Davis v M.G. O'Brien Investments Pty Ltd, in the matter of Davis [2026] FCA 344

1. The interim application was listed for hearing yesterday afternoon at 2.15pm.
2. When the matter came on for hearing, the applicants advised the Court that, rather than the orders set out in the interim application, they sought instead adjournment of the hearing of the interim application, and specifically the following orders (the adjournment application):
   1. Pursuant to section 41(6A) of the Bankruptcy Act 1966 (Cth) and rule 3.03(4) of the Federal Court (Bankruptcy) Rules 2016, subject to any further order of this Court, the time for compliance with the Bankruptcy Notice BN277208 dated 3 April 2025 issued on behalf of the Respondents to the Applicants and served on 8 April 2025 be extended until that date which is 4 days after the hearing and determination of the Application filed 23 March 2025 [sic], in accordance with order 2.
   2. The Application filed 23 March 2025 [sic] be listed for hearing on the first available date after 5 May 2026, on a date to be advised.

1. Relevant provisions of the Bankruptcy Act 1966 (Cth) are as follows:

41 Bankruptcy notices

...

(6A) Where, before the expiration of the time fixed for compliance with a bankruptcy notice:

(a) proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or

(b) an application has been made to the Court to set aside the bankruptcy notice;

the Court may, subject to subsection (6C), extend the time for compliance with the bankruptcy notice.

(6C) Where:

(a) a debtor applies to the Court for an extension of the time for complying with a bankruptcy notice on the ground that proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; and

(b) the Court is of the opinion that the proceedings to set aside the judgment or order:

(i) have not been instituted bona fide; or

(ii) are not being prosecuted with due diligence;

the Court shall not extend the time for compliance with the bankruptcy notice.

(7) Where, before the expiration of the time fixed for compliance with a bankruptcy notice, the debtor has applied to the Court for an order setting aside the bankruptcy notice on the ground that the debtor has such a counter‑claim, set‑off or cross demand as is referred to in paragraph 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter‑claim, set‑off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied.

1. At the hearing I asked Counsel for the applicants whether s 41(7) of the Bankruptcy Act applied. In particular I noted that the applicants had originally applied to the Federal Court for an order that the Bankruptcy Notice be set aside on the basis of a set-off, such that (for the purposes of s 41(7) of the Bankruptcy Act) time for compliance by the applicants was deemed to have been extended until and including the day on which the Court determined whether it was satisfied of such set-off.
2. Counsel for the applicants in written submissions had contended that the orders of Rangiah J of 18 July 2025 had "expressly altered [the] position, rendering the deadline for compliance to be [24 March 2026], despite the application in this proceeding to set aside the bankruptcy notice remaining undetermined". When asked in open Court, Counsel for the applicants pressed the submission, and no position to the contrary was taken by the respondents.
3. I have concerns about the provenance of this submission. No authority was cited for the proposition that an order pursuant to s 41(6A) could override an already enlivened automatic extension of time under s 41(7) of the Bankruptcy Act. However as I have already noted, the submission was pressed by the applicants. In such circumstances, notwithstanding my concern that, in fact, the time for compliance by the applicants with the Bankruptcy Notice is deemed to have been extended by s 41(7) of the Bankruptcy Act, I will proceed to determine the adjournment application for the hearing of an application pursuant to s 41(6A) and refuse it for the following reasons.
4. The adjournment of a hearing, including the hearing of the interim application presently before the Court, is an exercise of discretionary power pursuant to, inter alia, s 37M of the Federal Court of Australia Act 1976 (Cth). As recently explained in Snow v Secretary, Department of Social Security [2025] FCAFC 98:
   1. Whether or not an adjournment should be granted is a discretionary question to be considered by reference to the explanation and evidence proffered in support of the adjournment, any prejudice to the other party (and to other litigants and the Court more broadly), the principles of case management and the procedural history of the proceedings: Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175. The Court must also consider whether granting or denying an application for an adjournment is consistent with the "overarching purpose of the civil practice and procedure provisions" set out in s 37M of the Federal Court of Australia Act 1976 (Cth): Luck v Chief Executive Officer of Centrelink [2015] FCAFC 75 at [42] (Collier, Griffiths and Mortimer JJ).
5. Turning to the adjournment application before me, I consider first that the explanation for the adjournment application provided by the applicants in the present case was unsupported by credible evidence. In particular, the applicants' primary reason for seeking an adjournment was that they had instructed their lawyers in the Supreme Court proceedings (namely, Project Legal) to appeal the decision of Kelly J described earlier in this judgment. However, no notice of appeal against the decision of Kelly J, including in draft, was provided in evidence for my consideration in determining whether an appeal would actually be filed. Rather, the following was explained in the affidavit of the applicants' lawyer Mr Reece Allen of Project Legal:

13. The Grounds of Appeal are premised upon the basis that:

(a) Justice Kelly erred, for various reasons, in concluding that the Account could not exceed $350,000 (Ground 1); and,

(b) Justice Kelly erred in not making orders allowing certain amounts owing by POBE to the Applicants to be Set Off in the manner described at [5(c)] herein (Ground 2).

1. These premises are, in my view, inadequate to demonstrate either the fact of an appeal or the merits of such appeal.
2. The applicants further submitted that another Counsel was finalising the notice of appeal against the decision of Kelly J, however that could equally mean that no appeal may proceed in the event that that unidentified Counsel ultimately advised against it or the applicants ultimately decided not to instruct that the appeal in finalised terms be filed. In such circumstances there was also plainly no room for findings by this Court of the prospective merits of any such hypothetical appeal.
3. Second, there was no evidence of substance adduced before me explaining why there had been a delay of two weeks in preparing a notice of appeal against the decision of Kelly J. Notwithstanding that the effect of the UCPR was that the applicants have until 7 April 2026 to file a notice of appeal, this did not negate what, as the applicants claimed, was their clearly urgent obligation to comply with the Bankruptcy Notice by 24 March 2026 in accordance with the orders of Rangiah J. I further note that, although there had apparently been a change of lawyers by the applicants in the Federal Court proceedings (for which a Change of Lawyer notice had been filed), they had apparently retained the same lawyers in the Supreme Court proceedings.
4. Third, the applicants have been unsuccessful against the respondents in multiple hearings in the Supreme Court of Queensland, as well as the Court of Appeal. The applicants were further unsuccessful in seeking special leave to appeal to the High Court of Australia from the decision of the Court of Appeal. Most recently, the applicants were unsuccessful before Kelly J in respect of their claims for reduction of the total judgment debt ordered by the Supreme Court, by reference to a counter-claim, set-off or cross demand.
5. While such unfavourable decisions of the Queensland Courts and the High Court do not preclude consideration by this Court of the application filed on 24 April 2025, to the extent that those decisions are relevant in the consideration by me of the adjournment application, they support a refusal to adjourn. Put simply, there is ample reason for me to find that the respondents, as a matter of justice, should be entitled - as things presently stand - to the fruits of their multiple judgments in the Queensland Courts, and to pursue the Bankruptcy Notice issued on 3 April 2025 which was founded in one or more of those judgments.
6. Finally, while the refusal to grant an adjournment of the interim application (and/or any extension of time for compliance by the applicants with the Bankruptcy Notice) may have resulted in the applicants committing an act of bankruptcy, they are at liberty to apply for an order setting aside any sequestration order made. My attention was directed to no evidence suggesting any particular prejudice to the applicants if they are deemed now to have committed an act of bankruptcy, which prejudice could not be addressed were they later successful in having a sequestration order set aside.
7. It follows that the adjournment application is refused. Accordingly, the interim application must be dismissed. Costs follow the event.

I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Collier.