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In Re Maidstone Buildings Provisions Ltd 89 , it was held that the person in
question must have taken some positive steps and failure to give advice to the
company did not amounting to carrying on the business within the meaning of the
section. Therefore, based on the cases mentioned above, it is necessary to show
that the person is actually involved in or becomes part of any activities of the
company.
However in the light of decisions in Re Augustus Barnett & Son Ltd 91 and Re
Gerald Cooper Chemical Ltd 92 , the courts seemed to emphasise that there must
be fraudulent action and if the answer is in the affirmative, the person could be
held liable despite not having been involved in the „carrying of the business.‟
10.3.1.2 Intent to Defraud Creditors
The courts have grappled with the meaning of intent to defraud ever since the
provision was introduced in the 1929 Act. The statute does not provide a
definition or guidelines as to what constitutes fraud under the section. Maugham J
in Re William C Leith Brothers Ltd 93 held that the fraudulent trading provision is
invoked “if a company continues to carry on business and to incur debts at a time
when there is to the knowledge of the directors no reasonable prospects of the
creditors ever receiving payment of those debts, it is in general, a proper
inference that the company is carrying on the business with the intent to defraud.”
In Re Patrick & Lyon Ltd 94 , the same judge narrowed down his interpretation by
stating “fraud in the context of fraudulent trading connotes actual dishonesty
involving, according to the current notions of fair trading among commercial
men, real moral blame”. Scholars have made the criticism that it is difficult to
89 [1971] 3 All ER 363.
91 1986] BCLC 170.
92 [1978] Ch 262.
93 (1932) 2 Ch 71 at 77.
94 [1933] Ch 786 at 790.
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