How to set aside a statutory demand: a 21-day plan with a funding fallback

A statutory demand you believe is wrong is still a statutory demand. The clock runs whether or not the creditor is right. This guide is for the company that disputes some or all of the debt. It covers how the set-aside application works, the calendar that keeps you inside the law, and the funding plan that protects the company if the court doesn’t agree with you.

Two tracks, run side by side from day one:

• Track A — the dispute. A solicitor drafts, files and serves the application and affidavit.
• Track B — the money. You work out what the company would have to pay if the dispute fails or only partly succeeds, and line up a way to pay it fast.

Owners who run only Track A are the ones who end up facing a winding-up application.

What does it mean to set aside a statutory demand?

Under section 459G of the Corporations Act 2001, a company served with a creditor’s statutory demand can ask the Federal Court or a state or territory Supreme Court to cancel it. If the court agrees, the demand is gone. The creditor can’t rely on it to presume the company insolvent, though it can still sue for the debt in the ordinary way.

The application is not a full trial of who owes what. The court only asks whether there’s a real reason the demand shouldn’t stand. That keeps hearings short. It also means the paperwork has to be right the first time.

The trap: filed AND served inside 21 days

Most articles say “you have 21 days”. The detail that catches owners is that two things must happen inside that window:

1. The application is filed with the court, and
2. A copy of the application and the supporting affidavit is served on the creditor.

Miss either one and the application fails, however strong the dispute. The High Court decided in David Grant & Co v Westpac (1995) that courts have no power to extend this period. In Dyirranga Ltd v Deputy Commissioner of Taxation [2024] FCA 411, the Federal Court dismissed an application where the documents served on the creditor didn’t have the court’s seal, proceeding number and return date. They had gone out before the court accepted the filing. The company had a deadline, a lawyer and a dispute, and lost on paperwork.

There’s a second trap. Every ground you want to argue has to appear in the affidavit served within the 21 days. Victoria’s Court of Appeal confirmed in Sceam Constructions v Clyne [2021] VSCA 270 that grounds raised later are unlikely to be heard. You can’t file a placeholder and fill in the detail next week.

Which grounds can get a demand set aside?

Ground	Section	What it looks like in practice
Genuine dispute about the debt	s459H(1)(a)	Work was defective, goods weren’t delivered, the price charged isn’t the price agreed, or the amount was already paid
Offsetting claim	s459H(1)(b)	The creditor owes you money, for example damages for a late delivery that cost you a contract
Defect in the demand	s459J(1)(a)	Wrong company named or the amount misstated, but only if leaving it in place would cause “substantial injustice”
Some other reason	s459J(1)(b)	Rare. For example, the demand is being used as leverage for a debt the creditor knows is contested

A genuine dispute has to be more than a bare denial. The court wants a plausible argument backed by facts, such as emails, photos, delivery records or a quote showing the agreed price. A complaint that first appears after the demand arrives is treated with suspicion. If you raised the problem in writing months ago, find that email today. It’s often the most valuable document in the file.

What if only part of the debt is wrong?

This is where many set-aside plans fall over. Under section 459H the court works out a “substantiated amount”: the part of the debt not genuinely disputed, less any offsetting claim. Then:

• Below $4,000 (the statutory minimum): the court must set the demand aside.
• $4,000 or more: the court can vary the demand down to that figure instead of setting it aside. The company then has to pay the reduced amount within the time the court allows, or face the same insolvency presumption.

So if the creditor claims $90,000 and you can only seriously dispute $20,000, expect to pay roughly $70,000 even if the application “wins”. That number is the minimum Track B has to cover. Many solicitors advise paying or offering the undisputed amount early. It narrows the fight, cuts legal costs and shows the court you’re acting in good faith. Ask yours before you send any money.

The 21-day calendar

Count from the date of service (day 0). For service by post, check with your solicitor how the date is worked out, because it may not be the day it reached your desk.

Day	Track A — dispute	Track B — money
0–1	Record the service date and work out day 21. Call a solicitor and send them the demand plus every email about the debt	Run the numbers in the cash-gap countdown: undisputed amount, likely costs, and what’s due on payroll, BAS and rent over the same weeks
2–5	Solicitor advises on grounds and confirms the court. Gather evidence: contracts, quotes, delivery dockets, photos, complaint emails	Make a funding enquiry for the undisputed amount plus a buffer, so a route is ready rather than needed in a rush
6–10	Affidavit drafted and checked. Every ground is in it	Decide whether to offer the undisputed part now. See calling creditors to buy time for how that conversation goes
11–14	Target day for filing. Get the sealed copy back from the court, then serve it with the affidavit	Have documents ready for a lender: ID, the demand, recent statements, property details if relevant
15–21	Buffer for registry delays, service problems and weekends. Serve no later than day 21, and much earlier if possible	Funding approved or close to it, ready to draw if needed

Aim to file by day 14. Registries reject documents, process servers miss people, and day 21 can fall on a Sunday. The general day-by-day logic for notices like this is on our 21-day notice page.

If the dispute only covers part of the debt, Track B doesn’t have to wait for the hearing. Check your funding options now so the money is ready for the part you’ll have to pay either way.

After filing: hearing timelines and the 7-day window

Filing stops the clock on the demand itself while the application is decided. That buys time, but it isn’t open-ended.

In Victoria, set-aside applications filed on or after 21 July 2025 follow a set timetable under a Supreme Court notice to the profession. The court aims to hear them within about six weeks of filing, in half a day at most. Evidence filed late may be ignored, and ongoing settlement talks won’t usually justify moving the date. Other courts run their own lists, but expect weeks rather than months.

If the application is dismissed, section 459F generally gives the company 7 days after the decision to comply, unless the court orders otherwise. The High Court confirmed in Aussie Vic Plant Hire v Esanda Finance [2008] HCA 9 that once the compliance period has expired, a court can’t extend it. Seven days to find the full debt plus the creditor’s legal costs is not the time to start a loan application from scratch.

That’s why Track B runs from day one. If you win, the funding enquiry cost you nothing and the facility doesn’t need to be drawn. If you lose, the money can move within days rather than weeks.

Set aside or pay: which makes sense?

Situation	Usual best move
The whole debt is genuinely disputed, with documents from before the demand	Apply to set aside. Fund legal costs and a buffer
Part of it is disputed and more than $4,000 is clearly owed	Apply on the disputed part, and pay or fund the undisputed part
The dispute is thin or first raised after the demand	Pay or settle. A losing application usually adds the creditor’s costs
The company can’t pay its debts generally, not just this one	Speak to a registered liquidator or restructuring adviser before borrowing. ASIC’s director guidance is a sound starting point
The debt is valid but the creditor might accept a payment plan	Negotiate in writing, and still diary day 21 in case talks stall

Borrowing makes sense when the company is viable and the demand is a cash timing problem or a partly disputed bill. It doesn’t make sense if it only delays an outcome that’s already set.

How fast can funding realistically arrive?

Route	What’s possible	Suits
Urgent caveat loan	$20k to $250k possible same day, property-secured	The 7-day window after a lost application, or a creditor who’ll settle for quick payment
Second or first mortgage	Up to $5m possible within 24–48 hours	Larger demands, or several creditors at once
Unsecured business loan	$5,000 to $500,000; smaller amounts possible same day	Trading businesses without property and a clean set of statements

None of these is guaranteed, and every one moves faster when the documents are ready. A lender will want to see the demand, how the dispute stands and how the loan will be repaid. Payment straight to the creditor’s solicitor at settlement is common and gives you a clean record that the demand was satisfied.

Illustrative example: a partly disputed demand

Illustrative only. A Gold Coast joinery company is served a demand for $68,000 by a timber supplier. Two deliveries totalling $19,000 arrived warped, and the director emailed photos to the supplier at the time. The rest is owed.

On day 1, the director sends the demand and the emails to a solicitor. On day 3, they make a funding enquiry for $55,000, enough for the undisputed amount, legal costs and a cushion. The solicitor files the application on day 12, gets the sealed copy back the next morning and serves it on day 13. The affidavit covers the warped stock, with photos and the original emails attached.

With funding approved, the company offers to pay the undisputed $49,000 straight away. The supplier accepts, drops the disputed part to a separate negotiation and withdraws the demand. The application is discontinued by consent. The facility was ready in case the hearing went the other way, and without it the director would have had no leverage at all.

Contesting the demand doesn’t mean you can leave the money until later

A strong dispute and a funding plan are two halves of the same defence. We work with owners in the middle of legal deadlines all the time, and we know a statutory demand rarely arrives alone. Payroll, BAS and suppliers keep their own dates while the solicitor drafts the affidavit.

The enquiry takes about 60 seconds, and it doesn’t touch your credit file. There’s no credit check just for asking. Your details stay with us rather than going out to a pile of lenders, so your phone won’t light up with strangers. A real person reads what you’ve sent, looks at the demand, the disputed part and your deadline, and calls you back with the route that fits.

Please fill the form in accurately: the full amount claimed, how much you dispute, the service date and any property you could offer as security. Exact figures let us match the right option first time, before your 21 days or your 7 days run out.

Find out where you stand →