What is a Trust?
What is Trust Property?
What is a Trust Instrument?
What is a Trustee?
Briefly, the South African Trust Property Control Act of 1988 (referred to as the “Act”) governs Trusts authorized by the South African Master of the High Court and defines a Trust as an arrangement through which the ownership in the property of one person is bequeathed to Trustees or to specified beneficiaries (but controlled by Trustees) for the benefit of a person or class of persons or to achieve an object specified in that Trust Instrument.
Trust property in the Act is “movable or immovable property…includes contingent interests in property which in accordance with the…Trust Instrument are to be administered or disposed of by a Trustee”
A Trust Instrument in the Act is a “written agreement or a testamentary writing or a Court Order…”
Regarding the duties and conduct of a Trustee, the Act says a Trustee shall act with “…care, diligence and skill…reasonably…expected of a person who manages the affairs of another..”
The extent of the Trustees’ duties can be seen when considering, in particular one Section of the Act being Section 13, which stipulates that a Trustee or sufficiently interested person may apply to Court to amend or delete a Trust provision if that provision has a consequence which the Founder of the Trust did not contemplate or foresee and which hampers the objects of the Founder, prejudices beneficiaries’ interests or conflicts with the public interest.
It is submitted that this Section 13 of the Act may place an obligation on the Trustee to consider the objects of the Founder as well as the interests of the beneficiaries and the public when exercising his or her or its duties and to call for its amendment if the consequence of something in the Trust Instrument conflicts with these objects or interests.
Regarding the removal of a Trustee, Section 20(1) of the Act is applicable and holds that the South African Master of the High Court or any person with an interest in the Trust property may apply to Court to remove a Trustee if in the interests of the Trust or its beneficiaries and the Court may do so, if satisfied.
Section 20(1) appears to give the Court a wide discretion as to what would be viewed as being in the interests of the Trust or its beneficiaries when it chooses to remove a Trustee.
Two cases are briefly examined to assess how the Courts have interpreted the law.
In 2016, in Gowar and Another vs Gowar and Another (referred to as “Gower”), the South African Supreme Court of Appeal held that the Courts still retain the power to remove Trustees on South African Common Law grounds despite the legislation. According to the Court in Gower, the South African Common Law provides that Trustees can be removed by the Court if that Trustee was endangering Trust property or the administration of the Trust. The Court in Gower further held that mere enmity between the Trustees is not an adequate reason to remove a Trustee. In Gower, the Court found neither side could prove misconduct, lack of capacity, breach of fiduciary duties or any other grounds to justify a removal as Trustee.
In the 2020 South African case of McNair vs Crossman (referred to as “McNair”), the Court held that in addition to being able to remove Trustees for misconduct, incapacity or incompetence, a Court could also remove one or more Trustees if a loss of mutual respect and trust amongst the Trustees imperiled the administration of the Trust and management of property.
It is submitted that the view of the Court in McNair can be applied in particular circumstances. In McNair, the Court was of the view that there was misrepresentation by a Trustee which seriously damaged the business of an individual closely connected to the Trust and further held that this Trustee’s actions imperiled the assets of the Trust.
In summary, it is our opinion that according to South African law, a Trustee can be removed if the conduct of that Trustee endangers the Trust, its property or its administration. Such conduct must be evidenced because by extension it could also affect the interests of the Trust or its beneficiaries.
The above is an opinion and a summary and is only restricted to one aspect of Trust Law where South African law applies. Please consult a legal expert for advice regarding your particular circumstances.
Ismail Ayob and Partners practice in the area of Trust Law. Should you require any advice about Trusts, including in the area of taxation of Trusts, please let us know.
Contact us on 011 727 5800 or email us at email@example.com