View/Open - Research Commons - The University of Waikato

not „a party‟ if he knew that money would not be available to him if the company
or debtor remained honest. 81
In Re Augustus Barnett & Son Ltd 82 the parent company was held not liable under
the section since it was not involved in the carrying on of the business, and no
allegation of intent to defraud creditors was made. Hoffman J concluded that
section 332 was wide enough to apply to situations where the outsider was not
involved in the carrying on of the business, provided that the person participated
in the fraudulent acts. 83 The judge referred to the case of Re Gerald Cooper
Chemical Ltd 84 where the lender did not have a hand in carrying of the business
but was held liable because of his involvement in fraudulent acts. 85
Since one of the requirements for a person to be held liable is „the carrying on the
business‟, it is necessary to establish the meaning of the phrase. The case of Re
Sarflax Ltd 86 indicated the expression used in the section was not equivalent to
carrying on trade. The court, therefore, found that the collection of assets
acquired in the course of business and the distribution of the proceeds of those
assets constituted the carrying on of the business for the purpose of the section. 87
The court in Re Gerald Cooper Chemicals Ltd. (in Liquidation) 88 clarified the
point that the terms do not necessarily have to involve a series of transactions, but
that it was sufficient to show that only one creditor was defrauded by a single act.
81 [1978] Ch 262 at 268.
82 [1986] BCLC 170.
83 [1986] BCLC 170 at 173.
84 [1978] Ch 262.
85 [1986] BCLC 170 at 173.
86 [1979] 1 Ch 592.
87 [1979] 1 Ch 592 at 599.
88 [1978] Ch 262 at 268. The court decided that accepting of deposits when the company knows
that it could not discharge the contract amounted to carrying on the business with intend to
defraud. See also Morphitis v Bernasconi and others[2003] Ch 552.
247