Double check your claim

Posted on Mar 19, 2017 by Janine Wilson   |   Categories: Litigation & Dispute Resolution

Double check your claim that a debt is “due and payable” before you issue a statutory demand.

One element required for a party to issue a statutory demand seeking payment of a debt is that the debt is in fact due and payable.

Careful consideration needs to be given to the factual and the legal basis of the claimed debt and full instructions obtained so that critical independent thought can be given to the circumstances surrounding the creation of the debt.

As a client, it is important to provide your solicitor with as much information as you can regarding the creation of the debt and what you rely upon to say that the debt is due and payable.

Has the debt liability actually accrued? For instance, in a 2016 case, a statutory demand was issued in respect of a $51,000 “entry fee” which was invoiced pursuant to a clause of a services agreement between the parties (the Entry Fee Clause).

The Entry Fee Clause provided that the obligation to pay the entry fee arose where “you ask anyone else to provide such a loan during the period of time set out in Item 5 of Schedule A and we discover you have done so…”

The recipient of the statutory demand applied to the Supreme Court seeking to have the demand set aside on various grounds including that the debt had not actually arisen in accordance with the terms of the Entry Fee Clause.

The Court found that the Entry Fee Clause was an ambiguous clause and both parties had reasonable grounds for the different interpretations of that clause that each of them had adopted. The Court found that the proper interpretation of the Entry Fee Clause creating an entitlement to an “entry fee” was worthy of further investigation and the statutory demand was set aside.

In the same case, the plaintiff also claimed that the “entry fee” was a penalty and should not be enforceable. Having regard to the terms of the particular contract in dispute, the Court found that this was also a matter with some substance that required further investigation.

Accordingly, the statutory demand was set aside and the issuer of the demand was ordered to pay the costs of the Plaintiff of the Supreme Court proceedings.

 

(See Sydney Reynolds & Developments Pty Ltd v Reynolds Private Wealth Pty Ltd [2016] NSWSC 1104.)