Statutory demands are a quick and convenient way to
prove a debtor company's insolvency. But they're sensitive
creatures. There seems to be an endless list of potential defects
to make the demand challenge-worthy.
Luckily for creditors, a recent decision of the WA Court of
Appeal means there is one less way for a demand to fail.
The loan and the demand
Garuda Aviation is a small WA operator that borrowed $27 million
from CBA to buy a plane. The loan was secured by a mortgage over
the plane.
Garuda defaulted on the loan in late 2010 and went into
receivership. Garuda had paid off a chunk of the loan, and the
receiver sold the plane, but there was still a decent amount owing.
A portion of the overall outstanding debt was in dispute. The bank
served a statutory demand for the undisputed portion, which was
around $2 million.
