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[2015] ZAGPPHC 486
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Smith v Absa Bank Limited (A892/2014) [2015] ZAGPPHC 486 (1 July 2015)
HIGH COURT OF SOUTH
AFRICA
(GAUTENG DIVISION,
PRETORIA)
(
1 ) REPORTABLE: No
(2)
OF INTEREST TO OTHER JUDGES: No
In
the matter between:
1/7/15
Case
No. A892/2014
MARIA
ELIZABETH
SMITH
Appellant
and
ABSA
BANK
LIMITED
Respondent
JUDGMENT
MEYER,
J
[1]
On 12 August 2014, the Gauteng Division, Pretoria (Barn 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
Alie 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
lndien 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.'
___________________________
PA MEYER
JUDGE OF THE HIGH COURT
[11]
I agree.
___________________________
SAM
MBAQWA
JUDGE OF THE HIGH COURT
[12] I agree and it is so
ordered.
_______________________
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
Clo
Oltmans
Attorneys, Pretoria