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[2015] ZAECBHC 12
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Nkotobe and Others v Bengu and Others (580/2014) [2015] ZAECBHC 12 (15 May 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE LOCAL DIVISION, BHISHO)
CASE
NO. 580/2014
REPORTABLE:
YES
In
the matter between:
RATASI
GLADYS NKOTOBE
1
st
Applicant
VUYISWA
NTOZINI
2
nd
Applicant
NELISWA
REGINA QUZA
3
rd
Applicant
XOLANI
WELLINGTON BANKU
4
th
Applicant
MZWANDILE
WITNESS BAKO
5
th
Applicant
ASANDA
BENSTHUMANI
6
th
Applicant
SIPHO
ALEX HANISE
7
th
Applicant
and
MFANELO
WRIGHT BENGU
1
st
Respondent
THULISWA
MOREEN DYANI
2
nd
Respondent
NTOMBOTHANDO
KILA
3
rd
Respondent
MPHUMZI
RUMSELL XONXA
4
th
Respondent
THE
MASTER OF THE HIGH COURT
5
th
Respondent
MABHONGO
PHILLIP BUWA
6
th
Respondent
Trust
– Removal of trustees in terms of section 20(1) of the
Trust Property Control Act 57 of 1988 – locus standi of
applicants
- appointment of beneficiaries of the trust left to the
discretion of the trustees – persons who have a right to apply
to
the trustees to be appointed as beneficiaries lack the necessary
locus standi in proceedings in terms of section 20(1).
Removal
of trustees a drastic remedy – not to be ordered lightly –
order refused where an alternative and less drastic
remedy exists.
JUDGMENT
D
VAN ZYL ADJP:
[1]
The applicants want the first to fourth respondents
(the
respondents)
removed as trustees of the Mhala Development Trust
(the Trust)
. The application is in terms of section
20(1) of the Trust Property Control Act 57 of 1988
(the Act)
.
It provides that a trustee may, “
. . . on 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.
”
[2]
In argument the issues were confined to the following: The
first is whether the applicants have
the necessary legal standing
(
locus standi in iudicio)
to ask for the removal of the
trustees, and if so, whether the applicants have satisfied the court
that the removal of the respondents
would be in the interests of the
trust and its beneficiaries.
[3]
The Trust is an
inter vivos
trust. It was created in
2003 by Mxolisi Hamilton, a traditional chief in the Peddie area, and
Ntombomzi Vinolia Makinana.
The objective of the Trust
according to the trust deed is “
. . . to administer the
assets and / or monies as may be settled on the trust and to conduct
all business pertaining thereto in
the best interests of the
beneficiaries.”
(Clause 3) Clause 3.2 further
provides that the “
. . . main purpose and the object for
which the Trust has been constituted is to maximize the benefit to,
and interest of, the persons
falling under the jurisdiction of Chief
Mxolisi Hamilton Makinana . . . by means of such specific aims and
objectives as the trustees
may determine in their sole discretion
from time to time save as for any other provisions as contained in
this Trust Deed . . .”
[4]
The founders of the Trust entrusted to the trustees the power to
appoint the beneficiaries of the Trust.
Clause 1.1.4 of the
Trust Deed determines that a beneficiary is “
. . . any
person who falls under or subjects himself/herself to the
jurisdiction of Chief MXOLISI HAMILTON MAKINANA and is selected
by
Trustees after application by him or her and accordingly requires to
benefit in any manner in terms of this Trust Deed.
Said
selection/approval by the Trustees will be evidenced by a certificate
to be issued by the Trustees and shall be a final decision.”
[5]
From a reading of clause 1.1.4 it is evident that while the trust was
created to benefit the subjects
of Chief Makinana, the mere fact that
a person falls with that class of persons does not make him or her
automatically a beneficiary.
The use of the conjunctive “
and”
in clause 1.1.4 militates against such a construction. To
become a beneficiary a person must not only: (a) be a subject of
Chief Makinana; but must also be willing to become a beneficiary by
(b) applying to become a beneficiary; and (c) must have been
selected
by the trustees in their discretion. It is common cause that
the applicants are subjects of Chief Makinana, and
that they have
neither made application, nor have they been selected to become
beneficiaries. They refer to themselves as
“
potential
beneficiaries”
of the Mhala Trust and say that they “
are
desirous of applying to the Trustees for the purpose of being
selected by the Trustees”
, but that as a consequence of the
Trustees’ failure to convene meetings, they have been unable to
do so.
[6]
The respondents contend that until such time as the applicants have
applied to become beneficiaries,
and they have been selected as such
by the Trustees, they are not beneficiaries. That they may
potentially become beneficiaries
of the Trust is insufficient to give
them the necessary legal standing to claim the relief they are
seeking. The respondents
are supported in this argument by an
unreported decision of the Supreme Court of Appeal in
Ras &
Others v Van der Meulen & Another
(Case No. 635/2009 [1
December
2010] ZASCA 163)
where it was held that a person can apply
for the removal of a trustee of a trust only if he or she is a
beneficiary of that trust.
Short of being a beneficiary, a
person would have no interest in the trust justifying him or her
seeking the removal of a trustee.
(at para [9]. See also Pace
and Van der Westhuizen
Wills and Trusts (Lexis Nexis)
at page
B6.2.4 and B6.3.1.)
[7]
The applicants’ argument in turn is that the main purpose for
which the Trust was created was
to benefit persons who fall under the
jurisdiction of Chief Makinana. As persons for whose benefit
the conditions in the
trust deed were provided, they are potential
beneficiaries and have a sufficient legal interest in the proper
administration of
the Trust. In support of this submission the
applicants placed reliance on the decision in
Doyle v Board of
Executors
(1999 (2) SA 805
(C)) where it was said at 213B that
despite the contractual nature of a trust, it is “. . .
unquestionable that the trustee occupies a fiduciary office.
By virtue of that alone he owes the interest good faith towards
all
beneficiaries,
whether actual or potential.”
(My emphasis)
[8]
The reference to potential beneficiaries in the
Doyle
judgment
must be seen in the context of fact that the court was there dealing
with the proposition in
Hofer and Others v Kevitt NO and Others
(1996 (2) SA 402
(C)) that the office occupied by a trustee could not
in itself serve as a source of a fiduciary duty, to what was referred
to as
a “
potential beneficiary.”
In both the
Doyle
and
Hofer
decisions the issues dealt with therein
arose in the context of what is referred to as a contingent
beneficiary, and the terms
“
contingent”
and
“
potential”
beneficiary are used interchangeably.
[9]
A contingent beneficiary is a beneficiary whose rights to the
enjoyment of the benefits
of the trust property are conditional upon
the occurrence of an event such as the death of another (as in the
Hofer
case), the passage of a particular period of time (as in
the
Doyle
case), or where the trustee has a discretion, not
merely regarding the mode of applying the terms of the trust, but
whether or
not to distribute to a particular beneficiary. (As
in
Braun v Blann and Botha NNO and Another
[1984] ZASCA 19
;
1984 (2) SA 850
(A). See generally Cameron
et al
Honore’s South
African Law
of Trust 5
th
ed at page 557 to 558 and
Joubert (ed)
The Law of South Africa (LAWSA)
2
nd
edition vol 31 at para 547.)
[10]
That the court in the
Doyle
case was dealing with contingent
beneficiaries is also evident from its reference to the decision in
Gross and Others v Pentz
[1996] ZASCA 78
;
(1996 (4) SA 617
(A)). In
Gross
the rights of the appointed beneficiaries to both the income and
capital of the trust were subject to the discretion of the trustees
and the death of one of the beneficiaries. In that context
Corbett CJ proceeded to say that “
While the rights of such
beneficiaries are contingent, they do . . . have vested interests in
the proper administration of the trust.”
(at 628J)
The reference to “
potential”
beneficiaries in
Doyle
was therefore clearly intended to refer to those
beneficiaries whose rights to the benefits of the trust are
contingent as opposed
to being vested, and it was tasked to consider
the position of contingent beneficiaries in relation to the duty of a
Trustee to
account to the beneficiaries.
[11]
The
Doyle
case therefore dealt with the interest in the
administration of the trust of beneficiaries who have a contingent
right in the trust
property. It cannot serve as authority for
the proposition that a person whose expectation is limited to be
appointed a beneficiary
at the discretion of the trustees, has a
sufficient interest in the trust property to ask for the removal of a
trustee as envisaged
in section 20(1) of the Act. The
applicants are not without rights though. In terms of clause
1.1.4, as subjects of
Chief Makinana, and the intended beneficiaries
of the Trust, the applicants have the right to apply to become
beneficiaries of
the Trust, and the trustees, whose power of
appointment is coupled with a duty, have a concomitant duty to
consider their applications.
Does this give the applicants
locus standi
to seek the removal of the trustees?
[12]
The general principle is that a person who has a direct and
substantial interest in the right which
is the subject matter of the
litigation has the necessary legal standing. (
United Watch &
Diamond Company v Disa Hotels
1972 (4) SA 409
(C);
Cabinet of
the Transitional Government for the Territory of South West Africa v
Eins
1988 (3) SA 369
(A) and
Jacobs en ʼn ander v Waks en
andere
[1991] ZASCA 152
;
1992 (1) SA 521
(A).) In the context of section
20(1) of the Act the subject matter is the right to seek the
intervention of the court in
the administration of the Trust property
and the obligations of the trustees in relation thereto. The
question is whether
this right forms part of the applicants’
interest in the Trust.
[13]
The answer in my view is that it does not. While the applicants
have the right to apply to become
beneficiaries of the Trust, until
such time as they have actually applied, and they have been selected
by the trustees in their
discretion to benefit from the trust, the
applicants have nothing more than an expectation to be appointed
beneficiaries, as opposed
to a beneficiary who has an expectation to
receive a benefit from the Trust property after some future event.
[14]
Put differently, the applicants’ interest lies in the
enforcement of their right acquired in
terms of the trust deed to be
considered for appointment as beneficiaries, and not in the exercise
by the Trustees of their fiduciary
and other duties in relation the
Trust property which are associated with the public nature of that
office, and the supervising
function of the court in regard thereto.
Their legal interest therefore simply lies in being appointed
beneficiaries, as
opposed to an interest in the administration of the
Trust property by the trustees as envisaged in section 20(1) of the
Act.
[15]
I accordingly find that the applicants’ do not have a
sufficient legal interest in the Trust
property to clothe them with
locus standi
in proceedings for the removal of the Trustees.
[16]
While this spells the end of the matter, I may add that I am equally
not satisfied on the facts as
determined by applying the ordinary
rules of procedure applicable to motion proceedings, that the
applicants have shown that the
removal of the trustees will be in the
interests of the Trust and its beneficiaries, and that it is the
appropriate relief to grant
in all the circumstances. (
Plascon
Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A)) Counsel for the respondents acknowledged that on a practical
level the activities of the Trust centers around tourism and
the use
of two properties, what has been described as a tourism and
information centre, for that purpose. The respondents
do not
deny the failure to convene meetings of the trustees. The
reason they say is that they are at present engaged in a
dispute with
one of the co-founders of the Trust, namely Chief Makinana, over the
two properties and the other moveable assets
of the Trust. To
that end the trustees have instituted proceedings in the High Court
wherein they seek to interdict Chief
Makinana from
inter alia
interfering with the Trust’s use of the properties, and from
interfering with the activities of the Trust. These proceedings
have not been finalised.
[17]
That the failure of the trustees to perform their functions is as a
result of this dispute, rather
than a failure to act with the care,
diligence and skill as envisaged in section 19(1) of the Act, is
strengthened by the fact
that the trustees, according to the
applicants, in the past met regularly at least twice a month, that
they diligently performed
their functions, and that the two centres
were constructed in the discharge of the trustees mandate in terms of
the trust deed.
Moreover, the applicants have a far less
drastic remedy available to them. It is apparent from clause
1.1.4 and 3 of the
Trust deed that the founders of the trust must
have considerable faith in the trustees by having entrusted them with
wide discretionary
powers. In
Volkwyn N.O. v Clark en Damant
1946 TPD 456
at page 464 Murray J said the following: “
.
. .it is a matter not only of delicacy . . . but of seriousness to
interfere with the management of the estate of a deceased person
by
removing from the control thereof persons who, in reliance upon their
ability and character, the deceased has deliberately selected
to
carry out his wishes.”
This equally applies to
the office of trustee.
[18]
As stated in paragraph [11] above, as the objects of the Trust, the
applicants have the right to apply
to become beneficiaries thereof.
This right, and the power of the trustees to appoint the
beneficiaries of the trust, in
turn places a duty on the Trustees to
consider and decide the application. Should they fail to do so,
the court may enforce
the terms of the trust deed and compel them to
do it. As trustees they are bound to the terms of the trust
deed and obligated
to give effect thereto. (
Crookes NO and
Another v Waston and Others
1956 (1) SA 277
(A) at 305 C –
D and Cameron
op cit
at page 262.) A failure to consider
and decide the applicants’ application, or for that matter, the
creation by the
trustees of a situation that makes it impossible for
the applicants to make application as envisaged in clause 1.1.4,
would give
the applicants a right of action, and consequently entitle
them to approach the court for appropriate relief.
[19]
For these reasons the application falls to be dismissed with costs.
D
VAN ZYL
ACTING
DEPUTY JUDGE PRESIDENT
Counsel
for the Applicants
Adv S
Nzuzo
Instructed
by:
Dandala
Attorneys
18
Eales Street
KING
WILLIAMS TOWN
(Ref:
SD/xr/MDT/CIV 13)
Counsel
for the Respondents:
Adv M
Mphahlwa (1
st
to 4
th
Respondents)
Instructed
by:
Jikwana
Nginda & Associates
c/o
Messrs Losi & Co.
40
Eales Street
KING
WILLIAMS TOWN
(Ref:
HC/CIV/754)
Date
Heard: 07 May 2015
Judgment
Delivered: 15 May 2015