Hazel Williamson QC held there was wrongful trading from June 1994, but company's losses were partly due to extraneous actors like bad weather.

She noted that under IA 1986 s 214, ‘One cannot be a “sleeping director”; the function of “directing” on its own requires some consideration of the company's affairs to be exercised.’ Furthermore, the absence of warnings from one's advisers is no excuse for wrongful trading.

With regard to the trading position, he submits that he was entitled to rely on the fact that the company had a healthy order book at the time, and he refers to a letter written to the bank on 13 June 1994 by Paul Mould, enclosing the company's May management figures and a Contract Position Statement, this being information which the bank had requested on a monthly basis.

In addition, he says that the signs in the press, and so forth, all pointed to the market's having recovered from the depressed state of 1992/93 and being ready to improve - an opportunity that the company was therefore poised to use to its advantage, not least because several of its competitors were foundering.

It had had additional burdens placed upon it by the losses of resources, occasioned by [the bad debts from the two failed projects]… Its recent results suggested clearly that the basic core of its business was not capable of generating profits in those circumstances, let alone sufficient profits, quickly enough, to improve the cash flow position and restore the company's health.

However, the audited accounts for 1992/93 revealed a modest loss and a small balance sheet insolvency, and, most importantly, they contained the warning of the 'fundamental uncertainty' paragraph.

There is no evidence that any such analysis occurred… With regard to the strength of the company's order book, the letter to the bank dated 13 June 1994 looks impressive, but was clearly written for presentation purposes, and includes only the positive side of the picture.

I can see nothing to suggest that it showed such a change in the company's fortunes as to be regarded as stemming the decline which had set in and justifying ignoring the 'fundamental uncertainty' and the worsening picture in the intervening 10 or 11 months.

Moreover, I cannot place great weight on the justifiability of Mr Pierson's relying on his 'feel' that the business was improving, given that his judgments [of the value of the bad debt from the failed projects] were so obviously grossly optimistic.

In my judgment this section is intended to apply to cases where, for example, directors take specific steps with a view to preserving or realising assets or claims for the benefit of creditors, even if they fail to achieve that result.