A recent decision of the Supreme Court of New South Wales handed down on 30 April 2024 involved a debtor challenging whether a Creditor’s statutory demand had been validly served by email.

The amount of the statutory demand was approximately $85,000. The creditor and a director of the debtor company regularly engaged in correspondence by email. The creditor purported to serve the statutory demand on an email address regularly used by this director.

The director did not treat the statutory demand as having been served on the date it was received into his inbox, and as a result failed to apply to set aside the statutory demand within the requisite 21 days following service of the statutory demand.

The issue for determination by the court was whether service of the statutory demand on the email address was valid service. If it was, then the Court did not have jurisdiction to entertain the debtor company’s application to set aside the statutory demand. The Court found that service on the director by email was effective.

Accordingly, the debtor company was without a defence; presumably, the creditor was paid his $85,000 shortly thereafter.

The lesson

Receipt of a Creditor’s statutory demand places the company in a very vulnerable position. It only has 21 days to apply to set the demand aside, failing which, non-payment of the demand is an act of insolvency justifying the winding up of the debtor company.

If you are a director of a company and you receive a statutory demand by email, presume it was effectively served. Further, if you also think the money demanded is not due, get urgent legal advice.

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