Brief Summary

Trust — Charitable trust — Racially restrictive provisions in will — Educational fund established for white South African women — High Court deleting racially exclusive clause and substituting geographical description — Appeal against deletion of geographical clause — Racially restrictive clause found to be in conflict with public policy and the equality clause in the Bill of Rights — Appeal dismissed except for geographical substitution set aside due to lack of proof that it hampered the fund's objectives.

Comprehensive Summary

Summary of Judgment

1. Introduction

The matter concerned an appeal to the Supreme Court of Appeal against an order of the KwaZulu-Natal High Court, Durban (Nicholson J), granted in proceedings brought under section 13 of the Trust Property Control Act 57 of 1988. The proceedings sought the variation of provisions in a will establishing a charitable educational trust known as the Emma Smith Educational Fund.

The appellant was the curatores ad litem appointed for certain potential beneficiaries of the Fund. The respondents were the University of KwaZulu-Natal (as the administering institution) together with 28 members of its Council, who acted as trustees of the Fund.

The dispute arose from clauses in Sir Charles George Smith’s will (executed in 1938) that restricted eligibility for bursaries to “European girls” (accepted by the parties to mean white South African women) of specified parentage, and who had been resident in “Durban” for at least three years. The High Court ordered the deletion of the racial and parentage restrictions and also substituted “the Ethekwini Municipality” for “Durban”. The curators appealed. The University supported the High Court’s deletion of the racial restrictions; the appeal primarily put the permissibility and basis of the amendments in issue, including whether section 13 applied and whether the geographic substitution was justified.

The general subject-matter was the extent to which a court may, consistently with public policy and constitutional values, vary the terms of a charitable educational trust created by will, particularly where the trust is administered by a publicly funded university and contains racially restrictive conditions.

2. Material Facts

Sir Charles George Smith executed a will in 1938 and died in 1941. The will created the Emma Smith Educational Fund, funded by three-tenths of the residue of his estate. The bequest was accepted and has been administered continuously by the Natal University College and its successors, culminating in administration by the University of KwaZulu-Natal after institutional changes and a merger effected under legislation.

The relevant will provision directed that the Fund’s income be applied towards the higher education of “European girls” born of British South African or Dutch South African parents, who had been resident in Durban for at least three years preceding the grant. The parties were in agreement that “European” is an obsolete reference to white South Africans.

By the time the application was launched, the Fund’s capital had grown substantially (approximately R27 million, with about R4 million available for distribution at the time). The University’s evidence was that the Fund had not been fully applied over time, and that the racially exclusive terms contributed to under-distribution and posed difficulties in determining eligibility.

It was undisputed that the University is a public institution largely funded by government, committed to non-racialism, and that the restrictive terms caused the University embarrassment in administering the Fund and concern about potential proceedings under equality legislation because bursaries were reserved for white applicants.

As to geography, the University contended that the reference to “Durban” created uncertainty because the city’s boundaries had changed and Durban had become part of a larger metropolitan area now known as the Ethekwini Municipality. The SCA recorded, however, that no evidence had been placed before the High Court that the “Durban” requirement actually caused difficulty in attracting eligible bursars, particularly once the racial limitations were removed.

A prior 1999 application to vary the trust was withdrawn when evidence showed the bursaries had not been widely advertised and awards were restricted to study at the University. Although the position later improved regarding advertising and the range of institutions, funds still remained underutilised.

3. Legal Issues

The central legal questions were whether section 13 of the Trust Property Control Act 57 of 1988 empowered the court to delete or vary the impugned will provisions, and, if so, whether the jurisdictional requirements of section 13 were satisfied in relation to each amendment made by the High Court.

Within that overarching inquiry, the SCA had to determine whether the Fund was a trust to which the Act applied, despite the Fund having been administered across time by statutory institutions and having vested in a public university. This was substantially a question of law, turning on the character of the arrangement and the effect of the statutory framework.

The court also had to decide whether the racially restrictive beneficiary criteria were “in conflict with the public interest” as contemplated in section 13(c) and/or whether they hampered the achievement of the founder’s objects under section 13(a). This involved the application of constitutional-value based public policy to the trust provisions, being an application of law to fact infused with an evaluative judgment concerning public policy rooted in the Constitution.

A further issue was whether the substitution of “the Ethekwini Municipality” for “Durban” satisfied section 13’s jurisdictional threshold. This primarily turned on whether there were facts showing the “Durban” description brought about unforeseen consequences that hampered the trust’s objects, prejudiced beneficiaries, or conflicted with the public interest. The SCA treated this as a question of application of section 13’s statutory criteria to the evidentiary record, emphasising the need for proof of the operative jurisdictional facts.

4. Court’s Reasoning

Section 13 of the Trust Property Control Act authorises a court to delete or vary a trust provision if it brings about consequences not contemplated or foreseen by the founder and which (among other things) hamper the founder’s objects or are in conflict with the public interest. The SCA approached the matter by first addressing the threshold argument raised by the curators that the Act did not apply because the trust had effectively been “written into statute” through successive university statutes and merger legislation.

On that point, the SCA traced the statutory history of the Natal University College and its successors, noting that the statutes did not alter the trust’s substantive terms or transform it into something other than a trust created by will. The legislation regulated institutional succession and administration, and required the relevant educational institution to apply trust funds according to their conditions. The SCA therefore held that the Fund remained a trust and that the Trust Property Control Act applied.

Turning to the racial restrictions, the SCA accepted the High Court’s reliance on constitutional public policy, particularly the foundational value of equality in section 9 of the Constitution and the framework of the Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000. The SCA endorsed the approach that public policy is rooted in the Constitution’s normative value system, and that the Bill of Rights applies to the law relating to charitable trusts, including in person-to-person relations. In this setting, the racially exclusive terms of a public charitable educational trust were treated as incompatible with the constitutional commitment to equality and non-racialism.

The SCA considered it significant that the Fund was administered by a publicly funded university with statutory duties (under higher education and education policy legislation) not to discriminate unfairly and to pursue redress of past inequalities. Against that background, the court held that the racial restrictions both prevented the realisation of the testator’s broad educational intention (by narrowing eligible beneficiaries in a manner that left substantial funds undistributed) and were in conflict with the public interest.

The curators’ reliance on freedom of testation and arguments that amendment would chill charitable giving were rejected in the circumstances before the court. The SCA reasoned that, where a public charitable educational trust administered by a public institution imposes racially discriminatory criteria, the constitutional imperative to remove such clauses must take precedence. The court did not accept that this amounted to unlawful deprivation of property, and it declined to approach the matter as if it were dealing with a purely private associational bequest of a different character.

The SCA also rejected proposals that effectively retained race-based selection through the introduction of racial quotas, noting that such a proposal was not supported by evidence or precedent and would constitute an unwarranted intrusion into trustees’ discretion while perpetuating race-based selection.

In contrast, the SCA did not uphold the High Court’s geographic amendment. Although the parties had been agreed in the High Court that the “Durban” reference should be amended, the SCA focused on the statutory requirement that section 13 can only be invoked where jurisdictional facts exist—namely, that a provision brings about unforeseen consequences that trigger one of the section 13 grounds. The SCA held that no evidence showed that retaining “Durban” hampered the achievement of the Fund’s objects or created the kind of practical impediment required to activate section 13. The SCA also reasoned that the testator, who lived through Durban’s expansion, would have foreseen continued growth of the city, undermining any claim that later changes were unforeseen in the relevant sense. In the absence of proof meeting section 13’s thresholds, the geographic substitution could not stand.

Finally, the SCA noted that the parties were agreed that no costs order should be made.

5. Outcome and Relief

The Supreme Court of Appeal partly upheld the appeal.

It set aside the portion of the High Court’s order that substituted “the Ethekwini Municipality” for “Durban” in clause 26(f)(2) of the will.

Save for that limited interference, the appeal was dismissed, with the result that the High Court’s deletion of the racial and parentage restrictions (including the words “European”, “British”, and “Dutch South African”) remained in force.

No order as to costs was made, as the parties were in agreement that no costs order should issue.

Cases Cited

Minister of Education & another v Syfrets Trust Ltd NO & another 2006 (4) SA 205 (C).

Napier v Barkhuizen 2006 (4) SA 1 (SCA).

In re Lysaght, Hill v the Royal College of Surgeons [1966] Ch 191.

Blathwayt v Lord Cawley [1975] 3 All ER 625 (HL).

Carmichele v Minister of Safety and Security & another (Centre for Applied Legal Studies Intervening) [2001] ZACC 22; 2001 (4) SA 938 (CC).

Burchell v Anglin 2010 (3) SA 48 (ECG).

Ex parte President of the Conference of the Methodist Church of Southern Africa NO: In re William Marsh Will Trust 1993 (2) SA 697 (C).

Legislation Cited

Trust Property Control Act 57 of 1988, section 13.

Constitution of the Republic of South Africa, 1996, section 9 and section 25.

Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000, Preamble, section 7, and Schedule (section 29 illustrative list).

Higher Education Act 101 of 1997, section 22(5), section 23, and section 37(3).

Higher Education Amendment Act 23 of 2001, section 28(1).

National Education Policy Act 27 of 1996, section 4.

Natal University College Act 18 of 1909, section 3.

University of South Africa Act 12 of 1916, section 3(2).

University of Natal (Private) Act 4 of 1948, section 14.

University of Natal (Private) Act 7 of 1960, section 6.

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The Supreme Court of Appeal held that the Trust Property Control Act 57 of 1988 applied to the Emma Smith Educational Fund despite its administration by successive statutory university institutions, because the underlying arrangement remained a trust created by will and the statutes did not alter its essential nature or terms.

It held further that the will’s racially restrictive beneficiary criteria were properly deleted under section 13, because they were inconsistent with public policy rooted in the Constitution, particularly the equality guarantee, and because the restrictions undermined the effective achievement of the educational purposes of the trust in the context of administration by a publicly funded university.

However, the court held that the substitution of “the Ethekwini Municipality” for “Durban” was not shown on the evidence to meet the jurisdictional requirements of section 13. In the absence of proof that the geographical description hampered the trust’s objects or otherwise triggered section 13, that portion of the High Court order was set aside.

LEGAL PRINCIPLES

Section 13 of the Trust Property Control Act 57 of 1988 empowers a court to delete or vary a trust provision only where the statutory jurisdictional facts are present, including that the provision causes consequences not foreseen by the founder and that those consequences, among other things, hamper the founder’s objects or are in conflict with the public interest.

Public policy in South African law is rooted in the Constitution and its foundational values, including human dignity, equality, non-racialism, and the advancement of human rights and freedoms. Trust provisions, including those in charitable trusts created by will, must conform to this constitutional value system.

Racially restrictive provisions in a public charitable educational trust, particularly where administered by a publicly funded educational institution with statutory obligations not to discriminate unfairly, may be found to be in conflict with the public interest and thus susceptible to deletion or variation under section 13.

While freedom of testation is an important principle, it does not immunise testamentary trust conditions from constitutional public policy constraints, especially where those conditions produce unfair racial discrimination in the public sphere.

A court will not vary a trust provision under section 13 in the absence of evidence establishing that the provision actually triggers one of the statutory grounds; where such proof is absent, even an apparently sensible updating amendment (such as a geographic renaming) may not be sustained under section 13.

Curators Ad Litem to Certain Potential Beneficiaries of Emma Smith Educational Fund v The University of KwaZulu-Natal and Others (510/09) [2010] ZASCA 136; 2010 (6) SA 518 (SCA) ; 2011 (1) BCLR 40 (SCA) ; [2011] 2 All SA 1 (SCA) (1 October 2010)