Davis v M.G. O'Brien Investments Pty Ltd - Bankruptcy Case

Original Word Document (82.7 KB) Federal Court of Australia

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

| File number(s): | QUD 225 of 2025 |
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| Judgment of: | COLLIER J |
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| Date of judgment: | 25 March 2026 |
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| Catchwords: | BANKRUPTCY – bankruptcy notice – time for compliance – where time for compliance previously extended to 14 days after determination of Supreme Court of Queensland proceedings – further application to extend time for compliance – application to adjourn hearing of extension application pending filing of Notice of Appeal in Queensland Court of Appeal – s 41(6A) Bankruptcy Act 1966 (Cth) – discretionary factors relevant to adjournment – application refused |
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| Legislation: | Bankruptcy Act 1966 (Cth) ss 41(6A), (7)

Uniform Civil Procedure Rules 1999 (Qld) |
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| Cases cited: | Davis v Perry O’Brien Engineering Pty Ltd [2023] QSC 243

Davis v Perry O’Brien Engineering Pty Ltd [2023] QSC 281; (2023) 17 QR 313

Davis v Perry O'Brien Engineering Pty Ltd [2025] QCA 18

Davis v Perry O'Brien Engineering Pty Ltd [2026] QSC 31

Snow v Secretary, Department of Social Security [2025] FCAFC 98 |
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| Division: | General Division |
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| Registry: | Queensland |
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| National Practice Area: | Commercial and Corporations |
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| Sub-area: | General and Personal Insolvency |
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| Number of paragraphs: | 28 |
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| Date of last submission/s: | 24 March 2026 |
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| Date of hearing: | 24 March 2026 |
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| Counsel for the Applicants: | Ms S Philippou |
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| Solicitor for the Applicants: | Stonegate Legal |
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| Counsel for the Respondents: | Mr D de Jersey KC with Mr J Patty |
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| Solicitor for the Respondents: | O’Sullivan Sneddon Law |
ORDERS

| | | QUD 225 of 2025 |
| IN THE MATTER OF ROY STEVEN DAVIS AND COLLEEN DAVIS | | |
| BETWEEN: | ROY STEVEN DAVIS

First Applicant

COLLEEN DAVIS

Second Applicant | |
| AND: | M.G. O'BRIEN INVESTMENTS PTY LTD ATF THE O'BRIEN INVESTMENT TRUST

First Respondent

R.B. PERRY INVESTMENTS PTY LTD ATF THE PERRY INVESTMENT TRUST

Second Respondent | |

| order made by: | COLLIER J |
| DATE OF ORDER: | 25 MARCH 2026 |
THE COURT ORDERS THAT:

1. The interim application filed on 23 March 2026 by the applicants be refused.

2. The applicants pay the costs of the respondents of and incidental to the interim application.

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

REASONS FOR JUDGMENT

COLLIER J:

1 Before the Court is an urgent application for adjournment of a further interim application seeking extension of time for compliance with a bankruptcy notice. The urgency arose from the fact that the date of compliance with the bankruptcy notice was Tuesday 24 March 2026. I heard and dismissed the urgent application for adjournment and extension of time. These are my reasons for doing so.

Background

2 On 8 April 2025 Bankruptcy Notice BN277208 (issued on 3 April 2025) was served on the applicants on behalf of the respondents (the Bankruptcy Notice). The Bankruptcy Notice followed the decisions of Applegarth J in the Supreme Court of Queensland in Davis v Perry O’Brien Engineering Pty Ltd [2023] QSC 243 and Davis v Perry O’Brien Engineering Pty Ltd [2023] QSC 281; (2023) 17 QR 313, where his Honour gave final judgment against the plaintiffs (who are the applicants in the present proceedings) on 11 December 2023. The final form of judgment of Applegarth J materially ordered as follows:

1.     Judgment for the first and second plaintiffs against the first defendant in the sum of $299,152, plus interest in the amount of $127,538.14 up to and including 11 December 2023.

2.     Judgment for the second and third defendants against the first and second plaintiffs in the sum of $1,526,798 plus interest of $650,923.22 up to and including 11 December 2023.

3.     An order that the first defendant account to the plaintiffs for the net proceeds for which it is liable under clause 2.2 of the Deed dated 9 December 2015 being the net proceeds that it received from the use or sale of the Stock particularised in paragraph 38 of the amended statement of claim filed 3 July 2018 (CFI 46), insofar as the Stock.

(a)     was at the Birkdale and German Church sites and used by the first defendant for specific projects or sold; and

(b)     had been purchased, and either paid by or invoiced to the first defendant prior to 26 November 2015.

1.     A declaration that any amount ordered to be paid by the first defendant to the plaintiffs following the taking of the account referred to in paragraph 3 above, plus interest on that amount at the pre-judgment interest rates applicable from time to time specified in Practice Direction 7 of 2013 from 23 December 2015, is to be set-off against the Judgment in paragraph 2 above.

2.     The enforcement of the Judgment in paragraph 2 above be stayed to the extent of the Stock Proceeds Loan of $350,000 plus interest of $149,216.29 up to and including 11 December 20233, pending the finalisation of the account ordered in paragraph 3 above.

3.     The sum of $202,208.07 paid into Court on 14 March 2017 plus any accretions be paid to the second and third defendants, in partial satisfaction of the judgment in paragraph 2 above.

4.     The first defendant pay 70 per cent of the plaintiffs’ costs of and incidental to the claim to be assessed on the standard basis.

5.     The plaintiffs pay 90 per cent of the defendants’ costs or and incidental to the counterclaim assessed on the standard basis.

3 The judgments of Applegarth J were appealed by the applicants to the Court of Appeal of Queensland, which dismissed the appeal with costs on 28 February 2025: Davis v Perry O'Brien Engineering Pty Ltd [2025] QCA 18.

4 Simultaneously two separate questions were set down for hearing on 17 June 2025 before Kelly J in the Supreme Court of Queensland in respect of issues raised by Applegarth J, namely:

…appropriate calculations of interest to reflect the date of the judgment and to reflect my conclusions on the availability of set-off, and for a stay on execution of the judgment in favour of the second and third defendants to the extent of $350,000 plus interest pending the taking of an account of the stock sale proceeds which, if a monetary judgment for the amount to be accounted for, would have been the subject of an equitable set-off.

5 More specifically, the questions for determination were identified by Kelly J as:

whether the account ordered by paragraph 3 of the judgment (of Applegarth J) can exceed $350,000; and

whether there should be orders in the inherent jurisdiction in the terms sought by paragraph 3 of the amended application. In paragraph 3 of the amended application before his Honour the applicants sought orders in the inherent jurisdiction of the Supreme Court that:

(a)     the Company’s [the first defendant, Perry O’Brien Engineering Pty Ltd] debt to the Sellers in paragraph 1 of the judgment of $299,152 plus interest of $127,538.14 up to and including 11 December 2023 is set-off against the Sellers’ debt to the Buyers in paragraph 2 of the judgment; and

(b)     the Company’s obligation to pay costs in paragraph 7 of the judgment, and the balance of the Company’s debt to the Sellers in paragraph 1 of the judgment after the set-off in paragraph (a) above be set-off against the Sellers’ obligation to pay the Buyers’ costs in paragraph 8 of the judgment.

6 In the Bankruptcy Notice the respondents claimed the following debts owed by the applicants on the basis of the judgments of Applegarth J:

1.     Amount as per the accompanying final judgment/s or final order/s $1,678,504.93

2.     Add legal costs $0.00

3.     Add interest accrued since date of judgment/s or order/s $200,185.83

4.     Sub total (1 + 2 + 3) $1,878,700.76

5.     Less payments made and/or credit allowed since judgment/s or order/s $220,449.98

TOTAL DEBT AMOUNT (4 - 5) $1,658,250.78

7 Justice Kelly delivered his judgment in Davis v Perry O'Brien Engineering Pty Ltd [2026] QSC 31 on 10 March 2026. His Honour found in favour of the respondents in the present proceedings, and ordered as follows:

1.     The answer to the question identified in paragraph 2(a) of the orders made on 17 June 2025 is “No”.

2.     The answer to the question identified in paragraph 2(b) of the orders made on 17 June 2025 is “No”.

3.     It is declared that the amount of the net proceeds for which the first defendant is liable under Clause 2.2 of the Deed dated 9 December 2015 as referred to in paragraphs 3 and 4 of the judgment made in this proceeding on 11 December 2023 is $350,000.

4.     I will hear the parties as to any further orders and as to costs.

8 Any appeal of that decision to the Court of Appeal of Queensland must, in accordance with the Uniform Civil Procedure Rules 1999 (Qld) (UCPR), be filed by 7 April 2026.

9 On 24 April 2025 the applicants filed an originating application in the Federal Court seeking the following relief:

1.     That Bankruptcy Notice BN277208 dated 03 April 2025 issued on behalf of the Respondents M.G. O'Brien Investments Pty Ltd ATF the O'Brien Investment Trust and RB. Perry Investments Pty Ltd ATF The Perry Investment Trust and served on 8 April 2025 (the Bankruptcy Notice) be set aside on the grounds that:

a.     the amount stated in the Bankruptcy Notice is misstated as set out in the Notice issued by the Applicants to the Respondents dated 23 April 2025 pursuant to section 41 (5) of the Bankruptcy Act 1966 (Cth) (the Act); and

b.     the Applicants have a counter-claim, set-off or cross demand pursuant to section 40(1)(g) of the Bankruptcy Act 1966 (Cth) (the Act).

1.     An order that respondents pay the costs of this application.

2.     Such further or other order as the Court deems appropriate.

Interim Orders sought by Applicants

1.     That pursuant to section 41 (6A) of the Act and rule 3.03(4) of the Federal Court (Bankruptcy) Rules 2016, the time for compliance with the Bankruptcy Notice be extended to the first directions hearing in this proceeding.

2.     Further or in the alternative to paragraph 4 above, pursuant to section 41 (6A) of the Act, the time for compliance with the Bankruptcy Notice be further extended until that date which is 21 days after final determination of:

a.     the Applicants application for Special Leave to Appeal to the High Court of Australia by proceeding 328/25 against the judgment of the Court of Appeal in Appeal Proceeding CA16300 of 2023 (Special Leave); and

b.     if Special Leave is granted, the determination of the Appeal to the High Court of Australia,

whichever is the later to occur.

1.     In the alternative to the relief sought in paragraph 5 above, an injunction restraining the Respondents from presenting creditors petition against the Applicants until after determination of the proceedings described in paragraph 5a and 5b, whichever is the later to occur or earlier order.

2.     Such further or other order as the Court deems appropriate.

10 On 16 June 2025, Registrar Buckingham made orders extending the time for compliance by the applicants with the Bankruptcy Notice.

11 Subsequently on 9 July 2025, the Chambers of Rangiah J requested that draft case management orders be provided by the parties. On 10 July 2025 the parties provided draft consent case management orders. The parties were requested by Chambers to provide submissions on the connection between the originating application and the Supreme Court proceeding. On 18 July 2025 submissions were provided, and, on that same day, Rangiah J made the following orders by consent:

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 fourteen (14) days after the hearing and determination by the Supreme Court of Queensland in proceedings BS5928 of 2016 of:

(a)     the Applicants’ application for a stay of enforcement of paragraph 2 of the judgment of Applegarth J made in this proceeding on 11 December 2023; and

(b)     the following questions arising in relation to the Applicants’ Amended Application filed 31 January 2025 in those proceedings (Amended Application):

(i)     whether the account ordered by paragraph 3 of the judgment of Applegarth J made in this proceeding on 11 December 2023 can exceed $350,000.00; and

(ii)     whether there should be orders in this Court’s inherent jurisdiction in the terms sought by paragraph 3 of the Amended Application. (the Supreme Court Application).

1.     The Application dated 24 April 2025 be otherwise adjourned to a date to be fixed, after the hearing and determination of the Supreme Court Application.

2.     The parties have liberty to apply.

4.    Costs be reserved.

12 The Orders of Rangiah J of 18 July 2025 were enlivened by the delivery of judgment of Kelly J on 10 March 2026, such that the extension of time for compliance with the Bankruptcy Notice would expire at 4.30pm on 24 March 2026.

13 On 23 March 2026 the applicants filed an interim application in the following terms:

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 fourteen (14) days after the hearing and determination by the Queensland Court of Appeal of the Applicant's appeal (to be filed) to the decision of Justice Kelly made in Supreme Court of Queensland proceedings BS5928 of 2016 dated 10 March 2026.

2.     Costs reserved.

14 The interim application was listed for hearing yesterday afternoon at 2.15pm.

15 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.

Consideration

16 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.

17 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.

18 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.

19 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.

20 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:

9.    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.

21 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:

1.     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).

22 These premises are, in my view, inadequate to demonstrate either the fact of an appeal or the merits of such appeal.

23 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.

24 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.

25 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.

26 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.

27 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.

28 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. |
Associate:

Dated: 25 March 2026

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