View/Open - Research Commons - The University of Waikato

10.3.1.1 Party to the Carrying on of the Business
The liability in the section is not limited to directors only, but to any person who
has control over the company. The usage of the term „any person‟ in the section
allows action to be taken against anyone who has effective control over the
company. In Re Maidstone Buildings Provisions Ltd 75 the court considered
whether a company secretary can be made liable under the section. The court
rejected liability on the basis that a company secretary was not involved in the
carrying on of the business of the company. In order to be deemed a „party to the
carrying on of the business‟ some positive steps were required, and the function
of a company secretary did not concern the management of the company,
depending on the nature of his or her involvement in the company. 76
However, the court‟s decision that a company secretary‟s duties did not involve
the management of the company was rejected by the Court of Appeal in the case
of Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd. 77
where it was decided that in certain circumstances, a company secretary could
bind the company. Professor Farrar has suggested that as a consequence of the
decision the company secretary could be made liable under the Act. 78
The case of Re Gerald Cooper Chemical Ltd 79 shows that a creditor/lender could
also fall under the term a „party to …‟ if he accepts payments which he knows
have been obtained through the carrying on of business with the intention to
defraud creditors. 80 The court, however, clarified that the creditor in question was
75 [1971] 3 All ER 363.
76 [1971] 3 All ER 363 at 368.
77 [1971] 2 All ER 1028.
78 John Farrar “Fraudulent Trading” (1980) JBL 340 at 343 [Fraudulent Trading].
79 [1978] Ch 262.
80 [1978] Ch 262 at 268.
246