Baba v Sheehan [2019] NSWSC 1281

As you know, we three are Novocastrian optometrists.

We operated a business through a unit trust.

We were the directors of the trustee. Entities associated with, or controlled by, us were the unit holders. One of us became worried about the behaviour of the other two.

The concerned one appointed a new trustee, a Co controlled by him and his wife. Eventually, over resistance from the other two (and the trust’s accountant whose conduct was “egregious”: [58]), the new trustee took control.

Litigation followed.

The Court considered (i) whether the appointment was valid and (ii) whether a receiver should be appointed to the trust: [17].

The appointment was in writing ([41]) and in good faith: [61]. There is no rule preventing our appointor appointing a company he controlled: [65]. The appointment was valid: [68].

The Court refused to appoint a receiver noting it has no power to “wind up” of a trust on the basis proposed: [75]. Though there are powers to order the existing trustee to do certain things: [77].

The wisdom of 20/20 hindsight!