Baba v Sheehan

The appeal concerned a dispute between the beneficiaries of a discretionary trust and the trustee, Mr. Sheehan. The beneficiaries, represented by Ms. Baba, alleged that Mr. Sheehan had acted in fraud of his powers as trustee by exercising a power of appointment for an improper purpose. The matter came before the Court of Appeal of New South Wales.

The central legal issue before the Court of Appeal was whether Mr. Sheehan's exercise of the power of appointment constituted a fraud on the power. This required the court to determine if the power had been exercised with an intention to achieve a purpose foreign to or outside the scope of the power conferred upon the trustee.

The Court of Appeal, in dismissing the appeal, found that the evidence did not establish that Mr. Sheehan had exercised the power of appointment for an improper or extraneous purpose. The judges applied the principles relating to fraud on a power, which require a demonstrable intention to benefit oneself or a third party in a manner not contemplated by the power, or to frustrate the purpose for which the power was granted. In this instance, the court was not satisfied that such an intention had been proven.

Consequently, the Court of Appeal ordered that the appeal be dismissed with costs.