Stick To The Statute: No "Peaking" Around In Australia

In Short

The Situation: The High Court of Australia has confirmed in Bryant v Badenoch Integrated Logging Pty Ltd [2023] HCA 2 that the "peak indebtedness rule" is no longer available to liquidators when assessing the value of running accounts in unfair preference claims.

The Development: The court upheld the decision of the Full Court of the Federal Court, which found that the language of the Corporations Act requires that any preference made as part of a "continuous business relationship" must be valued as the difference in the amount owing to a creditor at the beginning and end of the ongoing relationship.

Looking Ahead: The peak indebtedness rule has now been abolished once and for all. As a result, liquidators are less likely to pursue unfair preference claims where a running account defence may apply as the potential recovery will be diminished. The decision may also give creditors more confidence in continuing business relationships with debtors in