Exercise care when relying on Tribunal orders for section 459E statutory demands

Creditors who obtain a monetary order from a tribunal against a company may seek to enforce the order by issuing a statutory demand on the company with the intention, if the demand is unsatisfied, to commence proceedings to wind up the company.

Under section 459E of the Corporations Act 2001 (Cth) (Act), a creditor may serve on a company a demand relating to a debt that the company owes which is due and payable.  If this demand is unsatisfied, the creditor may make an application for an order to wind up the company.

However, the company may make an application pursuant to section 459G of the Act to set aside the statutory demand.  To succeed in such an application, the company may show that the demand does not comply with all requirements under section 459E of the Act, including, if the debt demanded is not due and owing.

The Act does not contain a definition of “debt”.  The essential characteristic of a debt is that it is a claim for a liquidated sum of money that is immediately payable, or which by reason of a present obligation, will become payable in the future.  It excludes a claim for an unascertained amount due as damages.

In Anvic Holdings Pty Ltd v Constable [2002] NSWSC 424 (Anvic Holdings), the Supreme Court of New South Wales held that an order for monetary payment from the Fair Trading Tribunal (FTT) is not a debt and could not be relied upon for a statutory demand under section 459E.

In Anvic Holdings, the creditor obtained an order for monetary payment from the FTT against a company.  The creditor then issued a demand under section 459E of the Act on the company.  The company made an application to set aside the statutory demand on the grounds that an order from the FTT is not a “debt” within the meaning of section 459E.

The Court held that:

  • There is nothing in the Fair Trading Tribunal Act 2001 (NSW) requiring or compelling obedience to such an order.  Further, the Fair Trading Tribunal Act 2001 (NSW) provides that a monetary order from the FTT must be certified by a Registrar before it can be enforced.

  • Unlike an award made under an arbitration agreement, an order obtained from the FTT has no contractual force and appears to have no other compulsory characteristics.

  • An order of the FTT for payment of a liquidated amount which had not been registered as a judgment and which had no contractual force did not give rise to a “debt” for the purposes of a statutory demand.

Accordingly, the debtor company succeeded in setting aside the statutory demand.

Lavan Legal comment

Creditors should be aware that the legislation of other tribunals, such as Western Australia’s State Administrative Tribunal, contain similar provisions to the Fair Trading Act 2001 (NSW).   Orders made by those tribunals (without more) cannot be relied upon to issue a statutory demand.  Creditors should first register the order in the appropriate court to avoid any application to set aside the statutory demand.

Disclaimer – the information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.