Affidavits in support of statutory demands must be sworn by knowledgeable person

The form of a statutory demand is of vital importance and, as one creditor recently found out, in the Supreme Court of NSW the affidavit in support is of equal importance. The whole area of law is very technical, in these skirmishes victory usually goes to the party which dots its legal is and crosses its evidentiary tees.

In Finlay Australian v Taylor & Co [2010] NSWSC 193 a statutory demand was issued by the creditor and the debtor commenced proceedings to set it aside. The description of the debt in the demand was as follows:

The principal sum of $750,000 being due and owing by the Company to the Creditor in respect of a Loan Facility Agreement dated 27 September 2005 $750,000

The facility agreement was in evidence but the repayment date was 26 September 2010 (the hearing was on 17 March 2010). There was nothing in evidence to prove there had been a default under the agreement which would entitle the lender to accelerate the repayment date. This oversight might have been cured by cross-examination of the officer of the creditor who swore the affidavit in support of the demand however she was not called after the creditor conceded she had no direct knowledge of the matters set out in the affidavit.

In setting aside the statutory demand the Judge noted:

The requirement of that rule, as to the identity of the person making the affidavit accompanying the statutory declaration, is designed to serve the public interest as well as to protect the company against unwarranted demands, by endeavouring to ensure, within practical limits, that the person who must put his or her oath or solemn affirmation to the relevant matters (and thereby risk a conviction for perjury if a knowingly false statement is made) is the person associated with the creditor who is most likely to have direct knowledge of those matters. It is important in this regard to bear in mind that the relevant matters include not only a belief as to the existence and amount of the debt, but also a belief as to the absence of any genuine dispute about the existence or amount of the debt. The express requirement in the rule that the person making the affidavit depose to his or her belief that there is no genuine dispute is a significant mechanism for filtering out to cases where there is in fact such a dispute, so as to prevent such cases from reaching the court on such an application as the present, with a consequent waste of time and resources. This mechanism would be substantially weakened unless a person likely to have personal knowledge of the existence of a dispute if there is one makes the affidavit. A statement of a belief that there is no genuine dispute based solely on hearsay is unlikely to have anything like the same degree of reliability.

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