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[2018] ZAFSHC 120
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Du Plessis NO and Others v Van Niekerk and Others (836/2018) [2018] ZAFSHC 120; 2018 (6) SA 131 (FB) (26 June 2018)
FREE STATE HIGH
COURT, BLOEMFONTEIN
REPUBLIC
OF SOUTH AFRICA
Case
No. : 836/2018
In
the matter between:-
NEIL
DU PLESSIS N
.O.
First
Applicant
JAN
LUBBE
N.O.
Second
applicant
CHARLES
GEORGE FRIEDRICH KROHN
N.O.
Third
Applicant
and
ILZE
FOURIE VAN
NIEKERK
First
Respondent
LIZA
TASHLEY
SCHEEPERS
Second
Respondent
MASTER
OF THE FREE
STATE
Third
Respondent
HIGH
COURT
BLOEMFONTEIN
CORAM:
DAFFUE, J
HEARD:
24 MAY 2018
JUDGMENT
BY
J P DAFFUE
DELIVERED:
26 JUNE 2018
I
INTRODUCTION
[1]
A novel, interesting and important question has been raised in the
dispute between trustees of a trust which owns valuable immovable
property in the Knysna district.
[2]
A major female, who was only eleven years old when the trust was
created in 1999, is the sole income and capital beneficiary
of the
trust and for obvious reasons she finds herself in one of the
opposing camps.
[3]
The crisp point to be decided is whether the decision of the majority
of trustees, consisting of three professional persons,
i.e.
two auditors and a lawyer, to request the fourth trustee and mother
of the aforesaid beneficiary to resign as provided for in the
trust
deed was sufficient for her to lose her office as trustee, or put
otherwise, caused her to vacate her office.
[4]
The Master of the High Court decided not to take sides and abides by
the court’s decision.
II
THE PARTIES
[5]
The applicants are Messrs, N Du Plessis, J Lubbe and C G F Krohn, two
auditors and an attorney respectively, in their official
capacities
as trustees of the Ritom Trust IT 1138/99 (“the trust”).
Adv P J J Zietsman appeared for the applicants.
[6]
Ms I F van Niekerk, the first respondent, is the mother of the second
respondent. First respondent and Mr Krohn were the
first
trustees of the trust. Her position as trustee of the trust is
the focal point of the proceedings before me.
[7]
Ms L T Scheepers, a thirty year old female, cited as second
respondent herein, is the sole income and capital beneficiary of
the
trust. First and second respondents oppose the application and
they were represented by Adv G P van Rhyn.
[8]
The Master of the High Court, Bloemfontein, (“the Master”)
cited as third respondent, does not oppose the application
and has
given notice to abide by the court’s decision. An insignificant
report was filed.
III
THE RELIEF SOUGHT
[9]
The following relief is sought in the notice of motion:
“
1. That the First
Respondent
has
lost
her office as trustee
of
the Ritom Trust, IT 1138/99, on 1 February 2018.
2. That the
Third
Respondent is
ordered
to amend his records so as to reflect that the First Respondent has
lost her office as trustee of the Ritom Trust, IT 1138/99,
on 1
February 2018.
3. That the First
Respondent pays the cost of the application.
4. That the Second and/or
Third Respondent in the event that they oppose the application,
jointly and severally with the First Respondent
pay the cost of the
application.” (emphasis added)
IV
THE TRUST DEED AND
CLAUSE 5.7 IN PARTICULAR
[10]
The trust deed was entered into on 18 June 1999 between a certain
Marthinus Johannes Bam as founder/donor and first respondent
and
third applicant as the only trustees. The sole income and
capital beneficiary is second respondent who was at the time
still a
minor. The donation paid to establish the trust was R100.00.
The trust was duly registered by the Master whereupon
letters of
authority were issued to the two trustees. On 20 October 2016
the Master issued letters of authority to the present
four trustees,
to wit the three applicants and first respondent. As is evident
Mr Scheepers, the father of the beneficiary
and husband of first
respondent at the time, did not create the trust and was also not
appointed as trustee. However and
bearing in mind the history
sketched by first respondent in the answering affidavit, logic
dictates that he played a vital role
in the creation of the trust,
duly advised by his legal representative(s). In fact, he has
been conducting farming activities
on the trust’s immovable
property all along by making use of a company and close corporation.
[11]
Clause 5.7 of the trust deed deals with the vacation of a trustee
from his/her office as trustee. I quote the clause
verbatim
:
“
5.7 The office of
a TRUSTEE
shall be
vacated
if –
5.7.1 he becomes
disqualified in terms of clause 5.7;
5.7.2 he files an
application for the surrender of his estate or an application for an
administration order or if he commits an
act of insolvency as defined
in the Insolvency law for the time being in force or if the
(sic)
makes any arrangement or
composition with his creditors generally.
5.7.3 he resigns his
office by not less that (sic) 60 days (or such shorter period as the
remaining TRUSTEES or TRUSTEE may agree
to) written notice to the
remaining TRUSTEE or TRUSTEES;
57.4 the
majority
of TRUSTEES
request
a TRUSTEE
to resign
.”
(emphasis added)
V
WHAT TRIGGERED THE
APPLICATION?
[12]
A trustees’ meeting was held on 18 January 2018. The
three applicants were in Bloemfontein and they communicated
with
first respondent via telephone whilst she attended her attorney’s
offices in Johannesburg. A transcript of the
telephonic
conversation was made and attached to the answering affidavit.
The parties discussed several issues, but the removal
of first
respondent as trustee was neither a point on the agenda, nor
discussed. Second applicant merely mentioned towards
the end of
the conversation:
“
Baie
dankie ek
vermoed ons gaan
Ilze
verwyder
as trustee
.” (Thank
you, I presume we
are going
to remove
Ilze (first
respondent)
as trustee
.)
I added the emphasis. Mr Scheepers’ loan account against
the trust was discussed and applicants raised the
issue of payment of
interest on the loan account, rentals payable to the trust as well as
the approval of the trust’s financial
statements.
Applicants insisted that interest should be paid in respect of the
loan account, but first respondent responded
that interest was never
agreed upon and therefore interest should not be allowed to be
charged retrospectively. No agreement
could be reached with
first respondent. Eventually, and what must have been a huge
surprise for first respondent and her
attorney, second applicant
referred to a written offer to purchase the trust’s immovable
property. After a while tempers
flared up and the conversation was
terminated by applicants, notwithstanding protest by first
respondent’s attorney.
[13]
Following upon this meeting applicants informed first respondent in a
letter dated 18 January 2018 that she was
removed
(
“
dat u
verwyder
word as trustee”) as trustee in accordance with clause 5.7.4 of
the trust deed. I added the emphasis. Three reasons
were
advanced for this step,
i.e.
that 1) all items discussed were either rejected or opposed; 2) she
made false allegations against the applicants and 3) she admitted
that she did not have sufficient knowledge to fulfil her duties as
trustee. No minutes were sent to either first respondent
or her
attorney at that stage. It was only done on 31 January 2018.
It is apparent that applicants misread clause 5.7
and believed that
they could remove first respondent as trustee.
[14]
On the same day applicants informed the Master of their resolution to
remove first respondent as trustee and attached minutes
of the
meeting signed by all three. These minutes are not a correct
version of the meeting as recorded and transcribed and
as testified
to by first respondent. It was never recorded whilst first
respondent was in telephonic communication with them
that the
majority resolved to remove her as trustee and that a decision was
taken not to appoint any further trustee. Furthermore,
it is
incorrect that the removal of first respondent as trustee was on any
agenda circulated to her in particular. No mention
is made of
an agenda
ex facie
the transcript. First respondent challenged applicants’
version in this regard and even accused them of misrepresenting
the
facts to the Master. Her version was not refuted in clear and
concise terms and with reference to any objective evidence
and it
must be accepted as correct.
[15]
The Master pointed out to applicants that they could not resolve to
remove first respondent as trustee, but could only request
her to
resign. Consequently a further letter dated 1 February 2018
containing the request to resign was written to first
respondent.
Thereupon first respondent requested the Master an opportunity to
make representations in this regard.
The Master was not
prepared to issue new letters of authority to exclude first
respondent as trustee as requested, (or more aptly
put, instructed by
applicants) and furthermore allowed her to make representations which
she did. A copy of the written representations
is attached to
the answering affidavit. The Master did not adhere to
applicants’ instructions and in a report filed
with the
registrar abided with the court’s decision. I
deliberately used the word
“
instructions”
as it is applicants’ attitude
that the Master had no option than to issue new letters of
authority. It must be
reiterated that applicants failed
to respond to many allegations made by first respondent in her
answering affidavit and representations
to the Master which she
incorporated into her affidavit. They did this on the basis
that the court would be requested to
strike out all alleged
irrelevant material from the record. No such application was
brought and Mr Zietsman did not argue
or move such application during
his argument.
VI
THE PARTIES’
CONTENTIONS
[16]
Applicants’ case as changed and set out eventually in this
application is plain and simple. According to their counsel
clause
5.7 is clear and unambiguous; the majority of trustees may resolve to
request a trustee to vacate his/her office and such
trustee does not
have any option than to vacate his/her office. No reasons have
to be given. This is what occurred
in essence according to
them, although the correspondence indicates otherwise. They decided
to remove first respondent from office,
not during a trustees’
meeting, but behind her back. According to applicants first
respondent had no option than to
resign and the Master had no option
than to issue new letters of authority in favour of applicants only.
Although not stated
in so many words, it is apparent that applicants
believe that even the court has no say in the matter, except to
confirm their
decision. Therefore applicants did not even
attempt to respond to most of the issues raised in the answering
affidavit and
Mr Zietsman urged the court not to consider these
reasons and/or submissions. According to him any reasons given
are totally
irrelevant. He relied on a few passages in Cameron
et al, Honoré’s
South African Law of Trusts,
5th
ed p 225 and further and in particular paragraph (iv) under the
heading
“
Vacation in
accordance with the terms of the trust.”
[17]
Applicants somersaulted as mentioned. Initially they insisted
that they could validly remove first respondent as trustee.
When
their incorrect procedure was pointed out by the Master, they changed
tack and informed first respondent that they had
decided to request
her to resign. On their version she had no option than to
resign, which is totally irreconcilable with
a mere request which may
always be accepted or refused, but for obvious reasons they rely on
the peremptory wording in clause 5.7
that the office of trustee
“
shall be vacated”
if a request is made.
[18]
Applicants have obviously borrowed the language of Honoré when
they prepared their affidavits. The replying affidavit
in
particular deals with legal argument instead of a response to the
facts alleged by first respondent. In paragraphs 7.7
and 8 of
the founding affidavit it is stated by applicants that first
respondent
“…
has
already lost her office
and that the
Master must
accordingly
amend
his records …”
and
“…
the Master does
not have any jurisdiction to hear any representations …”
(emphasis added)
[19]
Mr Van Rhyn submitted that applicants have provided reasons and
therefore nailed their colours to the mast. They have
to live
with those reasons and the court should consider whether these are at
all relevant.
[20]
Mr Van Rhyn dealt with the disputes between the parties and submitted
that it is evident that the applicants do not act in
the interests of
the only beneficiary, the second respondent. He relied on first
respondent’s version that the trust
had been
“
captured”
by Mr Scheepers who is conducting
farming on the trust’s immovable property by making use of two
separate vehicles, to wit
a company and a close corporation. He
also submitted that applicants are under Mr Scheepers’
influence. I must
reiterate that this is vehemently denied in
the replying affidavit and it is not necessary to make any finding in
this regard.
[21]
Mr Van Rhyn submitted that the authorities are clear,
i.e.
the removal of trustees shall be done with circumspection. If
the wording of clause 5.7 is accepted as it stands, the majority
of
trustees may cause a trustee to vacate his/her office for frivolous
reasons or for no reasons at all, or worse, for
mala
fide
reasons.
Therefore, so he submitted, the court should find that an implied
term must be read into the relevant clause so
that the request to
resign may only be made on good cause.
[22]
Mr Van Rhyn also submitted that the issue of vacation of office was
not on the agenda of the meeting of 18 January 2018 and
that, in any
event, first respondent never received notice, not to speak of
reasonable notice as provided for in clause 6.2.1 of
the intention to
remove her as trustee.
VII
EVALUATION OF THE SUBMISSIONS
WITH REFERENCE TO LEGISLATION AND AUTHORITIES
[23]
It appears from the transcript of the meeting of 18 January 2018 that
applicants insisted on agreement by the trustees that
Mr Scheepers
should be entitled to interest on his loan account (the amount which
is in dispute) notwithstanding the fact that
there was never an
agreement on the payment of interest. First respondent was not
amenable thereto. Second respondent
has never received any
income from the trust, apparently as Mr Scheepers and/or his entities
did not pay any rental. There
may be valid reasons for this,
e.g.
improvements
were undertaken increasing the value of the trust’s property.
The full facts have not been placed before
the court. However,
I have no reason to doubt that first respondent has only the
interests of the trust and its sole beneficiary
at heart, whilst
applicants have a more objective view which may not be in the
interests of the trust beneficiary. It is
not necessary to make
any finding in this regard, save to say that first respondent’s
bona fides
are
above board.
[24]
I quoted the relevant clause of the trust deed, clause 5.7, in full
supra
.
I shall deal with the clause again in a moment. It is perhaps
apposite to state that another clause in the trust deed,
and to which
neither counsel referred, also deals with the incapacity of a person
to act as trustee. I refer to clause 5.6.
The persons
disqualified to act as trustee in terms thereof are 1) those
disqualified from acting as a director of company in terms
of s 218
of the 1973 Companies’ Act, 2) unrehabilitated insolvent
persons, 3) lunatics or persons declared incapable of managing
their
own affairs, 4) convicted criminals involving dishonesty and
sentenced to imprisonment without the option of a fine or a
fine
exceeding R500.00 and 5) companies which have been liquidated or
placed under judicial management.
[25]
Clause 5.7 provides for four instances in terms whereof the office of
a trustee shall be vacated as set out
supra.
The first instance is
really nonsensical as it merely encapsulates the other three
instances. The second instance relates
to sequestration and
like matters also mentioned to an extent in s 20(2)(c) of the Trust
Property Control Act, 57 of 1988, (“the
Trust Act”) which
provides a reason for the Master to remove a trustee from office.
The third instance is when the
trustee resigns (it is presumed freely
and voluntarily) and lastly when the majority requests the trustee to
resign. A study
of clauses 5.6 and 5.7 reveals that the two
clauses contain a mixed bag of the events stipulated in s 20 of the
Trust Act.
[26]
Before I deal with the interpretation of clause 5.7 I need to show
what the Trust Act stipulates pertaining to removal
of trustees from
office and some authorities will be quoted as well. I do this
notwithstanding Mr Zietsman’s submission
that the circumstances
in terms whereof a trustee can be removed from office by the court
and/or the Master are irrelevant and
therefore also the authorities
dealing with these matters. I do not agree with such
submission. In terms of s 20(1)
a court may remove a trustee
from office on application of the Master or an interested person.
This will only be done if
the court is satisfied that removal will be
in the interests of the trust (and in my view in particular) the
beneficiaries.
Section 20(2) stipulates that the Master may
remove a trustee in five instances, to wit 1) conviction of
dishonesty and if the
trustee is sentenced to imprisonment without
the option of a fine, 2) the failure to give security to the
satisfaction of the Master,
3) in the event of sequestration,
liquidation or judicial management, 4) if declared mentally ill or
incapable to handle his own
affairs and 5) the failure to perform his
statutory functions satisfactorily or to comply with any lawful
request by the Master.
[27]
In
Gowar and another v Gowar
and others
2016 (5) SA 225
(SCA) the court was confronted with a main and counter-application in
terms whereof the trustees of several family trusts
inter
alia
sought orders against
the others for their removal as trustees. The High Court found
that neither party had established the
requirements to remove the
other. This was confirmed on appeal when both the appeal and
cross-appeal were dismissed.
The court dealt with the common
law and Trust Act requirements for removal and found at paragraph
[31] that mere conflict between
trustees and beneficiaries or amongst
trustees was insufficient for removal of any of the trustees.
[28]
The SCA in
Gowar supra
relied on a passage in
Honoré
and a
dictum
in
Sackville West v Nourse
and another
1925 AD 516
at
527 and emphasised in paragraph [28] that removal will be
ordered if the trustee’s
“
continuance
in office will prevent the trust being properly administered or will
be detrimental to the welfare of the beneficiaries.”
The court warned at paragraph [30] that the court’s power
“…
to remove a trustee
must be exercised with circumspection.” Hereafter it
stated at paragraph [31] that
“
the
overriding question is always whether or not the conduct of the
trustee imperils the trust property or its proper administration.”
The following
dictum
in
Sackville West supra
at
519 is apposite:
“
And one of the
circumstances to be considered by a trustee is that he is dealing not
with his own money, but with that of the trust.
Greater care
and caution are required of him in the latter case than in the
former.”
[29]
I shall now consider the comments in
Honoré
vehemently relied upon by
Mr Zietsman
.
The
authors distinguish the three modes in terms whereof a trustee may
lose his/her office. I quote from 225:
“’
Vacation of
office’ refers to those modes by which a trustee loses office
with neither consent nor the need for cause to be
shown why office
should be lost. ‘Resignation’ is a mode by which a
trustee loses office by his or her own expressed
volition.
‘Removal’ refers to those modes by which a trustee loses
office without consent on good cause shown
for removal.”
[30]
The last two modes quoted
supra
speak for themselves.
A trustee may resign freely and voluntarily. The court and the
Master may remove a trustee in
circumstances alluded to
supra.
The term
“
vacation
of office”
may be
regarded as more problematic, but in my view it is not. The
authors in
Honoré
deal from 225 and further with five eventualities. The death of
a trustee is an obvious eventuality, as are the vacation
of office by
a trustee appointed
ex
officio,
the revocation of
a constitution under which the trustee was appointed and the
termination of the trust. The one eventuality
of relevance is
vacation of office in accordance with the terms of the trust.
In this regard the authors submit that
“
(i)t
is self-evident that the terms of the trust may prescribe that the
trustee vacate office
in a
certain event
.”
(emphasis added). The authors
rely for their submission on
Osman
v Jhavari
1939 AD 351
at
359. The
Osman
example
does not support applicants’ case. In that matter the
rules of the voluntary association provided for nine trustees
and
stipulated that if five trustees resigned or retired the remainder
should vacate office. The court found that when five
trustees
had resigned, the other four could not exercise any powers as
trustees. Clearly, the resignation of the majority
- the five
trustees - was
“
an event”
as mentioned by the authors.
[31]
Mr Zietsman submitted that the resolution of the majority – the
three applicants – was
“
an
event”
as identified by
Honoré
and provided for in the trust deed. I do not agree for the
reasons that follow in the next paragraphs. At this stage
I
need to point out that
Honoré
again refers to
“
an
event”
when termination
of a trust is dealt with. According to the authors, with
reliance on
Pietermaritzburg
Women’s Christian Temperance Union v Charlesworth & Appleby
& Perks Tea Room
1949(1) PH F10 (N), the trustee’s office comes to an end when
“
the event on which it is
to terminate occurs.” In my view
“
an
event”
can never be a
majority decision by trustees to terminate a trust contrary to the
terms of the trust deed or the interests of the
beneficiaries or to
cause the vacation from office by a trustee against his/her will
and/or without good cause, whether by way
of a request to resign or
otherwise.
[32]
It is mentioned at 232 in
Honoré
that the founder of a trust
may reserve the right to remove a trustee if so stipulated in the
trust deed. He may also confer
such a right on some other
person and presumably also the majority of trustees.
Honoré’s
discussion and the examples
provided do not support applicants’ case at all. The
contrary is true.
“
An
event”
must have its
origin in some external occurrence which can be established
objectively. If one considers the common law as
well as
statutory powers of the court to remove a trustee, it is hard to
believe that a trustee can be validly removed by the founder
or a
person nominated by him in circumstances where the interests of the
beneficiaries are not even considered. I accept
that such
procedure may be a cheaper procedure than litigation and might be
provided for in a trust deed based on the common law
principles or s
20 of the Trust Act, but the court or the Master’s power of
removal shall always be retained. The effect
of my approach is
that even if the trustees were given a mandate to remove a fellow
trustee, which is not the situation
in
casu
, it would only be
possible in circumstances analogous to that set out in the common law
or s 20 of the Trust Act. Furthermore,
the affected trustee
should always have the right to challenge the decision in a court.
Such right is afforded to a trustee
that is removed by the Master and
if a court removes a trustee he/she will have the right to apply for
leave to appeal the decision.
It must certainly also apply to
removal by the founder or a person nominated by him.
In
casu
applicants’
argument is straightforward: no procedural rights are afforded to
first respondent and
cadit
quaestio.
This
argument is unsound.
[33]
Bearing in mind the background and circumstances known to the parties
at the time when the deed of trust was entered into and
notwithstanding the fact that the wording of clause 5.7 may be
regarded as unambiguous, which it is not, it now becomes relevant
how
to deal with the parties’ submissions insofar as interpretation
thereof is concerned. Mr Zietsman’s argument
is simple:
don’t concern yourself with authorities dealing with
circumstances in which either the Master or the court is
entitled to
remove a trustee from office, because,
in
casu,
the parties to the
deed of trust decided to contract on a different basis. The
majority rules and their resolution must be
acceded to, whether or
not the Master or the court would not dare removing a trustee if no
sufficient reason exists. I shall
try to explain why this could
not be the law.
[34]
In an oft-quoted judgment Wallis JA summarised the current state of
our law regarding the interpretation of documents, including
contracts, as follows in
Natal
Joint Municipal and Pension Fund v Endumeni Municipality
2012
(4) SA 593
(SCA) at para [18]:
“
Interpretation
is the process of attributing meaning to the words used in a
document, be it legislation, some other statutory instrument,
or
contract, having regard to the context provided by reading the
particular provision or provisions in the light of the document
as a
whole and the circumstances attendant upon its coming into
existence. Whatever the nature of the document, consideration
must be
given to the language used in the light of the ordinary rules of
grammar and syntax; the context in which the provision
appears; the
apparent purpose to which it is directed; and the material known to
those responsible for its production. Where more
than one meaning is
possible, each possibility must be weighed in the light of all these
factors. The process is objective, not
subjective.
A
sensible meaning is to be preferred to one that leads to insensible
or unbusinesslike results or undermines the apparent purpose
of the
document.”
(emphasis added)
Thus,
the matter must be approached holistically and context and language
must be considered together with neither predominating
over the
other.
The
warning at 603F - 604D should be adhered to. Judges must be
alerted to and guard against the temptation to substitute
what they
regard as reasonable, sensible or businesslike for the words actually
used. See also
Bothma-Batho
Transport (Edms) Bpk v S Bothma en Seun Transport (Edms) Bpk
2014
(2) SA 494
(SCA) at paras [10] - [12].
[35]
In
BP Southern Africa (Pty) Ltd v Mahmood Investments (Pty) Ltd
[2010] 2 All SA 295
(SCA) Lewis JA stated the following in a
unanimous judgment at para [11]:
“
It
is settled law that the contractual provision must be interpreted in
its context, having regard to the
relevant
circumstances known
to the parties at the time of entering into the contract …. It
is also clear that the position must be given a
commercially
sensible meaning
…” (emphasis added)
[36]
In
Novartis
v Maphil
[2015]
ZASCA 111
, 3 September 2015, Lewis JA stated the following at para
[28]:
“
[28]
The passage cited from the judgment of Wallis JA in
Endumeni
summarizes the state of the law as it was in 2012. This court did not
change the law, and it certainly did not introduce an objective
approach in the sense argued by Novartis, which was to have regard
only to the words on the paper. That much was made clear in
a
subsequent judgment of Wallis JA in
Bothma-Botha
Transport (Edms) Bpk v S Bothma & Seun Transport (Edms) Bpk
[2013] ZASCA 176
;
2014 (2) SA 494
(SCA), paras 10 to 12 and in
North
East Finance (Pty) Ltd v Standard Bank of South Africa Ltd
[2013] ZASCA 76
;
2013 (5) SA 1
(SCA) paras 24 and 25.
A
court must examine all the facts - the context - in order to
determine what the parties intended. And it must do that whether
or
not the words of the contract are ambiguous or lack clarity. Words
without context mean nothing.”
(emphasis added)
[37]
At first glance clause 5.7 may appear unambiguous. This is not
the case at all. The word
“
shall”
indicating a peremptory meaning is used, but the word
“
request”
is irreconcilable with
peremptoriness.
“
Request”
is defined in the New Shorter Oxford
English Dictionary as follows: “Asked to be favoured with or
given (a thing); ask for;
express a wish or desire that, to do; asked
to be allowed to do; ask (a person) to do something.”
A
request is clearly what it has meant all along: a person who is
requested to do something has a choice, either to agree or to
reject
the request. Applicants’ belief must be considered to be
“
wishful thinking”.
Their desire can never be akin to first respondent’s removal
from office. A court can direct
a person to do something or to
refrain from doing something and in the event of non-compliance a
sanction may await the person.
In similar vein, an officer in
the armed forces may order, direct or instruct a trooper to do
something or to refrain from doing
it. Non-compliance will have
consequences. Having said this, clause 5.7 is clearly
ambiguous.
[38]
The above quoted judgments emphasise that context is important and
that all relevant facts must be examined by the court interpreting
a
particular contract in order to establish the intention of the
parties and this must be done even where the words used are
unambiguous.
In casu
Mr Krohn, an attorney, and
first respondent, the mother of the minor trust beneficiary, were
appointed the only trustees in 1999.
Obviously, clause 5.7.4
could not play a role at that stage and thereafter. I accept
that it was anticipated that further
trustees might be appointed and
this happened indeed, apparently only in 2016. Could it ever be
said that the parties to
the trust deed intended a situation where
the mother of the minor beneficiary might be requested to vacate the
office of trustee
and a stranger be appointed in her place or nobody
else appointed at all, without any valid reason, or for no reason or
even out
of malice and
mala
fide?
Surely not.
Such interpretation would make a mockery of the principles of trust
law. It might (or would) lead to an insensible
result and undermine
the whole purpose of the trust deed,
i.e
to ensure that the interests of the only beneficiary is properly
taken care of.
[39]
The telephonic discussion of 18 January 2018 referred to
supra
is indicative of the
applicants’ attitude. I am not prepared to find that Mr
Scheepers
“
has captured”
the trust or that applicants are under
his influence, but I find it disturbing that they insist on interest
being paid to Mr Scheepers
in the absence of an agreement in this
regard. First respondent’s version appears to be in the
interests of the trust,
but I cannot say that in respect of
applicants’ insistence. Instead of blaming first respondent for
being obstinate, she
should be commended for taking a stance in the
interests of the trust beneficiary. It is not the trustees’
duty and
obligation to further the interests of Mr Scheepers who
might or might not be a creditor of the trust and to negotiate
interest
on his behalf which was never agreed upon when the loans
(the amount which is in dispute) were allegedly advanced. They
should
act in the interests of the trust and the beneficiary.
[40]
In Potgieter v Potgieter NO
2012 (1) SA 637
(SCA) the orders granted
by the High Court were set aside on appeal by the SCA. The
central issue on appeal was whether the
purported variation of a
trust deed pursuant to an agreement between the founder and trustees,
which excluded the beneficiaries,
was legally binding.
Bertelsmann J found as such, but then varied the provisions of the
trust deed. The learned judge
believed that he was entitled to
act accordingly in order to give effect to what he believed to be the
real intent of the deceased.
Reliance was placed on s 13 of the Trust
Act granting powers to the court to vary trust provisions and the
values of the Constitution
as applied to law of contract. He
relied on
Barkhuizen v
Napier
[2007] ZACC 5
;
2007 (5) SA 323
(CC)
as the second basis for his authority. The facts in Potgieter
are distinguishable from the matter i
n
casu
. There, the High
Court, after finding that the agreement between the founder and
trustees was invalid, proceeded to award
two fifths of the trust
property to the two appellants, whilst the other potential
beneficiaries of the discretionary trust retained
their rights in
terms of an amended trust deed. Here, the power of the majority of
trustees to act in a manner that may be in direct
conflict with the
common law or s 20 of the Trust Act as well as constitutional values
(if the relevant clause is to be interpreted
as submitted by Mr
Zietsman) is the focal point.
[41]
I accept that the court cannot make a contract for the parties.
However, it is deemed necessary to consider
ubuntu.
In
Everfresh
Market Virginia v Shoprite Checkers
2012
(1) SA 256
(CC) at paras [70] and [71] Moseneke DCJ, writing for the
majority, said the following about the duty to negotiate in good
faith,
which I accept is not directly applicable
in
casu
:
“
[70]
If that were so, then the parties’ bargain was that they would
try to agree, and the age-old contractual doctrine that
agreements
solemnly made should be honoured and enforced (
pacta
sunt servanda
)
would bolster Everfresh’s case that the law should be developed
to make an agreement of this kind enforceable.
[71] Had the case been
properly pleaded, a number of interlinking constitutional values
would inform a development of the common
law. Indeed, it is
highly desirable and in fact necessary to infuse the law of contract
with constitutional values, including
values of ubuntu, which inspire
much of our constitutional compact. On a number of occasions in
the past this court has had
regard to the meaning and content of the
concept of ubuntu. It emphasises the communal nature of society
and ‘carries
in it the ideas of humaneness, social justice and
fairness’ and envelopes ‘the key values of group
solidarity, compassion,
respect, human dignity, conformity to basic
norms and collectives unity.’
[72]
Were a court to entertain Everfresh’s argument, the underlying
notion of good faith in contract law, the maxim of contractual
doctrine that agreements seriously entered into should be enforced,
and the value of ubuntu, which inspires much of our constitutional
compact, may tilt the argument in its favour. Contracting
parties certainly need to relate to each other in good faith.
Where there is a contractual obligation to negotiate, it would be
hardly imaginable that our constitutional values would not require
that the negotiation must be done reasonably, with a view to reaching
an agreement and in good faith.”
[42]
Section 39(2) of the Constitution stipulates that when developing the
common law every court shall promote the spirit, purport
and objects
of the Bill of Rights. In terms of s 10 of the Constitution
everyone, including a trustee such as first respondent,
has the right
to have their dignity respected and protected. In my view this
means that she cannot merely be “dumped”
as trustee by
“outsiders” where it is her clear intention and purpose
to take care of the interests of her daughter,
the sole trust
beneficiary. On the view taken by applicants they are above the
law in that their resolution to remove first
respondent as trustee
(which was later changed to a request to vacate office) is not
subject to any challenge by anyone: not the
Master and not the court
and no reasons have to be advanced for their unilateral decision.
This is contrary to s 34 of the
Constitution which provides everyone
the right to have any dispute that can be resolved by the application
of the law to be decided
in a fair public hearing before a court.
[43]
Even if it accepted that the majority of trustees has the right to
request a trustee to vacate his/her office (in the peremptory
sense
as understood by applicants), their discretion to make such a request
must be based on reasonableness. In
NBS Boland Bank Ltd v
One Berg River Drive CC and others
1999 (4) SA 928
(SCA) at paras
[25] – [28] the SCA dealt with the old Roman adage that a
discretion, unless unfettered, must be exercised
arbitrio bono
viri.
Van Heerden DCJ, writing for the full bench, stated
the following at para [25]:
“
It is, I think, a
rule of our common law that unless a contractual discretionary power
was clearly intended to be completely unfettered,
an exercise of such
a discretion must be made
arbitrio
bono viri
.”
This entails that the decision of a
good man is required; put differently, the majority is
“
obliged
to act reasonably and to exercise reasonable judgment (
arbitrio
bono viri
).”
See:
Juglal
NO Shoprite Checkers t/a OK Franchise Division
2004 (5) SA 248
(SCA) at 261D. Mr Zietsman’s submission
effectively boils down to a conclusion that the majority has an
unfettered
discretion to do as they wish as if the interests of trust
beneficiaries are irrelevant. I do not agree for the reasons
stated
in this judgment.
[44]
In
ex parte Minister of
justice: in re Nedbank Ltd v Abstein Distributors (Pty) Ltd and
others and Donelly v Barclays Bank Ltd 1995(3)
SA 1 (A) at 21D -22D
so-called
“
conclusive
proof”
clauses in deeds
of suretyship were found to be against public policy and void in that
parties to such contracts did not have the
right to challenge the
correctness of certificates of indebtedness relied upon by creditors.
[45]
It has been repeatedly stated by the SCA that
“
although
abstract values such as good faith, reasonableness and fairness are
fundamental to our law of contract, they do not constitute
independent substantive rules that courts can employ to intervene in
contractual relationships.” See:
South
African Forestry Co Ltd v York Timbers Ltd
2005
(3) SA 323
(SCA) at para [27] with reference to
Brisley
v Drotsky
and
Afrox
Healthcare Bpk v Strydom. See also: Bredenkamp v Standard
Bank
2010 (4) SA 468
(SCA)
para [53]. Cognisance should be taken of Brand JA’s statement
in the same paragraph of
Forestry
:
“
Acceptance of the
notion that judges can refuse to enforce a contractual provision
merely because it offends their personal sense
of fairness and equity
will give rise to legal and commercial uncertainty……. –
constitutional values such as
dignity, equality and freedom require
that courts approach their task of striking down or declining to
enforce contracts that parties
have freely concluded, with perceptive
restraint.”
The
learned judge of appeal repeated his words of caution in
Potgieter
supra
at paras [31] to [37]
and [34] in particular where he said:
“
Reasonable people,
including judges, may often differ on what is equitable and fair.
The outcome in any particular case will
thus depend on the personal
idiosyncrasies of the individual judge. Or, as Van den Heever
JA put it in
Preller and
others v Jordaan
1956 (1)
SA 483
(A) at 500, if judges are allowed to decide cases on the basis
of what they regard as reasonable and fair, the criterion will no
longer be the law but the judge.”
[46]
Mr Van Rhyn submitted that an implied qualification of
“
good
cause”
should be imported
into clause 5.7.4 and that this should be
“
considered
to be good law in general”, thereby borrowing from Brand JA in
Forestry supra
at
339J. It has been widely recognised that implied terms may be
imported into contracts by law. In doing so, the courts
have
considered requirements such as justice, reasonableness, fairness and
good faith. I refer to the judgments mentioned
by Brand JA in
Forestry supra
at para [28]. The learned judge of appeal emphasised later in
the same paragraph that it should be kept in mind that once
an
implied has been recognised, it is incorporated into all contracts if
it is of general application, and if not, then into contracts
of a
specific class. Mr Zietsman cautioned me not to introduce an
implied term as suggested by Mr Van Rhyn because the effect
would be
that it will apply to all deeds of trust with a similar wording as
in
casu.
[47]
I have seriously considered the
Forestry
judgment and the
dicta
of Brand JA in paragraphs [26] and further. In my
view the matter is clearly distinguishable.
In casu
we
are confronted with a totally different issue,
i.e.
the
interests of beneficiaries and the constitutional rights of first
respondent and in particular her right to access to a court
and a
fair hearing in terms of s 34 of the Constitution. I repeat: if
applicants are entitled to unilaterally cause first
respondent’s
vacation from the office of trustee in circumstances where they do
not have to produce reasons, or even for
mala fide
reasons, it
would be against public policy and the principles of
ubuntu
,
reasonableness and fairness. I am of the view that the
introduction of an implied term as suggested and amplified by me
infra
is good law in general for the reasons advanced earlier
herein. There is no valid reason why it should not be
applicable to
all deeds of trust similarly worded.
VIII
CONCLUSION
[48]
The accepted facts favour first respondent’s version. I
do not intend to mention these in the light of applicants’
approach to the litigation. Suffice to say that first
respondent’s version must be accepted insofar as final relief
is sought in opposed motion procedure. See:
Plascon-Evans
Paints.
The
overwhelming conclusion to be reached from a reading of the papers,
and the undisputed facts in particular, is that first respondent
has
the interests of her daughter, the sole beneficiary of the trust, at
heart as is expected of trustees, whilst the applicants
are
apparently more interested to get into the boxing ring and fight the
trust creditor’s fight for him.
[49]
I am satisfied that my conclusions and eventual orders can be
justified on four bases. The first basis is the interpretation
of the trust deed. Clause 5.7 is ambiguous as mentioned
supra
.
The context and all relevant circumstances must be considered
together with the language used to interpret the clause.
In my
view the parties to the trust deed, that is the founder, Mr Bam, and
the two original trustees, Mr Krohn and first respondent,
could never
have intended that either one of the trustees, and the mother of the
only beneficiary especially, could one day be
requested to resign and
vacate office without any good reason. The effect of such
“
request”, (whether
for good reason or not) as applicants want me to accept, is nothing
but a unilateral removal from office
as first respondent had
apparently no option than to resign and vacate her office. This
is a
contradictio in
terminis
. In order to
give practical, sensible and businesslike meaning to the words used,
the clause must be interpreted to read
that there must be good cause
for such a request and that the trustee shall vacate his/her office
only in the event of an acceptance
of the request.
[50]
Secondly and even if I am wrong about my interpretation, I am
satisfied that, notwithstanding the firm
dicta
expressed by learned judges
of appeal alluded to, I find that an implied term should be read into
clause 5.7.4 to the effect that
good cause must be present for a
resolution to be taken by the majority of trustees to get rid of a
trustee on the basis that he/she
be
“
requested”
to resign and that he/she shall only
vacate office once the request is accepted. The Master cannot
be directed to issue amended
letters of authority in a case as
in
casu
as if he has no option
at all to consider why the trustee should vacate his/her office.
[51]
The third ground is the following. The reasons initially
advanced by applicants do not justify first respondent’s
removal as trustee, but these reasons are clearly disputed. In
any event applicants have abandoned their right to rely on
these
reasons. Applicants have not proven that their action is
justified. They cannot be heard to say that they did
not have
to give reasons, or much worse, that they could take a decision
without any reason or even for a
mala
fide
reason. In my
view the applicants could only rely on clause 5.7.4 on the basis of a
discretion exercised
arbitrio
bono viri, i.e.
based on
the discretion of a good person acting reasonably. This they
failed to do.
[52]
There is a fourth ground on which the dispute may be adjudicated
against applicants. Even if it could be found that I
am wrong
(1) in my interpretation of clause 5.7, (2) in the second finding
that an implied term should be read into the clause
and (3) in
finding that the majority has to act
arbitrio
bono viri
, there is another
obstacle in applicants’ path which, in my opinion, they can
never surpass based on the facts presented
to me. Applicants’
resolution should have been taken on a properly constituted trustees’
meeting and upon proper
notice of their intention. They failed
to act accordingly, but elected to take a decision behind first
respondent’s
back. When the Master pointed out their
mistake, they took another decision, again secretly and without
notifying first respondent
in advance, in the hope of rectifying
their mistake. They failed to give proper notice in compliance
with the provisions
of the Trust Act.
[53]
Finally, there is no question of a deadlock between the trustees for
which eventuality clause 6.1 of the trust deed sufficiently
caters.
Decisions in the interests of the trust and trust beneficiary can be
taken by the majority of trustees during a properly
convened meeting
on condition that sufficient notice of all matters to be considered
is given. It is not necessary to remove
the first respondent in
order to conduct the business of the trust in a lawful manner.
Applicants’ criticism of first
respondent’s obstinate
attitude and the allegation that she accused them of discrimination
has not been proven. She
raised valid concerns in the interests
of the trust and trust beneficiary. Animosity and difference of
opinion are not sufficient
to have a trustee removed from office
and/or for the majority of trustees to unilaterally force another to
vacate his/her office
through a so-called request to resign, which as
I have indicated is a
contradictio in terminis
. See
also:
Gowar supra.
IX
COSTS
[54]
If a normal costs order is made against the applicants as trustees in
their capacities as such, the costs will have to be paid
from the
trust estate. Therefore, I seriously considered granting a
costs order against them
de bonis propriis
in order to avoid
prejudice to the sole trust beneficiary. This is what the
respondents seek in the answering affidavit and
what Mr Van Rhyn
submitted in his argument. Mr Zietsman argued that in the event
of the applicant being unsuccessful, the
parties should be ordered to
pay their own costs. This will be unfair as first and second
respondents will have to pay their
own costs, whilst applicants,
acting in their official capacities as trustees, will be entitled to
claim from the trust funds.
Eventually I decided not to make a
punitive costs order, bearing in mind the novelty of the dispute and
the applicants’ reliance
on advice from senior counsel. I
am also not amenable to make an order suggested by Mr Zietsman.
The costs should be
borne by the trust estate.
X
ORDERS
[55]
The following orders are issued:
1) The application is
dismissed.
2) The costs of the
parties, taxed on a party and party scale, shall be paid out of the
estate of the Ritom Trust, IT 1138/99.
_____________
J.
P. DAFFUE, J
On
behalf of applicant: Adv P J J Zietsman
Instructed
by:
Honey
Attorneys
Bloemfontein
On
behalf of the 1
st
& 2
nd
respondents: Adv G
P Van Rhyn
Instructed
by:
Otto
Krause Inc
c/o
Adrie Hechter Attorneys
Bloemfontein