Schoonhoven N.O and Others v Schoonhoven and Others [2024] ZAKZPHC 1; [2024] 2 All SA 250 (KZP)
The S Family Trust was formed in 1988 by JS as founder, who died in 2015. Under a power extended to him in the trust deed, JS determined the termination date of the trust in his will executed in 2010 to be fifteen years after his death. It was common cause between the parties that the trust would terminate in 2030. The four trustees brought an application for a declaratory order on the correct interpretation of certain clauses in the trust deed, the most important of which are the definition clause defining capital beneficiaries and the clauses dealing with the testamentary appointment powers extended to JS. The 1st and 2nd applicants, SAS and JFAS respectively, played the active roles as applicants, while only the 1st respondent, PCAS, opposed the application with the other 12 respondents not actively taking part. The first three applicants and the 1st respondent are siblings and the sons of JS. While the definition of ‘income beneficiary’ in the deed specifically referred to the trustees’ discretion to select income beneficiaries from a list of potential beneficiaries, the definition of ‘capital beneficiary’ referred to selection of beneficiaries from the list of potential beneficiaries without specifically referring to a discretion for the trustees to do so. In the will JS just indicated that the capital beneficiaries must be benefited in equal portions. The applicants argued that that the whole scheme created by the trust deed and the will resulted in a broad context within which it was clear that the capital beneficiaries had to be selected by the trustees. After they have done so, those beneficiaries then had to be benefited equally. The 1st respondent argued that if this is what the founder (JS) intended, the definition of ‘capital beneficiary’ would have included such discretion explicitly.
The court (E Bezuidenhout J) held that the application was in effect a request for rectification of the trust instrument clothed as an application for a declaratory order. The instrument (deed), being a contractual agreement, could only be rectified in accordance with the requirements for rectification by the court, one of which was that it should be done by way of an action procedure and not by way of an application. The court dismissed the application with costs, but found no reasons for a punitive cost order and also no reason to award the costs de bonis propriis against the trustees themselves in their personal capacities resulting in the costs effectively to be paid from the trust.
Comment:
The court remarked on the fact that the wording of both the deed and the will lacked clarity of formulation. Practitioners should take great care to ensure that documents such as these are worded unambiguously clear and correctly reflect the intentions behind them.