Prioritising Payment of Debts

In Re Structural Concrete Ltd (TLR 5 July Ch D)

On an application for a disqualification order against directors, a policy of deliberate non-payment of a certain class of debt, whether to the Crown or otherwise, necessarily gave rise to a finding of unfitness, it was difficult to envisage the exceptional circumstances in which such conduct, if carried on over a lengthy period at the risk of the creditors in question, would not constitute misconduct justifying a finding of fitness. The company had prioritised the payment of its debts in favour of the company’s overdraft at the National Westminster Bank and the company’s trade creditors, in the hope that it could trade its way out of trouble and ultimately pay off the other creditors, including the Inland Revenue. In fact the Inland Revenue and the other unsecured creditors were likely to receive nothing from the liquidation. It would send out entirely the wrong message if it were to be thought that a deliberate policy of not making any payment of such a Crown debt, allowing it to rise to £460,000-odd and making no attempt to secure the Crown’s agreement to that cause 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.