N and Others v Maluleke N.O and Others [2022] ZAGPPHC 911
Two trusts were set up, the Trading Trust and the Legacy Trust. The Legacy Trust is the only beneficiary of the Trading Trust.
The beneficiary clause of the Legacy Trust reads:
“1.1.2 the beneficiaries” means that person or other persons who may from time to time be selected by the Trustees in their entire and absolute discretion to be a beneficiary in respect of the income or capital profits or capital gains or capital or either under the Trust, from amongst the members of the classes consisting of:”
A list of 9 names then followed, and the descendants of any of these, as well as any trust set up for the benefit of any of these. If none of the persons mentioned or the alternatives are the available, the nearest relatives of the founder are included.
The 1st and 2nd applicants were included in the list of nine names. They brought an application, inter alia, for the joinder of 5th and 6th respondents, in their capacity as trustees, as well as 9th respondent (FNB) and for the freezing of the bank accounts of the trust with FNB, pending an account by the trustees to the Master under section 16 of the Trust Property Control Act (the TPCA).
The application was interlocutory. In the main application the applicants asked for the removal of the trustees on grounds of breach of trust.
The applicants argued that they, as members of a class from which beneficiaries could be drawn, had an interest in the trust property, while the respondents argued that, until they as trustees selected beneficiaries from the class, such persons were not beneficiaries and had no interest in the trust property.
The court (Millar J) set the questions for decision out as follows:
Whether the joinder should be granted, and whether the applicants had locus standi to bring the application.
The court held that, on a pure reading of the beneficiary clause and until a resolution was taken by the trustees in 2022, no person had any right to be a beneficiary.
The court held further that the fact that the trustees did not select beneficiaries before February 2022 (the trust was set up in 2016) did not “… transmute the persons named within the category of those who could be selected as beneficiaries, into beneficiaries.” The court distinguished Potgieter v Potgieter on the basis that there was no attempt in the present case to amend the trust deed.
Therefore the applicants had no locus standi as they had no interest in the trust property because they were not selected as beneficiaries.
Comment:
The judgement, once again, highlights the importance of careful wording in a trust instrument.