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A Guide to Creditor’s Statutory Demand

Our detailed guide tells you what you need to know about a Creditor's Statutory Demand.

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In an ideal world, every business transaction goes to plan and no one loses money. In a real world we live in, things do go wrong for good and bad reasons. You end up facing a challenge to recover money owed to you by another business.

You try every tool in the game, load up with patience and good will but nothing helps. What do you do?

One way to recover debt another company owes you is to issue a Creditor's Statutory Demand to the debtor.

What Is a Creditor's Statutory Demand?

A Creditor's Statutory Demand is a letter of demand served by a creditor to a debtor company in an attempt to recover debt owed to a creditor.

What are the Requirements to Serve a Creditor's Statutory Demand?

  1. The debt must be larger than $2000.
  2. The debt must be due and payable.
  3. The creditor is required to use Form 509H prescribed by the Corporations Act 2001.
  4. The creditor must provide an affidavit to verify ...

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Cascading Restraint Clause in Employment Contracts

A restraint of trade clause which provides for different levels of restraint in an employment contract is commonly referred to as a cascading restraint clause.

Cascading restraint clauses can operate by providing for multiple options in relation to distance, geography, time periods and the nature and type of conduct to be restricted.

Each variable is treated as an individual clause. Cascading restraint clauses cab be annulled and are independently binding. This means that where one level of restraint may be deemed too harsh, an employer can look to enforce a lower level restraint without the entire clause being invalidated.

The operation of cascading restraint clauses was tested in OAMPS Insurance Brokers Ltd v Hanna [2010] NSWCA 781.

The decision by the New South Wales Court of Appeal confirms that these clauses are valid and enforceable.

OAMPS Insurance Brokers Ltd v Hanna

Mr Hanna started employment as an experienced insurance broker with OAMPS in 1990, resigned in 2010 and moved to a position with another insurance broker firm.

During his time with OAMPS, Mr Hanna’s employment was subject to a written employment agreement. A schedule to the employment agreement contained a post-employment restraint of trade clause.

After Mr Hanna left OAMPS, a dispute arose regarding the enforceability of the restraint clause in the contract.

The restraint clause itself was a cascading clause with 9 restraints. The restraints ranged from 15 months across Australia, down to 12 months across metropolitan Sydney.

The Decision

OAMPS sought an order to prevent Mr Hanna from providing services to a number of its clients. The order was granted and Mr Hanna was restrained from dealing with 17 clients for a period of 12 months.

Mr Hanna advanced a number of grounds on ...

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Unfair Contract Terms for Small Businesses: ACCC v JJ Richards

This time last year, the protections against unfair contract terms were extended under the Australian Consumer Law (ACL) to include standard form contracts involving small businesses.

A ‘standard form contract’ is generally a pre-prepared contract which offers the same or similar terms to all consumers, and is often utilised by larger businesses to improve efficiency.

In conjunction with the new laws surrounding standard form contracts, the ACCC has ramped up its efforts to investigate businesses relying upon unfair contract terms. This recently culminated in the commencement of proceedings against JJ Richards & Sons Pty Ltd (JJ Richards), in which the ACCC sought to enforce the extended provisions. In the proceedings, the ACCC alleged that many of JJ Richards’ clauses:

  • created a “significant imbalance” in the rights and obligations of JJ Richards and small businesses;
  • were not reasonably necessary to protect JJ Richards’ legitimate interests; and
  • would, if relied upon, cause significant financial detriment to small businesses.

The Federal Court of Australia recently delivered its judgment[1] and found that, of the eighteen terms contained within JJ Richards’ standard form contracts, the following eight terms were “unfair” and subsequently declared void:

1. Automatic renewal: this clause bound customers to subsequent contracts unless they called the contract within 30 days before the end of the term.

2. Price variation: allowing JJ Richards to unilaterally increase its prices.

3. Agreed Terms: removing any liability for JJ Richards where its performance is “prevented or hindered in any way”.

4. No credit without notification: allowing JJ Richards to charge customers for services not rendered for reasons that are beyond the customer’s control.

5. Exclusivity: granting JJ Richards ...

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Creditor’s Statutory Demand: 21 Days is 21 Days, Christmas or Not

The Supreme Court of Queensland has reaffirmed the law that a debtor only has 21 days to file and serve an application to set aside a creditor's statutory demand, regardless of whether the Christmas/New Year period that falls within the 21 days.

Background of J & K Homes Pty Ltd v Evans Lawyers

The Supreme Court handed down its decision in an application by J&K Homes Pty Ltd who had been served with a creditor's statutory demand by the creditor, Evans Lawyers.

  • The creditor's statutory demand was served on the debtor on 19 December 2016.
  • Under the Corporations Act 2001 (Cth), the 21 day deadline fell on 9 January 2017.
  • However, the debtor filed its application on 11 January 2017.

In essence, the applicant applied to the Supreme Court to set aside the statutory demand on a number of grounds (genuine dispute, defects, substantial injustice).

However, a threshold question for the Court was whether the application was made outside the required 21 day period which the creditor argued was fatal.

The debtor argued that the period between Christmas and New Year's Day was not to be included in the 21 days, implying the deadline would not have expired until 17 January 2017.

In doing so, the debtor referred to rule 1.9(4) of the Queensland Uniform Civil Procedure Rules which states that “in calculating a period of time for the purpose of these rules, the period beginning on 25 December in a year and ending at the end of 1 January in the next year is not to be counted.”

The Decision

Unfortunately for the debtor, an argument referring to a Queensland Rule had no applicability in regards to the Federal Corporations Act 2001.

The Court referred to ...

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Commercial Lease Agreements: What You Need to Know

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If you’re a prospective tenant or landlord entering into a commercial leasing transaction, it’s likely that you will be asked to sign a number of different documents.

It’s important to understand the differences between each document and how they interact with each other. This knowledge will help you make an informed decision before you sign a commercial lease.

Let's look at each document to see what they mean.

Offer to Lease

The first document you're likely to sign is an Offer to Lease.

Offer to Lease is normally prepared by a property agent and sets out key terms that will form the foundation of the Lease Agreement.

These terms usually include the property address and size, current rent and annual increases, proportion of outgoings, security bond, whether there will be personal guarantees and any sort of incentive or special conditions.

Once the parties sign the Offer to Lease, the tenant will usually pay a deposit and the landlord will instruct its solicitors to proceed with preparing the formal Lease Agreement.

Whether the Offer to Lease is binding will depend on its terms. The document may expressly say that it is not binding in which case either party can pull out of the negotiations and the deposit will be refunded.

In some cases the Lease Agreement may be binding and give the landlord the right to keep the deposit if the tenant has a change of mind and perhaps further recourse against the tenant.

The Lease Agreement

The Lease Agreement is the formal document containing all of the ...

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