ABSTRACT
The primary element of the fraudulent trading provision is that the respondent must be proved to have carried on business with intent to defraud creditors or for any fraudulent purpose, that is, the intention to defraud or acting for any fraudulent purpose must accompany the carrying on of the business. The main issue that has dogged the provision, ever since its advent, has been what is meant by ‘intent to defraud’, and ‘fraudulent purpose’, and what actually has to be proved by a liquidator in order to establish that the respondent has engaged in one or the other. These phrases have never been defined statutorily and there has been judicial inconsistency concerning which test should be applied. In one of the first reported cases dealing with the first fraudulent trading provision, Re Patrick & Lyon Ltd [1933] Ch 786, Maugham J said that the words ‘defraud’ and ‘fraudulent purpose’ are words that connote actual dishonesty and encompass real moral blame (at 790). Ascertaining a meaning of these words is far from easy as ‘there has been a lack of consistency over the years in the judicial approach to formulating a test for fraudulent conduct’1 in relation to s 213. This chapter traces the way that the courts have interpreted the expressions, focusing on the most recent case law, and seeks to ascertain what the present tests are for establishing ‘an intent to defraud’.
