Federal Court of Australia

Colbran, in the matter of Balsub Pty Ltd (in liq) v Marks [2026] FCA 1355

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 588M of the Corporations Act 2001 (Cth), the defendant pay to the second plaintiff the sum of $3,520,511.13.

2.    Pursuant to s 51A of Federal Court of Australia Act 1976 (Cth), the defendant pay interest on the amount in paragraph 1 from the date the first plaintiff was appointed as liquidator of the second plaintiff in the amount of $1,580,347.80 as calculated in the attached schedule.

3.    The proceeding is otherwise dismissed.

4.    The defendant pay the plaintiffs’ costs of the proceeding.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ANNEXURE A

Schedule – interest calculations on $3,520,511.13

Calculated in accordance with paragraph 2.2 of the Interest on Judgments Practice Note (GPN-INT)

REASONS FOR JUDGMENT

MCEVOY J:

1    In this matter the first plaintiff is the court-appointed liquidator of the second plaintiff (the Company). The defendant, Mr Bradley Marks, was the director of the Company. The proceeding has been dismissed as against the second defendant, Ms Angela Marks.

2    The liquidator seeks relief in this proceeding under s 588M(2) of the Corporations Act 2001 (Cth) (Corporations Act) by reason of alleged contraventions by Mr Marks of his duty under s 588G to prevent insolvent trading, and compensation under s 1317H by reason of alleged breaches of directors’ duties under ss 181 and 182.

3    By interlocutory application filed 10 July 2026, the plaintiffs now seek default judgment against Mr Marks pursuant to Div 5.2 of the Federal Court Rules 2011 (Cth) (Rules) in respect of the insolvent trading claim (in the amount of $3,520,511.13), together with interest and costs. In the event that this relief is granted, the plaintiffs do not press their directors’ duties claims, and accept that the proceeding should otherwise be dismissed.

4    The bases for the plaintiffs’ default judgment application are that:

(1)    the defendant was required to file and serve his defence by 4:00pm on 12 June 2026, but has not filed or served a defence by that time, or at all;

(2)    the defendant has, through his solicitor, informed the plaintiffs and the court that he does not intend to file a defence nor take an active role in the proceeding; and

(3)    service of the application has been effected on Mr Marks in accordance with my orders dated 9 July 2026.

5    The plaintiffs rely on the following materials in support of their application:

(1)    the affidavit of Jonathon Kingsley Colbran affirmed 24 July 2025 (Colbran affidavit);

(2)    the affidavit of Hugh William Evans affirmed 10 July 2026 (first Evans affidavit);

(3)    the affidavit of Hugh William Evans affirmed 26 August 2026; and

(4)    written submissions dated 26 August 2026.

6    No affidavits or submissions were filed by Mr Marks in opposition to the application, and there was no appearance on behalf of Mr Marks. His position is explained by the fact that his solicitor, Mr Ramon Jimenez, informed the court prior to the hearing that Mr Marks would not defend the application and that, consequently, Mr Jimenez would make no appearance on behalf of his client.

7    For the reasons that follow I have determined that the plaintiffs should have judgment on their insolvent trading claim, together with interest and costs, and that the proceeding should otherwise be dismissed.

BACKGROUND

8    The plaintiffs submit, and I accept, that the relevant procedural history is as follows:

(1)    the Company was wound up on 26 July 2019, and it would seem from an ASIC search that the current liquidator was appointed on 29 September 2021, following the retirement of the former liquidator;

(2)    the liquidator applied for directions concerning the distribution of any proceeds from the insolvent trading claim, which I made on 19 December 2023: Colbran, in the matter of Balsub Pty Ltd (in liquidation) [2023] FCA 1635;

(3)    on 24 July 2025, the plaintiffs commenced this proceeding by filing the originating process, supported by the Colbran affidavit;

(4)    on 11 September 2025, Mr Marks was served with the originating process and the Colbran affidavit;

(5)    on 12 November 2025, Mr Jimenez filed a notice of appearance on behalf of Mr Marks;

(6)    on 13 May 2026, I ordered that a statement of claim (SOC) be filed and served by 15 May 2026 and defences be filed and served by 12 June 2026;

(7)    on 14 May 2026, the plaintiffs filed their SOC, which was subsequently served on 15 May 2026;

(8)    on 15 June 2026, the date for the filing and service of a defence having passed and a defence not having been filed or served, Mr Evans wrote to Mr Jimenez seeking an explanation for the delay and requesting Mr Marks’ defence without further delay;

(9)    on 7 July 2026, Mr Jimenez wrote to Mr Evans explaining that Mr Marks did not intend to file a defence and did not intend to take an active role in the proceeding. Mr Jimenez also indicated that his firm, Cohen Jimenez, would shortly cease to act;

(10)    on 8 July 2026, Mr Evans informed Mr Jimenez that the plaintiffs intended to seek judgment against Mr Marks in the form and amount specified in the interlocutory application;

(11)    on 9 July 2026, I made orders by consent to dismiss the proceeding as against the second defendant, Ms Marks;

(12)    also on 9 July 2026, upon the provision of a minute of proposed consent order signed on behalf of Mr Marks, I made orders directing the plaintiffs to file and serve the interlocutory application by 10 July 2026. Those orders included the following notations:

A.    The first defendant has informed the plaintiffs that he does not intend to defend or take an active role in the proceeding.

B.    The first defendant’s solicitor, Mr Ramon Jimenez, has informed the plaintiffs that he will shortly file a notice of ceasing to act in accordance with Form 8.

C.    The plaintiffs and the second defendant have separately agreed to orders dismissing the proceedings against the second defendant with no order as to costs.

D.    The plaintiffs have informed the Court and the first defendant’s solicitor that they intend to make an application for judgment against the first defendant pursuant to rule 5.23(2) of the Federal Court Rules 2011 (Cth) (Rules).

(13)    on 10 July 2026, the plaintiffs filed the interlocutory application and the first Evans affidavit, which was served by email on Mr Jimenez; and

(14)    it would seem that as at the date upon which this application was heard Mr Jimenez has not filed a notice of ceasing to act.

RELEVANT RULES OF COURT AND APPLICABLE PRINCIPLES

9    Rule 5.22 of the Rules provides that a party is “in default” if that party fails to, amongst other things, “comply with an order of the Court” (r 5.22(b)) or “prosecute or defend the proceeding with due diligence” (r 5.22(d)).

10    Rule 5.23(2)(c) relevantly provides that, if a respondent is in default, an applicant may apply to the Court for an order giving judgment against the respondent for the relief claimed in the statement of claim to which the Court is satisfied that the applicant is entitled.

11    In Michell v Cvetkovic [2022] FCA 1295 (Michell), I considered the applicable principles of the rules concerning default judgment, and the application of those rules to a claim made under s 588M of the Corporations Act. I made the following observations (at [17]–[19]):

In order to be satisfied that an applicant is entitled to the relief sought pursuant to r 5.23(2)(c) of the Rules, the Court must be satisfied that the respondent has been served with the relevant documents and that the Court has jurisdiction to grant the relief: Speedo Holdings B.V. v Evans (No 2) [2011] FCA 1227 at [18] (Flick J).

Rule r 5.23(2) relevantly provides that:

If a respondent is in default, an applicant may apply to the Court for:

…

(c)     if the proceeding was started by an originating application supported by a statement of claim or an alternative accompanying document referred to in rule 8.05, or if the Court has ordered that the proceeding continue on pleadings – an order giving judgment against the respondent for the relief claimed in the statement of claim or alternative accompanying document to which the Court is satisfied that the applicant is entitled; or

…

(e)     an order mentioned in paragraph (b), (c) or (d) to take effect if the respondent does not take a step ordered by the Court in the proceeding in the time specified in the order.

The principles applicable to the power to enter default judgment were essayed by Yates J in Chamberlain Group Inc v Giant Alarm System Co Ltd (No 2) [2019] FCA 1606 as follows:

[13]    The power to give judgment against a defaulting party is undoubtedly discretionary. The discretion must be exercised cautiously. Where the defaulting party is a respondent to a pleaded claim, the giving of judgment for final relief on the application will deliver complete success to the applicant without investigation of the merits of the pleaded claim: ACOHS Pty Ltd v Ucorp Pty Ltd [2009] FCA 577 at [27]. There is no requirement that the act or acts of default be intentional or amount to contumelious conduct. There is no requirement that the act or acts of default result in inordinate or inexcusable delay. That said, such features, if present, will be relevant to the exercise of the Court’s discretion. So too will conduct that persuades the Court that the defaulting party is manifesting an inability or unwillingness to cooperate with the Court and the other party or parties to the proceeding.

[14]    Rule 5.23(2)(c) requires the Court to be satisfied that the applicant is entitled to the relief claimed in the statement of claim. This requirement has been interpreted as meaning that the Court must be satisfied that 'on the face of the statement of claim' the applicant is entitled to the relief that is claimed. It is not a requirement that the applicant prove its claim by way of evidence. Put another way, the facts alleged in the statement of claim are taken to have been admitted: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2007] FCAFC 146; 161 FCR 513 at [42]. If, on inspection of the statement of claim, the Court is satisfied that the applicant would be entitled to the relief sought then this requirement of r 5.23(2)(c) will be met: CNIP Pty Ltd v Chan & Naylor Norwest Pty Ltd (No 2) [2011] FCA 1170 at [18] - [19]; Speedo Holdings B.V. v Evans (No 2) [2011] FCA 1227 at [23]. The Court may permit further evidence to be adduced, but not evidence that would alter the pleaded case: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2006] FCA 1427; 236 ALR 665 at [45], [48] - [50]; United Broadcasting International Pty Ltd v Turkplus Pty Ltd (No 2) [2010] FCA 1413 at [42] - [44]; Australian Competition and Consumer Commission v Yellow Page Marketing BV (No 2) [2011] FCA 352; 195 FCR 1 at [62] - [63].

(Emphasis added)

12    This statement of principles was adopted with approval in Fresh Start Equity Pty Ltd (in liq) v Bignold [2023] FCA 297 at [27]–[28] (Derrington J).

13    As the plaintiffs submit, ss 588G and 588M prescribe the elements that must be established in an insolvent trading claim. Section 588G defines the duty of a director to prevent insolvent trading by the company, and s 588M creates the liquidator’s statutory cause of action for payment to the company where that duty has been contravened. The elements of an insolvent trading claim were summarised by Barrett J in Edenden v Bignell [2008] NSWSC 666 as follows (at [16]):

(a)    that the company incurred a debt;

(b)    that the person against whom recovery is sought was a director of the company when it incurred the debt (s 588G(1)(a));

(c)    that the company was insolvent at that time or became insolvent by incurring the debt (or debts including the debt) (s 588G(1)(b));

(d)    that, at the time the debt was incurred, there were reasonable grounds for suspecting that the company was insolvent or would become so insolvent (s 588G(1)(c));

(e)    that the person against whom recovery is sought failed to prevent the company from incurring the debt;

(f)    that:

(i)    the person against whom recovery is sought was, at the time the debt was incurred, aware that there were grounds for so suspecting (s 588G(2)(a); or

(ii)    a reasonable person in a like position in a company in the company’s circumstances would have been so aware (s 588G(2)(b));

(g)    that the debt was owed to the person by whom recovery is sought (s 588M(1)(a));

(h)    that the person by whom recovery is sought has suffered loss or damage in relation to the debt because of the company’s insolvency (also s 588M(1)(a));

(i)    that the debt was wholly or partly unsecured when the loss or damage was suffered; and

(j)    that the company is being wound up.

14    In Michell, I made the following observations regarding the level of proof required to substantiate an application of this type (at [31]):

As has been mentioned, the condition that the Court be satisfied that the plaintiff is entitled to relief on the statement of claim before judgment is entered against the defendant does not require proof by way of evidence: see Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513 at 523-533 [42] (Moore, Dowsett and Greenwood JJ); Yeo v Damos Earthmoving Pty Ltd, Re Beachwood Developments Pty Ltd (in liq) [2011] FCA 1129 at [9] (Gordon J). What is required is that on the face of the statement of claim there is a claim for the relief sought and the Court has jurisdiction to grant that relief: see Arthur v Vaupotic Investments Pty Ltd [2005] FCA 433 at [3] (Heerey J); Speedo Holdings at [23] (Flick J).

DETERMINATION

15    I accept that the evidence summarised above establishes that Mr Marks has been served with the originating process, the SOC, the interlocutory application and supporting affidavits. In any event, pursuant to r 10.11 of the Rules, having filed an unconditional appearance Mr Marks is taken to have been served with the originating process.

16    I also accept that Mr Marks is “in default” within the meaning of rr 5.22(b) and 5.22(d), because he:

(1)    has not filed and served a defence by 12 June 2026 in accordance with my orders dated 13 May 2026, or at all; and

(2)    has informed the plaintiffs and the court, through his solicitor, that he does not intend to file a defence or take an active role in the proceeding.

17    Insofar as the plaintiffs’ claims are concerned, I accept that the SOC pleads the Company’s insolvent trading in a manner entitling the plaintiffs to the relief that they seek on its face. In that regard, I accept that:

(1)    the Company incurred debts between 26 July 2012 and 26 July 2019 (the Relevant Period) in the total amount of $3,520,511.13, which remain unpaid (SOC, [19]);

(2)    the debts are supported by extensive particulars contained in Annexure B of the SOC, which identify, amongst other things, the character of the debts and the dates on which they were alleged to have been incurred and, where possible, the agreements or goods or services to which they related;

(3)    Mr Marks was a director of the Company at the time the debts were incurred (SOC, [2] and [20]);

(4)    the Company was insolvent at all times during the Relevant Period by reason of the Company’s failure to comply with s 286(1) of the Corporations Act requiring the keeping of proper written financial records, and therefore by reason of the operation of the presumption in s 588E(4) of the Corporations Act (SOC, [21]);

(5)    during the Relevant Period, a reasonable person in the position of the directors of the Company would have been aware that there were reasonable grounds for suspecting that the Company was insolvent or would become insolvent (SOC, [22]);

(6)    although the SOC does not employ the statutory language of s 588G(2) that there was a “failing [by Mr Marks] to prevent the [C]ompany from incurring the debt”, that allegation is nonetheless made out in the SOC because it is alleged that Mr Marks was a director during the Relevant Period, and that the Company incurred the debts (SOC, [2], [19]–[21], [25]). I am therefore satisfied that the plaintiffs are entitled to the relief they seek on the face of the SOC: see Australian Securities and Investments Commission v Plymin [2003] VSC 123; 175 FLR 124 at [321], [325] (Mandie J);

(7)    by reason of the above matters, Mr Marks contravened s 588G(2) of the Corporations Act in relation to the incurring of the debts (SOC, [23]);

(8)    the creditors of the Company have suffered loss and damage in relation to their respective debts because of the insolvency of the Company (SOC, [24]);

(9)    each debt was wholly or partly unsecured when the loss or damage was suffered by the respective creditor (SOC, [25]); and

(10)    the first plaintiff may recover from Mr Marks an amount equal to the loss and damage of the Company’s creditors pursuant to s 588M(2) of the Corporations Act (SOC, [26]).

18    I accept, as the plaintiffs submit, that the discretion of the Court to make any order it considers appropriate pursuant to r 1.32 of the Rules favours the entry of judgment by default in accordance with the plaintiffs’ application under r 5.23(2)(c). The procedural history demonstrates that:

(1)    since 11 September 2025, Mr Marks has been on notice of the claims against him in the SOC, being the date upon which he was served with the originating process and the Colbran affidavit, to which a proposed form of SOC was annexed;

(2)    Mr Marks’ solicitors filed an appearance in the proceeding on his behalf and, it would seem, those solicitors remain on the record;

(3)    Mr Marks has not filed or served a defence by 12 June 2026 or subsequently, in default of my orders dated 13 May 2026, and has informed the plaintiffs and the court that he does not intend to file a defence in the proceeding; and

(4)    since 9 July 2026, when I made orders listing the application for hearing, Mr Marks has been on notice of the application.

19    Although it is not necessary for the plaintiffs to demonstrate that the default was intentional, I accept that this is relevant to the exercise of the discretion: see Michell at [19], quoting Chamberlain Group, Inc v Giant Alarm System Co, Ltd (No 2) [2019] FCA 1606 at [13] (Yates J), as extracted earlier in these reasons. In my assessment, the procedural history demonstrates that Mr Marks’ default is intentional. This is because he has been aware of the orders requiring that he file a defence, and he seems to have made the conscious decision not to comply with them. As I have said, his solicitors have communicated this intention to the plaintiffs and to the court.

20    Further, I accept that there has been no distribution to creditors which would otherwise serve to reduce their loss and damage and, in turn, the amount that might be awarded under s 588M of the Corporations Act. I accept, therefore, that the plaintiffs should have judgment in the amount of $3,520,511.13.

21    I note one final matter, which the plaintiffs have brought to the court’s attention. On 9 July 2026, Mr Jimenez sent an email to Mr Evans stating the following:

We note that the Plaintiffs intend to enter judgment for $3,520,511.13, being the higher of the two amounts set out in the Statement of Claim. We submit that the amount claimed by Carwellyn Pty Ltd ($2,124,030) should be excluded from the order under s. 588M. Our instructions are that the debt was a long term liability repayment of which would only have been demanded to the extent that Balsub Pty Ltd could repay it. Carwellyn Pty Ltd will withdraw its proof of debt if necessary.

22    Notwithstanding this communication, I accept that in the absence of a defence the allegations that the Company incurred a debt of $2,124,030.53 to Carwellyn Pty Ltd (Carwellyn) that remains owing, and that Carwellyn suffered loss and damage, are admitted. I agree with the plaintiffs’ submissions that it is neither necessary nor desirable to embark on an inquiry as to the circumstances in which this particular debt was incurred, nor the terms which governed it.

23    In any event, the plaintiffs are correct to submit that, on the evidence before the court:

(1)    the email from Mr Jimenez appears to admit that the Company incurred that debt, and whether it was due and payable is not to the point: see Re Melbournehomes.com Pty Ltd (in liq) [2020] VSC 854; 356 FLR 390 at [88] (Hetyey AsJ);

(2)    there is sufficient evidence, for the purposes of this application (and to the extent any evidence is necessary) of the incurring of the debt and of the claim for payment, as set out in:

(a)    the Company’s Report on Company Affairs and Property lodged with the Australian Securities and Investments Commission by Mr Marks on 26 July 2019, which lists the Marks Family Trust as a creditor. It seems that the trustee of the Marks Family Trust is Carwellyn;

(b)    the formal proof of debt lodged with the first plaintiff by Carwellyn on 16 August 2020, which contained a debt claim in the amount of $2,124,030 for “Loans Business Development” alleged to have been incurred in March 2012; and

(c)    the financial reports of the Balms Family Trust for the financial year ending 30 June 2016, for which the Company is the trustee, which records three liability accounts related to Carwellyn that, together, align with the debt claimed; and

(3)    the debt has not been released or forgiven, nor has Carwellyn’s proof of debt been withdrawn (which in any event is not, of itself, sufficient to discharge the liability).

24    In the circumstances I accept that Mr Jimenez’s email has no bearing on the outcome of the application.

25    For the foregoing reasons, the plaintiffs should have orders in the following terms:

(1)    Pursuant to s 588M of the Corporations Act 2001 (Cth), the defendant pay to the second plaintiff the sum of $3,520,511.13.

(2)    Pursuant to s 51A of Federal Court of Australia Act 1976 (Cth), the defendant pay interest on the amount in paragraph 1 from the date the first plaintiff was appointed as liquidator of the second plaintiff in the amount of $1,580,347.80 as calculated in the attached schedule.

(3)    The proceeding is otherwise dismissed.

(4)    The defendant pay the plaintiffs’ costs of the proceeding.

Associate:

Dated:    14 September 2026