Liquidators Be Aware – Statutory Demands and Personal Liability for Costs

31 August 2020
Susan Forrest, Partner, Brisbane

In SJG Developments Pty Ltd v NT Two Nominees Pty Ltd (in liq),[1] the Supreme Court of Queensland set aside a statutory demand served by the liquidators of NT Two Nominees Pty Ltd (in liquidation) (NT Two Nominees) on SJG Developments Pty Ltd (SJG).  Costs were awarded on the indemnity basis and more significantly, were also ordered against the liquidators personally.


The sole director of NT Two Nominees was Mrs Simmons (the estranged wife of Mr Simmons).  Mr Simmons, one of the three directors of SJG and its sole shareholder, acted as an accountant for NT Two Nominees and had been granted access to its bank accounts.

NT Two Nominees’ liquidators were appointed in July 2019.

On 12 December 2019, the liquidators demanded that SJG repay the sum of $135,703.46, allegedly being unauthorised payments made by Mr Simmons out of NT Two Nominees’ account (Demand). Prior to this, there had been no direct dealings between the companies.On 20 December 2019, SJG requested that the Demand be withdrawn on the basis that any money advanced to SJG were personal loans from Mr and Mrs Simmons and not from NT Two Nominees.  In further support of its request, SJG provided evidence that any advance had been repaid as approximately $122,000 had been paid to Mrs Simmons by way of bank cheque.

Despite SJG disputing the debt and requesting the withdrawal of the Demand, on 20 December 2019 the liquidators of NT Two Nominees served a statutory demand demanding payment of $60,000 (Statutory Demand). Interestingly, no explanation was provided at that time why NT Two Nominees sought only the reduced amount.

SJG made two requests that NT Two Nominees withdraw the Statutory Demand and warned that it would seek costs on an indemnity basis if it was not withdrawn.

SJG applied to the Supreme Court of Queensland for orders that:

  • the Statutory Demand be set aside;
  • NT Two Nominees pay SJG’s costs on an indemnity basis; and
  • the liquidators personally indemnify SJG with respect to any costs order made against NT Two Nominees.

The Court’s decision

Should the Statutory Demand be set aside?

NT Two Nominees contended that Mr Simmons caused unauthorised transfers totalling $60,000 to be made from NT Two Nominees’ funds to De Silva Hebron, solicitors for a seller from whom SJG bought land.

In the absence of any company records supporting the basis of the payments, NT Two Nominees based its Statutory Demand on:

  • Mrs Simmons’ advice that the payments were unauthorised; and
  • the NT Two Nominees’ bank statements which recorded payments to De Silva Hebron referring to a lot number that matched the land bought by SJG.

Whilst the Court acknowledged it was possible the payments could be characterised in the way that NT Two Nominees contended, based on the material before it, the Court considered that:

  • it was unclear whether the money was in fact received by De Silva Hebron or whether it was received for the purpose contended for by NT Two Nominees; and
  • the evidence of SJG showed there was a genuine dispute about the debt.

The Court concluded that it was obvious that there was a genuine dispute and the Statutory Demand was set aside, with costs ordered in favour of SJG as the successful applicant.

Should costs also be ordered against the liquidators personally?

Whilst SJG was awarded costs it was not satisfied to accept the risk that NT Two Nominees might have sufficient funds.  Accordingly, it sought a costs order against the liquidators personally.

The Court found that there was no need to examine if the non-party liquidators acted unreasonably, as the Court has a well-established inherent jurisdiction to make costs orders against non-parties where the interests of justice support such an order.  Further, the Court accepted that SJG’s application was necessitated by the liquidators’ refusal to withdraw the Statutory Demand, despite SJG’s various requests.

In the circumstances, the Court found that the justice of the case required that a costs order be made against the non-party liquidators personally.  Importantly, the Court did so without needing to form a view that they had acted unreasonably or in such a way that affected their right of indemnity.

Should costs be ordered on the indemnity basis?

In deciding whether indemnity costs should be awarded, the Court considered that:

  • it was obvious that there had been a genuine dispute as to the debt;
  • NT Two Nominees had been provided with fair warning of the grounds on which SJG would seek to set aside the demand; and
  • SJG had foreshadowed that it would apply for indemnity costs.

The Court found that the evidence of NT Two Nominees did not support its own contentions and did not disprove the existence of a dispute about the debt.  Further, when SJG had raised a genuine dispute about the debt and given warning it would seek indemnity costs on several occasions, the liquidators had sufficient opportunity to consider NT Two Nominees’ position and withdraw the Statutory Demand.

Consequently, costs were ordered on the indemnity basis.

This is a reminder that statutory demands should not be used as a debt collection tool.

Insolvency practitioners faced with limitations in access to company information should be cautious when issuing statutory demands as they may be exposed to personal costs orders even if not a party to the proceeding, irrespective of whether or not they acted unreasonably.


Authored by:

Susan Forrest, Partner
Petar Damnjanovic, Lawyer


[1] [2020] QSC 104.

This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.

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