Colbran, in the matter of Balsub Pty Ltd (in liquidation)

The case of Colbran, in the matter of Balsub Pty Ltd (in liquidation) involves the liquidator, Jonathon Kingsley Colbran, applying to the court for a direction under section 90-15 of the Insolvency Practice Schedule (Corporations) contained in Schedule 2 of the Corporations Act 2001 (Cth). The liquidator seeks to establish that the proceeds from a cause of action under section 588M of the Corporations Act are to be applied in discharge of debts, claims, or expenses of the company, regardless of whether they were incurred by the company in its own right or in its capacity as trustee of the Balms Family Trust. The central issue before the court was whether the proceeds of an insolvent trading claim should be treated as a trust asset when the company incurred liabilities in both its own capacity and as trustee.

The court found that the liquidator's notice to significant creditors and interested parties was sufficient and that the liquidator was justified and acting reasonably in proceeding on the basis that the proceeds of the cause of action are to be applied in discharge of debts, claims, or expenses of the company, irrespective of the capacity in which the company incurred its debts. This decision aligns with the principle of pari passu or "equal sharing" that underpins section 588M of the Corporations Act and the corporate insolvency regime more generally.

The court granted the directions sought by the liquidator, stating that the proceeds of the insolvent trading claim should be applied in accordance with the priorities prescribed by sections 556 and 555 of the Corporations Act. Furthermore, the court ordered that the liquidator's remuneration, costs, and disbursements of the application be paid from the assets of the company and the trust on an indemnity basis. The court also ordered that certain parts of the reasons for judgment be redacted and suppressed to prevent prejudice to the proper administration of justice.

In summary, the court found in favor of the liquidator and granted the directions sought, allowing the liquidator to proceed with the insolvent trading claim and apply the proceeds in accordance with the priorities prescribed by the Corporations Act. The court's decision reinforces the principle of pari passu in corporate insolvency and ensures that creditors share equally in sums recovered by any action brought by a liquidator.