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[2017] ZAGPJHC 90
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Correia v Bezuidenhout and Others (28258/2016) [2017] ZAGPJHC 90 (9 March 2017)
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REPUBLIC
OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH AFRICA
GAUTENG LOCAL DIVISION,
JOHANNESBURG
CASE
NO:
28258/2016
Reportable: No
Of interest to other judges: No
Revised.
9/3/2017
In the matter
between:
SORAYA NADINE THOMAS RAMALHO
CORREIA
(IDENTITY
NUMBER:…
)
Applicant
and
JEAN BEZUIDENHOUT
(IDENTITY
NUMBER: …
)
First
Respondent
NICOLAOS
AKAKIOS
Second
Respondent
JEAN
BEZUIDENHOUT
N.O.
Third
Respondent
NICOLAOS
AKAKIOS
N.O.
Fourth
Respondent
THE MASTER OF THE HIGH COURT,
JOHANNESBURG
Fifth
Respondent
JUDGMENT
MAKUME,
J
:
[1] In this application the Applicant
seeks an order for removal of First and Second Respondents as
Trustees of a Trust known as
Fine Two Trust IT 4318/2008 (the Trust).
The Applicant relies on the provisions of Section 20(1) of the Trust
Property Control
Act No 57 of 1988 (the Act). The Applicant also
seeks an order appointing her as a Trustee of the Trust in place of
the First and
Second Respondents.
[2] The issue in this application is
twofold. Firstly it is whether the Applicant has the required
locus
standi
to bring this application. Secondly, whether she has
satisfied the requirements of Section 20(1) of the Act in order to
succeed
with the application for removal of First and Second
Respondents as Trustees of the Trust.
BACKGROUND
FACTS
[3] The Trust was founded in the year
2008. According to the Letters of Authority the Trustees are
the following persons:
3.1 Christina Maria Martins Fernandes
(ID Number … ) Founder Member.
3.2 Bisessar Jairaj Badal (ID Number …
).
3.3 George Michaelides (ID Number …
) First Trustee.
[4] During or about November 2008 one
Antonio Carlos Brigham Da Silva Ramalho Correia ID Number …
(the deceased) entered
into a loan agreement with the Trust in terms
of which the deceased advanced to the Trust an amount of R4 650 000
(Four Million
Six Hundred and Fifty Thousand Rand) (“
the
loan amount
”). Clause 3.3 of the loan agreement
regulated the manner of repayment of the loan to the deceased.
[5] The loan amount was advanced to
the Trust to enable it to acquire 24 shares in a company known as
Cosmo-Net (Pty) Ltd Registration
Number 1999/17525/07.
[6] On the 24
th
January
2012 purportedly acting in accordance with Clause 20 of the Deed of
Trust a resolution was passed amending the Deed of
Trust in order to
resolve issues relating to the non-payment of the loan amount by the
Trust to the deceased. This resolution was
signed by one Trustee
namely the founder and two other persons who are described as
Nominated Trustees. Those persons happened
to be the First and Second
Respondents.
[7] The amendment sought to replace
George Michaelides as a beneficiary and in his place the deceased was
appointed a beneficiary
of the Trust. Secondly, provision was also
made for termination of the Trust on the date of death of the
deceased at the sole discretion
of the Trustees who retained the
authority to extend the lifespan of the Trust. In the resolution the
founder resigned as a Trustee
of the Trust.
[8] Pursuant to the resolution the
Loan Agreement was varied to stipulate the following:
8.1 That the Trust owed the deceased
an amount of R6 196 000,78 (Six Million One Hundred and Ninety Six
Thousand Rand and Seventy
Eight Cents).
8.2 That the pledge held by the
deceased as security for the loan namely the 24 shares in the company
Cosmo-Net is hereby relinquished
and in its place the deceased would
be entitled to receive dividends as and when same are declared by the
Director of Cosmo-Net
Limited.
8.3 Clause 2.3 of the amended Loan
Agreement reads as follows:
“
The Borrower (the Trust)
undertakes to do all necessary to change the current Trustees of the
Five Things Two Trust to Nicolaos
Akakios and Jean Bezuidenhout.
”
[9] The deceased was married to the
Applicant on the 9
th
April 2011 and in his will dated the
5
th
July 2013 he bequeathed to the Applicant the residue
of his estate and effects whether movable or immovable. He passed
away on
the 6
th
November 2014. It is common cause
that such residue included amongst others the dividends as and when
declared by the directors
of Cosmo-Net.
[10] The financial year end results of
Cosmo-Net for the period ending 29
th
February 2016
indicate that First and Second Respondents are two of the directors
of Cosmo-Net.
THE
ISSUES
[11] It is against this factual
background that I now deal with the issues in this matter.
[12] It appears that the Trustees
Bisessar Jairaj Badal (Badal) and George Michaelides (Michaelides)
resigned on the 24
th
January 2012 leaving only the founder
Christina Maria Martins Fernandes as the Sole Trustee. In
accordance with Clause 20
the Trust Deed may be varied if agreed to
by the founder Christina Maria Martins Fernandes and by all the
Trustees in this instance
Badal and Michaelides.
[13] The preamble to the resolution
dated the 24
th
January 2012 reads as follows:
“
Whereas Christina Maria
Martins Fernandes as founder of the Trust is desirous to amend
certain provisions of the Trust Deed in terms
of Clause 20 of the
Trust Deed …
”
This preamble clearly trumps the
provision of Clause 20 which requires that the proposed variation be
agreed to by the founder and
all the Trustees. The resolution
on which the amendment is founded was not signed or agreed to by
Badal and Michaelides instead
it was signed by persons who were not
authorised namely First and Second Respondents.
[14] In this case the founder was not
authorised by the then existing co-Trustees namely Badal and
Michaelides to sign the resolution
in contravention of Clause 20 of
the Deed of Trust and neither were First and Second Respondents
authorised to represent the Trust
in contravention of Section 6(1) of
the Trust Property Control Act 57 of 1988 which reads as follows:
“
Any person whose appointment
as Trustee in terms of a trust instrument, Section 7 or a Court Order
comes into force after the commencement
of this Act, shall act in
that capacity only if authorised thereto in writing by the Master.
”
First and Second Respondents were only
authorised to act from the date when the Master (Fifth Respondent)
issued Letters of Authority
which was only on the 26
th
May
2016 some four years after the impugned resolution and amendment.
[15] Accordingly both the resolution
as well as the variation Loan Agreement on which the Applicant based
her application are a
nullity and of no force and effect and could
not bind the Trust. See
Land and Agricultural Bank of South Africa
v Parker and Others
2005 (2) SA 77
(SCA) in which Cameron JA
elaborated as follows:
“
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. It
follows that a provision requiring that a specified number of
Trustees must hold office is a capacity-defining
condition. It lays
down a prerequisite that must be fulfilled before the Trust estate
can be bound. When fewer Trustees than the
number specified are in
office, the Trust suffers from incapacity that precludes action on
its behalf.
”
[16] The second issue is whether the
Applicant has set out sufficient grounds and reason why First and
Second Respondents should
be removed as Trustees of the Trust and why
she should be appointed a Trustee of the Trust.
[17] It is now trite that the Court
has inherent power to remove a Trustee from office at common law.
This power also derives from
Section 20(1) of the Act which provides
as follows:
“
[20]
REMOVAL OF TRUSTEES
(i)
A trustee may, on
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 interest
of the trust and its beneficiaries.
”
[18] The Act is silent and does not
spell out what grounds will suffice to justify a removal of a
trustee. The authors of
Honore’s
South African
Law of Trusts
5
th
Edition (2002) at 223 say that the
general principle which has crystallised over the years in the Courts
exercise of its common
law jurisdiction and now strengthened in
Section 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.
[19] Some circumstances which justify
removal of a Trustee by the Court are where the Trustee without
explanation removes Trust
funds from an apparently safe investment
with a financial institution and transfers them to his or her
personal account, where
the Trustee fails to inform his co-Trustees
about a crucial decision for example sell the Trust property when the
Trust instrument
demands of him or her to so inform them and get
their consent, also where a Trustee treats Trust property as his or
her own property.
[20] In this matter for the Applicant
to succeed she must prove that the First and Second Respondents’
conduct imperils the
Trust property or its proper administration or
that the removal will otherwise be in the interests of the Trust and
its beneficiaries.
[21] The entire factual basis for the
relief claimed by the Applicant is set out in the following paragraph
of the founding affidavit:
“
29. It is apparent that the
First and Second Respondents have contrived a stratagem to prevent
the declaration and payment of dividends.
I suspect that this goal is
being achieved by the First and Second Respondents either
remunerating themselves with exorbitant salaries
or creating
fictitious loan accounts.
30. This comprises a blatant abuse
of the fiduciary duty owed by the First and Second Respondent in
their capacity as trustees to
the deceased and now myself as the
beneficiary of the Trust.
31. The First and Second
Respondents have placed themselves in a position where their own
interests conflict with and are placed
above my interests as the
beneficiary of the Trust.
32. I have caused correspondence to
the addressed to the First and Second Respondents on my behalf as the
beneficiary of the Trust
requesting that they furnish me with Audited
Annual Financial Statements of the company from the time of the
conclusion of the
variation agreement to date.
33. My request in this regard has
been ignored.
34.
This in itself grants credence to my suspicions. In addition
thereto the First and Second Respondents’ conduct amounts
to a
failure to account to me properly on at all as a beneficiary of the
Trust.
”
[22] In my view the Applicant’s
main complaint is in fact contained in paragraph 28 of his founding
affidavit and that is
that the First and Second Respondents as
directors of Cosmo-Net have since the death of the deceased in 2014
not made payment of
dividends to the Trust to enable her as a
beneficiary of the Trust to access such dividends.
[23] In response to the complaint the
First and Second Respondents confirm that no dividends have been paid
not only to the deceased
nor any other shareholders. The
Respondents explain that the Directors of Cosmo-Net decided not to
declare dividends since
2016 but rather to conserve cash and maintain
adequate debt room to ensure that the company Cosmo-Net is best
placed to withstand
any prolonged adverse economic conditions.
[24] In reply to the above statement
the Applicant admits that no dividends have been distributed and then
denies the remaining
contents of paragraph 21.7 and does not base her
denial on any concrete facts. It is a bad denial. The
Applicant’s
case is premised solely on suspicion, speculation
and conjecture as she has not proffered any positive primary facts
from which
legitimate inferences can be drawn to demonstrate that the
First and Second Respondents have contrived a stratagem to the
declaration
and payment of dividends.
[25] In this regard Nicholas JA in the
matter
Bateir and Lloyd Aviation (Pty) Ltd and Another v Aviation
Insurance Co
1985 (3) SA 916
(A) at 939F-940A stated the
principles as follows:
“
Inference it was observed by
Lord Wright in Caswell v Powell Duffryn Associated Collieries Ltd
1939 (3) All Er 722
(HL) at 733E-G must be carefully distinguished
from conjecture or speculation:
‘
There
can be no inference unless there are objective facts from which to
infer the other facts which it is sought to establish.
In some
cases the other facts can be inferred with as much practical
certainty as if they had been actually observed. In other
cases the
inference does not go beyond reasonable probability. But if
there are no positive proved facts from which inferences
can be made,
the method of inference fails and what is left is more speculation
and conjecture.
’”
[26] In applying the aforegoing
principle to this case, I find that there are no primary facts which
establish on a balance of probabilities
that First and Second
Respondents have abused their fiduciary duties as Trustees nor is
there evidence that they have contrived
a stratagem to prevent the
company Cosmo-Net to declare payment of dividends.
[27] In view of the decision I have
come to it is not necessary for me to decide whether indeed the
Applicant has the necessary
locus standi
to bring an
application for removal of the Trustees in terms of Section 20(1) of
the Act.
[28] The fact that the company
Cosmo-Net has not declared dividends since the passing away of the
deceased has been explained. In
any case
Section 46
of the
Companies
Act 71 of 2008
stipulates the requirements for the declaration of
dividends in a company they are:
28.1 The Board of Directors of the
company must have authorised the distribution.
28.2 It must reasonably appear that
the company will satisfy the solvency and liquidity test immediately
after completing the proposed
distribution.
28.3 The Board of the company by
resolution must acknowledge that it has applied the solvency and
liquidity test and have concluded
that the company has satisfied the
solvency and liquidity test immediately after completing the
distribution.
[29] Even if I had found that the
variation agreement was validly concluded the Applicant would still
have no grounds to demand
that dividends be paid because in terms of
Clause 2.4 of the purported variation of Loan Agreement it is only
when and if the dividends
are received by the Trust that they can be
passed on to the deceased estate or to his heirs. Clause 2.4
places no obligation
on the company to declare dividends. That clause
reads as follows:
“
2.4 With effect the date of
signature this Variation Agreement any dividends received by the
Borrower as a result of its ownership
of the shares in Cosmo-Net
(Pty) Ltd shall be passed on to the Lender as and when requested by
the Lender.
”
[30] It is common cause that the
company Cosmo-Net has neither declared nor paid dividends to any of
its shareholders including
the Trust since the death of the deceased
and thus no dividends have accrued to the Trust since the death of
the deceased.
[31] In my view the fact that no
dividends have been declared and distributed does not demonstrate any
endangerment to the Trust
property or its proper administration or
that the removal of the Trustees will otherwise be in the interest of
the Trust and its
beneficiaries.
[32] In the circumstances it is my
view that the Applicant has not satisfied the requirements for the
removal as Trustees of First
and Second Respondents and accordingly
this application falls to be dismissed with costs.
ORDER
[33]
33.1 The application is dismissed.
33.2 The applicant is ordered to pay
the First and Second Respondents’ taxed party and party costs
which shall include costs
of counsel.
DATED at JOHANNESBURG this the day of
MARCH 2017.
___________________________________________
M A MAKUME
JUDGE OF THE HIGH COURT OF SOUTH
AFRICA
GAUTENG LOCAL DIVISION,
JOHANNESBURG
DATE
OF HEARING
20 FEBRUARY 2017
DATE
OF JUDGMENT
MARCH 2017
APPLICANT’S
COUNSEL
N LOMBARD
INSTRUCTED
BY
MESSRS BRUGMAN MOODLEY ATTORNEYS
JOHANNESBURG
Tel:
(011) 646-0335
Ref:
Ms S Moodley/BD/BMC004
RESPONDENTS’
COUNSEL
W G PRETORIUS
INSTRUCTED
BY
B J R BURT ATTORNEYS
JOHANNESBURG
Tel:
(011) 487-0123
Mr
B Burt/Mr S Thwala