The company had exceeded its overdraft limit and fallen behind in payments for PAYE, National Insurance contributions, VAT and debts to creditors (totalling around £212,618).
Nevertheless Mr Barford, the company's director and majority shareholder, paid himself an increasingly high salary in the very years that debts were mounting to creditors.
That was the year where there was a sharp swing to loss and a large adverse change in the net assets position.
However, in my judgment within the principles I have referred to, from the end of July 1984 at least Mr Barford had no reason for thinking that the company could pay its debts as they fell due or shortly thereafter.
There was a significant scale of dishonoured cheques from February 1985 onwards, and on 26 March 1985 Barclays wrote to the company suggesting that it find other bankers and repay the indebtedness.
It was at about that time that the company arranged to sell its premises, and that sale was completed-it seems after some delays-in July 1985 and Barclays was paid off.
Mr Hollington urged me to adopt the formulation of Knox J in Re Produce Marketing Consortium Ltd (1989) 5 BCC 569, where his Lordship said, at p. 597G: "Prima facie the appropriate amount that a director is declared to be liable to contribute is the amount by which the company's assets can be discerned to have been depleted by the director's conduct which caused the discretion under sec.
Thus, first, Mr Barford well knew from the years of Barclays' concern expressed to him and the accounts that he was providing that he was trading dangerously.
Secondly, the fraudulent trading continued for a long period after 31 July 1984 for some 22 months, drawing more creditors into the net.
Thirdly, the directors' remuneration was high in relation to a company in such a long-continued parlous financial state.
Subject to any submissions which may be I propose to declare that (1) Mr Barford was knowingly party to the carrying on of the business of the company with intent to defraud creditors for the period 31 July 1984 to liquidation, and is to be personally liable to the extent of £156,420 for its debts and liabilities, and (2) that sum shall form part of the general assets in the liquidation of the company.