Brief Summary

Trusts and trustees — Variation of trust deed — Distinction between unanimous-decision trusts and majority-decision trusts — Personal guarantees signed by respondents for debts of Franlese Boerdery — Respondents contending guarantees contrary to public policy and invalid due to lack of proper trustee resolution — Court finding that guarantees enforceable as respondents failed to prove invalidity — Clear provisions of trust deed not ignored in favor of abstract fairness.

Comprehensive Summary

Summary of Judgment

1. Introduction

The matter was an opposed motion application in the High Court of South Africa, Free State Division, Bloemfontein, in which the applicant bank sought money judgment against individual sureties and against trustees (in their representative capacities) on the basis of guarantees and, in relation to the individual respondents, also on the basis of a settlement agreement that had previously been made an order of court.

The applicant was The Standard Bank of South Africa Limited. The first and second respondents were Franco Phillipus Wiid and Johanna Elizabeth Wiid, cited in their personal capacities as guarantors. The third to fifth respondents were Franco Phillipus Wiid N.O., Johanna Elizabeth Wiid N.O., and Veronica Charlene Steyn N.O., cited as trustees of the Franlese Trust (IT 268/2001).

The applicant relied on guarantees signed on 13 November 2018, and on a settlement agreement concluded on 6 September 2022 (later made a court order on 14 October 2022) relating to the indebtedness of Franlese Boerdery (Pty) Ltd (the principal debtor). After business rescue proceedings and subsequent liquidation of the principal debtor, the bank pursued the guarantors for payment.

The general subject-matter of the dispute concerned (a) whether the first and second respondents could resist enforcement of the guarantees and settlement agreement on the basis of public policy, and (b) whether the trustees’ guarantee bound the trust estate in light of the trust deed’s requirements for authorising guarantees.

2. Material Facts

On 13 November 2018, the first and second respondents, acting in their personal capacities, signed a guarantee in favour of the applicant. In terms of that guarantee, they undertook, as a principal and independent obligation, to ensure due and punctual payment of all debts owed (or to be owed) by Franlese Boerdery (Pty) Ltd to the applicant, arising from agreements concluded or to be concluded between the bank and the company. The guarantee contemplated liability upon written demand.

On the same date, the third and fourth respondents (as trustees) signed a further guarantee in favour of the applicant, the terms of which were stated to be identical to those signed by the first and second respondents. The trustees’ guarantee was central to the later dispute about compliance with the trust deed.

On 6 September 2022, the first and second respondents signed a settlement agreement in respect of the principal debtor’s full outstanding indebtedness as at that date, together with interest and costs (including taxed attorney-and-client legal costs). This settlement agreement was made an order of court on 14 October 2022. The bank relied on certificates of balance in relation to three accounts, and it was stated that as at 25 March 2025 the total reflected by the certificates of balance (excluding interest) was R46 245 686.28.

It was common cause that the first respondent was the sole director of the principal debtor and that the Franlese Trust was the principal debtor’s sole shareholder. Shortly after the settlement agreement was signed, the principal debtor was placed into business rescue by resolution of the first respondent in his capacity as director. The bank’s claims were not disputed during business rescue. The business rescue was terminated, and the principal debtor was subsequently liquidated at the applicant’s instance.

The first and second respondents admitted that they signed the personal guarantees and the settlement agreement. Their opposition was advanced on the basis that enforcement would be contrary to public policy, including contentions that the bank allegedly knew, or should have known, that they would not realistically be able to satisfy a very large indebtedness, and that the insistence on guarantees was said to be meaningless and irrational in the circumstances.

The trustees’ defence focused on the trust deed. They contended that the trust could only be bound within the four corners of the trust deed, and pointed to clause 8.6.4, which they interpreted as requiring that any decision to provide a guarantee would be valid and binding only if all trustee posts were filled and all trustees authorised it. They asserted that the “Resolution to go with a Guarantee” dated 13 November 2018 was false in reflecting that a trustees’ meeting occurred, and contended that the fifth respondent signed the resolution only on 14 November 2018 and did not attend any meeting.

The applicant’s response relied, in substance, on the fact that the resolution bore the signatures of all three trustees, and on the trust deed provisions allowing written decisions. The applicant also emphasised that the respondents’ evidence was contradictory and that no bona fide factual dispute had been raised.

3. Legal Issues

The central legal questions before the court were whether enforcement of the personal guarantees and settlement agreement against the first and second respondents could be resisted on the basis that enforcement would be contrary to public policy, and whether the trustees’ guarantee bound the trust estate given the requirements in the trust deed for valid trustee decision-making in relation to giving a guarantee.

The dispute required determination of both legal questions (the approach to public policy in contract enforcement and the interpretation and application of the trust deed provisions) and application of law to fact (whether the respondents had advanced facts sufficient to show that enforcement would offend public policy; whether the trust deed’s requirements were met on the proved facts). The matter also involved an assessment of whether the respondents raised a real and substantial dispute of fact in motion proceedings, or whether their version was contradictory and not bona fide.

4. Court’s Reasoning

The court treated the first and second respondents’ “public policy” defence as one that had to be assessed within established constitutional-contractual principles. The judgment referred to Barkhuizen v Napier as authority for the proposition that the enquiry into contractual enforcement and public policy proceeds by examining, first, whether the clause/obligation is objectively unreasonable or contrary to public policy, and secondly, if not, whether enforcement should nevertheless be refused in light of the parties’ circumstances, with the party seeking to avoid enforcement bearing an onus to justify that result.

On the facts, the court considered it significant that the first and second respondents had admitted signing the guarantees and the settlement agreement, and that they had provided express warranties in the guarantee documentation (including warranties as to capacity, understanding of risks, fairness and reasonableness, and financial position). Against that contractual framework, the court rejected the respondents’ attempt to characterise the bank’s insistence on guarantees as arbitrary or irrational in a way that would justify non-enforcement.

The judgment also noted the applicant’s submission that the respondents’ opposition effectively amounted to an “ideological” objection to enforcement after the fact, despite having accepted substantial credit facilities and despite having signed a settlement agreement admitting indebtedness and regulating repayment. The court held that the respondents had not advanced facts demonstrating a legally cognisable basis to avoid enforcement on public-policy grounds, and had not shown that the applicant acted unreasonably or arbitrarily in requiring guarantees. The court further recorded that the respondents accepted that guarantees are generally not easily escaped, and it noted that the National Credit Act 34 of 2005 was not applicable on the case as presented.

In relation to the trustees’ defence, the court approached the matter as one turning on the interpretation of the trust deed and the written resolution relied upon. The court recorded that the respondents relied on Shepstone and Wylie Attorneys v De Witt N.O. and Others, particularly in relation to the function of “round-robin” (written) resolutions and the policy reasons behind requiring all trustees to sign such resolutions when no meeting is held. The respondents sought to use this to argue that clause 8.5 (the written-decision clause) was irrelevant because the resolution purported to be an extract of minutes of a meeting, and that the fifth trustee had not signed by the time the guarantee was executed.

The court, however, focused on clause 8.6.4 of the trust deed, which (as quoted in the judgment) provided that, notwithstanding any other provision of the deed, any decision in terms of which a guarantee or security is provided is valid and binding only if all trustee positions are filled and all trustees have approved it in writing. On the respondents’ own version, as at 13 November 2018 all trustee positions were filled. The court treated the signed resolution—bearing the signatures of all three trustees—as meeting the requirement of written approval contemplated by clause 8.6.4.

The court also considered the respondents’ factual account regarding when and where signatures were appended and whether a meeting occurred. The judgment held that the evidence advanced, particularly by the fifth respondent, was contradictory and unsatisfactory, including contradictions with what appeared from the guarantees (as to place and date of signature) and the implications of the resolution. The court accepted the applicant’s submission that the respondents’ version did not raise a bona fide defence or a “real and substantial” factual dispute suitable to defeat the application on the papers.

On that basis, the court concluded that the applicant had established a proper case for relief against the respondents on the guarantees (and, as against the first and second respondents, additionally on the settlement agreement made an order of court), and that the respondents had not demonstrated any sustainable ground to resist enforcement.

5. Outcome and Relief

The court granted the relief sought in the notice of motion in the form of an order that prayers 1, 1.1, 1.2, 1.3, 2, 2.1, 2.2, and 3 were granted. The effect was that judgment was entered against the first and second respondents (jointly and severally) for the amounts claimed on the three accounts with the stipulated interest, and judgment was also entered against the third to fifth respondents (as trustees), jointly and severally with each other and with the first and second respondents, up to the maximum aggregate sum of R40 000 000.00, together with interest a tempore morae.

The court held that the applicant, as the successful party, was entitled to costs. The relief sought included costs on the attorney-and-client scale as against the first and second respondents, and on Scale C of the Uniform Court Rules as against the third to fifth respondents, and the order granted the cost relief as encompassed within the granted prayers.

Cases Cited

Barkhuizen v Napier [2007] ZACC 5; 2007 (5) SA 323

Shepstone and Wylie Attorneys v De Witt N.O. and Others [2025] ZACC 14; 2025 (11) BCLR 1299 (CC)

Legislation Cited

National Credit Act 34 of 2005

Insolvency Act 24 of 1936

Rules of Court Cited

Uniform Court Rules (Scale C referenced in relation to costs)

Held

The court held that the first and second respondents were bound by the personal guarantees and the settlement agreement (made an order of court), and that they failed to establish that enforcement was contrary to public policy on the facts and on the applicable contractual principles.

The court further held that the trustees (third to fifth respondents) failed to show that the trust was not bound by the guarantee. On the court’s interpretation and application of the trust deed, particularly clause 8.6.4, the written approval of all trustees (as evidenced by the signed resolution) rendered the decision to provide a guarantee valid and binding, and the respondents’ factual account was found to be contradictory and not to raise a bona fide dispute.

LEGAL PRINCIPLES

Contractual obligations, including obligations under guarantees and settlement agreements, are generally enforceable in accordance with pacta sunt servanda, and a party seeking to avoid enforcement on the basis of public policy bears an evidentiary and persuasive burden to show why enforcement would be inconsistent with public policy in the circumstances.

The public-policy enquiry (as applied in the judgment with reference to Barkhuizen v Napier) requires attention to the objective terms of the obligation and, where those are not facially offensive to public policy, consideration of whether enforcement should nevertheless be refused in light of the parties’ circumstances; mere dissatisfaction with the commercial consequences of a freely undertaken obligation does not, without more, constitute a basis to resist enforcement.

A trust acts through its trustees, and whether trustees validly bound a trust estate to obligations such as guarantees depends on compliance with the trust deed’s decision-making requirements. Where the trust deed requires written approval by all trustees for the provision of a guarantee, a document bearing the signatures of all trustees may satisfy that requirement, and a court will not disregard clear trust deed provisions on the basis of abstract notions of fairness or equity.

In motion proceedings, a party resisting relief must raise a real, genuine, and bona fide dispute of fact; contradictory and unsatisfactory allegations that do not substantively engage the documentary record may be rejected as failing to constitute a bona fide defence on the papers.

The Standard Bank of South Africa Limited v Wiid and Others (2739/2025) [2026] ZAFSHC 19 (22 January 2026)