OPINION: Choose your trustees well to avoid drama
Trustees are the guardians of the trust assets and have a duty to manage these assets in the best interests of the beneficiaries, as outlined in the trust deed. Choosing a trustee, without anticipating various negative outcomes, who may become problematic later, may cost you dearly.
Removal by the master
In terms of Section 20 of the Trust Property Control Act, the master of the high court has the power to remove a trustee if such trustee: is a person who has been declared to be mentally ill or incapable of managing his/her own affairs by a competent court; or if he/she is by virtue of the Mental Health Act detained as a patient in an institution; or as a state patient is sequestrated, whether provisionally or final, and has not been rehabilitated; who as a company or close corporation has commenced voluntary liquidation proceedings. or has been placed under business rescue, or has been placed under provisional or final liquidation; where applicable is convicted of any crime involving dishonesty - such as theft or fraud - for which he/she has been sentenced to imprisonment, without the option of paying a fine - fails to perform satisfactorily any duty imposed upon him/her by or under the Trust Property Control Act, or to comply with any lawful request of the master of the high court fails to provide security, or additional security, as the case may be, as requested by, and to the satisfaction of, the master of the high court, within two months of being requested to do so, or within such further period as allowed by the master of the high court.
Removal by the court
Section 20 of Trust Property Control Act also allows the master of the high court, and any person having an interest in the trust property, to apply to the court, for a trustee to be removed. The court will remove such trustee if it is satisfied that such removal will be in the interests of the trust and its beneficiaries. It was held in the Ras van der Meulen case of 2010 that only a beneficiary of a trust has the right to apply for the removal of a trustee because, “short of being a beneficiary, a person would have no interest in the trust justifying him or her seeking the removal of a trustee”. Only a beneficiary, and not a person other than the beneficiary who has “sufficient interest in the matter”, is permitted to apply to court for the removal of a trustee.
Removal in terms of the trust deed
Trust deeds usually stipulate specific criteria for the removal of trustees, which may include the removal of a trustee, as approved by the majority of trustees. This clause does not seem to give the protection, as many people are hoping.
A recent case dealt with the issue whether a majority of trustees can remove another trustee from his/her office as trustee. A number of lessons can be learnt from the Trustees of the Ritom Trust versus Van Niekerk case, which was heard as recently as May 2018. In this case, three professional trustees, consisting of two auditors and a lawyer, wanted to remove the mother of the only beneficiary of the trust, as trustee. It appears if the beneficiary’s father, who is neither the founder, nor a trustee of the trust, influenced the other trustees to get rid of the mother, as trustee.
The following lessons are learnt: Even though a trust deed may contain a clause, empowering trustees to remove another trustee by majority vote, it is not sufficient to, without reason, enforce this clause. Trustees have to act reasonably and exercise reasonable care, to remove another. The removal of a trustee without good reason is against public policy and the principles of ubuntu, reasonableness and fairness.
The mere conflict between trustees and beneficiaries, or among trustees, is insufficient for the removal of a trustee. Removal of a trustee will be ordered if the trustee’s continuance in office will prevent the trust being properly administered or will be detrimental to the welfare of the beneficiaries. The overriding question is always whether or not the conduct of the trustee imperils the trust property or its proper administration (Gowar case of 2016). If a trustee is requested by others to resign, he/she shall vacate his/her office only in the event of an acceptance of request by him/her; otherwise not.
Although the removal of a trustee on the happening of a certain event is allowed (Osman v Jhavari case of 1939), the decision of a majority of trustees to remove another is not seen as “an event”. “An event” cannot be a majority decision by trustees to cause the vacation from office by a trustee against his/her will and/or without good cause, whether by way of a request to resign, or otherwise.
Proper procedure should be followed to remove a trustee, such as a properly constituted trustees’ meeting and upon proper notice of the trustees’ intention.
Even if the master or a court removes a trustee as described above, he/she should have a right to challenge the decision in a court. The removal of a trustee, which may have the result that the whole purpose of the trust deed is undermined - to ensure that the interests of the beneficiaries are properly taken care of - will not be allowed.
In terms of Section 10 of the Constitution, everyone, including a trustee, has the right to have their dignity respected and protected. It is therefore difficult for “outsiders” to “dump” a trustee who is acting in the interest of the beneficiaries.
In terms of Section 34 of the Constitution, everyone has a right to have any dispute, that can be resolved by the application of law, to be decided in a fair public hearing before a court.
Phia van der Spuy is the founder of Trusteeze.
The views expressed here are not necessarily those of Independent Media.
- BUSINESS REPORT