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[2016] ZASCA 101
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Gowar and Another v Gowar and Others (149/2015) [2016] ZASCA 101; [2016] 3 All SA 382 (SCA); 2016 (5) SA 225 (SCA) (9 June 2016)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 149/2015
In
the matter between:
JOHANNA
DOROTHEA GOWAR
FIRST
APPELLANT
FRANCOIS
PETER GOWAR
SECOND APPELLANT
and
REGINALD
DAVID GOWAR
FIRST
RESPONDENT
TERTIUS
NICOLAAS VAN DER WALT
SECOND RESPONDENT
MASTER
OF THE HIGH COURT,
THIRD RESPONDENT
GRAHAMSTOWN
Neutral
citation:
Gowar
v Gowar
(149/2015)
[2016] ZASCA 101
(9 June 2016)
Coram:
Maya
DP, Majiedt, Petse JJA and Victor and Baartman AJJA
Heard:
19 May
2016
Delivered:
9
June 2016
Summary:
Trust
and trustee ─ removal from office on grounds of misconduct ─
power of the high court to remove trustee under the
common law not
abrogated by s 20(1) of the Trust Property Control Act 57 of 1988.
Trust ─ termination of ─ power of
the court in terms of s
13 of the Trust Property Control Act to terminate a trust
circumscribed.
ORDER
On
appeal from:
Eastern
Cape Division of the High Court, Grahamstown (Smith J sitting as
court of first instance):
1
The appeal is dismissed with costs including the costs of two
counsel.
2
The cross-appeal is dismissed with costs.
JUDGMENT
Petse
JA (
Maya
DP, Majiedt JA and Victor and Baartman AJJA
concurring):
Introduction
[1]
This appeal and cross-appeal emanate from a long-standing family feud
about the control of various family trusts. Both concern
the
quintessential issue of the circumstances in which a court may remove
a trustee from office in terms of either the common law
or s 20(1) of
the Trust Property Control Act 57 of 1988 (the Act). A related issue
is whether the appellants have satisfied the
requirements of s 13 of
the Act which empowers a court to terminate a trust in certain
defined circumstances.
[2]
The second appellant, Mr Francois Peter Gowar, and the first
respondent, Mr Reginald David Gowar, are brothers. The first
appellant, Mrs Johanna Dorothea Gowar, is their mother. They all have
an interest either as trustees or beneficiaries (or both)
of four
family trusts, namely: (a) the David Gowar Trust; (b) the Rietfontein
Trust; (c) the Gowar Farm Trust; and (d) the R D
Gowar Testamentary
Trust. These trusts were established at various times by Mr Reginald
Denver Gowar, the father of the second
appellant and the first
respondent and formerly a farmer of Somerset East, who passed away in
July 2007 (the deceased). The first
respondent and the second
respondent, Mr Tertius Nicolaas van der Walt, are chartered
accountants and business partners. The third
respondent, the Master
of the High Court, Grahamstown (the Master), took no part in the
proceedings and I shall therefore refer
to the first and second
respondents collectively as ‘the respondents’.
[3]
The David Gowar Trust owns seven farms. The Rietfontein Trust owns
two farms whilst the R D Gowar Testamentary Trust owns one
farm,
farming equipment and livestock. The Gowar Farm Trust owns farming
equipment and livestock.
[4]
The second appellant and the first respondent are the trustees of the
David Gowar Trust. They, together with their respective
spouses and
descendants, are the beneficiaries of this trust. The respondents are
the trustees of the Rietfontein Trust, the second
appellant having
been removed as trustee. The beneficiaries of the Rietfontein Trust
are the David Gowar Trust, the first respondent
and his spouse and
descendants.
[5]
The second appellant and the respondents are the trustees of the
Gowar Farm Trust. The beneficiaries of the Gowar Farm
Trust are
the appellants, the first respondent and the two brothers’
spouses and descendants. The second appellant and the
first
respondent are, in addition, the trustees of the R D Gowar
Testamentary Trust and also its beneficiaries, as are their
respective
descendants.
[6]
The chief protagonists in this bitter and drawn-out dispute are the
Gowar brothers. Their conflict largely stemmed from their
irreconcilable differences about how the affairs of the various
trusts could be best served in the interests of the beneficiaries.
Despite concerted endeavours by third parties, including the first
appellant, to mediate the dispute remains unresolved.
[7]
Ultimately, the dispute culminated in an application brought by the
appellants against the respondents in the Eastern Cape Division
of
the High Court, Grahamstown. In that application the appellants
sought an order:
‘
1.
That [the] first respondent be removed as trustee of David Gowar
Trust (TM 5553/4) and R D Gowar Testamentary Trust (For Reginald
David Gowar and Francois Peter Gowar) (MT 2659/2007).
2.
That [the] first and second respondents be removed as trustees of:
2.1
Gowar Farm Trust (IT 1231/1997);
2.2
Rietfontein Trust (TM 5692);
3.
That [the Master of the High Court] be directed to appoint Jacobus
Marthinus Abraham Louw
[1]
and David Keith Reed as trustees of:
3.1
David Gowar Trust (TM 5553/4);
3.2
Gowar Farm Trust (IT 1231/1997);
3.3
Rietfontein Trust (TM 5692);
3.4
R D Gowar Testamentary Trust (For Reginald David Gowar and Francois
Peter Gowar) (MT 2659/2007).
4.
That Jacobus Marthinus Abraham Louw
[1]
[Stephen Kenneth
Gough] and David Keith Reed in their capacities as trustees of the
above trusts, be entitled to act in conjunction
with the remaining
trustees of each such trust and to administer the affairs of the
trusts, including the passing of a resolution
terminating each such
trust and distributing the trust capital and income to the
beneficiaries of the various trusts in accordance
with the provisions
of such trusts.
5.
That Jacobus Marthinus Abraham Louw [Stephen Kenneth Gough] and David
Keith Reed in their capacities as trustee of the above
trusts be
exempt from filing security with the Master of the High Court in
terms of the Trust Property Control Act 57 of 1988.
6.
That first and second respondents be ordered to pay the cost of this
application jointly and severally, the one paying the other
to be
absolved. . . .’
[8]
In addition to opposing the application, the respondents also brought
a counter-application. In it, they sought the following
relief:
‘
1.
That second applicant be removed as a Trustee of the David Gowar
Trust (TM5553), the Gowar Farm Trust (IT 1231/97) and the R
D Gowar
Testamentary Trust (MT2659/2007);
2.
That second applicant be ordered to pay the costs of first and second
respondent’s counter motion.’
[9]
Both the main and the counter applications came before Smith J who
dismissed both with costs, concluding that:
‘
[45]
Under these circumstances I am not satisfied that the applicants have
been able to prove misconduct,
lack of capacity, breach of fiduciary
duties, or any other grounds to justify the removal of the
respondents as trustees. But neither
have the respondents been able
to establish similar grounds for [the second appellant’s]
removal as trustee. For the reasons
which I have stated earlier, I am
also not convinced that his removal as trustee will be in the
interests of the beneficiaries.’
The
court a quo went on to hold, from the facts outlined in its judgment,
that:
‘
[46]
It must have been abundantly clear from [the] summary of the
allegations in the main and counter applications
that there are
extensive and fundamental disputes of fact.’
[10]
It continued:
‘
[47]
Mr Ford has belatedly applied for the matter to be referred for
trial. He conceded that the factual
disputes are so numerous and
interrelated that it would be impossible to refer only certain
discrete issues for oral evidence.
It is in my view unavoidable that
the ensuing trial would be protracted, and will incur substantial
expenses for the parties and
the trusts. In addition, I am of the
view that it is extremely unlikely that the balance of probabilities
in both the main and
counter applications will be disturbed by the
hearing of viva voce evidence. The answers to the allegations of
misconduct in both
the main and counter applications have been
comprehensive and reasonable, and those allegations relating to lack
of capacity and
breaches of fiduciary duties have also been soundly
refuted. There can also be little doubt that the applicants must have
anticipated
the extensive disputes of fact, but nevertheless decided
to institute motion proceedings. I am accordingly loath to exercise
my
discretion to refer the matter for trial under these
circumstances.’
[11]
Aggrieved by the outcome of their respective applications, both
parties sought and were granted leave by the court a quo to
appeal
and cross-appeal against its judgment.
Factual
background
[12]
It is necessary to set out some factual background. The trusts in
issue were established from 1994 to 2008. The various trust
deeds
state that the primary objects of the trusts shall inter alia be the
acquisition by purchase or otherwise of immovable property
or other
property and the maintenance, development and improvement of land.
The founder was the deceased, a successful farmer during
his farming
career. He was advised by the first respondent that it would be
prudent, for estate planning purposes, for him to conduct
his farming
operations and to pursue the acquisition of additional farms under
the auspices of a trust. Although the deceased was
initially not
receptive to the proposal, he later agreed subject to the second
appellant being made a beneficiary of the David
Gowar Trust. In
addition, a certain Mr Phillip Gerber, a chartered accountant and the
deceased’s confidant was, upon the
deceased’s insistence,
appointed as one of the trustees. The deceased subsequently
transferred two of his farms into this
trust.
[13]
As already mentioned, the David Gowar, the Rietfontein and the R D
Gowar Testamentary Trusts own several farms in the Somerset
East and
Alexandria districts. The Gowar Farm Trust farmed, from 2000 until
2010, on all of the farms owned by the other trusts
and on Glen
Cumming farm owned by the first appellant. The second appellant was
in charge of the farming operations conducted by
the Gowar Farm
Trust, initially with the deceased and in later years on his own. The
first respondent was responsible for the bookkeeping
and preparation
of the financial records of all the trusts and related matters. Some
of the farms were purchased and paid for by
the first respondent
whilst the others were purchased on behalf of the David Gowar Trust.
From the income generated through its
farming operations, the Gowar
Farm Trust inter alia paid its own operating expenses, the deceased’s
and first appellant’s
expenses and the second appellant’s
living expenses.
[14]
Additional farms were acquired and paid for with loans obtained from
certain banks. The monthly bond instalments ─ or
at least a
portion thereof ─ were paid from income generated from the
farming operations of the Gowar Farm Trust. Occasionally,
the first
respondent would pay any shortfall in the monthly bond payments.
Initially, the farming operations continued reasonably
well and
additional livestock was purchased. Other farming ventures, albeit
short-lived, were also undertaken. But later, the first
respondent
expressed dissatisfaction about the manner in which the second
appellant conducted the farming operations. He was, inter
alia,
critical of the following: (i) the farming operations that were
allegedly running at a loss and thus could not repay the
loans and
meet other farming expenses; (ii) the dilapidated state of the farm
properties and buildings; (iii) the second appellant’s
alleged
preoccupation with advancing his personal interests at the expense of
the other beneficiaries of the various trusts in
breach of his
fiduciary duties as a trustee; (iv) the alleged neglect and state of
disrepair of the farms’ irrigation systems;
(v) the second
appellant’s alleged failure to provide accurate stock numbers
for accounting purposes; and (vi) the fact that
there was
insufficient income generated from the farming operations to pay
rental to the trusts that owned the farms.
[15]
Following the deceased’s death and during 2008 in the build-up
to the escalation of their irreconcilable differences,
the second
appellant and the first respondent discussed the prospect of a
division of the assets of the trusts. But as they could
not agree on
how the division was to be implemented, it did not materialise. When
this happened, the second appellant and the first
respondent
apparently agreed that the second appellant should farm for his own
account from July 2009. A close corporation named
Peter Gowar Farms
CC, to be used by the second appellant to conduct farming operations
for his own account, was registered. It
appears that this arrangement
was shortlived for their differences persisted.
[16]
Matters came to a head when, in June 2010, a meeting of the trustees
of the Rietfontein Trust was convened by the first respondent
to
which the second appellant was allegedly invited. At that meeting, a
resolution was taken in terms of which the second appellant’s
trusteeship was terminated. Following the removal of the second
appellant as trustee, the respondents ─ being the remaining
trustees ─ took a resolution to withdraw all the farms from the
management of the second appellant through the Gowar Farm
Trust and
to let them to third parties at market-related rentals.
[17]
The second appellant was aggrieved by this turn of events and
asserted that the respondents’ action undermined the farming
operations of the Gowar Farm Trust to his financial prejudice as a
trust beneficiary. This exacerbated the conflict between the
appellants and the respondents. And as the previous attempts by the
second appellant and the first respondent to agree on a division
of
the trust properties had come to naught, the second appellant accused
the first respondent ─ in the latter’s capacity
as the
trustee of the various trusts ─ of dishonesty and serious
breaches of his fiduciary duties towards the trusts’
beneficiaries.
[18]
On their part, the respondents asserted that the second appellant was
guilty of: (i) putting his personal interests above those
of the
beneficiaries of the trusts; (ii) appropriating trust assets and
income for his personal use; (iii) treating trust assets
as though
they are his personal property; and (iv) refusing to account for his
management of the farming operations conducted by
the Gowar Farm
Trust. These accusations by the second appellant and the first
respondent levelled against each other were at the
heart of the
dispute in the court a quo.
Locus
standi
[19]
Although the appellants’ locus standi was disputed by the
respondents in the court a quo, it was no longer a live issue
before
us and thus no more need be said about it.
Legal
framework
[20]
I propose dealing first with the law relating to the nature of a
trust, the duties of trustees, their removal from office and
the
statutory power of a court to vary any provision of a trust or to
terminate a trust. It is trite that a trust is not a legal
person.
‘In its strictly technical sense the trust is a legal
institution
siu
generis
.
. . The trustee is the owner of the trust property for purposes of
administration of the trust but
qua
trustee he has no beneficial interests therein.’ (See in this
regard:
Braun
v Blann and Botha NNO & another
[1984] ZASCA 19
;
1984 (2) SA 850
(A) at 859D-H;
Commissioner
for Inland Revenue v Friedman & others NNO
[1992]
ZASCA 190
;
1993 (1) SA 353
(A) at 370D-H.)
[21]
In
Land and Agricultural Bank of South Africa v Parker and others
[2004] ZASCA 56
;
2005 (2) SA 77
(SCA) Cameron JA elaborated (para
10):
‘
.
. . . [A trust] is an accumulation of assets and liabilities. These
constitute the trust estate, which is a separate entity. But
though
separate, the accumulation of rights and obligations comprising the
trust estate does not have legal personality. It vests
in the
trustees, and must be administered by them ─ and it is only
through the trustees, specified as in the trust instrument,
that the
trust can act . . . .’
[22]
In
Lupacchini NO & another v Minister of Safety and Security
[2010] ZASCA 108
;
2010 (6) SA 457
(SCA) Nugent JA took this theme
further and observed that (para 1):
‘
.
. . . A trust that is established by a trust deed is not a legal
person ─ it is a legal relationship of a special kind that
is
described by the authors of
Honoré’s
South
African Law of Trusts
as “a legal institution in which a person, the trustee, subject
to public supervision, holds or administers property separately
from
his or her own, for the benefit of another person or persons or for
the furtherance of a charitable or other purpose.”’
[23]
Where more than one trustee have been specified in the trust deed
they share a common fiduciary obligation towards the fulfilment
of
the objects of the trust and must act jointly. (Compare:
Hoosen
& others v Deedat & others
[1999] ZASCA 49
;
1999 (4) SA 425
(SCA) paras 23, 24 and 26.)
[24]
It is apposite at this juncture to make reference to s 9(1) of the
Act. It reads:
‘
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.’
[25]
In
Sackville West v Nourse & another
1925 AD 516
, Kotze JA
whose judgment was supported by the other members of the bench,
succinctly stated the position relating to the fiduciary
duties of
trustees as follows (at 534):
‘
The
effect of this authority is that a tutor must invest the property of
his ward with diligence and safety. It is also said that
a tutor must
observe greater care in dealing with his ward’s money than he
does with his own, for, while a man may act as
he pleases with his
own property, he is not at liberty to do so with that of his ward.
The standard of care to be observed is accordingly
not that which an
ordinary man generally observes in the management of his own affairs,
but that of the prudent and careful man;
or, to use the technical
expression of the Roman law, that of the
bonus
et diligens paterfamilias
. . .’
The
learned judge of appeal continued (at 535):
‘
We
may accordingly conclude that the rule of our law is that a person in
a fiduciary position, like a trustee, is obliged, in dealing
with . .
. the money of the beneficiary, to observe due care and diligence,
and not to expose it in any way to any business risks.’
[26]
This principle was elaborated upon by this court in
Administrators,
Estate Richards v Nichol & another
[1998] ZASCA 82
;
1999 (1)
SA 551
(SCA) where the following was stated (at 557D-F):
‘
.
. . [T]he standard was higher than that which an ordinary person
might generally observe in the management of his or her own affairs.
Such a person, it was pointed out, was free to do what he liked with
his property and not infrequently selected investments which
were of
a speculative nature, particularly when the potential profits were
high. A person in a fiduciary position such as a trustee,
on the
other hand, was obliged to adopt the standard of the prudent and
careful person, that is to say the standard of the
bonus
et diligens paterfamilias
of Roman law, and was accordingly, as Kotze JA concluded at 535,
“obliged, in dealing with and investing the money of the
beneficiary, to observe due care and diligence, and not to expose it
in any way to any business risks”. The need to avoid
risks was
emphasised in the judgments of both Solomon ACJ and Kotze JA.’
Removal
from office of trustee
[27]
It is now trite that the court has inherent power to remove a trustee
from office at common law. This power also derives from
s 20(1) of
the Act which provides as follows:
’
20.
Removal of trustee
─
(1)
A trustee may, on the application of the Master or any person having
an interest in the trust property, at any time be removed
from his
office by the court if the court is satisfied that such removal will
be in the interests of the trust and its beneficiaries.’
[28]
Although the Act does not spell out the grounds for the removal of a
trustee, the authors of
Honoré’s
South
African Law of Trusts
[2]
assert that the general principle which has crystallised over time in
the court’s exercise of its common law jurisdiction
─ and
is now echoed in s 20(1) of the Act ─ is that a trustee will be
removed from office when continuance in office
will prevent the trust
being properly administered or will be detrimental to the welfare of
the beneficiaries.
[3]
[29]
In
Fey NO and Whiteford NO v Serfontein & another
[1993]
ZASCA 8
;
1993 (2) SA 605
(A) this court remarked that there was
nothing in
s 60
of the
Insolvency Act 24 of 1936
there under
consideration that expressly or by necessary implication indicates
that the court’s inherent common law power
of removal from
office of a trustee has been displaced. It said the following (at
610A-E):
‘
Thereafter
the learned Judge reasoned by analogy. It appears to me, with
respect, that his reasoning is instructive and sound. He
said:
“
It
would seem to me that the position of a trustee in insolvency is
analogous to that of a trustee, administrator or executor in
a
deceased's estate. He occupies a position of trust. Under the
insolvency laws it is his function to liquidate the insolvent estate
and account to creditors and the insolvent for his administration. In
this respect his fiduciary position differs little from that
of an
executor or administrator of the estate property. In my view the
Court has at common law the same power to remove a trustee
in an
insolvent estate as it has in respect of a trustee, or guardian or
administrator in a deceased's estate.”
On
the second issue before him Thirion J stated his conclusion in the
following words:
“
In
my view the grounds for removal of a trustee as set forth in
s 60
of
the
Insolvency Act 24 of 1936
as originally enacted were not intended
to be in substitution of the Court's common law powers but were
intended to be additional
thereto.
Madrassa
Anjuman Islamia v Johannesburg Municipality
1917 AD 718
at 723 and 727.
The
substitution of s 60 of the Act by s 18 of Act 99 of 1965, therefore,
did not in any way affect the Court's common-law powers
to remove a
trustee from office. This conclusion is in accordance with the well
recognised rule in the interpretation of statutes
that, in order to
oust the jurisdiction of a court of law, it must be clear that such
was the intention of the Legislature
(De Wet v Deetlefs
1928
AD 286
at 290), and in accordance with the rule that statutory
provisions which limit or do away with an aggrieved person's right to
seek
the assistance of the Court have to be strictly interpreted.
Benning v Union Government (Minister of Finance)
1914 AD 180
at 185.”’
Although
those remarks were made in a different but analogous context they, by
parity of reasoning, apply with equal force in the
context of s 20(1)
of the Act.
[30]
For present purposes, two principles must be emphasised. First, the
power of the court to remove a trustee must be exercised
with
circumspection. Second, neither
mala fides
nor even misconduct
are required for the removal of a trustee. As to the former, Murray J
explained this in
Volkwyn N.O. v Clarke and Damant
1946 WLD
456
as follows (at 464):
‘
.
. . [I]t is a matter not only of delicacy (as expressed in
Letterstedt’s
case
[
Letterstedt’s
v Broers
(1884)
9 AC 371
(PC) at 387]) but of seriousness to interfere with the
management of the estate of a deceased person by removing from the
control
thereof persons who, in reliance upon their ability and
character, the deceased has deliberately selected to carry out his
wishes.
Even if the . . . administrator has acted incorrectly in his
duties, and has not observed the strict requirements of the law,
something
more is required before his removal is warranted. Both the
statute and the case cited indicates that the sufficiency of the
cause
for removal is to be tested by a consideration of the interests
of the estate. . .’
[31]
As to the latter, Murray J said the following at 471:
‘
.
. . . It is of course true that proof of dishonesty or
mala
fides
is not essential for a case for the removal of executors or
administrators. . .’
The
learned judge continued (at 474):
‘
.
. . [T]he essential test is whether such disharmony as exists
imperils the trust estate or its proper administration. . .’
Thus,
the overriding question is always whether or not the conduct of the
trustee imperils the trust property or its proper administration.
Consequently, mere friction or enmity between the trustee and the
beneficiaries will not in itself be adequate reason for the removal
of the trustee from office. (See also in this regard:
Tijmstra
NO v Blunt-Mackenzie NO & others
2002 (1) SA 459
(T) at 473E-G.) Nor, in my view, would mere conflict
amongst trustees themselves be a sufficient reason for the removal of
a trustee
at the suit of another.
[32]
Moreover, it must be emphasised that whilst a trustee is in law
required to act with care and diligence, the decisive consideration
is the welfare of the beneficiaries and the proper administration of
the trust and the trust property. And, sight must not be lost
of the
crucial fact that the court may order the removal of a trustee only
if such removal will, as required by s 20(1) of the
Act, be ‘
in
the interests of the trust and its beneficiaries
’.
(My emphasis.)
Variation
or termination of trust
[33]
The variation of the provisions of a trust deed or its termination
may be achieved in various ways. For present purposes it
is only the
variation or termination in terms of s 13 of the Act that is of
relevance. Section 13 reads:
‘
13.
Power of court to vary trust provisions
─
If a trust instrument contains any
provision which brings about consequences which in the opinion of the
court the founder of a
trust did not contemplate or foresee and which
─
(a)
hampers the achievement of the
objects of the founder; or
(b)
prejudices
the interests of beneficiaries; or
(c)
is
in conflict with the public interest,
the
court may, on application of the trustee or any person who in the
opinion of the court has a sufficient interest in the trust
property,
delete or vary any such provision or make in respect thereof any
order which such court deems just, including an order
whereby
particular trust property is substituted for particular other
property, or an order terminating the trust.’
[34]
Thus, s 13 of the Act is to the effect that the court may on
application of the trustee or any person who, amongst others,
has
sufficient interest in the trust property delete or vary any such
provision, in a trust deed which brings about the result
specified in
the section or to grant ‘an order terminating the trust.’
Cameron et al
[4]
state that the
provisions have both subjective and objective criteria. The former
relate to the founder’s lack of foresight
or contemplation and
the latter relate to prejudice to the trust object, beneficiaries or
the public interest. These criteria must
be satisfied before the
court can intervene. Accordingly, as I see it, for the purposes of s
13 of the Act the appellants had to
establish on a balance of
probabilities that any provision of the trust deed has brought about
any one of the consequences mentioned
in s 13
(a)
,
(b)
and
(c)
of the Act and that the founder of the trust did not, at the time the
trust was established, contemplate or foresee such a result.
[35]
In
Potgieter & another v Potgieter NO & others
[2011]
ZASCA 181
;
2012 (1) SA 637
(SCA) Brand JA who wrote the unanimous
judgment of this court said (para 30):
‘
I
do not agree that s 13 supports the authority assumed by the court a
quo. I say this for two reasons. First, I find no provision
in the
original trust deed which brings about any consequence that could not
be foreseen by the founder. The consequences which
the court a quo
found untenable were brought about by an application of common-law
principles, not by any provision of the trust
deed. . . .’
Consequently,
absent the jurisdictional criteria required in terms of s 13 of the
Act, it would not be competent for the court to
exercise the
statutory power conferred on it by s 13. (See, for example:
Curators,
Emma Smith Educational Fund v the University of KwaZulu-Natal &
others
[2010]
ZASCA 136
;
2010 (6) SA 518
(SCA) para 48.)
Discussion
[36]
That there is a break-down of relationship between the chief
protagonists is apparent from the record. As appears above, the
record is replete with disputed accusations and counter-accusations
which, it was asserted, are a manifestation of a conflict of
interests, misconduct, dishonesty and breaches of fiduciary duties
made by the one against the other. At the hearing before us,
counsel
were agreed that there are material disputes of fact on the papers.
Thus, applying the principles set out in
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
1984
(3) SA 623 (A),
[5]
the averments
set out in the respondents’ affidavits should be accepted in
relation to the main application unless farfetched
or clearly
untenable. And, by the same token, the averments contained in the
appellants’ affidavits must be accepted in respect
of the
counter-application.
[37]
Accordingly, to succeed in the relief that the appellants seek
against the respondents, namely, their removal as trustees,
they must
prove that the respondents’ conduct of which they complain
imperils the trust property or its proper administration
or that the
removal will otherwise be in the interests of the trust and its
beneficiaries.
[38]
The appellants contended that the removal of the first respondent
from the trusteeship is necessary, inter alia, because he:
(a)
cajoled the second appellant into agreeing to the appointment of the
second respondent as a stratagem to gain control of the
Gowar Farm
Trust; (b) required the second appellant to farm for his own account
at the height of a drought and when the drought
broke, advised Cape
Merino and Wool not to accept any livestock or produce from the
second appellant, but that if it did, to make
payment therefor to the
Gowar Farm Trust which he controlled, so as to financially ruin the
second appellant; (c) deprived the
second appellant of the use of the
farms owned by the Rietfontein Trust by letting them to third parties
with devastating consequences
for the livestock; (d) unilaterally
passed a resolution amending the beneficiaries of the Rietfontein
Trust to the prejudice of
the David Gowar Trust; (e) appropriated
income derived from the letting of certain farms for himself; and (f)
misappropriated the
second appellant’s shares in GBG Estates
Trust (Pty) Ltd. In all of this, so the appellants contended, the
first respondent
acted in concert with the second respondent without
regard for the appellants’ financial wellbeing.
[39]
In argument, the appellants’ counsel nailed his colours to the
mast and relied solely on three bases in support of the
appellants’
case which he contended fell outside the realm of the factual
disputes. He advanced three contentions. First,
that the
surreptitious removal of the second appellant as the trustee of the
Rietfontein Trust leads to only one conclusion that
it was intended
to advance the first respondent’s interests. Second, the
addition of the first respondent’s wife and
children as
beneficiaries of the Rietfontein Trust constituted a variation of the
trust deed which was impermissible. Third, the
fact that 50 per cent
of the shares in GBG Estates (Pty) Ltd, a company in which the second
appellant allegedly held a 25 per cent
shareholding, were transferred
to the Dago Trust of which the first respondent and his family were
beneficiaries without reference
to him and by amending the balance
sheet of the David Gowar Trust to delete the reference to the Trust’s
shareholding in
GBG Estates (Pty) Ltd, the first respondent acted to
the prejudice of the trust’s beneficiaries in breach of his
fiduciary
duties.
[40]
I deal with these grounds in the reverse order. Apropos the affairs
of GBG Estates (Pty) Ltd, it was contended that the first
respondent’s activities reveal an extraordinary state of
affairs which called for an explanation from the respondents as
to
how the transfer of the shares came about. Yet, it was argued, the
respondents studiously avoided providing answers, choosing
to take
refuge in subterfuge by contending that the dispute relating to those
shares was
res
judicata
.
In my view, this submission is unavailing. It overlooks the simple
fact, highlighted by the respondents’ counsel, that whatever
may have happened with the shares of GBG Estates (Pty) Ltd had no
bearing on the affairs of the trusts. Simply put, it was not
a trust
issue and can therefore found no basis for the removal of the
respondents from trusteeship.
[41]
As to the removal of the second appellant as the trustee of the
Rietfontein Trust, the appellants’ contention was that
the
second appellant was removed merely because he had prior thereto been
required to resign but had refused to do so. The appellants
then took
an inferential quantum leap, relying on this fact, to contend that
the second appellant’s removal was calculated
to advance the
first respondent’s interests and those of the beneficiaries
benefiting through him to the exclusion of all
the other
beneficiaries.
[42]
The respondents, whilst admitting that the second appellant was
indeed removed as a trustee, nevertheless contended that his
removal
was permitted by clause 2.3 of the trust deed which empowers the
majority of the trustees to take a resolution removing
one of their
number, as happened in their case. And that as the second appellant’s
removal from trusteeship was accepted
by the Master it remained
effective for as long as it was still extant. In my view, there is
merit in respondents’ submissions.
This must be so for the
second appellant does not impugn his removal from trusteeship but
only seeks the removal of the respondents
as trustees of the affected
trusts.
[43]
I deal next with the last contention advanced by the appellants in
support of their case that the respondents are guilty of
misconduct
warranting their removal as trustees. It was contended on their
behalf that the addition of the first respondent’s
wife and
children as beneficiaries of the Rietfontein Trust amounted to a
variation of the Rietfontein Trust deed. Consequently,
as the sole
beneficiary before variation was the David Gowar Trust, its consent
qua beneficiary was necessary and without it the
purported variation
was ineffectual. In support of this contention the appellants placed
much store in
Crookes
NO & another v Watson & others
1956
(1) SA 277
(AD). There, Centlivres CJ, in the course of examining old
authorities and reference to the judgment of this court in
Commissioner
for Inland Revenue v Estate Crewe & another
1943 AD 656
, reiterated the principle that once a beneficiary accepts
the benefit under the trust he acquires rights and the trust deed can
thus not be varied without his consent.
[6]
[44]
Counsel for the respondents submitted that the appellants presented
no evidence to establish that the David Gowar Trust had
accepted the
benefit bestowed upon it in the Rietfontein Trust deed. Consequently,
the respondents contended that in the absence
of such evidence the
appellants’ reliance on the decisions in
Crookes
NO
and
Potgieter
NO
does
not avail them. I agree. In the present case, in order to
successfully invoke
Crookes
NO
and
Potgieter
NO
,
[7]
the appellants bore the onus of proving that the David Gowar Trust
had, in one way or other,
[8]
accepted the benefit bestowed on it. They have not discharged that
onus.
Termination
of the trust
[45]
Before considering this part of the appellants’ case it is
necessary to have regard to the terms of the trust deed. The
relevant
provision is clause 28. It reads as follows:
‘
28
Termination
[9]
This
trust shall terminate upon whichever of the following events shall
happen the earlier;
28.1
the passing of unanimous resolution by the Trustees that in their
sole and absolute discretion, there is a good and sufficient
reason
for such termination and they resolve accordingly; or
28.2
The entire Trust Capital has been distributed.’
[46]
The appellants seek the termination of the trust on the ground that
the relationship between the second appellant and the first
respondent has broken down. For this reason, the second appellant
contends that he ‘no longer trusts the first respondent
and
[is] not prepared to be associated with him in any manner
whatsoever’. Hence he is seeking the appointment of independent
trustees ‘who may then administer the affairs of the various
trusts in the interests of all beneficiaries and . . . terminate
such
trusts and distribute the capital and income to the beneficiaries. .
. .’
[47]
Counsel for the respondents submitted that the appellants have made
out no case for variation or termination of the various
trusts. It
was contended that absent the jurisdictional requirements specified
in s 13 of the Act the court is not vested with
any power under that
section to vary or terminate the trusts.
[48]
For the appellants it was argued that in substance what they seek is
the appointment of additional independent trustees who
would
administer the affairs of the trusts in conjunction with the existing
trustees. Those trustees would then, if they considered
there to be a
good and sufficient reason to do so, terminate the trusts in
accordance with the provisions regulating their termination.
[49]
This submission cannot prevail for the reasons explained in paras 34
and 35 above. Moreover, in their notice of motion the
appellants
sought an order for the appointment of two independent trustees in
order for them (in conjunction with the remaining
trustees) to, inter
alia, pass a resolution terminating the various trusts and
distributing the trust capital and income. Having
failed to bring
their case within the purview of s 13 of the Act, the relief sought
in that regard was manifestly doomed to fail.
Nor have the appellants
brought their case within the terms of clause 28 of the trust deed.
Cross-appeal
[50]
I deal next with the cross-appeal. It was in essence premised on the
contention that the court a quo erred in finding that
‘the
removal of the second appellant as a trustee was not in the interests
of the beneficiaries of the affected trusts’.
And that the
court a quo should have found that an overwhelming case of misconduct
against the second appellant had been established.
[51]
Earlier, I alluded to the fact that the fate of both the appeal and
the cross-appeal hinged entirely on the question whether
the
allegations and counter-allegations of misconduct fall outside the
realm of the factual disputes on the papers. Mindful of
this fact,
counsel for the respondents, in pressing for relief against the
second appellant, contended that the second appellant:
(a) preferred
his personal interests above those of the trusts and all other
beneficiaries; (b) banked farming income from the
Gowar Farm Trust
farming operations into accounts controlled by him; (c) utilised
trust assets for his personal benefit without
accounting therefor;
and (d) failed to account for livestock losses in excess of R1
million. It was argued that the factual account
in support of these
accusations was beyond question and that the second appellant’s
denials were far-fetched and clearly
untenable to warrant their
rejection on the papers.
[52]
Unsurprisingly, counsel for the appellants submitted that all of the
allegations against the second appellant were disputed.
And that the
second appellant’s denials were in fact not so far-fetched or
clearly untenable that the court would be justified
in rejecting them
merely on the papers. In my view, it is unnecessary to go into a
detailed discussion of this aspect. It suffices
to say that the
issues that counsel for the respondents submitted were discrete and
far removed from the factual conflict are in
truth inextricably
intertwined with the factual matrix contested by the appellants. This
conclusion necessarily means that the
cross-appeal too cannot
succeed.
[53]
It must follow, therefore, that the conclusion reached by the court a
quo cannot be faulted. Consequently, both the appeal
and the
cross-appeal fall to be dismissed.
[54]
In the result the following order is made:
1
The appeal is dismissed with costs including the costs of two
counsel.
2
The cross-appeal is dismissed with costs.
_________________
X M PETSE
JUDGE
OF APPEAL
APPEARANCES:
For
Appellants:
E A S Ford SC
Instructed
by:
Pagdens
Attorneys, Port Elizabeth
Claude
Reid Inc, Bloemfontein
For
First and Second Respondents:
A R Sholto-Douglas SC
(with
D H De La Harpe)
Instructed
by:
Coetzee
& Venter Inc, Port Elizabeth
Cooper
Majiedt Inc, Bloemfontein
[1]
Following
objection from the respondents, Mr Louw was substituted with a Mr
Stephen Kenneth Gough.
[2]
Cameron, De Waal,
Wunch, Solomon & Khan,
Honoré’s
South
African Law of Trusts
5
ed (2002) at 223.
[3]
See for example:
Sackville
West
above
at 527.
[4]
Cameron, De Waal,
Wunch Solomon & Khan,
Honoré’s
South African Law of Trusts
5
ed (2002) at 517.
[5]
At 634E-635C; see
also:
PMG
Motors Kyalami (Pty) Ltd & another v Firstrand Bank Ltd, Wesbank
Division
[2014]
ZASCA 228
;
2015 (2) SA 634
(SCA) para 23.
[6]
See also:
Potgieter
above,
para 28; Cameron, De Waal, Wunch Solomon & Khan,
Honoré’s
South
African Law of Trusts
5ed (2002) at 195.
[7]
Potgieter &
another v Potgieter & others
[2011]
ZASCA 181; 2012 (1) SA 637 (SCA).
[8]
See for example:
Ex
parte Orchison
1952 (3) SA 66
(T) at 78H where the following is stated:
‘
.
. . . But by agreeing to become vested with the
dominicum
of property and to administer it in terms of the trust the trustees
seem to me to have performed quite a different juristic act.
They
contracted for the benefit of third parties who might or might not
accept the benefits of the contract at some future date
. . . but
they did not accept benefits under the contract for those third
parties.’
[9]
This is common to
all four trust deeds.