When A Trustee Cannot Be Trusted | Legal Articles

 

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When A Trustee Cannot Be Trusted

The responsibilities and obligations of a Trustee are fiduciary in nature, much in the same way as those of a company director. Trustees ought to conduct themselves in a manner that serves the best interests of the trust and the beneficiaries. Where the conduct of a trustee negates this notion therefore, he/she may be removed from such position.

 

To start with, trustees exercise their authority and duties as per the Trust Deed, the Trust Property Control Act 57 of 1988 (TPCA). The Master of the High Court may also, issue directives to the trustees to execute certain duties in a certain situation. It becomes important therefore, that the Trust Deed be as clear and comprehensive as possible, so that disputes are avoided as far as possible.

 

A trustee may not exercise any authority without being issued a letter of authority by the Master of the High Court in terms of Section 6 of the TPCA, and thereafter without a resolution of the trustees. The essence and purpose of this principle (resolution) is that Trustees must act lawfully and jointly for their actions to be binding on the Trust. In Thorpe And Others v Trittenwein And Another 2007 (2) SA 172 the Court held that a void contract cannot be ratified by the other Trustees. A Trustee had concluded a purchase and sale agreement to buy land without the written authority of the other Trustees. The other Trustees then later sought to ratify the agreement, but the Court held that this was not possible. In Land and Agricultural Bank of South Africa v Parker and Others 2005 (2) SA 77 (SCA) the Court held that even in the absence of contrary provisions in the Trust Deed with regards to authorisation, Trustees must act together for an act to be binding on the Trust.

 

With that being said, we shall discuss the principles around the removal of a trustee. As alluded to above, the duties of a trustee are fiduciary in nature and at all material times the trustees must act in the best interests of the trust. The TPCA provides that,

 

9. Care, diligence and skill required of Trustee

(1) A trustee shall in the performance of his duties and the exercise of his powers act with the care, diligence and skill which can reasonably be expected of a person who manages the affairs of another. (2) Any provision contained in a trust instrument shall be void in so far as it would have the effect of exempting a trustee from or indemnifying him against liability for breach of trust where he fails to show the degree of care, diligence and skill as required in subsection (1)

 

Where the Court is satisfied that the removal of a trustee is in the best interests of the Trust and its beneficiaries, the Court may make an Order for such trustee’s removal. Such Court Order is preceded by an application by the Master or any other party who has an interest in the trust property. The provisions of Section 20 of the TPCA provide in this regard. A trustee may also be removed by the Master of the High Court upon the grounds provided in subsection (2) of the same section.

 

Amongst the key grounds upon which a trustee may be removed, is related to dishonesty. Being fiduciary in nature, where dishonesty on the part of a trustee is proven, it constitutes a ground under which a trustee may be removed.

 

In Fletcher v McNair (2020) ZASCA 135 the Court upheld the removal of one of the Trustees in a family Trust, upon a High Court application by Mrs McNair who is the Respondent in the ZASCA appeal. In the case above as well as in Konstantinos v Van Lingen And Others (2021) JOL 49289 (SCA) the below principles were confirmed, as part of the Courts’ determination on the removal of a Trustee;

  • In the event that the removal of a Trustee is in the best interest of the Trust and the beneficiaries, the Court may order such Trustee’s removal as per Section 20 of the Act;
  • The Court’s power to remove a Trustee must be exercised with circumspection;
  • The interests of the Estate must be weighed against the reason for removal, as it will qualify the adequacy of the reason;
  • Respect and effect of the deceased’s (Trust Founder) nomination of preferred Trustees, must be given effect to and not easily interfered with;
  • “Where there is disharmony, the essential test is whether it imperils the Trust estate or its roper administration” ;
  • Simple disagreements between the Trustee and beneficiaries are not adequate grounds alone to remove a Trustee;
  • “Neither mala fides nor misconduct are required for the removal of the Trustee” ;
  • Where a Trustee did not take correct decisions or strictly adhere to the law, are not sufficient to warrant the removal of a Trustee on that alone;
  • The essential premise is the consideration of the welfare of the beneficiaries and the proper administration of the Trust and its property.

 

At Van Deventer and Van Deventer Incorporated we assist with Trust matters. We also assist in family law matters such as maintenance, divorces, protection orders, Rule 43 applications, Rule 58 applications and others. Our services extend to general litigation, civil matters, criminal, labour, personal injury, company law, deceased estates amidst an array of others.

Contact us for comprehensive assistance.

 

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