Company

Director - disqualification - policy of non-payment of Crown debts in order to continue trading was misconductIn re Structural Concrete Ltd; ChD (Blackburne J); 21 June 2000

A company carrying on business as a specialist concrete subcontractor fell into financial difficulties during 1994-5 when disputes arose in relation to five of the company's seven major contracts.

In January 1995, the directors, on the advice of the group accountant, decided to prioritise making payments towards the company's bank overdraft and trade creditors at the expense of all other creditors, including the Inland Revenue, in the hope that the company would trade its way out of trouble.

The company was wound up in December 1996.

The official receiver initiated disqualification proceedings against the directors for financing the company's business with 462,890 retained from moneys collected for the Revenue as deductions from payments made to the company's self-employed workforce.

The district judge dismissed the application.

The official receiver appealed.Mark Cunningham (instructed by Dickinson Dees, Newcastle upon Tyne) for the Official Receiver; Romie Tager QC (instructed by Zatman & Co, Manchester) for the defendants.Held, allowing the appeal, that where there was no challenge to the findings of fact made by the court below, the appellate court was in as good a position as the trial judge as to the proper conclusions to be drawn from those findings on the issue of unfitness; that it would send out entirely the wrong message if it were to be thought that a deliberate policy of not making any payment of a Crown (or any other class of) debt, allowing it to rise to 460,000-odd and making no attempt to secure the creditor's agreement to this course of action, while at the same time paying the company's other pressing creditors, could not lead to a finding of unfitness and therefore to a disqualification; and that the director who had day-to-day control of the affairs of the company should be disqualified for four years and the other directors should each be disqualified for two years.