Shepstone and Wylie Attorneys v Abraham Johannes de Witt N O and Others [2023] ZASCA 74
TV, RV and W were trustees of the Penvaan Property Trust (the Trust). In the meantime Firstrand Bank brought an application for the sequestration of the Trust, after liquidating two companies which did business from premises owned by the Trust. TV and RV were in divorce proceedings when RV and W arranged a trustee meeting. As TV was living quite far away at the time he indicated that he could not attend the meeting at the place suggested by RV and W. To accommodate him, the meeting was moved closer to him, but he still did not attend. At the meeting W and RV decided that the Trust will stand surety for RV’s legal costs in the divorce proceedings and signed a deed of surety in favour of the appellants. When RV could not pay the appellants’ legal bills because she was dependent on income from the two companies, the appellants looked to the trust for payment. The appellants then issued summons in the high court for payment of their fees. The trustees of the Trust at the time denied that the surety was properly signed as TV was not at the meeting and did not sign the deed of surety, because the trustees did not act jointly as required by the trust deed. The high court upheld the defence by the trustees. The appellants then appealed to the SCA.
The court, in a majority judgement (Mbatha JA (Zondi and Mocumie JJA concurring)), held that, although the trustees could internally take decisions by way of a majority vote, that internal arrangement did not operate in the public sphere. In order for the majority decision to have had effect in this case, the trustees would all have had to sign the deed of surety, in the absence of a mandate by all the trustees to one or more of them to do so. The appeal was therefore dismissed with costs.
In a minority judgement, Kathree-Setiloane AJA (Weiner JA concurring) held that the appendix to the Trust deed required trustees to act jointly and unanimously in the exercise of all their powers and therefore concurred with the result, but for different reasons.
Comment:
The minority judgement seems to be based on an incorrect reading of the appendix to the Trust deed. The majority judgement will have far-reaching implications for decision-making in trusts. In effect it means that a dissenting trustee, despite being outvoted in a properly constituted trustee meeting, can hold the other trustees and therefore the trust estate to ransom by refusing to sign resolutions and documents required for external actions of the trust