Bryant, in the matter of Gunns Limited (in liq) (receivers and managers appointed) v Edenborn Pty Ltd (No 2)

Gunns Limited (in Liquidation) (Receivers and Managers Appointed) v Edenborn Pty Ltd is a case concerning a dispute over payments made by Gunns Limited to Edenborn Pty Ltd, which the plaintiffs alleged were unfair preferences under the Corporations Act 2001. The plaintiffs sought indemnity costs on the basis that the defendant unreasonably rejected their settlement offers, including a formal offer to compromise under rule 25.01 of the Federal Court Rules 2011. The court had to determine whether the defendant acted unreasonably in rejecting these offers and if the circumstances warranted an order inconsistent with the presumption in favour of indemnity costs. The court considered various factors, including the stage of the proceedings, the prospects of success, and the clarity of the offers, to assess the reasonableness of the defendant's actions.

The court found that the defendant's rejection of the settlement offers was not unreasonable. It noted that the proceedings were at an early stage when the first offer was made, and the amount claimed by the plaintiffs changed significantly during the currency of the offers. Furthermore, the defendant had reasonable grounds to challenge the claims based on the "single transaction" and "peak indebtedness rule" issues, which were supported by recent judicial and academic commentary. The court concluded that the defendant's case was not unreasonable, and thus, the rejection of the settlement offers was not deemed unreasonable in the circumstances of the case. Consequently, the court did not exercise its discretion to make an order inconsistent with rule 25.14(3) of the Federal Court Rules 2011.

The court declared that the payments made by Gunns Limited to Edenborn Pty Ltd were unfair preferences, insolvent transactions, and voidable transactions under the Corporations Act 2001. It ordered Edenborn Pty Ltd to pay Gunns Limited the sum of $2,455,090.11, representing the total of the amounts claimed, plus pre-judgment and post-judgment interest. Additionally, the court awarded the plaintiffs their costs of the proceeding on a party and party basis up to 11.00am on 18 February 2019, and on an indemnity basis from 11.00am on 18 February 2019. The parties were directed to confer to agree on the amount of costs payable by the defendant, with the plaintiffs having liberty to apply for the taxation of their costs if no agreement was reached.