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 two summaries. You can visit the archive at https://www.fisa.net.za/category/court-cases
1. Court case about trustees (or a trust?) holding member’s interest in a CC
The first appellant (M) wanted to sell his member’s interest in a close corporation (the CC) to the respondents, but wanted to transfer it to the Blucher Mellet Family Trust (the Trust) first and then have the trust sell the interest to the respondents (V and C). An agreement to this effect was entered into. Part of the agreement was that a bond would be registered over some fixed properties as security for payment of the purchase price and that the parties to the agreement would contribute equally to the costs of registering the bond. After the trustees on behalf of the Trust as seller paid its share of the costs, they demanded payment of their share by V and C. V and C then raised the issue that the trustees of an inter vivos trust cannot be members of a close corporation, as provided in section 29(1) of the Close Corporations Act, 69 of 1984. Therefore the appellants could not, in their capacity as trustees of the Trust, be members of the CC. The appellants failed to place any evidence before the court that the matter falls under the exceptions to section 29(1), as provided in section 29(1A), i.e. that the total number of trustees and beneficiaries of the Trust does not exceed ten and that no trustee is a juristic person.
The appellants approached the Free State High Court and after being unsuccessful there, a full bench of that court, also without success. They then took the matter on appeal to the Supreme Court of Appeals.
The court (Makaula AJA (Petse AP, Makgoka and Plasket JJA and Masipa AJA concurring)) held that the matter of the disqualification of the trustees of the Trust to be members of a close corporation was raised in the papers by the respondents from the beginning and that the appellants’ failure to address this by providing evidence that the matter falls within the provisions of section 29(1A) was fatal to the appellants’ case.
Although the result is most likely the correct one on procedural grounds, the court’s remarks in paragraph 22 raises concern.
“It seems to me that because the Trust purported to hold the member’s interest, rather than a trustee, the appellants do not get out of the starting blocks to bring themselves within the terms of s 29(1A).”
This remark seems to suggest that the court was of the view that that the Trust has separate personality and could act independently from its trustees. This is not in line with settled principles of South African trust law.
2. Court case about section 2(3) of the Wills Act, 7 of 1953
The applicant (D) brought an application under section 2(3) of the Wills Act, 7 of 1953 (the Act), asking the court to declare a document allegedly signed by the deceased (LR) as his last will and testament. The first respondent, the deceased’s estranged wife, had passed away by the time the case came to court. The second and third respondents (BR and BS) are the deceased’s daughters from a previous marriage, while the fourth respondent is the first respondent’s grandson who was adopted by the deceased and the first respondent. BR and BS opposed the application, while the fourth respondent did not. The fifth and sixth respondents, the Master’s of The High Court in KwaZulu-Natal and Gauteng indicated that they will abide the decision of the court.
An accountant (SR) alleged in his affidavit that he drafted the document on instructions of the deceased and took it to the deceased, who signed it. SR then took the document to T, the wife of his business partner, and N to sign as witnesses. T and N were not in each other’s presence when they signed and neither of them was in the deceased’s presence when they signed as witnesses. It was therefore common cause that the document did not comply with the formality requirements for a valid will as provided for in section 2(1)(a) of the Act. The document bequeathed 70% of the residue of the estate to D and 10% each to BR, BS, and one AdP, described in the judgement as the deceased’s partner.
BR and BS alleged that their father would not have made the bequests in the document and that he did not change the beneficiary nominations on his life policies.
The court (Mlaba J) was unconvinced that the deceased intended the document to be his last will and testament, and also found that the deceased did not draft the document. The application was dismissed with costs.
Although BR and BS made the averments referred to above, no specific allegations were made refuting the affidavit of SR that the deceased signed the document. It also seems that the court did not regard “draft” and “execute” as two separate actions as envisaged in section 2(3), and held that because he did not draft the document section 2(3) cannot apply.
Be that as it may, the lesson for fiduciary practitioners is to ensure that at all times that will documents are executed in strict accordance with the prescripts of section 2(1) of the Act.