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Court judgement on freedom to choose beneficiaries

Harvey NO and Others v Crawford NO and Others

In this case D executed a notarial deed of trust (the trust deed) in 1953 in which the capital beneficiaries were identified as D’s four children.  In the event of the death of any of the children before termination of the trust, “…his or her share shall devolve upon his or her legal descendants per stirpes.  If such child has no legal descendants, his or her share shall be divided equally between the remaining children or their legal descendants per stirpes.”

H, one of D’s children, had had several miscarriages by the time of D’s death and had discussed the possibility of adoption with him.  D maintained that H was still young and should not rush things.  H adopted two children, W and T, after D’s death.  The trustees of the trust, supported by H’s siblings, held the view that W and T would not be entitled to benefits from the trust should H pass away before distribution of capital, but that H’s share must accrue to her siblings.  An application to the Western Cape High Court (Dlodlo J) to declare that W and T be regarded as H’s descendants was unsuccessful.  On appeal to the SCA with the leave of the WCHC, H’s executor (H passed away while the appeal was pending), W and T argued that the WCHC was wrong in holding that it was not unfair discrimination on the basis of birth, which is one of the prohibited grounds under sec 9 of the Constitution.

The majority of the SCA bench (Ponnan, Tshiqi, Zondi, Dambuza JJA; Molemela JA dissenting) held that:

-> The situation should be distinguished from the long line of cases where the courts have intervened and changed the trust instruments of charitable trusts where there was discriminatory provisions.  This matter was a private matter in which an individual exercised his right to dispose of his property after his death as he saw fit, while in the charitable trust cases the trusts were all of a public nature.

-> “The Children’s Act 31 of 1937 (the 1937 Act) was in force at the time of the execution of the deed.” 
This act provided that: “an adopted child shall for all purposes whatsoever be deemed in law to be the legitimate child of the adoptive parent:
Provided that an adopted child shall not by virtue of the adoption –
(a) become entitled to any property devolving on any child of his adoptive parent by virtue of any instrument executed prior to the date of the order of adoption (whether the instrument takes effect inter vivos or mortis causa), unless the instrument clearly conveys the intention that the property shall devolve upon the adopted child;
(b) inherit any property ab intestato from any relative of his adoptive parents.”

-> As the adoption only happened after the trust was formed, it did not make the adopted children descendants by law.

-> The right to property in sec 25 of the Constitution includes the right to dispose of property in any way the owner sees fit as long as it does not infringe unjustifiably any other rights guaranteed by the Constitution.  D’s decision back in 1953 can therefore not be seen as discriminatory on the basis that he wanted to benefit only blood relatives.

-> A proper interpretation of the terms of the trust deed makes it clear that D’s intention was indeed to benefit only descendants of his children in the event that a child dies before distribution of the trust capital.

-> The requirements for the court to intervene under sec 13 of the Trust Property Control Act, 57 of 1988, were not met.

From this judgement it seems clear that the SCA places a high premium on the freedom of testators and trust founders to dispose of their private property as they see fit, as long as there is no overt discrimination in cases where the trust or inheritance has public application.

 

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