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R v Grantham

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R v Grantham
CourtHigh Court
Citation QB 675
Court membership
Judges sittingLord Lane CJ, Boreham J and Stuart-Smith J
Keywords
Fraudulent trading

R v Grantham QB 675 is a UK insolvency law case which decides that an intent to defraud, now under the Insolvency Act 1986 section 213, needs to be established for a conviction for fraudulent trading, and knowing that there was no prospect of being able to pay debt when they fell due, even if there might be a distant prospect in the future, constituted an intent to defraud.

Facts

Fraudulent trading cases
Re Sarflax Ltd Ch 592
R v Grantham QB 675
Re Augustus Barnett & Son Ltd BCLC 170
Re a Company (No 001418 of 1988) BCC 526
Morphitis v Bernasconi [2003] EWCA Civ 289
Jetivia SA v Bilta (UK) Limited (in liquidation) [2015] UKSC 23
See United Kingdom insolvency law

Mr Grantham was tried for fraudulent trading, contrary to the Companies Act 1948 section 332(3) (now Insolvency Act 1986 section 213). The jury were directed that they could find dishonesty and intent to defraud if they thought Mr Grantham obtained credit when he knew there was no good reason for thinking that his company would be able to repay the debt when it became due.

Mr Grantham was convicted. He appealed that the jury was given the wrong direction.

Judgment

Lord Lane CJ, Boreham J and Stuart-Smith J dismissed Mr Grantham's appeal. They held there was no error in the direction. Applying the House of Lords case Welham v DPP AC 103, under section 332 (now section 213, Insolvency Act 1986) an intent to defraud was established on proof of intention to dishonestly prejudice creditors in being repaid.

Significance

In a previous case from 1960, Re White & Osmond (Parkstone) Ltd Buckley J held that 'there is nothing to say that directors who genuinely believe that the clouds will roll away and the sunshine of prosperity will shine upon them again and disperse the fog of their depression are not entitled to incur credit to help them get over the bad time.' But this approach, allowing directors to keep incurring losses when they knew a company was unable to meet debts was disapproved by R v Grantham. If a director knew there was no short term prospect of repaying debts, it was irrelevant that he thought there may some hypothetical day be "blue skies" ahead.

See also

Unlawful trading cases
IA 1986 s 213 and CA 2006 s 993
Morphitis v Bernasconi [2003] EWCA Civ 289
Re Gerald Cooper (Chemicals) Ltd 2 Ch 262
R v Grantham QB 675
Re Augustus Barnett & Son Ltd BCLC 170
Re Sarflax Ltd Ch 592
Re a Company (No 001418 of 1988) BCC 526
IA 1986 s 214
Re Produce Marketing Consortium Ltd (No 2) BCLC 520
Re Purpoint Ltd BCC 121
Re Brian D Pierson (Contractors) Ltd BCC 26
Singer v Beckett 2 BCLC 287
Ward v Perks BCC 937
Re Oasis Merchandising Services Ltd 2 BCLC 493
see Unlawful trading and UK insolvency law

Notes

  1. 2 All ER 166
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