with
section 459G only if within the 21 day period an affidavit supporting the
application is filed with the court AND a copy of the application and a copy of
This is because section 1337B(2) is within Division 1 of Part 9.6 of the Corporations Act. Section
1337A(3), which is also in Division 1 of Part 9.6 of the Corporations Act, says that this division
does not limit the operation of the provisions of the Judiciary Act 1903 other than section 39B.
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the supporting affidavit are served on the person who served the demand on the
company: section 459G(3). Non-compliance with the requirements set out in
section 459G(3) will mean that the Court has no power to set aside the statutory
demand and is compelled to dismiss the section 459G application: David Grant
& Co Pty Ltd v Westpac (1995) 184 CLR 265; 13 ACLC 1572; 18 ACSR 225.
(c)
in applying for an order setting aside a statutory demand there also needs to be
compliance with Rule 2.4A of the Supreme Court (Corporations Rules) 1999 in
that an ASIC search of a company needs to be annexed to an affidavit.
(d)
the requirements for supporting affidavits are set out by Barrett J in Fastlink
Calling Pty Ltd (2008) 217 FLR 366; 26 ACLC 374. In that case his Honour had to
deal with a preliminary question as to whether or not a document that was filed
by a plaintiff was, in reality, an affidavit. Although “Affidavit” is defined in
section 9 to include an affirmation, there is no other definition in the
Corporations Act to provide guidance as to the meaning of the word “affidavit”2.
In consequence, and by virtue of section 5C of the Corporations Act, regard is
had to section 27(b) of the Acts Interpretation Act 1901 (Cth) which relevantly
provides that:
“the words “oath” and “affidavit” shall in the case of persons allowed by law to
affirm declare or promise instead of swearing, include affirmation, declaration and
promise and the word “swear” shall in the like case include affirm, declare and
promise.”
(e)
failure to serve the exhibits to the supporting affidavit within the 21 day period is
not necessarily fatal to the application: Tatlers.com.au Pty Ltd v Davis (2007) 25
ACLC 1150. Further, although it is not mandatory that the supporting affidavit
not annex the statutory demand, the applicant must prove the existence of the
demand: Expressway Spares Pty Ltd v CTK Engineering Pty Ltd [2005] NSWSC
1200
(f)
in Scope Data Systems v BDO Nelson Parkhill [2003] NSWSC 137, it was stated
by Barrett J at [22] that:
“the real point is that the Application and Affidavit filed and served within the 21
day period must fairly alert the claimant to the nature of the case the company will
seek to make in resisting the Statutory Demand. The content of the Application and
Affidavit must convey, even if it be by necessary inference, a clear delineation of the
area of controversy so that it is identifiable with one or more of the grounds made
available by section 459H and 459J. That process of delineation may not be extended
2
There is no statute in New South Wales which deals comprehensively or exhaustively with the
procedures involved in the creation of affidavits. The Oaths Act 1900, according to Barrett J in
Fastlink Calling Pty Ltd (2008) 217 FLR 366; 26 ACLC 374 at [15], presupposes certain
principles of the unwritten law and “builds upon them”. See Bacon’s Abridgement (Matthew
Bacon, “A New Abridgement of the Law”, London, 1832, Page 124.
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after the end of the 21 day period, although it is open to the plaintiff to supplement
the initial Affidavit by way of additional evidence relevant to the area of controversy
identified within the period.”
(g)
the affidavits filed with the application under section 459G should set out
sufficient material to enable the court to conclude that there is a genuine dispute
or off-setting claim (in the context set out below); if this is not possible within the
21 day time limit, the affidavits should explain why: The Hire Works Pty Ltd v
Elexpo Pty Ltd (1995) 19 ACSR 114; 14 ACLC 111. If it decides that there is a
genuine offsetting claim, the Court does not value the claim, but offsets its total
amount in order to arrive at the substantiated debt: Classic Ceramic Importers
Pty Ltd v Ceramica Antiga SA (1994) 13 ACSR 263; 12 ACLC 334. If the result is
that the substantiated debt is less than $2000, the court will set aside the demand.
However, it may do so subject to conditions, for example that the company pay a
specified portion of the sum claimed in the demand: see s 459M. If the court finds
there is a substantiated debt of more than $2000, then the demand may be varied
by the court and may still be relied on by the creditor for the winding up
application.
(h)
later affidavits cannot be relied upon to identify a new ground for contending
that the debt is genuinely disputed or to raise an offsetting claim. However, it is
open to an applicant to supplement its initial affidavits by supplementary
evidence relevant to an area of controversy which has been identified in the
initial affidavits: Graywinter Properties Pty Ltd v Gas & Fuel Corporation
Superannuation Fund (1996) 70 FCR 452; (1996) 14 ACLC 1703; 21 ACSR 581.
(i)
A ground of opposition to the demand is not raised by the supporting affidavit
may not be relied upon even if it should have been reasonably apparent to the
defendant from what is passed between the parties: Tatlers.com.au Pty Ltd v
Davis (2007) 25 ACLC 1150.
(j)
it has been held that the Court has no jurisdiction to hear an application to set
aside a statutory demand when the application and the supporting affidavit have
not been effectively served “in accordance with” the requirements of section
459G(2) and (3): Dominion Capital Pty Ltd v Pico Holdings Inc (2001) 4 VR 195;
40 ACSR 137. See also Cooloola Dairys Pty Ltd v National Foods Milk Ltd
[2005] 1 Qd R; (2004) 22 ACLC 1345. A failure to lodge the required affidavit
within a 21 day timeframe means that there is no valid application to set aside
statutory demand: Pearlburst Pty Ltd v Summers Resort Group Pty Ltd [2007]
NSWSC 1126
(k)
if there is more than one statutory demand served on the creditor, a separate
application must be made for each: Calquid Pty Ltd v A & D R Illes Pty Ltd
(2000) 34 ACSR 523.
(l)
service should be effected at the address specified in the Form 509H notice,
which is likely to be the address of the company's solicitors, rather than its
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registered office3: see Players Pty Ltd v Interior Projects (1996) 20 ACSR 189; 14
ACLC 918. However, service at the registered office may be sufficient; delivery to
an address other than the nominated address or registered office is not good
service: Rochester Communications Group Pty Ltd v Lader Pty Ltd (1997) 143
ALR 406; 23 ACSR 380; 15 ACLC 570. The High Court has now made it clear that
the 21 day period may not be extended whether under s 1322(4) or otherwise:
David Grant & Co Pty Ltd (rec apptd) v Westpac Banking Corp (1995) 131 ALR
353; 18 ACSR 225; 13 ACLC 1572. It may be possible, however, to put on
supplementary affidavits outside the 21 day period: Mibor Investments Pty Ltd
v Commonwealth Bank of Australia [1994] 2 VR 290; (1993) 11 ACSR 362; 11
ACLC 1062. The verifying affidavit should be sworn by a member or officer of
the debtor company and not by, for example, the company's solicitor: L M & W J
Taylor Pty Ltd v Armour Timber & Trading Pty Ltd (1996) 19 ACSR 231; 14
ACLC 449.
(m) if the company does not apply to set aside the demand on one of the grounds
available under sections 459H–459J, it will need the court's leave to raise those
grounds at any future hearing in the winding up proceedings: section 459S.
6.
Section 459H
This section provides that statutory demands may be set aside:
(a)
where there is a “genuine dispute” (section 459H(1)(a)) as to the debt claimed in
the demand. The debtor company must show there is a genuine dispute.
Although the standard of satisfaction the court requires is not high, the debtor
must at least show there is a “plausible contention” requiring investigation
(Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785; 12 ACLC 669. Arguing
that the creditor has no evidence for the debt is not enough (Moyall Investments
Services Pty Ltd v White (1993) 12 ACSR 320). Note that even though there is a
bona fide dispute as to a debt, the court still has a discretion to order that a
company be wound up where the evidence shows that it is insolvent (ACP Syme
Magazines Pty Ltd v Tri Automotive Components Pty Ltd (1997) 23 ACSR 530;
15 ACLC 732).
When a company claims there is a dispute it must find that there is an actual
dispute and that it is a genuine dispute. In Spencer Constructions Pty Ltd v G
& M Aldridge Pty Ltd (1997) 147 ALR 444, the Full Federal Court said that a
“genuine dispute” must be bona fide and truly exist in fact and that the grounds
for alleging the dispute are real, not spurious, hypothetical, illusory or
misconceived. A genuine dispute depending upon a matter of law must also be
identified, either expressly or by inference, in the supporting affidavit filed
within time: Tatlers.com.au Pty Ltd v Davis (2007) 25 ACLC 1150.
3
In relation to service of documents on companies and on directors, see section 109X of the
Corporations Act and Howship Holdings Pty Ltd v Leslie (1996) 41 NSWLR 542. However, it
should be noted that this section does not apply to statutory demands.
6
In Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR
290, Hayne J said, after referring to certain factors which identify the summary
nature of the section 459G procedure, that:
"These matters, taken in combination, suggest that at least in most cases, it is not
expected that the court will embark on any extended inquiry in order to determine
whether there is a genuine dispute between the parties and certainly will not attempt
to weigh the merits of that dispute. All that the legislation requires is that the court
conclude that there is a dispute and that it is a genuine dispute."
In Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, McLelland J said:
"It is, however, necessary to consider the meaning of the expression 'genuine dispute'
where it occurs in s.450H. In my opinion that expression connotes a plausible
contention requiring investigation, and raises much the same sort of considerations
as the 'serious question to be tried' criterion which arises on an application for an
interlocutory injunction or for the extension or removal of a caveat. This does not
mean that the Court must accept uncritically as giving rise to a genuine dispute,
every statement in an Affidavit 'however equivocal, lacking in precision, inconsistent
with undisputed contemporary documents or other statements by the same deponent,
or inherently improbable in itself, it may be' not having 'sufficient prima facie
plausibility to merit further investigation as to [its] truth' (cf Eng Mee Yong v
Letchumanan [1980] AC 331 at 341), or "a patently feeble legal argument or an
assertion of facts unsupported by evidence": cf South Australia v Wall (1980) 24
SASR 189 at 194."
In Karimbla Construction v Alliance Group Building [2003] NSWSC 617,
Barrett J repeated what he had said in Solarite Air Conditioning Pty Ltd v York
International Australia Pty Ltd [2002] NSWSC 411 in relation to setting aside a
statutory demand:
“It is appropriate to dwell for a moment on the guidance provided by these cases. The
tests of 'plausible contention requiring investigation', 'real and not spurious,
hypothetical, illusory or misconceived' and 'perception of genuineness (or lack of it)',
applied in the context of a summary procedure where 'it is not expected that the court
will embark on any extended inquiry', mean that the task faced by a company
challenging a statutory demand on the 'genuine dispute' ground is by no means at
all a difficult or demanding one. The company will fail in that task only if it is found
upon the hearing of its s.459G application that the contentions upon which it seeks to
rely in mounting its challenge are so devoid of substance that no further investigation
is warranted. Once the company shows that even one issue has a sufficient degree of
cogency to be arguable, a finding of genuine dispute must follow. The court does not
engage in any form of balancing exercise between the strengths of competing
contentions. If it sees any factor that, on rational grounds, indicates an arguable case
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on the part of the company, it must find that a genuine dispute exists, even where any
case apparently available to be advanced against the company seems stronger."
In Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation
Fund (1996) 70 FCR 452; (1996) 14 ACLC 1703, Sundberg J said at (ACLC 1,708;
FCR 459):
“In a section 459H(1)(a) case, the Affidavit must in my view disclose facts showing
there is a genuine dispute between the parties. A mere assertion that there is a
genuine dispute is not enough. Nor is a bare claim that the debt is disputed
sufficient. It follows from the fact that the Affidavit need not go into evidence, which
is the customary function of an Affidavit, that it may read like a pleading.”
If a ground of dispute has not been adequately raised in the required supporting
affidavit, the applicant may still rely upon the additional ground to show that
there would be a substantial injustice within the meaning of section 459J(1)(a) if
the demand is not set aside: Tablecloths.com.au Pty Ltd v Forbes (Aust) Pty Ltd
[2005] NSWSC 1343.
(b)
if the company has an “offsetting claim” (section 459H(1)(b)) which reduces the
admitted debt owed to below the statutory minimum of $2000. An offsetting
claim is a genuine claim which the debtor has by way of counterclaim, set-off or
cross-demand, whether or not it arises out of the same transaction or
circumstances as the debt claimed in the demand (s 459H(5); Just Right Foods
Pty Ltd v Inghams Enterprises Pty Ltd (1998) 27 ACSR 638). “Cross-demand” is
a very broad term, encompassing any claim for damages which can be
quantified, and might include a claim for damages under the Trade Practices Act
or for breach of contract (John Shearer Ltd v Gehl Co (1995) 130 ALR 732; 18
ACSR 780; 14 ACLC 147).
The Court must be satisfied that there is a “serious question” of the company
having an offsetting claim (Scanhill Pty Ltd v Century 21 Australasia Pty Ltd
(1993) 12 ACSR 341; 12 ACLC 111). To put it another way, that the company has
a claim that may have some substance (Chadwick Industries (South Coast) Pty
Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37); mere assertion will
not suffice, but proof of the claim is not necessary (John Holland Construction
and Engineering Pty Ltd v Kilpatrick Green Pty Ltd (1994) 14 ACSR 250; 12
ACLC 716).
Under s 459H(5), an offsetting claim must be a ‘counterclaim, set-off or crossdemand’. ‘Counterclaim’ and ‘set-off’ are technical words with a confined
meaning but ‘cross-demand’ is not: John Shearer Ltd v Gehl Co (1995) 60 FCR
136. The Full Federal Court has held that it extends beyond claims that could be
introduced by a defendant into an action. For example, a company against
whom a demand is made based on a bill of exchange can make counterclaims
only where there is fraud or under a relevant statutory provision: any other
cross-claim must be litigated separately. The amount of an offsetting claim,
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including accrued interest, is to be considered as at the time the application
under s 459G is heard, not the time of filing: Equuscorp Pty Ltd v Perpetual
Trustees WA Ltd (1997) 24 ACSR 194.
7.
Section 459J
This section provides that statutory demands may be set aside when the Court is
satisfied that:
(a)
because of a defect in the demand, substantial injustice will be caused, unless the
demand is set aside; or
(b)
there is some other reason why the demand should be set aside.
Defect in demand
Section 459J(2) provides that except as provided in subs (1), the court must not set
aside a statutory demand merely because of a defect. Once it appears that the court has
jurisdiction, the court has a judicial discretion whether to make an order setting the
demand aside. Section 9 states that a “defect” includes:
 an irregularity; and
 a misstatement of an amount or total; and
 a misdescription of a debt or other matter; and
 a misdescription of a person or entity.
[24.79]
It is rare that deficiencies in the form of demands are so fundamental that the demands
are incapable of assuming the description of statutory demands. In Topfelt Pty Ltd v
State Bank of New South Wales Ltd (1993) 47 FCR 226; 12 ACSR 381; 12 ACLC 15, the
demand notice claimed a debt and interest, but did not specify the rate of interest, the
source of the creditor's entitlement to it, nor the amount of interest claimed to the date
of the demand. Lockhart J of the Federal Court made it clear that demands should be
expressed in “clear, correct and unambiguous terms”, and set aside the demand.
In Kalamunda Meat Wholesalers Pty Ltd v Reg Russell & Sons Pty Ltd (1994) 13
ACSR 525; 12 ACLC 391, the notice did not follow the prescribed form (Form 509H)
because it omitted the notes 1–4 at the end of the notice; however, the court did not set
the demand aside, the debtor conceding that the omission did not cause it substantial
injustice. By contrast, a single demand with three separate creditors claiming one
composite debt constituted a defect leading to substantial injustice in First Line
Distribution Pty Ltd v Whiley (1995) 18 ACSR 185; 13 ACLC 1216.
Some other reason
In relation to “some other reason” to set the demand aside (section 459J(1)(b)), solvency
alone is not “some other reason” (Chippendale Printing Co Pty Ltd v DCT (1995) 15
ACSR 682). This must be something other than a defect in the demand itself. The fact
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that the accompanying affidavit does not comply with the rules of the state in which
the demand was served will not be “some other reason”, if the affidavit complies with
the rules of another court having jurisdiction (Spencer Constructions Pty Ltd v G &
M Aldridge Pty Ltd (1997) 24 ACSR 353; 15 ACLC 1001). If the Court finds the
statutory demand procedure has been used oppressively to coerce payment of a
disputed debt, this might justify setting aside the demand under this head: Moutere
Pty Ltd v DCT (2000) 34 ACSR 533.
The Court’s power to set aside a demand under s 459J(1)(b) is not confined by any
requirement that the court must be satisfied that the demand will cause substantial
injustice if it is not set aside. But exercise of the discretion given by s 459J(1)(b) must be
exercised on ‘some sound or positive ground or good reason which is relevant to the
purposes for which the power exists’ and applications under para (b) must be
approached in recognition that ‘ss 459H and 459J(1)(a) show that demands are to stand
unless there are reasons of appropriate seriousness for setting them aside’: Portrait
Express (Sales) Pty Ltd v Kodak (A’asia) Pty Ltd (1996) 20 ACSR 746.
8.
Consequences of failing to comply with the demand — oppose at hearing
Unless the demand is set aside, the debtor will have 7 days from the application being
determined (or such other period set by the court) to comply with the demand or
varied demand, failing which the creditor may rely on the demand to apply for the
winding up: s 459F(2).
If the application, however, is brought merely to obtain an extension of time to comply
with the demand, it will be considered an abuse of process and an order will not be
made: Vista Commercial Construction Pty Ltd v DCT (1997) 25 ACSR 285; 15 ACLC
1,688.
If it is decided to withdraw a notice of demand, it is not necessary to obtain a court
order. A statement in writing unequivocally withdrawing the notice is enough.
If the company has not complied with the demand within 21 days or succeeded in
having it set aside, it has failed to comply with the demand and, for the purposes of
the winding up application, it is presumed insolvent: s 459C(2)(a). The creditor may
proceed to a winding up application on the strength of that presumption.
At the hearing, the company's only real ground of opposition is to displace that
presumption — ie to show that it is in fact able to pay its debts as and when they
become due: see Commonwealth Bank of Australia v Begonia Pty Ltd (1993) 11
ACSR 609; 11 ACLC 1075. Even if it obtains the court's leave to raise the ss 459H–459J
grounds, it may only do so if those grounds are “material to proving” solvency: s
459S(2). If the company seeks to prove that it is solvent whether or not the claimed
debt is payable then the test of materiality under s 459S(2) will not be satisfied: Switz
Pty Ltd v Glowbind Pty Ltd (2000) 33 ACSR 723. The court will also expect an
explanation as to why the company did not apply to set the demand aside: Kekatos v
Holmark Construction Co Pty Ltd (1995) 18 ACSR 199; 13 ACLC 1581.
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Costs usually follows the event however the Court may also order indemnity costs in
appropriate cases.
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