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[2023] ZAKZPHC 131
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Dlhomo N.O and Others v Chalwa N.O and Another (8721/23P) [2023] ZAKZPHC 131; [2024] 1 All SA 126 (KZP); 2024 (4) SA 161 (KZP) (10 November 2023)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
Case
No:
8721/23P
In
the matter between:
SMALL
ENTERPRISE DEVELOPMENT
AGENCY
(SEDA)
INTERVENING APPLICANT
and
LINDANI
PERCIVAL DLHOMO N.O.
FIRST APPLICANT
WESLEY
AERLRED SOUTTER N.O.
SECOND APPLICANT
PAUL
FRANCIS PHILIP HEEGER N.O.
THIRD APPLICANT
and
PATRICIA
NTOMBIZODWA CHALWA N.O.
FIRST RESPONDENT
THE
MASTER OF THE HIGH COURT,
PIETERMARITZBURG
SECOND RESPONDENT
Coram:
Davis AJ
Heard:
16 October 2023
Date
of Judgment: 10 November 2023
ORDER
1
The intervening applicant’s application to intervene is
granted.
2
The amended substantive relief sought by the intervening applicant is
dismissed.
3
The intervening applicant is ordered to pay the costs of the
intervention
application, such costs to include the costs of two
counsel where so employed.
4
The first respondent be and is hereby removed forthwith as a trustee
of
the National Construction Incubator Trust with registration number
IT183/2008/N.
5
The second respondent is directed to endorse their records
accordingly.
6
The first respondent is directed to hand over to the applicants all
documents
including but not limited to banking and administrative
instruments relating to the administration of the National
Construction
Incubator Trust, within 3 days of this order.
7
In the event of the first respondent failing to comply with paragraph
3
above, the sheriff be and is hereby authorised to do all things
necessary to give effect to paragraph 3 above.
8
The first respondent is directed to pay the costs of the application,
in
her personal capacity (
de bonis propriis
) on an attorney
and client scale, including the costs consequent on the employment of
two counsel where so employed.
JUDGMENT
Davis
AJ:
Introduction
[1]
The applicants, Messrs. L Dlhomo N.O., W Soutter N.O. and P. Heeger
N.O., in their
personal capacities,
[1]
instituted an urgent application against the first respondent, Ms. P
Chalwa N.O., and applied for the following:
‘
(1)
That the first respondent be removed as a trustee of the National
Construction Incubator Trust.
(2)
That the first respondent is directed to pay the costs of the
application, in her personal
capacity
de boniis propriis
.
(3)
Further and/or alternative relief.’
[2]
[2]
Aside from the
voluminous
nature of the papers, the issues that requires determination are
inter alia; whether, SEDA should be joined as an intervening
party
and that an administrator should be appointed to administer the trust
or on
the
facts stated by the respondent, together with the admitted facts in
the applicants’ affidavits, justify the order
that
the
applicants have requested, i.e. the removal of the first respondent
as a trustee.
[3]
[3]
In an attempt to render this judgment more easily understood I will
refer to the three
original applicants, Messrs. Dhlomo, Soutter and
Heeger respectively as the applicants unless in context it is
necessary to refer
to them by their individual citation. I will refer
to Ms. Chalwa as the respondent and the second respondent who is the
Master
of the High Court as the Master, the Master did not
participate in these proceedings. I will refer to the Small
Enterprise Development
Agency who seek to intervene as SEDA.
[4]
Lengthy affidavits and evidentiary material have been filed on record
by the applicants
and the respondent in this matter, SEDA has chosen
not to engage with the factual correctness of the facts averred
either by the
applicants or the respondent, SEDA draws conclusions
about the effect of the conflict between the parties.
[5]
The respondent has filed detailed averments in her answering
affidavits. It is impossible
to traverse all the allegations and
averments contained in the papers in this judgment. Furthermore
counsel appearing on behalf
of the intervening applicant, the
applicants and the respondent have, to different degrees, filed
extensive heads of argument much
of which has proved helpful and is
appreciated. Not all the points raised will be dealt with but have
nonetheless been carefully
considered.
Background
[6]
Despite the matter proceeding under urgency the first preferential
date that could
be assigned by the senior civil judge, due to the
volume of the papers, was 16 October 2023. The exchange of affidavits
and papers
being completed by 17 July 2023.
[7]
On 29 September SEDA filed its application to intervene.
[4]
Context
[8]
In order to understand the relationship between the parties and why
SEDA applied to
intervene it is necessary to contextualise the
relationship between them. The applicants and the respondent were
appointed by the
Master as trustees of the National Construction
Incubator Trust (NCI Trust), which is duly registered and
incorporated in
terms of the Trust Property Control Act 57 of 1988
(the Act), with registration number IT183/2008. SEDA was the founder
of the
NCI Trust and the main beneficiary.
[5]
[9]
The NCI Trust is a public benefit organization mandated to develop
and mentor emerging
construction companies within Southern Africa.
Its focal point are BBBEE initiatives designed to empower emerging
construction
companies to compete with older and more established
companies in the open market. It seeks to assist those companies that
historically
did not have equal access and opportunity within the
industry to compete with other long established construction
entities. One
of the goals is to allow these emerging companies to
compete on an equal footing with those corporations that were the
beneficiaries
of historical inequality.
[10]
The NCI Trust provides technical and business administration
assistance, which includes training
and upskilling initiatives. Being
a public benefit organisation the objects of the trust accord with
the constitutional imperatives
of economic transformation.
[6]
[11]
The NCI Trust has numerous sources whereby it generates capital.
There is donor funding and the
NCI Trust also receives funding from
its partners, which include the metropolitan municipalities and other
local government authorities.
Funding is received from inter alia,
the eThekwini Municipality, the City of Ekurhuleni, Nelson Mandela
Bay, the City of Tshwane
and overseas donor funding. The majority of
its funding is sourced from public funds.
[12]
SEDA is legally obligated to support the NCI Trust, it is the founder
of the trust and is ‘possibly
the greatest supporter of the
Trust.’
[7]
SEDA is also the main beneficiary of the NCI Trust but is not the
only beneficiary. SEDA forms part of the government’s
Department of Small Business Development initiative.
[8]
[13]
Over the past three years SEDA has on average provided R10 million
rand per year to the NCI Trust.
The trust was set up at the instance
of SEDA in order to achieve the vision and objectives of SEDA. The
trustee’s fiduciary
duty is to manage the NCI Trust and provide
oversight in accordance with the trust deed and to ensure that the
donor funding is
used to attain the objects and purposes of the trust
as set out in the trust deed.
[14]
The applicants and the respondent are the only appointed trustees of
the NCI Trust.
[9]
The first applicant was appointed as the Chairman of the NCI Trust at
the Annual General Meeting of the trust in 2020,
[10]
the minutes of that meeting refer to the respondent as a trustee and
the Chief Executive Officer (CEO) of the National Construction
Incubator public benefit organisation, also referred to as a business
incubator (the Incubator).
[11]
The respondent is the person charged with the day-to-day operation of
the Incubator on behalf of the NCI Trust. The first respondent
as the
CEO of the Incubator is required to report and act in accordance with
the instructions of the board of trustees.
Chronology
of the dispute
[15]
On 6 March 2023 the first and second applicants arranged for an
informal meeting with the respondent
in order to obtain explanations
from her in connection with allegations of serious misconduct. A
preliminary investigation into
the respondent’s conduct as CEO
implicated her to have committed acts of maladministration,
misappropriation of funds and
irregular transactions constituting
serious misconduct. The respondent left before any meaningful
engagement occurred at the meeting.
[16]
On 30 March 2023 the respondent locked out the applicants from the
premises of the Incubator
including their access to the IT
infrastructure.
[17]
The respondent was served with a notice of suspension on 31 March
2023. The suspension notice
was signed by the first applicant as
chairman of the NCI Trust. The respondent ignored the notice of
suspension. The trustees in
terms of the trust deed are mandated to
provide an oversight over the functioning of the Incubator, including
decisions of the
board and the management of the Incubator. SEDA
removed the suspension shortly thereafter.
[12]
[18]
On 5 April 2023 the respondent enrolled an urgent application to be
heard in this division sitting
in Durban the next day.
[13]
The respondent sought an interdict preventing the applicants from
attending on the premises of the NCI Trust and associated relief.
[14]
The respondent deposed to the founding affidavit substantiating the
relief sought and her apparent authority to bring such an
application. The application was opposed on the basis that the
respondent was not authorised to bring such application. It was
struck from the roll with no order as to costs.
[15]
[19]
The first applicant notified the management of the Incubator and the
other trustees of the conduct
of the respondent on 11 April 2023. The
applicant placed the respondent on terms that should she not adhere
to the suspension and
restore to the applicants as trustees their
full access to the Incubator then they would launch an urgent
application for appropriate
relief.
[20]
The respondent without further reference to the applicants, on 13
April 2023 ‘procured’
the removal of the applicants as
the trustees of the NCI Trust. The Master of the High Court issued
new letters of authority appointing
Branton Abrahams and Masthideso
Ndlovu as trustees.
[21]
A meeting of the board of trustees and management of the incubator,
including the ‘new’
trustees was convened electronically.
The applicants immediately in writing advised the board of the
Incubator and the ‘new’
trustees that the meeting was
unlawful. Notwithstanding this the respondent applied to First
National Bank to open a bank account
in the name of the NCI Trust.
[22]
Another application was then brought before the high court sitting at
Durban on 26 April 2023
citing the newly appointed trustees of the
NCI Trust as applicants duly authorised to represent the trust. The
application was
directed against the first applicant and others
related parties. The application sought to unfreeze the funds on the
NCI Trusts
Absa Bank account with immediate effect. The matter came
before Mossop J, where it was postponed without the relief sought by
the
respondent being granted.
[23]
The applicants opposed the application, maintaining that the
appointment of the new trustees
was unlawful and their removal as
existing trustees fraudulently obtained. The applicants later
alleging that documentation produced
was indicative of instances of
fraud and forgery.
[24]
Notwithstanding the pending litigation and the
refusal by Mossop J to grant the relief sought, the respondent
on 8
May 2023, requested the Nelson Mandela Bay Metropolitan Municipality
to deposit donor funds into a new bank account that she
alleged had
been verified by National Treasury and the Master. This was done
notwithstanding the ongoing impasse concerning dispute
over the
appointment of the trustees.
[25]
This request was denied by the Nelson Mandela Bay Metropolitan
Municipality on the basis of the
ongoing legal dispute, undeterred
the respondent’s attorneys, purporting to represent the NCI
Trust sent a request to the
municipality requesting payment be made
into ‘the updated account’ on 12 May 2023.
[26]
The Master on 16 May withdrew the letters of authority that it had
authorised in respect of the
‘new trustees’ citing that
the respondent had not informed the Master of the pending litigation
that was ongoing in
both seats of this division.
[16]
[27]
The Master withdrew the letters of appointment for the new trustees
and confirmed that the applicant
in this matter and the respondent,
and no-one else, were in fact the trustees of the NCI Trust. This is
in accordance with the
original letters of authority dated 10
December 2020.
[28]
The next day, 17 May 2023, the applicants in this application
enrolled an urgent application
[17]
ostensibly seeking an order to prevent:
(a)
The respondent from operating other bank accounts in the name of the
NCI Trust, and
(b)
From encouraging donors to pay into any account without the consent
of the applicants, and;
(c)
Not to encourage any donor to pay into any account other than the
original ABSA account
of the NCI Trust.
[29]
Bedderson J made an interim order on 17 May 2023, which was later
confirmed,
[18]
the following are the paraphrased terms of that order:
(a)
That the respondent is
interdicted from opening any bank account in the name of the NCI
Trust without the consent of the applicants.
(b)
Interdicting the respondent
from encouraging any donor or potential donor to make payments into
any bank account other than the
original bank account of the NCI
Trust.
(c)
The respondent is to restore
full access to the premises and IT system of the trust to the
applicants.
(d)
Supply on oath a full list of
bank accounts and transactions opened by her.
(e)
The funds from these accounts
are to be transferred respondent to the bona fide account of the NCI
Trust.
(f)
No payments to be made from the
trust without the written consent of the applicants.
[30]
The next day, the respondent signed off on a payment schedule despite
the order of Bedderson
J. On 19 May 2023 the applicants requested the
respondent to comply with the court order. On 24 May the respondent
notified the
employees of the Incubator that ‘we have made the
decision to place our operations on temporary hold until the outcome
of
the litigation process’.
[19]
There was no meeting of the trustees when this notification was made.
[31]
On 31 May 2023, despite the interim order of Bedderson J being
effective, the respondent’s
attorney mailed the applicants
purporting to represent the NCI Trust despite not being authorised to
do so by the four trustees.
[20]
[32]
On 26 June 2023 an attorney representing Abrahams sent an email
[21]
to the applicants confirming that Abrahams did not sign the
resolution of the NCI Trust dated 24 April 2023 conferring authority,
nor did he sign the power of attorney dated 18 April 2023, these were
subsequently used in the court applications.
[33]
Attorneys for Dr Ndlovu sent an email to the
applicants indicating that Dr. Ndlovu did not sign the power
of
attorney or the confirmatory affidavit supposedly deposed to on her
behalf.
[22]
These documents were used in the applications instituted by the
respondent.
[34]
The applicants believing there was no full and substantial compliance
with the order and an unwillingness
on the part of the respondent to
work as a part of the NCI Trust in accordance with her fiduciary duty
to the trust approached
this division for an order removing the
respondent as a trustee of the NCI Trust
[35]
The application was enrolled in motion court on 23 June 2023 and was
opposed by the respondent.
A consent order postponing the matter
sine
die
was granted and the
applicants were given leave to approach the senior civil judge for a
preference date, with costs reserved.
[23]
Due to the voluminous papers filed the first available date on the
special opposed motion roll was 16 October 2023
The
intervening application
[36]
On 29 September 2023 the SEDA filed on notice of motion an urgent
application for leave to intervene
in these proceedings and that SEDA
be granted the right to present written submissions in advance of the
hearing and oral argument
at the hearing.
[37]
SEDA also sought substantive relief which included a prayer for the
removal of the applicants
and respondent as trustees of the NCI
Trust, replacing them with the appointment of an administrator and
costs to be awarded should
the application be opposed.
[38]
All parties were given to 12 October 2023 to oppose the application
and to file an affidavit
setting out the grounds of opposition. On 11
October 2023 SEDA filed amended papers and served them on the
litigants.
[39]
The substantive relief now sought by SEDA included, inter alia:
(a)
An order appointing one Mr. L
Matshidiso as the administrator of the NCI Trust alternatively;
(b)
To allow SEDA to appoint,
within five days, an interim board of trustees to take over the daily
administration of the NCI Trust;
(c)
That the Master be directed to
either issue a letter of authority to the administrator or in the
alternative appoint an interim
board of trustees pending an
investigation into the financial affairs of the NCI Trust and the
conduct of the of the current trustees
who are the applicants and
respondent in the original application.
(d)
An order was sought directing
the administrator or trustees appointed by the Master to complete the
investigation into the conduct
of the existing trustees within 120
days of being appointed, and/or
(e)
The four trustees, are to
surrender their letters of authority issued by the Master immediately
on the date of this order; or
(f)
In the alternative the Master
to be directed to withdraw the letters of authority forthwith, and
(g)
In addition that the
applicants’ motion be dismissed, alternatively stayed pending
the investigation report of the administrator
or the interim board of
trustees.
(h)
An order as to costs should the
application be opposed.
[40]
The founding affidavit of Mr Nkhosikona Mbatha was used in support of
their application to intervene.
The affidavit confirms that SEDA is
an agency of the Department of Small Business which provides
non-financial support to small
medium and micro enterprises (SMME’s)
and cooperatives throughout the Republic of South Africa. SEDA’s
main objectives
coincide with the NCI Trust, it founded the trust and
is fully funded by the Department of Small Business Development.
[41]
In order for SEDA to fulfil its functions the NCI Trust was
established in 2018. SEDA is the
co-founder, main funder and the
beneficiary of the NCI Trust. SEDA maintains that it should have been
joined to this application
as it has a direct and substantial
interest in the application. The affidavit is, surprisingly silent,
on why it did not seek to
intervene in the other recent applications
brought in this division as it was fully aware of the issues between
the trustees from
the outset.
[42]
The founding affidavit of SEDA does not deal with the averments that
pertain to the cause of
the impasse between the applicants and the
respondent, it does not illuminate any issues as to the conduct of
the applicants and
respondent. Instead, the affidavit focuses on the
results of the conduct complained of in the papers. There is no
attempt to interrogate
the averments of either the applicant or
respondent, to ascertain if there are real disputes of fact as to the
cause of the issues
that now confront the trust. SEDA instead
maintains that the result of the conflict between the applicants and
respondent is characterized
by serious infighting that warrants the
appointing of an administrator to administer the NCI Trust and
simultaneously to investigate
the cause of the conflict.
[43]
SEDA justifies seeking the relief they do on the basis that donor
money is currently being withheld
because of issues at the NCI Trust,
this resulted in employees and service providers not being paid and
this opens the NCI Trust
to legal challenges which directly impact
upon SEDA and its ability to perform in terms of its mandate.
[44]
The NCI Trust cannot fund the litigation of the trustees as that
directly and negatively impacts
upon their ability to properly mentor
and assist its beneficiaries. SEDA in its founding affidavit asserted
that the conduct of
both the applicants and the respondent allows the
court to exercise its inherent jurisdiction to remove them as
trustees or appoint
an administrator.
[45]
The applicants filed a notice to oppose the substantive relief sought
by SEDA but would abide
by the decision of the court with regard to
the prayer to be allowed to intervene. Somewhat ambiguously in its
replying affidavits
much was said indicating why intervention should
not be allowed.
[46]
Despite this ambivalence senior counsel for the applicants informed
the court at the hearing
that indeed the applicants had no objection
to the intervening applicant been admitted to these proceedings, they
merely opposed
the substantive relief sought by SEDA.
[47]
In respect of the application to intervene the respondent filed no
papers and abides by the decision
of the court. SEDA has indicated
that it is no longer pursues the removal of the trustees but the key
relief prayed for is now
an order appointing an administrator. In
respect of the substantive relief prayed for by SEDA it is now
limited to the following:
(a)
The appointment of Mr Leeto
Matshadiso as the administrator of the NCI Trust.
(b)
The Master to issue letters of
authority to the administrator allowing the administrator to take
over the daily administration of
the trust.
(c)
The administrator is to conduct
an investigation into the financial affairs of the NCI Trust and the
conduct of the current trustees.
(d)
The administrator be directed
to complete its investigation within 120 days.
(e)
The administrator may apply to
the Master of an extension of time should investigation be incomplete
but for not longer than 90
days.
(f)
All four trustees are
temporarily suspended pending the outcome of the investigation
conducted by the administrator.
(g)
The Master to withdraw letters
of authority to give effect to the suspension.
(h)
The staying of all litigation
between the parties pending the investigative report of the
administrator.
Intervening
application analysis
[48]
SEDA, in my view wisely does not pursue its prayer for the removal of
the trustees at this time,
it now seeks only to have this court
appoint an administrator. I say wisely, as its own founding affidavit
read with the affidavits
filed on record do not support the removal
of the trustees either in fact or in law.
[49]
The response of the applicants in their replying affidavit was that
even if this enmity impacts
upon beneficiaries, it is not, in law, a
ground to remove the trustees, especially in the face of what they
refer to as ‘indisputable
evidence of the Respondent’s
maladministration, malfeasance and breach of fiduciary duty this
relief is not countenanced
by our law.’
[50]
Mere friction or enmity between the trustees and beneficiaries will
not in itself be adequate
reason for the removal of the trustees. Nor
would mere conflict amongst trustees be a sufficient reason.
Ultimately the question
is whether the removal will, as required by s
20(1) of the Act, be ‘in the interest of the trust and its
beneficiaries’.
[24]
[51]
The applicants acknowledge the importance of their relationship with
SEDA, the existence of the
NCI Trust is founded on the aims and
objectives of SEDA and their appointments as trustees is to support
and provide leadership
and oversight in the attainment of these
objectives.
[52]
However, their appointment as trustees demands that they maintain
their independence and uphold
their fiduciary positions and integrity
and this demands that they act in the best interests of the NCI
Trust, which is a public
benefit organization. This has to be done
without fear or favour, noting that the NCI Trust and SEDA have a
joint responsibility
to the public, this court, and their funders to
be transparent about this matter.
[53]
On a scrutiny of the papers there is no evidence on the common cause
facts of the applicants
acting directly to undermine the NCI Trust,
the evidence discloses that the applicants merely seek to exercise
their fiduciary
duty towards the beneficiaries of the NCI Trust in
accordance with the trust deed and objects of the trust.
[54]
The applicants’ response to SEDA applying to the court appoint
on an interim basis an administrator
is flawed in law as it would
usurp the function of the Master, it would be from the outset a
nullity, void
ab initio
and ultra-vires the provisions of section 16(2) of the Act.
[25]
The power to appoint an administrator is the statutory preserve of
the Master and no one else.
[55]
Counsel for the intervening applicant relies on
Dladla
N.O v Lamula N.O
[26]
to refer to an example where the court had made an order in the terms
sought by SEDA. It is important to note that in
Dladla
N.O.
there was no challenge to the legality of that decision.
[56]
It is not the only time a high court has made the order sought by
SEDA, in
Van
der Meulen v Ras N.O.
[27]
Ledwaba
J, in a matter where there was enmity between a purported beneficiary
and the trustees stated:
‘
As
it is clear in the papers that there are disputes of facts in respect
of certain issues and there is an allegation that the trustees
did
not act in good faith . . . It will not be proper, in my view, to
replace the trustees unless a proper investigation has been
conducted
by the [Master].’
[57]
Ledwaba J ordered the Master in
Van
der Meulen v Ras
to ‘
carry
out an investigation in terms of Section 16 of the Trust Property
Control Act 57 of 1988 a copy of the report to be served
on the
applicant and respondent’s attorneys of record
’.
[28]
[58]
Ledwaba J’s judgment subsequently went on appeal to the Supreme
Court of Appeal (the SCA).
I align myself with the dicta of Leach JA
Ras
NO v Van der Meulen
[29]
where he said:
‘
The
court a quo also erred in ordering the Master to carry out an
investigation. Under s 16(1) of the Act, the Master has a wide
discretion to call upon trustees at any time to account to him.
Section 16(2) further provides that the Master may, “if he
deems it necessary, cause an investigation
to
be carried out . . . into the trustee's administration or disposal of
trust property”.
The
discretion to call for such an investigation vests solely in the
Master. It is not alleged that the Master had in anyway acted
improperly in the exercise of that discretion, and it was therefore
not competent for the court a quo to direct him to carry out
an
investigation
.’
(my emphasis, footnote omitted)
[59]
Similarly in
Master of the
High Court NGP v Motala NO
[30]
in which the court was dealing with a statutory provision reserving
to the Master the power to appoint a judicial manager in insolvency
proceedings Ponnan JA said:
‘
Any
doubt as may have existed as to the power of the high court to
appoint judicial managers — and to my mind there ought
to have
been none — has now been laid to rest by the judgment of
Bertelsmann J in
Ex
parte The Master of the High Court South Africa (North Gauteng)
2011
(5) SA 311
(GNP). In that matter the Master saw fit to approach
the high court for declaratory relief. What motivated the application
appears from the reported judgment (paras 2-4), which reads:
“
The
application has been necessitated by a practice that has developed
over the past years that attorneys who apply for the sequestration
of
individuals or the liquidation of companies (or, for that matter,
close corporations), or for judicial management of a company
in terms
of the Companies Act 61 of 1973 (see now Act 71 of 2008), include a
prayer in the notice of motion and draft order for
the appointment of
a specific individual as trustee or provisional trustee, as
liquidator or as provisional liquidator or judicial
manager or
provisional judicial manager.
Advocates who
are instructed to appear in these applications, usually in the
unopposed motion court, move for orders in these terms,
and, as is
apparent from a number of orders granted by judges of this court, do
so successfully.
The Master
contends that such orders are in conflict with the clear provisions
of the relevant statutory provisions, and that officers
of the court
should not apply for, and this court should not grant, orders that
interfere with the exercise of the applicant's
functions.”’
Ponnan
JA went on to quote the order issued by Bertelsmann J in
Ex
parte The Master of the High Court
,
[31]
where Bertelsmann J declared that the Master ‘is the only
person authorised to appoint’ trustees and provisional trustees
where an estate is sequestrated, liquidators or provisional
liquidators in the provisional or final liquidation of a company or
close corporation, judicial managers or provisional judicial managers
where a company is placed under final or provisional judicial
management. The last part of the order reads that ‘no judge of
the High Court of South Africa has authority or jurisdiction
to
effect any appointment of any person to any of the positions referred
to in paragraph 1.’
[60]
These decisions of the SCA are binding precedent and are dispositive
of the substantive relief
sought by SEDA. The application to have an
interim administrator appointed must fail, this court has no
jurisdiction in these circumstances
to make such an order.
[61]
In respect of the other grounds of objection to the substantive
relief it suffices at this point
to note that the manner in which
SEDA engaged with the papers filed by both sides would have struggled
to sustain a finding that
the applicants’ conduct in the matter
as opposed to that of the respondent justified such an order. I
decline, in light of
my findings herein, to deal with the applicants’
other arguments on why the relief should be refused. SEDA’s
application
for substantive relief fails.
Application
to remove the respondent as trustee
[62]
Section 20(1) of the Act provides that:
‘
A
trustee may, on the 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
.’
[63]
Koen J in
Tugh N.O
.
v Rajbansi
[32]
in a concise exposition of the law in this regard wrote,
‘
Proof
of misconduct, dishonesty or mala fides is not essential for the
removal of executers or administrators. In
Volkwyn
N.O. v Clarke and Damant
Murray J held:
“
the essential test is whether
such disharmony as exists imperils the Trust estate or its proper
administration”.’ (footnotes
omitted)
[64]
In a recent judgment of this division, E Bezuidenhout J held
that:
[33]
‘
Section
20(1) of the Act does not specify any grounds for removal, other than
that the court should be satisfied that the removal
will be in the
interests of the trust and its beneficiaries. I was referred to
Tijmstra NO v
Blunt-Mackenzie NO and others
where it was inter alia held that “[w]henever trust assets are
endangered a trustee should be removed”.’
[65]
Conflict or dislike between trustees or between a trustee and the
beneficiaries are not in themselves
suitable reasons for the removal
of a trustee: ‘[ultimately] the question is whether the removal
will, as required by s 20(1)
of the Act, be “in the interest of
the trust and its beneficiaries”.’
[34]
Duties
of trustees
[66]
In
Doyle v Board of
Executors
[35]
it was said that despite the contractual nature of a trust, it is
‘
unquestionable
that a trustee occupies a fiduciary office. By virtue of that alone
he owes the utmost good faith towards all beneficiaries,
whether
actual or potential
.’
[67]
Koen J in
Tugh
NO
[36]
provided the following helpful summary of the law applicable to
trustees:
‘
(a)
A trustee must administer a trust estate with the utmost good faith
and in the best interest of
the trust beneficiaries;
(b)
A trustee must act with impartiality, which implies the avoidance of
a conflict between
the trustee’s personal interest and those of
the beneficiaries;
(c)
A trustee is obliged to conserve trust property;
(d)
A conflict between interest and duty, whether arising from an act of
the Trustee, such as
a claim made against the Trust estate, or from
independent causes, is a ground for removal;
(e)
A trustee can be removed from office by the court if continuance in
office would prevent
the proper administration of a Trust or be
detrimental to the welfare of the trust beneficiaries and the Trust
Estate.’ (footnotes
omitted)
[68]
Koen J further pointed out that
[37]
Although
this court has the power in terms of s 20 of the Trust Property
Control Act 57 of 1988 or using its inherent power to remove
a
trustee where continuous occupation of the office of the trustee will
prevent the Trust from being properly administered or be
to the
detriment of the beneficiaries, such power must be exercised with
circumspection and only where the removal of the Trustee
will be in
the interest of the Trust and its beneficiaries. The First Respondent
in this regard relied on the decision in
Gowar and another v Gowar
and others
(‘
Gowar
’).
[69]
Koen J further in
Tugh
NO
,
[38]
with reference to
Gowar
v Gowar
[39]
stated as follows:
‘
In
Gowar
attention
was
inter
alia
drawn
to the following:
(a) In
Land
and Agriculture Bank of South Africa v Parker and others
Cameron
JA held that:
“
[A
Trust] 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”;
(b)
Where more than one trustee has been specified in the Trust Deed they
share a common fiduciary obligation towards the fulfilment
of the
objects of the Trust and must act jointly;
(c)
In terms of s 9(1) of the Trust Property Control Act:
“
(1) A
trustee shall in the performance of his duties and the exercise of
his powers act with the care, diligence and skill which
can
reasonably be expected of a person who manages the affairs of
another”;
(d)
Kotze JA in
Sackville West
said that:
“
a
tutor must observe greater care in dealing with his ward's money than
he does with his own, for, while a man may act as he pleases
with his
own property, he is not at liberty to do so with that of his ward.
The standard of care to be observed is accordingly
not that which an
ordinary man generally observes in the management of his own affairs,
but that of the prudent and careful man;
or, to use the technical
expression of the Roman law, that of the
bonus
et diligens paterfamilias.
”
(e)
This was reaffirmed in the context of trusts in
Administrators
Estate Richards vs Nichol and another
.
’
(footnotes
omitted)
The
trust deed
[70]
The deed of trust regulates and defines how the NCI Trust operates
and the duties of the trustees
to ensure compliance with the
directives of the deed.
[40]
is the trust deed recorded that the
‘
3.1
SEDA Technology Programme. (STP) is a programme of SEDA aimed at
increasing economic growth and employment creation through
the
enhancement of technological innovation, improvement in productivity
and accelerated international competitiveness of South
Africa’s
SMME’s.
3.2
STP wishes to establish a centre of excellence and development
support for small enterprises in the construction sector in KZN
which
will foster growth and lead to the establishment of sustainable
businesses.’
[71]
The primary objectives of the trust as stated in the deed inter alia
are:
‘
4.2.1
To receive capital construction
4.2.2
Set up a business framework for incubation.
[41]
.
. .
4.2.4
Use the Capital Contributions for purposes of Incubation.
.
. .
4.2.7
Enter into any agreement as may be necessary to implement any
of the above objects.
4.2.8
Carry out all such further activities provided for in the Trust Deed
and/or any other activities necessary for
or which will further the
objects set out above.’
Meetings
and decisions of the trustees
[72]
With regard to attending to the business of the trust, the trust deed
requires that:
(a)
At least four (4) meetings a year are required,
[42]
(b)
These meetings may be convened by the
chairperson or any trustee, at each meeting of the trustees
shall
have one vote
[43]
with the chairperson holding the casting vote.
(c)
Representatives of the beneficiary and other role-players may be
invited to attend
meetings of the trustees but may not vote at any
meeting.
[44]
(d)
A written resolution signed by all trustees is also deemed to be
valid in terms of 7.7 of
the trust deed.
[45]
[73]
The powers of the trustees according to the trust deed include inter
alia: -
(a)
The Trustees shall do all things necessary to give effect to the
objectives of the Trust
as envisaged 4.2 of the Deed.
[46]
(b)
Trustees shall not engage in any activity nor enter into any
agreement or transaction which
compromises or is not contemplated in
the objectives of the Trust.
[47]
(c)
The trustees may incur any liabilities on behalf of the Trust other
than pursuant
to the fulfilment of the objectives of the Trust.
[48]
(d)
The Trustees have the power to make use of the services of
professional advisors, management
consultants and/or employees to
carry out the aims and objectives of the Trust and to pay for those
services.
[49]
(e)
The trustees may accept donations or bequests on behalf of the trust
from anybody subject
to the terms and conditions of the trust deed
and subject to the terms and conditions of such donations.
[50]
(f)
The trustees can apply to do fund-raising for the trust if deemed
necessary.
[51]
[74]
The remuneration of the trustees is regulated by the trust deed,
which states as follows:
‘
10.1.
The Trustees shall be entitled to a fee or an amendment to the fee in
an amount to be agreed between the beneficiary and the
Trustees from
time to time and to be reimbursed by the Trust for any reasonable
administrative expenses which may be incurred in
their capacities as
Trustees as agreed between the Beneficiaries and the Trustees.
10.1.2
Contribution to the trust are required to be used for purposes of
incubation.’
[75]
The respondent is not just the CEO of the NCI Trust she is one of
four trustees. The core function
of the trustee is to ensure that the
trust’s aims and objectives as provided in the trust deed are
achieved. Although she
is the CEO, she is a trustee and bound by the
duties that attach to being a trustee. She bears the fiduciary duties
of a trustee
even if she is in charge of the management of the trust
on a daily basis.
[76]
Even where the respondent took decisions as the CEO after consulting
with her management team
at the Incubator the respondent was required
to ensure that where those decisions impacted upon the NCI Trust that
she would obtain
the necessary ratification of all the trustees. This
requirement is illustrated in the recent decision of
Shepstone
and Wylie Attorneys v De Witt NO
[52]
where the SCA said:
‘
Equally
trite, is the principle that trustees must act jointly in taking
decisions and resolutions for the benefit of the Trust
and
beneficiaries thereof, unless a specific majority clause provides
otherwise. Trustees are legally bound to comply with the
terms of the
trust deed. In line with their fiduciary duties, trustees must be
legally authorised to act through competent resolutions.’
[77]
Instructive with regards to the issues in this matter, is the
following, where Mbatha JA, quoting
from
Thorpe
v Trittenwein
,
[53]
said:
[54]
‘
In
Thorpe
and Others v Trittenwein
and
Another
2007
(2) SA 172
(SCA);
[2006] 4 All SA 129
(SCA), this
Court endorsed the principle that unless the trust deed provides
otherwise the trustees must act jointly if the
Trust is to be bound
by their acts. At paragraph 14, this Court expressed itself as
follows:
“
The answer,
I think, is that even if one regards the decision of the co-trustees
to enter into the agreement of sale as no more
than a matter of
internal trust administration, the point remains that in the absence
of a joint decision of the co-trustee (or
the majority if that is all
the trust deed requires), the assent of a single trustee will not
bind the trust.”
Most importantly, the court stated the
following:
“
A trustee
who was not a party to the decision making process and who therefore
has not authorized the contract would be free to
contest the validity
of the transaction.”
[78]
Mbatha JA further stated that:
[55]
‘
In
Steyn and Others N N O v
Blockpave (Pty) Ltd
2011
(3) SA 528
(FB) (
Blockpave
),
the court succinctly drew the distinction between internal and
external business with outsiders. The court held that although
trustees may disagree internally on a matter, they are prohibited
from disagreeing externally. Internal matters may be debated
and put
to a vote, thereafter the voice of the majority will prevail.
However, in so far as the Trust is required to deal with
external
business all trustees are required to participate in the
decision-making.’
[79]
The common cause facts as disclosed by the affidavits filed on record
reveal that the respondent
as CEO of the Incubator made unilateral
decisions pertaining to the running of the NCI Trust, that directly
impacted upon the NCI
Trust’s ability to optimally perform its
functions in accordance with the demands imposed upon it by the trust
deed, without
involving the other trustees at all.
[80]
Decisions were made by the CEO that bypassed the trustees, these were
objectively undermining
the proper functioning of the NCI Trust and
when concerns were raised by the applicants, quite properly as
trustees, the respondent
reacted in a manner that has culminated in
this hearing.
[81]
It is necessary to remind oneself that the NCI Trust is a public
benefit organisation mandated
to develop and mentor emerging
construction companies in South Africa. To this purpose the Trust
Deed regulates the conduct of
the Trustees in the manner in which
they achieve this purpose. The Trustees carry a fiduciary duty to act
in the furtherance of
the objectives of the Trust within the
parameters set in the Deed of Trust. The NCI Trust is an entity that
is managed in terms
of the Trust Deed not outside of the Trust Deed.
Compliance with the Trust is the responsibility of all the trustees,
it cannot
be delegated to another body or individual. The Incubator
itself has to act in accordance with the trust deed. Merely the
stating
of the duty imposed by law on a set of trustees is an
indication of the problematic actions of the respondent.
Application
for removal of trustee
[82]
Counsel for the applicant, Mr Ramdhani SC, and Mr Mhlabathi for the
respondent, made lengthy
submissions before me. Heads of argument had
been filed and the papers are voluminous.
[83]
Due to the content of the heads of argument filed on record,
especially those of the respondent,
before being addressed, I
requested the legal representatives to address me with specific
reference to the aims and objects of
the NCI Trust as provided in the
trust deed. I invited them to address me on how the conduct of the
respondent addressed the aims
of the NCI Trust.
[84]
It concerned me that the arguments particularly, about the conduct of
the respondent, made very
little reference to the trust deed, i.e.
what her responsibilities were in terms of the obligations imposed
upon her by the position
she held and in particular her fiduciary
duty owed to the NCI Trust. None of the issues raised by the
respondent’s legal
representative dealt with these duties,
instead the respondent attacked the bona fides of the applicants and
that, as CEO, she
was making decisions in the best interests of the
Incubator.
[85]
Bearing in mind the issues to be decided, it is perhaps more
expedient to first highlight and
discuss the submissions made on
behalf of the respondent.
Points
in limine
[86]
In her heads of argument, the respondent has raised some
in
limine
challenges to the
application. One of these included the non-joinder of SEDA to the
application,
[56]
somewhat surprisingly Mr Mhlabathi persisted with this argument
notwithstanding the fact that SEDA were allowed to intervene by
consent. They were a party to the proceedings so it makes the issue
of their non-joinder moot.
[87]
In respect of the submission that the applicants do not have the
authority to remove trustees
as the trust deed states that the
beneficiary is the person who may remove beneficiary appointed
trustees. The law is settled,
those that have a substantial interest
in the matter may apply to a competent court for the removal of a
trustee. The trustees
in this matter as per the trust deed are
independent appointees and the beneficiary cannot remove them unless
by a court application.
[57]
[88]
He argues that the same or similar allegations, including one as to
who the rightful trustees
are, these are pending in other courts and
that they should be finalized first. The SCA has repeated what is
required in order
to find a claim of
lis
alibi pendens
:
[58]
‘
Fundamental
to the plea of
lis
alibi pendens
is
the requirement that the same plaintiff has instituted action against
the same defendant for the same thing arising out of the
same cause
.’
[89]
No action has previously been instituted for the removal of any
trustee, the Master has filed
an affidavit stipulating who the
trustees of the NCI Trust is. The issue of the removal of the
respondent is not before any other
court.
Authority
to bring the action
[90]
The applicants and respondent are cited as nominee officio, however
in their Uniform rule 7(1)
notices they correctly allege that they
bring the application in their personal capacities. As trustees they
have sufficient interest
in the matter to find locus standi.
[91]
The
applicants have cited the respondents in her official capacity. This
is not in line with the authorities. E Bezuidenhout J,
in
Vorster
NO v Buthelezi
[59]
stated
‘
an
application for the removal of a trustee should be brought against
the trustee in his or her private, and not representative,
capacities.’
Despite
the application referring to the applicants and respondent in their
official capacities in terms of the rule 7(1) notice
the issue is
resolved.
Merits
[92]
The applicants allege that an investigation revealed highly
concerning conduct on the part of
the respondent. The applicant’s
founding affidavit, as deposed to by the first applicant, lists the
following as the grounds
on which the applicants assert that the
respondent should be removed as a trustee:
[60]
(a)
The misappropriation of NCI
Trust funds; and
(b)
Introducing a financial scheme
inconsistent with the NCI Trust deed.
(c)
Introducing a financial scheme
inconsistent with the objects of the NCI Trust deed.
(d)
Refusing to accept the
withdrawal of the letters of authority of the Master.
(e)
Locking out the appointed
trustees from the Incubator and all of its infrastructure.
(f)
The respondent opened a bank
account and directed payments into the new account controlled despite
the court order of Mossop J.
(g)
She failed to comply with the
court order of Bedderson J, i.e. to restore the applicants’
access to the information technology
(IT) infrastructure.
(h)
She purported to act on behalf
of a newly appointed trustees on two occasions without the requisite
authority to litigate on their
behalf.
(i)
Without the necessary authority
of the trustees, following the order of Bedderson J, the respondent
shut down the business of the
NCI Trust and sent employees home.
(i)
The respondent claimed legal fees from the NCI Trust despite never
having secured
authority to litigate in the trust’s name.
(ii)
She unilaterally granted salary increases as much as 25 percent to
herself.
(iii)
The respondent used the NCI Trust for personal gain and did not
advance the interests of the
NCI Trust as a public benefit
organisation.
(iv) She
received a commission payment or finder’s fee of R125 000 for a
donation from public
funds.
[93]
I am mindful of the factual disputes that are present in the
affidavits filed by the applicants
and the respondents. The correct
approach
is
where
[61]
‘
in
proceedings on notice of motion disputes of fact have arisen on the
affidavits, a final order, whether it be an interdict or
some other
form of relief, may be granted if those facts averred in the
applicant's affidavits which have been admitted by the
respondent,
together with the facts alleged by the respondent, justify such an
order. The power of the Court to give such final
relief on the papers
before it is, however, not confined to such a situation. In certain
instances the denial by respondent of
a fact alleged by the applicant
may not be such as to raise a real, genuine or bona fide dispute of
fact.’
[94]
In this particular matter the manner in which the respondent on the
facts contained in the affidavits
before me, even when considered as
favourably as possible in her favour leave the result inevitable. In
this judgment I set out
the duties of the trustees to administer the
trust as a collective and that duty has been completely disregarded
by the respondent.
The chronology reflects examples of where the
respondent failed in her duty to act in accordance with the trust
deed when she unilaterally
without the rest of the trustees’
approval embarked on litigation and authorised payment structures
that flew in the face
of her fiduciary duty.
[95]
She has instead embarked upon a journey as the CEO to run the NCI
Trust as an independent entity
enriching herself at the expense of
the aims and objectives stated in the trust deed to the detriment of
the beneficiaries. The
respondent made decisions without reverting to
her fellow trustees and without a resolution of the trustees to act.
[96]
It was submitted by the applicants that the respondent ‘disregarded
the fact that once
funds are donated to a trust, it becomes a trust
asset which must be distributed in terms of the provisions of the
trust deed’.
[62]
It is the fiduciary duty of the trustees collectively to ensure that
this is done. The functions of the trustees are to meet, to
pass
resolutions to ensure that the aims of the trust are met. It is clear
to me, as sure as night follows day, that the respondent
embarked
upon a journey as the CEO of the Incubator to make decisions
impacting upon the goals of the trust without attempting
to comply
with the NCI Trust’s rules and requirements. It is abundantly
clear that she regarded the management board as being
the proper
forum by which decisions were made and ignored her fellow trustees’
fiduciary duty to practice oversight over
these decisions.
[96]
Once it became apparent that the investigation ordered into her
misconduct had exposed serious
cases of maladministration and
malfeasance she embarked on a mission to protect herself by rendering
the trustees ineffective.
[98]
Instead of dealing with the notice of suspension and her position in
conjunction with the other
trustees within the parameters of the
trust deed the respondent approached the founding beneficiary and the
management of the operational
work of the NCI Incubator to assist her
in removing the suspension. She directly and deliberately conducted
herself contrary to
her fiduciary duty to the NCI Trust.
[99]
The preliminary investigations into the conduct of the respondent
revealed numerous cases of
payments not properly authorised, some
with apparently serious deficiencies. In light of the view I take I
will not do into any
great detail in respect of these, it suffices to
notes that the manner in which some of these factual complaints have
been responded
to in the answering affidavits of the respondent have
not disclosed a bona-
fide
dispute of fact with the
factual
averments of the applicant.
[100]
The most disturbing aspect is the manner in which the respondent has
been remunerated. She is the CEO of the Incubator,
as a trustee
holding such a senior position in the day to day management of the
NCI Trust and Incubator her fiduciary duty to the
trust to ensure the
proper management of the NCI Trust’s funds should be paramount
in her mind. In particular, her remuneration
as the CEO, outside of
mere expenses that she is entitled to as a trustee, could only be
ratified by a resolution at a meeting
of the trustees.
[101]
The trustees, in accordance with the trust deed, are the only people
entitled to vote on this issue. To glibly
say the board approved it
by a vote when there was no vote of the trustees and no duly
authorised resolution of the trustees reveals
a flagrant and
devastating breach of her duty to act in the utmost good faith to the
NCI Trust and its beneficiaries. The management
board of the
Incubator had no right to vote on either her remuneration as the CEO
or any bonus commission scheme that she might
be entitled to.
[102]
It is the examination of the salary increase of 25% and the 10%
finder’s fee that underscore the unfitness
of the respondent to
be a trustee. I deal firstly with the finder’s fee through
which the respondent received a finder’s
fee payment of R125
000 from a donation to the NCI Trust by SEDA.
[63]
The majority of the funds sourced by the NCI Trust are donations from
municipalities and government entities, this renders the
finder’s
fee hugely problematic. When looked at it in the light of the fact
that SEDA as the founder of the NCI Trust, is
legally obligated to
fund the trust, it is the NCI Trust’s primary donor and
beneficiary. The decision to pay to the CEO
a finder’s fee in
such circumstances is incomprehensible, especially in light of a
trustee’s duty to the trust.
[103]
SEDA over a period of 3 years has donated R10 million per annum to
the NCI Trust. It is legally obligated to do
so as the trust is one
of the main vehicles used to achieve the goals of SEDA. Without its
contributions the NCI Trust would face
serious challenges, indeed it
probably could not operate. Simply stated the respondent in terms of
this scheme would be enriched
in the amount of approximately R1
million rand per annum. This enrichment through this scheme would be
as a result of her doing
absolutely nothing and in direct
contravention of the stipulation in the trust deed that all funding
be used for incubation.
[104]
Those who work and are remunerated on the basis of a finder’s
fee protocol can benefit without necessarily
being actively involved
in the sourcing of the donor funding. Many entities operate on that
basis, that is easily accepted. If
the prescripts of the finder’s
fee agreement allowed it, then it would be due and payable.
[105]
What is completely unacceptable is the following:
(a)
Where an employee takes a finder’s
fee, from the legally obligated primary donor, who donates
money from
the public fiscus to the Incubator and that donation is in aide of
the work of the Incubator, i.e. to assist SMMEs to
gain a footing in
the construction industry, this behaviour defies comprehension.
(b)
There is no sourcing of, or the need
to find, an income stream, SEDA has to donate money.
(c)
The taking of the finder’s fee,
in light of the above, is exacerbated when the employee
is in
fact a trustee, who is charged with ensuring that donated funds are
used to achieve the aims and objectives of the NCI Trust.
(d)
The deed requires that all funding is
to be used for incubation, it cannot be used to pay a finder’s
fee or commission.
(e)
There is no resolution by the trustees
of the NCI Trust authorising the paying of a finder’s
fee,
noting that the trust could not have, in the proper exercise of their
fiduciary duty, authorised this fee.
(f)
This is a gross abuse of the
respondent’s position within the trust and placed herself
in
direct conflict with the purpose of the trust.
[106]
The respondent’s conduct on this aspect falls well short of
complying with her duty to the NCI Trust as
a trustee. The
respondent’s actions are the opposite to promoting the objects
of the ‘Incubator Trust,’ which
include the promoting and
upliftment of emerging construction companies and thereby creating
sustainable businesses. All she did
was deplete the funds available
to the trust that should be used for the purposes of incubation. It
is another illustration of
the respondent acting outside of her
duties towards the NCI Trust and failing to protect the income of the
trust. It is a clear
example of maladministration.
[107]
Paragraph
4.2.4
of the trust deed specifically states; that ‘the funds donated
and all capital contributions had to be used for purposes
of
Incubation’. The respondent was thus prevented by the trust
deed from using these contributions other than for incubation.
[108]
The duty of a trustee in respect of the trust with regard to the
finances of the trust was set out earlier per
Koen J in
Tugh
NO
.
[64]
The respondent was required to act with ‘great care’ when
dealing with the NCI Trust money, the standard quoted was
that of the
bonus
et diligens paterfamilias
.
Her behaviour is in stark contrast with this requirement.
[109]
In the founding affidavit of the applicants the respondent is
described as believing ‘
that
she is the be all and end all of the trust’
.
[65]
That may in large part be correct but the better description, in my
view is that, she simply ignored her duties as a trustee to
the NCI
Trust.
[110]
This is aptly shown when the respondent took a 25% salary increase,
which meant that instead of earning R1 630 804,00
per annum, she
now earned R2 049 755.00 per annum. When this
increase was agreed there was no meeting of the trustees,
there was
no resolution authorising the large increase, merely the submission
in her papers that her management board at the Incubator
had approved
the increase.
[111]
This increase could only have been approved by the trustees at a
meeting with only the trustees voting on the
issue. Taking into
account the cost to the entity this would be a decision that needed
to be responsibly taken considering the
fiduciary duty of all the
trustees. She simply circumvented the NCI Trust
by having
her increase ratified by her management board at the Incubator
whereas only the trustees should have voted on a salary
increase for
the CEO.
[112]
In returning to the issues that had to be decided, I am of the view
that the respondent was not entitled to pay
or distribute the funds
in the way she did and that these payments were made contrary to the
objects of the NCI Trust and accordingly
directly prejudicial to the
trust property and the beneficiaries of the trust.
[113]
The exposure of her financial maladministration triggered a set of
events and litigation in this division by the
respondent whereby she
tried to remove the applicants from the NCI Trust. The respondent
denied the applicants access to the premises
and the IT
infrastructure without the authorisation of a majority of the
trustees. This was in direct conflict with her fiduciary
duty as a
trustee.
[114]
She litigated without the authorisation of the majority of the
trustees, and purported to represent the NCI Trust,
she engineered
the removal of the trustees by the Master through deceit and
encumbered the trust with the costs of the litigation.
With respect
to the argument of Mr Mhlabathi that it has not been proved who
forged the signatures on the powers of attorney
of the ‘replacement
trustees’ does not assist the respondent. She drove the
replacement of the current trustees with
the new trustees, she was in
the unique position of knowing the process that was followed and how
the documents were signed. Her
failure to explain how the documents
were signed in the circumstances is fatal to her denial that
documents used to initiate litigation
were fraudulent.
[115]
There is no bona fide dispute that documents used in the earlier
legal proceedings, in particular, the power of
attorneys, were not
signed by those persons named on the power of attorney document. The
applicants laid sufficient basis for that
conclusion, the respondent
is in the best position to set the record straight. She chose not to
do so when it would have been simple
for her to do so. Whilst her
attorney was proceeding with the application, between them they must
have known where the source of
those signatures were. In such a case
her averments in her affidavit do not create any bona-fide dispute of
fact on this aspect..
[116]
The manner in which she litigated before the high court, how
she unilaterally purported to represent the NCI Trust
in the
application before Chetty J in Durban is unacceptable for a trustee.
The subsequent failure to comply with the order of
Bedderson J and
directly and through her attorney requesting donors to pay money into
a bank account contrary to the directives
of that court order that
specifically prohibited this conduct, is contemptuous and indicative
of someone who is not acting in any
accordance with a fiduciary duty.
[117]
The close proximity in time between the surfacing of the preliminary
report implicating the respondent in possible
maladministration and
financial irregularities and the respondent’s actions designed
to get rid of the current trustees is
telling. In direct conflict
with her duties as a trustee the respondent embarked on a path of
self-preservation at the expense
of the NCI Trust. The respondent was
no longer acting on behalf of the trust but to protect her misconduct
from exposure by the
other trustees.
[118]
The precedent referred to earlier makes it clear that trustees will
be removed when their continuance in office
will be detrimental to
the trust property and the beneficiaries. I must be satisfied that
that the removal will be in the interest
of the trust and the
beneficiaries.
[119]
SEDA’s unwillingness to deal with the facts of what occurred
within the trust that fundamentally undermined
the aims of SEDA is
disappointing, especially when the information was readily available
to them. They instead chose not to engage
with the factual issues. If
they had done so the conclusion they had to come to would have been
that the reality is, on the undisputed
facts in this application, it
is in the NCI Trust’s interest, SEDA’s interest and all
the beneficiaries’ interest,
that the respondent be removed.
[120]
I am unable to cover all the material contained in the papers for
this ruling, the record is vast, I have carefully
considered the
papers filed, the heads of argument filed along with the practice
notes, and after a consideration of all the material
believe that the
application must inevitably succeed. The respondent’s conduct
is the antithesis of what the fiduciary duties
of a trustee demand.
[121]
I have not said much about the submissions made on behalf of the
applicant. I agree with applicants’ counsel
that the applicants
were justified in bringing the application and that the respondent
breached her fiduciary duties in respect
of the NCI Trust in the
manner described above. On a reading of the papers and listening to
the submissions of counsel, for which
I am grateful, I conclude that
the respondent has conducted herself in a manner completely
unbecoming a trustee.
[122]
I also agree that the respondent’s continuance in office would
indeed be detrimental and prejudicial to
the welfare of the NCI Trust
and all its beneficiaries.
I
therefore have no hesitation to conclude that the first respondent
should be removed as a trustee of the NCI Trust.
In
respect of the amended substantive relief sought by SEDA in their
intervention application, I reiterate that their application
is
dismissed.
Costs
[123]
In
Vorster
[66]
E Bezuidenhout J quoting with approval from
Honore
[67]
states
‘
A
trustee who is removed may be ordered to pay the costs out of his or
her own pocket (
de bonis
propriis
) . . . failing
which the court may order the costs to be borne by the estate.’
The
facts and circumstances of this particular matter demand that these
costs be recovered from the respondent. The respondent’s
conduct is egregious. The applicants have prayed for an order that
the respondent pays the costs on the attorney and client scale.
I
agree. The deplorable conduct of the respondent in connection with
the litigation in this matter and the abuse of donor funds
from
public sources would also be a justification for an order against her
de
bonis propriis
.
The applicants, in the
original application to remove the respondent as a trustee, have been
substantially successful in resisting
the intervention application
brought by SEDA and should be awarded costs, such costs to include
the costs of two counsel where
so employed.
[124]
In my view this would be appropriate bearing in mind that the
applicants have acted in accordance with their duties
as trustees of
the NCI Trust and any costs not recovered from the respondents would
by implication come out of the trust, which
in my view would be
unwarranted. Counsel for the applicant has sought costs of two
counsel where so employed and I believe that
to be appropriate.
Order
[125]
After having read the papers, heard counsel for the applicant, the
intervening applicant and the legal representative
of the first
respondent, the following order is granted:
1
The intervening applicant’s application to intervene is
granted.
2
The amended substantive relief sought by the intervening applicant is
dismissed.
3
The intervening applicant is ordered to pay the costs of the
intervention
application, such costs to include the costs of two
counsel where so employed.
4
The first respondent be and is hereby removed forthwith as a trustee
of
the National Construction Incubator Trust with registration number
IT183/2008/N.
5
The second respondent is directed to endorse their records
accordingly.
6
The first respondent is directed to hand over to the applicants all
documents
including but not limited to banking and administrative
instruments relating to the administration of the National
Construction
Incubator Trust, within 3 days of this order.
7
In the event of the first respondent failing to comply with paragraph
3
above, the sheriff be and is hereby authorised to do all things
necessary to give effect to paragraph 3 above.
8
The first respondent is directed to pay the costs of the application,
in
her personal capacity (
de bonis propriis
) on an attorney
and client scale, including the costs consequent on the employment of
two counsel where so employed.
DAVIS
AJ
APPEARANCES
For the
applicants:
Mr. D.Ramdhani SC
Instructed by:
Mcgregor Erasmus
Attorneys
1
st
Floor Bond Square
12 Browns Road
The Point, Durban
Tel: 031 2018955
Email:
sandra@meattorneys.co.za
justin@meattorneys.co.za
glen@meattorneys.co.za
Ref: JM
KLINGBIEL/sv/NAT33/0004
Care of: Botha and
Olivier INC.
239 Chapel Street
Pietermaritzburg
3201
KwaZulu-Natal
For the
intervening applicants:
Mr.
F Baloyi
Instructed by
Maenetja Attorneys
65 Rigel Avenue
Waterkloof Ridge
Pretoria
Tel: 012 3274480
Email:
kaizer@maenetjaattorneys.co.za
maenetjai@gmail.com
Ref:
TIM/MCN/SEDA/02-2023
c/o Govindsamy,
Ndzinga & Govender Incorporated
211 Burger Street
Pietermaritzburg,
3201
P.O. Box 8518
Cumberwood, 3235
Docex: Pmb 29
Tel: 033 345
3427/9
Ref:
YG/dg/M1500/104
Email:
yugusan@gngattorneys.co.za
litigation@gngattorneys.co.za
For the first
respondent
Mr L M Nhlabathi
Instructed by
L M NHLABATHI INC.
Mpumuza Location
Off Caluza Road
Emasimini Stand
18842
P.O. Box 12225
Dorpspruit
3206
Tel: 033 8800108
Email:
info@lmnlaw.co.za
Date of hearing:
16 October 2023
Date of Judgment:
9 November 2023
[1]
Where a party appears in his official capacity, the letters NO
follow his surname
,
in this matter as will become apparent in the judgment, the
applicants act in their individual capacities as parties with a
substantial interest.
[2]
Verbatim
the notice of motion.
[3]
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at
634E
- 635C
,
Wightman
t/a JW Construction v Headfour (Pty) Ltd and another
[2008] ZASCA 6
;
2008 (3) SA 371
(SCA) para 12, and
National
Director of Public Prosecutions v Zuma
[2009] ZASCA 1
;
2009 (2) SA 277
(SCA) para 26.
[4]
The court file was handed to me during the morning of 2 October but
immediately removed by the registrar for the file to be updated
with
the intervening application. This was 9 court days before this
hearing. The applicants’ description of the application
being
brought at the ‘eleventh hour’ is therefore apt.
[5]
Indexed
papers, vol 1, at 69.
[6]
In
the preamble to the
Broad-Based Black Economic Empowerment Act 53 of
2003
it is stated that one of the objectives with that Act is to
‘promote the achievement of the constitutional right to
equality’.
The right to equality therefore occupies a central
place in any constitutional discussion on the broad-based black
economic empowerment
programme.
[7]
Indexed papers, vol 1, at
12.
[8]
The
Department of Small Business Development (DSBD) was established as a
standalone national department in accordance with the
reorganisation
of some national departments announced by the President in May 2014.
The
vision being a transformed and inclusive economy driven by
sustainable, innovative small medium and micro enterprises and
co-operatives.
[9]
This is true as to the last letters of authority issued by the
Master and supplementary explanation. See the indexed papers,
vol 1
at 83-84, annexure H.
[10]
Indexed
papers, vol 1, at 59-68.
[11]
A
useful description of what a ‘business incubator’
generally does is as follows:
‘
Although
the detailed definition of small business incubator is contested
there is a general consensus among scholars that a business
incubator provides various targeted business support and technical
support services aimed at growing emerging and small start-up
business enterprises into financially and operationally independent
enterprises.’ (references omitted)
M Masutha & CM
Rogerson ‘Small business incubators: An emerging phenomenon in
South Africa’s SMME economy’
(2014) 25
Urbani
izziv/Urban Challenge Journal
S47 at S48, and M Masutha & CM
Rogerson ‘Small enterprise development in South Africa: The
role of business incubators’
(2014) 26
Bulletin of
Geography. Socio-Economic Series
141 at 143.
[12]
The removal of a suspension notice taken by the trustees of a trust
entity without the approval of the trustees by resolution
is clearly
unlawful.
[13]
Chalwa
v Dlomo and two others
(KZD)
case no. 3590/23D, heard on 6 April 2023 where the matter was struck
from the roll with costs.
[14]
The indexed papers, vol 1, at
72-75.
[15]
The respondents, the three trustees did not seek costs as those
costs would by paid by the NCI Trust.
[16]
National
Construction Incubator v Lindani Dlomo
(KZD)
case no. D3590/2023, heard on 6 April 2023 where the matter was
struck from the roll with costs and
Chalwa
N.O. and three others v Dlomo and three others
(KZP) case no. 6117/2023P, 17 May 2023 where the matter was
postponed with directions.
[17]
Chalwa
N.O. and three others v Dlomo and three others
(KwaZulu-Natal
Division of the High Court, Pietermaritzburg) case no. 6117/2023P
was postponed
sine
die
,
see also the indexed papers, vol 1, at 78.
[18]
Per
Mossop J on 28 June 2023.
[19]
The indexed papers, vol 2, at 126.
[20]
The
indexed papers, vol 2, at 132-133.
[21]
The
indexed papers, vol 5, at 448.
[22]
The
indexed papers, vol 5, at 450.
[23]
Judge
Sibiya in paragraph 6 of her order also issued directives by which
dates heads of arguments and practice notes had to be
filed, at the
time I started to read the papers to prepare on 5 October nothing
had been filed in this regard by the first defendant.
Defendant’s
heads of argument and practice note were handed up to the court on
the date of the hearing.
[24]
Gowar
and another v Gowar and others
[2016] ZASCA 101
;
2016 (5) SA 225
(SCA);
[2016] 3 All SA 382
(SCA),
Tugh
NO and another v Rajbansi and others
[2018] ZAKZDHC 12 para 8.
[25]
Applicant’s heads of argument at
2-3,
paras 2-5.
[26]
Dladla
N.O and others v Lamula N.O and others
[2022] ZAGPPHC 868.
[27]
Van der
Meulen v Ras N.O. and others
[2009] ZAGPPHC 313 para 32.
[28]
Van der
Meulen v Ras N.O. and others
[2009] ZAGPPHC 313 para 35, see para 1 of the order.
[29]
Ras and
others NNO v Van der Meulen and another
2011 (4) SA 17
(SCA) para 10.
[30]
Master
of the High Court Northern Gauteng High Court, Pretoria v Motala NO
and others
[2011] ZASCA 238
;
2012 (3) SA 325
(SCA) para 7.
[31]
Ex
parte the Master of the High Court South Africa (North Gauteng)
2011 (5) SA 311
(GNP) para 44.
[32]
Tugh NO
and another v Rajbansi and others
[2018] ZAKZDHC 12 para 8.
[33]
Vorster
N.O v Buthelezi and others
[2023]
ZAKZPHC 109 para 86.
[34]
Tugh NO
and another v Rajbansi and others
[2018] ZAKZDHC 12 para 8.
[35]
Doyle
v Board of Executors
1999
(2) SA 805
(C) at 831A-B. See also
Harvey
NO and others v Crawford NO and others
[2018] ZASCA 147
;
2019 (2) SA 153
(SCA) para 45.
[36]
Tugh NO
and another v Rajbansi and others
[2018] ZAKZDHC 12 para 5.
[37]
Tugh NO
and another v Rajbansi and others
[2018] ZAKZDHC 12 para 5(f), referring to
Gowar
and another v Gowar and others
[2016] ZASCA 101
;
2016 (5) SA 225
(SCA);
[2016] 3 All SA 382
(SCA)
paras 27 and 30.
[38]
Tugh NO
and another v Rajbansi and others
[2018] ZAKZDHC 12 para 6.
[39]
Gowar
and another v Gowar and others
[2016] ZASCA 101
;
2016 (5) SA 225
(SCA);
[2016] 3 All SA 382
(SCA)
.
[40]
Indexed
pages vol 1, at 85-102
[41]
Incubation is defined in para 2.1.0 of the trust deed as meaning
‘the process of nurturing SMME’s in the South African
Construction Industry and assisting then to grow and achieve Target
Construction Sector Grading, which process shall involve
among other
things mentorship, technical and business support, marketing and
facilitation of networking opportunities.’
[42]
Trust
deed; 7.2 page 94. of volume 1 of the indexed papers
[43]
Ibid
7.4
[44]
Ibid
7.9
[45]
Ibid 7.7
[46]
8.2.1
of the trust deed at page 96-97 of the indexed papers volume 1.
[47]
Ibid
8.2.2
[48]
Ibid 8.2.3
[49]
Ibid
8.2.7.8
[50]
Ibid
8.2.7.10
[51]
Ibid
8.2.7.11
[52]
Shepstone
and Wylie Attorneys v De Witt NO and others
[2023] ZASCA 74
para 20.
[53]
Thorpe
and others v Trittenwein and another
2007 (2) SA 172 (SCA), [2006] 4 All SA 129 (SCA).
[54]
Shepstone
and Wylie Attorneys v De Witt NO and others
[2023] ZASCA 74
para 21.
[55]
Shepstone
and Wylie Attorneys v De Witt NO and others
[2023] ZASCA 74
para 22.
[56]
The respondent’s heads of argument at 4 para 4.
[57]
Section
20(1) Trust Property Act 57 of 1988.
[58]
Hassan
and another v Berrange NO
2012
(6) SA 329
(SCA) para 19
.
[59]
Vorster
N.O v Buthelezi and others
[2023]
ZAKZPHC 109 para 112
.
[60]
Indexed
papers, vol 1, at 17. This is also contained in the chronology.
[61]
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at
634E
- 635C
,
Wightman
t/a JW Construction v Headfour (Pty) Ltd and another
[2008] ZASCA 6
;
2008 (3) SA 371
(SCA) para 12, and
National
Director of Public Prosecutions v Zuma
[2009] ZASCA 1
;
2009 (2) SA 277
(SCA) para 26.
[62]
Vorster
N.O v Buthelezi and others
[2023]
ZAKZPHC 109 para 77.
[63]
Indexed
pages, vol 2, at 104.
[64]
Tugh NO
and another v Rajbansi and others
[2018] ZAKZDHC 12 para 6(d).
[65]
The indexed papers, vol 1, at 23, para 50.
[66]
Vorster
N.O v Buthelezi and others
[2023]
ZAKZPHC 109 para 112.
[67]
E
Cameron
et
al Honoré’s South African Law of Trusts
6ed (2018) at 275, see also at 482. See also
Stander
and others v Schwulst and others
2008
(1) SA 81
(C), and
Kidbrooke
Place Management Association and another v Walton and others NNO
2015 (4) SA 112
(WCC).