Under section 459G of the Corporations Act 2001 (Cth), a company served with a statutory demand has a statutory right to apply to the court to set aside the demand. Section 459H allows the company to challenge the validity of the statutory demand, typically on grounds such as a genuine dispute over the debt and/or company has an offsetting claim.
For an application under Section 459G to be successful, the company must support the application with an affidavit. This affidavit, commonly referred to as the “21-day affidavit,” must be filed within 21 days of receiving the statutory demand. The affidavit must outline the grounds on which the demand is being contested and provide evidence to support these claims.
The affidavit plays a crucial role in presenting the company’s case, as it must detail the facts and any supporting documentation. If the affidavit establishes a legitimate dispute, the court may set aside the statutory demand, preventing it from leading to more severe consequences, such as the winding up of the company.
In summary, Section 459H provides a safeguard for companies facing potentially unfair or invalid statutory demands, while the affidavit in support serves as the essential tool for raising and substantiating any challenges. The requirements for the affidavit in support were discussed in a recent case by the Victorian Court of Appeal.
BRC Group v Watagan Park [2025] VSCA 36
On 12 March 2024, the respondent issued a statutory demand to the applicant, claiming the applicant owed a debt under a loan agreement. The applicant sought to have the statutory demand set aside, submitting an affidavit in support of the application within the required 21-day statutory period (the “21-day affidavit“). On 11 September 2024, an associate judge dismissed the applicant’s request to set aside the demand.
The judge concluded that the 21-day affidavit raised a dispute concerning the existence of a loan agreement, which would give rise to the alleged debt. However, the judge rejected the argument that the affidavit presented an additional dispute regarding the terms of the loan agreement, specifically that the repayment date had not yet occurred. This was based on the applicant’s assertion that the loan was not due for repayment until the respondent had the option to exercise its equity option under an equity rights agreement (the “additional dispute“).
The applicant appealed the decision on the following grounds:
- The judge erred in holding that there was no serious question or plausible contention on a ground raised in the 21 day affidavit;
- The judge erred in holding that, if there were a serious question or plausible contention on a ground raised in the 21 day affidavit, the dispute was not genuine; and
- Further or alternatively, the 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.
The applicant accepted that it could not succeed absent success on proposed ground one.
In relation to proposed ground one, the applicant did not seek to challenge the judge’s finding that there was no serious question raised on the basis that there was no concluded agreement. Rather, it submitted that the judge erred in finding that the 21 day affidavit was confined to that dispute and did not raise the additional dispute. Its submission was that the 21 day affidavit was an affidavit ‘supporting the application’ in relation to the additional dispute for the purposes of s 459G(3)(a) of the Corporations Act 2001 (Cth) (the ‘Act’).
The Court of Appeal rejected the appeal for the following reasons:
- The brief mention of the equity rights agreement in paragraph 14 of the 21-day affidavit isn’t enough, especially since the agreement itself wasn’t attached. Its terms weren’t outlined or even summarized. Saying it was ‘intended’ for the dates to be ‘aligned’ is vague and unclear. This doesn’t properly raise the issue as a new dispute, either directly or indirectly — particularly because the equity rights agreement is already known to be complex.
- It was also found that the 21-day affidavit doesn’t suggest a different agreement was made. Paragraphs 16 and 17 contradict that idea. The emails in exhibit MD-1 clearly show the parties were still negotiating. If a new agreement had been reached, you’d expect that to be stated simply and clearly — but it wasn’t.
- Nowhere is it said that the repayment date was different from the one in the 1 January document, or that it hadn’t been reached. There’s also no claim that the repayment date was linked to some other process in the equity rights agreement. Saying the debt wasn’t ‘payable’ doesn’t clearly raise this as a new dispute. Paragraph 24 just says that the repayment date was never finalised — not that a different one was agreed. The documents in MD-1 even include the unsigned 1 January document, which clearly says repayment was due on 23 December 2023 and doesn’t connect it to the equity agreement. The email from 25 September also mentions December 2023 as the repayment date.
- The 21-day affidavit seems to be making a completely different point: that the loan terms were never fully agreed on. This is shown clearly in paragraphs 16, 17, and 24, which say the agreement wasn’t finalised. So the judge was right to treat these statements as raising a separate issue that didn’t support the additional dispute.
- The affidavit doesn’t raise the additional dispute or give any basis for saying the repayment date was tied to another agreement — especially since that agreement wasn’t included or even described. Therefore, the associate judge was right to say this affidavit didn’t support the new dispute.
