IN THE HIGH COURT OF SOUTH AFRICA
GAUTENG DIVISION, PRETORIA
REPORTABLE: ~/NO
OF INTEREST TO OTHER JUDGES: ~/NO
REVISED.
06/03/2025
SIGNATURE DATE
In the application between:
BETTY HAPPY XABA TRUST
IT NUMBER 001579/2018(G)
and
RUBICON TRUST COMPANY LTD
SONA PILLA Y N.O.
ANDRE CHRISTO DU TOIT N.O.
LABUSCHAGNE J JUDGMENT CASE NO: 015371/2025
Applicant
First Responden t
Second Responden t
Third Responden t
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[1] In this application Betty Happy Xaba, the beneficiary of the Betty Happy Xaba
Trust, IT No. 001579/2018 (G) applies on behalf of the Trust to the urgent
court for an order liquidating the first respondent, being a company appointed
as the trustee of the Betty Happy Xaba Trust. The trust was created to protect
an RAF award made to her when she was 18. The capital award was
approximately R6.5m.
[2] The deponent contends that she is acting in a derivative capacity on behalf of
the Trust. She applies for the liquidation of the trustee of the trust, the first
respondent.
[3] The urgency was triggered by a letter in December 2024 in which the
beneficiary was notified that the second respondent, a nominee of the trustee
company, was facing criminal charges for dishonesty. The second respondent
did not participate in the proceedings before me and argument was advance d
on behalf of the first and third respondents. The third respondent is the second
nominee of the Trust company.
[4] The arguments advanced as to why the first respondent should be liquidated
are centred around an investment made by the first respondent of the capital
of the Trust in BHI Trust, an entity which has since been sequestrated. The
agreement governing the investment into BHI contain terms with sufficient red
flags indicating that the investment was not o nly risky, but imprudent. The
agreement contained an acknowledgment that the investment is unregulated,
that no interest was payable at all on the investment and that the BHI Trust
would be entitled to 10% of whatever growth there would be in the investment.
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[5] As beneficiary, Ms Xaba has cause for concern. The question in this matter
is however not what remedies she as beneficiary has against her trustee. The
question is whether she could act on behalf of the Trust against the trustee.
As the Trust is not a separate legal entity but is repres ented by its trustee, the
applicant’s approach to court is akin to the lef t hand attempting to litigate
against the right hand. It is simply not possible for a derivative action on behalf
of a single trustee against such single trustee. This application therefore
falters at the first step, despite there being cause for concern.
[6] In light thereof that the first respondent’s investment decision, which place d
the entire Trust capital at risk, is on the face of it a breach of the fiduciary duty
that the first respondent as trustee owes to the beneficiar y, and as such may
be called to account inappropriate proceedings , I do not regard it as
appropriate to grant a cost order. Insofar as the Trust is both applicant and
first respondent, a cost order would be not sensical in any event.
[7] Both parties relied on Gross v Pentz 1996 (4) SA 417 (AD). In that action
Corbett CJ set out the distinction between “representative action” and “direct
action” stating the following at 625 E – H:
“At this point, however, I should stress that a distinction must be drawn
between actions brought on behalf of a trust to, for instance, recover trust
assets or to nullify transactions entered into by the trust or to recover damages
from a third party, on the one hand, and, on the other hand, actions brought
by trust beneficiaries in their own right against the trustees for
maladministration of the trust estate, or for failing to pay or transfer to
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beneficiaries what is due to them under the trust, or for paying or transferring
to one beneficiary what is not due to him.”
[8] In Henry -Carl Sasser (Jnr) and Others v Henry -Carl Sasser (Snr) and
Others 2024 (JDR) 2786 (GP) Rip AJ stated the following at paragraph [8]:
“[8] It is trite that in matters concerning the Trust itself, the Trustees need
to act on behalf of the Trust and other parties do not have locus standi
to act on behalf of the Trust as a general rule. Courts have, however,
identified and accepted into part of South African law the principle now
known as ‘the Benningfield Exception’. This exception is based upon
a decision of the Privy Council in Benningfield v Baxter (1886) 12AC
167 (PC) a decision decided on an appeal from the Supreme Court of
Natal. Essentially, the basis of the decision was that when, as in the
case of Benningfield and the other matters referred to in the Gross
matter supra, a Trustee would have to essentially sue himself due to
the allegations against such Trustee, the exception becomes
applicable. In those circumstances, the beneficiaries could, in a
representative action, institute an action for the relief r equired, which
would include relief against the delinquent Trustee. The basis being
that to expect the delinquent Trustee to actually pass a resolution
together with the other Trustees in terms whereof action must be
taken against himself, even if the other Trustees were innocent,
cannot be expected.
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[9] Essentially, as I understand the authorities, a representative action
would accrue to the beneficiaries when it is clear that the Trustees
cannot or will not take a decision to institute an action for the relief that
the beneficiaries are seeking, in c ircumstances where the
Benningfield Exception would be applicable.”
[9] I do not conc ede of circumstances in which the trustees would resolve to
liquidate the Trust company on the grounds alleged by the beneficiary. The
beneficiary’s cause for concern lies in the failure of the first respondent to take
steps to set aside its investment in BHI. It would be within the ambit of the
Benningfield Exception if the deponent, as beneficiary, were to purport to act
on behalf of the first respondent in proceedings against the BHI Trust.
However, that is not the case before me at the moment .
[10] The Benningfield Exception is not applicable. The beneficiary cannot purport
to act in a derivative sense on behalf of the Trust against the first respondent
for its liquidation.
[11] In the premises the application fails.
[12] Consequently, I make the following order:
1. The application is dismissed. No order as to costs.
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LABUSCHAGNE J
JUDGE OF THE HIGH COURT