Applying the COVID-19 Act

While the legislative amendments enacted to minimise the economic impacts of COVID-19 were welcomed, until now questions have remained as to their actual effectiveness and operation.

The Queensland Supreme Court’s recent decision in Sunstate Land Pty Ltd v Hiview Design & Construction Pty Ltd [2020] QSC 181, by Justice Callaghan is one of the first decisions applying the Coronavirus Economic Response Package Omnibus Act 2020 (Cth) (“the Economic Response Act”).

On 20 March 2020, Hiview Design & Construction Pty Ltd (“Hiview”) issued a creditors statutory demand pursuant to 459E(2)(e) of the Corporations Act 2001 (Cth) (“the Corporations Act”) on Sunstate Land Pty Ltd (“Sunstate”) demanding payment of $275,840.78. Hiview attempted to enforce their demand within the statutorily prescribed period of 21 days, despite Schedule 12 of the Economic Response Act increasing the response time from 21 days to six (6) months.

An issue in contention in the case was the timing of the service of form 509H on Sunstate. Callaghan J accepted that the statutory demand was received by the agents of Sunstate on 1 April 2020, one (1) week after the commencement of the Economic Response Act. Sunstate
subsequently applied to have the statutory demand set aside relying on the Economic Response Act and the increased response periods provided therein, rendering the notice defective.

“In considering that submission, these provisions and the effect of the legislation, regard must always be had to section 459J(2), which constrains the Court from setting aside a statutory demand merely because of a defect. The effect of the legislation does, however, seem to go beyond merely rendering the notice of demand defective. It has changed in a fundamental way the status of the relevant obligations as they were thought to exist when the notice was issued.”

Callaghan J concluded by finding that service of the demand pursuant to section 109X of the Corporations Act was effected on 1 April 2020 and therefore the new legislation applied to the demand. As a result, his Honour held that the demand should be set aside under s459J of the Corporations Act. The Court relied on the objectives of the Economic Response Act which included the continuation of business and the notion that “the new legislation has had an irresistible impact on the present circumstances.”

“…it is noted that elsewhere in the legislative “omnibus”, specific provision was made for relief in respect of debt incurred during the six-month period starting on the day the new laws commenced... It might, therefore, be inferred that it was, in fact, intended that there not be any discrimination in the operation of the amendments to section 459F as between debts according to whether they were incurred before or after 25 March 2020…”

The key takeaway from the decision is that the Economic Response Act (and in particular the amendments to the Corporations Act) were intended to apply on a non-discriminatory basis to all debts, irrespective of whether they were incurred before or after the commencement of the Act.