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 numerous decisions that made it clear that the 21 days says what it means, that is: 21 consecutive days which begin and end at midnight.

As the debtor did not file and serve its application within the 21 day period (albeit two days late), the Court had no power to make an order setting aside the statutory demand.

Further, the Court noted that the 21 day requirement under the Corporations Act 2001 was an absolute limitation of time which could not be extended by the Court.

Despite the “novel” argument made by the debtor, the Court formed the view that the application was “doomed to fail”.

Accordingly, the Court awarded indemnity costs (rather than the usual standard costs) against the debtor.

For further information on Creditor’s Statutory Demands, please refer to the other two articles on this site and contact us to discuss.