Varying or setting aside a statutory demand due to unconscionability

The NSW Supreme Court has recently considered an application to set aside or vary a statutory demand on the basis of unconscionability. In re Eastmark Holdings Pty Ltd [2011] NSWSC 1084, the registered owner of 45 lots in a strata scheme development in North Sydney was engaged in an ongoing argument about the payment of outstanding levies to the owners corporation. The owners corporation issued a statutory demand for payment of the outstanding levies.

The court found that there was a genuine dispute between the parties regarding the amount of the debt and ordered that the amount demanded be varied. A genuine dispute arises where the debtor raises a 'plausible contention' which requires further investigation. However, the court was not willing to set aside the statutory demand in this case because the unconscionable conduct pleaded in this case did not directly relate to the statutory demand for outstanding levies - rather it related to proposed special levies being considered by the owners corporation.

This case summarises the court's position on the circumstances in which it will set aside a statutory demand on the basis of unconscionability. Importantly, when the unconscionable conduct does not relate to the matters raised in the demand, it is unlikely that the court will exercise its power to set aside the demand.