You are here: Home » Latest News » Court Cases » Court case about trustees selling trust property to trusts of which they are beneficiaries – Kuttel v Master of the High Court and Others [2022] ZASCA 156

Court case about trustees selling trust property to trusts of which they are beneficiaries – Kuttel v Master of the High Court and Others [2022] ZASCA 156

Kuttel v Master of the High Court and Others [2022] ZASCA 156

CK founded a trust in 1981 and named it the Padjoy Trust (the Trust) after his nickname (Padda) and his wife’s (JK) name. The two of them, plus an accountant, were the first three trustees. The purpose of the trust were to hold assets to provide for CK and JK’s maintenance after CK’s retirement as a successful businessman. The trust was to remain in force until the death of the survivor of them, after which the trust capital was to be equally distributed between the applicant (PK), the fourth respondent (FK) and the fifth respondent (AK). CK later resigned as trustee due to ill-health. Until JK’s death, the trust had five trustees, JK, FK, AK and two independent trustees (both attorneys), L and A. Due to PK having relocated to the USA and a poor relationship between CK and PK, the latter was never made a trustee. During the period 2012 to 2013, the trustees decided to restructure the family’s affairs. As part of this process, 81.6% of the shares in the eighth respondents (Southern) was sold to the seventh respondent (Grace) for just over R32m. Grace is controlled by two Namibian trusts for the benefit of FK and AK and their families. The sale price was determined by calculating 81.6% of the average market value of Southern, obtained by way of two independent valuations. PK was not informed of this. When PK learnt about this in 2017, he was unhappy about the transaction. PK brought an application in the Western Cape High Court to order the Master to appoint him as a trustee of the Trust, alternatively to set aside the Master’s decision not to appoint him as a trustee, and to declare the sale transaction of Southern’s shares to Grace unlawful and invalid and order repayment of the purchase price.

PK’s application was dismissed with costs by the Western Cape High Court (Steyn J) and leave to appeal was refused. On petition to the Supreme Court of Appeals (SCA) an order was made referring the application for leave to appeal for oral argument before the SCA. PK brought an application before the SCA for permission to add further evidence on appeal. The SCA decided not to adjudicate the latter in this matter, as, if leave to appeal was granted, the SCA could deal with the application in the appeal process, and if leave was refused the point would be moot.

JK passed away shortly before the application was heard in the SCA. In the SCA PK did not proceed with argument on the Master’s failure to appoint him as a trustee, but contended that the sale agreement was unlawful and invalid because he was treated unfairly as compared to the other two beneficiaries (FK and AK) in that he was not placed in a position where he could make an offer for the shares in Southern. PK also contended that the court’s permission was required because the transaction in essence was a sale of immovable property to trustees, parties in a fiduciary relationship to the Trust and its beneficiaries. The trustees contended that there was no duty on them to inform PK or obtain the court’s permission and that the transaction was valid and done at arm’s length.

The SCA (Plasket JA, Van der Merwe JA, Musi and Kgoele AJJA concurring, Molemela JA dissenting) held that there is no duty on fiduciaries to obtain the court’s permission for purchasing movable property and that the shares were movable property. The shares in a company cannot be equated to the assets held by that company. The court was further satisfied that the transaction was at arms-length and that FK and AK, although both trustees of the Trust, were not in a position to control the Trust or by themselves determine the outcome of decisions by the trustees. Furthermore, the reason for the rule that the court should be approached for permission if a fiduciary wants to buy immovable property is to ensure that the purchase price is determined at arm’s length to protect the interests of beneficiaries of the fiduciary relationship. Due to the process followed to determine the sale price, the court was satisfied that the transaction was at arm’s length.

The minority judgement relies, inter alia, on Griessel NO and Others v De Kock and Another [2019] ZASCA 95; 2019 (5) SA 396 (SCA) to hold that PK was treated unfairly as beneficiary by the actions of the trustees. Click here for FISA’s summary of the judgement in the De Kock case.


The minority judgement seems to ignore the risk that shareholding of a trading company entails for a trust, especially where the income beneficiaries are elderly and dependent on the income from dividends of such a company, and questions the reasons for the transaction in which the shares in Southern were sold to Grace. In the process it seems to miss the point that it is exactly because of the duty to treat different classes of beneficiaries fairly that a decision like the one the trustees took is justified in the circumstances. It also seems to accept that a contingent beneficiary has a right to be consulted where trust assets are sold, even if for fair value.

Recent Posts