Applying to set aside a statutory demand in the family court – what could possibly go wrong?

In today’s case this is precisely what happened, when AXL received a statutory demand (SD) from a creditor.

Remember, when you receive a SD, you have 21 days to serve on the creditor an application to set it aside. Alternatively, you could pay the debt, or appoint formally an insolvency practitioner of your own choosing.

In theory, you are allowed to do this in the Family Court (FC). The FC is included in the definition of Courts: per 58AA of the Corporations Act. Also, the debt the subject of the SD arose from FC proceedings.

But in practice is it a good idea? Probably not!

When AXL lodged the application to set aside the SD, the FC took its normal approach to filing and stamping documents. Unfortunately, this meant the documents were not stamped until some time after the 21 days. Despite the repeated attempts of AXL.

Justice Black (from a different court) was at pains to say that the FC registry staff did not follow the correct procedures (Rule 25.02 of the Family Law Rules applies the Federal Court (Corporations) Rules to corporations matters in the Family Court).

Instead, Justice Black said that the FC Registry staff should have promptly returned the application to AXL (whether on the same day or a reasonably short time after).

Accordingly, AXL had not served the creditor within the 21 days and so the winding-up application remained valid.

This is an unfortunate tale, and it shows how strict Courts apply the winding-up provisions.

insolvency statdemands svvoidables

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