Setting Aside a Statutory Demand: Lawyers in Melbourne

If your company has just been served with a creditor’s statutory demand, the 21 days to apply to set it aside are already running. The court can’t extend them, so call us today or send us the details.

Hendersons Legal is a Melbourne law firm established in 2001, and our debt recovery and insolvency lawyers act for creditors, company directors and liquidators. If you need a lawyer to set aside a statutory demand in Melbourne, this page explains how it works, what the court expects and what to do first.

It is written for company directors, and the accountants who advise them, whose company has just received a demand. If you are the creditor and want to issue one, read our guide to using a statutory demand to recover a company debt instead. Our principal, David Henderson, has more than 30 years’ experience.

What a statutory demand is, and why it is serious

A statutory demand is a formal written demand from a creditor for a debt that is due and payable and at least a minimum amount set by law. It tells the company to pay the debt, or to secure or compound it (roughly, to give security for it or settle it by agreement), within 21 days of being served.

A demand is a good deal more than a letter. If the company doesn’t comply, and doesn’t apply in time to set the demand aside, the creditor can apply to wind the company up. In that application the court must presume the company is insolvent. The creditor can rely on that presumption if it applies within three months of the company’s failure to comply.

You have 21 days, and the court cannot add more

The 21 days run from service of the demand on the company. An application to set the demand aside can only be made within that time, and the court has no power to extend it. Work out the date of service first, and keep any record of how the demand arrived.

What counts as applying in time

Two things must happen within the 21 days:

• the application to set the demand aside is filed with the court, together with a supporting affidavit; and
• a copy of the application and the affidavit is served on the creditor.

Filing alone is not enough.

Applying properly matters for another reason too. The company is only taken to have failed to comply once the compliance period ends, and when an application is made in time that period generally runs until seven days after the application is finally decided.

Grounds for setting aside a statutory demand

The court can set a demand aside on four grounds. Which one fits depends on your documents.

A genuine dispute about the debt

The company genuinely disputes that it owes the debt, or disputes the amount. For example, the goods were never delivered, the work was not done as agreed, or the invoice has already been paid.

An offsetting claim

The company has a genuine claim against the creditor, by way of counterclaim, set-off or cross-demand. That claim can come from a different transaction to the one behind the demand.

If only part of the debt is disputed or offset, the court looks at what is left. If the remaining amount is below the statutory minimum, the court must set the demand aside. If it is at or above the minimum, the court may vary the demand instead.

A defect that causes substantial injustice

The demand has a defect that would cause substantial injustice unless the demand is set aside. A defect alone is not enough: the court must not set a demand aside merely because of one.

Some other reason

The court can also set a demand aside if there is some other reason to do so. Whether a reason is enough depends on the facts, so we look at it closely before relying on it.

Paying, securing or compounding instead

Setting aside is not the only response. The demand itself asks the company to pay, or secure or compound the debt, within the 21 days. If the debt is genuinely owed, paying it or agreeing security or a settlement may be the sensible way out. We can help you weigh that against an application.

Talking to the creditor does not stop the clock

Talking to the creditor is often sensible. But the 21 days keep running while you talk, and the court can’t give you more. If the creditor says it will wait, treat the deadline as live until you have advice.

Which court hears the application

These applications can be made in the Supreme Court of Victoria or the Federal Court of Australia. The Supreme Court deals with them in its Corporations List, which notes they are often time sensitive. We can advise which court suits your matter (see also our court representation and litigation page). We appear in the Supreme Court’s winding up list ourselves.

The Supreme Court’s July 2025 notice, in plain words

In July 2025 the Supreme Court of Victoria issued a Notice to the Profession on these applications. It applies to applications filed from 21 July 2025. In plain words:

• The court makes a timetable of its own accord, soon after the application is filed.
• Where possible, the final hearing is within six weeks of filing, before an Associate Judge or a Judicial Registrar. It is listed for no more than half a day.
• Affidavits should be concise, and exhibits limited to the documents that matter to the grounds and the real issues.
• Late evidence is generally not considered unless the court gives permission, and you must explain the delay.
• Settlement talks, current or expected, will not ordinarily justify changing the timetable or adjourning the hearing.

The risk of costs

Applying carries a costs risk, because the court decides who pays the costs of the application. The Supreme Court’s notice says parties must keep costs reasonable and proportionate, and the court may refuse costs for evidence that is unnecessarily long or for grounds pursued unnecessarily or unsuccessfully. That is why we look hard at the merits of your grounds before anything is filed.

What to gather now

• the statutory demand, and the affidavit that came with it
• the envelope, email or other record showing how and when the demand was served on the company
• the contract or terms of trade, and the invoices behind the debt
• emails, letters or messages showing the debt was disputed, or that you raised a problem
• records of any payments made, and anything the creditor owes the company

Don’t wait until you have everything. Send what you have and tell us what is missing.

What happens if you do nothing

If the 21 days pass with no payment, no agreement and no application made in time, the company is taken to have failed to comply with the demand. The creditor can then ask the court to wind the company up and appoint a liquidator, and the court must presume the company is insolvent. In a liquidation, ASIC says, the liquidator takes control of the company.

Our winding up application lawyers page explains what happens next. If the demand is a sign of wider cash trouble, see our page for company directors in financial difficulty.

When to call a lawyer about a statutory demand in Melbourne

• Your company has been served with a demand and the 21 days have started.
• You think the debt, or part of it, is wrong or has already been paid.
• The company has a claim against the creditor.
• The creditor has told you it will apply to wind the company up.

This is general information, not legal advice. Every situation is different, so get in touch about yours.

Send us the details

Use our online enquiry form to describe the matter briefly and upload the statutory demand and its affidavit. We also act for creditors and liquidators, so we check for conflicts before we discuss the details. If the deadline is close, call (03) 9629 2211 as well, because an enquiry does not stop time running.

Questions about setting aside a statutory demand

How it works

1. Call (03) 9629 2211 or send us the details through our online enquiry form. Tell us the date the demand was served, and send the demand, its affidavit and any correspondence about the debt.
2. We clarify your instructions and take a first look at the documents.
3. We send you a costs agreement and disclosure statement setting out the scope of the work and our fees.
4. Once you accept, we start work and keep you posted.