When Dealing with Trusts Goes Wrong | Legal Articles


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When Dealing with Trusts Goes Wrong

When dealing with trusts, a recent case sheds light on the intricacies and legal principles involved. In Shepstone & Wylie Attorneys v Abraham Johannes de Witt NO And Others, the Supreme Court of Appeal affirmed the court's decision, highlighting crucial aspects of trust law that warrant attention.

Case Overview:

The Penvaan Property Trust found itself entangled in legal complexities when it ratified a resolution to act as surety for the indebtedness of Mrs. Volker. The resolution, however, was endorsed by only two of the three trustees, including Mrs. Volker. Subsequently, the trust faced legal action as the surety for outstanding legal fees, asserting that the resolution lacked validity due to not being signed by all trustees. The case raised questions about conflicting clauses in the trust deed, notably regarding decision-making quorums.

Trust law -attorneys Johannesburg

Key Findings and Legal Principles:

  1. Unanimous Decision Requirement:

    • The Supreme Court of Appeal reinforced the principle that, in the absence of a specific clause allowing a majority of trustees to bind a trust, unanimous decisions and resolutions are necessary. This aligns with precedents like Coetzee v Peet Smith Trust en Andere [2003] (5) SA 674 (T).
  2. Fiduciary Duty of Trustees:

    • Trustees bear a fiduciary duty to act in the best interest of the trust, not for personal gain. The case emphasized that resolutions favoring individual trustees over the trust's interest violate trust principles.
  3. Trust Affairs According to Trust Deed and Laws:

    • The affairs of the trust should adhere to the trust deed and relevant laws, such as the Trust Property Control Act 57 of 1988.
  4. Joint Action by Trustees:

    • Trustees are obligated to act jointly in the best interest of the trust, as affirmed in Le Grange and Another v the Louis and Andre Le Grange Family Trust No 1562/95/PMB and Others [2017] ZAKZPHC.
  5. Stringency in Binding Trusts:

    • The legal landscape becomes more stringent when parties seek to bind the trust in favor of third parties, necessitating adherence to specific legal principles.
  6. Caution for Third Parties:

    • Third parties engaging with trusts should exercise caution, recognizing the intricate legal principles involved in such transactions.

Conclusion: The Supreme Court of Appeal upheld the decision, reinforcing the importance of strict adherence to trust principles and legal requirements. The case serves as a reminder that understanding trust laws and seeking legal advice is imperative when dealing with trust affairs.

Van Deventer & Van Deventer Inc. - Trust Attorneys Johannesburg & Cape Town

For comprehensive legal services related to trusts, including setup, trust deed drafting, and dispute litigation, Van Deventer & Van Deventer Inc. is here to assist. Explore our interactive website for a detailed overview of our services, and feel free to contact us for professional legal guidance.

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