''R v Grantham''

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QB 675 is a

UK insolvency law United Kingdom insolvency law regulates companies in the United Kingdom which are unable to repay their debts. While UK bankruptcy law concerns the rules for natural persons, the term insolvency is generally used for companies formed under the ...

case which decides that an intent to defraud, now under the

Insolvency Act 1986 The Insolvency Act 1986c 45 is an Act of the Parliament of the United Kingdom that provides the legal platform for all matters relating to personal and corporate insolvency in the UK. History The Insolvency Act 1986 followed the publication and ...

section 213, needs to be established for a conviction for

fraudulent trading In company law, fraudulent trading is doing business with intent to defraud creditors. Law Where during the course of a winding-up, it appears to the liquidator that fraudulent trading has occurred, the liquidator may apply to the court for an or ...

, 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

Mr Grantham was tried for

, contrary to the

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section 332(3) (now

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 Welham or Wellham may refer to: Places *Welham, Leicestershire, England * Welham, Nottinghamshire, England * Welham, Somerset, England; a UK location *Welham Boys' School, India *Welham Girls' School, India People with the surname *Kris Welham (b ...

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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, ''

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2 All ER 166 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.

Notes

{{reflist, 2 United Kingdom insolvency case law High Court of Justice cases 1984 in United Kingdom case law

Facts

Judgment

Significance

See also

Notes