A recent case from the Court of Appeal in Victoria[1] provides a useful summary of the relevant principles when seeking to set aside a statutory demand.

Background

On 12 March 2024, Watagan Park Pty Ltd (“Watagan Park”) served a statutory demand on BRC Group Pty Ltd (“BRC Group”) which alleged that BRC Group owed it a debt pursuant to a loan agreement.  BRC Group applied to set the statutory demand aside by filing the required application and a supporting affidavit within the statutorily imposed 21-day timeframe.

The grounds on which BRC Group sought to set aside the statutory demand were as follows:

1. the amount the subject of the statutory demand was not payable to Watagan Park as demanded because the parties never finalised the loan agreement;
2. the loan was not yet due for repayment. Watagan Park asserted that the repayment date was in December 2023, whereas BRC Group alleged that the repayment date was tied to an equity right agreement that was to be entered between the parties; and
3. there is a genuine dispute as to the amount of the debt as amounts alleged by Watagan Park to have been loaned to BRC Group were contented to have not in fact been loaned.

On 11 September 2024, an Associate Judge of the Supreme Court of Victoria dismissed BRC Group’s application to set aside the demand on the following grounds:

• whilst the affidavit filed in support of the application raised grounds of dispute that:
  • there was no concluded loan agreement that would give rise to the alleged debt (Ground (a) above); and
  • there was a genuine dispute as to the amount of the debt (Ground (c) above),

those grounds were not supported by the evidence put before the Court; and

• despite submissions on behalf of BRC Group, the Associate Judge did not find that the affidavit raised an additional ground of dispute that the terms of the loan agreement differed from the terms contended by Watagan Park (Ground (b) above).

In summary, relevant to this article, the reasons of the Associate Judge were that[2]:

1. the position of BRC Group was that there was no concluded agreement. The affidavit in support of the application to set aside the statutory demand did not state any alternative along the lines that there was an agreement but on different terms;
2. the material relied upon in the affidavit was explicitly relied on for the purpose of establishing that there was no agreement because negotiations were continuing. That material could not fairly be said to raise a ground of an agreement existing on alternative terms; and
3. the ground that there was a loan agreement on foot between the parties but with alternative terms that did not require repayment of the loan was not ‘fairly raised’ on the affidavit and was otherwise irreconcilable with the initial clearly stated ground that there was no agreement.

BRC Group appealed that decision.

Grounds of Appeal

BRC Group’s grounds of appeal were:

1. that the Associate Judge had erred in holding that there was no serious question or plausible contention on a ground raised in the affidavit;
2. that the Associate Judge had erred in holding that, if there were a serious question or plausible contention on a ground raised in the affidavit, the dispute was not genuine; and
3. further or alternatively, the Associate Judge erred in failing to hold that there was a genuine dispute as to whether the debt on which the statutory demand was based was due and payable.

BRC Group accepted that it could not succeed with its appeal if it failed on the ground of appeal identified in 1 above.  BRC Group failed to satisfy the Court of Appeal of the matters in 1 above and was unsuccessful in its appeal.

Court of Appeal’s reasons

An application for an order setting aside a statutory demand is made in accordance with section 459G of the Corporations Act 2001 (Cth) if, within the 21-day statutory period:

1. an affidavit supporting the application is filed with the Court; and
2. a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company.[3]

The key question for the Court of Appeal was whether the affidavit filed on behalf of BRC Group constituted an affidavit ‘supporting the application’ in respect of the argument that the loan was not yet due for repayment because the alleged repayment date was tied to an equity right agreement that was to be entered between the parties.

In reaching its conclusion, the Court of Appeal considered the cases of Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq) (“Malec”),[4] GoConnect Ltd v Sino Strategic International Ltd (in liq) (“GoConnect”),[5] and the decision of the NSW Court of Appeal in NA Investments Holdings Pty Ltd v Perpetual Nominees Ltd (“NA Investments”).[6]  From those cases, the Court of Appeal distilled the following principles:[7]

1. where an affidavit filed within the statutory period identifies a ground with some specificity, such as to exclude other alternatives, this may exclude another different ground;
2. an affidavit that is filed within the statutory period that does not identify the dispute later sought to be relied upon is not a ‘supporting affidavit’ in so far as the different genuine dispute is concerned;
3. the affidavit must ‘support’ the application by providing the basis for establishing that there is a genuine dispute about the existence or amount of the debt;
4. most commonly this will be done by the deponent describing the dispute. That description will delineate the scope of the dispute;
5. the ground for resisting the demand must be raised expressly, by necessary inference, or reasonably available inference;
6. where the dispute about the existence or amount of the debt is based purely on the construction of a document, the requirement may be satisfied be exhibiting the document;
7. mere assertion that the debt is disputed is insufficient; and
8. the question of sufficient identification will be considered in context, having regard to the degree of specificity with which the initial dispute is defined.

In applying the above principles to the arguments raised by BRC Group, the Court of Appeal found that:[8]

1. a passing reference to the equity right agreement in one paragraph of the affidavit was insufficient in circumstances where:
   1. that agreement was not exhibited to the affidavit; and
   2. the terms of that agreement were not identified or even described in a summary way;
2. a statement that the repayment date under the loan agreement and relevant dates within the equity right agreement were intended to be aligned was unhelpful and ambiguous;
3. clear statements within the affidavit that there was no final agreement reached at all as to the terms of the loan cannot be reconciled with the additional ground of dispute that an agreement on different terms to what was alleged by Watagan Park had been reached between the parties;
4. similarly, reliance on the material exhibited to the affidavit for the purpose of asserting that no concluded agreement was reached cannot be reconciled with a subsequent reliance on that same material to assert that a different agreement was reached; and
5. statements to the effect that the debt was ‘not payable’ do not delineate any such dispute and were insufficient.

The above is a timely reminder to all parties seeking to set aside a statutory demand that there must be clear enunciation in the supporting affidavit of the grounds upon which such relief is sought, including the identification of supporting material and the ability to reconcile potentially alternative arguments that are to be made to a court based on the content of the affidavit.  Those arguments should be identified and enunciated in the affidavit(s) that is to be filed in support of the application to set aside the statutory demand within the 21-day statutory time period.

How Rose Litigation Lawyers Can Help

At Rose Litigation Lawyers, we regularly act in winding up proceedings, both for entities or individuals seeking to enforce a statutory demand and entities seeking to have a statutory demand set aside.  Our insolvency team has deep experience in navigating complex insolvency and restructuring scenarios and we are focused on achieving remarkable outcomes for our clients.

Whether you are seeking to enforce a statutory demand and wind up an entity or set aside a statutory demand and prevent orders winding up your business, we provide timely, strategic, and commercial advice tailored to your circumstances.

[1] BRC Group Pty Ltd (ACN 620 080 659) as trustee for the BRC Group Unit Trust v. Watagan Park Pty Ltd (ACN 128 663 749) as trustee for the Clancy Family Trust MKT2 [2025] VSCA 36.

[2] [2024] VSC 563 at [55]-[60].

[3] Corporations Act 2001 (Cth), s 459G(3).

[4] [2015] VSCA 330.

[5] [2016] VSCA 215.

[6] [2010] NSWCA 210.

[7] [2025] VSCA 36, [40]-[47].

[8] Ibid, [50]-[54].

The content of this publication is intended to provide a summary and commentary only. It is not intended to be comprehensive nor does it constitute legal advice, and has been prepared based on applicable legislation and case authority at the date of publication. You should seek legal advice on specific circumstances before taking any action.