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Statutory Demands - can be an expensive exercise if used incorrectly

If your debtor is a limited liability company, then provided certain requirements are met, the statutory demand procedure can be used as a means of debt collection. Abuse of this procedure is not tolerated by the courts. Getting it wrong can be an expensive mistake. The most important requirement is that the statutory demand procedure is only available if there is no dispute that the money is owed. If there is a dispute you cannot issue a Statutory Demand. At CollectIT we are often told by our clients that the reasons given by the debtor for disputing the debt are not genuine. That may be so but unless our clients have solid proof they can rely on in court, using the statutory demand procedure is very risky because a court may not be able to determine who is telling the truth based on the court documents. If there is no dispute then CollectIT issue a Statutory Demand on its clients’ behalf and serve it on the debtor. The amount of the demand is the debt owed, together with any interest and collection costs that can be contractually claimed. If there is a dispute, and a Statutory Demand is issued, this is how the exercise can go ... after being served with the Statutory Demand the debtor company has 10 working days to apply to the High Court to set the statutory demand aside. If the documents are filed within this time limit (no extensions are given) then the creditor would need to have court papers prepared and filed explaining why it should not be set aside. The Court hearing is on the papers, which means there is no questioning of witnesses. The creditor company must be represented by a lawyer in the High Court.Following the hearing the successful party is able to claim costs. If the statutory demand procedure should not have been used because a genuine dispute existed, costs in the vicinity of $6,000 are likely to be awarded to the debtor company - an expensive mistake! If the Statutory Demand is served and no steps are taken by the debtor company to set it aside, then within 15 working days from the day after service the creditor is able to file for liquidation of the debtor company in the High Court.Do not make the costly mistake that so many others have made using this procedure incorrectly. 

Contact CollectIT today on 07 834 9111 and discuss your individual situation.