Forever Pets Pty Ltd (FP) is a small company providing a taxidermy service for customer's pets once they have passed away. This is a niche market and the restrictions from COVID-19 have severely affected business resulting in financial difficulties for FP. In April and May 2020, FP was late paying rent to the landlord for their showroom and have had difficulty in paying existing invoices for glass eyes and wadding from their suppliers.

In May 2020 FP was approached by Hunting Lodges Pty Ltd (HL) to supply mounted deer heads for a chain of fancy Vodka bars they are opening. There are 10 bars in total to be opened (one each month) over the next 10 months, beginning in June 2020. The contract is lucrative for FP and given their difficult financial situation they agree to complete the work and be paid $20,000 for each bar that is completed.

On the basis of the contract with HL, FP place a bulk order with the supplier of specialised taxidermy polyurethane, Specialty Foam Supplies Pty Ltd (SFS). This order is enough to complete the contract and has a substantial discount for a bulk purchase.

FP complete the first fit-out in June and are paid by 15 July as required in the contract. The July and August fit-outs are completed by FP, but payment for these remains outstanding, even though payment was due on 15 August and 15 September respectively. FP have repeatedly requested payment for those invoices outstanding and have received assurances the payments will be forthcoming. In the meantime, FP have managed to pay all their bills except the amount owing to SFS.

On 25 October 2020 SFS served a statutory demand and affidavit on the registered office of FP under s 459E of the Corporations Act 2001 (Cth) seeking payment of the outstanding invoice for $10,000 for the supply of taxidermy polyurethane. FP have disputed the amount owing on the basis that the polyurethane supplied by SFS was of an inferior quality and forced FP to purchase extra clay and wadding to the value of $5,000 to augment the inferior polyurethane.

FP come to you for advice regarding the statutory demand. FP also believe the financial difficulties experienced by the company will be a short term problem given the assurances of payment from HL.

Specifically advise FP on two points:

A.How long do FP have to pay the amount in the statutory demand fromSFS? What are the implications of failing to pay the statutory demand from SFS? Can FP apply to have the statutory demand set aside? [8 marks]

B.FP are concerned that SFS may initiate winding up proceedings against FP. Does FP have any options in regard to external administration under the Corporations Act 2001(Cth) that may assist the business to continue trading? [6 marks]