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Court case about removal of trustee

Du Plessis NO and Others v Van Niekerk and Others [2018] ZAFSHC 120

The applicants, two auditors and an attorney, are the trustees of a trust with a thirty year old female as its single income and capital beneficiary.  The first respondent is the mother of the beneficiary and is/was also a trustee.  The trust property consists of valuable agricultural land in the Knysna area.

In early 2018 a trustee meeting was held.  The three applicants were together in one room and the first respondent and her attorney was linked by telephone.  A serious difference of opinion between the first respondent and the three applicants ensued about the payment of interest to the father of the beneficiary who held an outstanding loan to the trust.  The father is farming on the agricultural land through a company and a close corporation, without paying any rent.  The first respondent was opposed to the trust paying interest on the loan.  The three applicants later, after the meeting, invoked a clause in the trust deed that stipulated:
5.7 The office of a TRUSTEE shall be vacated if –
5.7.4 the majority of TRUSTEES request a TRUSTEE to resign.”
to terminate the trusteeship of the first respondent.

The applicants argued in court that, because the body of clause 5.7 states that the office SHALL be vacated if the majority of trustees request the trustee’s resignation, nothing further is needed and that the Master must issue new letters of authority under section 6 of the Trust Property Control Act (TPCA).  The Master in Bloemfontein refused, which led to the application.  The Master was cited as third respondent, but did not oppose the application and indicated that he will abide the court’s decision.
The court found that the removal of the first respondent as trustee is invalid for four reasons:
1.    The peremptory wording of the body of clause 5.7 is negated by the use of the word “request” in 5.7.4, which makes the clause ambiguous.  If given its ordinary meaning “request” implies that the receiver of the request has a choice to accede to the request or not.  It also cannot be that any such request, whether reasonable or not, in the interests of the beneficiary or not, and even mala fides, must lead to the office of that trustee being vacated.
2.    Good cause for the removal of the trustee must be taken as an implied term of clause 5.7.4.  In this case none such good cause was advanced by the applicants and their case was, in fact, that they are under no obligation to supply reasons for their decision.
3.    The decision to request a trustee to resign must be one by “a good person acting reasonably”, and the applicants advanced no evidence or argument to show this.
4.    The applicants did not take a proper decision at a trustee meeting with proper notice of their intention.

The court dismissed the application and ordered the costs to be paid from the trust estate.

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