This is a judgement in the federal Court where the shonk George Adler attempted to have his bankrupt Annulled.
This is his second Bankruptcy.
He was a bankrupted one more after this.
Tibor Karolyi handled the Bankruptcy and fucked over all his creditors.
Re 
George Adler 
Ex Parte: George Adler [1988] FCA 388 (7 November 1988)
FEDERAL COURT OF AUSTRALIA
Re: GEORGE ADLER
Ex parte: GEORGE ADLER
No. NSW 504 of 1976
Bankruptcy
COURT
IN THE FEDERAL COURT OF AUSTRALIA BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY Davies J.(1)CATCHWORDS
Bankruptcy - application for annulment - unsecured debts paid in full - whether Court's discretion to annul should be exercised - relevance of factors additional to the payment of creditors.Bankruptcy Act 1966 (NSW) - s.154
Marek v. Treganza
[1963] HCA 40;
(1963) 109 CLR 1
Re Taylor; Ex parte Taylor
(1901) 1 QB 744
Re John Maxwell Craig
(1960) 19 ABC 29
HEARING
SYDNEY 7:11:1988Counsel for the Bankrupt: Mr D.P.F. Officer QC with Mr S.G. Finch
Solicitors for the Bankrupt: A.G. Robinson & Associates
Official Receiver on behalf of the Official Trustee: Mr D.J.N. Bluett
ORDER
The motion be dismissed. NOTE: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.
DECISION
This is an application brought by the bankrupt, Mr George Adler , under s.154(1) of the Bankruptcy Act 1966 (Cth) to annul his bankruptcy. Section 154(1) provides:-
"Where the Court is satisfied -
(a) that a sequestration order ought not to have
been made or, in the case of a debtor's
petition, that the petition ought not to have
been presented or ought not to have been
accepted by the Registrar; or
(b) that the unsecured debts of the bankrupt,
being debts that have been proved in the
bankruptcy, have been paid in full or the
bankrupt has obtained a legal acquittance of
them,
the Court may make an order annulling the bankruptcy."
The motion is brought on the ground that the unsecured debts proved in the bankruptcy have been paid in full. The making of an order of annulment is discretionary. It is on the discretionary aspects of the matter that this application turns. There has been no opposition to the motion.2. An order of sequestration is made not by way of punishment but for the administration of the bankrupt's estate in the interests both of the bankrupt and of the creditors. If, in the course of administration, it transpires that the bankrupt's assets are sufficient to pay the debts or if the bankrupt is able to arrange for acquittance of the debts in some other manner, an order for the annulment of the bankruptcy may and commonly will be made. The bankrupt's affairs will have been put in order and it is apt that the rehabilitation of the bankrupt should be completed by the annulment of the bankruptcy. This power to annul on payment in full of the debts provides an incentive to a bankrupt to work for and to achieve payment in full of his creditors.
3. An instance of the ordinary case is Marek v. Tregenza
[1963] HCA 40;
(1963) 109 CLR 1 in which McTiernan, Kitto and Menzies JJ. held that a bankruptcy ought to be annulled where the bankrupt had, within six months of sequestration, paid in full all the unsecured debts proved in his bankruptcy and had, within a little more than two years after sequestration, paid in full a mortgage debt owed by himself and his wife and completed the purchases provided by hire purchase agreements to which he was a party at the date of the bankruptcy. At pp 2-3, McTiernan J. pointed out that, though the Court may refuse for good cause to act under
s.154(1) even though all the debts of the bankrupt were paid, there was no relevant reason in that case for refusing the application. At p 8, Kitto and Menzies JJ. expressed a like view, concluding that no purpose would be served by the refusal of the application and that considerations of general policy and of particular justice combined to entitle the bankrupt to have the sequestration order annulled.
4. The contrast is seen in Re John Maxwell Gray
(1960) 19 ABC 29, in which Clyne J. refused both a discharge and an annulment though the bankrupt's debts had been paid in full. In that case, Mr Gray's estate had been sequestrated in January 1948. Shortly thereafter, he went overseas and committed offences in the United States of America and in France for which he was convicted. After returning to Australia in 1958, the bankrupt paid sufficient moneys to the trustee to enable payment in full of his creditors. At p 32, Clyne J. concluded:-
"It would be, in my opinion, wrong to grant the
applicant a discharge or an annulment. If the
court did either, it could be said that the court
was giving him a passport, as it were, to set up in
business again without some hindrance or restraint
and that the court considered him a fit person to
receive such a passport. He is not such a person."
Likewise, in Re Taylor; Ex parte Taylor (1901) 1 QB 744, the Court dismissed an appeal against a decision of a registrar refusing to annul a bankruptcy. The decision refusing to annul the bankruptcy was based on the ground that the bankrupt had falsified his statement of affairs and had failed to disclose all his assets. Wright J. summed up the position at p 746 as:-
"He could not have got his discharge, even by paying
in full, unless there were some special reason.
Why? Obviously because the Legislature thought
that, when a debtor who had become bankrupt
committed crimes like these in his bankruptcy, he
ought to be punished by the stigma which attaches
to an undischarged bankrupt, and by whatever
disqualifications are attached to it. It is sought
to get behind that by seeking to annul the
adjudication. Sect. 35 gives a discretion, and it
seems to me that it was rightly exercised."
5. In the present case, there are several factors weighing against annulment of the bankruptcy. The first, and perhaps the most important, is that the bankruptcy has been a long one and necessary in the interests of creditors. The order of sequestration was made on 26 October 1976. Debts were proved to the amount of $324,749. No sum was recovered from the realisation of assets. An objection to Mr Adler's discharge from bankruptcy by force of s.149 of the Act was lodged by the Official Trustee on 27 June 1980, on the ground that Mr Adler had a deficiency in excess of $250,000 and had not given a satisfactory explanation of how the deficiency arose. On 24 December 1985, upon the application of the Law Society of New South Wales, a creditor in the bankrupt estate, Morling J. made the following consent orders:
"1. The Bankrupt, until further order of the
Court, not be discharged from Bankruptcy by
virtue of Section 149 of the Bankruptcy Act
1966.
2. Subject to further order of the Court, the Law
Society of New South Wales be granted leave to
enter an objection to the discharge of the
Bankrupt by force of Section 149 of the
Bankruptcy Act 1966.
3. Subject to further order of the Court, the
period at the expiration of which the
objection entered by the Law Society of New
South Wales will lapse be a period of ten (10)
years commencing on the date of the Bankruptcy
(namely 1st February 1981).
4. Subject to further order of the Court, the
period at the expiration of which the
objection entered by the Official Receiver on
behalf of the Official Trustee in Bankruptcy
on 30th June 1980 will lapse be a period of
ten (10) years commencing on the date of the
bankruptcy (namely 1st February 1981).
5. The Law Society of New South Wales, the
Bankrupt and the Official Receiver have
liberty to apply.
6. Questions of the costs of the Application be
reserved.
7. The Law Society of New South Wales have leave
to file in Court the Notice of Objection to
Discharge."
6. Mr Adler made no contribution to his estate until 1982, when he forwarded to the Official Trustee $200,000, said to be an advance against commission likely to be earned by him from his employment as a property consultant with Industrial Equity Limited. That contribution was made at about the time Mr Adler came up for sentence in the District Court of New South Wales, as I shall later mention. On 12 April 1988, Mr Adler made application to annul his bankruptcy pursuant to s.154(1)(b) of the Act. That application was dismissed on 24 May 1988 on the ground that the conditions of s.154(1)(b) had not been complied with. Subsequently, on 24 August 1988, Mr Adler forwarded to the Official Trustee $150,283, which he had borrowed from a business associate, Mr Frank Theeman. This sum was sufficient to pay out the creditors and the costs and remuneration arising from the administration of the estate.7. It was thus the postponement of the discharge of the bankruptcy, first by virtue of the objection lodged by the Official Trustee and subsequently by order of the Court, which prompted Mr Adler to find the means to pay out his creditors.
8. Secondly, as the payment to the creditors was made many years after the date of the bankruptcy, without interest and without allowance for inflation, payment in full was made only in a formal sense.
9. Thirdly, Mr Adler does not appear to have worked assiduously with the Official Trustee to achieve a proper resolution of his affairs. His first statement of affairs disclosed unsecured liabilities of $33,688.42 and assets of $56,606. The proved liabilities amounted in fact to $324,749. Nothing was realised from assets. The Official Trustee was unable to recover any sums from clients of Mr Adler's legal practice. The cashbook had not been written up after February 1975 and there was no record of dealings with debtors of the practice.
10. Indeed, the evidence does not satisfy me that Mr Adler has been entirely forthcoming to the Official Receiver with respect to his financial position. For example, the Official Receiver, in his report, referred to Mr Adler's taxable income for each of the years 1979, 1980, 1981 and 1982, in respect of each of which the taxable income varied from $3,882. to $4,150. Yet, Mr Adler's affidavit includes this information with respect to this period, when he was a director of Adnom Pty Limited:-
"a. During the period in which I was director
of Adnom Pty Limited, to the best of my
recollection, that company did not trade
and existed merely for the purposes of
being the intended recipient of any
commission to be paid by the Dainford
Group. During that period the amount of
commission received by that company on my
behalf was in the order of $50,000.00."
In the same vein, Mr Adler's contribution of $200,000 was said to be paid out of commission "likely to be earned". And a letter from Mr Adler's solicitors to the Official Receiver, dated 22 February 1988, includes this unusual information:-
"5. Our client does not have any present
weekly earning and has no other source of
income.
...
7. At present a weekly rental of $1,000.00
is paid for our client's residence. This
payment is made by way of an advance to
our client on account of anticipated
distribution of profits by his employer.
Our client also receives an advance for
his living expenses."
These matters suggest that Mr Adler may have had greater earnings or a greater potential for earning than was disclosed to the Official Receiver.11. Fourthly, some of Mr Adler's debts resulted from deficiencies in the trust account of Mr Adler's legal practice. The Law Society of New South Wales proved in the bankruptcy for $244,864. Mr Adler was struck off the roll of solicitors and, on 17 March 1982, was convicted in the District Court of New South Wales on four charges of fraud arising out of these trust deficiencies. A case of such nature, involving moral turpitude, is not to be looked on in the same light as one where the debts arose from mere financial misfortune or bad judgment.
12. Fifthly, Mr Adler has, as a bankrupt, committed offences under s.227 of the Companies Code in that, while bankrupt, he was a director of Adnom Pty Limited from 30 June 1978 to 29 June 1981, of Plantara Pty Limited from 8 January 1982 to 5 February 1982, of Quzaan Pty Limited from 4 April 1973 to 16 September 1980 and of Rodney David Pty Limited from 16 November 1981 to 5 February 1982. With respect to these events, Mr Adler has deposed that Adnom Pty Limited and Quzaan Pty Limited did not trade and that, in the other two companies, he acted simply as an alternate while Mr John Austin was not available to be a director. Nevertheless, offences were committed.
13. Sixthly, Mr Adler has been charged with 193 offences under
ss.173,
178A,
178BA,
178BB and 252 of the
Crimes Act 1900 (NSW) and under ss.554(1)(b)(i), (2)(c)(i) and (2)(d) of the Companies Code. These charges arise out of the liquidation of Adnom Pty Limited. Mr Adler has also been charged with common law conspiracy in relation to the liquidation of Plantara Pty Limited. Mr Adler has pleaded not guilty to all charges. In his report made for the purposes of this motion, the Official Receiver did not refer to these charges, considering them to be irrelevant. Of course, they have not been proved and cannot be taken as indicative of guilt. Nevertheless, in an application for the annulment of a bankruptcy, the honesty, probity and financial responsibility of the bankrupt is a matter to be taken into account. These charges raise a question in this regard.
14. On the other hand, an important factor favouring an annulment is that Mr Adler has paid his creditors in full, a very substantial amount.
15. Moreover, his Honour Judge Ford in the District Court deferred sentence upon Mr Adler in respect of the four charges I have mentioned, upon Mr Adler's entering into a recognisance in the sum of $100 to be of good behaviour for a period of twelve months and to appear to receive sentence if called upon to do so at any time in respect of any breach within that period. His Honour referred to the four offences and said:-
"... as a result you lost your practice, house,
assets and was struck off the rolls and in the
small community in which you and your parents were
such proud members, you were embarrassed and
disgraced. Against that background you have lived
for a further eight years in the same city and
today persons occupying high positions, including
the Chief Minister of the Central Synagogue and
others of high standing come here to this Court and
speak well of you. You have in that time, as I say
in a most dramatic way proved that you are sorry
for what happened and that you want to rehabilitate
yourself. That is, by the repayment of the whole
of the indebtedness which amounts to some
$250,000.00 to $260,000.00. I am reminded by your
Counsel that the repayment is not derived in any
way from advances or loans made to you, but is able
to be made because of your subsequent creditors.
The fact is that that amount represents the whole
of your indebtedness to any creditor and not merely
the discharge of your obligations relating to the
charges which are the subject of criminal
proceedings."
I am influenced by his Honour's very favourable view of Mr Adler.16. To annul a bankruptcy is to expunge the bankruptcy, to set it at nought. As I have said, it is proper to do this when the administration of the bankrupt's estate or the bankrupt's efforts has resulted in payment in full of the creditors and there is no cogent reason why the bankrupt should not be fully rehabilitated in the commercial community. However, there is the nature of the debts to be taken into account. Many of Mr Adler's debts resulted from fraud and from trust deficiencies. And, I am not satisfied that Mr Adler has done all that was reasonably open to him to do to assist the Official Receiver in the administration of the estate or that he is a person who ought to have the stigma of past bankruptcy removed from his reputation. Moreover, the payment in full of the creditors was made a very long time after the date of the bankruptcy and only when the discharge had been postponed with a view to ensuring that better steps were taken in the interests of creditors.
17. In the light of these matters, it seems to me that it would be inappropriate to annul the bankruptcy. Certainly, Mr Adler should receive some benefit from the arrangements he has made to pay off the debts of his estate and the remuneration and expenses of the Official Trustee, in all $350,283. On the facts presently before me, I think that that step would be appropriately recognised by the grant of an order of discharge after so many years. However, the present application is not for discharge but merely for annulment. In my view, an order of annulment ought not to be made.
18. The motion will therefore be dismissed.
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