Countryside (No.3) v Best/Lawson

The case involved a dispute between Countryside (No.3) and Best/Lawson. The company sought to hold the directors liable for insolvent trading under the Corporations Act and to determine whether the beneficiaries of a unit trust were personally liable to indemnify the trustee. The dispute was heard in the Federal Court of Australia. The central issue in the case was whether the directors could be held liable for insolvent trading if they genuinely believed that no debt was incurred, and whether the obligation to take up additional units in the trust constituted an obligation to indemnify for past debts.

The court had to consider the meaning of 'debt' under the Corporations Act and whether the directors' belief that no debt was incurred could be a defence against liability for insolvent trading. The court also had to determine whether the beneficiaries of the unit trust were personally liable to indemnify the trustee and whether the taking up of additional units in the trust involved an obligation to indemnify for past debts. The court found that the directors' belief that no debt was incurred did not absolve them of liability if the court found that a debt had, in fact, been incurred. The court held that the obligation to take up additional units in the trust did not constitute an obligation to indemnify for past debts, and the beneficiaries of the unit trust were not personally liable to indemnify the trustee.

The Federal Court of Australia held that the directors were liable for insolvent trading despite their belief that no debt was incurred. The court found that the obligation to take up additional units in the trust did not involve an obligation to indemnify for past debts, and the beneficiaries of the unit trust were not personally liable to indemnify the trustee. The court ordered the directors to indemnify the company for the losses incurred due to the insolvent trading.