In Sheptstone & Wylie Attorneys v Abraham Johannes de Witt NO & Others, the Supreme Court of Appeal of South Africa examined the validity of a suretyship signed by a majority of trustees instead of by all trustees, as required by the trust deed. The suretyship was signed in favor of the appellant for the personal indebtedness of a beneficiary in respect of legal fees incurred in her divorce action.
The Trust Property Control Act 57 of 1988 regulates inter vivos trusts. For purposes of administration of the trust, trustees are deemed to co-owners of the trust’s property and assets. Trustees must act jointly in decision-making unless the trust deed specifies otherwise. Trustees are legally obligated to adhere to the terms of the trust deed and must act through competent resolutions in line with their fiduciary duties.
The SCA affirmed that a trust operates in two spheres: internally and externally. Internally, trustees can disagree, and decisions can be made by majority vote. However, externally, trustees must present a united front, with decisions supported by the signature of all trustees. External decisions are those relating to the trust property with the outside world, while internal decisions concern the use of income for the welfare of the beneficiaries.
In this case, the SCA found that the trust deed required the trustees to act jointly and unanimously. Therefore, the court ruled against the appellant.
In dealing with trusts, which relate to external trust matters, and even though the trust deed allows majority decisions, all the trustees must still participate in the decision-making and all of them must sign a resolution to make it valid externally. Ensure that all trustees signing for the trust have the power to do so per the trust deed and by a valid, unanimous resolution.
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