Re Richard James Cleary [1983] FCA 5 (28 January 1983)

FEDERAL COURT OF AUSTRALIA

Re: RICHARD JAMES CLEARY
No. 399 of 1978
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Ellicott J.

CATCHWORDS

Bankruptcy - Discharge - Application four years after bankruptcy commenced - objection by Official Trustee and several creditors - Substantial deposits and withdrawals recorded in applicant's bank accounts - No contribution for benefit of creditors - Whether discharge prejudicial to administration of applicant's estate - Whether assets of applicant sufficiently disclosed - Whether applicant carried on business as publisher - Nature of applicant's interest in or relationship with Hong Kong company - Whether adequate public examination - Court's discretion in relation to discharge where none of matters specified in s.150(6) of Act established - Whether discharge should be postponed beyond statutory term.

Bankruptcy Act 1966, ss. 150, 149, 81

HEARING

SYDNEY
28:1:1983

ORDER

1. The application for discharge be refused.

2. The applicant pay the costs of the Official Trustee.

DECISION

Richard James Cleary ("the applicant") was made bankrupt on 8 June 1978 and has applied, pursuant to s.150(1) of the Bankruptcy Act 1966 ("the Act") for an order of discharge, twelve months having expired since the date his bankruptcy commenced.

An objection to his discharge was lodged by the Official Trustee on 3 June 1981 under s.149(3)(c) of the Act, the reason given being that his discharge would prejudice the administration of the applicant's estate, particularly the investigation of reasons for substantial deposits and withdrawals recorded in an account of the applicant at the Commonwealth Savings Bank in Oxford Street Sydney.

An objection was also lodged on behalf of a creditor, Wilke & Co. Limited on 14 October 1982 after the application for discharge was lodged. Its debt is $68,000.

The creditors have been duly served and the application is opposed by several creditors, namely, American Express International Inc. (the petitioning creditor), Putsj Publications N.V., Colour Scanners Pty. Limited, as well as Wilke & Co. Limited. At the hearing the Official Trustee, Wilke & Co. Limited, Putsj Publications, as well as the applicant, were represented by counsel.

Prior to his bankruptcy the applicant had been a school teacher and publisher of books used in schools. For a period prior to 1970 he wrote and published a number of books on mathematics. Because he liked writing and publishing educational books he caused a company, R.J. Cleary Publishers Pty. Limited, to be incorporated on 28 August 1970 and he was the sole beneficial owner of the shares in that company. Shortly after it was formed he gave up teaching and worked full-time for the company. At first it created books and had them printed. They were kept at his home and, as orders were received, supplied to schools. Subsequently, the company, under his control, created the works and had them printed but supplied them to a distributor for distribution to book shops and schools. Ultimately, because the company had difficulty in distributing books and the publishing industry appears to have been in a tight situation, he and the company found themselves in financial difficulty and the company went into liquidation on 16 June 1978.

The company R.J. Cleary Publishers Pty. Limited was dissolved on 10 May 1979 and no dividend was paid to its creditors.

The Official Trustee has filed a report pursuant to the Act. According to it, the applicant, in his statement of affairs, disclosed, as assets, his shares in the company and a debt due to him by the company, both of which are valueless. He also disclosed fourteen unsecured creditors whose liabilities totalled approximately $104,000. Of this amount, approximately $98,000 represented debts of the company which he had guaranteed. Eight creditors have lodged claims totalling $33,000 but as yet no dividend has been paid. The public examination of the bankrupt was held on 12 September 1978 and it was then adjourned to a date to be fixed.

Since his bankruptcy the applicant has earned income as follows:-
Year ended 30 June 1979 $7171.00
Year ended 30 June 1980 $2279.00
Year ended 30 June 1981 $14883.00
Year ended 30 June 1982 $20847.00

He is currently employed as a school teacher at St. Vincent's College at Potts Point where he earns $318.00 per week after tax. He has given evidence that he lives a very simple lifestyle and that his income is used up in maintaining himself. He says he has not been able to make any contribution for the benefit of his creditors.

The applicant would like to obtain his discharge. He is 40 years of age, is not married but would like to do so. He does not see himself having a career as a school teacher but would like to settle down and go back into publishing as a non risk publisher, that is to say, he would create the books for other publishers who would then take over the entire risk.

Having regard to these circumstances including the passage of time and the assets of his bankrupt estate, there may seem little point in prolonging the applicant's bankruptcy. However, the creditors have opposed it, particularly Wilke & Co. Limited, on a number of grounds to which I will shortly refer.

In considering the claims of the creditors, it is necessary to have in mind the court's powers under s.150. These powers are contained in sub-ss. (5) (6) (7) (9) and (10) which provide:-
"150(5) The Court shall, if any of the matters specified in sub-section (6) is established -

(a) refuse to make an order of discharge; or
(b) make an order of discharge but suspend the operation of the order as

the Court thinks proper, either unconditionally or subject to conditions. (6) The matters upon the establishment of which the Court may exercise the powers specified in sub-section (5) are as follows:-
(a) that the bankrupt has omitted to keep and preserve such books, accounts or records as sufficiently disclose his business transactions and financial position within the period of 5 years immediately preceding the date on which he became a bankrupt;
(b) that the bankrupt has, after knowing himself to be insolvent, continued to trade or obtained credit to the amount of $100 or upwards;
(c) that the bankrupt has contracted a debt provable in the bankruptcy without having at the time of contracting it any reasonable or probable grounds of expectation (proof of which lies on him) of being able to pay it after taking into consideration his other liabilities at the time;
(d) that the bankrupt has failed to account satisfactorily to the trustee for any loss of, or depreciation of, assets or for a deficiency of assets;
(e) that the bankrupt has brought on, or contributed to, his bankruptcy by -

(i) rash or hazardous speculations;
(ii) unjustifiable extravagance in living;
(iii) gambling or wagering; or
(iv) culpable neglect of his business affairs;
(f) that the bankrupt has, within the period of 6 months immediately

preceding the presentation of the petition on which, or by virtue of the presentation of which, he became a bankrupt -
(i) put any of his creditors to unnecessary expense by a frivolous or vexatious defence to an action brought against him; or

(ii) incurred expense by bringing a frivolous or vexatious action;
(g) that the bankrupt has, within the period of 6 months immediately

preceding the presentation of the petition on which, or by virtue of the presentation of which, he became a bankrupt, when unable to pay his debts as they became due, given an undue preference to any of his creditors;
(h) that the bankrupt has been guilty of fraud or fraudulent breach of trust; or
(i) that the bankrupt has been convicted of an offence against this Act or the repealed Act or of any other offence related to his bankruptcy.
(7) The Court shall not, under sub-section (5), suspend the operation of an order of discharge subject to conditions that require, or have the effect of requiring, the bankrupt to make payments from his income at any time after the expiration of the period of 5 years commencing on the date of the bankruptcy.

. . . . . . . . .
(9) Where none of the matters specified in sub-section (6) is established,

the Court may -

(a) refuse to make an order of discharge;
(b) make an order of discharge; or
(c) make an order of discharge but suspend the operation of the order as

the Court thinks proper, either unconditionally or subject to conditions.
(10) The Court shall not, under sub-section (9), suspend the operation of an order of discharge beyond the period of 3 years commencing on the date of the bankruptcy."

If, therefore, the provisions of s.150(5) are not applicable, I have a discretion under s.150(9) which, in the circumstances of this case, is limited to making or refusing to make an order of discharge because a period of three years has already elapsed from the date of the bankruptcy.

It is also important to bear in mind that if I do not make an order or no order is made pursuant to s.149(8) (9) or (12) of that section the applicant will be discharged by operation of law (s.149(14)) on 8 June 1983 because, on that date, the objections already lodged will lapse and the bankrupt is, by force of s.149, discharged upon the lapsing of the objections.

The principal grounds upon which the creditors have opposed an order for discharge are that the bankrupt has, since the date of his bankruptcy:-
(a) carried on business as a publisher of books and acquired property thereby, divisible amongst his creditors;
(b) purported to act as managing director of R.J. Cleary Publishers Pty. Limited and acquired property so divisible;
(c) been the beneficial owner of the share capital of Bahloo Publishers Limited, a Hong Kong company, and received substantial amounts which are divisible amongst his creditors;
(d) received amounts from L. & S. Educational Supply Corporation Limited ("L. & S.") and Edward Arnold (Publishers) Limited which have not been made available to his creditors;
(e) conducted bank accounts in Sydney and Hong Kong; and
(f) failed to make sufficient contribution to his estate despite his earnings as a school teacher and a publisher.

The creditors also claim that the applicant had failed to disclose matters (a) to (e) and that there has been an inadequate public examination.

In the circumstances it is said that the grounds of objection permissible under s.149(4) have been established, namely:-
(a) that he is able or likely, within five years from the date of his bankruptcy, to be able to make a significant contribution to his estate;
(b) that his discharge would prejudice the administration of his estate;
(c) that he has failed to co-operate in the administration of his estate;
(d) that his conduct after the date of his bankruptcy has been unsatisfactory.

It is also claimed that he has been guilty of fraud.

Some of the allegations made against the applicant are inter-connected. The allegation that has concerned me most has been the suggestion that he is the owner of the shares in Bahloo Publishers Limited ("Bahloo"). I shall deal subsequently with the allegations concerning this company. However, subject to this, I am satisfied with the applicant's explanations of the allegations contained in the paragraphs set out above.

It is first alleged that he has been carrying on business as a publisher. This, it is claimed, is borne out by the fact that his name has been shown in a publication "Australian Books in Print" in 1981 and in "Australian Book Scene" 1982-1983 as a publisher of books. In "Australian Books in Print" 1981, he is shown as the publisher of "Australiana, general, educational and childrens books". In connection with this entry he supplied a long list of publications as at 29 May 1980. Some of these were shown as out of print.

In the 1979 and 1980 editions of "Australian Books in Print" he is shown as the Managing Director of R.J. Cleary Publishers Pty. Limited.

He was a member of the Australian Book Publishers Association from 1980 to 1982 and paid subscriptions appropriate to that category of publishers whose turnover was below $50,000. For the purposes of his membership, annual statistics were supplied to the Australian Book Publishers Association on a confidential basis and the actual returns for 1980 and 1981 are before me. In the first return under "Sales in Australia" an amount of $2279 is shown against "income from sales of rights in Australia" and approximately $7,000 as "value of work in progress at balance date". In relation to 1981 he showed against "income from sale of rights outside Australia" $14,883 and as the "value of stock and work in progress at balance date" approximately $16,000.

There is no positive evidence that he was carrying on the business of publishing books after the commencement of his bankruptcy either on his own behalf or on behalf of R.J. Cleary Publishers Pty. Limited except the evidence relating to Bahloo and the assertions made either in the publications I have referred to or to the Australian Book Publishers Association. His explanation was that he held out that he was engaged in publishing to keep up with professional information so that he could ultimately get back into the publishing industry. He agreed that in each case it was untrue and apologised for it.

In relation to the sales and stock figures in the returns to the Australian Book Publishers Association, he says that these figures actually represented his earnings or a proportion of his earnings as a teacher and therefore were not true.

His membership of the Association has not been renewed because he is a bankrupt. The information about his bankruptcy was not passed on to the Association by him but by some other person.

The list of books sent to "Australian Books in Print" represented titles of books in whose publication he had been involved. He agrees that he was representing that, as at May 1980, they were still in print except to the extent indicated. He says that at that point in time they were being distributed by the company L. & S. His name appeared in relation to them, he says, because he was the creator of the particular books. They were being supplied by Bahloo and he was acting here as agent for Bahloo.

Although this evidence leaves one in some doubt as to the true position it does not enable me to find positively for the purposes of these proceedings that the applicant is or has been carrying on, since June 1978, the business of publishing. At the same time it does not give me any great confidence in the reliability of the applicant as a witness or of the statements he makes. It may well be that he wished, following his bankruptcy, not to publicise the fact any further than was needed and to continue to give the impression that he was a publisher of books to the trade even though he was not. However, in doing so he was prepared to make assertions which were untrue and about which he now feels embarrassed and for which he apologises.

There is no evidence that he has acted as managing director of R.J. Cleary Publishers Pty. Limited since his bankruptcy except that he may have received 900 pounds from Edward Arnold (Publishers) Limited for royalties. On the evidence, it is more likely than not that it was paid in 1977. However, even if received subsequently, I am not satisfied that it formed part of his estate or that his action in receiving it affected his estate.

A further allegation by the creditors relates to the receipt of certain amounts from the company, L. & S., namely, $1,000 paid in May 1979 and $6084 in February 1980.

As to the sum of $1,000, the applicant says he received it on behalf of Bahloo and with its approval he treated it as a loan from that company which he applied towards expenses associated with the books he was then preparing.

As to the sum of $6084 he says he agrees it was paid into the account of Bahloo but, having no interest in the company, he has no interest in the moneys. Both these payments therefore are to some extent connected with the relationship between the applicant and Bahloo. At the moment I am not satisfied, on the evidence, that the creditors had any interest or retain any interest in either of these amounts.

It was also alleged that he had maintained two bank accounts, one in Hong Kong and the other at the Commonwealth Savings Bank in Oxford Street, Sydney. He denies having an account in Hong Kong and there is no other evidence before me of it. He admits however the existence of an account with the Commonwealth Savings Bank. He also had accounts with the National Bank Savings Bank Limited and there is some account with St. Vincent's College. So far as the evidence goes, I do not think these accounts have any relevance except so far as they contain entries relevant to his association with Bahloo. Otherwise they do not indicate the conduct of any business or the receipt of any property other than that which has been explained, namely, the income from his occupation as a teacher.

A further ground of objection was that he had earned substantial income as a teacher but had made no contribution to his estate out of that income. As to this he appears to have a complete answer because s.131 provides that a bankrupt is entitled to retain income for his own benefit subject to any order made by the court under that section. No such order has been made or sought notwithstanding the passage of time since June 1978.

This brings me to the matter which, as I indicated earlier, has concerned me most, namely, his association with the Hong Kong company known as Bahloo. It appears that this company was incorporated in November 1975 and has a small paid up capital of $2.00. Contact is made with it at the registered office of a firm of accountants, John B.P. Byrne & Co. at their premises in Hong Kong. The accountants provide the administrative services for the company and do all its financial work. The shareholders are two other companies, Edgworth Limited and Bericom Limited. He says that Bahloo is a nominee company but that he does not know specifically for whom it is a nominee. He deals with two persons in Hong Kong, Mr Jeff McLean and a Mr Leung. The company's business is acting as an agent between printers in Hong Kong, typesetters in Hong Kong and other publishers outside of Hong Kong. In addition to L. & S., Bahloo has clients such as Nelsons in Canada, Sackett & Merlin in London, Southdown Press and Rigby Press. The applicant claims that he has no knowledge of what business Bahloo does or has done with anybody else outside L. & S.

In 1981 and 1982 no business was done with L. & S. He says that during 1979 the business done with L. & S. was approximately $39,000 and in 1980 $6,000. Mr McLean and Mr Leung, he says, were employed by the accountants, John B.P. Byrne & Co. and their services were apparently sub-contracted to Bahloo. The applicant claims that after his bankruptcy he spoke to Mr McLean and told him about it and that it was agreed that the applicant could act on an agency basis for Bahloo in Australia. He also asked if Bahloo would help him out in getting some books published which he was in the process of writing. There was to be no cash remuneration in the sense of payment for acting as agent. What he did for Bahloo was to be on a voluntary basis but in turn it was going to help him out with some loans to get his books "off the deck". Before the bankruptcy, R.J. Cleary Publishing Pty. Limited had arranged with Bahloo to have books printed in Hong Kong. The company ordered from Bahloo instead of ordering from a printer.

It is claimed on behalf of the creditors that the applicant is the beneficial owner of the shares in Bahloo and that he has concealed his interest in that company. He denies this and says his only relationship has been as an agent. In support of their assertions, the creditors relied on the evidence of Ian Robert Stevenson, now the Educational Publications Manager of David Syme & Co. Limited, but until recently the Managing Director of L. & S.

He says that in 1973 when Mr Cleary came to them asking them to undertake distribution of some of his products, he told Mr Stevenson he intended to set up a Hong Kong company to produce books or handle the Australian market and that Mr Cleary felt that there were a lot of advantages having a company located in Hong Kong, namely, access to extremely low cost printing, the tax rate and because it is a place used extensively to produce books. During the course of discussions in 1978, at the time of his pending bankruptcy, Mr Stevenson says he asked the applicant what he was going to do and how would he continue and the applicant said it did not concern him at all as he could still trade and produce books in Hong Kong. The applicant told him that he owned the shares in Bahloo. In cross-examination Mr Stevenson was asked:-
"Do you recall the words he used, the exact words?--- We were discussing his proposed activities for the future, and he said he had no worries about continuing to produce books. He said it was impossible to find out who owned Bahloo Publishing but that he owned the shares in it, he was able to conduct the business and to continue to produce goods through it.
Are you sure he did not use words to the effect that he was associated with that company?---He was more than associated with it, I have known it since the day it started.
I am suggesting to you that he indicated that he was associated with that company---I am afraid he did not.
I suggest to you that he used words to the effect that he had an interest in the company?---No."

The applicant denies the conversations in 1973 and 1978. He asserts that his only relationship is as agent.

The creditors also rely on letters from him to L. & S. These appear to relate to business L. & S. was doing with the applicant involving Bahloo. It is claimed they show he regarded this business as part of his publishing business. For instance, in one of 3 October 1979, he wrote to Mr Stevenson:-
"The last reprint delivery has been made to you and it seems an ideal time to summarise where we both stand. Much has happened with me over the past year; it has been the most profitable period of 12 months ever] Not in turnover, but simply cash profit and I'll certainly not hold my head down to anyone in Australian publishing - especially since it was done from scratch."

In the letter he also speaks of "one of my confirming houses in Hong Kong". There are other letters. Some are written by him on behalf of Bahloo Publishers Limited of Hong Kong, others are directly from himself. The correspondence, in parts, refers to "we" and "us" and is perhaps not conclusively indicative of being in business on his own account particularly in view of the reference to Bahloo Publishers Limited. However, it does, in my view, leave outstanding the question of his relationship with that company and there is left an impression that is at least consistent with the view that what he is doing on behalf of Bahloo he is really doing for his own benefit.

Mr Stevenson says that, in Octover 1981, he visited Hong Kong and attempted to ascertain the whereabouts of Bahloo. He visited the firm of John B.P. Byrne & Co. He was told at first there was no such company as Bahloo Publishers Limited registered there but after prevailing upon them they apparently admitted it. He asked if he could speak to somebody connected with it and he was introduced to a Mr Dennis Mee who said they had Bahloo registered there. Mr Stevenson's evidence then proceeded:-
"I said would it be possible to talk to someone from the staff of Bahloo and perhaps visit somebody from the company. They said there is nobody here in Hong Kong connected with the company. All the instructions are received from Australia. I asked who owned the company and they said they were not at liberty to tell me. It was a nominee company. I said do you get your instructions from Mr Cleary. They said Mr Cleary is the only person we have ever dealt with in relation to the company."

Mr Stevenson said he could not find Bahloo listed in the Hong Kong telephone directory. He agreed that L. & S. had done business with Bahloo since the date of the applicant's bankruptcy i.e. in 1979 and 1980 and that it was about $20,000 in value.

Another aspect of the evidence which is relevant is the applicant's evidence that he has received amounts totalling $20,000 from Bahloo which he says was provided for use in the writing of his books. The last payment made to him by Bahloo was in February 1980. The books in question are maths text books for use in schools which come in a kit form. He says he has done work on them but it will be a considerable time before he obtains any remuneration from them. They have sections on computers and because no decision has been made about the computer system to be taught he has been unable to complete and sell them. Their preparation has involved travelling to the various states and conferring with officers of the education departments.

In his affidavit he said he used the whole of the amount for writing books whereas in his oral evidence he agreed that a large part of it, possibly half, had been used for his own support and upkeep at a time when he was finding it difficult to get employment as a teacher. He also said that these loans were in the course of repayment. He explained this by saying that the preparation of the books had gone on and on and as they are still under preparation he had decided to pay back some of the money. In all he has repaid something between $2,000 and $2,500.

The latest payment was $500 in May or June 1982. He said there had been no pressure on him to pay the amounts back and he started making payments in approximately Christmas 1981. He says he has had no discussion with anybody in Bahloo since December 1980 and he simply transferred the funds through the bank to their account. He could not recall telling the Official Trustee about the repayment of these funds.

As stated earlier, the applicant denies that he beneficially owns the shares in Bahloo. He apparently knows that the shares are held in trust but he does not know who the beneficiaries are. He says that the only sense in which he has an interest in Bahloo is that he was acting as agent to get business with L. & S.

The only positive evidence that the applicant has a beneficial interest in the shares of Bahloo is his alleged statement to Mr Stevenson. Having observed Mr Stevenson in the witness box, I find no reason to reject his evidence. He appears to have had a reasonably close relationship with the applicant in business. He also appeared to have a reasonably clear recollection of the substance of the conversations he had regarding the Hong Kong arrangements. He appeared to me to be an honest witness. The applicant on the other hand has admitted the untruth of some of his statements. Even though these statements were made for purposes which he felt were justified, I am not prepared to accept his evidence as reliable. In the face of the positive evidence of Mr Stevenson, I am therefore not prepared to accept, for the purpose of these proceedings, the applicant's denial of his interest in Bahloo. I am satisfied that he did say to Mr Stevenson that he owned the shares in Bahloo. It does not follow from this that he in fact had or still has such an interest but as I will indicate, his statement to Mr Stevenson is, I think, a relevant circumstance in deciding whether I should make an order of discharge at this stage.

I have already referred to the provisions of s.150 sub-s.(6) and I am not satisfied that any of the matters specified in that sub-section have been established. It follows from this finding that s.150(5) is not applicable and I am left to exercise the discretion conferred on me by s.150(9). Under that sub-section, in the events which have happened, I must either make or refuse to make an order of discharge. In the light of the findings I have made, I have decided that I should, in the exercise of my discretion, refuse to make an order of discharge.

In the ordinary course, it appears that unless an order is made by the Court under s.149(8) or (12), the applicant will be discharged, by operation of law, in June this year. I was asked by the creditors to make an order that the bankrupt should not then be discharged but on the evidence before me I am not prepared to do so. They, of course, would be at liberty to make a fresh application for such an order before June next if so advised.

At the outset of the hearing, counsel for the Official Trustee indicated that his client proposed to take a neutral stance stating, in effect, that he was satisfied with the information provided by the applicant. However, during the hearing counsel for the creditor, Wilke & Co. Limited, indicated that his client was prepared to meet the costs of further enquiries into the ownership of the shares in Bahloo. At the conclusion of the hearing counsel for the Official Trustee indicated that his client's satisfaction related to the activities or transactions on the applicant's bank account and that, in the light of the creditors' offer to meet costs, there were matters that he wished to investigate further.

It is clear that the creditors have been aware for some time of the possible beneficial interest of the applicant in the shares of Bahloo and presumably were aware that he had not revealed any interest in his statement of affairs. His examination was adjourned in September 1978 and no application has been made to have it continued or for the conduct of an examination under s.81 of the Act as to the shares in or the dealings of the applicant with Bahloo. These are all factors which might incline a court to make an order of discharge because it could be said that there has been more than adequate time for the creditors and the Official Trustee to investigate this matter.

However, when a bankrupt applies for a discharge it is for him or her to satisfy the Court in the exercise of its discretion that an order should be made. Where the Court is not satisfied by the bankrupt that all substantial assets have been disclosed that is a strong reason for refusing an order. In this case I am not satisfied with the applicant's explanation of the role of the company Bahloo in his affairs or of his relationship with it. The loans made to him by the company seem to point to the existence of something other than the ordinary relationship of principal and agent even allowing for the exigencies of the publishing trade. He has made repayments of these loans without any request for repayment - indeed without any contact with Bahloo at all. In my opinion, the circumstances of these loans and their partial repayment are consistent with his having a relationship with the company much closer than that of an agent, for instance, as a person who either controls it directly or indirectly or has a beneficial interest in it.

When I add to this the evidence of Mr Stevenson, which I accept, that the applicant told him he owned the shares and that as late as October 1981 a representative of the accountants, John B.P. Bryne & Co. told Mr Stevenson that the applicant is the only person with whom that company has dealt with in relation to Bahloo, my doubts as to the true relationship between the applicant and Bahloo are confirmed.

Therefore, notwithstanding the delay that has occurred, I have decided that it would not be proper to grant an order for discharge until the Court is either satisfied of the true relationship between the applicant and Bahloo or until the trustee has had a further reasonable opportunity to make enquiries as to that relationship. The period between this date and his discharge by operation of law should be sufficient to enable the Official Trustee to make those enquiries. Because the applicant, on any view, has a close association with the company, he should be able to assist the trustee in his enquiries. If the truth is that he is not the beneficial owner of the shares, it would be in his interest to do so. If it appears, on further enquiries, that the bankrupt has an interest in the shares, it will be open to the trustee or the creditors to make an application for orders preventing his discharge by operation of law.

It was alleged that the applicant has been guilty of fraud. On the evidence at present before me, I am not satisfied of this.

In the exercise of my discretion, I have decided not to make any order as to costs in these proceedings, except those of the Official Trustee. In the circumstances I think they should be paid by the bankrupt.

I therefore order that:-

1. The application for discharge be refused.
2. The applicant pay the costs of the Official Trustee.