Four former directors of Structural Concrete Ltd, which was wound up in 1996 with debts totalling over £1m, have been banned by the High Court from holding further directorships for between two and four years. However, the bans have been suspended pending an appeal.
The bans followed an appeal by the Official Receiver against the refusal of District Judge Wilby, at Bolton County Court, to impose disqualifications under the provisions of the Company Directors Disqualification Act 1986.
Now Blackburne J has held that Judge Wilby was wrong and has banned Thomas David Barnes from holding a directorship for four years, and banned Brian Barnes, Leslie Dutton and Alan James Cuningham for two years each.
Structural Concrete, a subsidiary of Barnes Construction (UK) plc, began trading in early February 1994 and ceased trading in early autumn 1996. During its brief life, the company undertook only seven contracts in which it was employed as a subcontractor. Each project involved a major construction project and the main contractors were usually substantial organisations. However, in five of the seven contracts the company experienced difficulty in recovering what it claimed was due from the main contractors.
Blackburne J said that the company had been the victim of a practice engaged in by main contractors to assist their cash flow, known as “subby bashing”. He said that in a bid to offset the financial problems created by this, Structural Concrete withheld payments to the Inland Revenue from January 1995 onwards.
The judge added this was part of a “deliberate policy of discrimination” carried through by Thomas Barnes and to which his three co-directors acquiesced. He stated that it would require exceptional circumstances to justify a finding that misconduct such as had taken place should not result in a ruling that the directors concerned were unfit to hold directorships.
“It would be to send out entirely the wrong message if it were to be thought that a deliberate policy, followed over very many months, of not making any payment of a Crown debt of this kind, allowing it to rise to £460,000 odd and making no attempt to secure the Crown’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 disqualification,” he said.
However, he accepted that the former directors had no intention of benefiting themselves by their actions and every intention of discharging what was due to the Revenue and others, and in those circumstances the appropriate disqualification periods fell within the lowest disqualification scales.
Official Receiver v Barnes and others Chancery Division (Blackburne J) 21 June 2000.
Mark Cunningham (instructed by Dickinson Dees, of Newcastle upon Tyne) appeared for the plaintiff; Romie Tager QC (instructed by Zatman & Co, of Manchester) appeared for the defendants.
PLS News 26/6/00
