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[2015] ZAGPPHC 409
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Smith v ABSA Bank Limited (A892/2014) [2015] ZAGPPHC 409 (30 June 2015)
HIGH COURT OF SOUTH
AFRICA
(GAUTENG DIVISION,
PRETORIA)
Case No. A892/2014
DATE: 30 JUNE 2015
In the matter between:
MARIA ELIZABETH
SMITH
................................................................................................
Appellant
And
ABSA BANK
LIMITED
........................................................................................................
Respondent
JUDGMENT
MEYER, J
[1] On 12 August 2014, the Gauteng
Division, Pretoria (Bam J) granted judgment against the appellant
(the surety) in favour of the
respondent bank (the creditor). The
appellant executed a deed of suretyship in favour of the bank and
bound herself as surety and
co-principal debtor with the trustees for
the time being of the Neelmarie Trust (the trust) for the due payment
of any amount owing
by the trust to the bank. The bank claimed that
the trust owed it a total sum of R1 012 592.35 plus interest arising
from three
instalment sale agreements. The court a quo inter alia
found that the three instalment sale agreements had been validly
concluded
between the bank and the trustees of the trust and it held
the surety liable on the deed of suretyship. The appeal to this Full
Court is with the leave of the court a quo.
[2] Mr Cornelius Rudolph Smith was the
trust donor. He, his wife, who is the appellant, and Ms Estelle Keet
were the first trustees.
Mr Smith and the appellant, their issue and
adopted children are the income and capital beneficiaries of the
trust. Ms Keet resigned
as a trustee and Mr Smith and the appellant
were the only two trustees in office when the instalment sale
agreements were concluded
on 6 February 2008, 1 April 2009 and 9
April 2009.
[3] The appellant raised a variety of
defences to the bank’s claims on the papers and before the
court a quo, but before this
court her central defence relates only
to the questions of ‘trust capacity’ and ‘trustee
authority’. (See:
Nieuwoudt and another NNO v Vrystaat Mielies
(Edms) Bpk
2004 (3) SA 486
(SCA); Land and Agricultural Bank of South
Africa v Parker and others
2005 (2) SA 77
(SCA)).
[4] In her answering affidavit the
appellant denied ‘. . . that the person who purported to sign
the agreements on behalf
of the Neelmarie Trust had authority to bind
the Trust or to enter into the agreements.’ She also states
that the trust estate
could not be bound because the trust deed
requires that there must be a minimum of three trustees and they were
only two in office
at the time when the instalment sale agreements
were purportedly concluded.
[5] In Parker, para 11, the Supreme
Court of Appeal held-
\ . . that a provision requiring that a
specified minimum number of trustees must hold office is a
capacity-defining condition.
It lays down a prerequisite that must be
fulfilled before the trust estate can be bound. When fewer trustees
than the number specified
are in office, the trust suffers from an
incapacity that precludes action on its behalf.’
[6] Clause 5.1 of the trust deed in
question prescribes that there shall at all times not be less than
three and not be more than
five trustees. This provision, however,
must be read in the context of the trust deed as a whole. Clauses 7.2
- 7.4 provide as
follows:
‘7.2 Alle besluite wat die
trustees neem, tensy in hierdie akte anders aangedui, geskied by
wyse van ‘n gewone meerderheid
besluit van al die trustees (en nie net van die trustees teenwoordig
op ‘n spesifieke
geleentheid nie)....
7.3 Ongeag enige andersluidende
bepaling in hierdie akte sal alle besluite by wyse van 'n eenparige
besluit van trustees geskied
indien daar op enige stadium slegs twee
dienende trustees is.
7.4 Indien daar op enige stadium slegs
een dienende trustee is mag sodanige trustee handgende die
aanstelling van verdere trustees
soos bepaal in hierdie akte slegs
administratiewe funksies in sy/haar hoedanigheid as sulks uitoefen en
sal hy/sy in besonder nie
die bevoegdheid he om ten gunste van
homself/haarself of sy/haar boedel oor enige trustbates of gedeeltes
daarvan te beskik nie.’
Clause 14.5 is also presently relevant.
It reads:
’14.5 Onderhewig aan die
bepalings van paragraaf 14.6, mag die Trustees te enigertyd en van
tyd tot tyd en tot en met die
beeindiging van die trust die netto
inkomste van die
trustfonds, wat mag insluit ‘n
verlies, betaal of aanwend tot die voordeel van alle of sodanige een
of meer van die begunstigdes
in sodanig aandele indien meer as een,
en op sodanige wyse en onderhewig aan sodanige voorwaardes en
beperkings as wat die trustees
van tyd tot tyd in hulle algehele
diskresie mag bepaal. Die diskresie is egter onderhewig daaraan dat
die minimum aantal trustees
in paragraaf 5.1 genoem, wel in hulle amp
is.’
[7] The trust deed, therefore, empowers
two trustees to act and to bind the trust estate in the absence of
the minimum of three
trustees in office. One trustee in office is
only empowered to perform administrative functions. But two trustees
in office may
exercise most of the powers conferred upon the trustees
provided all their decisions were unanimous. A minimum of three
trustees,
however, are required to exercise certain powers such as
those contemplated in clause 14.5 of the trust deed. The power to
have
concluded the instalment sale agreements in question is not one
that may only be exercised when the minimum of three trustees are
in
office. There is, therefore, no merit in the appellant’s
contention that the trust suffered from an incapacity that precluded
the conclusion of the instalment sale agreements.
[8] I now turn to the appellant’s
contention that Mr Smith was not authorised to conclude the
instalment sale agreements in
the absence of joint and unanimous
action of both trustees. ‘It is a fundamental rule of trust law
. . . that in the absence
of contrary provision in the trust deed the
trustees must act jointly if the trust estate is to be bound by their
acts.’
(Parker, para 15.)
[9] The instalment sale agreements in
question are annexed to the founding papers. They were not signed by
the appellant in her
capacity as the only other trustee of the trust.
I have mentioned that the trust deed requires the decisions of two
trustees to
be unanimous. It also confers the power on the trustees
to authorise one or more of them to sign certain documents (and I
accept
that the instalment sale agreements in question fall within
the ambit of the documents so contemplated) and to act on behalf of
all the trustees (clause 13.1.48). Whether Mr Smith was authorised or
had the ostensible authority to act on behalf of the other
trustee is
a factual issue (see Nieuwoudt para 23).
[10] The bank did not set out to
establish Mr Smith’s authority or ‘that it thought or was
entitled to think’
that he was authorised by his wife to
conclude the instalment sale agreements (see Parker para 18). It is
not suggested that a
decision or decisions to conclude the instalment
sale agreements were or must be inferred to have been taken
unanimously by the
two trustees prior or at the time of the
conclusion of each agreement. Inferences can only be drawn from
established facts. In
reply to the appellant’s averments that
the trust could not be bound while there were fewer than three
trustees and that
Mr Smith was not authorised to conclude the
instalment sale agreements the bank contented itself by stating that
those averments
‘will not assist’ her and ‘can be
no valid defence’ to the bank’s claims against her ‘in
her
capacity as surety.’
[11] The stance adopted by the bank was
therefore merely that the defences under consideration against the
validity of the principal
debts do not avail the surety. It erred in
its stance. It is a trite principle of law that a surety’s
obligation is an accessory
obligation and for there to be a valid
suretyship there has to be a valid principal obligation between the
debtor and the creditor.
(See: Caney The Law of Suretyship in South
Africa 5th Ed. At 28; LAWSA Vol 26 2nd Ed para 287.) There are
accordingly also
no real disputes of facts raised on the
papers that should be referred to trial in terms of Uniform Rule
6(5)(g), as the respondent’s
counsel requested this court to do
should the appeal succeed.
[12] This case yet again demonstrates
the need to be careful when dealing with a trust. (See Nieuwoudt para
24; Parker para 1.)
[13] In the result I propose that the
following order be made:
(a) The appeal succeeds with costs.
(b) The order of the court a quo is set
aside and replaced with the following:
The application is dismissed with
costs.’
P.A. MEYER
JUDGE OF THE HIGH COURT
I agree.
A.M BAQWA
JUDGE OF THE HIGH COURT
C.PRETORIUS
JUDGE OF THE HIGH COURT
DATE OF HEARING: 17 June 2015 DATE
OF JUDGMENT: June 2015
FOR APPELLANT: Adv CP Wesley
INSTRUCTED BY: Friedland Hart
Solomon & Nicolson, Pretoria
FOR RESPONDENT: Adv J Minnaar
INSTRUCTED BY: Hammond Pole Majola
Inc, Johannesburg
C/o Oltmans Attorneys, Pretoria