Bryant v Badenoch Integrated Logging Pty Ltd [2023] HCA 2

Bryant v Badenoch Integrated Logging Pty Ltd [2023] HCA 2
High Court of Australia
Kiefel CJ, Gageler, Gordon, Edelman, Steward, Gleeson, Jagot JJ
Corporations – winding up – insolvency – voidable transactions – unfair preferences – construction of s588FA(3) of Corporations Act 2001 (Cth) – appeal against decision of Full Federal Court – appellants were liquidators of relevant debtor company – respondent agreed to supply services to debtor company for harvesting and hauling timber – debtor company suffered significant declines in revenue – frequently late in making payments or only making partial payments – respondent continued to provide services to debtor company despite debtor company’s increasing indebtedness – debtor company appointed liquidators, appellants – respondent agreed with debtor company to terminate agreement – agreed to continue to supply some services for further short period – appellants applied to have series of payments made by debtor company to respondent within six month period ending on relation back day set aside as unfair preferences – contended that if continuing business relationship existed so as to engage s588FA(3), applicants were entitled by ’peak indebtedness rule’ to choose starting date of ’single transaction’ within relation back period to prove existence of unfair preference – primary judge held “peak indebtedness rule” applied under s588FA(3) – primary judge held only two of the payments (3 and 4) were made as an integral part of a continuing business relationship involving a running account; and the remaining payments (1 and 2 and 5 to 11) were not – Full Court held “peak indebtedness rule” did not apply under s588FA(3), and that payments 1 and 2 were also part of the relationship – High Court held Pt 5.7B of the Corporations Act does not incorporate “peak indebtedness rule” – whether a “transaction is, for commercial purposes, an integral part of a continuing business relationship” under s588FA(3)(a) involves an objective factual inquiry as to the “business character” of the relevant transaction – appeal dismissed.
Bryant