A trust is defined as "A relationship created at the direction of an individual, in which one or more persons hold the individual's property but subject to certain duties to use and protect it for the benefit of others."
In Agricultural Bank of SA v Parker 2005 2 SA 77 SCA, the court held that:
"The core idea of the Trust is the separation of ownership (or control) from the enjoyment. Though a trustee can also be a beneficiary, the central notion is that the person entrusted with control exercises it on behalf of and in the interests of another. This is why the 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."
According to the provisions of the Trust Property Control Act, 57 of 1988 (the "Act)" trustees fulfil a pivotal role.
Removing Trustees
In many instances, beneficiaries could believe that the trustees are not fulfilling their (fiduciary) duties. In this instance, several remedies exist to remove such a trustee from office.
Naturally, a trustee could be removed as outlined in the Trust Deed. Also or in the alternative by application to the Master of the High Court. Or by way of a court order.
The court has inherent power to remove a trustee from office at common law. This power is also sourced in s 20(1) of the Act, which provides that:
Section 20 of the Act:
"A trustee may on application of the Master or any person having an interest in the Trust property, at any time be removed from his office by the court if the court is satisfied that his removal will be in the interests of the Trust and its beneficiaries."
Fletcher v McNair (1350/2019) [2020] ZASCA 135 (23 October 2020), involved a court-sanctioned removal.
Facts of the case
That appeal concerned the removal of the appellant, Mr Warren Fletcher, as a trustee of the McNair Family Trust (the Trust) at the respondent, Mrs Gillian McNair. On appeal, the Full Court reversed the decision and removed the appellant as a trustee and replaced him with the respondent's sister.
After the deceased's death, Mr McNair continued his managerial duties in Applied, until June 2015, when the relationship between him and the respondent soured. The respondent took over as a manager. The fall-out reasons between the respondent and Mr McNair are not germane to the dispute in this appeal. They disagreed with how Applied had to be managed. They accused each other of misappropriation of funds, and they laid criminal charges against each other in this regard.
The respondent's complaints against the appellant and Mr Crossman, as set out above, gave rise to three issues. The first concerned Applied's debt to Top Spin, for which she became personally liable. The second was about the sale of a Top Spin property in Port Elizabeth. The third was related to a distribution agreement involving Applied.
Judge Petse undertook a functional examination of authorities, from which the following principles can be distilled:
(a) "the court may order the removal of a trustee only if such removal will, as required by s 20(1) of the Act, be in the interests of the Trust and its beneficiaries;
(b) the power of the court to remove a trustee must be exercised with circumspection;
(c) the sufficiency of the cause for removal is to be tested by a consideration of the interests of the estate;
(d) the deliberate wishes of the deceased person to select persons in reliance upon their ability and character to manage the estate, should be respected, and not be lightly interfered with;
(e) where there is disharmony, the essential test is whether it imperils the Trust estate or its proper administration;
(f) mere friction or enmity between the trustee and the beneficiaries will not in itself be an adequate reason for the removal of the trustee from office;
(g) mere conflict amongst trustees themselves is not a sufficient reason for the removal of a trustee at the suit of another;
(h) neither mala fides nor even misconduct are required for the removal of a trustee;
(i) incorrect decisions and non-observance of the strict requirements of the law, do not of themselves, warrant the removal of a trustee;
(j) the decisive consideration is the welfare of the beneficiaries and the proper administration of the Trust and the Trust property. "
The appeal was upheld based on a breakdown in the relationship between co-trustees originating from outside the Trust - on its own not sufficient for the removal of co-trustee. The determinative test always whether Trust property and affairs imperilled, which in this case it was not. These principles as outlined in the aforesaid case were also confirmed in Konstantinos v Van Lingen and others [2021] JOL 49289 (SCA).
Conclusion
We recommend that Trustees are elected to serve, and clear expectations are communicated to avoid deadlocks. Also, to ensure that the necessary structures to provide a harmonious environment is established. A tailored Trust Deed is pivotal to ensure that even cases of removal are adequately provided for as an alternative to or an amplification of other remedies.
Originally published Feb 3, 2021 .
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
