Baba v Sheehan (No 2) [2020] NSWSC 468

Supreme Court New South Wales

Medium Neutral Citation: Baba v Sheehan (No 2) [2020] NSWSC 468 Hearing dates: On the papers; final written submissions received 24 April 2020 Date of orders: 30 April 2020 Decision date: 30 April 2020 Jurisdiction: Equity - Corporations List Before: Parker J Decision: See [75] Catchwords: EQUITY – trusts and trustees – unit trusts – distribution of entitlements – purported salary sacrifice arrangements – modification of trust accounts – repayment of unauthorised amounts Category: Consequential orders (other than Costs) Parties: Silktote Pty Limited (Cross-Claimant) Mustafa Baba (Second Cross-Defendant) Anna Monica Baba (Third Cross-Defendant) Representation: Solicitors: McGirr Lawyers (Cross-Claimant) Beazley Lawyers (Second and Third Cross-Defendants) File Number(s): 2017/252703 Publication restriction: Nil

Judgment 1. On 26 September last year I delivered my principal judgment in these proceedings: Baba v Sheehan [2019] NSWSC 1281. This supplementary judgment assumes familiarity with, and uses the terms defined in, the principal judgment. References to paragraphs of the principal judgment are denoted "J". 2. I described the structure of the proceedings at J [8]-[9]. They involved both the claim by Mrs Baba against Mr Sheehan, Silktote and others, and a cross-claim by Silktote against Mr Baba, Mrs Baba and others. 3. I concluded that Silktote had been validly appointed as trustee of the SSO Trust, and that Mrs Baba's other claims failed. As a result I dismissed Mrs Baba's claim: J [89]. The present judgment concerns the orders to be made on the cross-claim by Silktote. 4. Silktote's claim was for repayment of monies paid to Mr Baba and Mrs Baba out of the funds of the SSO Trust. As pleaded, the claim concerned payments made from the 2012 financial year to the 2016 financial year. I describe these payments in more detail below. 5. In my principal judgment I dealt with Silktote's claim at J [83]-[85]. I referred only to some of the payments which were the subject of the pleaded claim, namely some of the payments made to Mrs Baba by way of purported "salary sacrifice" under the Income Tax Assessment Act 1997 (Cth) ("ITAA"). I thought that those payments appeared to have been an abuse of the ITAA provisions. I concluded that an account was necessary and ordered that Silktote bring in a minute of order, agreed if possible, to provide for such an account to be taken. 6. It took some time for the parties to agree on the form of orders. On 27 November, I made orders that each of the Babas: file and serve on [Silktote] an account verified by affidavit showing all sums received by [him or her] for each of the financial years 2012 to 2018 from Smart Street Optical Pty Limited [the former trustee, referred to in my principal judgment as SSO] as trustee of the SSO Trust by way of: (a) salary; (b) consultancy fees; and (c) payments by way of salary sacrifice. 1. This order obliged the Babas to provide an account with respect to all remuneration and "salary sacrifice" payments. It was not limited to the particular "salary sacrifice" payments to which I referred in my judgment. It also extended to the 2017 and 2018 financial years, which were beyond the scope of Silktote's pleaded case. But no point was taken about this. 2. After some delay, affidavits from the Babas pursuant to these orders were filed in February of this year. Affidavits from Silktote's accountant and solicitor were filed in response. The parties treated the evidence admitted at the principal hearing (which took place over four days in November 2018 and March 2019) as continuing to be available. No application was made for any of the new evidence to be the subject of cross-examination, or for any witness from the principal hearing to be recalled for further cross-examination. 3. The parties agreed that I should determine Silktote's claim on the papers. After some delay, the parties' written submissions were completed on 24 April 2020.