Brief Summary

Trusts — Resolutions of trustees — Legality and enforceability — Applicants sought to declare three resolutions adopted by the second respondent, as trustee of the Botha Ruthven Family Will Trust, illegal and void — Resolutions included withdrawal of legal action regarding the sale of a farm and termination of the Trust — Court considered whether the resolutions were valid and whether the first respondent should be removed as trustee — Court held that the resolutions were not validly adopted and set them aside, affirming the applicants' claims regarding the Trust's assets and legal obligations.

Comprehensive Summary

Summary of Judgment

1. Introduction

This was an application in the Gauteng Division, Pretoria, for declaratory and consequential relief concerning the administration of a family trust. The applicants sought orders declaring certain trust resolutions illegal, void, and unenforceable, setting them aside, and removing a trustee from office.

The applicants were Anja Botha and Joey Botha (the daughters of the late Stephanus Botha jnr) and Sarel Johannes Petrus Roux N.O. (cited in a representative capacity in connection with the late Stephanus Botha jnr’s estate). The only respondents who opposed the application were the first and second respondents (referred to collectively in the judgment as “the respondent(s)” for purposes of opposition). The impugned resolutions were adopted by the second respondent, acting as the sole trustee of the Botha Ruthven Family Will Trust (IT11143/2002) (“the Botha Ruthven Trust”).

The matter arose against the background of pending litigation in the Mpumalanga High Court under case number 4390/18, in which the trust sought, among other relief, to set aside the sale and transfer of a farm and to reverse distributions said to have been made to persons who were not entitled to the proceeds. Evidence in that action had been concluded; the late Stephanus Botha jnr died after the trial but before heads of argument were filed, and by the time of this application the outstanding step in that litigation was the delivery of judgment.

Procedurally, the respondents’ answering affidavit was filed late and was accompanied by an application for condonation. The court granted condonation, noting the applicants had replied substantively and were not materially prejudiced.

The general subject-matter of the dispute was the proper exercise of trustees’ powers and duties under the trust deed and the Trust Property Control Act 57 of 1988, including whether decisions to terminate the trust, withdraw litigation, and terminate attorneys’ mandates were taken in the interests of the trust and its beneficiaries, and whether the trustee should be removed.

2. Material Facts

The family relationships were central to identifying the relevant trust, beneficiaries, and the nature of the dispute. Stephanus Botha snr executed a will creating three trusts, including the Botha Ruthven Trust (described as a bewind trust). The farm at issue, described as Gedeelte 4 (Gedeelte van Gedeelte 2) van Plaas Grootrietvley 210 (“the farm”), was intended to be administered in terms of that structure.

It was common cause in the judgment’s narrative that the second respondent and the late Stephanus Botha jnr had, at a stage, proceeded on the belief that the farm had been bequeathed to the first respondent and his brother. The first respondent and his brother decided they could not maintain the farm and sold it. The farm was transferred in 2012 to the Charles Botha Family Trust (or “Charles Botha Trust”, as referred to in the judgment). From the sale proceeds, an amount of R1 million was shared equally between the first respondent and his brother, meaning each received R500 000.

Subsequently, the late Stephanus Botha jnr took the view that the farm was in fact bequeathed to the Botha Ruthven Trust and should not have been sold, and that the proceeds should not have been paid to the first respondent and his brother. In 2018, he consulted attorneys and procured steps (through Gerhard Botha & Partners) to institute litigation in the Mpumalanga High Court to cancel the sale and the registration of transfer of the farm to the Charles Botha Family Trust. A trust resolution was prepared authorising litigation, and a further resolution was prepared indemnifying the first respondent in respect of litigation costs. The Mpumalanga action proceeded to the point that evidence was concluded.

After Stephanus Botha jnr’s death, the first and second applicants requested to be added as co-trustees. The request was refused on the basis (as stated by the first respondent) that Stephanus Botha jnr’s will did not provide that his daughters, or anyone else, should substitute him.

Thereafter, the second respondent, acting as sole trustee, adopted three resolutions (described earlier in the judgment as adopted on 28 May 2021, and in the final order as adopted on 25 June 2018). The substance of the resolutions, as treated by the court, was that the trustee resolved to withdraw the Mpumalanga action, terminate the Botha Ruthven Trust, and withdraw the mandate given to Gerhard Botha & Partners in relation to the Mpumalanga litigation.

A disputed factual theme concerned the first respondent’s state of mind when the earlier litigation-authorising resolution was signed. The first respondent contended that he had been misled into signing the resolution because he understood it to be only an investigation, and that he would not have agreed had he appreciated that he and his brother might have to repay monies received. The applicants contended the first respondent’s real concern had always been exposure to legal costs, and that this had been addressed by the indemnity, including assurances said to have been reaffirmed by the late Stephanus Botha jnr’s wife that the estate would carry the liability for costs.

It was not disputed (as recorded by the court) that the first respondent testified against the trust’s case in the Mpumalanga litigation. The applicants relied on that as demonstrating conflict with the trust’s interests.

3. Legal Issues

The central legal questions were whether the three impugned resolutions were lawful and enforceable and, if not, whether they should be set aside, and whether the second respondent should be removed as trustee of the Botha Ruthven Trust.

The dispute involved the application of legal duties and statutory standards to the facts, rather than pure questions of law alone. In particular, the question whether the resolutions served the interests of the trust and beneficiaries required evaluation of the trustee’s conduct against fiduciary duties and the statutory “interests of the trust” test. The removal application also required a discretionary/value judgment: whether removal would be in the interests of the trust and its beneficiaries, within the framework of section 20(1) of the Trust Property Control Act.

A further issue arose incidentally concerning litigation-cost risk and the effect of an indemnity. However, the court expressly limited itself to the disputes properly presented and did not decide broader questions not squarely raised for determination.

4. Court’s Reasoning

The court accepted that it was required to decide on the legality and enforceability of the resolutions and whether removal of the trustee was warranted. It first dealt with the late answering affidavit and granted condonation, emphasising the absence of material prejudice because the applicants had replied and the issues could be ventilated fully.

On the challenge to the resolutions withdrawing litigation and terminating the mandate, the court evaluated the respondents’ explanation that the first respondent had been misled into signing the original resolution authorising litigation. The court found there were no cogent contentions to displace the evidence that the first respondent’s concern related to exposure to legal costs and that he had been indemnified. The court considered the respondents’ account internally inconsistent, noting the answering affidavit simultaneously alleged misleading conduct and also that the first respondent was persuaded and then signed the resolution.

The court further addressed the first respondent’s concerns about the trust lacking funds, the absence of a bank account, and uncertainty about the attorneys’ fees. It accepted in principle that a trustee must act with care and diligence and not recklessly expose the trust to risk. However, the court reasoned that the first respondent had insisted on an indemnity specifically to address that risk. In that context, the court treated the risk-based justification for withdrawing the litigation as not supporting the resolutions adopted.

Regarding the indemnity and whether it continued after Stephanus Botha jnr’s death, the court stated that there was no reason to conclude that the indemnity should not bind the deceased estate. The court reasoned that once an executor is appointed, the executor takes over the deceased’s obligations and rights, and that this would extend to the indemnity agreement the first respondent had signed. The court characterised the advice relied upon by the first respondent as unfounded and lacking merit. At the same time, the court expressly declined to decide questions about whether the indemnity would bind third parties in the Mpumalanga litigation, stating that it had not been invited to pronounce on that aspect and referring to the principle that courts should decide the disputes presented to them.

The applicants also challenged the respondent’s suggestion that the trust had no “assets”. The court recorded the applicants’ reliance on the statutory definition of trust property in section 1 of the Trust Property Control Act, which includes movable or immovable property and contingent interests administered under a trust instrument. The thrust of the reasoning was that the farm, being at the centre of the trust dispute, could qualify as trust property, undermining the “no assets” contention in the context advanced.

On the trust-termination resolution, the respondents relied on a trust deed provision permitting termination one year after the death of the surviving spouse, who died on 10 September 2017 (so that one year would have lapsed by 9 September 2018). The respondents argued the trustees had “unfettered” discretion to terminate. The court emphasised, as an overriding consideration, that a trustee must act in the interests of the trust and/or beneficiaries. The court found the respondent had failed to advance sound reasons demonstrating that termination was in the trust’s best interests or for its benefit. On the facts as assessed, the court concluded that the decision to terminate was not shown to be aligned with the trust’s interests or those of its beneficiaries.

A major element in the court’s reasoning was conflict of interest. The applicants argued that the first respondent’s personal interest in avoiding repayment of the R500 000 received from the sale of the farm put his interests at odds with those of the trust. The court accepted that, on the overall facts, the respondent was not acting in the interests of the trust and beneficiaries, and highlighted as additional evidence of conflict that the first respondent had testified against the trust in the Mpumalanga proceedings, which the court viewed as inconsistent with the trust’s interests.

On removal, the court applied section 20(1) of the Trust Property Control Act, which authorises removal on application by the Master or any person with an interest in trust property if the court is satisfied that removal will be in the interests of the trust and its beneficiaries. The court accepted that the first and second applicants (as beneficiaries through the deceased beneficiary’s estate) and the third applicant (as executor) had a sufficient interest for standing. The court endorsed the principle that removal does not depend on establishing mala fides or misconduct, and treated the decisive enquiry as whether removal would serve the trust’s interests.

The court rejected the notion that setting aside the termination resolution would make removal unnecessary. It noted the incompatibility between the first respondent’s criticisms of the attorneys and his later position, and it considered the respondent’s stance irreconcilable with continued trusteeship. The court also addressed practical considerations, recording that once the trustee is removed the Master may appoint trustees under section 7 of the Act, and that the respondent had not pointed to any trust deed provision prohibiting appointment by the Master.

Finally, on costs, the court found the respondent’s conduct demonstrated pursuit of personal interests and held that a punitive costs order was warranted. It awarded costs de bonis propriis on an attorney and client scale.

5. Outcome and Relief

The court granted the application. It declared the three resolutions adopted by the second respondent (described in the order as adopted on 25 June 2018) to terminate the trust, withdraw the Mpumalanga High Court action, and terminate the attorneys’ mandate, to be illegal and invalid, and it set them aside.

The court removed the second respondent as a trustee of the Botha Ruthven Family Will Trust (IT11143/2002) and authorised the Master of the High Court to appoint a trustee or trustees in terms of the Trust Property Control Act.

The court ordered the second respondent to pay the costs of the application on the attorney and client scale, de bonis propriis.

Cases Cited

Molusi and Others v Voges NO and Others 2016 (3) SA 370 (CC)

Bafokeng Tribe v Impala Platinum Ltd and Others 1999 (3) SA 517 (BH)

Volkwyn NO v Clarke and Damant 1946 WLD 456

Gowar and Another v Gowar and Others 2016 (5) SA 225 (SCA)

Legislation Cited

Trust Property Control Act 57 of 1988, section 1

Trust Property Control Act 57 of 1988, section 7

Trust Property Control Act 57 of 1988, section 20(1)

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The court held that the resolutions adopted by the second respondent, acting as sole trustee, to withdraw the pending Mpumalanga litigation, terminate the trust, and terminate the attorneys’ mandate were not shown to have been adopted in the interests of the trust and its beneficiaries and were therefore declared illegal and invalid and set aside.

The court further held that the second respondent’s conduct, including the conflict between personal interests and the trust’s interests, justified removal as trustee under section 20(1) of the Trust Property Control Act, applying the standard that removal must be in the interests of the trust and its beneficiaries and noting that misconduct is not a prerequisite.

The court held that punitive costs were justified and ordered costs de bonis propriis on an attorney and client scale against the second respondent.

LEGAL PRINCIPLES

A trustee’s powers, including any discretionary powers conferred by a trust deed (such as a power to terminate the trust), must be exercised in a manner consistent with the trustee’s fiduciary duties and with the overarching requirement that the trustee act in the interests of the trust and its beneficiaries. A purportedly “unfettered” discretion was not treated as absolving a trustee from the obligation to justify that the decision serves those interests.

In applications for removal of a trustee under section 20(1) of the Trust Property Control Act 57 of 1988, the decisive enquiry is whether removal will be in the interests of the trust and its beneficiaries. The court applied authority to the effect that neither mala fides nor misconduct is a prerequisite for removal; rather, the court evaluates whether the trustee’s continued office is compatible with proper administration and beneficiary interests.

The court applied the principle that a court should decide only the disputes placed before it for determination. Where a legal question (such as whether an indemnity binds third parties) was not presented for decision, the court declined to make a pronouncement on it.

The judgment also proceeded on the statutory conception of trust property in section 1 of the Trust Property Control Act, treating trust property broadly as including movable or immovable property (and contingent interests) to be administered under the trust instrument, in the context of rejecting the contention that the trust effectively had no assets for purposes of the trustee’s decision-making.

Botha and Others v Ruthven and Others [2023] ZAGPPHC 159; 29145/2021 (8 March 2023)