Liebenberg NO v MGK Bedryfsmaatskappy (Edms) Bpk (61/2001) [2002] ZASCA 116; [2002] 4 All SA 322 (SCA) (25 September 2002)

About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2002
>>
[2002] ZASCA 116
|

|

Liebenberg NO v MGK Bedryfsmaatskappy (Edms) Bpk (61/2001) [2002] ZASCA 116; [2002] 4 All SA 322 (SCA); 2003 (2) SA 224 (SCA) (25 September 2002)

REPUBLIC OF
SOUTH AFRICA
IN THE SUPREME COURT OF
APPEAL
OF SOUTH AFRICA
Case number: 61/2001
Reportable
In the matter between:
SAMUEL LIEBENBERG NO
Appellant
and
MGK BEDRYFSMAATSKAPPY (EDMS) BPK
Respondent
CORAM
: VIVIER ADP, FARLAM,
NAVSA, MPATI JJA et HEHER AJA
HEARD
: 27 AUGUST 2002
DELIVERED
: 25 SEPTEMBER 2002
SUMMARY:
TESTAMENTARY
TRUST – INTERPRETATION OF – WHETHER TRUSTEE EMPOWERED TO SIGN
UNLIMITED SURETYSHIP IN RESPECT OF DEBTS OF A BENEFICIARY
IN ABSENCE
OF EXPRESS POWER CONFERRED BY WILL.
_____________________________________________________________
JUDGMENT
_____________________________________________________________
FARLAM JA
[1]
This is an appeal against a final
sequestration order granted on 27 September 2000 by Coetzee AJ,
sitting in the Transvaal Provincial
Division of the High Court, in
terms of which it was ordered that the estate of the Hugo Frederik
Mokken Trust (Trust no 471/90),
be sequestrated for the benefit of
the creditors and that the costs of the sequestration application,
including those occasioned
by the employment of two counsel be costs
in the sequestration. The appellant is the present trustee of the
trust.
[2]
In both the Court
a quo
and this Court
there was only one point in dispute between the parties, viz whether
the trust deed under consideration in the present
case, which was
contained in the will of the late Hugo Frederick Mokken (to whom I
shall refer in what follows as ‘the testator’)
empowered the
trustee of the trust to bind the trust property by means of an
unlimited deed of suretyship for the proper compliance
by Jan
Alexander Mokken, the testator’s eldest son and one of the
beneficiaries of the trust, of all his obligations, present or
future, to the respondent.
It was common cause between the parties that if the
Court were to find that the trustee was so authorised a final
sequestration order
would have to be made.
[3]
In his will the testator, after making two
bequests, directed that the residue of his estate should be
transferred to the trustee
to be held in trust for the purposes and
upon the trust set out in the will, which was to be known as the ‘HF
MOKKEN WILL TRUST’.
In the will the expression ‘the Trust Estate’ was
used as a collective reference to the residue transferred to and all
investments
made by the trustee.
The testator appointed his widow as executrix and
trustee under the will.
[4]
The powers of the trustee were set forth in
Paragraph 4 of the will, the material provisions of which read as
follows:
‘(1) The Trustee shall have the power
(a) to leave the Trust Estate in the actual state of investment in
which it is received by her;
(b) to vary and transpose investments regardless of limitations or
restrictions imposed by Statute or otherwise on persons in a similar
capacity;
(c) to sell, alienate or otherwise dispose of the assets of the Trust
Estate in such manner, for such consideration (in money or
otherwise)
and upon such terms and conditions as she, in her sole discretion,
may determine and to receive the consideration and
grant discharge
therefor .....
(d) to invest and re-invest the assets of the Trust Estate or the
proceeds of each sale of trust assets in any manner and in any
form
of investment she deems fit anywhere in the world and whether within
the Republic of South Africa or elsewhere; the intention
being that
the Trustee shall have the widest possible powers of investment to
ensure that the real value of the capital of the Trust
Estate does
not diminish with time and with that intention in mind to obtain
advice from investment consultants from time to time
and to pay their
fees from the income of the Trust Estate;
(e) to purchase, sell, transfer and otherwise deal in immovable
property and incorporeals, in all cases upon all such terms and
conditions
as she in her sole discretion may deem fit, provided that
any immovable property acquired by the Trustee in terms of this Will
shall
be registered in the name of the Trust;
(f) to borrow money upon such security as she in her sole discretion
may deem fit, including the passing of Mortgage Bonds over immovable
property belonging to the Trust and to accept donations from any
person and on any terms and conditions;
(g) to secure the payment of any borrowings by the Trustee by
mortgaging or pledging any asset of the Trust;
(h) to call in, recover, collect and sue for all moneys owing to the
Trust, to foreclose bonds and to buy in security;
(i) to allow time for the payment of any debts due to the Trust and
to compromise, compound or submit to arbitration any such debt
and
any claim made against the Trust;
(j) to exercise all the voting rights attaching to any shares,
debentures or other securities forming part of the Trust Estate;
(k) to enter into, vary and cancel agreements relating to the
holding, disposal and exercise of votes in respect of shares in any
company or companies forming part of the Trust Estate;
(l) to enter into any agreement with a company reducing its capital
and in which the Trust holds shares and receive any capital returned
in the form of cash, securities or otherwise;
(m) to consent to any reorganisation or reconstruction of any company
or companies, the securities of which are from time to time
held by
the Trust and to consent to any reduction of capital or other dealing
with such securities;
(n) to improve and develop immovable property forming part of the
Trust Estate by erecting buildings thereon and otherwise to expend
the Trust Estate upon the preservation, maintenance and upkeep of any
such property and to demolish any buildings;
(o) to allow any person to occupy an immovable property or use any
immovable property forming part of the Trust Estate at such rental
or
consideration as he in his sole discretion may determine, provided
that should such occupier or user be a beneficiary of the Trust,
the
Trustee may dispense with the payment of rental or consideration.
(p) to determine whether any amount received by the Trust, including
all profits made on the realisation of investment or other assets,
represents for the purpose hereof, capital or income;
(q) to pay out of the Trust Estate all taxes and other imposts levied
and imposed on or calculated by reference to the capital or
income of
the Trust or to any heir on account of his interest in the Trust or
which may be imposed on the Trustee in respect of matters
arising out
of the Trust;
(r) to determine whether and to what extent any amounts disbursed are
on account of capital or income;
(s) to employ agents and other people to assist in carrying out the
objects and purposes of the Trust and to pay their reasonable
fees,
commission and remuneration and other charges out of the Trust
Estate;
(t) to institute legal proceedings of every nature on behalf of and
in the name of the Trust and to defend any legal proceedings
which
may be instituted against the Trust;
(u) to grant credit on terms of such nature as she may deem fit in
respect of the payment of the purchase price of any asset forming
part of the Trust Estate, sold by her;
(v) to transfer all or any of the assets forming part of the Trust
Estate to any place outside the Republic of South Africa and to
administer the Trust Estate or such transferred assets at such place;
(w) to enter into partnership or any joint venture with any person or
body corporate for the purpose of carrying on any trade, business
or
industry;
(x) to sign all documents of whatsoever nature and to do all things
necessary to give effect to any of her decisions;
and generally all such powers as are allowed by law; the intention
being
that the Trustee shall have the widest possible powers and unfettered
discretion to exercise such powers subject only to the limitations
placed on
her by law.
(2) I direct that my Trustee shall expend so much of the income
derived from the Trust Estate as she in her sole discretion shall
deem fit on the maintenance of my wife and on the maintenance and
education of our children. In exercising her discretion as to
the
amounts so to be expended, my Trustee shall have regard to my wish
that my wife shall continue to enjoy a standard of living
not lower
that that enjoyed by her at the date of my death and to my further
wish that each of my children shall be given the opportunity
of
benefitting from a university or other post-matriculation education
up to the attainment by him of a bachelor’s degree or other
comparable qualification. Should any child of mine cease to attend
an educational institution or not be as diligent in the pursuit
of
his studies as my Trustee shall consider to be reasonable or should
any such child fail to attain results which my Trustee shall
consider
to be reasonable, my Trustee shall be entitled to withhold, wholly or
to such extent as she shall consider to be proper,
financial support
for such child’s education for such period or periods as she shall
deem to be desirable in the circumstances.
My Trustee shall continue
to exercise the powers granted to her in terms of this Sub-paragraph
until all my children shall have
attained bachelors’ degrees or
shall have ceased to qualify for financial support for their
education as hereinbefore provided.
All income derived from the
Trust Estate and not so expended shall be invested as part of the
capital thereof.
(3) With effect from the date on which my Trustee shall cease to
exercise the powers granted to her in terms of Paragraph (2) of
this
Paragraph and until the date of distribution as hereinafter defined,
all income derived from the Trust Estate shall accrue to
and be paid
to my wife and my children in the proportions of two-fifths to my
wife and one-fifth to each child.
(4) My Trustee shall further be entitled but not obliged from time to
time in her absolute discretion to make advances out of the
Trust
Estate to or on behalf of my wife and any of my children for any
special reason such as illness or for any business undertaking
or for
purposes of travel or, in the case of my children, for marriage or
for any other special reason which my Trustee in her sole
discretion
may deem to be for the benefit of my wife or such child or children.
All such advances shall be brought into account
in making the final
distribution of the Trust Estate as hereinafter provided.
(5) For the purposes of this Paragraph the expression “the date of
distribution” shall mean the date on which my youngest child
shall
attain the age of 25 (TWENTY-FIVE) years or, in the event of his
earlier death
(a) the date on which he would have attained such age; or
(b) the date on which my Trustee elects to terminate the H.F. Mokken
Will Trust;
whichever is the earlier.
(6) On the date of distribution my Trustee shall pay and transfer the
whole of the Trust Estate to my wife and my children in equal
shares
provided that:
(a) All advances that may have been made in terms of Paragraph (4)
hereof
shall be taken into account;
.....
(7) (a) .....
(b) Until a beneficiary shall have received from the Trustee the
whole of his share in the said Trust Estate, so much of the income
therefrom as the Trustee in her absolute discretion will decide to
distribute, shall be paid to or on behalf of the beneficiary for
his
maintenance and education as the Trustee shall deem fit or for the
purpose of paying any taxation assessed upon the income accruing
to a
beneficiary from the said Trust. Any income which is not distributed
by the Trustee in terms of this Sub-paragraph shall be
added to and
treated as part of such beneficiary’s share of the said Trust
Estate;
(c) Notwithstanding anything to the contrary hereinbefore contained,
the Trustee shall be entitled, from time to time, to pay to
and apply
for the benefit of a beneficiary, before the due date for payment
thereof as hereinbefore provided, the whole or any portion
of the
share of such beneficiary of the said Trust Estate held by the
Trustee on behalf of the beneficiary, if in the opinion of
the
Trustee the same is reasonably required by or for the benefit of the
beneficiary. Further, the Trustee shall be entitled, if
she sees fit
to do so, to postpone the due date for payment of the whole or any
part of the capital to which a beneficiary is entitled
in terms
hereof for such period or periods as she may, in her discretion, deem
fit, but not beyond the date that such beneficiary
attains the age
of 30 (THIRTY) years
.....’
[5]
The testator’s widow was granted a letter
of authorisation in terms of
section 6(1) of the Trust Property Control Act 57 of
1988 on 8 August 1990.
On 28 September 1995 she signed a document in which she
purported to
bind the trust as surety and co-principal debtor in
solidum
in favour of the
Magaliesbergse Graankoöperasie Beperk (to which I
shall refer in what
follows as ‘the co-op’), the predecessor in title to
the respondent, for the
proper and prompt repayment by her eldest son, Jan
Alexander Mokken, of
each and every amount which he then owed or in the
future might owe to the
co-op and also for the prompt and proper performance by
him of all other
obligations of whatever nature which he then had or
might incur towards the
co-op.
[6]
Not much care and consideration appears to
have preceded or accompanied the execution of the deed of suretyship
in the present matter.
I say this because the deed of suretyship
signed by the testator’s widow, purportedly in her capacity as
trustee, was headed ‘Borgakte
(Algemeen Maatskappy)’. It appears
that a form used by the co-op when companies stood surety in favour
of the co-op for the debts
of others was used. In the deed the
trust, after being initially named, was throughout referred to as
‘die Maatskappy’. Annexed
to the deed was what purported to be
an extract from the minutes of a meeting of directors of ‘die
Maatskappy’ at the foot of
which the testator’s widow certified
that the transaction was in accordance with the Memorandum and
Articles of Association of
‘die Maatskappy’ and she purported to
indemnify the co-op against any losses arising from any action should
the transaction be
ultra vires
‘die Maatskappy’.
[7]
The judge in the Court below held that the
testator’s widow was authorised in terms of the trust deed
contained in the will, in
her capacity as trustee, to bind the trust
estate in respect of an unlimited suretyship.
[8]
In his judgment he referred to the fact that
the words ‘in her sole discretion’ were repeatedly used in the
trust deed and he
placed considerable emphasis on the unnumbered
paragraph which follows paragraph 4 (1) (x) in which it was
specifically provided
that the trustee was to ‘have the widest
possible powers and unfettered discretion to exercise such powers
subject only to the
limitations placed upon her by law’. It was
held that it was clear from the use of these words that the
testator’s widow had
a very wide discretion with regard to the
management of the affairs of the trust. The judge found it
significant that the trustee’s
discretion in terms of paragraph
4(4) to make advances out of the trust estate to or on behalf of the
beneficiaries was described
in the will as an absolute one. He held
that the execution by the trustee of a deed of suretyship to the
respondent in respect of
her eldest son was incidental to the making
of an advance to him to enable him to acquire his own farm.
[9]
It was accordingly held that a provision was
to be implied in the trust deed that the trustee could stand surety
to secure the debt
of a beneficiary and to protect the interests of
that beneficiary and of the trust itself.
The reference to the interests of the trust itself was
based on a finding that the testator’s eldest son had incurred the
debts
which were covered by the suretyship not only in respect of his
own farming business but also in order to carry on the farming
activities
of the trust.
[10]
The judge held in terms that because the
trust deed authorised the making of an advance to one of the
beneficiaries it also authorised
the provision of a deed of
suretyship because this was reasonably necessary in order to render
the making of an advance meaningful.
[11]
He pointed out that nowhere in the trust
deed was there a provision requiring the trustee to obtain security
in respect of an advance
made from the trust capital to a beneficiary
and said that he saw no difference in principle between placing the
trust at risk by
making an unsecured advance and doing so by means of
the provision of suretyship. This fitted in with the intention of
the testator,
so it was held, that the trustee should be vested with
unlimited powers to benefit one or more of the beneficiaries over the
others.
She was empowered, so the judge said, to spend all the trust
capital for one or more of the beneficiaries to the exclusion of the
others.
[12]
Having held that the trustee was empowered
to bind the trust by signing a deed of suretyship, the judge
proceeded to say that he could
not see any distinction between an
unlimited suretyship and a limited one. The trustee could, so it was
said, monitor the extent
of the production credits extended to her
son and the loans made to him and if it appeared that his conduct was
putting the trust
at risk, she could terminate the suretyship and
avoid further exposure for the trust. The fact that she failed or
may have failed
to do so could not in his view play a role in the
interpretation of the will and the fact that a proper division or one
envisaged
by the deceased could not take place was a fortuitous event
which was in the judge’s view irrelevant to the interpretation of
the
will.
[13]
The question to be considered in my opinion
is whether the court
a quo
was entitled to find that the wide
language of the trust deed, in particular the repeated use of the
words ‘in her sole discretion’
as well as the fact that in the
unnumbered paragraph which follows paragraph 4(1) (x) she was given
‘all such powers as are allowed
by law, the intention being that
the Trustee shall have the widest possible powers and unfettered
discretion to exercise such powers
subject only to the limitations
placed on her by law’, indicated that the testator intended her to
have the power to bind the trust
estate by an unlimited deed of
suretyship. It is not necessary to make a finding on the question as
to whether she was empowered
to provide a limited suretyship on
behalf of the debts of a beneficiary for an amount less than his or
her anticipated share on the
final distribution of the trust estate.
[14]
In my view, as counsel for the appellant
correctly submitted, although wide powers were given to the trustee
in the trust deed, all
these powers were given to her so as to
achieve the objects of the trust, which do not include the provision
of unlimited deeds of
suretyship. The wide powers given to the
trustee are clearly subject to the express provisions and the purpose
of the trust deed
that the real value of the trust assets must not
diminish and it must be possible for the trustee on the termination
of the trust
to make an equal division of the trust assets among the
beneficiaries, viz, the widow and the testator’s three children.
Although
provision is made for advances to be made to some or all of
the beneficiaries it is clearly provided in paragraph 4(4) that all
such
advances must ‘be brought into account’ in making the final
distribution.
Although the phrase ‘brought into account’ may be
ambiguous, it is to be interpreted restrictively in this case and its
clear
meaning appears to be that the adjustments necessitated by the
fact that advances were made are to be effected in the accounts of
the final distribution, so that some beneficiaries may receive less
than others, possibly nothing at all, provided that what each
receives (by way of advances received and final distribution) is an
equal share of the trust estate at the date of distribution plus
the
sum of the advances made. The testator does not appear to have
intended that one or more of the beneficiaries should receive
as an
advance more that what it was envisaged would be his or her final
share, with the result that a payment in would be required,
because,
if the beneficiary concerned were unable to pay in the amount
required, the testator’s purpose in seeking to ensure an
equal
distribution among the beneficiaries of the trust on its termination
would thus be defeated.
[15]
In my view the provisions in the trust deed
have to be read against what one may call the common law background,
viz that a trustee
has no power (absent a provision to that effect in
the trust deed) to expose the trust assets to business or farming
risks: see
I A Essack Family Trust v Soni and Others
1973(3)
SA 625(D) at 627 G-H and
Honoré’s South African Law of
Trusts,
5 ed, § 181. A trustee who contends that such a
power is necessary to preserve the value of the trust property must
apply to
court for the necessary power: Honoré
loc cit.
In the present case it is important to note that the testator
conferred a whole raft of powers on the trustee including the power
to conduct a business and to deal with the properties but significant
in its absence from the powers so conferred was the power to
stand
surety.
[16]
It appears from the summary given above of
the reasons given by the judge in the Court
a quo
that he said
at one point that the power to stand surety was reasonably incidental
to the power to make advances. At another point
he said that the
provision of a deed of suretyship was reasonably necessary to render
the making of an advance meaningful. As far
as his statement that
the provision of a deed of suretyship is reasonably incidental to the
making of an advance is concerned it
is clear that the wrong test was
applied. In interpreting a will (and the same principle must apply
where a trust deed incorporated
in a will is to be interpreted) it is
clear words can only be read in by necessary implication. This has
been repeatedly laid down
by the courts. For present purposes it is
sufficient to refer to
Heymans v Van Tonder
1985(3) SA 864(A)
at 877 C-E.
The principles to be applied in implying a provision in
a will are the same as those to be applied when tacit terms are
sought to
be implied in a contract: see
CIR and Others v Sive’s
Estate
1955(1) SA 249(A) at 260 C-D.
[17]
On the application of those principles, it
is clear in my view that it is impossible to imply a provision in the
will in the present
matter that the trustee was empowered to execute
an unlimited deed of suretyship in favour of one beneficiary under
which the trust
could be liable to the full amount of the trust
assets and possibly beyond, so that the other beneficiaries could on
the termination
of the trust receive nothing.
[18]
Both in the court
a quo
and in this
court the respondent endeavoured to contend that the deed of
suretyship in the present case had been provided to protect
the
interests of the trust and that the debts covered by the suretyship
were incurred in order,
inter alia,
to carry on the farming
activities of the trust. In my view it is not necessary to make a
finding on this issue for two reasons:
first
,
because, as I
have pointed out, the trust deed did not expressly or by necessary
implication confer the right to provide an unlimited
suretyship on
the trustee so that if it were indeed necessary to preserve the trust
assets that she should have the power to stand
surety she would have
had to approach the court for the power; and second, because it is
clear that the suretyship she provided
went far beyond any endeavour
to protect the trust assets because it related to every indebtedness,
present or future, of the testator’s
eldest son, for whatever cause
arising, that is to say whether or not it had anything to do with the
preservation of the trust assets.
Indeed when the point was put to
counsel who appeared for the respondent he, quite correctly in my
view, conceded that the suretyship
could not be partly valid in
respect of debts relating in some way to the trust estate and partly
invalid in respect of all other
debts.
[19]
In my view the trustee in the present case
was not authorised to execute an unlimited suretyship for a
beneficiary’s debts. It
follows that the trust estate should not
have been sequestrated.
[20]
The following order is made:
1. The appeal is allowed with costs, including those
occasioned by the employment of two counsel.
2. The order made in the court
a quo
is set aside
and replaced by the following:
‘The provisional order of sequestration is discharged
with costs.’
CONCURRING:
VIVIER ADP
NAVSA JA
MPATI JA
HEHER AJA
......................
IG FARLAM
JUDGE OF APPEAL