Powers, duties and

responsibilities of
trustees

Presentation to:
FISA Gauteng Regional Meeting
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PUBLICATIONS

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References

§
Honoré – Honoré’s South African Law of Trusts, Sixth
Edition – Cameron, de Waal & Solomon

§
Olivier – Trust Law and Practice – Olivier, Strydom & Van
den Berg

§
Pace & Van der Westhuizen – Wills and Trusts – Pace &
Van der Westhuizen

§
TPCA – Trust Property Control Act, Act 57 of 1988

-3-
Trusts

Olivier:

”One of the greatest dangers associated with a

relatively new legal institution such as the trust
is that the injudicious utilisation, and even
misuse thereof, as the result of a lack of
knowledge on the part of the practitioner, can
lead to restrictive legislation and over-regulation
of the trust”

”Without the trust our legal system would,

without a doubt, be much poorer”

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V.Z. Diane Windsor Morrell v V.Z. Demo and V.Z Demo
NO and the Best Trust Company (Pty) Ltd NO

This case deals with the failure to pay maintenance and pleading poverty
while placing assets in four different trusts. Examining the trusts, the judge
started by stating that:

§
“Persons are generally entitled to organise their financial affairs to
maximise their advantage without fear of opprobrium. He mentioned
that trusts are well recognised as permissible vehicles for estate and
financial planning and that corporate vehicles are used to shelter
individuals from the vagaries and risks of conducting a business. The
separateness of a company from its shareholders is recognised in law as
is the shelter a trust provides for its beneficiaries.”

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V.Z. Diane Windsor Morrell v V.Z. Demo and V.Z Demo
NO and the Best Trust Company (Pty) Ltd NO

Dealing with the trustees in this specif ic case the court doubted the active
role played by the independent trustee in the administration of the trust.

The Court then referred to the assets held in trust. There were four trusts of
which one held only furniture, household affects and a life policy. The assets
held by this trust included furniture, kitchen appliances, braai equipment,
camping equipment, garden furniture and implements, lawn mower,
power tools, bathroom towels and toiletries, cell phone, leather wallet,
ray ban sunglasses and a car phone.

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V.Z. Diane Windsor Morrell v V.Z. Demo and V.Z Demo
NO and the Best Trust Company (Pty) Ltd NO

The judge concluded by stating the following:

“Whilst I could understand the rationale placing a business and

properties in trust, there does not seem to me to be any
commercial rationale for placing all one’s household and personal
effects into a trust”

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Trusts

Honoré

”The trust was imported in South Africa by common usage after the
British occupation of the Cape in 1806. It is now a vibrant and
authentic institution of modern South African Law, for which the
courts have devised distinctively South African rules and principles,
and for which new uses are constantly being devised.”

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Trusts

Professor Maitland  

“If we were asked what is the greatest and most distinctive

achievement performed by Englishmen in the field of jurisprudence I
cannot think that we should have any better answer to give than
this, namely, the development from century to century of the trust
idea

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Trusts

Pierre Le Paulle

"Trusts have now pervaded all fields of social institutions in common

law countries. They are like those extraordinary drugs curing at the
same time toothache, sprained ankles and baldness, sold by peddlers
on the Paris boulevards; they solve equally well family troubles,
business difficulties, religious and charitable problems. What
amazes the sceptical civilian is that they really do solve them.”

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Trustees – who can act
§
No prescribed qualifications for trustees;

§
In general anybody can be nominated and appointed,
except for persons disqualified in terms of the TPCA or
the trust instrument.

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Appointment

§
The Trust Instrument:

§
Power to appoint trustees normally depend on the provisions
of the trust instrument. It might be reserved for :

§
the founder;

§
the trustees;

§
the beneficiaries;

§
other persons i.e. the auditors of the trust;

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Appointment
§
The Master of the High Court:

§
In common law the Master did not have the authority to appoint
trustees;

§
In terms of section 7 of the TPCA the Master now has the authority to
appoint trustees:
§
where the trust instrument makes no provision for appointment of
trustees [section 7(1)] ;
§
where the Master deems it desirable to appoint a co-trustee
regardless of the provisions of the trust instrument [Section 7(2)];
§
in both cases it is advisable that interested parties are consulted by
the Master.

§
The Courts:

§
The Court has inherent jurisdiction to ensure the continued proper
administration of trusts by trustees.

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Authorisation to Act
v
Section 6(1) of the TPCA

Simplex (Pty) Ltd v Van der Merwe and Others NNO 1996 (1) SA
111 (W)

Signing of an agreement by a trustee on behalf of a trust, prior to

issuance of a Letter of Authority by the Master authorising him to act
as envisaged in section 6(1) of the TPCA, declared null and void and
not ratifiable.

Kropman and Others NNO V Nysschen 1999 (2) SA 567 (T)

According to the judge the object of section 6(1) of the TPCA is to

protect those who will ultimately benefit from the trust. Therefore
he could see no reason why a court, in exercising its discretion,
could not retrospectively validate any actions taken by trustees prior
to the issuance of Letters of Authority.

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Authorisation to Act
v
Section 6(1) of the TPCA

Van der Merwe v Van der Merwe and Others 2000 (2) SA 519 (C)

Held that there was a clear difference between the appointment of a

trustee (which took place by virtue of the trust deed) and the
authorisation to act as trustee (which is granted by the Master as
required by section 6(1) of the TPCA). The judge favoured the
Simplex decision.

§
The provisions of section 6(1) are peremptory;

§
Acts performed by trustees prior to authorisation were
consequently null and void;

§
Ratification was impossible as an act which was null
and void at any time could not be ratified.

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Authorisation to Act

Kriel v Terblance NO and Others 2002 (6) SA 132 (NC)

The court agreed with the Simplex decision as well as the decision in
the Van der Merwe case, concluding that actions by trustees, prior
to their authorisation by the Master are null and void. Bearing in
mind the abstract system of ownership in our law, the transfer, in
this case, to a second buyer would be valid even though the
underlying agreement of sale was invalid. The initial seller will at
most have a personal right against the purchaser based on unjustified
enrichment.

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Authorisation to Act

Lupacchini NO and another v Minister of Safety and Security

[2011] 2 All SA 138 (SCA)

The court, in deciding the question of locus standi in iudicio of a

trustee who has not yet been appointed by the Master referred to the
case of Watt v Sea Plant Products Ltd [1998] 4 ALL SA 109 (C) where
it was held by that court that lack of authorisation by the Master did
not affect locus standi in iudicio.

Held that it would seem anomalous if a trustee could be capable of

engaging in “litigation but yet be incapable of concluding contracts
required to pursue the litigation. In the same vein it would seem
even more anomalous if a trustee would be capable of conducting
major litigation from beginning to end with major consequences for
the trust, but yet not be capable of contracting for the purchase of
a pen.”

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 Resignation
§
Provisions of the trust instrument;

§
Section 21 of the TPCA:
q
“Whether or not the trust instrument provides for the
trustee's resignation, the trustee may resign by notice in
writing to the Master and the ascertained beneficiaries
who have legal capacity, or to the tutors or curators of
the beneficiaries of the trust under tutorship or
curatorship”

WM Soekoe and Others v Le Roux (898/2007) ZAFSHC

135

Held that a trustee ceases to be a trustee only

once new Letters of Authority have been
issued by the Master of the High Court

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Meijer NO and Another v First Rand Bank Ltd and
Another [2012] ZAWCHC 23

Held that the resignation should

take effect upon it being shown
that the written notice was sent to
the Master and the ascertained
beneficiaries coupled with
acknowledgement of receipt by
the Master.

Honoré:
§
“Statutory mode of
resignation provided in
section 21 is not
prescriptive in instances
where the trust instrument
permits resignation.”

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Investec Bank Ltd v Adriaanse and Others NNO [2012]
ZAGPPHC 253

The view of Honoré was referred

to and the court held that a
trustee only needs to comply with
the provisions contained in the
trust deed relating to the
resignation of trustees in order to
validly resign from office.
In Muller v Muller and Others
case number 50560/2013 (5th of
February 2013) the Pretoria High
Court again held that section 21 of
the act needed to be complied
with.

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Loss of office of trustees

§
Death of the trustee;

§
The trustee becoming incapable of
managing his own affairs;

§
Termination of the trust;

§
Insolvency of a trustee;

§
Termination by the Master as envisaged
in section 20(2) of the TPCA

§
Removal by the court;
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 Removal of trustee by the High Court

§
Section 20(1) of the TPCA -
§
On application by the Master or any person having an interest in the trust
property

Removal of trustee by the Master

§
Section 20(2) of the TPCA -

(2) A trustee may at any time be removed from his office by the Master-

(a) if he has been convicted in the Republic or elsewhere of any offence

of which dishonesty is an element or of any other offence for which he has been
sentenced to imprisonment without the option of a fine; or

(b) if he fails to give security or additional security, as the case may be,
to the satisfaction of the Master within two months after having been requested
thereto or within such further period as is allowed by the Master; or

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 Removal of trustee by the Master

(c) if his estate is sequestrated or liquidated or placed under

udicial management; or

(d) if he has been declared by a competent court to be mentally ill

r incapable of managing his own affairs or if he is by virtue of the
Mental Health Act, 1973 ( Act 18 of 1973 ), detained as a patient in
n institution or as a State patient; or
[Para. (d) amended by s. 4 of Act 18 of 1996.]

(e) if he fails to perform satisfactorily any duty imposed upon

im by or under this Act or to comply with any lawful request of the
Master.

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 Tjimstra v Blunt-MacKenzie 2002 (1) SA 459 (T)

§
It was held that a trustee can §
A trustee, without any explanation,
be removed even if he has transferred trust monies from safe
acted bona fide. custody at a financial institution into
§
Mala fides or misconduct is not his own account.
necessary for a removal by the §
A trustee refrained from informing any
court. of his co-trustees of his decision to sell
immovable property although he was
§
When the administration of trust required to do so in terms of the trust
deed.
fails to comply with the prescribed §
The trustees failed to study the trust
standard of what a bonus et deed and find out what the rights and
diligens paterfamilias would have duties of the office of trustee were.
done and trust assets are §
Trust assets were treated by trustees
threatened or endangered, the as if it were their own assets.
trustees must be removed §
There was no independent
§
The court noted the following contribution from some of the trustees
actions on the part of some of the and they merely relied on the views of
other more senior trustees.
trustees compelling the court to §
A trustee had permitted, without any
dismiss them → objection from her, gross misconduct
of the other trustees.
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 Stander and Others v Schwulst and Others 2008
(1) SA 81 (C)

§
The actions of the trustees led to the court ordering costs against the trustees
and also ordered that the trustees could not recover their costs from the trust.

§
In this case the trustees did not attend to the administration of the trust in a
logical manner and their primary focus was the preservation of capital, without
taking into account the needs of the beneficiaries and the wishes of the founder
as also set out in a Letter of Wishes.

§
The trustees refused to make any distribution of capital and seemed to be
focussed on growing the capital of the trust to the detriment of the beneficiaries
and, in so doing, increasing their trustee remuneration

§
Trustees must at all times act with the benefit of the beneficiaries in mind.
Preserving trust capital at all costs to the detriment and in ignorance of the needs
of beneficiaries (sometimes in order to ensure higher trustee remuneration) are
grounds for removal of a trustee. The fact that trustees ignored a Letter of
Wishes by the founder counted against them.

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Stander and Others v Schwulst and Others 2008
(1) SA 81 (C)
§
Application for removal of a trustee where
he is sued for breach of trust is an
application against the trustee personally.

§
The cost in a removal application should
follow the result. If the trustee is removed
for improper conduct or breach of trust, he
should pay the costs of the other side
personally. Conversely, if the complaining
beneficiary’s claim is found to be baseless,
the cost should be paid by the unsuccessful
applicant personally.

§
Where application is made against the
trustee in his representative capacity all
trustees should be cited and the cost will
normally be borne by the trust.

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Kidbrooke Place Management Association and
Another v Walton and others NNO 2015 (4) SA 112 (WCC)

In this case the trustees of a trust sold property of the trust to a company owned by them
personally and then onsold it at a profit. Application was made in terms of section 21 of the
TPCA to remove them as trustees.

Held:
It is not correct that only a beneficiary of a trust could claim the removal of one of its
trustees, as the Act permitted any person with an interest in the trust property to apply for
the removal of a trustee;
The purchase of immovable property from a trust by a trustee needed to be confirmed by
the court.

Ras NO and Others v Van der Meulen and Another (635/09) [2010] ZASCA 163;
2011 (4) SA 17 (SCA) (1 December 2010)

In the court a quo it was held that the respondent (not being a beneficiary) had
sufficient interest in the matter to warrant the application for the removal of a
trustee. The Appeal Court disagreed and held that the respondent in this case, if
not a beneficiary would not be entitled to apply for removal of a trustee.

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 Common law powers of trustees

§
Power of sale – doubtful whether trustee has common law powers to
sell trust property other than fungible assets such as shares;

§
Power to run a business – no common law power for trustees to run a
business;

§
Power to take over assets and liabilities of business – no common law
power for trustees to do so.

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Common law powers of trustees

§
Power to enhance trust property – only with consent of beneficiaries;

§
Power to mortgage trust property – no such common law power;

§
Power to guarantee loan or stand surety – no such common law power;

§
Power to borrow money – no such common law power;

§
Power to let trust property –
no such common law power.

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 Powers of trustees

§
Normally derived from the trust instrument;
§
Powers granted by the court;
§
Important that trust instruments confer adequate powers on
trustees to ensure the proper administration of the trust;
§
Where a particular power omitted, valid inference may be, that
the founder did not intend the trustee to have that power

Honoré:
q
“It seems obvious that the common law does not confer
adequate or sufficiently defined the powers on trustees.
Hence, unless the trust instrument confers sufficient
expressed powers on the trustees, applications to court
may become necessary. The court may be willing to fill the
gaps in trust deed. But, if the deed is properly drawn, this
should not be necessary”

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 Powers of trustees

§
Powers may be compulsory or discretionary. Where a compulsory
unambiguous directive is given to a trustee in the trust deed, the
trustee does not only have the power but also the duty to comply with
the directive;
§
When exercising discretionary powers, a trustee must apply his mind
to the matter and decide the best avenue to follow in a particular set
of circumstances;
§
Powers normally attach to the office of trustee and not to a particular
trustee. However a trust deed might provide that a particular trustee
must approve all investments by the trust on the Stock Exchange.
When this trustee ceases to be a trustee investments on the Stock
Exchange will no longer be allowed;
§
Trustees must act jointly in exercising the powers given to them;
§
Powers relating to alienation of trust assets, leases, mortgages,
signing of surety or the making of loans, must be given to the trustees
explicitly otherwise the trustees will not be able to undertake any
activities in connection with such matters;

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Powers of trustees

In Liebenberg NO vs MGK
Bedryfsmaatskappy (Pty) Ltd
2003 (2) SA 224 (SCA) trustees
were given wide powers but not a
specific power to bind the trust as
surety. The court held that the
trustees were not able to bind the
trust as surety.

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Duties and responsibilities of trustees

Olivier:

q
“Trust instruments usually list the powers of a trustee, but are
fairly silent as far as his duties are concerned. The reason for this
is, most probably, the fact that a duty is the obverse of a power.
The object of the powers given to a trustee is to enable him to do
justice to his fiduciary duties, which attaches to the office.”

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 Duties and responsibilities of trustees

§
Olivier quoted with approval in Wiid
Fischer and Rabie vs Wiid and
Others:

§
“The object of the powers given
to a trustee is to enable him to
do justice to the fiduciary
duties which attach to his
office. It is self-evident that
there is a duty to exercise all
powers in such a manner that
the beneficiaries reap the
benefits. Although the trustees
duties can be listed under a
number of headings the
dominant consideration
inherent in all the duties is the
benefit of the beneficiaries.”

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Duties and
responsibilities
§
Honoré (262) : of
trustees
§
“Three main principles of general import govern the
administration of a trust:

§
A – The trustee must give effect to the trust
instrument properly interpreted, as far as it is lawful
and effective under the law of the place the
administration is to take place;

§
B – The trustee must in the performance of duties and
the exercise of powers act with “The care, diligence
ad skill that can reasonably be expected of a person
who manages the affairs of another;

§
C – Except as regards questions of law the trustee is
bound to exercise an independent discretion.”

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Duties and
The Trust Property
responsibilities of Control Act

trustees
v
Section 9 – Care, diligence and skill required of trustee

v
A trustee shall in the performance of his duties and exercise of his
powers act with the:
q
Care;
q
Diligence;
q
Skill
v
Which can be reasonably expected of a person who manages the affairs of
another.
v
The seriousness of the duty is emphasised by section 9(2), which specifies
that any provision contained in the trust deed shall be void in so far as it
would have the effect of exempting a trustee from or indemnifying him
against liability for breach of trust where he fails to show the degree of
care, diligence and skill as required in subsection (1).

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The Trust Property Control Act
v
Section 10 – Trust Account

v
Whenever a person receives money in his capacity as trustee, he
shall deposit such money in a separate trust account.

v
Section 11 – Registration and identification of trust property

v
A trustee shall:

§
Indicate clearly in bookkeeping the property which he holds in
his capacity as trustee;
§
Register trust property or to keep it registered in such a manner
to make it clear from the registration that it is trust property;
§
Make any account or investment at a financial institution
identifiable as a trust account or investment;
§
Clearly identify property, other than fixed property and
accounts or investments, as trust property in the best possible
manner.
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The Trust Property Control Act
v
Section 12 – Separate position of trust property

v
Trust property shall not form part of the personal estate of the trustee.

The Financial Institutions (Investment of funds)

Act 39 of 1984

§
Financial institutions are bound, broadly, to invest
trust property and, where registration is usually
required to complete the investment, to register it
in such a way that it is identif iable as trust
property (Honoré paragraph 169).

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The Financial Intelligence Centre Act
Act 38 of 2001
§
In the past certain trustees, especially those providing financial
advice might fall under the provisions of this act and will have to
comply with the provisions thereof.

NOW
§
Schedule 1 - List of accountable institutions

A board of executors or a trust company or any other person

that invests, keeps in safe custody, controls or administers
trust property within the meaning of the Trust Property Control
Act, 1988 (Act 57 of 1988).

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The Financial Intelligence Centre Act
Act 38 of 2001

The FIC is apparently of the opinion that any trustee who is part of a
board of trustees (who can consequently impact the decisions of the
trustees) MUST register as an ACCOUNTABLE INSTITUTION.

Consequences:

§
Must all individuals register?
§
Unnecessary compliance
burden

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FATCA (Foreign Account Tax Compliance Act) &
CRS (Common Reporting Standard)

§
In case of trustees, beneficiaries and interested parties residing in
other jurisdictions the trustees will have to comply with the
reporting obligations;

§
Where a financial institution acts as trustee, the financial
institution will do the reporting on behalf of the trust (Trustee
Documented Trust).

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The trust deed

§
Apart from common law or legislated duties of trustees, the trust
instrument might confer further duties on the trustees.

§
The trust deed needs to be studied in detail on order to ensure that it
is administered according to the wishes of the founder

Common law and court decisions

§
A trustee is not free from liability for
breach of trust merely because action was
taken in good faith. The trustee must
observe scrupulous care (exacta
diligentia) in administering trust assets.
§
A trustee will not necessarily be protected
from liability for breach of trust by the
fact that he or she has acted on wrong
legal advise given by an attorney - Boyes
NO v Bloem 1960 (3) SA 855 (T).
- 42 -
Summary of duties of trustees

§
Lodge trust deed with the Master;

§
Ensure that Letters of Authority is issued;

§
Obtain the trust instrument and study it;

§
Apart from common law duties, comply with all
additional duties of the trustees as set out in the
specific trust instrument;
§
Take control and possession
of trust property;

§
Make an inventory of all
trust assets, as well as a
list of all liabilities;

§
Collect all debts due to the
trust;
- 43 -
Summary of duties of trustees

§
Keep trust assets separate from
private assets and register trust
property, where registration is
required, so as to make it clear from
the registration that it is trust
property;

§
Keep all necessary documentation in
safe custody;

§
Section 17 of the TPCA – all
documents must be kept for five years
after the termination of the trust.

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Investment of trust assets
Administrators, Estate Richards v Nichol 1999 (1) SA 551
(SCA)

The decision provided much needed clarity regarding investment of trust

monies by trustees in modern times. The court held that, due to inflation, it
was necessary to relax the previous strict rules regarding investments by
trustees. There was nothing wrong in trustees, for instance, investing on the
stock exchange and in unit trusts.

§
The acceptance of an element of risk is unavoidable if the trust was to
serve its purpose to protect the capital for the benefit of the beneficiaries.

§
The trustee exercising due diligence and care would bear in mind when
purchasing shares both in regard to their selection and the balance of the
share portfolio that there is an element of risk involved and would thus
avoid investments which were of a speculative nature  

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Duty to obtain reasonable return on trust
capital

§
By accepting office, a trustee undertakes duties of management;
§
The trustee must not stand idly by;
§
It is a breach of trust to agree to an unreasonable low rate of
interest on a loan or to let out property at a rent lower than the
reasonable market rate;
§
Must secure a balance of stability and growth in the capital value of
the trust and the income it produces;
§
Try to free trust property from burdens;
§
Invest surplus trust funds not required for immediate payment in
terms of the trust deed, without delay;
§
Loans to trustees even if authorised by the trust deed and even if
credited with a market related rate of interest should be avoided.

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Duty to account
§
A trustee is duty bound to keep proper records of his administration
of a trust and to account to any beneficiary in this regard.

§
Doyle v Board Of Executors 1999 (2) SA 805 (C)

§
Whether the trust arose from contract or not seemed to be
immaterial to the judge. “While a contract is alive, it appears to be
unquestionable that a trustee occupies a fiduciary duty. By virtue
of that alone he owes the utmost good faith towards all
beneficiaries whether actual or potential.” The right to account was
mentioned to be at once two distinct concepts. “It is both
substantive and procedural.” It is a right as well as a remedy.
§
The trustee is bound, in the discharge of its duty of good faith, to
demonstrate to the capital beneficiary that which he has received is
the correct product of the initial capital, properly administered.
Only once this has occurred can a beneficiary be able to challenge
any entry.
§
Defendant ordered to provide full detail to beneficiary, from date
of his appointment in 1951!
- 47 -
Duty to protect trust capital

§
Trustee has a duty to open a separate bank account and deposit all
trust monies that are not yet invested in the bank account;

§
Where the trust is subject to contingent liabilities, trustees should
retain a reserve to meet them;

§
Trustees should refrain from
distributing the whole trust estate until
all contingent liabilities are met;

§
Trustee has a duty to have liquid funds
available in the trust to cover any
liabilities of the trust.

- 48 -
Duty to ensure proper decision making

Trustee must be well

acquainted with the manner
in which decisions must be
taken on behalf of the trust,
in the case of Tjimstra vs
Blunt-McKenzie 2002 (1)
SA 459 (T) the court held
that trustees could be
removed from off ice for not
making a thorough study of
the trust deed.

- 49 -
Coetzee v Peet Smith Trust and Others 2003 (5) SA 674 (T)

§
There was no indication in the will whether decisions by
trustees should be unanimous or whether a majority decision
will prevail.

§
The court held that the law relating to joint ownership with
regards to decision making is applicable to trust law, unless
the trust deed or will contains provisions to the contrary.

§
Joint unanimous conduct in the alienation, handling and
management of trust assets was therefore a pre-requisite.
Barring any provisions in the will or trust deed to the contrary,
decisions must be taken unanimously.

- 50 -
Steyn NO and Others v Blockpave (Pty) Ltd (2959/2010)
[2010] ZAFSHC 134 (12 October 2010)

The imperativeness of joint decision making by trustees was again confirmed by the
court, stating that the trustees of a trust have to decide, participate and act together
as one in dealing with the affairs of the trust even if they were not all in agreement or
even if not all present under the same roof.

The following eloquent remarks by Judge Rampai regarding trust decisions need to be
emphasised:

1) A trust operates on two different spheres.

§
“Internally, trustees may differ. A matter on the agenda may be
debated. If the trustees are not unanimous, a matter must be put to a
vote. The majority vote then prevails as the decision of the trustees. The
dissenting trustee has to subject himself to the democratic vote of the
majority;

§
Externally, trustees cannot differ. The split internal decision becomes
the resolution of the trust in its dealing with the world at large. The
dissenting trustee is just as bound by the resolution as those who had
supported it all along during the debate on the internal sphere.”

- 51 -
Steyn NO and Others v Blockpave (Pty) Ltd (2959/2010)
[2010] ZAFSHC 134 (12 October 2010)

2) On the external sphere the trust functions by virtue of its

resolutions which have to be supported by its full complement of the
trust body. A quorid meeting of trustees may perfectly take a valid
decision on the internal front. However, such a decision will remain
only a decision and not a valid resolution unless it also enjoys the
support of an absent trustee(s) in whose absence it was taken.

3) A majority of trustees in office may form a quorum internally at a

trust meeting, but can still not externally bind a trust by acting
together.

4) It is not the majority vote, but rather the resolution by the entire
complement which binds a trust estate. A trust operates on
resolutions and not votes.

- 52 -
Cunningham-Moorat v Bester – Unreported case no
45551/2012 Gauteng Local Division, Johannesburg (14 June
2017).

Plaintiffs contend: non-payment of R100 donation by founder to trustees

meant that the trust was not properly established and therefore never legally
existed.
First issue:
“because the sum of R100.00 was never paid…the Income Trust never had
an ascertainable, definite or clearly defined trust res and was invalid
and void ab initio.”
Second issue:
The trust was never activated, because the deceased had never instructed
that it should be activated. No bank account was opened, no auditors were
appointed and there was no donation.

“…non-activation is a concept unknown to the Law of Trusts in South

Africa.”
- 53 -
Cunningham-Moorat v Bester – Unreported case no
45551/2012 Gauteng Local Division, Johannesburg (14 June
2017).

The Court held:

Not an essential factor for the formation of a valid trust that the property
must be transferred. If there is no transfer, the trustees still acquires the
right to demand the property from the Founder. A trust assumes legal
existence upon registration and the issuance of the LOA. The trustees may
have failed to meet their obligations and may be grounds to have them
removed.

The Court held:

a Trust will be legally recognised once it is registered with the Master and an
LOA is issued.

- 54 -
Trinity Asset Management v Grindstone Investment [2017]
ZACC 32; 2017 (12) BCLR 1562 (CC); 2018 (1) SA 94 (CC) (5
September 2017)

§
Grindstone borrowed R 3 050 000 from Trinity;
§
Capital was due and repayable to Trinity within 30 days from date
of written demand (1 Sep 2007);
§
Money advanced 2008;
§
Sep 2013 Trinity send written demand, but Grindstone makes no
payment;
§
9 Dec 2013 Trinity served Letter of Demand, 23 Dec 2013
Grindstone denies debt;
§
18 July 20014 trinity launches application to liquidate Grindstone.

- 55 -
Trinity Asset Management v Grindstone Investment [2017]
ZACC 32; 2017 (12) BCLR 1562 (CC); 2018 (1) SA 94 (CC) (5
September 2017)

Grindstone defence:
§
Loans made in 2008 prescribed in 2011;
§
Debt repayable on demand is in law repayable immediately – demand is
not necessary;
§
Creditor cannot delay prescription by failing to take a step.
 
Trinity:
§
Never intention that loans advanced in Feb 2008 would become due and
repayable immediately;
§
Never intention that prescription would start running on payment of
tranches;
§
Grindstone had not pleaded date of inception or prescription.

Dispute regarding debt – cannot liquidate and held that defence of

prescription was valid. High Court granted leave to appeal.
- 56 -
Trinity Asset Management v Grindstone Investment [2017]
ZACC 32; 2017 (12) BCLR 1562 (CC); 2018 (1) SA 94 (CC) (5
September 2017)

§
Supreme Court of Appeal – decided 3 to 2 to uphold High Court’s
judgment. The debt was due the moment it was lent.

§
Minority’s view – failed to plead and prove when prescription
started running. View – demand was an essential requirement for
Trinity’s cause of action. Minority agreed with general principle
that: where no time for repayment is stipulated in an agreement
then the debt is due immediately. BUT – parties expressly agreed
otherwise.

- 57 -
Trinity Asset Management v Grindstone Investment [2017]
ZACC 32; 2017 (12) BCLR 1562 (CC); 2018 (1) SA 94 (CC) (5
September 2017)

Constitutional Court – Trinity submits that prescription commences as

soon as debt is due. Grindstone would not lode written argument due
to it being liquidated in the meantime.
 
Questions:
1. Prescription properly before court;
2. Contract points to intention to defer when debt became due and
thus delay onset of prescription
3. Whether claim prescribed.

- 58 -
Trinity Asset Management v Grindstone Investment [2017]
ZACC 32; 2017 (12) BCLR 1562 (CC); 2018 (1) SA 94 (CC) (5
September 2017)

Cameron - Majority:
Intention not to delay when debt became due, but to allow
Grindstone 30 days to repay the debt once Trinity issued demand.
Prescription was therefore a valid defence.
 
Mojapelo – Minority:
Debt becomes due as per the contract. When there is no due date –
the debt is generally immediately due. Parties may intend that the
creditor may be entitled to determine time for performance and that
the debt only becomes due when demand has been made as agreed.
In this case demand is a condition before the claim – and prescription
starts to run only from demand.

- 59 -
South African Bank of Athens Ltd v Salvadora Ninety Nine
CC (2009/41058) [2010] ZAGPJHC 37 (7 May 2010)

§
The membership interest in the respondent was held by the JAV
family trust. In terms of the Close Corporations Act and CIPRO
Practice Note Number 1 of 2006, the trustees of a trust owning a
membership interest in a Close Corporation must appoint one of
them as representative of the trust holding the membership
interest.

§
The defendant alleged that, due the fact that he was not
authorised to sign surety on behalf of the CC by the trust being
the sole member, the deed of surety was unenforceable.

§
The court held that it is not the trust that is the member, but
the person in whose name the membership interest is reflected.
The fact that the person who signed the suretyship was not
authorised by the trust to sign suretyship is therefore not
relevant.
- 60 -
Impartiality of a trustee

§
A trustee must remain impartial and avoid, as far as possible, a
position where private interests conflicts with his or her duty as
trustee. In other words, where his or her private interests conflict
with those of the trust beneficiaries;
§
Sometimes the trust instrument creates the conflict, but even so, if
a trustee who is also a beneficiary acts in a way as to benefit
himself at the expense of other beneficiaries his acts will be vary
narrowly scrutinised;
§
Sackville-West Nourse 1925 AD 516
“Where one man stands to another in a position of confidence
involving a duty to protect the interest of that other, he is not
allowed to make a secret profit at the other’s expense or place
himself in a position where his interest conflicts with his duty…”
§
Self enrichment not allowed;
§
Trustee must act as a reasonable and prudent person in performing
his duties

- 61 -
Impartiality of a trustee

Jowell v Bramwell-Jones and Others

1998 (1) SA 836 (W) /
Jowell v Bramwell-Jones and Others
2000 (3) SA 274 (SCA)

§
Trustees are duty bound to treat
beneficiaries impartially and to strike a
balance between the interests of
different beneficiaries.

- 62 -
 General

§
When asked to agree to the revocation for variation of a trust deed,
the trustees should take care to protect the rights of the
beneficiaries concerned;

§
Negligence includes not knowing what one ought to know;

§
Keep records of the affairs
of the trust and furnish
copies of these records to
beneficiaries if requested
to do so;

- 63 -
General

§
Trustees must act jointly when dealing
with outsiders;

§
Trustee must at all times be actively
involved in the administration of the
trust. There is no place in our law for a
passive trustee;

§
Ensure that tax affairs of trust is up to
date and handled correctly. In terms of
the Income Tax Act, the trustee is a
representative taxpayer and can, in
certain circumstances, incur personal
liability.

- 64 -
Land and Agricultural Bank Of South Africa v
Parker 2005 (2) SA77 (SCA)
Parker No V Land And Agricultural Bank Of South
Africa [2003] 1 All SA 258 (T)

No legal personality:

“Except where statute provides otherwise, a trust is not a legal person. It is

an accumulation of assets and liabilities. These constitute the trust estate,
which is a separate entity. But though separate, the accumulation of rights
and obligations comprising the trust estate does not have legal personality.
It vests in the trustees, and must be administered by them—and it is only
through the trustees, specif ied as in the trust instrument, that the trust can
act. Who the trustees are, their number, how they are appointed, and under
what circumstances they have power to bind the trust estate are matters
def ined in the trust deed, which is the trust’s constitutive charter. Outside
its provisions the trust estate cannot be bound. It follows that a provision
requiring that a specif ied minimum number of trustees must hold off ice is a
capacity-def ining condition. It lays down a prerequisite that must be
fulf illed before the trust estate can be bound.”

- 65 -
Land and Agricultural Bank Of South Africa v
Parker 2005 (2) SA77 (SCA)
Parker No V Land And Agricultural Bank Of
South Africa [2003] 1 All SA 258 (T)
Must act jointly:

“Regarding the second principle, for the Parkers to

purport to bind the trust estate after the son’s
appointment, without consulting him, constituted a
further breach of their obligations under the trust
deed.
 
It is a fundamental rule of trust law, which this
Court recently restated in Nieuwoudt NO v Vrystaat
Mielies (Edms) Bpk, that in the absence of contrary
provision in the trust deed, the trustees must act
jointly if the trust estate is to be bound by their
acts. The rule derives from the nature of the
trustees’ joint ownership of the trust property. Since
co-owners must act jointly, trustees must also act
jointly.”
- 66 -
Suretyship or loans by trustees
§
Trustees must act independently at all times and
must not be influenced in their decision by other trust
parties;

§
When granting loans or signing suretyship, trustees
are duty bound to ensure that such action is to the
benefit of the trust and the beneficiaries.

- 67 -
In Liebenberg NO vs MGK Bedryfsmaatskappy (Pty) Ltd
2003 (2) SA 224 (SCA)

Held that, notwithstanding

very wide powers afforded
to trustees in a
testamentary trust, the
provisions of the trust deed
(will in this case) were to
be read in each case
against the common law
background, viz that a
trustee has no power,
absent the provision to the
effect in a trust deed, to
expose the trust assets to
business or farming risks.

- 68 -
In Liebenberg NO vs MGK Bedryfsmaatskappy (Pty) Ltd
2003 (2) SA 224 (SCA)

The absence of a specific power in

•

the will, entitling the trustees to

sign surety (unlimited) for one
beneficiary under which the trust
could be liable to the full amount of
the trusts assets and possibly
beyond, so that the other
beneficiaries could not on
termination of the trust receive
anything, was null and void.

- 69 -
 Standard Bank of SA Ltd v Suzette Koekemoer 2004 (6)
SA 49 (SCA)

The appellant loaned money to the trust. The loan was

•

secured by a first mortgage bond over the trust property. The

trust again onloaned the money to a person who was not a
beneficiary of the trust. Held that the bank loaned the money
to the trust and not to the third person. If the bank knew that
the trustees were prohibited from onlending the money to the
third respondent, the home loan agreements would have been
unenforceable.
- 70 -
 Investec Bank Ltd v Adriaanse and Others NNO
[2012] ZAGPPHC 253

Held that though outsiders dealing with

•

trusts are obliged to observe the provisions of

the trust deed, primary responsibility for the
compliance lies with the trustees.
Development of a higher standard of
diligence for outsiders than for trustees held
to be objectionable.

“While outsiders have an interest in self protection, ultimate responsibility for

•

compliance with the formalities and for ensuring that contracts lie within the
authority conferred by the trust deed and that the contract is for the benefit of
the trust and its beneficiaries lies with the trust (trustees).”

- 71 -
 Liability of trustees towards third parties
and beneficiaries

“The trustee who indulges in litigation in bad

faith, runs the risk of being liable for costs.
Even where litigation is concerned the trustee
is supposed to act in a reasonable manner and
as a prudent man. Senseless litigation may
amount to the squandering of trust funds and
the court may, to show its displeasure, order
the trustee to pay the costs out of his own
pocket.” – Olivier

§
It may happen that, even if a trustee acts in an off icial capacity he can still incur personal
liability. In the Simplex case the trustee purchased immovable property on behalf of the
trust, prior to being authorised to act as trustee by the Master. The owner of the property
instituted action against the trustee personally on the ground of damage and reduction in
value of the property while it was under their control. The court held, that because of the
duty of care that rested on the trustees, they could be sued in their personal capacities;

§
The trustee may be personally liable to benef iciaries for a breach of trust.

- 72 -
Wïïd Fischer & Rabie v Wïïd And Others (1571/2006) [2012]
NC (13 JANUARY 2012)

The following observations were made regarding the duties of trustees:

1. Trusteeship requires far more than respecting the sentiments of a deceased

founder;

2. Failure to act and decide independently from the founder causes neglect
and liability for losses. A failure of this kind can cause trustees to be removed;

3. A conflict of interest can cause trustees to be removed;

4. The fact that the trust deed in many cases contains a

general stipulation that the trustees shall have an
unlimited or unfettered discretion does not allow them
to do as they please;

- 73 -
Wïïd Fischer & Rabie v Wïïd And Others (1571/2006) [2012]
NC (13 JANUARY 2012)

5. The trust deed should be scrutinised for different levels of

discretion to ensure that the trustees are actually seen to be properly
exercising their discretion in terms of the trust deed.

- 74 -
Possible defences by trustees

§
Indemnity clauses in trust instruments. In view of the provisions of
section 9 of the TPCA, it is difficult to see how this defence will be
successful.

§
A sound defence against an illegal breach of trust could be that all
beneficiaries, being of full age and capacity, consented to or
confirmed the actions of the trustee.

- 75 -
NEW CASE LAW!

- 76 -
 TRUSTS
Joubert & others V Joubert & others [2019] ZAWCHC 56 (10 MAY 2019)

The first question that arises in this case is the authority of a corporate
trustee to act, prior to the individual representing such juristic person being
authorised by the Master to act.

The second question of interest was acceptance of benefits by the

beneficiaries.

§
As far as the first question is concerned:

§
The court took a surprising stance, ruling that while the individual
representing the corporate trustee has not yet been authorised by
the Master and can therefore not validly act as trustee, the
corporate trustee can nevertheless be recognised as a valid trustee
for purposes of the joint action rule;

- 77 -
TRUSTS
Joubert & others V Joubert & others [2019] ZAWCHC 56 (10 MAY 2019)

§
As far as the second question is concerned:

§
The court ruled that acceptance by the beneficiaries was not
proven.

§
The court also made some interesting obiter remarks, regarding the
acceptance of benefits, to the effect that a beneficiary cannot
accept benefits piecemeal, without also accepting the burdens that
come as part of the trust deed.

§
Finally, where a trust deed provides, a in this case, that the trustees
can amend in any way the see fit, there is a strong argument that any
beneficiary accepts benefits subject to this provision.

- 78 -
 TRUSTS
Joan Cynthia Griessel No & others v De Kock [2019] SCA 95 (6 JUNE 2019)

The question before the court is whether a beneficiary of a discretionary

trust had acquired rights which was capable of protection.

The first respondent in the court a quo was a beneficiary in a discretionary

trust and was afforded, as was the other beneficiaries, to visit the farm with
their families on vacation, on a rotational basis. A difference of opinion
resulted in the first respondent being removed as a beneficiary.

§
The SCA came to the conclusion that the right the benef iciary has to visit the
farm was a vested right and that the benef iciary had to be reinstated and
granted permission to visit the farm, .

- 79 -
TRUSTS
Fesi v Ndabeni Communal Property Trust (411/2017 & 412/2017) [2018]
ZASCA 33 (27 MARCH 2018)

§
The Master has a right to refuse to appoint a trustee, should valid
reasons for such refusal exist.

§
This right can be compared to the
Master’s right to remove a trustee.

- 80 -
TRUSTS
Van Wyk v Daberas Adventures CC (1431/2016) [2018]
ZANCHC 31 (1 JUNE 2018)
In this case one of the trustees [BC van WyK] was afforded a negative veto
right in the sense that he must form part of the majority, where a majority
decision is required by the Trust Deed.
BC van Wyk was later removed as a trustee, due to the fact that he became
insolvent.

§
It was argued that a unanimous decision taken by all the trustees in
office, excluding BC van Wyk – who at this stage was not
reappointed, was invalid.

§
The court ruled that:

§
The veto right of BC van Wyk only applied to majority
decisions; and

§
That even in the case of majority decisions it made no sense,
since he was disqualified to act as a trustee – and for that
reason could not partake in trustee decisions.
- 81 -
TRUSTS
Nair N.O V Nair N.O And others [2019] ZAKZPHC 23
(26 APRIL 2019)

§
In this decision the court a quo ordered a trust to be terminated in
terms of section 13 of the TPCA.

§
On appeal it was ruled that the provisions of section 13, could in this
case not be applied to terminate the trust, if the jurisdictional
requirements of the section were not met.

- 82 -
TRUSTS
McNair v Crossman & another [2019] ZAGPJHC 298
(5 SEPTEMBER 2019)

The court had to decide on the removal of a trustee as a result of enmity

between the trustees.

The court referred to Gowar v Gowar (149/2015) [2016] ZASCA 101 where it
was ruled that the court was mindful of the fact that disharmony may exist in
the administration of a Trust and that this is in itself not sufficient for the
removal of a Trustee.

The court held that:

§
It found that the mere friction or enmity between the trustee and
the beneficiaries will not in itself be adequate reason for the
removal of the trustee from office;

§
There must at least be some mutual respect and trust between
trustees. If not, that incompatibility, places the trust property and
its affairs at risk;
- 83 -
TRUSTS
Du Plessis NO & others v Van Niekerk & others (836/2018) [2018] ZAFSHC
120 (26 JUNE 2018)

Clause 5.7.4 of the trust deed provided that the office of a trustee shall be
vacated if the majority of trustees request the trustee to resign.

The three independent trustees tried to use this clause to remove the fourth
trustee.

The court held that:

§
The wording of clause 5.7.4 indicated a mere request by the
trustees which could either be accepted or declined by the trustee
in question;

- 84 -
TRUSTS
Du Plessis NO & others v Van Niekerk & others
(836/2018) [2018] ZAFSHC 120 (26 JUNE 2018)

§
The removal of a trustee by his co-trustees would only be possible in
circumstances, analogous to that set out in the common law or section 20 of
the TPCA;

§
Looking at the wording of the relevant clause as well as the facts of the
case, the court ruled that the clause cannot be used to remove a trustee
from office without reasonable cause, and, secondly the meeting to remove
the trustee was not properly constituted which means that the decision was
not properly taken;

§
Also, with reference to Ubuntu and section 34 of the Constitution, valid
reasons, in terms of Trust Law, would have to be provided for the removal
of a trustee in this way, and even then, the trustee being removed should
always have the right to challenge the decision in court.

- 85 -
Gert van den
Berg

Callie van der

Merwe

Tel:
(012) 111 7729

Email:
[email protected].
za
- 86 -