Be transparent or pay the price

In a recent decision  In the matter of Boss Engineering (NSW) Pty Limited [2017] NSWSC 1334 (Boss Engineering), Brereton J dealt with an application to set aside a statutory demand made out of time.

As is commonly known, pursuant to section 459G of the Corporations Act 2001 (Cth.) (the Act) if a creditor’s statutory demand is not complied with within 21 days of the date of its service, a presumption of insolvency arises which can be relied upon to seek the winding up of a company. If there is dispute about the debt on which the statutory demand is apparently based, an application to set aside the statutory demand can be made, which application MUST be made and served within 21 days.

In Boss Engineering, Brereton J dealt with an application in which there was a dispute over the date on which a statutory demand was served. Boss Engineering asserted the statutory demand was served on 29 June 2017 and, if accepted, its application to set aside the statutory demand was made within the 21 day period prescribed by the Act and the Court would be able to hear the application.

The Office of State Revenue (the OSR) maintained the statutory demand was served on 27 June 2017 and, if accepted, Boss Engineering’s application was made out of time and the Court would not have jurisdiction to hear it.

Having carefully reviewed the evidence, the Court found the demand was served on 27 June 2017 and accordingly the application to set aside the demand was made out of time. Ordinarily this would be the end of the matter as the Court would not have the jurisdiction to deal with the application to set aside the statutory demand. In this case, however, the Court found that the OSR had knowledge that Boss Engineering believed the demand was served on 29 June 2017. The Court found that Boss Engineering had, on a number of occasions, made it known to the OSR that it believed the statutory demand was served on 29 June 2017, and at no time did the OSR advise Boss Engineering that it was wrong in its belief.

His Honour held that in the circumstances, the OSR was estopped from asserting that the demand was served on 27 June 2017 as it had allowed Boss Engineering to assume the statutory demand was served on 29 June 2017, and allowed Boss Engineering to act to its detriment in reliance upon that assumption (i.e. by delaying its application to set aside the statutory demand). The Court said that the OSR could not allow Boss Engineering to make a mistake and then take advantage of that mistake.

The case highlights the obligation of parties to behave honestly and with full disclosure at all times. It is an interesting application of the law and an example of the Court’s intolerance of a party taking an unfair advantage of a situation.

For more information, please contact ERA Legal.

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