Re Patrick and Lyon [1933]

Re Patrick and Lyon [1933] Ch 786 involves Maugham J's definition of fraud as actual dishonesty involving, according to current notions of fair trading among commercial men, real moral blame. The case centres on creditors alleging that the director deliberately delayed the liquidation of a company to purchase assets that could be charged under debentures owed to him.

The claimant, creditors of a consistently loss-making company, claimed that the director intentionally delayed the liquidation process by six months to acquire assets to be charged under debentures owed to him. The claimant sought to hold the defendant personally liable under Section 275 of the Companies Act 1929 (now Section 213 of the Insolvency Act 1986) for carrying on the business with the intent to defraud its creditors.

The director was not held personally liable. The court found that the company's business was conducted to clear stock and not to secure assets as security for debentures. Additionally, there was insufficient evidence to establish fraud in this case.

Maugham J, in providing a definition for fraud, asserted that the words "defraud" and "fraudulent purpose" in the relevant section denote actual dishonesty involving real moral blame, according to prevailing notions of fair trading among commercial individuals. He emphasised that while he was not defining fraud, this understanding of the term must be one of its elements, as used in the statutory provision.

Maugham J's definition of fraud in this case is stricter than the definition he provided in Re W C Leitch Bros Ltd [1932], emphasising the element of actual dishonesty involving moral blame. The diversity in the construction given to intent to defraud by Maugham J led to interpretative difficulties. The case raises questions about the appropriateness and effectiveness of current civil procedures under section 213 of the Insolvency Act for fraudulent trading, especially considering the same test is applied to both civil and criminal proceedings.

In essence, Re Patrick and Lyon adds nuance to the understanding of fraud in the context of insolvency law, emphasising the need for actual dishonesty and moral blame.
Back to blog

UOL Case Bank

Upon joining, you become a valuable UOL student and gain instant access to over 2,100 case summaries. UOL Case Bank is constantly expanding. Speed up your revision with us now.

Subscribe Now

Where are our students from?

Yale University
Council of Europe
Baker Mckenzie 
University of Chicago
Columbia University
New York University
University of Michigan 
INSEAD
University College London (UCL)
London School of Economics (LSE)
King’s College London (KCL)
University of London
University of Manchester
University of Zurich
University of York
Brandeis University
University of Exeter
University of Sheffield
Boston University
University of Washington
University of Leeds
University of Law
Royal Holloway, University of London 
Birkbeck, University of London
SOAS, University of London
University of Kent
University of Hull
Queen’s University Belfast
Toronto Metropolitan University
Hong Kong University of Science and Technology
University of Buckingham
ESSEC Business School

  • Criminal Practice

    Diagrams and Charts

    Our carefully designed diagrams and charts will guide you through complex legal issues.

  • Criminal Law

    Clear and Succinct Definitions

    Key concepts are concisely defined to help you understand legal topics quickly.

  • Property Law

    Statutory Provisions

    Statutory provisions are provided side by side with legal concepts to help you swiftly locate the relevant legislation.

  • Public Law

    Case Summaries

    We have summarised important cases for you so that you don't need to read long and boring cases.

  • Evidence

    Rules and Exceptions

    Rules and exceptions are clearly listed so that you know when a rule applies and when it doesn't.

  • Company Law

    Terminology

    Legal terms and key concepts are explained at the beginning of each chapter to help you learn efficiently.

  • Case Law

    Case law is provided side by side with legal concepts so that you know how legal principles and precedents were established.

  • Law Exam Guide

    Law Essay Guide

    You will learn essential law exam skills and essay writing techniques that are not taught in class.

  • Law Exam Guide

    Problem Question Guide

    We will show you how to answer problem questions step by step to achieve first-class results.

  • Conflict of Laws

    Structured Explanations

    Complex legal concepts are broken down into concise and digestible bullet point explanations.

  • Legal System and Method

    Legal Research

    You will learn legal research techniques with our study guide and become a proficient legal researcher.

  • Jurisprudence and Legal Theory

    Exam-focused

    All essential concepts, principles, and case law are included so that you can answer exam questions quickly.