The Fiduciary Institute of Southern Africa (FISA) has developed an extensive archive of court case summaries relating to fiduciary matters. The summaries are written by FISA CEO, Louis van Vuren.
Below are threeo summaries. You can visit the archive at https://www.fisa.net.za/category/court-cases
Court case about POCA and trusts
Nyhonyha N O and Others v NDPP [2024] ZASCA 113
The main question that arose in this appeal was whether assets held in trust of which the beneficiaries of corrupt and unlawful transactions were trustees and beneficiaries fell within the scope of the term “realisable property” in terms of section 14 of the Prevention of Organised Crime Act, 121 of 1998 (POCA). After an interim restraint order under POCA was initially granted over the property, the order was lifted on the return date. The National Director of Public Prosecutions (NDPP) successfully appealed against this lifting of the interim restraint order to a full bench of the Gauteng High Court (Keightley and Adams JJ and Randera AJ). In turn the appellants (trustees of the trusts) then appealed to the Supreme Court of Appeal (SCA) against the decision of the full court.
N and P were directors of Regiments Capital (Pty) Ltd (Regiments), a company implicated in state capture and a corrupt deal involving locomotives for Transnet. Both of them are alleged to have benefited from the proceeds of these alleged crimes. Both of them formed family trusts in which “their” respective shareholdings in Regiments were kept. After the NDPP’s appeal to the full court of the Gauteng High Court, that court held that N’s and P’s, and the appellant’s assets are subject to a restraint order under section 14(1) of POCA. All were refused leave to appeal to the SCA by the full court, but special leave was then granted to the appellants (not to N and P) by the SCA. The appellants argued that the trust property in both trusts were beyond the scope of a restraint order under POCA as the property in both trusts were not exclusively controlled by, or for the benefit of, N and P. They argued that, for a restraint order to be competent, it had to be shown that these trusts were “abused” by N and P and that the “veil” could therefore be pierced. The NDPP argued that exclusive control was not necessary and that the piercing of the veil was also not required for a restraint order. It would be only at the end of the forthcoming criminal proceedings about the alleged corruption that the trial court would be called upon to determine whether, taking all the proved facts into consideration, a forfeiture order should be granted in favour of the state.
The SCA (Molefe JA, with Nicholls and Weiner JJA, Coppin and Smith AJJA concurring) held that to require proof of exclusive control or benefit, or abuse of the trust form and hence piercing of the veil, would frustrate the purpose of POCA, i.e. the prevention of enjoyment of proceeds of criminal behaviour by the perpetrators of a crime. On the evidence the court also found that in both cases N and P in fact benefited substantially from the assets of the trusts. The appeals were dismissed with costs and the order of the full court confirmed.
Comment:
Practitioners should always advise clients that, although trusts are very good structures for asset protection, no structure can protect assets when those assets have been obtained by fraud or, in general, in an illegal way. See also in this regard our summary of Botha N.O. v Leboko-Radebe and Others [2022] ZAGPJHC 724
Court case about interpretation of trust deed
Schoonhoven N.O and Others v Schoonhoven and Others [2024] ZAKZPHC 1; [2024] 2 All SA 250 (KZP)
The S Family Trust was formed in 1988 by JS as founder, who died in 2015. Under a power extended to him in the trust deed, JS determined the termination date of the trust in his will executed in 2010 to be fifteen years after his death. It was common cause between the parties that the trust would terminate in 2030. The four trustees brought an application for a declaratory order on the correct interpretation of certain clauses in the trust deed, the most important of which are the definition clause defining capital beneficiaries and the clauses dealing with the testamentary appointment powers extended to JS. The 1st and 2nd applicants, SAS and JFAS respectively, played the active roles as applicants, while only the 1st respondent, PCAS, opposed the application with the other 12 respondents not actively taking part. The first three applicants and the 1st respondent are siblings and the sons of JS. While the definition of ‘income beneficiary’ in the deed specifically referred to the trustees’ discretion to select income beneficiaries from a list of potential beneficiaries, the definition of ‘capital beneficiary’ referred to selection of beneficiaries from the list of potential beneficiaries without specifically referring to a discretion for the trustees to do so. In the will JS just indicated that the capital beneficiaries must be benefited in equal portions. The applicants argued that that the whole scheme created by the trust deed and the will resulted in a broad context within which it was clear that the capital beneficiaries had to be selected by the trustees. After they have done so, those beneficiaries then had to be benefited equally. The 1st respondent argued that if this is what the founder (JS) intended, the definition of ‘capital beneficiary’ would have included such discretion explicitly.
The court (E Bezuidenhout J) held that the application was in effect a request for rectification of the trust instrument clothed as an application for a declaratory order. The instrument (deed), being a contractual agreement, could only be rectified in accordance with the requirements for rectification by the court, one of which was that it should be done by way of an action procedure and not by way of an application. The court dismissed the application with costs, but found no reasons for a punitive cost order and also no reason to award the costs de bonis propriis against the trustees themselves in their personal capacities resulting in the costs effectively to be paid from the trust.
Comment:
The court remarked on the fact that the wording of both the deed and the will lacked clarity of formulation. Practitioners should take great care to ensure that documents such as these are worded unambiguously clear and correctly reflect the intentions behind them.
Court case about interpretation of will
Moodley v James and Others [2023] ZAKZDHC 92
Mr and Mrs P made a joint will on 30 April 2018. Mrs P passed away in September 2022 and Mr P in January 2023. Mr P did not execute a new will after Mrs P’s death. In clause 3 of the joint will the first respondent (J) is mandated to set up an inter vivos trust for the benefit of the applicant (A) as income and capital beneficiary, with J as the trustee of this trust. J failed to set up the trust after the death of Mrs P, which led to the launching of an application by A to order J to do so.
Clause 3 of the joint will reads:
‘Should we however die simultaneously or within 30 (thirty) days of each other, we revoke the bequest above and bequeath our separate estates to an inter vivos trust which is to be established by our daughter, Premajodh James of which our grandson, Alyster Moodley shall be the capital and income beneficiary.
…
Should the inter vivos trust not be established within a period of 30 (thirty days) after the executor gave the settlor a written notice to this effect, the said bequest shall devolve upon our children…’,
while clause 4 reads:
‘Should the survivor of us, survive the first dying by more that 30 (thirty) days and subsequently dies without leaving a will, the survivor bequeaths his or her estate as mentioned in clause 3 above.’
Although it does not appear from the judgement, the will most probably bequeathed the estate of the first-dying to the survivor in a clause preceding clause 3.
J opposed the application and brought a counter-application that Mr P died intestate, because the trust was not set up within thirty days as provided for by clause 3.
Counsel for A argued that the scheme which the testators tried to create in the will is quite clear, i.e. that if they died simultaneously or within 30 days of each other the trust should be set up (clause 3) and if the survivor died after a period of 30 days without having made a new will, the trust should similarly be set up (clause 4). Counsel for J argued that clause 4 cannot be applied as Mr P did not die without a will as he was a party to the joint will. As the joint will does not make provision for the situation that arose, i.e. that the trust was not set up within thirty days of the executor notifying J to do so and Mr P did not die without a will, neither clause 3 nor clause 4 can apply and Mr P’s estate has to devolve upon intestacy.
While remarking that the clauses are poorly drafted, the court (Hlatshwayo AJ) held that the will has to be interpreted in its full context and that the intention of the testators must be gleaned from this. The argument that Mr P did not die without a will as required by clause 4 does not hold any water. The intention is clear that, in the absence of both spouses and without a later (post the first-dying’s death) will the trust has to be created. It could not have been the intention to create the absurd situation that would arise if the trustee can just fail to set up the trust within 30 days and by doing so alter the devolution of the estate. The counter application was dismissed with costs, the application was granted with costs and J was ordered to sign the trust documents and lodge it with the Master within ten days of the order.
Comment:
This is another court case that could have been avoided by proper attention to the provisions of the will during the process of drafting it. Practitioners should always think through the process of interpretation of the clauses in the wills they draft.
