Dlhomo NO and Others v Chalwa NO and Another [2023] ZAKZPHC 131
D, S and H (the applicants) are the independently appointed trustees of the National Construction Incubator Trust (the trust), while the first respondent (C) was also a trustee at the relevant time and the chief executive officer of the National Construction Incubator (NCI). The founder of the trust, the Small Enterprise Development Agency (SEDA), brought an application to intervene in the application as an applicant. The trust was set up to fund the NCI, while the NCI exists to assist with the transformation of the construction industry by supplying training and support to new and small construction companies to enable them to compete with the existing larger construction companies. The trust was, in the main, in turn funded mainly by SEDA, but also by several metropolitan municipalities.
The applicants brought an application for the removal as trustee of the trust of C and an order that they are still trustees of the trust. SEDA applied for leave to intervene and, if successful with that, for the appointment of an independent administrator for the trust. The applicants’ case was that C enriched herself at the expense of the trust by taking a finder’s commission on funds transferred to the trust by SEDA, as well as by giving herself a 25% salary increase. They also averred in their papers that C procured new letters of authority for the trust without their prior knowledge from the Master of the High Court (the Master), the second respondent, on the basis that the applicants were no longer trustees of the trust. These new letters of authority were later withdrawn by the Master. She also opened a new bank account for the trust without any authority from her co-trustees (the applicants) and requested donors to pay funds into the new account. All this was achieved through, what the applicants alleged, forged powers of attorney and other documents.
Apart from a flat denial of any wrongdoing, C did not put any information before the court gainsaying the applicants’ version. Prior to the case being heard C also brought court applications purportedly on behalf of the trust without any authority given by the applicants.
The Pietermaritzburg High Court (Davis AJ) granted SEDA’s application to intervene, but refused their application for the appointment of an independent administrator for the trust. The court further applied the so-called joint-action rule and held that the actions of C were void as she had obtained no authority from her co-trustees to act on behalf of the trust. The court referred amongst others to Thorpe and Others v Trittenwein and Another and also to Shepstone and Wylie Attorneys v Abraham Johannes de Witt N O and Others and reiterated that one of the trustees of a trust can only act alone on behalf of the trust on proper and prior authorisation by co-trustees. The court also stressed the fiduciary duty of a trustee towards the trust and all its beneficiaries and took a particularly dim view of the fact that C bypassed the other trustees and had decisions about her remuneration taken by the management board of NCI which, in the court’s view, had no such authority. The court granted the application to remove C as trustee of the trust and also granted a punitive cost order on attorney and client scale against C to be paid de bonis propriis (i.e. out of her own pocket).
Comment:
- Becoming a trustee places onerous duties on the person. Many trustees are appointed without a proper understanding of their duties.
- Trustees are usually appointed in accordance with the trust instrument and the Master only plays the role of authorising (under section 6 of the Trust Property Control Act, 57 of 1988) appointed trustees to act. The Master has limited powers to appoint trustees in certain circumstances. Unfortunately the court contributed to existing confusion about this by loose and inaccurate use of the term “appoint” when apparently referring to authorisation under section 6.