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[2015] ZASCA 71
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Standard Bank of South Africa Limited v Swanepoel N.O. (20062/2014) [2015] ZASCA 71; 2015 (5) SA 77 (SCA) (22 May 2015)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 20062/2014
In
the matter between:
STANDARD BANK OF
SOUTH AFRICA
LIMITED
...................................................
APPELLANT
and
GERHARDUS
JOSHUA SWANEPOEL
NO
...............................................................
RESPONDENT
Neutral
Citation:
Standard
Bank v Swanepoel NO
(20062/2014)
[2015] ZASCA 71 (22 May 2015)
Coram:
Lewis, Mhlantla,
Pillay JJA and Schoeman and Dambuza AJJA
Heard:
11 May 2015
Delivered:
22 May 2015
Summary
:
The naming of a trust as a party to a contract, despite the fact
that it does not have legal personality, does not render the
contract
invalid where it is clear that its trustees or trustee acted for the
trust in concluding the contract.
ORDER
On
appeal from: Gauteng Division of the High Court, Pretoria (Hughes J
sitting as court of first instance).
The
appeal is upheld with costs. The order of the court a quo is set
aside and replaced with the following:
‘
The
exception is dismissed with costs.’
JUDGMENT
Lewis
JA (Mhlantla and Pillay JJA and Schoeman and Dambuza AJJA concurring)
[1]
At issue in this appeal is whether a duly registered trust can be
named as a party to a contract, concluded by the sole trustee
on its
behalf. If not, the respondent, the defendant in the court a quo,
claims that he is not bound by two transactions: a contract
of loan
(for agricultural production) and a business banking overdraft
facility.
[2]
The appellant is the Standard Bank of South Africa Ltd. On 3 November
2011 it concluded an ‘Agricultural Produce Loan’
with the
first respondent, Johannes Swanepoel, acting for the Harne
Trust, undertaking to lend
some R1
312 860 to it on various terms. (I shall refer to the trust by name
or as ‘the trust’.) Secondly,
Swanepoel had, also as
trustee of the Harne Trust, opened a business banking account with
the Bank in 2008, in terms of which the
Bank undertook to lend and
advance moneys from time to time on the overdraft facility granted.
[3]
Swanepoel, in his personal capacity, had in 2009 signed a deed of
suretyship guaranteeing the trust’s obligations to the
Bank,
which would also have covered liability under the 2011 loan
agreement. The trust defaulted on repayment of the loan capital
and
interest, and was overdrawn on the business account. The Bank
instituted action against Swanepoel in his capacity as trustee
of the
trust and against him personally as surety. (It had also claimed
against his brother as co-trustee, but withdrew the action
against
him as it transpired that he was not a trustee of the trust.)
[4]
Swanepoel excepted to the particulars of claim, contending that the
loan agreement purported to be between the Bank and the
Harne Trust:
a trust is not a legal person, he contended, and has no contractual
capacity and thus no valid contract was concluded.
Accordingly, no
valid cause of action was disclosed against Swanepoel in his capacity
as trustee and his accessory obligation as
surety was also
unenforceable being in respect of an invalid contract. The same
exception was raised in so far as the business
account was overdrawn.
[5]
Hughes J in the Gauteng Provincial Division of the High Court upheld
the exception. She held that because the trust was not
a legal
person, and that it could act only through its trustees, no contract
of loan had been concluded and moneys advanced by
the Bank to the
trust, by way of overdraft, also had no valid underlying transaction.
Thus the suretyship, being in respect of
non-existent obligations,
was likewise unenforceable. The appeal against this judgment is with
the leave of the court a quo.
[6]
The Bank argued on appeal that the finding of the court a quo, that a
trust cannot enter into a contract because it is not a
legal person,
is contrary to legal principle and precedent, and fails to
distinguish between trust capacity, authority and nomenclature.
Accepting as we must, for the purpose of determining whether the
particulars of claim disclose a cause of action, the fact that
Swanepoel was the only trustee, or was authorized by any other
trustee to enter into a binding contract for the trust, the question
is whether the loan to the trust was concluded by him on behalf of
the trust.
[7]
The basic principles governing the conclusion of a contract for a
trust are worth repeating. They are set out clearly in
BOE Bank
Ltd (formerly NBS Boland Bank Ltd) v Trustees, Knox Property Trust
[1999] 1 All SA 425
(D) at 432-7, a decision approved by Cameron, De
Waal and Wunsh in
Honore’s South African Law of Trusts
5
ed (2002) at 71. McCall J, referring inter alia to
Commissioner
for Inland Revenue v Friedman & others
[1992] ZASCA 190
;
1993 (1) SA 353
(A) at
370E-I, and
Braun v Blann and Botha NNO & another
[1984] ZASCA 19
;
1984 (2)
SA 850
(A) at 859E-F, said (at 434h-i)
‘
However,
whatever its true legal nature may be, both our common law and our
legislation have recognised the existence of an arrangement
whereby
assets and liabilities are vested in a trustee or in trustees. This
arrangement is, in everyday parlance referred to as
“a trust”
and individual trusts are often given a name in the deed conferring
the trust property, and the powers to
administer it, on the trustee
or trustees.’
[8]
This court in
Braun
v Blann
, as McCall
J pointed out, has referred to a trust as a ‘legal institution
sui generis’. It is a legal entity though
it does not have
legal personality. And the Trust Property Control Act 57 of 1988
defines a trust as ‘the arrangement through
which the ownership
in property of one person is by virtue of a trust instrument made
over or bequeathed’ to a trustee or
to beneficiaries designated
in the trust instrument.
[9]
McCall J continued, in
BOE
Bank
(at 436d-e):
‘[I]t is clear that in the developing law of trusts in South
Africa, it is recognised that a trust has a legal
existence, whether
it be called “an entity”, “an institution” or
“an arrangement”.’ Moreover,
said the court, cases
in the name of a trust are not unknown – a reference to
Rosner
v Lydia Swanepoel Trust
1998 (2) SA 123
(W).
[10]
In
BOE Bank
the court had to determine an issue on all fours
with this matter: whether the principal debtor, for which a defendant
had bound
himself as surety, was sufficiently identified when
referred to as a trust. McCall J said (at 436f-g):
‘
It
may well be that it would have been more correct to describe the
principal debtor as the named Trustees, in their capacity as
Trustees
of the Trust or as the Trustees for the time being of the Trust.
Certainly, as appears from
Rosner’s
case . . . where there is litigation against a trust, the trustees in
their representative capacity and not the trust, as such
ought to be
cited. That however, is not the end of the matter because it is clear
that . . . the identity of the creditor, the
surety and the principal
debtor must be capable of ascertainment by reference to the
provisions of the Deed of Trust, extrinsic
evidence . . . .’
[11]
That principle has been affirmed often by this court including in
Sapirstein &
others v Anglo African Shipping Co (SA) Ltd
1978 (4) SA 1
(A) at 12B-E which dealt with the identity of the
parties to a suretyship or of the principal debtor. If the identity
of all the
parties can be ascertained by having regard to a trust
deed, or extrinsic evidence, a suretyship must be read accordingly.
Indeed,
even in construing a will where an estate, or its residue, is
left to a trust, or a bequest is made to a trust, regard may be had
to the trust deed to ascertain the identities of the trustees:
Kohlberg v Burnett
NO & others
1986 (3) SA 12
(A) at 25F-26B.
[12]
In
BOE Bank
the court held that the description of the principal debtor as a
trust in the deed of suretyship was sufficient identification
and
that the suretyship was enforceable. The principles enunciated by the
court, and all the authorities on which it relied, are
in my view
correct. The question that then arises is whether this matter is in
any way distinguishable.
[13]
The Bank’s particulars of claim (which I shall reflect as if
action had not been instituted against Swanepoel’s
brother)
alleged that Swanepoel had entered into a written agreement of loan
in his capacity as a trustee of the Harne Trust duly
represented by
him. A copy of the agreement was attached. The agreement reflected
Harne Trust, with its registration number set
out, as the ‘borrower’.
The agreement set out the amount of the loan, which was to be repaid
over a period of eight
months. The Bank was entitled to charge
interest on the outstanding balance and to debit the account of the
trustees for all advances,
bank charges and interest. The agreement
was signed by Swanepoel ‘on behalf of the borrower’,
referred to again as
the Harne Trust with its registration number.
[14]
In so far as the overdraft with the Bank was concerned, the Bank also
alleged that the application to open the business account
was signed
by Swanepoel on behalf of the Harne Trust, and that the suretyship
signed by Swanepoel guaranteed the repayment of advances
and payment
of interest and costs.
[15]
The Bank, according to the particulars, made advances in terms of the
agricultural production loan, and pursuant to the business
loan
agreement, and debited the accounts with interest, fees and
costs. The amount advanced and repayable to the Bank, it
contended,
was some R640 688, and the amount by which Swanepoel’s account
was overdrawn in February 2013 was some R66 342.
It claimed these
amounts plus interest.
[16]
The agreements are both in standard form, as is the suretyship. The
agricultural loan was authorized by a resolution of the
‘Trustees
of Harne (Proprietary) Ltd’ a puzzling nomenclature (but
undoubtedly an error arising because the resolution
was in standard
form and catered for companies, trusts and other legal entities),
but was signed by Swanepoel as trustee.
A resolution was embodied in
the application for the business account, and that too was signed by
Swanepoel ‘for’ the
Harne Trust.
[17]
In my view, while the documents were not carefully drawn, it is
patent that Swanepoel, when signing the loan agreement and
the
application for the business account, was clearly doing so in his
capacity as trustee of the trust. I fail to understand the
argument
for Swanepoel, accepted by the court a quo, that ex facie the two
agreements the Bank intended to contract with the trust,
and not its
trustee. Both contractual documents clearly designate the trust (as
duly registered) as the party to the contract (the
borrower) acting
through Swanepoel as trustee. There is no indication whatsoever that
Swanepoel was acting in his personal capacity.
And there is nothing
in the particulars of claim that suggests that the trust was in some
way acting without a trustee.
[18]
The court a quo quoted passages from the judgment of this court in
Land and
Agricultural Bank of South Africa Ltd v Parker & others
2005 (2) SA 77
(SCA) paras 9 and 10, where Cameron JA reaffirmed that
a trust does not have legal personality and, in the absence of the
authorization
of the trustees, as required by the deed of trust,
cannot be bound by a contract. The court a quo concluded from this
that the
Harne Trust could not have entered into a contract with the
Bank. But
Parker
says no such thing. It simply emphasizes the principle that all
trustees must act jointly in order to bind a trust, unless otherwise
permitted by a trust deed, which might provide for prior authority to
be given by the trustees to one of them. (See also
Thorpe
& others v Trittenwein & another
2007 (2) SA 172
(SCA) paras 9 and 12 to 14.)
[19]
Hughes J also found that a court may not refer to extrinsic evidence
to identify the parties to a contract, citing in this
regard
KPMG
Chartered Accountants (SA) v Securefin Ltd & another
2009 (4) SA 399
(SCA) para 39. Again, the authority has no bearing on
the issue. That paragraph dealt with interpretation of a contract and
the
parol evidence rule. Evidence to explain a provision or to
identify parties or a merx is admissible, as the cases cited above
show,
and the passage in
KPMG
cited does not in any way suggest otherwise. It points out only that
parol evidence may not be led to alter or vary the terms of
a
contract. And it says expressly that in interpreting a contract the
court must have regard to the context, or factual matrix,
which in
this case would be all the documents relied upon and the trust deed.
[20]
In the circumstances it is clear to me that, on the facts as alleged
in the particulars of claim, a valid cause of action arising
from
default on the agricultural production loan and on repayment of the
funds advanced on overdraft, is disclosed.
[21]
Accordingly, the appeal is upheld with costs. The order of the court
a quo is set aside and replaced with the following:
‘
The
exception is dismissed with costs.’
_______________________
C
H Lewis
Judge
of Appeal
APPEARANCES
For
Appellant: S Symon SC
Instructed
by: S Roux Incorporated, Pretoria
Matsepes
Incorporated, Bloemfontein
For
Respondents: G Jacobs
Instructed
by: Morris Pokroy Attorneys, Pretoria
E G Cooper Majiedt,
Bloemfontein