A recent decision of the Supreme Court of Queensland, Sunstate Land Pty Ltd v Hiview Design & Construction Pty Ltd[2020 QSC 181], is one of the few cases in which the application of the Coronavirus Economic Response Package Omnibus Act 2020 (Cth) has been considered.
In delivering his decision, Justice Callaghan referred to the objectives of the Act to provide “flexibility to temporarily adjust legal obligations”, which included the facilitation of the “continuation of business”.
On 20 March 2020, the respondent, Hiview Design & Construction Pty Ltd (Hiview) executed a “creditor’s statutory demand for payment of debt” pursuant to paragraph 459E(2)(e) of the Corporations Act 2001 (the “Act’’) (the ‘’Demand’’).
The Demand described two amounts in the schedule for the aggregate sum of $275,840.72 and required payment within the former statutorily described period of “Twenty-one days after service … of (the) demand.” The Demand also informed Sunstate Land Pty Ltd (Sunstate) that it could apply for an order setting the demand aside, and that: “Such application must be made within 21 days after the demand is served”.
Hiview invoked the authority of the Court on the issue of service of the Demand by relying on sections 7 and 29 of the Commonwealth Acts Interpretation Act. Callaghan J, after considering an affidavit sworn by a director of the accountancy firm which serves as the registered address of Sunstate, accepted that the Demand was received by Sunstate’s agent on 1 April 2020 pursuant to section 109X of the Act being 1 week after commencement of the relevant schedule of the Coronavirus Economic Response Package Omnibus Act 2020 (the “Omnibus Act”).
The relevant schedule (12) of the Omnibus Act commenced on 25 March 2020 which extents the period allowed for compliance with a statutory demand issued pursuant to the Act to 6 months from 21 days as it then read.
Sunstate sought, pursuant to section 459G of the Act, to have the Demand set aside.
The Court accepted that the relevant provisions of the Omnibus Act applied to the Demand which meant that the Demand was defective meaning that “it lacks something which is necessary or essential for completeness” as explained by Callaghan J in the Judgment and outlined below:
- where paragraph 3 of the Demand states a period of demand, it should, by force of law, state a period of 6 months;
- where paragraph 5 of the Demand states the period of 21 days, it should, by force of law, state 6 months; and
- the Demand was not in the prescribed form 509H as set out in the current iteration of the Corporations Regulations.
Sunstate submitted that substantial injustice would be caused unless the Demand is set aside. The substantial injustice arose because the legislation provided, and Sunstate would have understood it to provide, that the period identified in the notice was no longer applicable. By reason of the defects with the Demand, Sunstate was not in law obliged to comply with the Demand. However, if the Demand was not set aside Sunstate would be presumed to have committed an act of insolvency.
In reaching his decision to set aside the Demand, his Honour referred to specific provision being made in the Omnibus Act in respect of debt incurred during the six-month period starting on the day the new laws commenced. His Honour indicated that it was the intention of Parliament to provide “Flexibility to temporarily adjust legal obligations” and that the new legislation facilitates the “continuation of business”.
His Honour concluded by saying that the Omnibus Act “has had an irresistible impact on the present circumstances and, pursuant to both section 459J(1)(a) and (b) of the Corporations Act” ordered that the Demand issued by Hiview to Sunstate, be set aside.
If you intend to issue a statutory demand under the current regime it is important that you consult with an experienced litigation lawyer who can assist with preparing and issuing a creditor’s statutory demand for payment of debt that complies with the current iteration of the Corporations Regulations.
Marino Law has extensive experience acting for creditors issuing creditor’s statutory demands, corporations responding to creditor’s statutory demands, applications to set them aside and applications to wind up a company. Should you require assistance in any of the above areas, please contact one of our highly experienced corporate litigation lawyers.