Delegation & Abdication - Let Us Talk About Trustees | Legal Articles

 

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Delegation & Abdication - Let Us Talk About Trustees

The duty of trustees is to act as guardians of the Trust assets, and to act in the best interests of the Trust and its beneficiaries. The obligations and duties of trustees are fiduciary in nature as per Section 9 of the Trust Property Control Act 57 of 1988.

 

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)

 

The essence of these duties primarily lies in the decision-making process, and the implementation thereof is another. It becomes important at this juncture, to distinguish between delegation and abdication of responsibilities.

To start with, it ought to be remembered that trustees must act jointly in the decision-making processes aimed at binding the Trust and in the general administration of the Trust assets. It is necessary to clarify that, despite a Trust Instrument providing that a certain decision requires a majority vote, all the trustees must participate in the process that will achieve a majority vote. This fundamental principle of trustees acting jointly was upheld in the case of Coetzee v Peet Smith Trust 2003 (5) SA 674 (T). Further, pursuant to a decision being made, resolutions must be signed and passed to that effect. The issue of joint participation in the management of the Trust by the trustees is a fundamental one and trustees may not simply abdicate this responsibility (Stander And Others v Schwulst And Others 2008 (1) SA 81 (C)).

Before we delve into the gist of this discussion, there are a few important principles that need to be noted. A party may not act as a trustee without a Letter of Authority from the Master of the High Court. Any conduct or decision that is made by a party acting as a trustee, prior to the issuing of a Letter of Authority, is null and void. Further, this authority may not be delegated to a third party who does not derive authority from the Master’s appointment. As alluded to above, the essence of these duties primarily lies in the decision-making process, whilst the implementation thereof is another.

In the case of Hoosen NO And Others v Deedat And Others (336 of 1997) [1999] ZASCA 49 it was held that a trustee may not delegate the exercise of their discretion and decision making authority to another person without authority from the Master. Should this happen, it effectively amounts to abdication of duty. However, in some circumstances a proxy may be used where a trustee cannot attend to a meeting. Such a proxy however, will only act according to specific instructions as per the power of attorney.

Delegation may only be done in the implementation of a decision that has already been made by the trustees. For example, the trustees may resolve to rent out an immovable property to generate profit for the upkeep of the beneficiaries, it does not mean the trustees must be involved in the day-to-day management of the tenants. They can delegate this to a rental agency. What the trustees may not delegate is the discretion and decision-making authority of whether to rent out the property or not. Trustees may also, delegate the negotiation of a purchase and sale transaction to one of the trustees. In this instance, the trustee is only implementing a decision or resolution that has already been taken by the trustees jointly, and this does not amount to abdication of duty by the other trustees. The Court in Van Wyk v Daberas Adventures CC [2018] ZANCHC 31 made an emphasis on this aspect, and trustees are urged to be wary of the fine line between abdication and delegation.

At Van Deventer and Van Deventer Incorporated we assist in various legal fields that include Trusts, Deceased Estates, Family law, Labour law, Criminal law, Commercial law, Property law and Civil law. Our approach is committed.

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