Fairness in the Flow of Money: Lessons from Bryant v Badenoch
Home › Case Studies › Case Law Library › Commercial & Business Cases › Debt recovery & Insolvency › Bryant v Badenoch Integrated Logging Pty Ltd [2023] HCA 2
Published: 15 November 2025 | Reviewed: 15 November 2025
(3-minute read)
Case Summary - Facts, Reasoning and Principles
Bryant v Badenoch Integrated Logging Pty Ltd [2023] HCA 2 is now the leading authority on the running-account principle and the scope of unfair preference claims under s 588FA of the Corporations Act. The liquidators of Gunns Ltd sought to claw back payments made to Badenoch during the six-month relation-back period. They argued the “peak indebtedness rule” entitled them to cherry-pick the starting point for calculating the net effect of payments.
The High Court unanimously rejected the peak-indebtedness rule. The Court held:
Section 588FA(3) does not permit liquidators to select an arbitrary start date.
The statute requires an objective look at the entire continuing business relationship, not a selective snapshot.A “continuing business relationship” exists when transactions are commercially interdependent, such as where payments “in” and supply “out” support ongoing trade.
The correct question is whether each payment forms, for commercial purposes, an integral part of that continuing relationship.
Intent may be relevant but is not determinative - the inquiry is objective.The doctrine of ultimate effect remains central.
Payments should be evaluated by their net commercial effect, not isolated or artificially reframed.
Applying this, the Court held that some payments were part of the continuing business relationship, while later payments (when supply ceased and parties were “looking backwards, not forwards”) were not. Because Gunns’ net indebtedness increased over the true period of the relationship, there was no unfair preference.
The decision restores coherence to preference law: focus on substance over tactics.
Why This Judgment Still Matters Today
At its heart, Bryant v Badenoch is a judgment about fair process in financially strained relationships.
The Court rejected a rule that would allow a more powerful party — here, the liquidator — to manipulate the starting point to create an artificial unfairness. Instead, the High Court reinforced:
Context matters more than isolated moments.
Fairness requires transparency in how money moves over time.
You cannot evaluate a financial relationship by taking a single self-selected snapshot.
This principle matters today because modern business relationships often involve fluid, intertwined financial exchanges: rolling supply agreements, ongoing service contracts, monthly retainers, subscription models, running trade accounts, and payment plans.
Where money moves back and forth, the true fairness of the relationship can only be judged by the whole pattern, not by selective extracts. When finances move without clarity, without shared control, or under pressure, the risk of perceived unfairness increases dramatically.
Clean Law’s work repeatedly encounters this theme: fairness requires structural clarity, not just goodwill.
How to Avoid the Same Trap - Escrow Safeguards as Structural Fairness
From Clean Law’s client-protection architecture, the safeguard most closely aligned with Bryant v Badenoch is Escrow Safeguards (Rank #2) - the same structural solution used to correct power imbalances in commercial dealings.
The judgment warns against the danger of selective financial framing in relationships where one party holds greater informational or procedural control. In traditional legal practice, a similar imbalance occurs: funds flow into a lawyer’s trust account, and the lawyer decides when to draw on those funds.
That system places clients in a vulnerable position - much like Gunns, who relied on Badenoch’s supply and was embedded in a complex financial flow without equal control.
Escrow rebalances that power:
Funds cannot move without the client’s clear, informed approval.
Just as the High Court insisted that financial character must be assessed holistically, escrow ensures that every financial movement in a legal matter is visible, contextual, and client-directed.Two-lawyer oversight creates transparency.
One lawyer advocates; the other oversees financial integrity. This mirrors the Court’s insistence on objective scrutiny of each transaction’s “business character.”No one can use selective financial timing to create pressure.
In insolvency, the peak-indebtedness rule was rejected because it enabled tactical manipulation. In legal practice, escrow prevents any perception that a lawyer could tactically draw money at a moment that benefits them.
Escrow safeguards operationalise what Bryant v Badenoch teaches:
fairness emerges when financial movement is balanced, transparent, and viewed in its full context.
Reflection
The High Court reminds us that the fairness of a relationship cannot be judged by one moment; it must be understood by looking at the whole pattern of conduct. Escrow safeguards apply this lesson directly - giving clients shared visibility, shared control, and the assurance that financial decisions reflect a complete picture, not a selective one.
To see how Clean Law applies the High Court’s fairness principles in practice, explore how escrow safeguards restore transparency and shared control in legal funding.
Request a Confidential Consultation
If you’re navigating financial disputes or want to understand how these safeguards apply to your matter, you can request a confidential call here.
By Nicky Wang
Principal Solicitor
Legal Liaison Ltd (trading as Clean Law)
Prepared in accordance with public-interest governance,
annual Law Society trust-account audits, and ACNC-reported standards.
Disclaimer: This page is intended to provide general information only and is not legal advice. The contents may not reflect the most current legal developments and do not take into account your individual circumstances. You should not act or refrain from acting on the basis of this information without obtaining legal advice tailored to your situation.
