As we’ve set out in our earlier article, statutory demands are serious business. If you fail to deal with one appropriately after being served, the consequences could be dire for you and your business.
So let’s say you’ve been served with a statutory demand – what should you do next?
You’re Going to Need an Insolvency Lawyer
We realise this sounds self-serving, but in all but the most straightforward cases you should engage a lawyer who understands the statutory demand process.
Most realistically, this means insolvency lawyers or litigation lawyers – your local business lawyer may or may not have the necessary expertise to deal with it, and your accountant certainly doesn’t (sorry to our accounting friends).
The steps we set out will give you a solid foundation to prepare for contacting your lawyer, and will let you have to hand the information or documents that you will probably be asked for.
Statutory demands have a strict 21-day deadline that cannot be extended under any circumstances.
Sitting on a demand for 14 days because you’re not sure what to do next is a truly terrible idea. You’re hamstringing your lawyer and boxing yourself into an almost inevitable corner of having to make an expensive court application.
As soon as you receive a statutory demand, get on the phone.
Nail Precisely When You Were Served
The first thing you need to know – with absolutely precision – is how and when you were served with the statutory demand documents.
- Was it delivered, posted, emailed or some combination of those?
- For each method used, who received the documents, on what date, at what time?
- In each case what, exactly, was received?
This lets you and your lawyer know the deadline that needs to be met.
Clarify What the Demand Is For
Except for cases of mistaken identity, it’s rare that a statutory demand is served on a company that has no idea what it’s for.
Most likely, you have a fair idea of what the creditor is saying is owed and why.
So, for this part, you should put together:
- Relevant contracts, agreements or terms;
- Copies of any invoices that might be relevant;
- Previously issued letters of demand or correspondence on the topic;
- If any part-payments have been made, then copies of the remittance advices, transaction reports or similar.
If there are discrepancies between previous claims or correspondence and what is stated in the demand, then that can be useful to highlight too.
This will help flesh out the basis for the claims, the relevant governing contract documents, and the way in which the numbers claimed have been calculated.
Is There are Dispute About The Demanded Sum?
This question relates specifically to the amount demanded by the other party (not to other claims – we deal with that below).
So, in relation to the actual sum in the statutory demand, do you disagree with:
- The fact that it is claimable at all; or
- The amount that has been claimed?
If so – why?
For example, disputes about the amount claimed might include:
- This is a claim for work done, but the work was not actually done;
- This is a claim for a duplicate invoice seeking payment twice for the same thing;
- The invoice has been paid previously;
- The invoice exceeds what was agreed to be the price for the services.
If you do have such a dispute, then put together any relevant documents, correspondence or calculations that might back it up.
Do You Have a Cross-Claim Against the Same Party?
So the other half of the “dispute” category is whether or not you might have a claim back against that same party (whether or not it relates directly to the amount claimed in the statutory demand).
This could really be anything. Perhaps it is:
- A liquidated damages claim on a construction contract;
- A breach of warranty claim for goods that weren’t fit for purpose; or
- A claim for services you rendered to the person making the claim.
There aren’t restrictions on the potential categories for this, but the claim needs to be genuine and supported by evidence of some kind.
With these fairly simple steps, you will have a relevant and helpful set of instructions and documents for your lawyers. At the same time, you will have put your own thoughts in order in a meaningful way so that you have a good appreciation of where you stand commercially on the issues.
Of course, there are other legal avenues to explore, but this process will get you on the right track.
With this information, your lawyer can give you some useful initial advice about whether you might be able to contest the demand and have it set aside. That, in turn, will help you make good decisions about what (if any) negotiations might be in order, and what kind of outcome is desirable for you in the circumstances.
You now have the fundamental tools you need to respond quickly and appropriately efficiently and quickly to a statutory demand.