It has long been established that non payment of crown debts, cannot, in itself, justify a finding of unfitness (see Re Sevenoaks Stationers (Retail) Ltd 1991 Ch 164, 183 per Dillon LJ). Instead, a policy of discrimination must be established.

1) The starting point is to establish a discriminatory practice of paying other creditors with the result that the company is trading at the expense of the creditor who is discriminated against. This may constitute unfit conduct.

2) The evidence required to establish a policy of discrimination can be direct but can also be inferred from conduct – for example, the fact of withholding payment for a significant period in contrast to the payment of others. Such practice is normally found in cases where the company is insolvent, cannot pay all its creditors when the debts falls due and the director decides to pay those creditors who press and not those who forbear (whether intentionally or because of administrative problems in pressing for prompt payment of companies in financial difficulty).

3) If a deliberate policy of non-payment of Crown debts is established, the court asks whether the defendant has fallen below the standards of probity and competence appropriate for persons fit to be directors of companies taking into account any extenuating (not the higher test of exceptional) circumstances. However, the guidance of the court is that a deliberate policy of non-payment over a lengthy period is likely to be misconduct justifying such a finding.

4) If the Defendant has fallen below the required standards of probity and competence, it is the duty of the court to make a disqualification order. Other matters, such as subsequent conduct and the current position are for mitigation and/or an application for permission to act.

5) A finding of a deliberate policy of discrimination does not require a conscious decision to that effect by the directors of a company. Accordingly, the decision can be subconscious and the reasons for it may be unconscious.