In the recent SCA ruling in Shepstone and Wylie Attorneys v Abraham Johannes de Witt NO & Others, a strong reliance was placed by the court on its interpretation of the trust deed, which, unfortunately, was not well crafted, says Phia van der Spuy, a chartered accountant and tax adviser.

‘The court (unfortunately) interpreted the trust deed in a peculiar way, given the fact that it is fraught with problematic clauses and unwise structuring. These issues have seemingly resulted in a new strange requirement of how trustees ought to make decisions. The problematic trust deed may, therefore, to a degree, be blamed for this adverse outcome for Shepstone Wylie.’

In her analysis on the IoL site, Van der Spuy notes the trust deed required the husband, who did not physically participate in the relevant meeting, to be the chairperson at all meetings and to have a casting vote.

The court held that signing a surety for the wife’s obligations was not in the interest of the trust.

Van der Spuy says the court ignored the steps to be followed to constitute a valid meeting (including the fact that all trustees received the notice and the required quorum was present after various attempts by the trustees who did co-operate) and solely relied upon the fact that there was no disagreement between the trustees present at the meeting, and therefore, the majority decision rule was basically inapplicable in this instance.

What constitutes ‘a meeting’? Van der Spuy points out in Van der Merwe NO and others v Hydraberg Hydraulic CC, the court held in order to qualify as ‘a meeting’, all the trustees in office would have to receive notice so as to be able to participate in it if they so wished.

‘Clearly, this requirement was met in this case.’

Furthermore, in Le Grange and Another v Le Grange Family Trust & Others, the court correctly held that the obligation to act jointly does not imply that the minority has to agree with the majority or that votes have to be unanimous for any decision to be binding on the trust. Van der Spuy says the Van der Merwe case also confirmed that ‘unanimity among the trustees is not required in order for decisions to be made effectively in respect of transactions concerning the administration of the trust and the dealing with its assets in terms of the powers conferred on the trustees in terms of clause six of the trust deed. It is sufficient if the relevant decision enjoys the support of a majority.’

Van der Spuy says if the wording of the trust deed was unquestionable in the Shepstone and Wylie case, the majority decision rule should have been applied, and the two trustees could have made a valid decision after the husband seemed to just not have pitched for the duly constituted meeting and, therefore, obstructed a trustee decision. ‘It seems that he did not fulfil his fiduciary duties to participate in trust matters.’

She concludes: ‘This case cannot set a new requirement that all trustee decisions are to be made unanimously. It was held in the Van der Merwe case and confirmed in the Le Grange case that – even though the trust deed, which provided that majority decisions would bind the dissenting or absent trustees – it could not avoid the application of the rule that the minority is obliged to act jointly with the other trustees in executing the resolution adopted by the majority. Therefore, even the dissenting trustee is obliged to sign a duly authorised resolution of the board of trustees and cannot use that as a mechanism to veto transactions.’

Full analysis on the IoL site