Page 63 - Print21 magazine Sep-Oct 2022

Legal Issues
Commercial disputes
full amount of money claimed by
the plaintiff, without a hearing and without notifying you. Once a default judgment is entered against you, the plaintiff has up to 12 years to enforce it. Importantly, a court judgment will also remain on your credit report for five years, even if you repay the debt.
Lawyers can assist you in a number of ways when you receive a Statement of Claim, even in situations where you accept that monies are owing. This can include:
Negotiate a settlement with the plaintiff on your behalf.
If there is any dispute as to how much is owing, to negotiate payment of a reduced amount
Apply to the court for payment of the debt by instalments, rather than paying a lump sum.
Responding to Creditors Statutory Demand
If a Creditors Statutory demand is served on your company you will have 21 days within which to either: a) pay the debt
b) come to an arrangement with the creditors; or
c) make an application to set aside the Creditors Statutory Demand (usually on the basis that there is a genuine dispute about the amount or existence of the debt).
Most importantly, do not ignore the demand. Serious consequences will flow. If a company fails to comply with or respond to a Creditors Statutory Demand, it will be deemed to be insolvent. Once
a company is deemed insolvent,
an application can be made by any creditor, not only by the creditor who served the Creditors Statutory Demand, to wind the company up. A winding up application cannot
be opposed using arguments that could have been (or were) used
in an application to set aside the Creditors Statutory Demand. If there is a genuine dispute about the debt, it is too late to raise
this argument at the hearing of a winding up application. 21
Legal eagle Wal Abramowicz lays out the various options when your business is in dispute with another party.
Disputes frequently arise in commercial relationships and the majority of them can be resolved amicably. However, a number can
and do end up in the Court system, with one party making a legal claim against the other. What can you do when someone owes you money, or is breaching a contractual agreement they have with you, or alternatively, your business owes someone money but it is unable to pay?
The two most commonly used legal tools available to recover a debt or damages are by filing and serving a Statement of Claim, or by serving a Creditors Statutory Demand.
Statement of Claim – what is it and when is it used?
What is it? A Statement of Claim
is the document filed in court to commence proceedings. The party starting the claim is called the plaintiff and the party defending it is known as the defendant. The claim sets out the factual dispute between the parties and sets out the remedy the plaintiff is after, usually a sum of money.
When is it used? It is the only
legal option available for recovery
of damages, but can also be used for more simple cases of “debt” recovery. It is often used to “get the ball rolling”, where negotiations between parties to a dispute have ground to a halt.
Creditors Statutory Demand – what is it and when is it used?
What is it? A Creditors Statutory Demand is a formal demand for
payment of money owed by a company which totals more than $4,000.
It cannot be used where money is owed by an individual. This remedy
is provided by the Corporations Act 2001. The demand must be made in writing by using a prescribed form under the Corporations Act known as Form 509H.
When is it used? It is used for debts where there is no dispute about the amount of money owing. It cannot be used for damages claims.
It is commonly used in straightforward cases where companies have failed to pay an invoice. If there is any hint of a dispute regarding the amount owing, it is best not to use this method. It is a useful way to exert pressure on a company to force it to pay its debts. The company has only 21 days in which to respond to a demand. If the demand is not met within 21 days (either by being paid, withdrawn or formally set aside), the creditor can apply to wind up the company as the company will be deemed insolvent by its failure to comply.
Although Form 509H appears to be a fairly simple form to complete, you should ensure that a lawyer experienced in this area drafts the form.
Responding to a
Statement of Claim
If you receive a Statement of Claim (and even if you agree that the money/debt is owing), do not ignore it. It is important to immediately contact your lawyer for advice. If you do nothing within 28 days from the date you receive the document, the plaintiff/creditor can obtain
a “default judgment” against you. That is an order that you pay the
For help with
any of the issues raised, contact Wal Abramowicz, Fox & Staniland Lawyers, Gordon, NSW
Tel 02 9440 1202, Email wal@ foxstanliand. com.au
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