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[2012] ZAGPJHC 228
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Groeschke v Trustee for the Time Being of the Groeschke Family Trust and Others (44105/2011) [2012] ZAGPJHC 228; 2013 (3) SA 254 (GSJ) (31 October 2012)
REPORTABLE
SOUTH
GAUTENG HIGH COURT, JOHANNESBURG
CASE
NO: 44105/2011
DATE:31/10/2012
In
the matter between:-
GROESCHKE,
ROBIN.
..........................................................................................
Applicant
and
TRUSTEE
FOR THE TIME BEING OF THE
GROESCHKE
FAMILY
TRUST
...........................................................................
First
Respondent
BENIGNA
OFFWOOD
.........................................................................................
Second
Respondent
BENIGNA
OFFWOOD
N.O.
.................................................................................
Third
Respondent
MASTER
OF THE NORTH GAUTENG
HIGH
COURT
.........................................................................................................
Fourth
Respondent
JUDGMENT
A
J BESTER, AJ:
[1]
The relevant facts that gave rise to this application can be
summarised as follows :-
a)
One Heinrich Groeschke, ("the deceased"), who passed away
on 26 September 2009, created the First Respondent in February
1999,
as an inter vivos trust in favour of his son, the Applicant;
b)
The Applicant was appointed as the trust's sole capital and income
beneficiary;
c)
The deed of trust ("the deed") that created the First
Respondent, stipulated, among others, as follows :-
i)
The deceased was appointed as the First Respondent's sole and initial
trustee (clause 4.1);
ii)
There was no need for more than one trustee (clause 4.2);
iii)
The deceased had the power to appoint additional trustees in his will
(clause 4.3);
iv)
On the date of the death of the deceased, the executor of his estate
will become a trustee (clause 4.4);
v)
The appointment of a trustee will be of no force or effect unless
accepted in writing by such appointed trustee (clause 4.9);
vi)
The deceased, in his capacity as trustee, was entitled to appoint any
person as an alternative trustee in the place and stead
of another
trustee during the latter's absence or disability to act as a trustee
(clause 4.8);
vii)
The trustees may "change" the capital beneficiaries of the
trust, but no change whatsoever may be effected after
the death of
the deceased. However, during the life of the deceased, the deed of
trust may be "altered" only by the deceased
(clause 22).
d)
On 1 December 2005, the deceased resolved in a written resolution
signed by him and two witnesses, to effect certain amendments
to the
deed;
e)
The resolution was lodged with the Master of the High Court in the
life of the deceased;
f)
The Second Respondent was, in terms of the deceased's last will,
appointed as executrix of his estate on his death in 2009;
g)The
Fourth Respondent (initially cited as the "Master of the South
Gauteng High Court", but later corrected by amendment)
issued to
the Second Respondent her letters of authority as trustee of the
trust only on 9 March 2011;
h)
The Second Respondent cannot recall whether or not she had accepted
her appointment as trustee in writing or not, but there is
no dispute
that she had actually accepted the appointment as trustee by the
deceased and had discharged her duties as such;
[2]
The reason for the removal of the Applicant as a beneficiary is not
directly relevant, but the allegation is that the Applicant
had
stolen money from the family business and had, thereafter, left the
business. The Applicant was thereafter disowned by the
deceased. The
Applicant disputes the allegations of theft, but not that the
deceased had renounced him as his son.
[3]
Because of the importance of the resolution in the dispute between
the parties and in argument on their behalf, it is necessary
to
reproduce the relevant part of it in this judgement :-
"1
December 2005
MINUTES
OF MEETING OF THE TRUSTEE: GROESCHKE FAMILY TRUST: IT 1961/99
Present:
Heinrich
Groeschke ...
The
trustee has resolved that the following changes should be made to the
trust deed in terms of clause 22 of the trust deed in
terms of which
Heinrich Groeschke is authorised to make changes to the trust deed.
1)
That Benigna Offwood ... be appointed as alternative
trustee to
the trust in terms of clause 4.8 of the trust
deed.
2)
The current capital beneficiary, Robert Groeschke be removed as
beneficiary of the trust in respect of both capital and income.
It is
the wish of the trustee that Robin Groeschke, his spouse and
descendants specifically be excluded as income and capital
beneficiaries.
3)
The capital beneficiary be replaced with Heinrich Groeschke or any
person or persons that the trustees appointed by way of resolution.
4)
Income beneficiary be or any person that the trustees appointed by
way of resolution.
8)
Added to clause 7.6 shall be a paragraph that states that decisions
by the trustees that have not been properly minuted are not
null and
void merely because of the fact that the decisions were not minuted.
[4]
In this application the Applicant now, some 7 years after the date of
the resolution and over 3 years after the death of the
deceased,
attacks the validity of the resolution as an amending instrument and
the validity of the amendments themselves. That
the lengthy delay in
the launch of the application is, however, not explained in the
papers before me and neither did the Respondent
take any point in
respect thereof.
[5]
The Applicant contends that the deceased's resolution was no more
than an expression of intent. An amendment to a trust instrument,
he
argues, must in order to be effective, be on application; it cannot
be achieved merely by way of a resolution; and it must be
effected in
the trust instrument itself. Therefore, he submitted, the resolution
did not amend the trust and, accordingly, he had
remained a
beneficiary of the trust.
[6]
In the alternative the Applicant argued that, even if the resolution
is held to be an effective amending instrument, the amendments
themselves had resulted in a failed or a "limping" trust
and must therefore be held to be invalid and pro non scripto.
If the
amendments are pro non scripto then the Applicant was not removed as
a beneficiary of the trust.
[7]
In prayer 1 of his notice of motion, the Applicant therefore seeks an
order declaring him to be, alternatively at all times
to have been,
the sole capital and income beneficiary of the First Respondent.
[8]
It is not necessary to consider the further, alternative relief
sought by the Applicant in his Notice of Motion. These alternative
prayers presume a valid amendment of the deed and a valid removal of
the Applicant as a beneficiary, but with subsequent failure
of the
trust. It must then follow, as fairly conceded during argument by Ms
Hardy on behalf of the Applicant, that, if the Applicant's
removal
was valid, he would have no locus standi to claim the alternative
relief as, after that removal, he had no further interest
in the
trust or its continued validity or invalidity.
[9]
The only issues therefore to be determined in this application is
whether or not the resolution constituted a valid amending
instrument
and if it did, whether the amendments brought about by paragraphs 1,
2, 3 and 4 of the resolution ought to be declared
pro non scripto.
Did the deceased's resolution amend the deed of trust? [10] A deed of
trust is a contract.
[11]
More specifically, the Supreme Court of Appeal has held that it is a
contract akin to a stipulatio alteri, namely a contract
for the
benefit of a third party. Therefore, a founder of a trust and a
trustee can by agreement between them vary or even cancel
a deed of
trust before the third party has accepted the benefits conferred on
him or her by the trust deed. "But once the
beneficiary has
accepted those benefits, the trust deed can only be varied with his
or her consent. The reason is that, as in the
case of a stipulatio
alteri, it is only upon acceptance that the beneficiaries acquire
rights under the trust before acceptance,
a beneficiary is a
"contingent beneficiaries only'. Therefore a trust deed varied
without the beneficiary's consent after
the latter has accepted the
benefits conferred by the trust deed, is invalid.
See:
Potgieter v Potgieter NO
2012 (1) SA 637
SCA paragraph 18 and 29
[12]
There is nothing before me that shows that the Applicant had known
of, and had accepted the benefit under the trust. Consequently,
no
argument was addressed to me on that score. There was also no dispute
between the parties that, in terms of clause 22 of the
deed, the
deceased had the right, unilaterally to vary the deed.
[13]
It is trite that consenting contractants can validly vary a contract,
for example, by addendum, further contract, etc. That
also applies,
per force, to deeds of trust. However, the Trust Property Control
Act, 57 of 1988 ("the Act") adds statutory
limitations to
that trite precept of contract law in the definitions section and in
sections 2 and 4.
[14]
In terms of the definitions section of the Act, a "trust
instrument' is "a written agreement or a testamentary writing
or
a court order according to which a trust was created".
[15]
A trust instrument must therefore be in writing. However, that does
not mean that a trust cannot be created by oral agreement.
But that
oral agreement only becomes a "trust instrument" when it is
reduced to writing: in terms of 2 of the Act, "(i)f
a document
represents the reduction to writing of an oral agreement by which a
trust was created or varied, such document shall
for the purposes of
this Act be deemed to be a trust instrument".
[16]
A written document in terms of which a deed of trust is varied can
therefore also be in the form of an addendum, a further
contract,
etc. As is the case with any other variation contract, a document
that amends a deed of trust must be read with the deed
itself in
order to determine the terms of the amended deed.
[17]
In the case before me, because the deceased had the right
unilaterally to amend the deed, a formal contract in the ordinary
sense of the word was not required; a document signed by the deceased
and in terms of which he amends, or indicates that he has
resolved to
amend the deed of trust was sufficient.
[18]
Section 4(2) of the Act stipulates that, "(w)hen a trust
instrument which has been lodged with the Master is varied, the
trustee shall lodge the amendment or a copy thereof so certified with
the Master". The import of this section, when read with
the
definition section and section 2, is clear: when a trust is varied,
orally or in writing, the trustee must lodge the amendment
document
with the Master. If a copy of the document is lodged, the trustee
must certify that copy. Section 4(2) does not say that,
if that
document is not lodged, the variation would not be valid; it simply
enjoins the trustee to lodge it. As well, the section
does not
require an application to amend (as contended by the Applicant).
Neither does the section stipulate a time frame for the
lodgement of
the document or the form and content of the document. The section
also does not require the lodgement of a complete,
amended deed of
trust after the amendment; it requires only the lodgement of the
document amending the deed.
[19]
It is in my view quite clear that the lodgement of a deed of trust
and of the documents amending that deed is required under
sections 2
and 4 of the Act simply in order to facilitate, for example, the
identification of the terms of a trust and the powers,
rights and
obligations that flow from them. Hence, non-compliance with these
sections, despite their peremptory tone, is not met
with a suspension
or even the invalidation of a trust.
[20]
Turning then to the deceased's resolution, the introduction to that
document reads that the trustee "has resolved that
the following
changes should be made to the trust deed'. The resolution then
proceeds to list the amendments to the deed.
[21]
The Applicant submits, apparently because of the formulistic futurity
signified in the wording of the introduction, that it
does not
constitute an amendment of deed. He says that it is no more than an
expression of an intent to amend. Accordingly, so
the argument went,
the resolution itself was not intended to bring about any changes to
the deed - a further act of amendment to
effect the amendment was
therefore necessary and, accordingly, also a written instrument to
confirm that amendment.
[22]
In my view, however, that interpretation is not sustainable. It
ignores the fact that the deceased had the right unilaterally
to
amend the deed of trust and that he could do so orally or in writing.
The deceased's resolution, framed much along the lines
of a company
resolution, declares unequivocally that he has resolved, i.e., has
decided, that certain changes would be made to
the deed. In order to
give effect to that decision, it was recorded in writing under his
signature, duly witnessed.
[23]
In my view, the intention of the deceased as expressed in the
resolution is clear: for reasons considered by him to be perfectly
valid, he wanted to remove the Applicant as the capital and income
beneficiary of the trust; appoint himself as beneficiary in
the place
of the Applicant; appoint the Second Respondent as a trustee; whilst
remaining a trustee himself.
[24]
Nothing in the resolution points to another layer of formality that
was required by the deceased as a prerequisite for the
effecting of
the amendment. On the contrary, the resolution was thereafter lodged
with the Master to evidence the variation of
the trust instrument and
to comply with section 4(2) of the Act. That lodgement therefore
served as the official recordal of his
amendment. If that was not so,
why else would the deceased have lodged it? As pointed out above, it
is common cause that the resolution
was indeed lodged with a Master
during the life of the deceased, although it is uncertain as to when
exactly it was lodged. But
it does not matter when it was lodged; its
validity is not affected by a late lodgement for the Act does not
stipulate a time-frame
for the lodgement of an amending instrument.
[25]
Even if there is some doubt as to the import that must be accorded to
the resolution and its lodgement and whether or not,
in the context
of this case, it signifies an intent to amend only or an actual
amendment; it does not matter. I agree with the
submission by counsel
for the Respondents that I should, in case of such doubt, incline to
a construction of the resolution that
would render the amending
transaction by the deceased operative rather than inoperative. (See
McCullogh v Fernwood Estates Ltd.,
1920 AD 204
at p. 209; Kotze v
Frenkel
& Co.,
1929 AD 418
; Hughes v Rademeyer,
1947 (3) SA 133
(AD))
[26]
I therefore hold that the resolution did effect the desired
amendments to the deed.
Should
the amendments in the deed be regarded as pro non scripto?
[27]
Rather ingenuously, it was argued on behalf of the Applicant that, if
I find that the resolution was a valid amending instrument,
then, for
the purposes of considering whether or not the amendment had resulted
in a failed or a limping trust, I should construe
paragraphs 1, 2, 3
and 4 of the resolution individually and as discrete amendments, not
as one simultaneous, multi-faceted amendment.
I must therefore
consider them sequentially (or, "step-by-step" as it was
submitted) and, for example, consider whether
the amendment in
paragraph 1, namely the appointment of the Second Respondent as
trustee was valid before proceeding to consider
the validity of
paragraph 2, namely the removal of the Applicant as beneficiary. If
then, the appointment of the Second Respondent
was invalid, that
amendment and consequently all of the succeeding amendments too,
ought to be treated as pro non scripto. The
underlying reasoning is
that such "anomalies", i.e., an invalid or a limping trust
"ought to have been, but was
not foreseen" by the deceased
when he made the amendments. If he did foresee them, he would not
have made them, therefore
he could not have intended to create such
"anomalies" and they should be disregarded as pro non
scripto.
[28]
Counsel did not refer me to any authority for that proposition. If
there is such authority, I could not find it.
[29]
I am of the view that such an unorthodox approach to the
interpretation of an amending instrument is entirely inappropriate.
The deceased resolved in one instrument that a series of amendments
must be made to the deed. Therefore, in order to determine
whether
those amendments had resulted in a failed or a limping trust, the
deed incorporating all of the amendments must be considered.
Accordingly, in this case I should consider the original deed,
reading into at the amendments brought about by the resolution.
Therefore, I must consider a deed amended, among others, by the
appointment of the Second Respondent as an "alternative
trustee";
the removal of the Applicant as a capital and income
beneficiary; and the substitution of the Applicant with the deceased
as capital
and income beneficiary. Then, having regard to the deed so
amended, I must consider, globally, the effect, if any, of those
amendments
on the continued validity of the deed.
[30]
The principle change brought about by the amendment was that, before
the amendment, the deceased was a trustee only, whereas
after the
amendment he was both a trustee and a beneficiary.
[31]
There can be no doubt that a trust with a sole trustee who is also
the sole beneficiary cannot be validly created: Land and
Agricultural
Bank of South Africa v Parker and Others
2005 (2) SA 77
(SCA) at
paragraph 19. But that is not the case here. As shown below, although
the deceased was, after the amendment, the sole
beneficiary, he was
not the sole trustee. But there is, as held in Parker, nothing that
prevents a trustee from also being a beneficiary
:-
"The
core idea of the trust is the separation of ownership (or control)
from enjoyment. Though a trustee can also be a beneficiary,
the
central notion is that the person entrusted with control exercises it
on behalf of and in the interests of another. This is
why a sole
trustee cannot also be the sole beneficiary: Such a situation would
embody an identity of interests that is
inimical
to the trust idea, and no trust would come into existence." (my
accentuation)
[32]
As is evident from a reading of Parker, if at some time after the
creation of a trust the circumstances had changed so that
the
beneficiaries of that trust were also its trustees, that would not
render the trust a failed trust. As submitted by counsel
for the
Respondents in this case, when Cameron JA made the above cited
comments in a Parker, he lamented the debasement of trusts
as a means
of protection from creditors. However, he found against the trustees
of Parker Trust for reasons which of necessity
imply that the trust
had not failed, but had continued in existence despite the fact that
the all of the trustees were also the
beneficiaries of the trust.
Cameron JA was not called upon to decide it, but in my view, by the
same token, if as a result of intervening
circumstances after a
trust's creation, a sole trustee is left as a sole beneficiary, then
the position might be undesirable, but
it would also not cause the
trust to fail.
[33]
Therefore if, after the amendment, the deceased had become sole
trustee and beneficiary, then that would not have resulted
in a
failed trust. And, if that situation is undesirable, it does not
invalidate a valid trust. Section 7 of the Act empowers the
Master,
even in the absence of, or notwithstanding any provision in the trust
instrument, to appoint any person whom he deems fit
as trustee or as
a co-trustee with any serving trustee. This section therefore also
confirms, in my view, the proposition that
a shared identity of
beneficiaries and trustees that arose after the creation of a trust
would not simply render the trust a failed
trust.
[34]
The removal of the Applicant as capital and income beneficiary and
his substitution with the deceased, even if he was then
a sole
trustee and beneficiary, posed no dilemma for the continued validity
of the trust.
[35]
However, the removal of the Applicant as beneficiary did deprive him
of all interest that he had in the trust and he therefore
has no
locus standi whatsoever to the relief sought in this application.
[36]
Conceivably, the appointment of the Second Respondent as "alternative
trustee" and not as "additional trustee"
in paragraph
1 of the resolution presents a dilemma only at face value. The choice
of wording by the deceased in paragraph 1 was
unfortunate, but not
fatal. As pointed out above, the intention of the deceased as
expressed in the resolution was to remove the
Applicant as the
capital and income beneficiary of the trust and to appoint himself as
beneficiary, but without himself resigning
as a trustee.
[37]
In accordance with clause 4.8 of the deed of trust an "alternative
trustee" is appointed to serve "in the place
and stead of
another trustee ... during that trustee's absence or disability to
act as a trustee". However, nothing in the
resolution permits
one to infer that the deceased wanted to appoint the Second
Respondent because he intended to absent himself,
or because he was
somehow disabled to act as a trustee. On the contrary, the inference
to be drawn from the wording of the resolution
as read with the deed
is that the deceased intended to continue to serve as a trustee
whilst at the same time to enjoy the benefits
of a beneficiary.
Therefore, he could only have intended to appoint the Second
Respondent as an additional trustee, not as an alternative
trustee.
If I am obliged, in case of doubt as to his intentions, to incline to
a construction of the amended deed that would render
the amending
transaction by the deceased operative rather than inoperative, then
the circumstances relevant to the resolution (and
logic) therefore
dictate that I should construe the phrase "alternative trustee"
in paragraph 1 of the resolution so
as to mean that the deceased
intended to appoint the Second Respondent as an "additional
trustee".
[38]
Finally, the Applicant contended that the Second Respondent had not
accepted her appointment as trustee in writing as required
by clause
4.9 of the deed of trust. The Second Respondent says in answer that
she cannot recall whether or not she had accepted
her appointment in
writing. It is quite evident from the application that the
Applicant's submission is not based on evidence (he
was not there,
therefore he would not know); it is simply a speculative submission.
It is therefore not possible to conclude on
the affidavits before me
either that the Second Respondent did, or did not accept appointment
in writing. But whether or not the
Second Respondent had accepted the
appointment in writing is not a question that I have to decide. The
basis for the declaration
sought by the Applicant is that the
amendment of the deed so as to appoint the Second Respondent as a
trustee was invalid, not
that her appointment was at some stage
thereafter invalidated because she did not accept the appointment in
writing. Nevertheless,
clause 4.9 of the deed does not stipulate a
time-frame for acceptance in writing and there is in any event no
dispute that, in
the life of the deceased, the Second Respondent had
actually accepted her appointment and that she had thereafter
discharged her
duties as trustee. There is therefore no reason not to
conclude that, as he would have been entitled to do, the deceased had
simply
waived the clause 4.9 written acceptance requirement in
respect of the Second Respondent's appointment.
[39]
I therefore hold that the amendments introduced into the deed by
means of the resolution were valid and did not result in a
failed
trust.
[40]
Counsel for the Respondents have submitted that, because the issues
to be decided in this case are new and complex, and because
the
application is relatively voluminous, the employment of two counsel
was warranted. Counsel for the Applicant did not make contrary
submissions.
I
accordingly make the following order:-
a)
The application is dismissed with costs, such costs to include the
costs consequent upon the employment of two counsel, were
two counsel
were employed.
A
J BESTER
ACTING
JUDGE OF THE SOUTH GAUTENG HIGH COURT, JOHANNESBURG
FOR
THE APPLICANT: ADV G HARDY
INSTRUCTED
BY :SPRINGER-NEL ATTORNEYS
FOR
THE RESPONDENTS : ADV A KEMACK, SC; ADV R STEPHENSON
INSTRUCTED
BY : LINDSAY KELLER ATTORNEYS
DATES
OF HEARING : 19 OCTOBER 2012
DATE
OF JUDGMENT : 31 OCTOBER 2012