Setting aside a statutory demand on conditions: a double-edged sword?

A debtor company will often seek to set aside a creditor's statutory demand on the basis that there is a genuine dispute as to the existence or amount of the alleged debt claimed by the creditor, the debtor company has an off-setting claim against the creditor (or both), that reduces or cancels out the amount claimed in the statutory demand.

Sometimes overlooked by both the creditor and the debtor company is that, on the hearing of an application to set aside a statutory demand, the court has the power to set aside the statutory demand on conditions.

Depending on the circumstances of the case, the court could order, for example, that the debtor company:

• commence its proceedings in relation to the disputed debt or off-setting claim within a specified period; or