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Statutory Demands QLD

Statutory demand lawyers, Queensland

A statutory demand gives a company 21 days, and that deadline cannot be extended by the creditor, by agreement, or by the court. If one has been served on you, the clock started the day it arrived. We act on both sides and we move at the speed the section requires.

21 days from service, and no extensionsBoth sides: issuing and setting asideActing Queensland-wide
Speak to our Experts: (07) 5370 8759Start Fast-Track Assessment

Start with the Fast-Track Assessment

Tell us who owes what and how long it has been outstanding. It takes about a minute, and it decides whether a letter is enough on its own.

A demand has landed, or you need to issue one. Start here.

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We will come back to you with whether a letter of demand is the right next step and what it needs to say. No obligation, and no cost for the first conversation.

The 21 days, and the two ways companies lose them

A creditor's statutory demand is a formal notice under section 459E of the Corporations Act 2001 requiring a company to pay a debt of at least $4,000 within 21 days. That much is settled, it is on every page that ranks for this term, and the Federal Court publishes its own information sheet on it. We have linked it below rather than rewrite it.

The definition is not where this goes wrong. The deadline is.

Twenty-one days from service. Not from the date typed on the demand, and not from the day somebody got around to opening it.

It is not extended because the office was closed over Christmas, because your accountant was away, or because the creditor said on the phone that they would give you longer. It is not extended by the court either. In David Grant & Co v Westpac the High Court held that section 459G confers no power to extend the 21 days at all, and nothing since has softened it.

There is a second trap inside the first, and it is the one that costs companies their challenge. Filing the application is not enough. Section 459G requires that the application AND its supporting affidavit both be filed and served on the creditor within the 21 days. Filed on day 20 and served on day 22 is out of time, and out of time here is not a delay to be excused: in David Grant the High Court held the period defines the court's jurisdiction, so a late application is no application at all.

A laptop and papers on a desk in an office

Where the 21 days actually go

Three points on one line. Only the middle one is yours, and it is shorter than it looks, because the affidavit has to be drafted, sworn and served inside it as well.

  • Day 0Service, at the registered officeThe demand is served at the company's registered office, which is the address on the ASIC register rather than the one on your invoices. Post to that address counts. The clock starts whether or not anyone there opened the envelope, which is why a company that has moved and never updated the register can lose the whole 21 days before it learns the demand exists.
  • Days 1 to 21The only window there isEverything that can be done has to be done now: pay it, compound for it, or apply to set it aside. A section 459G application goes to the Supreme Court of Queensland or the Federal Court, and the application and its supporting affidavit must both be filed and served on the creditor inside the 21 days. All four things. The affidavit has to set out the grounds relied on, because the courts have held you cannot raise a new ground after the window shuts.
  • Day 22The presumption of insolvencyIf none of that happened, the company is presumed insolvent. That presumption is not a formality, it is the creditor's entire case: it lasts three months and it means a winding-up application no longer has to prove the company cannot pay its debts. The argument moves from whether you owe the money to whether the company should continue to exist.

The Federal Court publishes its own information sheet on statutory demands and winding up proceedings, and the section itself is in the Corporations Act 2001. Both are free, and neither will tell you which day yours started.

Odyssey Legal
Not sure which day the clock started?

If you are reading this because a demand arrived and you are not sure what day the clock started, that is the first question to answer and it is worth a phone call rather than a form. Service is on the company's registered office as it appears on the ASIC register, which is often not the address you trade from. You can check the registered office on ASIC's register.

Speak to our Experts: (07) 5370 8759Start Fast-Track Assessment

A demand has been served. There are four things you can do

Three of them end the demand. The fourth ends the argument, and not in your favour.

Hands signing a document across a desk
Option onePay the debt
Use it whenThe debt is genuinely owed, the company can pay it, and the amount is less than the cost of the fight
What it costsThe debt, in full, inside the 21 days
What it gets youThe demand is spent and the presumption never arises
Where it falls downPaying a debt you dispute to make a demand go away teaches the creditor that the demand works
Two people talking across a meeting table
Option twoCompound for the debt
Use it whenThe debt is owed but the company cannot pay all of it in 21 days
What it costsWhatever the creditor will accept, negotiated in writing
What it gets youA settlement, a payment plan, or security the creditor agrees satisfies the demand
Where it falls downOnly a completed agreement counts. A creditor who says yes and does not sign leaves the clock running
A laptop and papers on a desk in an office
Option threeApply to set it aside
Use it whenThere is a genuine dispute about the debt, an offsetting claim, or a defect in the demand itself
What it costsCourt filing fees and legal costs, quoted to you before any work starts
What it gets youThe demand set aside or reduced, and usually your costs paid by the creditor
Where it falls downIt must be filed and the affidavit served inside the 21 days. Nothing can be done about it afterwards
A person sitting alone at a desk in low light
Option fourDo nothing
Use it whenAlmost never, and only as a considered decision about a company that is genuinely finished
What it costsNothing now, and the company later
What it gets youTime, and nothing else
Where it falls downOn day 22 the company is presumed insolvent, and at the winding-up hearing you cannot argue about the debt

We will tell you which of the four we think applies, including when that answer is the first one. A demand on a debt you genuinely owe and can pay is not a case, it is an invoice with a deadline attached. If the debt is genuinely owed and the company simply cannot pay it, the question is no longer the demand: read bankruptcy and insolvency instead, because the directors' own position is live from that point.

Four grounds to set a demand aside

They are not alternatives to be picked from. Each is a different argument with a different test, and the first decides most applications.

s 459H(1)(a)

A genuine dispute about the debt

The common one, and the bar is lower than people expect. You do not have to prove you will win the dispute. The test, from Eyota Pty Ltd v Hanave Pty Ltd, is a plausible contention requiring investigation - much the same idea as a serious question to be tried - and the court will not try to resolve the dispute itself on the application. What the bar being low does not mean is that saying so is enough. The same case is clear that a patently feeble legal argument, or an assertion of facts unsupported by evidence, does not get there. Nor does a dispute manufactured on day 19: one raised in writing months earlier reads very differently.

s 459H(1)(b)

An offsetting claim

A genuine claim the company has against the creditor, whether or not it arises out of the same dealings. It does not have to defeat the debt. The court works out the substantiated amount by subtracting the offsetting total, and if what is left falls below the statutory minimum the demand is set aside altogether rather than reduced.

s 459J(1)(a)

A defect causing substantial injustice

A misstated amount, a debt described so loosely the company cannot tell what is claimed, an affidavit sworn by somebody with no knowledge of the debt. A defect on its own is not enough, which is the part that catches people out: section 459J(2) says a demand is not to be set aside merely because of a defect. It has to have caused substantial injustice.

s 459J(1)(b)

Some other reason

The residual ground. An abuse of process, a debt that is not yet due and payable, or a demand used as leverage against a company that is plainly solvent - which is what the court was dealing with in Owners Corp SP66609 v Perpetual Trustee Co, where it observed that a demand should not be used that way and that indemnity costs may follow. It is rarely run on its own and rarely succeeds on its own, but it is the ground that catches a demand which is technically in order and still should not have been issued.

The grounds have to be in the affidavit you serve inside the 21 days. A ground you think of afterwards is generally not available to you, so the affidavit is the application - not a formality attached to it. It is also the reason a letter of demand matters more than it looks: a dispute the other side put in writing months ago is evidence of a genuine dispute, and a creditor holding that letter in their own file should not be issuing a statutory demand at all.

Issuing one, and the five questions to answer first

A statutory demand is not a debt collection tool. It is an insolvency tool that happens to collect debts, and the difference matters because the consequences of getting it wrong run the other way.

Issue one on a debt the other side genuinely disputes and the likely outcome is that it is set aside and you pay their costs. Deploying a demand where a real controversy exists, or against a company that is plainly solvent, has been treated as an abuse of process, and in Owners Corp SP66609 v Perpetual Trustee Co the court noted that indemnity costs may follow. That is a long way from a letter that did not work.

Odyssey Legal
All five have to be yes before a demand is the right step
  • The debt is due and payable now, and it is fixed rather than estimated
  • The total is at least $4,000
  • The debtor is a company, not a person or a trust without a corporate trustee
  • There is no genuine dispute, and nothing in your own file suggests one
  • There is no offsetting claim you already know about

What the demand itself has to do

Six requirements, and a demand that misses one is open to a section 459J attack whether or not the debt is real.

  • In writing, in the prescribed formForm 509H. It is a prescribed form and the wording is not optional; a demand drafted as a letter is not a statutory demand no matter how firmly it is worded.
  • The debt, specified with enough detailSection 459E(2) wants the debt and its amount specified where there is one debt, and the total of the amounts where there are two or more. Underneath that sits a body of case law on particularising a debt well enough that the company can actually tell what is claimed. This is the requirement most often failed, and it is the one that produces the section 459J defect arguments.
  • Twenty-one days to complyThe demand must require payment, or compounding, within 21 days after it is served. A demand that gives less than that is defective on its face.
  • Signed by the creditor or its representativeSigned by or on behalf of the creditor. Where a company is the creditor, by somebody with the authority to bind it - an unauthorised signature is the sort of defect that only surfaces once the demand is challenged.
  • A sworn affidavit verifying the debt (Form 7)Required unless the debt is a judgment debt. The form is Form 7 under the court's Corporations Rules, it has to be sworn by somebody with actual knowledge of the debt, and it must accompany the demand when it is served rather than follow it. It also must not be sworn BEFORE the demand it verifies, which is a dating error that shows up in a surprising number of demands.
  • Served properlyAt the company's registered office as it appears on the ASIC register, or personally on a director who resides in Australia. Service is what starts the 21 days, so it is also what you will have to prove if the company says it never received it.

None of that list is secret either. It is in the Act, on the Federal Court's information sheet and on every competitor's page. The work is the judgement before the list: whether this debt should be the subject of a statutory demand at all. Our debt recovery page sets out what the alternatives are and what each of them costs, which is the comparison worth making before a demand is drafted.

Speak to our Experts: (07) 5370 8759Start Fast-Track Assessment

The 21 days passed. What happens now

Four things, in order, and every one of them is more expensive than the window you already had.

01 / 04
  1. The presumption
  2. The application
  3. The hearing
  4. The directors
  1. From day 22

    The company is presumed insolvent

    What that meansIt lasts three months from the end of the 21 daysAnd what it costs youThe creditor no longer has to prove inability to pay
  2. Within three months

    The creditor applies to wind the company up

    What that meansFiled in the Supreme Court of Queensland or the Federal CourtAnd what it costs youAdvertised, which your bank and your suppliers can see
  3. At the winding-up hearing

    You cannot argue about the debt

    What that meansSection 459S bars it unless the court grants leaveAnd what it costs youAnd s 459S(2) allows leave only if the ground goes to solvency
  4. Throughout

    The directors' own position is now live

    What that meansTrading on while insolvent is a separate personal exposureAnd what it costs youIt is a different question from the debt, and a faster one
It is not always over

Paying the debt after the 21 days does not undo the presumption automatically, but it usually ends the application, and an application that is withdrawn still leaves the question of who pays the costs of it. The point of this section is narrower than it looks: everything on it is more expensive than the 21 days you already had.

The directors' own exposure is a separate question from the company's, it moves faster, and it is set out on bankruptcy and insolvency rather than here. If a winding-up application has already been filed against you, that is a Supreme Court proceeding with its own timetable, and the call is more urgent than the form.

Speak to our Experts: (07) 5370 8759Start Fast-Track Assessment

Why choose Odyssey Legal?

Imagine the relief of finally knowing your legal troubles are in expert hands. Whether it's recovering money owed through our Letter of Demand or pursuing your rights through legal proceedings, you'll leave our consultation with certainty about your path forward and the confidence that comes from having expert litigation lawyers protecting your interests.

Queensland Law Society
Australian Restructuring Insolvency and Turnaround Association
Sunshine Coast Business Council
Damon Laffin, Legal Practice Director at Odyssey Legal
Legal Practice Director

Damon Laffin

Master of Laws majoring in Commercial Litigation
Admitted to the Supreme Court of Queensland
Admitted to the High Court of Australia
11+Years of Queensland experience
$1M+Recovered for clients
What that means in practice
Focused Expertise. At Odyssey Legal, our expertise is focused solely on Litigation, Dispute Resolution and Business, giving our clients precise and practical solutions tailored to the situation.
Proven Track Record. We've successfully resolved countless disputes and helped safeguard countless businesses, efficiently and effectively.
Expert Experience. Our team brings over a decade of litigation experience, having handled a variety of complex disputes. This translates directly into strategic insights that only come from years in the trenches.
Peace of Mind. From the first consultation, we provide clarity, confidence, and a clear path forward, so you can focus on what matters most and leave the legal headache to us.
Fast-Track Assessment

Find out how many of the 21 days you have left

Five questions, about a minute. It tells us which side of a statutory demand you are on, how many of the 21 days are left, and what can still be done with them - and if the answer is that you should simply pay the debt, we will say that too.

Start Fast-Track Assessment

If a demand has already been served, call (07) 5370 8759 rather than filling anything in. This is the one service on the site where the form is the slower option, and the deadline does not pause while a message sits in an inbox.

Frequently asked questions

What is the difference between a letter of demand and a statutory demand?

A letter of demand is a private request for payment. It creates no new rights, it has no prescribed form, you can send one to anybody, and ignoring it has no automatic legal consequence beyond the claim that may follow.

A statutory demand is a step in the insolvency regime. It can only be served on a company, it has to be in the prescribed form with a sworn affidavit, and ignoring it for 21 days creates a presumption that the company is insolvent. One is correspondence. The other is a countdown.

How long do you have to respond to a statutory demand?

Twenty-one days from the day it is served, and service is at the company's registered office rather than wherever you happen to trade from.

The 21 days cannot be extended. Not by the creditor agreeing, not by a public holiday, and not by the court: the High Court settled that in David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265, where it held the period defines the court's jurisdiction rather than being a procedural rule that can be cured. If you intend to challenge the demand, the application and its supporting affidavit have to be filed and served inside those 21 days.

What happens if you don't comply with a statutory demand?

On day 22 the company is presumed insolvent, and that presumption lasts three months. It is what the demand exists to produce.

The creditor can then apply to wind the company up, and at that hearing the company generally cannot argue about the debt at all. Section 459S bars any ground the company could have raised on a set-aside application, unless the court gives leave - and section 459S(2) says leave must not be given unless the ground is material to proving that the company is solvent. Arguing about the debt is usually not that. The winding-up application is also advertised, which is often the first your bank and your suppliers hear of it.

Is a statutory demand serious?

It is the most serious piece of paper most small companies ever receive, and the risk is that it does not look like one. It arrives as a two page form, often over an amount the company regards as arguable, and it reads like a firmer invoice.

The consequence is not proportionate to the amount. A $6,000 demand that is ignored can end with a company being wound up, because the question at the hearing is no longer the $6,000.

The creditor said they would give us more time. Are we safe?

No, and this is the single most common way companies lose their challenge. An agreement to hold off does not stop the 21 days running, because the period is fixed by the section rather than by the parties.

If a creditor is genuinely prepared to allow more time, the safe form of that is a written agreement that compounds the debt, or a withdrawal of the demand. A phone call and a friendly email are neither.

What is the minimum amount for a statutory demand?

The statutory minimum is $4,000. Below that a statutory demand cannot be used and the debt has to be pursued in the ordinary way.

The figure also matters when a demand is challenged on an offsetting claim: the court subtracts the amount it accepts you have a genuine claim for, and if the remainder falls under $4,000 the demand is set aside rather than reduced.

What is Form 509H, and where do I get it?

Form 509H is the prescribed form for a creditor's statutory demand and it is published in Schedule 2 to the Corporations Regulations 2001. Unless the debt is a judgment debt, the demand also needs a verifying affidavit, which is Form 7 under the Corporations Rules of the court you would be in. The Federal Court's information sheet on winding up proceedings sets out how the two fit together.

The form being free and public is the reason a defective demand is so common. Getting the form is the easy part; specifying the debt with enough detail, and swearing an affidavit that will survive being read back to you, are not.

Can a statutory demand be served on a person rather than a company?

No. A statutory demand is a creature of the Corporations Act and it applies only to companies. The equivalent step against an individual is a bankruptcy notice under the Bankruptcy Act, which has its own threshold and its own timeframe.

Sole traders and partnerships are not companies, so a statutory demand served on one is not a statutory demand at all. A demand addressed to a trading name has the same problem, and it is worth checking the ASIC register before anything is served.

Related information

Corporations Information Sheet 1, Federal Court of AustraliaThe court's own guide to statutory demands and winding up proceedings, and the result at position one on this searchSearch ASIC's registersWhere to confirm a company's registered office before serving, or after receiving, a demandLetter of demandThe step before this one, and the reason a demand that flushed out a written dispute can rule a statutory demand outDebt recoveryThe four-rung ladder, where a statutory demand sits on it, and what the alternatives costBankruptcy and insolvencyDirector duties, insolvent trading and what happens once the company cannot payCommercial litigationA winding-up application that is defended is litigation, with its own timetable and its own costs exposureInsolvency information for directors, ASICThe regulator's own guidance on what directors must do when a company is in trouble
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