Question 2 Brodie Pty Ltd is the trustee of the Brodie family trust. The trustee operates a liquor...

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Question 2 Brodie Pty Ltd is the trustee of the Brodie family trust. The trustee operates a liquor retail store at a building owned by Brodie Pty Ltd as trustee for the family trust. Recently, the sole director of Brodie Pty Ltd, Larry, ordered $15,000 worth of wine and spirits for the store from Winits Pty Ltd. This purchase was made even though the store was seriously in debt and the trust had insufficient cash reserves to service its existing loans. In signing the contract, Larry made it clear that he was signing 'as trustee of the Brodie family trust'. The family trust business has failed due to a downturn in consumer demand and cannot meet its debts. The $15,000 owed to Winits Pty Ltd has not been paid, and there are outstanding mortgages and many other debts. From whom (if anyone) can Winits Pty Ltd recover the $15,000?

Robert · Accepted Answer

Issue: 
The issue in question is from whom, if anyone, can Winits Pty Ltd recover the $15,000?  
Law: 
A trust is an obligation which is imposed on a person or an entity to hold some property for 
the benefit of the beneficiaries of that. In accordance with legal terminology, a trust is not a 
legal entity, but is rather a relationship. In rather simpler terms, the owner of property which 
may be real estate, shares, money, or a business, creates a trust over such property. The trust 
is so created so as to declare that it must exist and be held for the benefit of a beneficiary. The 
owner of the property who is also the settler of that trust appoints either themselves or 
another party to be the trustee. In case where the settler is not the trustee, they transfer the 
ownership of the property to the trustee. Thus, the trustee holds the trust property and must 
deal with such property in accordance with the wishes and requirements of the settler as are 
set out in the trust deed. I must be noted that the trustee of the trust is personally liable for all 
the debts and obligations of the trust. However, the trustee can generally fulfil the debts and 
obligations of the trust from the trust property. 
The applicable law is contained in Section 197 of the Corporations Act 2001.  
As per Section 283AC of the Corporations Act 2001 relating to who can be a trustee; besides 
others, the trustee must be a body corporate, approved by ASIC.  
As per Section 197 of the Corporations Act 2001, a director is liable to discharge all debts 
and other obligations which are incurred by the corporation as a trustee. Further, he or she is 
liable both individually,

Question 2 Brodie Pty Ltd is the trustee of the Brodie family trust. The trustee operates a liquor retail store at a building owned by Brodie Pty Ltd as trustee for the family trust. Recently, the...

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