Creditors should not issue a creditor’s statutory demand unless the debt referred to in the demand is due and payable rather than simply owing.

A debt that is due and payable means that it is payable at some point in time and is recoverable against a debtor.

A debt that is owing is only an acknowledgement that a debt exists, but says nothing about the creditor’s rights to seek payment of the debt.

This principle was discussed in the recent case of In the matter of ReNu Waste Pty Ltd 2020 NSWSC 108 where a creditor loaned monies to the debtor on the understanding that the monies would be repaid upon a property being sold by the debtor.

The debtor experienced significant delay in selling the property in question and the creditor terminated the contract and issued a creditor’s statutory demand.

The debtor attempted to set aside the demand on the basis that the debt was only owing rather than due and payable. The court found that the combination of the termination of the agreement coupled with the demand made it clear that the debt was due and payable. The court refused to set aside the demand.

Whilst the creditor was successful in this matter, creditors generally ought to ensure that they have the right to demand payment from debtors and that the debt is due and payable.