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carrying it on (whether because of the way it is carried on or for any other reason)
will be that creditors will be defrauded.” 110 It is submitted that the phrase "natural
or foreseen consequences because of the way it is carried on or for any other
reason" suggests an objective element.
In R v Grantham 111 the court held that intent to defraud can be assumed if at the
time when the debts were contracted the person realised that there was no reason
for thinking that funds would be available to pay the debt when it became due or
shortly thereafter. In R v Sinclair 112 the judge held that “it is fraud if it is proved
that there was the taking of a risk which there was no right to take which would
cause detriment or prejudice to another…” From the decision, it shows that fraud
can be present if the director acting recklessly and as result of that, a third party is
in a disadvantaged position.
In Twinsectra Ltd v Yardley and others 113 , Lord Hutton stated that there are three
possible standards which can be applicable in order to determine whether a
person has been acting dishonestly. The first is purely subjective where a person
is judged as dishonest if he transgresses his own boundary. The second, is purely
objective and the person is adjudged to be dishonest if his conduct falls below
what a reasonable and honest person would regard as honest, although the person
himself may not be aware as such. The third, concerns a combination of both
subjective and objective elements whereby the test is satisfied if the person in
question is aware that he has acted dishonestly based on the standard of a
reasonable and honest person. The judge concluded by stating that “dishonesty
requires knowledge by the defendant that what he was doing would be regarded
as dishonesty by honest people, although he should not escape a finding of
dishonesty because he sets his own standard of dishonesty and does not regard as
110 [1978] Ch 262 at 267.
111 [1984] 1 QB 675 at 682.
112 [1968] 1 WLR 1246 at 1249.
113 [2002] 2 AC 164 at 172.
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