The Secretary of State for Business Innovation And Skills v Cork

JUDGE HODGE QC: This is my extemporary judgment at the trial of a director’s disqualification application brought by the Secretary of State for Business, Innovation and Skills by a claim form issued on 10^th October 2011 under claim number 1MA02433. Originally there were two defendants, Mr Raymond Michael Cork and Mr Charles Lindsay Melville Porter; but Mr Porter gave a disqualification undertaking for a term of six years on 19^th December 2011, and the claim has been discontinued as against him. Therefore the sole defendant is Mr Raymond Michael Cork. The Secretary of State is represented by Miss Lucy Wilson-Barnes of counsel, and Mr Cork is represented by Mr Christopher Cook of counsel. Both counsel have submitted helpful written skeleton arguments dated (in the case of Miss Wilson-Barnes) 3^rd October 2012 and (in the case of Mr Cook) 4^th October 2012.

This claim relates to the affairs of a company called Landmark Publishing Limited. That company was a publisher of limited circulation, specialist interest and hobby books and niche travel guides. It was incorporated in September 1996, and it commenced trading in or about November 1996. The two equal 50 per cent shareholders in the company were Mr Cork and Mr Porter. Mr Porter was the company secretary and the full time managing director. He himself was a published author; and he was responsible for dealing with the printers of the books, and had all of the contacts with the company’s list of authors. He, for example, dealt with the royalty payments to the authors. He was appointed a director of the company on 21^st February 1997. Mr Cork was a qualified accountant. His interest in the company was essentially as an investor. He worked very much on a part time basis for the company, dealing with its accounts, and working on average one day a month. He was appointed a director of the company after Mr Porter, on 15^th January 1998.

The company entered into administration on 15^th September 2009, and Mr Ronald Stanley Harding and Mr Joseph Gordon Maurice Sadler were appointed to act as joint administrators. The company exited from administration and was dissolved on 27^th December 2010. At the time the company entered into administration in September 2009, Mr Porter was 62 years of age and Mr Cork was 57. Notice of intention to commence disqualification proceedings against both Mr Porter and Mr Cork was sent out on 4^th August 2011. The claim form was, as I have stated, issued on 10^th October 2011 and it seeks a disqualification order under section 6 of the Company Directors Disqualification Act 1986. That section, as is well known, empowers the court to make a disqualification order against a person in any case where, on an application under section 6, the court is satisfied (a) that he is or has been a director of a company which has at any time become insolvent (whether while he was a director or subsequently), and (b) that his conduct as a director of that company (either taken alone or taken together with his conduct as a director of any other company or companies) makes him unfit to be concerned in the management of a company. By section 9(1) of the 1986 Act, where it falls to a court to determine whether a person’s conduct as a director of any particular company or companies makes him unfit to be concerned in the management of a company, the court shall, as respects his conduct as a director of that company, have regard in particular—

Mr Clarke sets out the full extent of the evidence deployed against both Mr Cork and Mr Porter in the remainder of his first affirmation, which extends to 129 numbered paragraphs. Exhibit RMRC1 to Mr Clarke’s first affirmation extends to over 500 pages of documentation.

Mr Cork filed an affidavit in response to Mr Clarke’s evidence, which was sworn on 5^th March 2012. It forms the principal evidence in answer to the claim and comprises some 47 paragraphs, with an exhibit RMC1. At paragraph 4, Mr Cork sets out the principal aims of his affidavit which, he said, would be to demonstrate that he had given due consideration to whether a proposed investment to be made in the company, and said to be of £100,000, by Mr Porter was a realistic proposition, but that he (Mr Cork) did not entirely rely on Mr Porter’s word, but did take steps to monitor the progress of the proposed investment; and also to show that the proposed investment would have been sufficient to enable the company to trade out of its financial difficulties if the recession had not been as deep, and as damaging, as it transpired to be.

At paragraphs 5 through to 14, Mr Cork describes his responsibilities within Landmark and his investment in that company. He explains that by profession he was an accountant, and was a director of a number of companies. He says that he was appointed as a director of Landmark on 15^th January 1998, and he remained such until the company entered into administration on 15^th September 2009. He explains that he held 50 per cent of the shares in Landmark, but that he had no involvement in the day to day conduct of its business. His duties were to prepare Landmark’s quarterly management accounts and quarterly VAT returns. He worked at Landmark for, on average, one day a month, preparing those financial records. It is said that the day to day book-keeping, sales and purchase ledgers, and payroll were dealt with by Mrs Stella Porter and Mr Porter. The latter was the managing director of Landmark, responsible for the day to day management of its business, and for the royalty payments to authors. Mr Porter was also responsible for deciding on the timing of payments to Landmark’s creditors. Mr Cork explains that he had no previous knowledge of the publishing business, unlike Mr Porter, upon whose experience he relied. Mr Cork said that he received no remuneration or other expense payments from Landmark. He had given a £35,000 personal guarantee to Landmark’s bankers, HSBC, and he had so far been called upon to pay some £16,825 odd to HSBC under its terms; and he may be called upon to pay a similar sum if Mr Porter fails to honour his guarantee liability. Mr Cork explains that he was a creditor of Landmark in the sum of £6,582 by way of a director’s loan account. He made an equity investment in Landmark of £46,500 which has been lost; and there was a further £5,000 loss to his family as a result of a loan to Mrs Porter for a different business venture that she had been engaged in. Mr Cork explains that he had no involvement with, or interest in, Horizon Publishing Limited, the corporate entity which acquired the assets of Landmark from the administrators.

At paragraphs 15 and 16, Mr Cork addresses the allegation that he allowed the company to trade with knowledge of its insolvency, taking unreasonable advantage of the forbearance of authors, and at the risk, and to the detriment, of creditors generally. He explains that he agrees that, from the signature of Landmark’s accounts for the year ending 31^st December 2007 on 3^rd August 2008, he was aware that Landmark was insolvent; but he denies that he allowed it to trade at the risk, and to the detriment, of creditors generally, or to take unreasonable advantage of the forbearance of authors. He relates what had been agreed with regard to an investment of £100,000 in Landmark, and the strategy that he, and Mr Porter, had agreed would be implemented to reduce the company’s overheads. He says that it was not until August 2009, upon his return from holiday, that he became aware that there was any problem concerning obtaining the £100,000 investment. Advice was immediately taken from insolvency practitioners; but, due to a delay in the appointment of administrators, that appointment was not effected until 15^th September. The reason for that delay was that insolvency practitioners had advised that a sale to a new, Phoenix, company, to be established by Mr Porter, would procure the best outcome for creditors because it was the best, if not the only, means of realising value from the assets of Landmark. Mr Cork expressed his belief that, during that period of time, the amount due to creditors increased by approximately £25,000. There was said to be nothing that Mr Cork could have done about that; he simply wished to see the best outcome for the creditors.

At the end of his cross-examination, Mr Clarke said that he was not aware of any liabilities being incurred after cessation of trading. Mr Cork, in cross-examination, indicated that his figure of £25,000 approximately was essentially a guesstimate, and was based upon fixed outgoings such as salaries and rent.

Mr Cork proceeded to address the allegation that Landmark’s accounts, both for the year end of 31^st December 2007, and its draft accounts for the year end of 31^st December 2008, showed an insolvent position, with net liabilities, which was deteriorating, at paragraphs 17 and 18. He accepted that what was said at paragraph 9(a) of Mr Clarke’s first affirmation was factually correct, but it was said that it does not present a full picture of Landmark’s course of trade. For example, it is said that the net liabilities shown in the management accounts for August 2008 recorded net liabilities of £86,933. That was a figure which was reiterated at paragraph 41 of Mr Cork’s first affidavit, although in cross-examination he was unable to explain the figure, which does not, in fact, accord with that shown in the draft management accounts for August 2008 to which he was referring. He was unsure where he had arrived at the figure of £86,933 from; and he indicated that he could not now recall, but he must have added something else in. The significance of the asserted figure was Mr Cork’s evidence that an investment of £100,000 would therefore have been sufficient, at that time, to settle Landmark’s indebtedness. Whilst Mr Cork does not dispute that the company was insolvent, it is his evidence, and case, that if Mr Porter’s investment of £100,000 had been made, Landmark could have traded its way back to solvency. The directors had agreed not to take any repayment of their own loans during 2008; and Mr Cork says that any payment taken by Mr Porter was without Mr Cork’s knowledge or agreement.

Mr Cork addresses the debts due to authors in respect of royalty payments at paragraphs 19 to 21. He addresses trade and expense creditors at paragraphs 22 through to 26. He addresses the position of Her Majesty’s Revenue and Customs at paragraphs 27 and 28; and paragraph 29 addresses the directors’ remuneration and loan accounts. The bank’s position is set out at paragraphs 30 through to 32.

At paragraphs 33 onwards, Mr Cork addresses the impact of trading beyond 3^rd August 2008. At paragraph 33, he acknowledges that, by April 2008, Mr Porter and he had recognised that Landmark needed capital. At a board meeting that had taken place on 29^th April 2008, Mr Porter and he had discussed the company’s finances. It was said to have been clear to them that the company was insolvent and could not trade its way back to solvency without a substantial capital investment. Mr Porter informed Mr Cork that he was going to raise capital of £100,000, which he would put into Landmark. Mr Porter told Mr Cork that he had achieved planning permission for a plot of land. He was said to have shown Mr Cork a letter from Derbyshire Dales District Council approving the planning application. Mr Cork understands that Mr Porter no longer has a copy of that letter. In evidence, Mr Cork accepted that the planning permission was one which had been granted in 1999, and which therefore had expired, unless implemented, in 2004. But Mr Cork indicated that he had been led to understand by Mr Porter that the planning consent had, in fact, been implemented. That is something which Mr Cork had averted to in paragraph 3 of his second affidavit, where it was said that Mr Porter had informed Mr Cork that he had taken steps to protect the planning permission that he had obtained for his land. In paragraph 3 of the second affidavit, it was said that Mr Cork had had no reason to doubt that that was the case. At no time had Mr Porter informed Mr Cork that the planning permission had expired, or that he had had to make any new application for planning permission. Returning to paragraph 33 of Mr Cork’s first affidavit, he says that Mr Porter was a retired chartered surveyor. His proposal appeared sound, and he appeared to know what he was doing. Mr Porter had stated that he intended to take out a loan of £100,000, secured on the land, which he would then invest in Landmark, enabling it to meet its obligations. At the meeting, he was said to have shown Mr Cork the cash flow forecast which he had prepared, and which showed Mr Cork the effect of the proposed investment; a copy of that was exhibited as pages 2 and 3 of exhibit RMC1. It was said that Mr Cork and Mr Porter considered the position of Landmark and its creditors, as shown in the spreadsheet, and that there was nothing in it that Mr Cork considered to be unrealistic. He then sets out the outcomes for the four major creditors of Landmark, namely the Revenue, the printers, Geo Centre, and royalties to writers.

At paragraph 34, Mr Cork explains that the second part of the strategy that the two directors had discussed and agreed in April 2008 was to make substantial reductions to Landmark’s overheads by various means, such as reducing the sub-contractors’ costs, reducing headcount, and so on. That strategy was said to have been successful because there was a £33,728 reduction in overheads and expenses, shown by the draft annual accounts to the year end of 31^st December 2008 compared to the previous 12 months. I interpose to observe that the draft profit and loss account for the year end 31^st December 2008 (at page 83 of exhibit RMRC1) showed a reduction in turnover between 2007 and 2008 from £463,698 to £350,177. The cost of sales was reduced by a little under £100,000, and the gross profit was therefore reduced from £114,365 for 2007 to £99,382 in 2008. Overheads also fell, so that the operating loss was reduced from £38,596 in 2007 to £19,852 in 2008. The overall loss for the financial year, after nil taxation, was reduced from £50,283 in 2007 to £29,930 in 2008. Nevertheless, substantial loss there was. At paragraph 35, Mr Cork says that these strategies would bring Landmark back to profit, or at least a break-even point, and pay off the creditors. It was clearly a preferable outcome to putting Landmark into insolvency, which would have inevitably led to a shortfall to the creditors. Mr Porter was said subsequently to have confirmed that by email, a copy of which appeared at page 4 of exhibit RMC1; that email was dated 29^th April 2008 and enclosed the cash flow forecast for 2008-2009. It was said to show £100,000 going in in July, although Mr Porter said that he was not sure that he could raise that sum prior to “the sale”, presumably of the land. It is of some significance that the cash flow forecast envisaged total sales for the calendar year to the end of December 2008 of £518,846. As I have already indicated, when the draft accounts for the year to 31^st December 2008 came to be prepared by Mr Cork in (according to his evidence) April 2009, the sales for the year were, in fact, only £350,177. At paragraph 37, Mr Cork explains that he met Mr Porter on a regular monthly basis; and when they met, Mr Cork asked him how the raising of the finance was progressing. Mr Porter would explain the position that had been reached, which appeared to Mr Cork to be satisfactory.

Mr Cork relates that during the latter part of 2008 he attended a meeting with Mr Porter and a representative of Aberdeen Enterprise Finance. They discussed the loan facility; and the AEF representative indicated that he would recommend approval. Mr Cork’s recollection was that the loan that was being discussed was for £150,000, as Mr Porter wanted to release funds for his own personal use as well. Subsequently, on a date which Mr Cork cannot now specify, Mr Porter told him that he had an arrangement with AEF, which was just waiting for confirmation that the planning conditions had been satisfied. There was no suggestion that Mr Porter had any concern that this could present a problem; it appeared simply to be a technicality. Mr Cork’s understanding was that a loan offer was made to Mr Porter by AEF which, he believes, demonstrates that the strategy for raising capital was valid. Mr Cork explains that he was satisfied that there was every prospect of £100,000 being raised, and made available for creditors. From his frequent conversations with Mr Porter, there appeared to be no basis for concern until, on 14^th August 2009, he received an email (page 5 of exhibit RMC1) that the planning application had been refused, and that one of the printers, Cromwell (then in administration), would be taking the matter to court if Cromwell had not been paid by 18^th August. It was this that led to the taking of advice from insolvency practitioners. In paragraph 37 of his first affidavit, Mr Cork had related that his recollection was that the loan being discussed was for £150,000. In paragraph 9 of Mr Cork’s second affidavit, he relates that the meeting that he had attended with AEF was to discuss a total loan being sought by Mr Porter of £180,000. It is said that Mr Porter, in fact, got two offers, one for £120,000 and another for £60,000. It is said that Mr Cork was not aware of that split until he had received a copy of the AEF offer letter from Mr Porter, in preparation for his first witness statement. That offer letter, which is in fact dated 2^nd February 2009 (and is to be found at page 5 and following of exhibit RMRC2 to Mr Clarke’s second affirmation), was only received by Mr Cork after the instant litigation had commenced. Mr Cork was asked about the discrepancy between the two stated loan figures of £180,000 and £150,000; and he indicated that he was not sure which the correct one was. His concern was solely directed to the amount that the company was to receive. At paragraph 39 of his first affidavit, Mr Cork relates that he was informed, and acted on the basis, that Mr Porter’s investment would be £100,000, as indicated by the cash flow forecast. It was said that at no time, until he read Mr Clarke’s first affirmation, had he had any knowledge of an investment of as little as £60,000; at no time had Mr Porter informed Mr Cork that he had intended to reduce his investment. At paragraph 41, Mr Cork relates that the cash flow forecast had shown that, with the £100,000 investment, Landmark could continue to trade. Mr Cork believes that that is supported by the fact that, by August 2008, the management accounts were said to show that Landmark’s net liabilities stood at £86,933, a figure which was said to include debts that were not due as they were on delayed terms, royalties due to Mr Porter which he had waived, and, Mr Cork believes, inflated royalties claims. The investment of £100,000 would, according to Mr Cork, have allowed the creditors who had then fallen due to be settled. As I have said, page 185 of exhibit RMRC1 does not support the figure of £86,933; and Mr Cork was unable to explain the discrepancy in the figures. At paragraph 46, Mr Cork emphasises that he did not personally benefit in any way from the continued trading by Landmark. Whilst he accepts that the position of creditors also worsened, that was said only to have occurred because a genuine, realistic source of substantial funds was believed to be available to be invested in Landmark that would have addressed the company’s debts. He submits that it would not be appropriate to disqualify him from acting as a director, particularly in the light of his limited role within Landmark, and his genuine, and reasonable, belief that capital was available to that company.

Mr Cork’s evidence was answered by the second affirmation of Mr Clarke, together with exhibit RMRC2. It is unnecessary for me, in this judgment, to relate the terms of that second affirmation. Mr Cork replied to Mr Clarke’s second affirmation in his second affidavit, sworn on 9^th May 2012. I have already related what Mr Cork had to say at paragraph 3 in relation to the asserted planning permission for Mr Porter’s land. At paragraph 4, Mr Cork records that he had not made a detailed record of all of his discussions with Mr Porter; nor had he kept his papers relating to Landmark because there had been no suggestion of any allegation of wrongdoing with regard to the conduct of the company’s affairs until a very long time after Landmark’s administration had come to an end.

At paragraph 7, Mr Cork notes that Mr Porter had been unable to provide the claimant’s solicitor with a detailed chronology of events; and she had not appeared to have asked him for one. Nor had she appeared to have put it to Mr Porter that what he had indicated was in any way insufficient. The loan of £100,000, which Mr Cork understood was to be made, would have allowed Landmark to pay its liabilities when they fell due and, so it was said, would have clearly benefited creditors during the period between April 2008 and August 2009. It was said that the directors were moving forward in anticipation that the loan funds would be available. As was clearly demonstrated by the cash flow forecast, Mr Cork was informed that the loan was to be £100,000. It was Mr Porter who had prepared that cash flow forecast, and, therefore, if Mr Porter now recalls that his recollection was that the figure had always been £60,000, it was said that he was clearly mistaken. Mr Clarke acknowledged that Mr Porter must have been mistaken as to the initial level of the investment; and it is clear from the cash flow forecast that Mr Porter’s recollection in that regard must indeed have been wrong. At paragraph 10, Mr Cork says that if there had been any suggestion that the amount to be borrowed and invested in the company had only been £60,000, then that would clearly not have been sufficient; and he (Mr Cork) would have made that very clear to Mr Porter. That matter was said never to have arisen because Mr Porter never suggested to Mr Cork that he was borrowing less than £100,000 to be put into the company.

At paragraph 11, Mr Cork says that in view of the credit terms available to Landmark’s creditors, and that, as a going concern, it would have been appropriate to judge its solvency by looking at the situation from the point of view of cash flow, on that basis Landmark is said to have been able to pay its debts as they fell due; and the £100,000 investment is said to have been sufficient to have enabled the company to have traded out of its position. During the period April 2008 to September 2009, it is said that trading conditions worsened; but, as Mr Porter has said, at no time did anyone predict that the economic decline would be long term.

Mr Cork exhibits the management accounts to September 2008 as exhibit RMC2 to his second affidavit (at divider 15 of file 2). He says that these show the calculated royalty figure. Mr Cork does not, in paragraph 13, assert that it was his understanding that the royalty figure, which in those accounts was said to be £74,419.77, was in any way inflated or wrong. Mr Cork relates that his understanding from Mr Porter was that Mr Porter had been in touch with all of the authors, and that they accepted that the company was making late payments. Mr Cork was said to have had no reason to assume that they were unhappy, as many continued to provide new work for publication. Mr Cork concludes by submitting (at paragraph 15) that he acted properly on the basis of the information that was expressly given to him that an investment of £100,000 would be made in the company from a source that was within Mr Porter’s control, and which he understood had the benefit of planning permission. He does not agree that such an investment would have been insufficient to enable the company to trade out of its position. He asks for those matters to be taken into account when considering the application against him.

Mr Clarke produced a third affirmation, made on 17^th May 2012, dealing solely with Mr Cork’s assertion that Landmark would have been in a position to pay its debts as they fell due, and that the £100,000 investment would have been sufficient to have enabled the company to have traded out of its position. Mr Clarke analyses the September 2008 management accounts, and he also produces (as exhibit RMRC3 at divider 16 of trial bundle 2) an aged creditors’ analysis as of 30^th September 2008. That shows that out of the trade liabilities of about £121,960, £88,221 was more than four months old. He carries out a calculation which shows that there would have been a shortfall of £74,586.72 in respect of royalties due, taxes, and aged trade debt more than four months old. It is said that Landmark was therefore not solvent on a cash flow basis, as alleged by Mr Cork, either at 30^th September 2008 without an investment of capital, or, if that investment of £100,000 had been made on 1^st October 2008, it is said that, given the deteriorating position of Landmark as trading losses accumulated thereafter, the same insolvent position persisted through to liquidation, either with or without an investment of £100,000. It seems to me that the figure for royalties should fall to be reduced perhaps by as much as £21,000 to reflect the fact that royalties did not fall due for payment until 12 months after the date of the relevant sales. The figure of £21,000 can be taken from the trading profit and loss account for the year ended 31^st December 2008 in the draft accounts at page 88 of exhibit RMRC1; that shows royalties for 2007 at £20,984 and, for 2008, at £20,613. Mr Cork accepted in evidence that the annual level of royalties was in the order of £20-21,000. Thus, it may be appropriate to reduce the figure for royalties by £21,000 to some £53,586.72. However, that still leaves a shortfall, as of the end of September 2008, of £53,586, even assuming the £100,000 investment had been made at that time. By reference to the September 2008 management accounts, the company’s debtors amounted to a total of £46,466. Even if all of those debts had been capable of immediate realisation, there would still have been a shortfall of just over £7,000, even after the £100,000 investment had come in. It is clear from later accounts - the draft accounts for the year ended 31^st December 2008 (which begin at page 78 of exhibit RMRC1), the management accounts for the year ended December 2008 (at page 198 of exhibit RMRC1) which, according to Mr Cork’s oral evidence, he had seen in February 2009, and finally the management accounts for March 2009, which were produced by Mr Cork on the morning of the second day of the trial (whilst he was in the course of being cross-examined), and which bear the date 4^th July 2009 - that the company’s position was worsening as time went on. That indeed was accepted by Mr Cork in his evidence.

So far I have summarised the written evidence in the case. The trial began at 10.30 on Monday 8^th October. For the Secretary of State, Miss Wilson-Barnes opened the case for about an hour and a half. It is unnecessary for me to relate much of what was said in her written skeleton argument, although I record that I have borne all that she had to say firmly in mind. At paragraph 34, she summarised the Secretary of State’s case thus: The period of insolvent trading was long and significant, over a year, in which numerous small creditors were put in a worse position. The suggested investment was at best speculative, the entire risk of which was put on the body of creditors. To the extent that the prospect depended on third parties, Mr Cork should have assessed the risks involved. He failed to do so; or, if he did, he could not have reached any reasonable view, during 2008 or 2009, that there was a reasonable prospect, within a reasonable time, of paying the creditors. Miss Wilson-Barnes submits that the allegation made in paragraph 9 of Mr Clarke’s first affirmation is made out, and that it shows unfit conduct on the part of Mr Cork.

In the course of her oral opening, Miss Wilson-Barnes took me through the documents upon which the Secretary of State placed particular reliance. She emphasised that there was no documentary evidence at all that, at any stage, Mr Cork had made himself fully aware of the chronology, and the timescale, of either the application for a loan facility, or of the planning application. Nor, she submits, was there any evidence that Mr Cork had ever stood back and considered how the delays were affecting the company’s ongoing trading position. She submits that there was a lack of monitoring of the progress of the investment which, on Mr Cork’s own evidence in the case, was the only hope for this insolvent company. She emphasised:

After her opening had concluded, Mr Clarke was called as the first witness. He corrected two small errors at paragraphs 13 and 79 of his first affirmation and, subject to those corrections, confirmed all three affirmations. I should say that it seems to me that his correction to paragraph 79, in which he recorded that one of the printers (Athenian) had been owed the total sum of £10,847 rather than £10,347 as stated, should also be carried through into the table which appears at paragraph 65; and I read Mr Clarke’s first affirmation subject to that correction. Mr Clarke was cross-examined for a total of an hour and 40 minutes, extending over the luncheon adjournment, and concluding at about 2.40. Given his position, and his lack of direct knowledge of the company’s affairs, there was inevitably no challenge to the honesty of Mr Clarke’s evidence. I find Mr Clarke to have been a reliable and helpful witness. He freely acknowledged that there had been no allegation of dishonesty against Mr Cork, or any breach of fiduciary duty on his part. He acknowledged that Mr Cork held a number of other appointments as directors, none of which had ever progressed to the stage of disqualification proceedings. He accepted that Mr Porter’s recollection must have been at fault when he said that there had never been any discussion of an investment of as much as £100,000 into the company, on the basis of the cash flow forecast produced in April 2008. It is clear, and I find, that the initial investment proposed to be made into the company was indeed £100,000, and not the later figure of £60,000.

I find the basis for increasing the figure for royalties from £75,032 to £85,237 to be insufficiently founded upon reliable evidence. Mr Cook put to Mr Clarke the fact that he had always substituted a higher figure in the table which appears at pages 396 to 397 of exhibit RMRC1 to Mr Clarke’s first affirmation. I do not consider that there was anything sinister or untoward in Mr Clarke’s adoption of the higher figure; but it seems to me that the adoption of the higher figure is unjustified; and that is borne out by the fact that Mr Don Philpott was shown as being owed nothing in the statement of affairs but, because he asserted that he was owed £10,000, that figure was adopted by Mr Clarke. It seems to me that there is no justification for a £10,000 royalty figure. Mr Cork thought that he could not have been owed anything of that sort: on the basis of even the highest 10 per cent royalty rate, that would have implied sales of £100,000, of which there is no evidence whatsoever. I find that the court cannot safely rely upon any increased figure for royalties over and above that which had been acknowledged by Mr Cork himself in his figures for December 2008, which would put the figure at about something in the order of £75,000.

The other feature of Mr Clarke’s evidence which it is worth recording is that he indicated that he had not been aware of any liabilities being incurred after the company ceased to trade which, of course, is the cut off date for the allegations of unfit conduct.

After Mr Clarke’s evidence concluded, at about 2.45 on the afternoon of day 1, Mr Cork went into the witness box. He was cross-examined by Miss Wilson-Barnes for about an hour and 45 minutes, until 4.30 on the afternoon of day 1, and from about 10.40 until about 10 past 12 on the morning of day 2. On the morning of that day, Mr Cork produced three new documents. These were a draft balance sheet in the form of management accounts for June 2008 dated 18^th October 2008; management accounts/balance sheets for March 2009 dated 4^th July 2009; and what was described as a prior year report for the month of March 2009, and for the period January to March 2009, dated 4^th July 2009. The March 2009 balance sheet shows that the position had worsened even since December 2008. Debtors had in fact, I think, gone down; but trade creditors had gone up to £118,569.56. The VAT reclaim was £1,537.60, but that was as against taxes of £22,970.07, which were a liability. The royalties due remained at the figure of £75,031.65. Current assets less current liabilities had risen to £138,455.53, and total assets less current liabilities showed a deficiency of £133,568.89. For the three months to the end of March 2009, sales had fallen to £34,990.82; and that should be compared with sales for the corresponding period (January to March) 2008 of £102,706.41, a variance of £67,715.59. The costs of sales had increased, despite the fall in sales volume, from £8,270.56 in the previous year’s corresponding three month period to £10,294.49, an increase of £2,023.93. Direct expenses had gone down, but not by the same proportion as the fall in sales. As a result, what had been a net profit in the period January to March 2008 of £43,394.65 had become a net loss of £11,371.52. It would appear that during the three months January to March 2009, a sum of only £150 had been paid by way of royalties. That is a figure which also appears in the document which is to be found at page 213 of exhibit RMRC1. That shows total royalty payments for 2009 amounting to only £719.81, the first being on 2^nd March 2009 and the last on 13^th August 2009 (in the sum of £100). Mr Cork indicated that he was not sure that records of royalty payments had been kept up to date; but I do note that the latest of them was dated as recently as 13^th August 2009, immediately before insolvency advice was taken. The conclusion to be drawn from the financial information is of a worsening financial position throughout the period August 2008 through to the onset of administration in September 2009 and, indeed, the cessation of trading on 24^th August 2009. At the end of Mr Cork’s cross-examination - and there was no re-examination of him - I asked Mr Cork questions for about 20 minutes. In total, Mr Cork was in the witness box for just over three and a half hours, on days 1 and 2 of the trial.

I find Mr Cork to be an honest witness; but I also found him to be argumentative and, perhaps understandably, given the nature of this litigation, defensive of his conduct and actions. I do not accept him as an entirely reliable witness. I do not accept his evidence, for example, that he ever thought that Mr Porter was overstating the figures for royalties. I say that, first, because there was no mention of that at paragraph 13 of Mr Cork’s second affidavit; secondly, because there is no objective reason for Mr Cork ever to have had any reason to doubt the figures that were being provided to him by Mr Porter; and, thirdly, because any expression of doubt as to Mr Porter on this point would be entirely inconsistent with Mr Cork’s asserted complete reliance upon all that Mr Porter had been saying to him about the proposed investment that Mr Porter was intending to make into the company. I see no reason why, if he had thought that Mr Porter was overstating the figures for royalties, Mr Cork should have increased, as he did, the royalty figures as between the August and September 2008 management accounts, or why he should have adopted Mr Porter’s figure for the draft accounts for the year ended 31^st December 2008. Indeed, if one looks at the draft accounts for the year ended 31^st December 2008, the figure for royalties stated in the trading profit and loss account (at page 88 of exhibit RMRC1) is actually very difficult to reconcile with the sales figures. In 2007, on sales of £463,698 the royalties are said to be £20,984; for 2008, on sales of £350,176, the royalties are said to be only some £300 less, at £20,613. It is difficult to understand why, with a drop in sales of £113,000 between 2007 and 2008, the royalties fall by only some £370. It is also difficult to see why, if royalties were primarily payable at 10 per cent, the royalties are so much less than 10 per cent of the sales figures in the case of each of the two years. Mr Cork did seek to explain that in answer to questions from the bench at the end of his evidence. He indicated that a number of works had been remaindered, and also that a number of authors would receive payment in the form of packages of books, which they could then pass on to their friends and other enthusiasts in their particular hobbies or fields of interest. I have no reason to doubt the honesty of the answers that Mr Cork was giving; but I do not find his answers to be a satisfactory explanation for the discrepancies between the figures. Certainly, I see no basis for his asserted belief that royalties were in any way overstated. I do not accept his evidence on that point. So I do not accept Mr Cork as an entirely reliable witness. He also was unable to explain the discrepancy between the figure of £86,933 which appears at paragraphs 17 and 41 of his first affidavit, and which is not consistent with the management accounts to which he makes reference. He was also unable to explain the discrepancy between the proposed loan of £150,000, referred to at paragraph 37 of his first affidavit, and the figure of £180,000 to which he referred at paragraph 9 of his second affidavit.

What Mr Cork did, however, do, during the course of his evidence, was to make a number of acknowledgments. He accepted that the company had been insolvent from early August 2008, both on a balance sheet basis, and in terms of its ability to pay debts as they fell due, although he asserted that the latter point was what he described as “very marginal”. He accepted that the balance sheet for the year ended 31^st December 2007 showed that the company was insolvent. He accepted that the company had not been paying its trade debts in accordance with its credit terms. He acknowledged that the company had been making consistent trading losses since 2004; and he expressed a lack of surprise at the level of the company’s insolvency because he had been looking at quarterly management accounts which, he acknowledged, showed a worsening financial position. When he was referred to the answer to question 8 in the insolvency questionnaire (at page 41 of exhibit RMRC1), inquiring when Mr Porter first became aware that the company was insolvent, that is to say unable to pay its debts as and when they fell due, Mr Cork accepted that his answer, which was following notice from Mr Porter that he could not invest in the company, was wrong; although he added that he had believed that, with the investment from Mr Porter, the company would be able to pay its debts as they fell due. Mr Cork acknowledged that the continuing survival of the company was contingent on the £100,000 investment; without that £100,000 investment, the company could not survive: Mr Cork acknowledged that. He also accepted that from August 2008 onwards, the financial position of the company worsened; it continued to make losses. He accepted that every month the situation had got a little bit worse; and that, certainly by November 2008, he had appreciated that the cash flow forecast, which had been provided to him in April 2008, was no longer valid. Indeed, Mr Cork accepted that in August 2008, he was already concerned that the £100,000 investment had not come into the company. He explained that, originally, Mr Porter had thought he would be able to sell the land; but by about September or October he had realised that he was having difficulty in selling the land and so he had started looking to fund the investment. That had taken about two or three months. There had been a change of course; and Mr Cork said that he knew that Mr Porter was talking to finance houses. Mr Cork, nevertheless, was adamant that he believed that Mr Porter was going to raise the money, and that that would be of benefit both to the company and to its creditors. He emphasised that the investment would have made no difference to himself (Mr Cork) because he was going to lose his money in any event. He genuinely believed that Mr Porter would raise the money, and that that would be of benefit to the company’s creditors. He acknowledged that he should have asked Mr Porter a lot more questions; he should not have trusted him. He accepted that, if Miss Wilson-Barnes was suggesting that he (Mr Cork) had been naïve, then she was right. With hindsight, he accepted that he could have done a lot more to check out what Mr Porter was doing, and not trusted him. He accepted that he had been naïve; but he did not accept that it was negligent for him not to have asked to see a facility letter. It was all a matter of trust; and one must trust one’s fellow director.

So far as the planning consent was concerned, he accepted that the consent he had seen had been only for five years, and that it had expired in 2004. But his understanding was that once the planning consent had been implemented by commencing work on site, then it would be of continuing force and effect. He said that Mr Porter had told him that he had commenced work so as to protect the planning consent. He said that there was nothing on the letter he had seen to show that work had not started, although he acknowledged that there would have been a need to make further inquiries. He made it clear that both he and Mr Porter had believed, at the beginning of 2009, that they could make the company profitable if they had the £100,000 investment. With that, they would have been able to have paid off the printers, and would thereby have been able to print more books, albeit they would have only printed against pre-sold copies. Mr Cork made the point that since he was not being paid anything by the company, it would have been pointless for him to have continued if he did not think that the company could have made a profit, which would have enabled him to receive a return on his initial investment in the company. He said that Miss Wilson-Barnes could call him naive, but he was not stupid. They had looked at the position, and they had believed that they could make a profit out of the company. He accepted that, from 2008, the amount outstanding in respect of royalties must have gone up, but the major increase in the company’s debts had not been the royalties, which had increased by some £7,000 over the period in question, but in the company’s trade creditors. The position of the trade creditors is shown by the table at paragraph 65 of Mr Clarke’s first affirmation, subject to the adjustment in respect of Athenian Press to show a figure of £10,847. Mr Cork was shown various letters written by authors within the exhibit to Mr Clarke’s first affirmation. He accepted that it was unacceptable for the authors not to have been told the full amount that was due to them; but he resolutely refused to accept that all of the authors had been prejudiced by not being told what they were owed. I accept Miss Wilson-Barnes’s submission that that was an unsatisfactory aspect of Mr Cork’s evidence. It is clear to my mind that all of the authors were prejudiced by not being told what they were owed. True it is that they would have known that their books had been published, and that there might be some royalties owing to them; but it is most unlikely that they would have been able to take legal proceedings to recover sums when they did not know what the sums were, and did not know whether the costs of legal proceedings would be justified by the sums in issue. But Mr Cork did accept that very many of the authors did not know what they had been owed. I accept Mr Cork’s evidence that the figure claimed by Mr Philpott of £10,000 royalties was completely “out of kilter”; and I have already indicated that I do not accept that the final figure for royalties has been demonstrated to be greater than £75,000; but, as Mr Cork acknowledged, the real increase in the company’s liabilities was in relation to printers’ debts after 2008, as demonstrated by the adjusted table at paragraph 65 of Mr Clarke’s first affirmation.

Mr Cork, to his credit, acknowledged that it had been obviously wrong for the company to have opened a new account in 2009 (Athenian Press Limited) when the company had been unable to pay its debts as they fell due; but he said that he probably would not have known very much about the position with the printers at the time. The June management accounts, he said, had never been done. He did not know that a new printer was being used; he knew nothing about the company’s printing commitments. He knew that costs were being incurred to printers, but he would not necessarily have known who the printers were. He did not dispute that there was creditor pressure during the course of 2008; and, in answer to a question from the bench at the end of his evidence, Mr Cork acknowledged that that pressure had continued into 2009. He said in terms that he was aware that trade creditors were pressing; but he said that that was not the position in relation to authors. The authors had continued to send manuscripts in; indeed, when the company went into administration, they had moved over to Mr Porter’s new corporate vehicle, Horizon; and Mr Cork treated that as evidence that they were not too concerned about the non-payment of royalties. Mr Cork reiterated his view that the £100,000 investment would have covered debts as they fell due, even though he accepted that it would not have covered all of the current liabilities of the company. But when he was pressed about that, by reference to the figures spoken to by Mr Clarke in his third affirmation, and by those disclosed by the later management and draft accounts, Mr Cork was driven to agree that a £100,000 investment would have been “very marginal”, even in August of 2008. When pressed that it would not have been possible in December 2008, Mr Cork maintained his position that it would have been possible in what he described as “the real world” because part payments to creditors would have induced them to hold their hand in relation to the balances due to them. Mr Cork acknowledged that business was far quieter in 2009; indeed, he described sales as being “exceedingly low”. In answer to questions from the bench at the end of his evidence, Mr Cork described the substantial reduction in sales as between January to March 2008 and the corresponding 3 months in 2009 as producing a very low figure, with a big move from profit to loss. He also acknowledged that there had only been one royalty payment in the first three months of 2009, in the sum of £150. That concluded Mr Cork’s evidence.

Mr Cook addressed me in closing for about 40 minutes. In his written skeleton argument, Mr Cook had accepted that the company had been balance sheet insolvent throughout the whole of its history, from about 2004. He submitted that the case turned largely on whether Mr Porter had promised £100,000 by way of capital injection; whether Mr Porter and Mr Cork had planned meaningful realistic reductions in overheads; and whether the capital injection, together with those deductions, would have been sufficient to have enabled the company to trade out of its acknowledged difficulties. Mr Cork’s case was that the capital promised by Mr Porter had been £100,000 and not the £60,000 suggested by the Secretary of State; and that that £100,000 would indeed have been sufficient. He placed reliance upon the April 2008 spreadsheet. He submitted that Mr Cork had continued to believe that Mr Porter would eventually inject the monies, and he had continued to hold the view that it was appropriate for the company to continue to trade. He submitted that before Mr Porter had told Mr Cork on 14^th August that he (Mr Porter) would be unable to make the investment, Mr Cork had reasonably continued to believe that the company would be able to pay its debts as they fell due, and was continuing to receive support from its bank. Whilst the company’s liabilities exceeded its assets, it was said not to have reached the point of no return on account of the projections within the spreadsheet, and the company’s anticipated return to profitability. Mr Cook submitted that current debts could be met, and that the company was commercially solvent in the sense required by section 123(1) (e) and section 123(2) of the Insolvency Act, which he submitted was the correct sense to apply when considering whether the conduct of a director was appropriate. He emphasised that the burden of proof of unfitness rested on the Secretary of State. The court was required to be satisfied that Mr Cork’s conduct made him unfit. Whilst Mr Cork asserted that he had at all times acted properly, he acknowledged that the financial performance of the company had not been good; and that the decision that he had made, in conjunction with Mr Porter, to continue to trade had not been an easy one; but it was said that Mr Cork had challenged Mr Porter’s thinking, and it was only on Mr Porter’s continued promise of eventual funding that it had been agreed that the company could reasonably continue. After Mr Cork was told by Mr Porter on 14^th August 2009 that funding would not be forthcoming, the two directors had immediately taken advice from insolvency practitioners, and they had accepted the advice that the company should be placed into administration. The actual onset of administration was delayed until 15^th September on account of the preparations for the pre-packaged sale in which Mr Cork took no part. He had had no involvement in the successor business.

Mr Cook submits that a court which takes the view that a director’s conduct does not warrant the making of a disqualification order is free to stop short of a finding of unfitness. He emphasised that the twilight period of trading of a company in the run up to insolvency often gives rise to difficult, and for a short period at least, forgivable decision making. Even if a court finds that a decision to trade was objectively unreasonable with the benefit of hindsight, that finding need not necessarily lead to a determination of unfitness as a director cannot be expected to have a wholly dispassionate mind and might reasonably have clung to hope for a period. It might be that even if a court were to find the director’s conduct to have been imprudent, and even in part improper, it might consider that as not so serious as to justify a finding of unfitness, warranting a two year disqualification as the statutory minimum. Mr Cook submitted that the public did not need to be protected from Mr Cork: he had not in any way behaved dishonestly, he had sustained a financial loss, he had worked for no reward, he had many other directorships in respect of which no complaint was, or had ever been, made, and the company was kept going on an assurance of investment by Mr Porter. It was said that Mr Cork had not fallen below a reasonable standard of probity or competence. In the course of his closing submissions, Mr Cook took me to the four authorities to which he had made reference in his written skeleton argument. The first was the decision of Mr Justice Peter Gibson in the case of Bath Glass Limited [1988] 4 BCC 130. I was taken to passages at page 133 column 2 through to the top of page 134. I was invited to read the second full paragraph of column 1 at page 134 through to the end of the second full paragraph in column 1 on page 136. Mr Cook acknowledged that each case should turn upon its own facts; but he submitted that there had to be a measure of consistency between cases when making disqualification orders. He read to me the passage at page 138 column 1 beginning, “I return to Mr Charles’s main criticisms of the conduct of Mr Elliott and Mr Sharp...” through to the end of the judgment. Mr Cook laid particular emphasis upon the six countervailing points which Mr Justice Peter Gibson identified at pages 138 to 139 of his judgment. He placed particular reliance upon Mr Justice Peter Gibson’s conclusion that imprudent, and indeed improper in part, although he thought the directors’ conduct to have been, in all the circumstances he was not satisfied that their conduct as directors was so serious as to make them unfit to be concerned in the management of a company.

When Miss Wilson-Barnes later came to address me in closing, she submitted that none of the six countervailing factors identified by Mr Justice Peter Gibson in the Bath Glass case had any application on the facts of the present case. She submitted that the facts of Bath Glass were very far removed from the facts of the present case. Apart from the fact that, in both cases, the relevant directors had not acted dishonestly, or with a view to benefitting themselves at the expense of creditors, which was the first of Mr Justice Peter Gibson’s countervailing points, I accept Miss Wilson-Barnes’s submission. Mr Cook’s second authority was the decision of the Inner House of the Court of Session in the case of the Secretary of State for Trade and Industry v Blackwood [2005] BCC 366. Mr Cook took me to paragraphs 7 to 8, paragraph 17, and paragraphs 20 to 22 of the Court of Session’s decision. I have borne what is said in those paragraphs firmly in mind. Mr Cook’s third authority was the case of the Secretary of State for Trade and Industry v Creegan [2001] EWCA Civ 1742, reported at [2004] BCC 835. Mr Cook took me to holding number 1 in the head note:

“It was well established on the authorities that causing a company to trade, first, while it is insolvent and, secondly, without a reasonable prospect of meeting creditors' claims was likely to constitute incompetence of sufficient seriousness to ground a disqualification order. But it was important to emphasise that it would usually be necessary for both elements of that test to be satisfied. In general, it was not enough for the company to have been insolvent and for the director to have known it. It must also be shown that he knew or ought to have known that there was no reasonable prospect of meeting creditors' claims.”

I bear that firmly in mind. Finally, in terms of authority, Mr Cook cited the decision of Mr Justice Park in the case of Re: Cubelock Limited [2001] BCC 523 at paragraphs 51 through to 53. Again I take full account of what is said there, in particular that whilst disqualification can result from incompetence, more than commercial misjudgment is required; that is because the Act is not intended to stifle enterprise. There must be incompetence of a very high degree. The burden on the Secretary of State in establishing unfitness based on incompetence is a heavy one. The reason for that is the serious nature of a disqualification order, including the fact that, subject to the court giving leave under section 17, the order will prevent the respondent being concerned in the management of any company. That has a particular resonance in the case of Mr Cork who, I understand, is the director of a number of companies. Mr Cook emphasised the clear lack of all relevant documentation. He made the point that there had been no order for disclosure of documents, and no report from the company’s administrators. He emphasised the burden resting upon the Secretary of State. Mr Cork had had to explain his conduct, but he could not be criticised for failure to produce various documents. Essentially, the court was faced with the jury question: was Mr Cork unfit to be concerned in the management of a company? Mr Cook submitted that the background was of some significance. The books published by the company had been of limited interest, some of the writers had been hobby writers, they had moved with Mr Porter from Morland Press to the present company, and then on to Horizon. The business was one where authors were said to be likely to be tolerant of the narrowness of margins. It had been appropriate for Mr Cork to allow Mr Porter, as the managing director of the company, to discharge his functions as such by dealing with the authors, particularly where Mr Porter himself was an author. Mr Cook acknowledged that Mr Cork had had a duty to monitor matters; but in the circumstances, monitoring through the receipt of reports from Mr Porter had been appropriate. There had been no real challenge by the Secretary of State to the various numbers within the spreadsheet which had been produced by Mr Porter in April 2008. His strategy had been to move the company to profitability by reducing overheads. The introduction of the sum of £100,000 would have enabled the company to move into profitability, by enabling the company to implement its strategy of moving to a practice of publishing only against pre-sales of books. Mr Cook acknowledged that Mr Cork had accepted that he had been naive, and, with hindsight, that he should have done more. He had accepted what Mr Porter had said on trust; but that was not so grossly inappropriate and incompetent as to justify disqualification. Mr Cook asked the question: “When does unwitting naivety transcend into gross incompetence”. The royalties owing during the period relied upon by the Secretary of State were said only to have increased by about £8,000 over a 14 month period. Mr Cook submitted that the change had not been that great in comparative terms.

Miss Wilson-Barnes accepted that in order to justify disqualification, there had to be no reasonable belief that creditors’ claims could be met; but she submitted that the creditors had been in a considerably worse position between the August of 2008 and the company ceasing to trade a year later, both collectively and individually. She addressed the question of forbearance by the company’s authors in pressing for royalty payments. She submitted that royalties had indeed increased in level over the period of insolvent trading. During the course of 2008, only about 60 per cent of royalties had been paid as they fell due; and the level of payment was considerably reduced during the course of 2009. The company had itself chosen to deal with authors writing on minority interest and esoteric subjects. The company had been achieving sales, albeit at a lower level than previously, and yet had not been paying royalties, during the course of 2009 in particular. The personal characteristics and interests of the authors made the advantage taken of them by a commercial company far worse. She submitted, and I accept, that Mr Cork’s lack of recognition that the company’s conduct had been prejudicial to the authors had been unfortunate, and did him no credit. Miss Wilson-Barnes addressed the issue whether there had been a reasonable prospect of meeting creditors’ claims. She emphasised that the only way of achieving that, as acknowledged by Mr Cork, had been by the injection of a further £100,000 investment. She emphasised that a reasonable prospect was far more than a mere hope or possibility. She referred me to paragraph 8 of Sir Martin Nourse’s judgment in Secretary of State for Trade and Industry v Creegan, where he indicated that it was necessary to ask whether the evidence established that there had been no reasonable prospect of meeting creditors’ claims. She took me through the whole of that paragraph; and she submitted that none of the considerations there identified by Sir Martin Nourse applied in the instant case. She emphasised that the company’s own bank, in May of 2008, had been highlighting the bank’s concerns. She invited the court to bear in mind the facts:

So far as the submission that there was no need to disqualify Mr Cork in order to deter him, Miss Wilson-Barnes referred me to a passage in the Westmid Packaging Services case at page 655 letters A to E. There Lord Woolf said that:

“…there are occasions when disqualification must be ordered even though, by reason of the director’s recognition of his previous failings and the way he has conducted himself since the conduct complained of, he is in fact no longer a danger to the public at all. In such cases it is no longer necessary for the director to be kept ‘off the road’ for the protection of the public, but other factors come into play in the wider interests of protecting the public, that is a deterrent element in relation to the director himself and a deterrent element as far as other directors are concerned. Despite the fact that the courts have said disqualification is not a ‘punishment’, in truth the exercise is little different from any sentencing exercise. The period of disqualification must reflect the gravity of the offence. It must contain deterrent elements. That is what sentencing is all about, and that is what fixing the appropriate period of the disqualification is all about. What Mr Justice Vinelott (in Re: Pamstock Limited) called ‘tunnel vision’, ie concentration on the facts of the offence, is necessary when considering whether a director is unfit. In relation to the period of disqualification, the facts of the offence are still obviously important, but many other factors ought (and in reality do) come into play.”

Miss Wilson-Barnes submitted that Mr Cork had maintained the stand point that he had done nothing wrong. He had failed to accept the inescapable personal responsibilities of every director of a company. Trust in a fellow director was not a reason for failing to discharge one’s own responsibilities as a director. She made the point that since he was not in receipt of any income from the company, there would have been no personal loss to Mr Cork if he had done as he should have done and pulled the plug on the company’s continued trading. She submitted that this was not a case of commercial misjudgement because Mr Cork had simply failed to exercise any commercial judgment at all. When I invited Miss Wilson-Barnes to indicate whether the Secretary of State wished to make any submissions as to the period of disqualification, on instructions she told me that this was a case in the bottom bracket, but it was at the top of the bottom bracket.

Those are the evidence and the submissions in the case. I have borne all of them fully in mind. I bear in mind, in particular the fact that, as was said in Creegan, it is not enough for the company to have been insolvent, as it is acknowledged that this company was, but it is also necessary for the director to have known that; and it must also be shown that he knew or ought to have known that there was no reasonable prospect of meeting creditors’ claims.

I am prepared to accept, at least until the period in or about August 2008, that Mr Cork was acting reasonably in the interest of the company’s creditors generally in seeking to progress a proposed capital injection of £100,000 into the company. However, the spreadsheet which had been supplied to him made it clear that it was intended that that injection should take place in July of 2008; that injection was never made. At that point, Mr Cork should have placed the position under anxious, and continuing, scrutiny. He had been led to understand, initially, that the investment would come through a sale of Mr Porter’s property. When that was not forthcoming, Mr Cork was led to understand that there would be a loan, raised on the security of the property, which would be invested in the company. Mr Cork does not appear to have scrutinised the full extent of the loan that Mr Porter was taking out. Hence the discrepancy between the figures of £180,000 and £150,000. As matters progressed, and the company’s financial position worsened, it should have become apparent to Mr Cork that £100,000 would be quite inadequate to offset the company’s insolvent position. Mr Cork himself accepted that £100,000 would have been “very marginal”, even at the end of August 2008. As the company’s financial position worsened, it must have become apparent to him that the £100,000 proposed investment was going to prove increasingly inadequate to address the company’s insolvent position. Subject to a reduction of some £21,000 in the level of royalties, I accept the figures in Mr Clarke’s third affirmation. It is quite apparent from those figures that, even in September 2008, and even assuming that it proved possible immediately to realise all of the company’s debts owed to it, there would be a shortfall of over £7,000. The extent of that shortfall was increasing month on month, as must have been apparent to Mr Cork when he reviewed the quarterly management accounts, and when he prepared the draft 2008 accounts, as he says, in April 2009. But he must have known about this long before then. He should have been much more astute in following up the progress of the investment. In my judgment, it was wholly inadequate for him simply to attend a meeting with AEF towards the end of 2008, and then not seek to follow that up at all. It is quite clear, when one looks at the facility letter that was produced by AEF on 2^nd February 2009, that it was for a loan of £60,000, and not £100,000. On Mr Cork’s own evidence, that would have been wholly inadequate to address the company’s insolvent position. It was also apparent, had Mr Cork looked at that letter, that the offer was open for acceptance only until 5 pm on 24^th February, at which time it would lapse. It would also have been apparent that conditions of the loan included the production of evidence, to AEF’s solicitors’ satisfaction, that the property had the benefit of detailed planning permission for a detached bungalow and garage, and the production to AEF of all approved plans, drawings and specifications in relation to the planning permission on the development: see conditions 16 and 17. It would have been apparent to Mr Porter: