Re; Alfred Yehiskel Zion & anor Ex Parte Chevron Hotel (Melbourne) Pty Ltd
[1984] FCA 346
•26 OCTOBER 1984
Re: ALFRED YEHISKEL ZION AND BARBARA ZION
And Re: THE SEPARATE ESTATE OF ALFRED YEHISKEL ZION
Ex Parte: CHEVRON HOTEL (MELBOURNE) PTY. LTD. AND H.S.P. (NOMINEES PTY. LTD.
No. 663 of 1979
Bankruptcy
COURT
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
BANKRUPTCY DIVISION
Smithers J.
CATCHWORDS
Bankruptcy - application seeking order that the bankrupt not be discharged from bankruptcy pursuant to s.149(12) of the Bankruptcy Act 1966 - conduct of bankrupt leading up to and during his bankruptcy - general principle that a bankrupt should be free on giving up the whole of his property - regard to the interests of the public and commercial morality.
HEARING
MELBOURNE
#DATE 26:10:1984
ORDER
The bankrupt shall not be discharged pursuant to s.149 of the Bankruptcy Act 1966.
The applicants have liberty to apply for an order for costs pursuant to r.160 of the Bankruptcy Rules.
JUDGE1
As foreshadowed on 4 September 1984 I publish my reasons, in extended form, for the order made by me on that day that the bankrupt (Zion) be not discharged by virtue of s.149 of the Bankruptcy Act 1966 (the Act). The order was made on the application to the Court made by Chevron Hotel (Melbourne) Pty. Ltd., and H.S.P. (Nominees) Pty. Ltd. (the applicants) seeking that Zion not be discharged from bankruptcy by virtue of the provisions of s.149(8) and (12) of the Bankruptcy Act 1966 (the Act). The sequestration order was made against Zion and his wife on 6 September 1979.
A bankrupt will be discharged upon the expiration of three years from the date of bankruptcy (see s.149(1)) unless, inter alia, an objection is entered by the Registrar, Inspector General, the trustee or a creditor setting out the following grounds:-
(a) that the bankrupt is able, or is likely within 5 years from the date of the bankruptcy to be able, to make a significant contribution to his estate;
(b) that the discharge of the bankrupt would prejudice the administration of his estate;
(c) that the bankrupt has failed to co-operate in
the administration of his estate;
(d) that the conduct of the bankrupt, either in
respect of the period before or the period after the date of the bankruptcy, has been unsatisfactory.
See ss.149(3)(c) and 149(4).
An objection was lodged by the Official Trustee against discharge of Zion from his bankruptcy. If an objection is entered a bankrupt is not entitled to a discharge until the objection is withdrawn or lapses. An objection lapses at the expiration of 5 years from the date of bankruptcy (s.149(7)) unless an order is made pursuant either to s.149(8) or 149(12). Section 149(8) states:-
"149(8) (Court order) The Court may, at any time
before the expiration of 5 years from the date of
the bankruptcy, on the application of the Registrar, the Inspector-General, the trustee or a
creditor, order that the period at the expiration of which an objection entered under paragraph 3(c) will lapse be such period, being a period exceeding 5 years, commencing on the date of the
bankruptcy as is specified in the order."
The effect of an order pursuant to s.149(8) is that the date on which an objection lapses will be extended beyond the relevant five year period for such period as is specified in the order. Section 149(12) states:-
"149(12) (Order that bankrupt not be discharged) The Court may, at any time before the discharge of a bankrupt, on the application of the Registrar, the Inspector-General, the trustee or a creditor, direct that the bankrupt shall not be discharged from bankruptcy by virtue of this section."
If an order pursuant to s.149(12) is made the bankrupt loses the right to obtain an automatic discharge and must make an application under s.150 of the Act in order to obtain a discharge.
The matters which the Court takes into account when considering applications under ss.149(8) and (12) are set out in r.51A of the Bankruptcy rules as follows:-
"51A The following matters are prescribed for the
purposes of sub-section 149(10) and (13) of the Act:
(a) whether the bankrupt is able, or is likely within 5 years from the date of the bankruptcy to be able, to make a significant contribution to his estate;
(b) whether the discharge of the bankrupt would prejudice the administration of his estate;
(c) whether the bankrupt has co-operated in the
administration of his estate;
(d) the conduct of the bankrupt, in respect of
the period both before and after the date of
the bankruptcy;
(e) any matters arising out of the conduct of the
bankrupt as a bankrupt, being matters that are the subject of an investigation that is not completed;
(f) the age and state of health of the bankrupt;
(g) any evidence adduced by the bankrupt, the Inspector-General, the trustee or a creditor relating to -
(i) the circumstances in which the debts of the bankrupt were incurred, including the bankrupt's experience in, and understanding of, financial matters and of the obligations imposed on the bankrupt as a result of incurring the debts; and
(ii) the conduct of the bankrupt's creditors, including the nature and extent of any inquiries made by the creditors into the bankrupt's ability to pay his debts and whether the bankrupt was induced to incur debts by conduct on the part of the creditors that departed from the standards of normal and reasonable commercial practice."
The applicants contended that the circumstances satisfy all the grounds set out above and accordingly that an order under s.149(12) that the bankrupt shall not be discharged by virtue of that section should be made. Those circumstances are to a considerable degree described in a report dated 19 April 1984 by Mr. Colby, the then Official Trustee. The opinion is expressed therein that the cause of Zion's bankruptcy was the failure of certain asset stripping schemes due to overvaluation of assets in companies acquired coupled with heavy reliance by Zion on borrowed capital. Mr. Colby reported in general terms that Zion's acquisition of various companies and his manipulation of them, together with an extravagant lifestyle led to his eventual demise. Mr. Colby reported that the ten year period prior to Zion's bankruptcy had been marked by a pattern of large borrowings to support ventures for which Zion did not have the equity capital to sustain. Significant transactions during that period included:-
(a) the acquisition by Zion of a company known as BLB
Corporation of Australia Establishment. Zion took over
this company by purchasing its shares for $850,000. He
transferred the assets of the company to a company formed by him in the name of BLB Corporation Pty. Ltd. Zion provided at least $90,000 of the purchase price
from his own resources and $760,000 was borrowed. In
the first year of trading Zion borrowed $216,461 from
BLB Corporation Pty. Ltd., and Zira Investments Pty.
Ltd., a Zion company, also borrowed $230,336 from it.
(b) Late in 1972 Zion and Emil Kornhauser (who controls the
applicants) purchased the shares in Sheldons Holdings Ltd., a launderer and dry cleaner, for $160,000. They sold the business back to the vendors for $130,000 and
retained the public company as a shell. Subsequently, the company's name was changed to Z-K Securities Ltd., the shareholders of which were Zion and Kornhauser, Kornhauser subsequently withdrew from the company.
(c) In mid 1973 Zion embarked upon a share buying venture
that, over the course of several years, was to place him
in full control of Pizzey Ltd., a leathergoods merchant
and toymaker. He intitially acquired Pizzey Ltd. shares
through Z-K Securities Ltd., and as a result became personally indebted to the financier, Industrial Equity Ltd., for $565,000.
According to Colby, Zion hoped, but vainly, that the
price paid by him for Pizzeys was much less than its net
worth. The purpose was to sell those assets, settle the
liabilities and be left with a surplus that would be
substantial even after meeting Zion's personal debts
which, by the time the take-over was completed in 1976,
were running into millions of dollars.
The largest single amount for which he became liable was
$2.3 million and this was arranged by Mr. Kornhauser through one of the applicant companies.
(d) Early in 1978 Zion commenced buying the shares of Winns
Ltd., and eventually acquired 93% of the issued scrip.
The acquisition was financed with borrowed funds and
these included $205,000 from a private lender in
Geelong. Zion purchased 650,000 Winns shares for
$500,000 from Burns Philp & Co. Of this amount $350,000
was outstanding at the date of bankruptcy. Winns Ltd.
was unprofitable when he commenced buying the shares and
it went into receivership in March 1978.
(e) $2.5 million was owed to the ANZ Banking Group Ltd.
pursuant to a guarantee of a debt of Delajohn Holdings
Pty. Ltd., an associate of Pizzey Ltd. This debt was
assigned by the ANZ to the applicants on 18 February 1980 together with the securities that had been given to the ANZ by the Zions to secure the debt.
(f) Despite the increasing burden of interest and principal
repayments Zion maintained his lifestyle which included
a luxurious house with expensive swimming pool in an
elite suburban street, a Rolls Royce motor car, the
acquisition of jewellery and furs, a collection of
paintings, and gambling losses. During his public examination Zion admitted his gambling losses to have been between $100,000 and $200,000 between 1975 and
1979.
Mr. Colby reported that the sequel to the Pizzey takeover could almost be described as bizarre. He said:-
" Notwithstanding what was obviously a financial crisis for him he adopted a shortsighted and incredibly irresponsible policy of realising or
pledging the companies' assets and spending the proceeds until the money ran out, caring little for the tenets of accountability and obviously hoping that somewhere along the way he would be saved from disaster by the success of other business projects. There were however too few of
such profitable ventures.
The principle of accounting chaos that he followed and developed with rare and arcane skill is best illustrated by quoting verbatim from his
public examination. The passages below refer to
transactions of Queensland Produce Export Pty. Ltd, a Pizzey subsidiary. They may be found between pages 227 and 236 of the transcript. The
questions were put by Counsel for the Trustee.
Q. "You see, Mr. Zion, in fact you used the account of Queensland Produce Export Pty. Ltd. for a large number of transactions of a
personal nature, did you not? --- possibly.
Q. For example, that $10,000 that we were talking about yesterday which was invested in
your daughter's name came from Queensland Produce Export Company, did it not? --- Mr. Registrar, is that the cheque that was an exhibit?
Q. Yes, the cheque butt yesterday, remember? ---
Yes, well, I have not denied that.
Q. Well, that is what I am saying to you, is it
not? --- Well, I used - I took the money out
of Queensland and put it in Debbie's name, or
gave it to Debbie. I am not arguing about that.
Q. There was a sum of $24,000 paid to you on 6
March 1979, from Queensland Produce Export Pty. Ltd. Do you know what happened to that? --- I do not recall it.
Q. You do not recall it. The sum of $24,000 is
a fair amount of money is it not? --- I repeat my answer.
Q. Do you agree that $24,000 is either a large or substantial amount of money? --- I would concede that.
Q. Did you often receive cheques from Queensland Produce Export Pty. Ltd. for $24,000 or thereabouts? --- I cannot recall.
...
Q. Mr. Zion, on 19 March 1979, there was a sum
of $17,000 paid to you; do you remember that? --- If the cheque has been drawn and paid to my account I would accept it.
Q. A further sum of $4,150 paid to Mr. Julius Holt on 20 March 1979; do you remember that? --- No.
Q. Mr. Zion, in fact you were using, were you not, the Queensland Produce Export Pty. Ltd. as a private bank account for yourself, were
you not? --- I do not accept that.
Q. You do not accept that; you were paying private bills from their money, were you not? --- That may be so.
Q. That is the case is it not? --- I would concede that some private bills were paid.
Q. For example, Mr. Forrest, he was not a creditor of Queensland Produce Export Pty. Ltd., was he? --- No.
Q. He received money from Queensland Produce Export Pty. Ltd. did he not? --- Well if there is a cheque to Mr. Forrest from QPE I
would accept it.
Q. Mr. Spielvogel? --- Yes, again if there is a
cheque I would accept it.
Q. Mr. Jenkins? --- I repeat my answer.
Q. Mr. Zion, it must therefore be the case must
it not, that you had a loan account with Queensland Produce Export Pty. Ltd? --- I am not saying that I did not, I am just saying that I have no exact knowledge at the period of which you are asking me whether there was
or was not a loan account, but if you have the figures it would be easier if you just tendered it to me and said, look, there was a
loan account for this amount and I would confirm or deny it.
...
Q. In fact, most the transactions that went through that company's bank account, related to your own personal dealings, did they not?
--- Partly yes and partly they were inter-company dealings.
Q. Mr. Zion you were the person that drew the cheques, were you not? --- I am not denying that.
Q. You were the person that paid the moneys in,
were you not? --- I am not denying that either.
Q. And in fact, with the nature of the business that was carried on by that company, there were very few receipts or payments that related to company business, were there? --- You mean to the leasehold?
Q. Yes? --- Yes, I would agree with that.
Q. So if some 20 cheques, for example, were drawn during the month of March 1979, would you not agree that most of them were personal? --- I cannot agree or disagree, I
do not have the cheques in front of me.
Q. I do not either. For example, Mr. Spielvogel on 6 March 1979, that is a personal matter, is it not? --- If the cheque was written and
if the cheque went through the account, I
would say that Spielvogel, Jenkins, Forrest, were personal matters. I am not denying that.
Q. The company did not owe any money to those people, did it? --- I repeat, they were personal matters.
Q. Well, they are all people that have lent you
money are they not --- Well, some are loans, some are investments. But generally speaking, you could regard them as such.
Q. They are all people who are listed as your creditors? --- That is correct.
Q. From what source did you pay the interest to
each, for example, to Mr. Spielvogel? --- Some were paid, from memory, from my own account, some were paid from QPE and possibly some were even paid from elsewhere. I just cannot recall.
Q. Yes. So you admit as far as Mr. Spielvogel is concerned that it is highly likely that the company account was --- As personal loans
to me yes.
Q. Mr. Forrest, what arrangements did you have for the payment to Mr. Forrest of moneys" --- The same answer would apply to Mr. Forrest.
Q. Mr. Jenkins? --- The same".
The liquidator for Queensland Produce Export Pty. Ltd. has proved in the estate for $327,598. The liquidator of another Zion company (not in the
Pizzey Group) has proved for approximately $181,000."
The sequestration order against Zion and his wife of 6 September 1979 was made on the petition of the applicants presented on 21 August 1979. The act of bankruptcy was that on 16 August 1979 Zion and his wife signed an authority under s.188 of the Act. They left Australia for America on 23 August 1979 and from there went to Israel on 28 August 1979. In January 1980 they returned to America, remaining outside Australia until 18 December 1980.
During his period outside Australia Zion was involved in various commercial activities. He became self employed as a corporate consultant in Oregon which, according to him, gave rise to the opportunity of involvement in oil prospecting and the utilization of tax shelters in the United States.
He was also involved in a brief partnership in Oregon with an American businessman which resulted in the acquisition of land in Tucson as a business investment. It is to be noted that he did not disclose ownership of the land to a representative of Ernest Niemann, who was the trustee of his estate at the time, when that representative was in America and had specifically sought and received from Zion an affidavit disclosing his assets.
When Zion and his wife left Australia Zion took with him $8,000 in traveller's cheques which purportedly was a loan on the security of an insurance policy. His wife took with her, jewellery and furs that had been insured for $35,000 and $12,000 respectively. She also took with her an uninsured diamond ring that Zion had purchased for $11,000 in 1969.
The Zions at that time had a bank account in Israel with the Bank Leumi in Jerusalem. Deposits to the account had come from the sale of a flat that he and his wife had owned in Tel Aviv and commissions and interest that he had earned from the sale of yarn and toys some years previously in Europe. The amount totalled some $58,000. Zion also had with him some $4,000 in cash.
During his public examination Zion stated that the money in the Leumi account was transferred to the First National Bank of Arizona when Zion and his wife returned there in January 1980. He stated that the fund financed living expenses, contributed towards the acquisition of the land in Tucson and provided $20,000 capital for the partnership that was formed. This money and the jewellery and furs formed part of the bankrupt estate.
Whilst Zion was in Israel he was interviewed for the television current affairs programme "60 Minutes" and received a fee of $2,500, $1,000 of which he remitted directly to selected creditors in Australia.
There are numerous other instances of Zion's behaviour during his period away from Australia whilst bankrupt. They include staying at the Hilton Hotel in Jerusalem for 10 days when he was bankrupt and using the estate's money for that purpose.
Zion sent an open letter to his creditors dated 17 November 1980 in the following terms:-
"To the creditors of the estate of Alfred Yehiskel Zion and barbara Zion (other than the Kornhausers)
The enclosed letter, addressed to Mr. T. Given, the attorney for Ernest Niemann in the United States, sets out the details of the negotiations that have been taking place. Our attitude to the Kornhauser claims is clearly set out in that letter and requires no repetition.
I have suggested to Roy Douglas that, in addition to the actions which the trustee should be taking as set out in my letter to Mr. Given (pages 9 and 10), it is my desire to work towards the repayment of those creditors not associated with the Kornhauser interests, from my current commercial activities.
My efforts of the past year have now reached a
stage where I can commence gainful commercial activities. Under an independent trustee there is no reason why income from my activities could not
be harnessed to repay creditors, other than the Kornhausers. This is in addition to the benefits that creditors would derive against the Kornhauser interests. The bankruptcy hurled at me by the Kornhausers must not be a medium to occasion financial loss to third parties. I therefore suggest that:
(a) A corporation should be formed to encompass all my current dealings in the United States for the period of the compromise.
(b) The trustee be the registered holder of 25%
of the shares in this corporation and receive 25% of its gross income. This is an equal split as 50% of the gross income would be required for taxes. The remaining 50% is split 25% for the trustee and 25% for me. The question of tax is all important. The maximum has been allowed but the less paid for taxation, the more there is to split.
(c) To secure the trustee, the voting rights in
the corporation should be on a 50/50 basis, irrespective of the shareholding, so that the trustee could veto any enterprise that he would deem impractical or uncommercial.
(d) The trustee have adequate authority to audit and supervise the activities of the company.
(e) I give an undertaking that my entire activities in the United States, and elsewhere, for the period of the compromise, will be handled through this corporation.
(f) Upon th determination of the period of compromise, the trustee will receive the certifiable market value of these shares, to be paid to him within a specified time not exceeding six months from that date. The trustee to use these shares to pay any remaining balance owing to you. If no balance is owing, the trustee to transfer the
shares back to me.
I request that the aforementioned arrangement, however modified by you, constitute a compromise to which the Federal Court (Bankruptcy Jurisdiction) be asked to consent. This request is for the benefit of all parties. It is in my creditors' interests that I should be active, capable of earning more than the basic wage, and that I work towards our joint commercial benefit.
It is also obvious that our current trustee, Ernest Niemann, should resign, as he cannot be expected to take any action against his own clients, the Kornhausers. We seek an independent trustee who can look at all the aspects of the malevolent destruction of our finances and take such steps as are necessary and proper for the benefit of our estate, which is our true creditors.
There should never have been a bankruptcy of my
wife and myself. Our inability to fund our defences and counter claims against the Kornhausers, so maliciously planned by them, have
brought us to this situation. Yet, we do not propose to give up.
To any creditor who has not received this memorandum, due to the fact that I do not have a list of all creditors who have proved, I am mailing a courtesy copy to Hungerford Hancock &
Offner and they may obtain one from Mr. Roy Douglas of that firm."
A further letter to creditors dated 19 March 1981 was sent by Zion setting out the following:
" I hereby make the following offer to the creditors of our estate:
A. Preamble
1. This offer is limited to creditors admitted as such in my Statement of Affairs.
2. This offer is subject to lending institutions compromising their claims for monies owing to them, to the capital sums due as at 6th September, 1979, less any payments received from sale of securities.
3. Insofar as this offer relates to lending institutions with the joint guarantees of Barbara Zion as well as those of Alfred Zion
it is conditional upon their agreeing to discharge Barbara Zion from any liability thereunder and consenting to her early discharge from bankruptcy without any contribution on her part.
4. Insofar as lending institutions hold any security in the form of shares in companies as collateral for advances which we have also
guaranteed it is a condition of this offer that such shares are surrendered to us upon the approval of this Composition and Scheme of Arrangement by the Federal Court of Australia, Bankruptcy Division.
5. In the past year certain negotiations and commercial contracts came about in the United States which resulted in the following:
(i) Development of certain real estate in the
city of Tucson, Arizona, which has been
selling successfully, details of which have been supplied to the trustee. The gross profit estimate of about US$100,000 will be achieved on the basis of current sales. It is a condition of this offer
that the proceeds of sale of the land constitute the initial contribution referred to in Paragraph B.
(ii) The establishment of a corporate consultancy business in the State of
Oregon. This has given me entree into
oil prospecting and the utilization of
tax shelters in the United States. Prior
to my return to Australia I had proposed setting up, in addition to my office in Portland, three additional offices in
Chicago, Phoenix and San Francisco. This
has been held in abeyance due to my return. I estimate that the income from the first oil project currently under negotiation will be between US $100,000 and US$250,000. A further benefit is
that completion of this project will bring about additional business in the same field and the probability of further
gain.
(iii) The completion of "And It Came, To Pass,"
the first part of the trilogy, which is
now due for publication. It has had good
reception with publishers and reviewers from the media. Certain parts of the book have to be rewritten prior to publication and this is being done. The principal market for the book is the United States. Whilst I was in the USA. I received the annexed offer from Liberty
Cable Television. The trustee indicated to me that he would not return my passport to complete the interview (whose
advertising value for the book would be
in excess of US$50,000), I have therefore had to request its postponement to June,
1981. Once the publication of "And It
Came, To Pass" is achieved the second part of the trilogy, to be entitled, "The Merchants of Melbourne," will find a
ready market.
To sum up, it is necessary for me to return to
full commercial activity to make a meaningful contribution to creditors. My earnings to date have been restricted to that of hourly remuneration as a consultant. This nets about $200 a week and even with maximum growth in the foreseeable future will not enable me to make any
meaningful contribution. It is my anticipation that on my discharge I will earn sufficient monies over the next five years to pay to creditors a
substantial portion of the amount owing to them, if not the full sum.
B. Offer.
1. That my wife and I be discharged as soon as
possible.
2. That in consideration thereof I pay into a
fund over a period of the next five years one
half of all my income, after tax, such payment to be used to repay creditors in quarterly, half yearly or yearly distributions as they may wish.
3. The said fund to be managed by a committee of
three creditors. I would report to this committee at regular intervals on my activities.
4. That such payments cease after the period of
five years, or earlier, if creditors are paid
in full."
What has been described by me is not and does not purport to be a comprehensive account of Zion's conduct or activities before and during his bankruptcy. However, it is indication, prima facie, of the attitude adopted by him.
It is Zion's contention, although not stated before me on affidavit, that his behaviour after his bankruptcy was dictated by the view that the original trustee of his estate, Niemann, was inextricably linked with the Kornhausers and only concerned with their interests. As his relationship with the Kornhausers was particularly acrimonious Zion did his best to be unco-operative. Zion points to the fact that from the time when Niemann resigned as trustee on 3 April 1981 his conduct was exemplary and his co-operation unqualified.
As far as his pre-bankruptcy conduct is concerned Zion considers that his commercial career was successful apart from some isolated episodes, the most significant of those being his dealings with the Kornhausers. Be that as it may it does not excuse ruthless behaviour such as leasing a Rolls Royce for the purpose of aggravating Emil Kornhauser when Zion had neither the funds nor the intention of maintaining payments on the vehicle. That demonstrated a total disregard for third parties merely because of his attitude towards the applicants.
His disregard for creditors and also this Court and the orders it made is aptly demonstrated by his use of the money in the bank account in Israel. Zion carried on business in Israel and America with funds which were part of the bankrupt estate and which should have been passed to the Trustee. His attitude appeared to be that although he might be bankrupt in Australia he could do what he wanted with the estate's money elsewhere.
The two letters of offer to all crediters bar the Kornhauser's indicates that he was involved in commercial activities without fetter from August 1979 until his return to Australia in December 1980.
These two letters of offer also raised hopes that large profits could be made as a result of his activities and yet only $20,000 was recovered that being from the sale of land in Tucson. Unless he had access to other moneys the proposals in the letters could not be carried out.
The policy of the Act in relation to discharge is that a debtor on giving up the whole of his property shall be a free man again able to earn his livelihood although it is recognized that there are instances where a bankrupt ought not to be freed: see Re Gaskell (1904) 2 KB 478.
Regard must be had not only to the interests of the bankrupt and the creditors but also to the interests of the public and to commercial morality and the bankrupt's conduct relative to his bankruptcy.
Both Official Trustees (Mr. Colby and Mr. Burzacott) consider Zion's conduct since April 1981 to be exemplary. I note that there are creditors who support Zion's discharge and a large number of creditors who neither support nor oppose it. But for present purposes the dominating consideration is Zion's conduct leading up to his bankruptcy and his activities and excursions during his bankruptcy as indicated in the evidence before me. Zion incurred approximately $6 million of proved debts and no dividend has been paid to the creditors. He utilized the estate's monies for his own purposes; was totally unco-operative and caused needless expense as instanced by his forcing the trustee's representatives to pursue him across the world. On the evidence the inference is that Zion's conduct before bankruptcy was characterised by recklessness in the incurring of very large debts and for a time after his bankruptcy was characterised by wilful disregard of his duties and obligations as a bankrupt. His attitude has been coloured, no doubt, by a violent antipathy to the Kornhausers and he adopted a policy of attempting to arrange his bankruptcy on the basis that he could satisfy creditors other than the Kornhausers by payment of some portion of his liability to them, excluding the Kornhausers, and thereby taking the matter out of the hands of the Trustee. Notwithstanding the recent good conduct of Mr. Zion the evidence and previous reckless and wilful and irresponsible financial dealings including ignoring of his duties to the Court and the court appointed officers, indicates an attitude which is likely to reassert itself when financial freedom is attained and for the time being at least it is in the public interest that his proclivities in these respects should not be granted freedom.
The creditors who support Zion's discharge are, with one exception, individuals whose debts are minor by comparison with the whole. Of those creditors who neither support nor oppose Zion's discharge I cannot help but feel that they are struck by the unlikelihood that they will ever receive any of the money owed to them.
I do not believe that Zion should never be discharged, but I am not prepared, on the evidence before me, to discharge him at this stage and I feel that he ought to come to this Court and justify his re-entry into the commercial world.
I therefore made the following orders:-
That the bankrupt shall not be discharged pursuant to
s.149 of the Bankruptcy Act 1966.
That the applicants have liberty to apply for an order
for costs pursuant to r.160 of the Bankruptcy
Rules.
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