Company law: Complying with the 21 day time period for a statutory demand.

Last month, the case of J & K Homes Pty Ltd v Evans Lawyers [2017] QSC 24 provided an important company law reminder. In this decision, the Supreme Court of Queensland held that, in accordance with section 459G of the Corporations Act 2001, a company has a 21 day time limit for complying with a creditor’s statutory demand. Significantly, this refers to 21 calendar days, not business days, and therefore weekend and public holidays are included within this time frame.

The facts

In this case, the creditor’s statutory demand was served on 19 December 2016, prior to the Christmas public holiday break. When determining the date by which any application to set aside the creditor’s statutory demand needed to be filed, the applicant (J & K) relied on rule 1.9(4) of Schedule 1A of the Uniform Civil Procedures Act 1999 (Qld). This section states that “in calculating how many days a particular day, act or event is before or after another day, act or event, only the first day, or the day of the first act or event, is to be counted”. As a result, J & K did not include the period between Christmas and New Year’s Day when calculating the 21 day time frame.

J & K’s application was filed on 11 January 2017, or 23 business days after the date of receiving the creditor’s statutory demand.

The result

The court held that J & K was incorrect to rely on the Uniform Civil Procedures Act, and that the 21 day period included weekends and any Christmas public holidays which fell in that period.

The Court also recognised that it does not have the power to extend the time prescribed, as established by past case law. This includes Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Limited [2008] HCA 9, where the High Court considered the meaning of the power to extend the period for compliance under section 459F(2)(i) of the Corporations Act. It held that the court could not extend the time for compliance with the statutory demand because of the contrary underlying policy of the Corporations Act, which encourages the speedy resolution of applications to wind up companies in insolvency.

Consequently, the applicant was ordered to pay the respondent’s costs on a standard basis until 24 January 2017 and thereafter on an indemnity basis.

What should we learn from this company law update?

  • Companies must be careful to include all calendar days when calculating the date by which any application to set aside a creditor’s statutory demand needs to be filed.
  • If a company fails to do this, the only remedy available is to defend itself by proving its solvency, which is a difficult and costly process.
  • Consequently, companies should seek legal advice from a solicitor immediately after receiving a statutory demand to ensure that they have sufficient time during the allowed 21 day period to negotiate a resolution or to prepare, file and serve any application to set aside the statutory demand issued by the creditor.

Want to know more about how this decision could impact your business? Please don’t hesitate to contact a solicitor at Butlers Business and Law on (02) 4929 7002 or fill out an enquiry form on our website. We have experience in advising Newcastle and Sydney based businesses in company law matters.