Benaharon v Fabric Dyeworks (Aust) Pty Ltd - [1998] FCA 1109

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VG 7423 of 1998

BETWEEN:

YIGAL BENAHARON
FIRST APPLICANT

GLORIA BENAHARON
SECOND APPLICANT

AND:

FABRIC DYEWORKS (AUST) PTY LTD
(ACN 006 402 213)
RESPONDENT

JUDGE:

WEINBERG J

DATE:

24 AUGUST 1998

PLACE:

MELBOURNE

EX TEMPORE REASONS FOR JUDGMENT

The court has before it an application by Yigal Benaharon and Gloria Benaharon to extend the time for complying with a bankruptcy notice. The application is brought pursuant to subs 41(6C) of the Bankruptcy Act 1966. That subsection provides as follows:

“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 the 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.

The background to this application is relatively straightforward.

On 29 May 1998 Smith J, in the Supreme Court of Victoria, delivered judgment in matter No 5251 of 1996, Fabric Dyeworks (Aust) Pty Ltd v Yigal Benaharon and Gloria Benaharon. The case involved an allegation that the two defendants (who are the applicants in the present proceeding) were at all relevant times directors of a company, Yigal Fabrics Pty Ltd (“Yigal Fabrics”). That company was engaged in the business of buying and selling material. From time to time it would have the material dyed by the plaintiff, Fabric Dyeworks (Aust) Pty Ltd, as part of that business.

Between April 1993 and November 1994, Yigal Fabrics incurred debts to the plaintiff totalling $464,807.55 at the end of that period. The plaintiff brought proceedings to recover that amount from the defendant directors pursuant to the provisions of the Corporations Law. In essence, the plaintiff contended that the directors were liable for the debts of Yigal Fabrics because that company had been permitted to trade while insolvent, contrary to the provisions of s 592 of the Corporations Law (prior to 23 June 1993), and s 588G thereafter.

His Honour, Smith J, found for the plaintiff. In the course of his reasons for judgment he found that from at least 30 June 1992, Yigal Fabrics was insolvent. His Honour found that prior to 23 June 1993 there were reasonable grounds to expect that Yigal Fabrics would not be able to pay its debts as they fell due and, after 23 June 1993, there were reasonable grounds to suspect that fact. He rejected the various defences proffered on behalf of the defendants and gave judgment for the plaintiff in the sum of $464,807.55 plus $95,563.05 interest.

That judgment was apparently authenticated on 1 June 1998. On that same date a bankruptcy notice was issued on behalf of the plaintiff judgment creditor. On 12 June…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1998] FCA 1109
Decision Date: 24 AUGUST 1998

CaseChat Overview and Summary

The applicants, Yigal and Gloria Benaharon, sought an extension of time to comply with a bankruptcy notice issued against them. The respondent, Fabric Dyeworks (Aust) Pty Ltd, opposed the application. The legal issue before the court was whether the appeal brought by the applicants was instituted in good faith. The court found that the applicants had acted in good faith and granted the extension of time for compliance with the bankruptcy notice.

The court considered the affidavits of both parties and the grounds of appeal. While some of the grounds of appeal were barely tenable, others had the potential to set aside the judgment. The court found that there was nothing to suggest that the appeal was not instituted in good faith. The applicants had acted promptly to institute the appeal and had prosecuted it with due diligence. The court also took into account the Mareva injunction granted to the respondent, which provided protection against the dissipation of the applicants' assets.

The court exercised its discretion in favour of granting the extension of time for compliance with the bankruptcy notice. The court ordered that the time for complying with the bankruptcy notice be extended until the hearing and determination of the appeal, or until further order. The applicants were also ordered to pay the respondent's costs of the application.

This case highlights the importance of acting in good faith when instituting an appeal. The court found that the applicants had acted in good faith and granted the extension of time for compliance with the bankruptcy notice. The court also emphasised the need for the applicants to expedite the hearing of the appeal. The case also highlights the importance of a Mareva injunction in protecting a judgment creditor against the dissipation of assets.

Orders