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[2021] ZASCA 1
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Haitas v Froneman and Others [2021] ZASCA 1 (6 January 2021)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case No: 1158/2019
In
the matter between:
HAITAS
KONSTANTINOS APPELLANT
and
FRONEMAN
GABRIEL FRANCOIS VAN LINGEN FIRST
RESPONDENT
HAITAS
MARIA
ELPIS SECOND
RESPONDENT
FWC
ESTATE & RELATED SERVICES (PTY) LTD THIRD
RESPONDENT
BRAND
KITCHEN HOSPITALITY (PTY) LTD FOURTHRESPONDENT
MEZEPOLI
HOLDINGS (PTY) LTD FIFTH
RESPONDENT
MEZEPOLI
CAMPS BAY (PTY) LTD SIXTH
RESPONDENT
MEZEPOLI
MELROSE ARCH (PTY) LTD SEVENTH
RESPONDENT
MEZEPOLI
NICOLWAY (PTY) LTD EIGHTH
RESPONDENT
PLAKA
HOLDINGS (PTY) LTD NINTH
RESPONDENT
PLAKA
MENLYN (PTY)
LTD TENTH
RESPONDENT
PLAKA
NORTHCLIFF RESTAURANT (PTY) LTD ELEVENTH
RESPONDENT
MERCHANT
PROPERTY INVESTMENTS (PTY) LTD TWELFTH
RESPONDENT
THE
COMPANIES AND INTELLECTUAL PROPERTY
COMMISSION
THIRTEENTH RESPONDENT
THE
MASTER OF THE HIGH COURT OF SOUTH
AFRICA,
GAUTENG DIVISION, PRETORIA
FOURTEENTH RESPONDENT
Neutral
citation:
Haitas v Froneman
and
Others
(1158/2019)
[2021] ZASCA 01
(06
January
2021
)
Coram:
PETSE DP, ZONDI, VAN DER MERWE and NICHOLLS JJA and UNTERHALTER
AJA
Heard:
06 November 2020
Delivered:
This judgment was handed down electronically by circulation to
the
parties’ legal representatives by email. It has been published
on the Supreme Court of Appeal website and released to
SAFLII. The
date and time for hand-down is deemed to be 15h00 on 06
January
2021
.
Summary
:
Trust Law
-
s 20(1) of Trust Property
Control Act 57 of 1988 (the Act) - whether the conduct of the
trustees justifies their removal in terms
of s 20(1) of the Act,
alternatively the common law - whether a breakdown of the
relationship between a beneficiary and the trustees
justifies the
removal of the trustees from office.
ORDER
On
appeal from:
Gauteng Division of the High Court, Johannesburg
(
Matojane J sitting as court of first
instance)
:
The
appeal is dismissed with no order as to costs.
JUDGMENT
Nicholls
JA (Petse DP, Zondi and van der Merwe JJA and Unterhalter AJA
concurring):
[1]
When wealthy businessman, Evangelos Haitas (the
deceased) died on 21 October 2018, a family feud broke out over the
control of the
restaurant businesses that he had built up during his
lifetime. The appellant, Mr Konstantinos Haitas, is the deceased’s
son and sole surviving heir. He is also the only income and capital
beneficiary of an
inter vivos
trust, the Kam Trust (the Trust), established by his late father in
2007, and the vehicle through which the restaurant businesses
are
owned. While he was alive the deceased was the fulcrum of the
businesses.
His two co-trustees
played little role, with effective control
in the hands of the deceased. His death has
resulted in suspicion and hostility between the appellant and the
remaining two trustees.
[2]
The first and second respondents, respectively Mr Gabriel Froneman
and Ms Maria Elpida
Haitas, are the
surviving
trustees appointed by the deceased in
December 2013. Mr Froneman is a chartered accountant employed as such
at Middel & Partners
Incorporated. He is the representative of
FWC Estate & Related Services (Pty) Ltd (FWC), the third
respondent. Ms Haitas is
the deceased’s sister, the appellant’s
aunt, and resides in Greece. The fourth to twelfth respondents are
private companies
owned by the Trust (the trust companies), and no
relief is sought against them. The shares held by the Trust in the
trust companies
constitute its principal assets. The Trust owns the
majority of the shares or all issued shares in the trust companies.
They, in
turn, own four restaurants situated in Melrose Arch,
Nicolway, Menlyn Park and Eastgate and two franchise operations,
under the
Plaka and Mezepoli brands, which earn license fees.
Merchant Property Investment (Pty) Ltd holds the various properties
owned by
the Trust. The head office, from which the businesses are
managed and operated, is Brand Kitchen Hospitality (Pty) Ltd (Brand
Kitchen).
It is the fourth respondent. The thirteenth and fourteenth
respondents are the Companies and Intellectual Property Commission
and
Master of the High Court, respectively, who took no part in these
proceedings.
[3]
The appeal has its genesis in an urgent application in the Gauteng
Division of the
High Court, Johannesburg (the high court) launched by
the appellant on 16 April 2019 when he was 19 years old. The main
relief
sought was the removal of Mr Froneman and Ms Haitas as
trustees, and for the Master to urgently appoint two more trustees,
one
of whom should be an independent trustee. This Court was urged,
in the alternative, to appoint two additional independent trustees
to
break
any
deadlock
that might arise
in the
running of the Trust. The appellant also sought to declare the
appointment of Mr Froneman and Ms Haitas as directors of the
trust
companies void ab initio. Further, ancillary relief was sought that
the trustees produce the financial statements of the
Trust and all
the trust companies; that they meet urgently with the appellant
regarding trust matters and that he be permitted
to have legal
representation at such meeting. Finally, the appellant seeks an order
that Mr Froneman and Ms Haitas pay the costs
of the application in
their personal capacities.
[4]
The high court (Matojane J) dismissed the application and made no
order as to costs.
It held that although the trustees did not
function optimally in all respects, there was no necessity to remove
them and no reason
to believe that they would be guilty of any future
misconduct or would endanger the assets of the Trust. Leave to appeal
was granted
to this Court by the high court.
[5]
To understand the family dynamics, it is necessary to set out the
dramatis personae
.
First and foremost is the appellant himself. As the sole heir and
beneficiary, he is
apparently
keen to maintain a
certain lifestyle. The obstacle he faces is that the trust property
vests in him only when he turns 23 years
old. In addition, in terms
of the deceased’s Will any inheritance will be retained in a
testamentary trust and only accrue
to him once he turns 25 years old,
if he is in possession of a university degree. If not, then a third
will accrue to him at the
age of 25 and the balance when he reaches
30 years of age
[1]
.
The Will makes provision for the appellant to succeed the deceased as
a trustee of the Kam Trust on reaching the age of majority
.
[2]
[6]
At the time of his father’s death the appellant had commenced
his studies at
the University of Amsterdam in the Netherlands. These
were abandoned soon after the death, ostensibly to attend to trust
matters
and to his father’s estate. His expenses while abroad
were shared equally by his mother and father. His current complaint
is that he is receiving no maintenance from the Trust. The trustees
have only paid him
€
878.82 when
he was still in Amsterdam; a further R2 000 on his return; and
an amount of R5 645.00 in repayment of monies
paid by his
stepfather for medical expenses.
[7]
A central character, and according to the trustees the driving force
behind the appellant’s
actions, is his mother and the former
wife of the deceased, Ms Margarita Tsangaris-Scherf. During the
subsistence
of
the marriage she was integrally involved with growing and running the
businesses. The marriage ended in an acrimonious divorce.
She was one
of the original trustees and a capital beneficiary. Her resignation
as a trustee
was
one of the terms of the divorce settlement. She has since remarried
Mr Sandro Scherf who evidently also plays a supportive role
in the
appellant’s life.
[8]
Ms Sofia Lorena Lanuza Batista is a Panamanian national and
had
been the deceased’s romantic partner
since 2013. She is the target of much of the appellant’s anger
and
resentment
.
Ms Batista is a businesswoman in her own right who, on the urging of
the deceased, left her employment at Bidvest to become a
consultant
to the trust companies. She co-habited with the deceased and was
sharing a house with him at the time of his death.
The appellant
accuses the trustees of making various unauthorised and unlawful
payments on behalf of Ms Batista into a Panamanian
bank account which
he alleges contravened exchange control regulations, and amounts to
money laundering. She is not a beneficiary
of the
T
rust
or an heir to the deceased’s
W
ill.
Nor is she a party to these proceedings.
[9]
Mr Mohsen Abdullah, also known as Manal, is a 10% shareholder in
Brand Kitchen, which
manages and operates the businesses. Mr Abdullah
worked for the deceased for 12 years prior to his death and was the
operations
manager of the businesses at the time of the death. He has
experience in the restaurant industry and has expressed concern for
the future of the businesses. Mr Abdullah was aggrieved when the
trustees overlooked him for the position as general manager and,
instead, appointed Ms Batista. He has a close relationship with the
owners of one of the Plaka franchisees, trading as Mastika
Tree.
They, with the support of Mr Abdullah, sought substantially to reduce
their royalties after the deceased’s death. No
royalties at all
have been paid since November 2018 and as a result the trustees
accuse Mr Abdullah of acting against the interests
of the trust. He
has made common cause with the appellant and his mother in trying to
remove the trustees from office and brought
to light what he
perceived to be irregular payments made to Ms Batista. Mr Abdullah
described the deceased as being the ‘heart
and soul’ of
the business whose personal relationships with franchisees,
landlords, staff and supplier was an integral part
of the businesses’
success.
[10]
Ms Otilia De Sousa is an attorney who represented the deceased in his
divorce proceedings against
Ms Tsangaris-Scherf. She has been
appointed execut
rix
of
the deceased’s estate. She, too, is accused of attempting to
sideline the appellant and deprive him of vital information.
[11]
According to Mr Froneman and Ms De Sousa the deceased, while he was
ill, warned them that his
son was immature and would be unduly
influenced by his mother. This was a situation he wanted them to
guard against at all costs.
The undertaking they made to the deceased
in this regard has inevitably informed most of their actions and has
in turn infuriated
the appellant and his mother. Their attempts to
prevent Ms Tsangaris-Scherf from playing a role in the businesses has
undoubtedly
contributed to a pervasive mistrust between the trustees
and Ms De Sousa on the one hand and the appellant and his mother on
the
other.
[12]
The day after the death of the deceased, a meeting was convened at
the joint residence by Ms
Batista. Staff salaries and rentals had to
be paid in a few days at the end of the month. At the meeting, it was
decided that Mr
Froneman should be appointed as a director of the
trust companies. The meeting was attended by the companies’
banker and
lawyer who advised that this was the quickest way to gain
access to the bank accounts for the purposes of paying necessary
expenses.
Mr Froneman was duly appointed on 23 October 2018.
[13]
On 1 November 2018, Ms Haitas was appointed as a director of the
trust companies, the day before
the deceased’s funeral was held
in Greece. The day after the funeral, she read the Will to the
appellant and his mother,
and provided them with a copy of the Trust
Deed.
It turned out that t
his
was an outdated Trust Deed which led to further suspicion.
[14]
On 9 November 2018, the appellant received a copy of the acceptance
of trusteeship form to be
completed in order to accept his
appointment as a trustee of the Kam Trust. The appellant also wrote
to Mr Froneman demanding access
to financial information about the
trust companies; the deceased’s life insurance policies and
confirmation that the Trust
would continue to cover half his living
expenses in Amsterdam. He stated: “most importantly, I would
like to inform all concerned
that my mom will be involved in all
matters, on my behalf, she has my power of attorney, signing power
and is my most trusted advisor.
. . ” It appears that from then
on relations deteriorated rapidly.
[15]
Ms Tsangaris-Scherf started sending emails to Mr Froneman, as did the
appellant’s current
attorneys, all demanding documents and
financial information. The appellant requested to meet with the
trustees and Ms De Sousa
but insisted that this be in the presence of
his advisors, his attorney or his stepfather. The trustees indicated
that any meeting
would only take place directly with the appellant. A
stalemate was reached. In November 2018, the question of whether the
trust
was quorate was raised, an issue which will be dealt with
later.
[16]
On 27 November 2018, the appellant returned from the Netherlands. On
his return, he wanted to
visit the house his father lived in, and
shared with Ms Batista, because he wanted to spend some time in his
father’s room.
He also requested the use of his father’s
Pajero motor vehicle and the keys to a property on the Vaal River
owned by one
of the trust companies. The request was denied by his
aunt, Ms Haitas, who also refused access to the house, saying that
this was
a matter that should be taken up with Ms Batista as the
house was also her home. This further strained relations.
[17]
On 16 April 2019, the appellant launched the present application for
the trustees’ removal.
The appellant received his letters of
executorship on 19 May 2019. No meeting of the trustees could be held
as Mr Froneman and
Ms Haitas insisted that the appellant could not
have his advisors present. However, on 20 May 2018, he was given
access to various
financial documentation relating to payments made
by the trust companies, including those to Ms Baptista. The financial
statements
provided to the appellant were the un-audited financial
statements for the trust companies from 2009 to 28 February 2017. The
financial
statements for 2010 were missing.
[18]
Before dealing with the appellant’s complaints against the
trustees, two preliminary points
must be referenced. The first was
that the amended Trust Deed is ‘suspicious’ and possibly
fraudulent. It differed
from the original Trust Deed in various
respects, including that the appellant had to wait until the age of
23 before he would
become a capital beneficiary of the trust
property. The sole reason for the suspicion was that the Trust Deed
was signed on 23
May 2018 at Melrose Arch when in fact the deceased
was in Greece at the time. It was not signed by all the trustees on
the same
day and before all the witnesses. However, there is no
dispute that the amended Trust Deed was signed by all the trustees,
including
the deceased. Ms Tsangaris-Scherf
’
s
attempt to cast doubt on the Trust Deed was not pursued before this
Court and requires no further consideration.
[19] The second issue was
that the Trust was inquorate after the deceased’s death when Mr
Froneman
and Ms Haitas were trustees. Clause 5.2 of the Trust Deed
states that at all times there shall be a minimum of 3 and a maximum
of 5 trustees. It goes on to deal with the situation where a trustee
resigns or dies in the following manner:
‘
Provided
that if there is only one trustee . . . the remaining trustee will be
authorised to exercise all the powers of trustees
for the maintenance
and administration of the trust fund until such time as another
trustee has been appointed, which appointment
the trustee so in
office shall make within NINETY (90) days of the resignation or death
of his co-trustee.’
[20]
The thrust of the argument was that as there were two trustees, and
not only one trustee, remaining
after the death of the deceased, the
provisions of clause 5.2 would not be applicable. Any other
interpretation, so it was contended,
would render the requirement of
a minimum number of trustees entirely obsolete and counter to this
Court’s decision in
Land and
Agricultural Bank of South Africa v Parker and others
[3]
.
In that case the difficulty was that there was a sub-minimum number
of trustees. It was held that a provision requiring a minimum
number
of trustees to hold office is a capacity-defining condition, unless
the Trust Deed provides otherwise. If fewer than the
required number
of trustees hold office, a trust does not have the capacity to take
any action. These facts are distinguishable
from the current matter
where the contention is that there are too many trustees for the
relevant clause to have application. In
my view clause 5.2 cannot
have the meaning contended for by the appellant. It cannot be
seriously suggested that after the death
or resignation of a fellow
trustee, one trustee can exercise all the powers to administer the
Trust but not two – that would
be a manifest absurdity.
[4]
Interpreted sensibly, the proviso in Clause 5.2 means that provided
there is at least one trustee, the remaining trustee or trustees
will
be authorised to exercise all the powers of the trustees. So
understood, Clause 5.2 regulates the position when there remain
either one or two trustees.
[21]
Aligned to the above is the contention that the appointment of Mr
Froneman and Ms Haitas as directors
of the trust companies was void
ab initio. Relying again on
Land and Agricultural Bank
it is
argued that that when the minimum number of trustees do not hold
office the remaining trustees have a duty to appoint a further
trustee. Because of the delay in appointing the appellant as the
third trustee, the two trustees did not have the requisite capacity
to appoint themselves as the directors without the appellant’s
authorisation. In the absence of this, Mr Froneman and Ms
Haitas
could not exercise the rights attached to the shares in the trust
companies to appoint themselves as directors. They did
not act
jointly as trustees and therefore their appointment is void ab
initio.
[22]
Having found that clause 5.2 of the Trust Deed, properly interpreted,
must mean that two trustees
were within their rights
and
competent
to attend to the administration of the Trust, it
follows that this argument is
equally
unmeritorious and must suffer the same fate. It was contended that
even if it is accepted that clause 5.2 is capable of
being
interpreted as applying to two trustees, their authority would be
limited to the most essential aspects for maintaining the
Trust, and
not to usurp the powers to control the trust companies.
This
is precisely why the appointment of a director of the trust companies
was urgently required - for ‘the maintenance and
administration
of the trust fund’. It would have been detrimental to the trust
companies to have delayed the payment of staff
salaries and rentals
until the appellant had received his letters of authority.
[23]
I revert now to the crux of the appeal.
Essentially, there are three broad categories of complaints
that the appellant contends justify the removal of the trustees.
These
are the lack of disclosure and transparency in regard to the
financial documents of the Trust and the trust companies; the
trustees’
refusal to maintain the appellant; and the payments
made to Ms Batista;
[24]
The appellant argues that instead of openness and transparency
,
Mr Froneman and Ms Haitas have shown a reluctance to disclose the
financial records of the
T
rust and trust
companies. Clause 15.1 of the
T
rust
D
eed
expressly provides that the trustees shall keep a proper set of books
recording the financial affairs of the
T
rust.
In addition, ‘financial statements will be prepared and will be
subject to annual audit. Every beneficiary of the trust
shall on
request be entitled to a copy of the financial audited statements of
the trust.’ On 20 May 2019 the trustees furnished
the appellant
with the audited statements from 2009 – 2016 with the exception
of the 2010 financial statements. That, in
this regard, they were
remiss in their duties as trustees is common ground.
[25]
One of the appellant’s
greatest grievance is the trustees’ unwillingness to allow him
to benefit from any trust monies.
In February 2019
,
in response to a request from
the appellant, Mr Froneman sent an email expressing his regret that
the appellant had terminated his
studies in Amsterdam as a good
education was his father’s greatest wish for him. Mr Froneman
pointed out that the deceased’s
personal bank accounts were
frozen and until the appellant turned 23 years old he was not
entitled to a distribution from the
T
rust.
Their fiduciary duties as trustees, stated Mr Froneman, was to ensure
‘that capital and income is preserved.’
The latter
statement was not strictly correct, as the Trust Deed afforded the
trustees a wide discretion as to the allocation and
distribution of
trust income.
[5]
Nonetheless
,
the trustees remained
trenchant in their refusal to make payment of any trust monies to the
appellant. They persisted with the view
that should he require
maintenance he should make an application to the Trust which they
would consider.
[26]
While refusing to give the appellant any monies
,
the trustees made payments in the approximate sum of R600 000 to
Ms Batista, which the appellant considered unduly generous
and
favoured Ms Batista over the appellant. In addition, the trustees
approved payments of foreign exchange to Ms Batista which
,
it is contended
,
were unlawful. Two
invoices in the ZAR amount of R61 528.52 and R61 350.75
were issued by Elango Implex Inc, based in
Panama, for ‘consulting
fees’ and ‘market research in the Region’ on behalf
of Ms Batista. Mezepoli Holdings
and Plaka Holdings made the
application for the foreign exchange payments in January 2019 and
,
a few days later
,
on 25 January 2019 Mr
Froneman authorised the payments.
[27]
Mr Froneman’s justification was that it was legal and
permissible for Ms Baptista to have
her consulting fees paid through
this entity. Because of the administration involved
,
he later advised her to invoice her services through a local company
in future. This she did through Tailor Webs (Pty) Ltd (Tailor
Webs)
.
Mr Froneman
,
on behalf of Brand Kitchens
,
signed an agreement in terms of which Tailor
W
eb
s
would get paid R80 000 per month for consultancy fees and a
further R15 000 for property management. It is not disputed
that
Ms Batista did the work, although the appellant queries whether she
should have been paid this much. The appellant’s
complaint is
that because Ms Batista did not invoice the trust companies in her
personal capacity, this resulted in a loss of R12 000
in respect
of value added tax which would not otherwise have been payable and
that the illegal foreign exchange payments imperilled
the Trust.
Further, that the conflict over Ms Baptista’s payments
was
a stark illustration of the conflict that arose
from
Mr Froneman and Ms Haitas having appointed themselves as
directors of the trust companies.
[28]
It is common cause that when Ms Batista entered into an intimate
relationship with the deceased,
he persuaded her to leave her job
with Bidvest and work as a consultant for the trust companies. On the
appellant’s own version
she was responsible ‘for
overseeing work done by three outsourced personnel, being a social
media or public relations assistant,
a marketing consultant and an
artwork designer.’ When the deceased became too ill to work,
from March to October 2018, Ms
Batista took
over
most of his workload, as well as her own. Mr Froneman says
that before he died, the deceased had instructed him to pay her half
her normal commission which had accumulated over 4 months and her
annual bonus into a foreign entity. He denied that the offshore
payments were irregular, asserting that they were legitimate and
recorded in the companies’ books. As an accountant he was
satisfied that the payments were reasonable for the work that had
been done by Ms Batista.
[29]
The primary issue for determination is whether the conduct of the two
trustees justifies their
removal in terms of s 20(1) of
the
Trust Property Control Act 57 of 1988 (the Act), alternatively
the common law. Section 20(1) provides that:
‘
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 interests of the trust and its beneficiaries.’
[30]
The general principle is that a court will exercise its common law
jurisdiction to remove a trustee
if the continuance in office of the
trustee will be detrimental to the beneficiary or will prevent the
trust from being properly
administered
.
[6]
A trustee has a fiduciary duty to act with due care and diligence in
administering property on behalf of another. However, courts
have
taken a pragmatic approach as to what misconduct should be construed
as imperilling trust assets. As early as 1946 the court
in
Volkwyn
NO v Clarke and Damant
[7]
cautioned that this was a delicate matter and the power to remove a
trustee was one that should be used with circumspection. Irrespective
of whether the common law or s 20(1) is utilised, the courts have
emphasised that when a deceased person has deliberately selected
certain persons to carry out their wishes because they believe they
are best placed to do so, a court should be loathe to interfere
[8]
.
[31]
The early authorities, and the circumspection required before a court
exercises its power of
removal, were cited with approval by this
Court in
Gowar
[9]
.
It was held that
neither mala fides nor
misconduct necessarily warrant the removal of a trustee. Disharmony
in the administration of a Trust is only
to be considered if this
imperils the trust assets and removal will only be necessary if it is
in the interests of the Trust and
its beneficiaries.
[32]
In certain circumstances it is not necessary that there be a finding
of dishonesty, gross inefficiency
or untrustworthiness on the part of
the trustee and a conflict of interest may be sufficient
justification for the removal of a
trustee. The appellant argued that
even an innocent trustee can be removed for conflict of interest
.
For this, reliance was placed on
Kidbrooke
Place Management Association and Another v Walton and Others
[10]
.
That case concerned a Trust whose object was
to donate land to develop a housing scheme for retired persons who
obtained life rights
to their unit. The trustees sold properties to
companies in which they had a direct or indirect proprietary
interest, which they
then on-sold at a R50 000 profit for every
erf. In addition,
one of
the
trustee
s
and his wife were the sole members of a close corporation which
earned commission on the sale of life rights. The court held that
the
trustees were in breach of their fiduciary duties in that they had
profited from their actions, which they had failed to disclose,
and
had acted in direct conflict with the express provisions of the Trust
Deed. Their actions were motivated by personal gain and
an order was
granted removing the remaining trustee from office, the other trustee
having resigned.
[33]
I do not understand
Kidbrooke
to
be authority for the proposition that conduct by the trustees which
does not find favour with the beneficiary justifies their
removal. In
fact this Court has found that enmity between the beneficiary and the
trustees is not of and in itself an adequate
reason for their
removal.
[11]
Rather, the court in
Kidbrooke
found that, although playing a valuable role in the administration of
the trust, the trustees misconstrued the nature of their
role and
responsibilities. In
Kidbrooke
the removal application was a precursor to further legal action by
the life rights holders for a proper accounting and disgorgement
of
profits.
[34]
Insofar as it may be contended that
Letterstedt
v Broers
[12]
which was cited with approval in
Kidbrooke
,
provides support for the appellant’s contention this, too, is
misplaced. In both
Kidbrooke
and
Letterstedt
the
trustees breached their fiduciary duties by profiting at the expense
of the Trust, with the trustees overcharging the trust
estate in the
latter. Lord Blackburn observed:
‘
It
is quite true that friction or hostility between trustees and the
immediate possessor of the trust estate is not of itself a
reason for
the removal of the trustees. But where the hostility is grounded on
the mode in which the trust has been administered,
where it has been
caused wholly or partially by substantial overcharges against the
trust estate, it is certainly not to be disregarded.’
[13]
[35]
What the above authorities have emphasised is that the conduct of
trustees must be detrimental
to the trust assets and it is only then
that their conduct may warrant removal. It not necessary that their
conduct be unimpeachable
but generally where there is no impropriety
and no financial gain on the part of trustees, courts will not
interfere. In this matter
there is nothing to suggest any impropriety
in the conduct of Mr Froneman and Ms Haitas. There is no evidence of
any personal gain
or of overcharging. The criticism to be levelled
against them is that they have been over-zealous in carrying out what
they believed
to be the deceased’s wishes. What is clear is
that since early November 2018 all meaningful communication between
the trustees
and the appellant had broken down. That there is
disharmony cannot be disputed. But, in my view, it is not sufficient
to warrant
the removal of Mr Froneman and Ms Haitas as trustees and I
see no reason to interfere with the high court’s reasoning in
this regard.
[36]
That the trustees have, in some respects, been lax in maintaining
proper accounting records of
the Trust cannot be denied. The problem
pre-dates the death of the deceased who did not require audited
financial statements and
ran the businesses single-handed. Although
access to some of the information is now only of historical value,
once the appellant
was appointed as a trustee, he still believed
documents were being withheld from him and required unfettered access
to all financial
information to ensure that the trustees were
complying with their duties. This underscores the depth of mistrust
between the appellant
and the trustees. Certainly, it was negligent
of the trustees to give the deceased free rein during his lifetime,
and subsequent
to his death they have not been forthcoming with
financial information. The information that is available was provided
to the appellant
once he became a trustee. It was not necessary to
apply for the trustees’ removal to obtain financial
disclosures. This could
have been obtained by far less drastic
remedial action. In prayer 6 of the notice of motion it is exactly
this that is sought.
[14]
[37]
Similarly, the foreign exchange payments made to Ms Batista were at
the instance and upon the
instruction of the deceased and, while
perhaps ill-advised, have not resulted in any negative repercussions
to the trust companies
because a proper case is made out that the
payments were for services rendered.
[38]
The appellant is entitled to an income from the Trust for his
education and general well-being.
This, Mr Froneman has stated under
oath that he and Ms Haitas will consider once they receive an
application. While this approach
is unnecessarily formalistic, it
neither imperils the trust, nor subverts the interests of the
appellant as the beneficiary of
the trust. The trustees would be
well-advised to properly consider the appellant’s needs in
order to avoid further litigation.
[39]
The only issue is whether the trustees’ conduct has imperilled
the trust companies, and
therefore the trust assets. The appellant
claims, as advised by Mr Abdullah, that this is indeed the case. This
is denied by the
trustees who point out that Mr Abdullah has an axe
to grind, as he was not elevated to the position that he thought he
deserved.
He has also actively encouraged Mastika Tree to stop paying
license fees. There is no doubt that the restaurants have suffered a
decline in turnover. With the deceased having played such a pivotal
role in the businesses, it is only to be expected that his
death
would cause an upheaval, as well as a loss of confidence and morale
amongst staff and management.
[40]
As regards the proposal that other independent trustees be appointed
to break the deadlock, the
issue is whether there is a deadlock to
break. The appellant and his mother disapprove of the manner in which
the Trust is being
run but this does not mean that it is rendered
dysfunctional. We were informed that the appellant would have peace
of mind that
he was being treated fairly if independent trustees were
appointed. But even if one were to accept that this Court has the
power
to appoint further trustees, there is
in
sufficient
reason to do so. The appellant has
elected
not
to
attend meeting
s
of trustees
presumably because of the enmity with
his co-trustees
. The other trustees are his aunt and his
father’s trusted financial advisor who, whatever their
shortcomings, have the Trust’s
interests at heart. The
appellant would be well advised to attend these meetings, and take
legal advice thereafter, if he so wishes.
Until he participates in
the governance of the Trust it is premature to claim that there is a
deadlock requiring the appointment
of an independent trustee. In any
event the appellant is at liberty to approach the Master under s 7(2)
of the Act to appoint further
trustees, if warranted.
[41]
In conclusion, my view is that the conduct of the trustees, although
leaving much to be desired
in the way they handled certain matters,
does not justify the primary relief sought against them - their
removal. The appeal falls
to be dismissed.
[42]
The high court made no order as to costs. In this court there was no
argument on costs and no
suggestion that any other order would be
more appropriate. I find no reason to differ from the high court.
[43]
In the result I make the following order:
The
appeal is dismissed with no order as to costs.
_________________
CH
NICHOLLS
JUDGE
OF APPEAL
APPEARANCES:
For
appellant: A
C Botha SC (with him M F B Clark
)
Instructed
by: Brian
Kahn Inc., Johannesburg
Claude
Reid Inc., Bloemfontein
For
first to twelfth respondent: M
Smith
Instructed
by: Nance-Kivell
Attorneys, Germiston
Israel
& Sackstein Attorneys, Bloemfontein
[1]
Clause 5.2 of the Will.
[2]
Clause 5.3 of the Will.
[3]
Land and Agricultural Bank of South Africa v
Parker and Others
2005 (2) SA 77 (SCA).
[4]
Natal Joint Municipal Pension Fund v Emdumeni
Municipality
[2012] ZASCA 13
;
[2012] 2 All SA 262
(SCA);
2012 (4) SA
593
(SCA);
2012 4 SA 593
(SCA) and the later cases of this Court
enjoin courts to interpret contracts in a commercially sensible and
business-like manner,
having regard to their language, context and
purpose in what is a unitary exercise.
[5]
Clause 11 of the Trust Deed provides that:
‘
Employment
of Income
The
trust is a discretionary trust as far as the employment, allocation
and distribution of trust income is concerned, and the
trustees may
in their absolute discretion, by way of a proper resolution passed
by them, allocate income to any beneficiary who
may qualify as an
income beneficiary, and in particular they are entitled to:
11.1
pay all costs incurred by the trustees in connection with the
administration of the trust;
11.2
pay such amounts to any beneficiary as the trustees may deem
reasonable and desirable for the maintenance, education and
general
welfare of such beneficiary’.
[6]
Sackville West v Nourse
and Another
1925 AD 516
at 526; Gowar and Another v Gowar and Others
[2016] ZASCA 101; [2016] 3 All SA 382 (SCA); 2016 (5) SA 225 (SCA).
[7]
Volkwyn NO v Clarke and Damant
1946 WLS 456.
[8]
Volkwyn NO v Clarke and Damant
1946 WLS 456 at 464.
[9]
Above fn 6 paras 30 & 31.
[10]
Kidbrooke Place Management Association and
Another v Walton and Others NNO
2015 (4) SA
112(WCC).
[11]
Above fn 6 para 31
.
[12]
Letterstedt v Broers
(1884) 9 AC 371 (PC).
[13]
Letterstedt v Broers
(1884)
9 AC 371
(PC) 386 - 387.
[14]
Prayer 6 of the notice of motion provides:
'6
An order that the first and second respondents forthwith, but in any
event in no less than 5 days from the date of this order
furnish to
the applicant: -
6.1 the latest audited financial statements of the KAM
Trust; and
6.2 the latest audited financial; statements (
or if
they have not been audited, the latest draft
financial statements
)
accounting and financial records
(
which includes all
audited financial
statements
)
from inception of the Trust
Companies.'