When to act and when not to as a trustee
JOHANNESBURG - The trustees are the custodians of the assets in a trust. The trustees act of behalf of the trust and, in their capacity as trustees, can bring and defend actions concerning the trust. That is why it is so important to understand when someone can act, and be held liable, as a trustee and when someone can no longer act, and be held liable, as trustee. Misconceptions regarding when one can and should act as trustee may result in invalidating trust actions and may even lead to abuse by dishonest trustees.
The first important aspect to understand is that trustees have to be appointed or nominated in terms of the trust deed, accept their appointment, and be authorised by the Master of the High Court to act. A trustee acts in a fiduciary capacity the moment he/she is lawfully (therefore subject to the terms of the trust deed) appointed as trustee and he/she has accepted trusteeship (signed a J417 Master form). It is therefore not dependent on his/her authorisation by the Master of the High Court. An appointed, but unauthorised trustee, can therefore commit a breach of trust and can be sued in a personal capacity for breach.
When can a trustee act?
When it comes to the appointment of a trustee, the Trust Property Control Act (the Act) is clear that a trustee can only act as a trustee once all three requirements are met - he/she has been appointed in terms of the trust deed, accepted trusteeship and is appointed by the Master as evidenced by a Letters of Authority stating all authorised trustees (Section 6(1) of the Act). The Master can generally not refuse to authorise a duly appointed trustee, except in cases where the applicant cannot furnish security when required to do so (Chief Master’s Directive 2 of 2017). All trustees, except those appointed by statute or in terms of an oral agreement are therefore subject to the requirement of written authorisation.
Due to recognised delays at the Master’s office, the Chief Master in his Directive 2 of 2017 stated that a trustee “must be allowed to perform those functions that will allow him or her to obtain the Master’s authority and must be allowed to maintain and conserve assets while that authority is pending”. This does however not entitle a person to act as trustee and bind the trust with his/her actions before he/she is authorised by the Master in terms of a Letters of Authority (Simplex v van der Merwe case of 1996).
When does trusteeship cease?
The main difference between the authorisation of a trustee by the Master and the removal of a trustee by the Master, is the fact that although the Master has to authorise a trustee to act as discussed above, a person’s entitlement to resign as trustee is not subject to the Master’s or the Court’s permission, subject however to the requirements of the trust deed. Section 21 of the Act allows trustees to “resign by notice in writing to the Master and the ascertained beneficiaries who have legal capacity”. As long as these requirements are met, it may be practical to, considering potential long delays at the Master’s office, make allowance in the trust deed for the effective removal of a trustee upon his/her written resignation and on receipt of proof that the resignation has been lodged with the Master (such as a Master stamped submission), subject to having at least one remaining trustee (Meijer v Firstrand Bank Ltd case of 2012). The Courts will however not allow any abuse by a majority of trustees to get rid of a minority trustee (du Plessis v van Niekerk case of 2018).
Phia van der Spuy is a registered Fiduciary Practitioner of South Africa®, a Master Tax Practitioner (SA)™, a Trust and Estate Practitioner (TEP) and the founder of Trusteeze®, a professional trust practitioner.