THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Case no: 186/2003
REPORTABLE
In the appeal between:
LAND AND AGRICULTURAL BANK
OF SOUTH AFRICA Appellant
and
J L PARKER First Respondent
D G PARKER Second Respondent
T T PARKER Third Respondent
Before: Mpati DP, Cameron JA, Brand JA, Erasmus AJA
and Jafta AJA
Appeal: Thursday 9 September 2004
Judgment: Thursday 23 September 2004
Trusts – Authority to bind trust – Sub-minimum of trustees cannot
bind trust – Even where majority of trustees have power to bind
trust, power must be properly exercis ed – Trusts – Abuse of trust
form – Courts’ duty to develo p trust law in accordance with
business efficacy, commercial accountability and the reasonable
expectations of outsiders – Mast er’s power to appoint trustees and
co-trustees and to authorise trustees – Should ensure that trusts in
which all trustees are beneficiaries and all beneficiaries are related
to each other have an independent outsider as trustee
JUDGMENT
_____________________________________________________
2
CAMERON JA:
[1] This is a battle about a family tr ust. It concerns an outstanding
debt of over R16 million the ap pellant bank (‘the bank’) claims
the respondent trust (‘the trust’) owes to it. Though the appeal
in the end turns on the trust’s legal standing in the court below,
that question depends on t he main argument the bank
advanced on the merits of the a ppeal. And that in turn brings
to the fore yet again questions about the use and abuse of the
trust form in business dealings.
[2] The three respondents are the current trustees of the trust. (At
the hearing of the appeal the bank’s application to join the third
trustee was granted without op position.) The trust was
established in 1992. The founder, Mr DW Parker, a
Lichtenburg farmer of formerly substantia l means, named the
trust for his wife (‘the Jacky Parker Trust’). The beneficiaries
are Parker and Mrs Parker (‘the Parkers’) and their
descendants. The first trus tees were the Parkers and one
Senekal, the family attorney. But Senekal resigned in 1996.
This left the Parkers as the only trustees.
[3] The trust deed requires that ‘there shall always be a minimum
of three trustees in office’. And when the number falls below
3
three, it gives the power to app oint a third to the remaining
trustees – who were the Parkers. This power, coupled with the
minimum requirement, in effect placed a duty on the Parkers to
appoint a third trustee when S enekal resigned. In breach of
their duty to give effect to the terms of the trust deed, 1 they
failed for nearly two years to do so. Only in June 1998 did they
notify the Master of the High Court – who has common law and
statutory jurisdiction over the administration of trusts 2 – that
Senekal had resigned.
[4] The fact that they were the only trustees did not stop the
Parkers from accepting loans for the repayment of which they
purported to bind the trust. In particular, between April and
October 1998 they purported to bind the trust as co-principal
debtor and surety in a seri es of agreements in which
companies associated with thei r family business obtained very
substantial advances from t he bank. The last of these
agreements was concluded in Oct ober 1998. By that time, the
Parkers – prompted by a direction from the Master – had at last
appointed a third trustee. But they did not replace Senekal with
1Honore’s South African Law of Trusts (5ed, 2002) page 262.
2Trust Property Control Act 57 of 1988, s 3. Section 6(1) provides that ‘Any person whose
appointment as trustee in terms of a trust instrument, s 7 or a court order comes into force
after the commencement of this Act, shall act in that capacity only if authorised thereto in
writing by the Master’.
4
an independent outsider. Instead, they selected their son, DG
Parker (‘the son’) – also a beneficiary. His affidavit – which the
bank did not dispute – stated that he was not consulted or
informed about the last agreemen t. That involved a loan of
R30 million from the bank.
[5] Things went awry, and the ban k moved to sequestrate the
Parkers and the trust. In September 2000 it obtained a
provisional order sequestrating t he trust and Parker’s estate.
(Its application to sequestr ate Mrs Parker failed because it
could not demonstrate benefit to creditors.) Roux J confirmed
the orders of sequestration on 27 October 2000, and refused
leave to appeal. Parker petition ed this Court. He failed. But
the trust obtained leave, and successfully appealed to the full
court, which set aside t he order sequestrating it. 3 With special
leave granted by this Court, th e bank now appeals against that
decision.
[6] Before the full court, the trust’s central defence to the bank’s
claim was that the Parkers on their own did not have power to
bind the trust in concluding t he loan agreements with the bank,
whether before or after they appointed the son as third trustee.
3Parker NO v Land and Agricultural Bank of SA [2003] 1 All SA 258 (T) ((Kirk-Cohen J,
Hartzenberg and Shongwe JJ concurring). The relevant provisions of the trust deed are set
out at 261.
5
This defence the full court uphe ld. Kirk-Cohen J pointed out
that the trust deed does not em power two trustees to transact
business in the absence of the peremptory minimum of three
trustees:
‘While the trustees (def ined in clause 1 as being the minimum of three
trustees) acting together could del egate any rights and duties to one or
more of them, such delegation would only be effective if the minimum of
three trustees so delegated. In t he papers no case is made out that [the
Parkers] were in fact carrying out powers or duties so delegated to them.’4
[7] Although the trust deed requires t hat there must be a minimum
of three trustees, it does ma ke provision for decisions to be
taken by majority vote, and for the trust to appoint agents to act
on its behalf. That agent co uld obviously be one of the
trustees, if duly authorised. But, as the full court emphasised,
the bank’s case was not that the Parkers were at any stage
authorised to act on behalf of th e trust as its agents. Its case
throughout was that tw o trustees acting alone could bind the
trust.
[8] Before the son’s appointment, the bank’s argument rested on
the general proposition that trus t law permits trustees who are
in office, acting together, to bind a trust estate. After his
appointment, the bank contended that since the trust deed
4[2003] 1 All SA 258 (T) 263d-e and 263g.
6
authorised majority decision-maki ng, it conferred power on the
Parkers to bind the trust acting without the son.
[9] These contentions rest on an erroneous approach to the
questions of trust capacity and trustee authority. Given the
way the bank pleaded its case, and the evidence it presented,
two principles of trust law enta il that its submissions cannot
prevail. The first is that a trus t does not have legal personality.
The second is that, in the abse nce of authorisation in the trust
deed, trustees must act jointly. I deal with these in turn.
A sub-minimum of trustees cannot bind the trust
[10] The first principle accounts for the fact that the trust could not
be bound while there were fewer than three trust ees. Except
where statute provides otherwise, a trust is not a legal person.5
It is an accumulation of assets and liabilities. These constitute
the trust estate, which is a separate entity. But though
separate, the accumulation of rights and obligations comprising
the trust estate does not have le gal personality. It vests in the
trustees, and must be administ ered by them – and it is only
through the trustees, specified as in the trust instrument, that
5 Commissioner for Inland Revenue v MacNeillie’s Estate 1961 (3) SA 833 (A) 840D-H;
Commissioner for Inland Revenue v Friedman NO 1993 (1) SA 353 (A) 370E-I.
7
the trust can act. Who the trustees are, their number, how they
are appointed, and under what circumstances they have power
to bind the trust estate are ma tters defined in the trust deed,
which is the trust’s constitutive charter.6 Outside its provisions
the trust estate can not be bound.
[11] It follows that a provision requ iring that a specified minimum
number of trustees must hold o ffice is a capacity-defining
condition. It lays down a prerequi site 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.
[12] This is not to say that the trus t ceases to exist. Nor is it to
say that the trust obligation fa lls away. Counsel for the bank
cited passages from Honoré7establishing that a trust will not be
allowed to fail for want of a trus tee, and that the administration
of a trust proceeds even when not all the trustees can be
appointed in the precise manner envisaged in the trust deed.
This is to confuse the existenc e of the rights and obligations
that constitute the trust esta te with the question whether and in
what manner the trust estate can be bound. It is axiomatic that
6 Compare Honoré’s South African Law of Trusts (5 ed, 2002) p 262 (§ 160).
7 Honoré’s South African Law of Trusts (5 ed, 2002) pages 201-202 (§ 122), 207-208 (§ 124)
and 228 (§ 136).
8
the trust obligation exists even when there is no trustee to carry
it out. The court or the Mast er will where ne cessary appoint a
trustee to perform the trust. 8 But it does not follow that a sub-
minimum of trustees can bind a trust.
[13] In the present case, the Parkers alone were not ‘the trustees’
as defined in the trust deed. Nor, while fewer than three
trustees were in office, were there ‘trustees’ on whose behalf
the Parkers could act, or from whom they could receive
authority to bind the trust estate . The fact that they acted
jointly in signing the contract s does not change this, because
the trust’s incapacity during this period does not arise from the
joint action requirement, but from the trust’s incapacity while a
sub-minimum of trustees held office.
[14] The Parkers in other words co uld not bind the trust because
no one could. This does not m ean that their duties as trustees
ceased. On the contrary, their obligation to fulfil the trust
objects and to observe the provisions of the trust deed
continued. These required that they appoint a third trustee
when a vacancy occurred – a duty they signally failed to fulfil.
But until they did so the trus tee body envisaged in the trust
8 Trust Property Control Act s 7(1) gives the Master a default power to appoint trustees: ‘If the
office of trustee cannot be filled or becomes vacant, the Master shall, in the absence of any
provision in the trust instrument, after consultation with so many interested parties as he may
9
deed was not in existence, and the trust estate was not
capable of being bound. For the Pa rkers to purport to bind the
trust estate during this peri od was an act of usurpation that
simply compounded the breach of trust they committed by
failing to appoint a third trustee. Such conduct may, as I
indicate later (para 37.3), provide the ba sis for impugning the
very existence of the trust; but that was not the bank’s case.
Joint action requirement entails that trustees must act
together
[15] For the Parkers to purport to bi nd the trust estate after the
son’s appointment, without (according to his evidence)
consulting him, constituted a further usurpation and a further
breach of their obligations under the trust deed. It is a
fundamental rule of trust law, wh ich this Court recently restated
in Nieuwoudt NO v Vrystaat Mielies (Edms) Bpk ,9 that in the
absence of contrary provision in the trust d eed the trustees
must act jointly if the trust esta te is to be bound by their acts.
The rule derives from the nature of the trustees’ joint ownership
of the trust property. Since co-ow ners must act jointly, trustees
deem necessary, appoint any person as trustee’.
92004 (3) SA 486 (SCA) para 16 (Harms JA for the Court).
10
must also act jointly. 10 Professor Tony Honoré’s authoritative
historical exposition 11 has shown that the joint action
requirement was already being enforced as early as 1848. 12 It
has thus formed the ba sis of trust law in this country for well
over a century and half.
[16] So unless authorised otherwise the Parkers and the son had
to act jointly if the trust was to be bound. The bank’s argument
sought to accommodate the change the son’s appointment
wrought by claiming that the parti cular provisions of the trust
deed permitted the Parkers to bind the trust without consulting
him. It is true that the so n’s appointment remedied the
incapacity from which the trust su ffered. Now, according to the
trust deed, the three trustees in office, acting either
unanimously or by majority de cision, could bind the trust.
Similarly, ‘the majority’ of the trustees in office could constitute
a quorum at trustees’ meetings.
[17] The bank contended that since the Parkers were a majority
of the trustees in office, and si nce they could form a quorum at
trust meetings, they could bind the trust acting together. But
10See the judgment of van Dijkhorst J in Coetzee v Peet Smith Trust 2003 (5) SA 674 (T).
11 Tony Honoré Chapter 26, ‘Trust’, in R Zimmermann and D Visser Southern Cross – Civil
and Common Law in South Africa (1996) page 854 note 39.
12 Trustees of Dodds, King & Co v Watson (1848) 1 Menz 140, followed by Walker & Co v
Beeton’s Trustees 1869 Buch 225. Both decisions were clarified and explained, and the
report of the former corrected, by de Villiers CJ in Muller Bros v Lombard, van Aarde & Co
11
this is to confuse power to ac t with its due exercise. The deed
empowered the majority of the tr ustees to meet and to make
decisions. To this extent th e joint action requirement was
abrogated – but the majority rem ained part of a three-trustee
complement, and it had to exerci se its will in relation to that
complement. The bank does no t suggest that any meeting or
consultation of the trustees was convened, or that any vote
took place in which the majority will was exercised. On the
contrary, on the evidence which it has chosen not to challenge
no such meeting, consultation or majority decision ever
occurred. In these circumst ances the Parkers on their own
were not entitled to bind the trus t. Again, conduct of this sort
may give rise to an inference concerning the abuse of the trust
form; but, again, this was not the case the bank sought to
make.
‘Internal formalities’ argument must also fail
[18] The bank also contended that the question whether the
Parkers were authorised after t he son’s appointment to bind
the trust was an internal forma lity which it as an outsider was
entitled to assume had been observed ( Royal British Bank v
(1904) 21 SC 657
12
Turquand).13 This court in Nieuwoudt recently left open the
question whether and in w hat circumstances the Turquand rule
could be applied to trusts, while pointing to certain difficulties in
its application.14 Within its scope the rule may well in suitable
cases have a useful role to pl ay in securing the position of
outsiders who deal in good faith with trusts that conclude
business transactions. This case does not provide the
opportunity for considering its app lication, however, since the
bank’s case was never that it t hought, or was entitled to think,
that the Parkers were authoris ed by the son to conclude the
last loan agreement. Its case wa s that they were entitled to do
so regardless of his authorisati on. That proposition has to be
rejected for the reasons given, and with it the ‘internal
formalities’ argument.
Evidence here does not justify going behind the trust form
[19] This disposes of the bank’s contentions on the merits of the
full court’s judgment. But befo re proceeding to apply these
conclusions to the bank’s alternative argument, some
observations are needed about the abuse of the trust form this
13 (1856) 119 ER 886 (Exch Ch).
14 Nieuwoudt NO v Vrystaat Mielies (Edms) Bpk 2004 (3) SA 486 (SCA) paras 9-12 (per
Farlam JA, for the court) and paras 19, 22 (per Harms JA, for the court).
13
case yet again brings to light. T he core idea of the trust is the
separation of ownership (or control) from enjoyment. Though a
trustee can also be a beneficiary , the central notion is that the
person entrusted with control ex ercises it on behalf of and in
the interests of another. This is why a sole trustee cannot also
be the sole beneficiary: such a situation would embody an
identity of interests that is inimical to the trust idea, and no trust
would come into existence. It may be said, adapting the
historical exposition of Tony H onoré, that the English law trust,
and the trust-like institutions of the Roman and Roman-Dutch
law, were designed essentially to protect the weak and to
safeguard the interests of those who are absent or dead.15
[20] This guiding principle provided th e foundation for this court’s
major decisions over the past c entury in which the trust form
has been adapted to South Africa n law: that the trustee is
appointed and accepts office to ex ercise fiduciary responsibility
over property on behalf of and in the interests of another.
[21] The first of those decisions, Estate Kemp v McDonald’s
Trustee,16 arose because of difficulties stemming from a
testator’s bequest (in the words of Innes CJ) ‘to persons who
15 Tony Honoré Chapter 26, ‘Trust’, in R Zimmermann and D Visser Southern Cross – Civil
and Common Law in South Africa (1996) page 849.
16 1915 AD 491, per Innes CJ at 498.
14
are not intended by the testator to have any enjoyment of the
subject matter, but are directed to possess and administer it on
behalf of successive sets of beneficiaries’. Forty years later, in
Crookes NO v Watson ,17 Schreiner JA again emphasised that
‘the ordinary case of a trus t’ was ‘where the trustee is not
beneficially interested in the trus t property’. The last of the
previous century’s major cases adapting the trust form, Braun v
Blann and Botha NNO ,18 arose because it was contended that
our law did not allow the conferm ent of discretionary powers of
appointment ‘on trustees who ha ve no beneficial interests in
the property in question’.
[22] This has not changed. The essential notion of trust law, from
which the further development of the trust form must proceed,
is that enjoyment and control should be functionally separate.
The duties imposed on trustees , and the standard of care
exacted of them, 19 derive from this principle. And it is
separation that serves to secu re diligence on the part of the
trustee, since a lapse may be visited with action by
17 1956 (1) SA 277 (A) 292 D-E.
18 1984 (2) SA 850 (A) 856G, per Joubert JA.
19 Trust Property Control Act 57 of 1988 s 9: ‘Care, diligence and skill required of trustee
(1) A trustee shall in the performance of his duties and the exercise of his powers act with the
care, diligence and skill which can reasonably be expected of a person who manages the
affairs of another. (2) Any provision contained in a trust instrument shall be void in so far as it
would have the effect of exempting a trustee from or indemnifying him against liability for
breach of trust where he fails to show the degree of care, diligence and skill as required by
15
beneficiaries whose interests conduce to demanding better.
The same separation tends to ensure independence of
judgment on the part of the trustee – an indispensable requisite
of office20 – as well as careful scrutin y of transactions designed
to bind the trust, and compli ance with formalities (whether
relating to authority or in ternal procedures), since an
independent trustee can have no interest in concluding
transactions that may prove invalid.
[23] The great virtue of the trust form is its flexibility, and the great
advantage of trusts their relative lack of formality in creation
and operation: ‘the trust is an all-purpose institution, more
flexible and wide-ranging th an any of the others’. 21 It is the
separation of enjoyment and control that has made this
traditionally greater leeway possible. The courts and
legislature have countenanc ed the trust’s relatively
autonomous development and adm inistration because the
structural features of ‘the ordinary case of trust’ tend to ensure
propriety and rigour and accountability in its administration.
[24] But this has changed in the la st two decades. This is not
simply because trusts have incr easingly been used to transact
subsection (1).’
20 Honoré pages 89-91 (§ 52), 264 (§ 160).
21 Tony Honoré Chapter 26, ‘Trust’, in R Zimmermann and D Visser Southern Cross – Civil
16
business. So long as the fu nctions of trusteeship remain
essentially distinct from the beneficial interests, there can be no
objection to business trusts, sinc e the mechanisms of the trust
form will conduce to their proper governance, which will in turn
provide protection for outsiders dealing with them.
[25] The change has come principal ly because certain types of
business trusts have developed in which functional separation
between control and enjoyment is entirely lacking. This is
particularly so in the case of family trusts – those designed to
secure the interests and pr otect the property of a group of
family members, usually identi fied in the trust deed by name or
by descent or by degree of kinship to the founder.
[26] In Nieuwoudt,22 Harms JA drew attenti on to this ‘newer type
of trust’ where for estate pl anning purposes or to escape the
constraints imposed by corporate law assets are put into a trust
‘while everything else remains as before’. The core idea of the
trust is debased in such ca ses because the trust form is
employed not to separate beneficial interest from control, but to
permit everything to remain ‘a s before’, though now on terms
and Common Law in South Africa (1996) page 850.
22 2004 (3) SA 486 (SCA) para 17.
17
that privilege those who enjoy benefit as before while
simultaneously continuing to exercise control.
[27] Nieuwoudt was a farming trust, where the sole trustees were
the farmer and his wife. They were also the sole income
beneficiaries. In the present case, the Parkers were amongst
the three founding trust ees. They are also the only named
beneficiaries. The only other beneficiaries are their
descendants. Parker, the found er, also reserved the power to
himself ‘by written deed inter vivos or by means of stipulation in
his will, to determine the natur e and extent of any benefit
accruing to any beneficiary of t he Trust’. Only in default of
Parker’s exercise of this pow er are the truste es entitled to
award assets to beneficiaries.
[28] When Senekal resigned, the P arkers as mentioned failed for
nearly two years to appoint a th ird trustee as the trust deed
required of them. And then they appointed their son. As will
emerge, when a further vaca ncy occurred (bec ause Parker’s
sequestration disqualified hi m), Mrs Parker and the son
appointed the daughter: she is the third trustee who was joined
at the hearing.
[29] It is evident that in such a trust there is no functional
separation of ownership and enjoy ment. It is also evident that
18
the rupture of the control/enjo yment divide invites abuses. The
control of the trust resides enti rely with beneficiaries who, in
their capacity as trustees, have little or no independent interest
in ensuring that transactions ar e validly concluded. On the
contrary, if things go awry, th ey have every inducement as
beneficiaries to deny the trus t’s liability. And no scruple
precludes their relying on defic iencies in form or lack of
authority since their conduct as trustees is unlikely be
scrutinised by the beneficiaries . This is because the
beneficiaries are themselves, or those who through close
family connection have an identity of interests with them.
[30] The papers in this case manife st a string of unscrupulous
defences to the bank’s claim, most of which were abandoned
by the time the litigation reac hed the full court, but which
obliged the bank to go to the length of employing medical
experts to pronounce on the mental state of Mrs Parker, since
the Parkers unwarrantably put even this in issue. That a
successful defence – the sub-minim um incapacity and the joint
action requirement – eventua lly emerged from hundreds of
pages of paper, and prevailed a fter many court appearances
over four years of litigation, doe s the Parkers no credit, since it
19
is their own breaches of trust in running the family trust that led
to the unenforceable transactions.
[31] As trustees who were simultaneously the principal
beneficiaries the Parkers had an interest in obtaining loans
from the bank; as beneficiari es they had a simultaneous
interest in contesting their repa yment. The other beneficiaries
were scarcely likely to have distinct interests: they were even
more unlikely to hold the Parkers accountable for their
breaches of trust in concluding the unenforceable transactions.
[32] No comfort can be derived in this state of affairs from the fact
that the bank had the trust deed (as it did) or that it drew up the
loan documents itself (as it did). It is correct, as Harms JA
warned in Nieuwoudt, that outsiders dealing with trusts must be
warned to be careful. 23 It is also correct, as Mpati DP has
recently pointed out, th at an outsider dealing with a trust has a
manifest interest in ensuring that trustees have authority to
encumber the trust property. 24 But trust deeds may be
complex, prolix and obscure: in the present case, the point that
has foiled the bank was rejected at first instance (where Roux J
23 Nieuwoudt NO v Vrystaat Mielies (Edms) Bpk 2004 (3) SA 486 (SCA) para 24.
24 Standard Bank of South Africa Ltd v Koekemoer case number 73/03, judgment of 27 May
2004, para 12 [also a family trust that contested liability for a loan].
20
regarded it as ‘nonsense’ and ‘opportunism’), and established
only after toilsome appellate litigation.
[33] While outsiders have an int erest in self-protection, the
primary responsibility for complianc e with formalities and for
ensuring that contracts lie within the authori ty conferred by the
trust deed lies with the truste es. Where they are also the
beneficiaries, the debasement of trust function means all too
often that this duty will be violated.
[34] The situation may in due course require legislative attention.
But that does not mean that the Master and the courts are
powerless to restrict or prevent abuses. The statutory system
of trust supervision invests ex tensive powers in the Master.
These include the power to appoint trustees in the absence of
provision in the trust instrument,25 and to appoint any person as
co-trustee of a serving trustee where he considers it ‘desirable’,
notwithstanding the provisions of the trust instrument. 26 I n
addition, trustees require written authorisation from the Master
before they may act in that capacity.27
[35] The debasement of the trust form evidenced in this and other
cases, and the consequent brea ches of trust this entails,
25 Trust Property Control Act 57 of 1988 s 7(1).
26 Section 7(2).
27 Section 6(1).
21
suggest that the Master shoul d in carrying out his statutory
functions ensure that an adeq uate separation of control from
enjoyment is maintained in ever y trust. This can be achieved
by insisting on the appointm ent of an independent outsider as
trustee to every trust in wh ich (a) the trustees are all
beneficiaries and (b) the benefici aries are all related to one
another.
[36] The independent outsider does not have to be a professional
person, such as an attorney or accountant: but someone who
with proper realisation of the re sponsibilities of trusteeship
accepts office in order to ensure that the trust functions
properly, that the provisions of the trust dee d are observed,
and that the conduct of trust ees who lack a sufficiently
independent interest in the obse rvance of substantive and
procedural requirements arising from the trus t deed can be
scrutinised and checked. Su ch an outsider will not accept
office without being aware that failure to observe these duties
may risk action for breach of trust.
[37] The courts will themselves in appropriate cases ensure that
the trust form is not abused. The courts have the power and
the duty to evolve the law of tr usts by adapting the trust idea to
the principles of our law ( Braun v Blann and Botha NNO and
22
another).28 This power may have to be invoked to ensure that
trusts function in accordance with principles of business
efficacy, sound commercial a ccountability and the reasonable
expectations of outsiders who deal with them. 29 This could be
achieved through methods appropriate to each case.
37.1 As mentioned earlier, within its scope the rule that outsiders
contracting with an entity and dealing in good faith may
assume that acts performed wi thin its constitution and powers
have been properly and duly per formed, and are not bound to
inquire whether acts of internal management have been
regular, may well in suitable case s have a useful role to play
in safeguarding outsiders from unwarranted contestation of
liability by trusts that conclude business transactions.
37.2 The inference may in appropriat e cases be drawn that the
trustee who concluded the alle gedly unauthorised transaction
was in fact authorised to condu ct the business in question as
the agent of the other trustees. (In Nieuwoudt, the matter was
sent back for evidence to be heard on how the farmer there
conducted the ordinary busines s of farming without being
authorised thereto by his wife, the other trustee.) Such an
28 1984 (2) SA 850 (A) 859F-G, per Joubert JA.
29 Compare the comments of Van Coppenhagen J in Vrystaat Mielies (Edms) Bpk v
Nieuwoudt NO 2003 (2) SA 262 (O) para 12.
23
inference may in a suitable case be drawn from the fact that
the other trustees pre viously permitted the trustee or trustees
in effective charge of affairs free rein to conclude contracts. A
close identity of interests bet ween trustee-beneficiaries, as in
most family trusts, may make it possible for the inference of
implied or express authority to be more readily drawn.
37.3 It may be necessary to go furt her and extend well-established
principles to trusts by holding in a suitable case that the
trustees’ conduct invites the inference that the trust form was
a mere cover for the conduct of business ‘as before’, and that
the assets allegedly vesting in trustees in fact belong to one or
more of the trustees and so ma y be used in satisfaction of
debts to the repayment of which the trustees purported to bind
the trust. Where trustees of a family trust, including the
founder, act in breach of the duties imposed by the trust deed,
and purport on their sole authori ty to enter into contracts
binding the trust, that may provide evidence that the trust form
is a veneer that in justice shoul d be pierced in the interests of
creditors.
[38] It is not necessary to dete rmine the extent of these
developments in the present case since Mr Subel conceded
that the bank did not set out to establish a case along these
24
lines. It chose to stand or fa ll by the two-trustee contention,
and in the absence of evidence establishing another basis for
holding the trust or its assets liable, that argument must on the
merits of the appeal fail.
Two trustees could not represent trust in appeal to full court
[39] However, by happy symmetry t he trust and the Parkers also
chose to stand or fall by th e two-trustee argument. That
argument paradoxically, though by no means unjustly, entails
that the appeal must succeed and the judgment of the full court
be set aside. It will be reca lled that Roux J granted a final
order of sequestration against Park er. At that date, the
trustees were Parker, Mrs Park er and the son. Clause 4.4.4 of
the trust deed provi des that on insolvency trusteeship is
automatically terminated. So Parker automatically ceased to
be a trustee on 27 Oc tober 2000. (In terms of s 150(3) of the
Insolvency Act 24 of 1936, 30 his subsequent unavailing
application for leave to appe al did not suspend his
sequestration.) The trust once aga in had only two trustees –
Mrs Parker and the son. Not unt il more than two years later
30 Section 150(3): ‘When an appeal has been noted (whether under this section or under any
other law), against a final order of sequestration, the provisions of this Act shall nevertheless
apply as if no appeal had been noted: Provided that no property belonging to the
25
was Parker replaced (by the d aughter, the present third
respondent).
[40] In the meanwhile, inattentiv e as ever to the trust deed,
Parker continued to act as though he was a trustee. He signed
the trust’s petition for leave to appeal to this court. And the
appeal to the full court was instituted in the names of Parker,
Mrs Parker and the s on ‘in their capacities as appointed
trustees for the time being of the Jacky Parker Trust’.
[41] On the principles set out ear lier, and vindicated at the
insistence of the trust, it is cl ear that none of these actions was
validly taken. Mrs Parker and the son could not act on behalf
of the trust. No o ne could: for there w ere only two trustees.
The trust accordingly did not validly petition this court for leave
to appeal against the judgment of Roux J. Nor was it at any
stage properly before the full court.
[42] The point remained nascent, however, until it became
evident to junior counsel repres enting the bank before the full
court which way the wind was blowing. After argument he
ascertained from the trust’s attorneys that Parker had not been
replaced as trustee. He then sought to place the point before
the full court by submitting a memorandum. By this stage, the
sequestrated estate shall be realised without the written consent of the insolvent concerned.’
26
full court had already prepared its judgment a llowing the trust’s
appeal and setting aside the order of Roux J. It now postponed
handing down judgment, and gave counsel for the trust an
opportunity to respond. He – paradoxically – vigorously
disputed the bank’s entitlement to raise the question of the
trust’s standing or the two trus tees’ authority. In the
meanwhile, a third trustee wa s hurriedly appointed – the
Parkers’ daughter. It is she who was substituted at the hearing
of the appeal in this court.
[43] The full court then delivered its judgment allowing the trust’s
appeal. In an accompanying ruling it declared that it refused to
entertain the bank’s submissions on legal standing because
they were ‘submitted informa lly, irregularly and without
consent’.
[44] It is not hard to understand t he full court’s exasperation at
the turn of events. But it er red in refusing to entertain the
bank’s submissions. Harms JA has pointed out that the
question of legal standing is in a sense a procedural matter, but
it is also a matter of substance. It concerns the sufficiency and
directness of interest in litigat ion in order to be accepted as a
27
litigating party. 31 The bank was entitled to raise the trust’s
standing as a litigant at any st age – even when, after argument
before the full court, it became cl ear that the appeal was likely
to succeed on the two-trustee argum ent. The trust’s complaint
that this was expedient and in consistent lies hollow in its
mouth. The onus to establis h that it had standing rested upon
the trust. The argument it ask ed the full court to uphold on the
merits embodied a proposition that necessarily entailed that it
was not validly before that forum at all. That the bank should
insist that the trust’s argument be consistently applied was
neither illogical nor, in this case, unjust.
[45] Before us counsel for the trus t sought to suggest that the
original resolution the three trus tees adopted to resist the
sequestration application covered subsequent steps. But this
is manifestly not so: the resolution was only to oppose the
application for sequestration ‘in the High Court of South Africa,
Transvaal Provincial Division’. This neither contemplates nor
authorises an appeal. 32 Nor was the full court appeal at any
stage ratified on behalf of th e trust: whether by design or
oversight, no such ratificati on was attempted after the
31 Gross v Pentz 1996 (4) SA 617 (A) 632B-C (dissenting on grounds not material to the
exposition quoted).
32 See Pretoria City Council v Meerlust Investments Ltd 1962 (1) SA 321 (A).
28
daughter’s appointment as trustee. Whether or not they could
have done so is a question that is not for resolution now.
[46] It follows that the full court sh ould have concluded that the
trust was not before it, and stru ck the appeal from its roll on
that ground. The appeal must therefore succeed, and the
judgment of Roux J reinstat ed. The bank was represented
before the full court only by junior counsel, but before us by two
counsel. Though counsel omitted to apply for the usual order –
doing so in correspondence only after the appeal was heard –
it was at all stages clear t hat the matter warranted the
employment of two counsel, and the bank’s omission caused
the trust no prejudice.
Order
1. The appeal succeeds with costs, including the costs of two
counsel.
2. The order of the full court is set aside. In its place there is
substituted:
‘(a) The appeal is struck from the roll with costs.
(b) The trustees Jacq ueline Lesley Parker and Dakin Greig
Parker who brought the appeal proceedings without authority
are to pay the costs from t heir own pockets, jointly and
severally.’
E CAMERON
JUDGE OF APPEAL
29
MPATI DP )
BRAND JA ) CONCUR
ERASMUS AJA )
JAFTA AJA )